Real Property Notes Blog

“Successor” to the developer

In Walnut Brook Dev. Co. v Deflorio, an unpublished Michigan Court of Appeals decision, the court found that a corporation that purchased all of the assets of the developer of a condominium, but did not assume the liabilities, was nonetheless a “successor” of the developer such that it could exercise a right of first refusal reserved in the condominium documents to the developer.

It appears that the court of appeals will be fairly liberal in finding successorship to a failed developer.  While no court has yet considered the meaning of “successor developer” as defined in the Michigan Condominium Act, this case suggests that a “successor developer” under the Act likely will have all of the rights of the original developer.

Affidavit of Lost Mortgage can be used instead of original mortgage

In response to a bankruptcy opinion issued last year, the Michigan Legislature has passed Public Acts 347, 348, and 349 of 2014 providing that a full copy of a mortgage can be recorded with an affidavit setting forth the circumstances of the execution of the mortgage.  If such an affidavit is recorded, then the mortgage becomes a lien against the property as of the date of recording of the affidavit.  The acts specify that they apply to affidavits recorded before the date of the acts as well as affidavits recorded afterward.

Last year a bankruptcy case held that, until an original mortgage is actually recorded, no lien is created against the real property.  An affidavit itself does not satisfy the recording requirements.  The bankruptcy court allowed a chapter 7 trustee to avoid the mortgage and sell the property to pay a dividend to creditors.  The acts are clearly a response to that ruling.

© Steve Sowell 2018