Real Property Notes Blog

Property Tax Repayment Agreements Unenforceable?

In Lancaster and York, LLC v Oakland County Treasurer, an unpublished opinion from the Michigan Court of Appeals, a delinquent real property owner entered into a repayment plan with the Oakland County Treasurer.  Notwithstanding the agreement, the treasurer foreclosed the property for unpaid taxes.  The property owner filed suit challenging the sale on the sole basis that there was an agreement for repayment of the taxes which the county breached.  The circuit court dismissed the case and the property owner appealed.

The Michigan Court of Appeals affirmed.  Contracts must be supported by consideration:  some promise, payment, or provision of goods or services by both parties to the contract.  Under the pre-existing duty rule, a party’s promise to provide performance that he is already otherwise required to provide—be it by statute, contract, or other enforceable duty—is not valid consideration to render an agreement an enforceable contract. Because the property owner had a pre-existing statutory duty to pay his property taxes, and because he promised nothing extra and paid nothing for the agreement, no contract was formed.

This opinion should make any delinquent taxpayer wary of entering into any sort of tax repayment plan with a municipality.  Any such agreement should require new consideration from the taxpayer, as well as an explicit agreement by the municipality that it will withhold the taxes from foreclosure.

Failure to Initial Changes to Offer to Purchase; No Contract

In LV204, LLC v Gatmaitan, an unpublished Michigan Court of Appeals Opinion, a buyer made an offer to purchase property reputed to be the Fisher family’s summer home.  The seller made come changes to the offer; a provision required the Buyer to initial each change and sign the counteroffer.  The buyer signed the document, but did not initial any of the changes.  The parties continued to correspond for two years, with the buyer adding additional requirements.  Finally, the buyer sued.  The trial court dismissed the case finding that, because the buyer never initialed the changes, there was no contract formed.

This case highlights an important point of contract law:  when a contract provides a specific method of acceptance, no contract is formed unless the acceptance is unambiguous and in strict conformance with the offer.  Only if an offer (or counteroffer) does not contain a specific form of acceptance can acceptance be inferred from conduct.  Signing alone was not sufficient; the counteroffer also required he initial each change.  Failure to do so was fatal to his claim that a contract was formed.

Agreement to Allow One Co-owner Exclusive Use of General Common Elements Enforceable

In Dorfman v Pierce Martin LLC, an unpublished Michigan Court of Appeals case, a six-unit condominium project was established, with four units characterized as residential and two units characterized as commercial.  The owner of the two commercial units requested approval of the use of approximately 365 square feet of general common elements for outdoor seating in connection with a restaurant, whose final character had not yet been finalized.  After informal discussions among the owners of the four residential units, the vice-president of the association issued a letter stating that the association approved the project and had obtained all necessary approvals from co-owners.  Once it was determined that the restaurant would serve alcohol, two of the owners of residential units challenged, claiming either that the letter was not properly issued because there was no formal meeting of co-owners, or that the grant was a violation of the bylaws because it was an improper conveyance of the general common elements. The trial court ruled in favor of the owner of the commercial units.

On appeal, the court held that there was no conveyance of the unit; only a change in use.  Under a provision common in many condominium documents, the association had the power to approve alterations to the common elements.

The court also rejected the argument that the approval was void because there was no formal meeting to vote on the matter.  The court noted that the evidence in the trial court showed that the four residential owners had agreed among themselves to act informally on association matters and had done so for other matters besides this one.  The court held that to require formal approval under the circumstance would be to elevate form over substance.

Disclosure Statement states “Seller has never lived at the property”: Buyer Has No Claim

In Celano v Hofstra, an unpublished Michigan Court of Appeals Opinion, Seller originally purchased lakefront property for her granddaughter and granddaughter’s boyfriend to live in.  Seller later sold the property to buyers.  Seller visited the property only once and never lived there.  The statutory Seller’s Disclosure Statement contained lines through the first two pages, with the notation “Seller has never lived at the property.”  The buyers sent an e-mail to the granddaughter asking “Can Seller fill out the Disclosure to the best of her ability?  They must know some information about the age of the roof, etc.”  In response, the granddaughter replied that seller was unaware of the age of the roof and “it will probably need a new one shortly.”  Buyer had an inspection of the property which revealed no issues.  Buyer closed.  Within a few months, severe flooding occurred at the property.  The neighbors informed buyer that the property was known to flood and that the granddaughter and boyfriend had troubles with flooding.  Seller’s seller also informed Buyer that he had experienced flooding.  Buyer sued, claiming Fraud, Silent Fraud, Negligent Misrepresentation, Failure to Disclose, and Breach of Contract.  The trial court, on summary disposition motion filed by the Defendant, dismissed the case.

On appeal, the Court of Appeals affirmed.  Fraud and negligent misrepresentation claims require that the defendant make an “affirmative misrepresentation.”  Since Seller made no representations about the condition of the property, Seller could not be held liable.  Silent fraud requires that the Plaintiff supress the truth which he had a legal duty to disclose.  Seller had a legal duty to disclose under the Michigan Sellers Disclosure Act, but Seller indicated that she had no knowledge of the condition of the property; Buyer was unable to adduce any evidence that Seller was aware of the flooding and failed to disclose it.  Further, Buyer could not prove reliance, because Seller disclosed nothing and Buyer had the property inspected.  Finally, because the purchase agreement provided that Buyer was buying the property “as is,” and because there was no change in the condition of the property from that disclosed in the Disclosure Statement, Seller did not breach the contract.

This case reinforces the warning “caveat emptor:”  “let the buyer beware."

© Steve Sowell 2018