Real Property Notes Blog

Owner Not Personally Liable for Taxes which Accrued Prior to Ownership

Public Act 189 of the Public Acts of 2017, effective November 21, 2017, adds a provision that an owner of property is not personally liable for taxes which accrued against real or personal property before the owner became the owner.  The owner may raise this defense in an action for collection regardless of whether he raised the issue before the local board of review.

PRE Exemption Not Lost By Renting Residence for More than 14 Days

In Rentschler v Twp. of Melrose, a published Michigan Court of Appeals opinion, the taxpayer claimed a principal residence exemption on property located in Boyne City.  The township issued a notice of disallowance of the exemption on the basis that the owner had rented the property out for more than 14 days in any calendar year, relying upon guidelines issued by the Michigan Department of Treasury.  The owner filed an appeal with the Michigan Tax Tribunal, which found that the owner used the property as his principal residence, that it was residential property, and that he had occupied the property for the majority of the years in question.  Nevertheless, based upon the guidelines, the Tribunal found that the owner did not qualify for the exemption based upon the guidelines.

The Court of Appeals reversed, finding that the owner met all of the requirements of the statute.  The court also found the guidelines, which do not have the force of law, to be in error.  The guidelines were based in part on federal tax laws, which allow a homeowner to deduct rental expenses against rental income if the homeowner’s principal residence is rented for more than 14 days in any calendar year.  However, the federal statute does not disqualify the home as residential; it merely creates a dual character (residential and rental use) for the property.  Because the guidelnes attempt to impose a requirement not contained in the statute, the guidelines fail and the owner was entitled to the exemption.

Wife Signs Note, Both Husband and Wife Sign Mortgage; Mortgage Valid

In Pierce v Partners for Payment Relief DE III, LLC, an unpublished Michigan Court of Appeals opinion, the wife only signed the promissory note, but both husband and wife signed a mortgage on their property.  The mortgage had stamped under husband’s signature the phrase “For the purpose of subordinating all rights and interest including dower/homestead rights.”  The wife died and no estate was opened.  The husband subsequently died; his estate was opened and the personal representative quit claimed the property to their son.  The mortgagee subsequently started foreclosure proceedings.  The son filed suit seeking to stop the foreclosure and invalidate the mortgage, on the basis that the property was held as tenants by the entirety and, since husband never signed the promissory note, the debt and mortgage were extinguished upon the wifes death.  The trial court agreed.

On appeal, the Court of Appeals reversed.  Because husband signed the mortgage subordinating all rights and interest in the property jointly with his wife, the property was properly security for the wifes debt even though the husband was not liable for the debt.

No Irregularity in Foreclosure Proceeding, No Relief

In Acoff v US Bank NA, an unpublished Michigan Court of Appeals opinion, the mortgagors challenged the foreclosure of their home.  The bank filed a motion for summary disposition under MCR 2.116(C)(8) on the basis that their complaint failed to state a claim on which relief could be granted.  The trial court granted the motion and on appeal, the decision was affirmed.

A mortgagor seeking to set aside a foreclosure sale must plead and prove (1) fraud or irregularity in the foreclosure proceedings, (2) prejudice to the mortgagor, and (3) some causal connection between the fraud or irregularity and the prejudice. 

The mortgagors’ complaint alleged that the property was not posted with the foreclosure notice as required by statute; however, their complaint did not allege either prejudice or a causal connection.  

In an interesting aside, the court noted that the mortgagors waited until after the redemption period to expire which, under Bryan v JPMorgan Chase Bank, meant they lacked standing to challenge the foreclosure.  The court noted that, although Bryan was binding precedent, at least one federal court opinion held that it had jurisdiction to hear a post-redemption claim notwithstanding Bryan.  However, because the lower court did not reach the issue, the appellate court did not have to address it, either.

Whose Postmark Matters?

In Arbor Crossings Apt LLC v Twp. of Muskegon, an unpublished Michigan Court of Appeals opinion, the Plaintiff sought to file a petition with the Michigan Tax Tribunal.  The relevant statute provides that a petition is considered filed if "The petition is postmarked by the United States postal service on or before May 31 of the year.  The petition was mailed to the Tax Tribunal.  It bore a postal machine postmark of May 31, and a USPS postmark dated June 1.  The Tax Tribunal dismissed the petition as untimely.

On appeal, the petitioner argued that the postal machine postmark should be treated as the date for purposes of the statute.  The Court of Appeals disagreed, holding that the statute unambiguously treats the word postmarked as a verb in the phrase postmarked by the United States postal service, and thus the postmark must have been applied by the United States postal service.  Because the mark applied by the United States postal service was June 1, the petition was untimely.

© Steve Sowell 2018