Real Property Notes Blog
Insufficient Tender; Property Not Redeemed
In Miller v Griffin, an unpublished Michigan Court of Appeals opinion, a sheriff’s sale in foreclosure of property was held on March 12, 2020. There was a third party purchaser. The sheriff’s deed was not recorded until May 11, 2020. An individual on behalf of the mortgagor met with the third party purchaser on November 11, 202, and tried to tender redemption, but was advised the amount tendered was insufficient. The correct amount was tendered on November 16, 2020. A suit to quiet title followed. The trial court held that the parties who tendered the funds had no standing to do so because they had no recorded interest in the property. An appeal followed.
The appeals court held that, as agents of the mortgagor, the parties tendering the funds had standing to do so, but because the correct amount was not tendered until after the redemption period expired, the trial court reached the right result for the wrong reason and would not be overturned.
Curiously, the parties and the court all assumed the redemption period ran from the date of recording, not the date of sale, contrary to the published opinion discussed here issued just 7 days previously.
Redemption Period Runs from the Date of Sale
In Kessler v River AG Properties, LLC, a published Michigan Court of Appeals opinion, agricultral property was foreclosed and sold on August 21, 2020, but the sheriff’s deed was not recorded until September 14, 2020. The mortgagor tendered more than sufficient funds to the register of deeds on September 14, 2021, claiming the redemption period ran from the date of recording, not the date of sale. The trial court granted the purchaser summary disposition and the court of appeals affirmed.
Under the plain language of the statute, the redemption period runs from the date of sale, not the date of recording of the sheriff’s deed. Although a different statute requires the sheriff’s deed to be recorded within 20 days of the date of sale, it contains no penalty for failure to do so.
Yet Another Panel of the Court of Appeals Finds Short Term Rentals Violate Residential Use Restrictions
In Aldrich v Sugar Springs Property Owners Association, a published opinion of the Michigan Court of Appeals held that short term rental of a residence on a lot was a violation of the “residential purposed only” restriction contained in a Declaration of Covenants, Conditions, and Restrictions.
As a published opinion, it should put to rest any thought that short term rentals are somehow compatible with residential use restrictions in Michigan. Prior opinions have been discussed here.
“Occupancy” for Purposes of Landlord-Tenant Relationships Act Defined
In Beebe v AG Managment Company, LLC, an unpublished Michigan Court of Appeals opinion, Tenants on a month to month tenancy gave 45 days’ notice of termination on February 20, 2019. One of the tenants turned in keys on April 5, 2019, but the other tenant still had possessions in the property and did not vacate or turn in keys until April 11, 2019. The landlord prepared an itemized list of damages prorating rent through April 11, 2019, and mailed it on May 6, 2019, with a partial refund of the security deposit. The tenants contested the balance and, when the landlord failed to file suit within 30 days of vacating, filed suit against the landlord. The trial court determined that tenancy did not end until April 11, when keys were turned in. The trial court also determined the landlord was excused from filing suit within 45 days of the end of occupancy because there was a written agreement regarding final disposition of the security deposit.
The court of appeals reversed in part. The court agreed that “occupancy” did not end until April 11, 2019 when the last set of keys was turned in. Thus, landlord’s itemized list of damages was timely. However, the court reversed the trial court’s decision that there was a written agreement regarding the security deposit, finding there was conflicting testimony that needed to be resolved.
The court of appeals also reversed dismissal of the conversion count of the tenant’s complaint: if the trial court on remand found the landlord did not comply with the Landlord Tenant Relationships Act by timely filing to retain the security deposit, the court could find that the Conversion statute was violated because the landlord exercised wrongful dominion over the tenants’ security deposit.
Short-term Rentals Again Found to Violate Restrictive Covenants
In Apache Hills Property Owners Association, Inc. v Sears Nichols Cottages, LLC, an unpublished Michigan Court of Appeals opinion, the court held yet again that renting a residence on a short term basis violates covenants that lots will be used as a single family private residence and that no business of any sort would be conducted.
The opinion gives a good overview and analysis of the prior case law regarding short term rentals and restrictive covenants.
Association Only Required to Give Notice, Not Prove it was Received; Failure to Use Smith/Pirgu Framework Required Remand
In Sunflower Village Homes Assn v Lacy, an unpublished Michigan Court of Appeals opinion, the homeowners association filed suit against the homeowners for unpaid assessments together with interest, late fees, and attorney fees pursuant to the bylaws. The court entered a default against the defendants and Plaintiff moved for a default judgment, supporting the request for attorney fees with an exhibit of the work done by plaintiff’s attorney and a brief walking through the factors which the Michigan Supreme Court has held a court must analyze in determining an award of attorney fees.
The defendants opposed the motion and requested that the defaults be set aside, claiming as a defense that the defendants were not properly served with notice of the assessments. The court denied the request to set aside the defaults, entered a default judgment, but only awarded $500 of the requested attorney fees of over $3,000. Both sides appealed.
The appeals court held that the association bylaws only required notice to be mailed to the defendants, not actually received by them; thus, the claim they did not receive notice was not a meritorious defense.
The court also held that the case had to be remanded to the trial court for consideration of the Smith/Pirgu factors in deciding a reasonable attorney fee. The Michigan Supreme court has ruled that a trial court must “comprehensively review and state its findings with respect to all the factors in the Smith/Pirgu framework” in deciding attorney fees; failure to do so is an abuse of discretion.
Two Month Delay in Approving Handicap Modification Request Not Unreasonable
In Estate of Romig v Boulder Bluffs Condominiums, a published Michigan Court of Appeals opinion, the court held that Plaintiff’s claim of a violation of the Persons with Disabilities Civil Rights Act was barred by collateral estoppel.
A request was made to install a handrail along the front porch of a condominium unit. The intial request did not contain any information that the request was made on behalf of a handicapped person and was denied. When additional information including a doctor’s note was provided, the handrail was approved. The time period between the initial, unsupported request, and the approval, was two months. In the interim, the handicapped person fell twice.
The Plaintiff initially filed in federal court, which declined to take supplemental jurisdiction over the state law claim. Ultimately, the federal court held that the condominium association did not violate the Fair Housing Act, 42 USC 3601, because the delay between the first request and the eventual approval was not unreasonable.
Plaintiff then filed suit in state court. After summary disposition in favor of defendants in the trial court, affirmance by the Court of Appeals, and consideration by the Michigan Supreme Court, the case was remanded to the trial court to consider whether the federal decision barred Plaintiff’s claims under the doctrine of collateral estoppel. After additional findings of fact in the trial court, the court of appeals held the claim under the PWDCRA was barred by the federal court’s finding that the delay was not unreasonable. It also held that Plaintiff did not establish that the initial denial of the request was the result of discrimination.
While condominium associations should move promptly on a request for modification related to a handicap, the law does not require an instant decision. Consideration of a request is an interactive process and there is room in the process for deliberation.
Condominium Association Entitled to Attorney Fees in Appeals
In Copperfield Villas Association v Tuer, an unpublished Michigan Court of Appeals opinion, the appeals court held the trial court erred in failing to award the condominium association costs and reasonable attorney fees incurred in appeals of the case.
The appeals court parsed out the language of both the MI Condominium Act and the provisions of the condominium bylaws, including the meaning of “proceeding” and “successful.” Based upon the plain language of both, the association was successful in the proceedings, which included the appeals. The case was remanded to the trial court to determine reasonable attorney fees incurred in the appeals.
No Interest in Property? No Notice? Foreclosure Sale Not Subject to Automatic Stay
In In re Wright, an opinion issued from the United States Bankruptcy Court for the Eastern District of Michigan, the Debtor filed a Chapter 13 bankruptcy case the day before a condominium lien foreclosure sale. No notice of the bankruptcy filing was given to the Association until the day after the sale was held. The condominium unit was titled solely in the debtor’s husband.
The Association filed a motion to confirm the absence of any automatic stay as to the Association and the condominium unit. The debtor opposed the motion on the ground the debtor had an equitable interest in the unit and a possessory interest, both of which are property of the estate. The court granted the Association’s motion, on two independent grounds.
First, the debtor had no interest in the property. Although the debtor claimed an equitable interest under a theory that it was part of her “marital estate” or because she had a constructive trust against the property, the court rejected both of those arguments. The court held her possessory interest derived from permission of her owner-husband and the foreclosure sale did not interfere with that right.
Second, the court held, based upon Easley v Pettibone Michigan Corp, 990 F2d 905 (6th Cir 1993), the debtor unreasonably withheld notice of the bankruptcy filing and the Association would be prejudiced if the debtor could use the filing to avoid the sale after the fact.
Affidavit of Facts Sufficient to Set Aside Sheriff’s Deed
In 1373 Moulin, LLC v Wolf, a published Michigan Court of Appeals opinion, a mortgagor granted two mortgages on property. The mortgagor defaulted on the first and the mortgagee foreclosed. Before the redemption period expired, the mortgagee recorded an affidavit stating the mortgagor and mortgagee had entered into an agreement which, if fulfilled, would set aside the sale, that the mortgagor had fulfilled the condition, and that the sale was thus set aside. The mortgagor subsequently sold the property. The balance of the first mortgage was paid, but funds were held in escrow for payment of the second and never paid over to the holder of the second mortgage.
The second mortgagee subsequently sold the mortgagee to one of the defendants, who then foreclosed. The purchaser filed suit seeking to quiet title, claiming that the affidavit was ineffective to set aside the first mortgage foreclosure and that foreclosure extinguished the second mortgage. On cross motions for summary disposition, the trial court found that the affidavit was effective to set aside the first foreclosure and thus the second mortgage was not extinguished. The purchaser appealed.
The purchaser argued that, pursuant to Wilmington Savings Fund Society v Clare, discussed here, the affidavit was insufficient to set aside the sale. The court distinguished Clare holding that the affidavit in Clare did not state facts, but instead created a condition, while the affidavit in this case only recited that a condition had been made and fulfilled. The affidavit was upheld and the second mortgage was not extinguished.
When faced with a situation where an affidavit purporting to affect a foreclosure sale has been recorded, the purchaser should proceed cautiously.
Complaint to Set Aside Foreclosure Sale Must Be Filed within the Redemption Period
In TCF National Bank v Decker, an unpublished Michigan Court of Appeals opinion, the mortgagor defaulted under her mortgage. The bank foreclosed, and the redemption period expired. The bank then filed a complaint to recover possession of the property. The mortgagor filed counterclaims asserting fraud in the sale process, asking the court to set aside the sale or in the alternative for money damages.
The bank filed a motion for summary disposition and to dismiss the counterclaims, asserting the counterclaims were derivative of the foreclosure process and thus barred under Bryan v JPMorgan Chase Bank, which held that a mortgagor loses all rights to contest a foreclosure when the redemption period expires. The motion was granted and the mortgagor appealed.
On appeal, the appeals court held that an action to challenge a foreclosure sale must be filed within the redemption period. Once the redemption period expires, the mortgagor loses all rights in the property. Only if a suit challenging the foreclosure is filed prior to the end of the redemption period does a trial court have the power to equitably extend the redemption period. A court does not have the power to equitably revive a redemption period already expired.
“Proper Purpose” is a Low Bar
In Bafna v Echo Valley Condominium Association, an unpublished Michigan Court of Appeals opinion, the Plaintiff, a member in a condominium association, requested seven categories of records from the Association: (1) bills or invoices showing the cost of past litigation, (2) records related to swimming bands (to access the pool), (3) work orders for bulb replacements in his building, (4) board minutes from April to September 2019, (5) records relating to when his checks were received and posted to his account, (6) board minutes for 2018, and (7) financial statements for 2017 and 2018. The Association denied the requests on the basis Plaintiff did not state a proper purpose, leading to a lawsuit. The trial court granted summary disposition in favor of Plaintiff, ordering the Association to produce the documents. The Association appealed.
The Nonprofit Corporation Act requires the Association to produce records for reviewing and copying if a member states a proper purpose for the request. While the initial requests were hard to understand (English was apparently not Plaintiff’s native language, his complaint was much clearer. The appeals court held that the complaint could clarify the requests. The appeals court also held it need not consider whether a proper purpose was an implied requirement under the MI Condominium Act, which also contains a records review provision.
Regarding proper purpose, the appeals court held, based upon a case interpreting a basically identical provision of the Business Corporation Act, the legislature did not intend to erect a formidable obstacle to review of a corporation’s records. The court granted all seven of the requests, finding a proper purpose had been stated. With respect to the request for board minutes, the court stated “we can perceive no legitimate reason why any corporation would find it permissible to withhold its corporate Board meeting minutes from one of its shareholders/members.”
A dissenting opinion argued that the trial court and the court of appeals were wrong in considering the requests in light of the amended complaint.
An Association should take co-owner requests to review records seriously and allow the inspection unless there is a compelling reason to deny it. The court dismissed Association arguments that the co-owner was contentious, that providing the records serves only to empower a co-owner to complain without a remedy, or that decisions regarding swimming bands were within the control of the board. Records review is a part of the statutes and thus an administrative expense for an Association.