Real Property Notes Blog

Violation of local ordinance may give rise to cause of action against Condominium.

In Spigner v Yarmouth Commons Association, a non-co-owner resident slipped and fell in the snow on the roadway of the association as she was attempting to access her mailbox.  She alleged a claim against the condominium and the management company under MCLA §559.241, which provides that a "condominium project shall comply with applicable local law, ordinances, and regulations.”  She alleged that the condominium violated a local ordinance which provides that a property owner shall keep "sidewalks, walkways, stairs, driveways, parking spaces and similar areas shall be kept in a proper state of repair, and maintained free from hazardous conditions, by failing clear the snow away from the mailboxes.

The court of appeals noted that there was no issue of fact that she fell in the roadway, not on a sidewalk, walkway, stair, driveway, or parking space and thus the local ordinance did not apply.  The court held that it need not reach the issue of whether MCLA §559.241 provides a private cause of action.

Frankly, this author thinks that the association got a big pass on this issue, as the court could just as easily have held that the private road within the condominium was a driveway or parking space or similar area which the association had a duty to maintain.  This section of the Michigan Condominium Act will undoubtedly be used by personal injury lawyers again.

Denial of unemployment benefits violation of Medical Marihuana Act

In Braska v Challenge Mfg., a reported Michigan Court of Appeals case, three claimants were fired by their employers when they tested positive for marijuana.  Each employer had a “zero tolerance” policy.  The claimants filed for unemployment benefits.  In each instance, there was no evidence presented that the employees used marijuana on the job, were under the influence of marijuana on the job, or that they refused to submit to a drug test.

The court held that denial of unemployment benefits was a violation of the Michigan Medical Marihuana Act’s prohibition on imposition of a civil penalty for using medical marijuana.

The viewer may be wondering why this is mentioned on a real property blog?  The court specifically reserved, and did not decide, the issue of whether the employer’s firing itself, an action by a private actor, was covered by the MMMA, but the court reaffirmed that the use of marijuana remains illegal.  Thus, the question whether use of medical marijuana would violate a restriction prohibiting “illegal” activity in a condominium or homeowner association remains to be decided.

Summer Resort Associations can have perpetual existence

In Hogg v Four Lakes Association, a published Michigan Court of Appeals decision, the court held that the provisions of the General Corporation Act (enacted after the Summer Resort Association Act and, more significantly after the 1963 Constitution was adopted) control over the provisionsn of the Summer Resort Associations Act and allow summer resort association to have perpetual existence rather than an existence limited to 30 years.

The 1908 Constitution limited any corporation to a term of 30 years.  The Summer Resort Association Act, passed in 1929, contained a provision limiting association existence to 30 years.  The 1963 Constitution eliminated the 30 year limitation.  The General Corporation Act, passed in 1968, provided, in pertinent part, that "Notwithstanding any other provision of law, the term of existence of every domestic corporation heretofore incorporated or hereafter incorporating under any law of this state may be perpetual or may be for a limited period of time, as fixed by its articles, or amendment thereto made before the expiration of its corporate term.

The Court of Appeals found that the later provision of the General Corporation Act was sufficient to abrogate the provision of the earlier-adopted Summer Resort Association Act that limited resort associations to 30 years.

Interestingly, the same issue had been decided by another panel of the court of appeals in 2013, but since that decision was unpublished, this court was not bound to follow it.

Landlords can no longer turn a blind eye to crime committed on rental property

The Michigan Legislature recently amended the civil forfeiture statutes regarding the circumstances under which real property can be forfeited because it is "the proceeds of a crime, the substituted proceeds of a crime, or an instrumentality of a crime.”

An “Instrumentality” merely means that the property was used to store stolen goods, or that the crime was planned at that location, or that the property is otherwise somehow connected directly to the crime (e.g., the site of a crime).

The statute provides that property is not subject to forfeiture if "The owner of the property did not have prior knowledge of, or consent to the commission of, the crime, if the lack of prior knowledge is not the result of the owner’s willful blindness” OR if "Upon learning of the commission of the crime, the owner of the property served written and timely notice of the commission of the crime upon an appropriate law enforcement agency, and served a written and timely notice to quit upon the person who committed the crime."

The “willful blindness” language and the second section are both new.  It means that landlords who suspect that a crime is occurring on the rental premises must take some action:  ignoring the situation may result in loss of the property.

Civil forfeiture is a harsh remedy; it results in total loss of the property without compensation. The burden of proof is lower than in criminal trials.  In a criminal trial, the prosecutor must show guilt beyond a reasonable doubt.  In a civil forfeiture, the prosecutor must show knowledge or willful blindness by a preponderance of the evidence.

Court of Appeals reaffirms high standards necessary to challenge a foreclosure

In Diem v Sallie Mae Home Loans, Inc., a published Michigan Court of Appeals Opinion, the court considered a challenge to a mortgage foreclosure filed by the mortgagor three days before the redemption period expired.  

The court fairly succinctly set forth the elements of a claim challenging a foreclosure sale.  

  1. Fraud or irregularity in the foreclosure proceeding.
  2. prejudice to the mortgagor.
  3. a causal relationship between the alleged fraud or irregularity and the alleged prejudice.

The court found that even assuming that the allegations of fraud or irregularity were true, the second and third elements had not been pled.  The mortgagor could not state how he had been prejudiced by the defects he alleged in the foreclosure proceedings.  Thus, there was no causal relationship.

It is extremely difficult in Michigan to set aside a foreclosure sale.  Minor irregularities in the sale procedure, even fraud, will not be sufficient absent some actual prejudice which prevented the mortgagor from being in a better position to protect his interest in the property.

Easements and Land Contracts

In Wells Venture Corp. v GTR Glacier Club, LLC, the Michigan Court of Appeals discussed when and whether an easement granted by the purchaser of a land contract remained valid when the land contract was subsequently forfeited and the seller regained title.

Wells Venture owned two contiguous parcels of property:  one consisting of undeveloped land and the other a golf course.  It sold the undeveloped land outright in 2002, then sold the golf course on a land contract in 2005.  In 2007, a detention pond and drainage system were installed on the golf course parcel, and the golf course buyer purportedly granted an easement to the owner of the undeveloped parcel.  The land contract was subsequently forfeited in 2010 and Wells Venture regained title to the golf course.  In 2011, Wells Venture filed suit seeking removal of the pond and drainage system, alleging among other theories trespass and quiet title.

The trial court granted summary disposition to the owner of the undeveloped parcel, finding that the injury to Wells’ title occurred in 2007 and the statute of limitations for trespass passed three years later, before the lawsuit was filed.

The court of appeals reversed.  The court of appeals noted that, upon sale of the golf course on land contract, Wells Venture retained only legal title as security for payment of a personal debt:  the land contract.  A land contract seller’s interest is personal property, not real property.  It did not ripen back into real property until the land contract was forfeited in 2010.  Thus, the earliest that trespass on Wells Venture’s interest could have occurred was when the land contract was forfeited.  Thus, the trespass action was timely.

The court also noted that there are only four ways to grant or obtain an easement:  by express grant, by reservation or exception, by covenant or agreement, or by adverse possession.  To the extent that the owner of the undeveloped land claimed that Wells Venture agreed to the easement by tacit consent, this claim was invalid as a matter of law.  Because there was an issue of fact as to whether an express grant of easement was made which the trial court never reached, the court remanded the matter.

In a footnote, the court also noted that Wells Venture argued that, upon forfeiture of the land contract, any easement granted by the land contract buyer would have been terminated as a matter of law.

This case points out the hazards of negotiating an easement when a land contract is involved.  The person seeking the benefit of an easement needs to obtain a grant from both the land contract seller and the land contract vendor.

Assignment of Land Contract cannot be used to avoid personal liability

In Beauchamp v Schramm, an unpublished Michigan Court of Appeals opinion, the buyers on a land contract formed a corporation and assigned their buyer’s interest in the land contract to the corporation after the seller had declared a default and started land contract foreclosure proceedings.  The land contract permitted assignment.  The trial court dismissed the claims against the original buyers based upon the assignment.

The court of appeals reversed, finding that the assignment was made in bad faith with the intent to avoid personal liability for the deficiency upon sale of the property, likening the assignment to a fradulent conveyance under the Michigan version of the Uniform Fraudulent Conveyance Act.  The court reversed and remanded for a trial on the buyer’s liablity.

The interesting thing about the court’s opinion is that it raised the issue of the Uniform Fraudulent Conveyance Act without the issue having been raised or briefed by either party.

The issue could have been avoided entirely with appropriate drafting of the assignment clause.  Rather than simply providing that the contract could be assigned, the contract should have provided that it could be assigned, but that the buyers are not released from their liability under the contract without consent of the sellers.

150-day bar from refiling upheld despite condominium’s appeal

In Edwards v Wexford Parkhomes Condo. Assn (In re Edwards), Ms. Edwards’ second bankruptcy case was dismissed and the court entered an order barring her from filing another case for 150 days from the dismissal.  Although Ms. Edwards initially appealed the dismissal, she dropped her appeal.  The association cross-appealed on the basis that the bar should have been longer than 150 days.

The district court held that the bankruptcy court did not abuse its discretion in imposing a 150 day bar.  The length was within the discretion of the bankruptcy court and the decision would not be overturned on appeal.

Opposing counsel not required to drive defendant to court.

In Bear Creek Village Association v Bajor, an unpublished Michigan Court of Appeals case, the defendant representing himself, appealed from the entry of a default judgment entered for unpaid condominium assessments.  The default judgment was entered on motion of the Plaintiff association when the defendant failed to appear twice for status/settlement conferences.

On appeal, the defendant claimed that his failure to appear was not willful, because he had car troubles, had requested that Plaintiff’s counsel drive him to court and Plaintiff’s counsel had refused.  The court pointed out that the defendant had other alternatives besides counsel giving him a ride:  he could have taken a bus, asked a relative to drive him, or even requested a telephone conference instead.

The defendant also failed to show any manifest injustice in the entry of the judgment.  The court had already granted the Plaintiff summary disposition on the issue of liability and the only remaining claim was damages.  Plaintiff submitted satisfactory proof of the balance owed in connection with the motion for default judgment and the defendant apparently submitted nothing to controvert it.

6th Circuit Court of Appeals sets standards for evaluation of a “reasonable modification” claim under FHA

In Hollis v Chestnut Bend Homeowners Assn., a Tenesee Case, homeowners with two Downs Syndrome children submitted a request to add a sunroom to their home to accommodate their children’s disabilities.  The association rejected the request on the basis that request included a metal roof and the association preferred shingle roofs.  The homeowners subsequently sold their home and moved out of the subdivision, but filed suit against the association, both in their individual names and as “next friend” of their two disabled children, claiming a violation of the Fair Housing Act.

The trial court granted summary disposition to the association on the basis that the homeowners did not show that the association’s denial was pretextual.  Also, the court held that the homeowners did not have standing apart from their children.

The 6th Circuit reversed and remanded.  The court of appeals held that the trial court used the wrong standard in assessing the claim and set the standards that should be used when examining a “reasonable modification” claim under the Fair Housing Act.  It also held that the definition of “aggrieved person” under the Act was broad enough to include the parents has separate claimants.

The opinion is instructive in several respects.  First, it notes that there are four theories of claims under the Fair Housing Act:

  • Disparate intent.
  • Disparate impact.
  • Failure to make a reasonable accommodation.
  • Failure to permit a reasonable modification.

Second, the opinion sets out the elements of a cause of action for failure to permit a reasonable modification under the FHA:

  1. Reasonableness of the requested modification.
  2. Necessity of the requested modification.
  3. That the plaintiff suffers from a disability.
  4. That the Plaintiff requested an accommodation.
  5. That the request was denied.
  6. That the defendant knew or should have known of the Plaintiff’s disability at the time the request was denied.

An association faced with a request for modification to accommodate a handicapped person should immediately seek legal counsel to guide the association through the appropriate procedures to consider and act on the request.  Failure to allow a reasonable modification request can be quite expensive.

FNMA only liable for post-sale assessments

In Federal National Mortgage Association v Villa Del Lago Condo. Assn, an unpublished Michigan Court of Appeals opinion, the court of appeals held that a condominium association was only able to collect from FNMA assessments which accrued subsequent to a foreclosure sale, in line with the decisions rendered previously and discussed here and here.  The court also held that FNMA’s slander of title claim was properly dismissed, because there was no bad faith in the recording of the association lien.

The law now seems fairly settled in Michigan that a foreclosing first mortgage lender, or its assigns and grantees, are liable for assessments only from the date of the mortgage foreclosure sale forward.

Lot owner submits plans for dock which are approved, but constructs different dock. Dock ordered removed

In Lottievue Improvement Association v. Kim, an unpublished Court of Appeals opinion, a homeowner submitted plans and specifications for a dock to the association for approval.  However, after approval but before construction the homeowner decided to move the location of the dock and to increase its length by 50%.  Revised plans were never submitted to the association.  Upon construction, the association filed suit seeking removal of the dock.

The court of appeals held that there was no question of fact that approval was required, and that plans for the dock as actually constructed were never submitted to the association, the dock was in violation of the declaration of restrictions. the court of appeals affirmed the trial court’s order requiring removal of the dock.

This case highlights the need for a homeowner to strictly comply with the approval requirements of a declaration of restrictions.  Failure to comply can result in expensive litigation, and ultimately removal of the struture in violation of the restrictions.

© Steve Sowell 2018