Real Property Notes Blog
HUD relaxes procedures for FHA Condo Approval
In new rules issued August 14, 2019, HUD has eased the process for obtaining approval for an FHA loan on a condominium. Purchasers can again seek spot approval for a condominium unit in a project that has not obtained FHA approval status under the “DELRAP” process; the entire condominium need not be certified. The rule also extends the term that a condominium stays on the approved list from two years to three years before needing to reapply. The new rules take effect October 15, 2019. A copy of the rules are available to be downloaded.
Co-owner held responsible for alterations made by prior owner.
In Fox Pointe Association v Ryal, an unpublished Michigan Court of Appeals opinion, the condominium association levied fines and filed suit against the co-owner for installing a door handle that was pewter instead of polished brass, as well as for a square door lock and larger address numbers. The association was granted an injunction by summary disposition and awarded over $15,000 in attorney fees.
Ryal did not dispute that the lock and address numbers did not comply, but defended on the basis that they were already there when she purchased the unit. The court of appeals held that whether she made the alterations herself was irrelevant for purposes of the injunctive relief sought by the association. The trial court’s grant of an injunction and attorney fees to the association was upheld and the case was remanded to the trial court for an award of additional attorney fees and costs to the association for defending the appeal.
Even something as seemingly minor as the color of a door handle or the size of address letters requires approval of the board before making a change. Such changes without board authorization can be an expensive mistake.
Purchaser never signed “land contract;” claim dismissed
In Moore v Moore, an unpublished Michigan Court of Appeals opinion, father and son drew up a document entitled “Purchase Agreement” for a ten-acre parcel of land owned by the father. Son never signed the document. Son took possession, resided on the land for over 20 years, and conducted a business from the property. Relations broke down and father sued son to quiet title to the property (other claims were made as well, but this is a real property blog, so this summary only address the land contract issue). The trial court quieted title in the father. Son appealed and in the first appeal, the court of appeals reversed and remanded, holding that the purchase agreement was sufficient to satisfy the statute of frauds, but remanded to the trial court for further proceedings. After protracted additional proceedings, the trial court held that the document was a valid land contract, but that son had breached it. The trial court entered a judgment quieting title in the father and son again appealed.
The court of appeals affirmed, but held that the trial court had reached the right result for the wrong reason. The court of appeals analyzed the “purchase agreement” and found that it did not contain sufficient information to be a land contract. Although it identified the parties and the property, it did not provide payment amounts beyond the first year, and did not contain an interest rate past the first 7 years. The time, the amount of the payments, and the interest rate are all essential elements of a land contract. Finally, the son testified that he purposely did not sign the purchase agreement because he thought he would be inheriting the property. Contracts require both offer and acceptance; without the son accepting it, a valid contract was never formed.
Plaintiff signed mortgage but not note; not a “borrower” under RESPA
Tara and Nathan Keen purchased a house. Both signed the mortgage, but only Nathan signed the promissory note. Nathan subsequently conveyed his interest in the property to Tara. Tara kept up the payments for several years, but then defaulted and the mortgagee foreclosed. Tara filed suit in federal district court claiming violations of the Real Estate Settlement Procedures Act (“RESPA”). The district court dismissed her case because she was not a borrower and RESPA grants only borrowers a cause of action. She appealed to the 6th Circuit Court of Appeals.
In Keen v Helson, the appeals court applied the plain and ordinary meaning of the word “borrower” because RESPA does not define borrower. After reviewing several dictionary definitions, and after reading the word in the context of the entire statute, the court held that someone who signs a mortgage but not the promissory note is not a “borrower” within the meaning of RESPA. Since she was not a borrower, RESPA did not provide her a cause of action.