Real Property Notes Blog

Tax-foreclosing county not liable for condominium assessments

In Harbor Watch Condominium Association v Emmet County Treasurer, a published Michigan Court of Appeals opinion, the court held that a condominium association could not recover unpaid condominium assessments from a county from the time of foreclosure until the county sold the units.  Because the county was not a voluntary purchaser, because the county was restricted by statute in the use of funds generated by a tax sale, and because the properties ultimately sold for less than the unpaid taxes, the court held that the county was not liable.

The opinion raises several questions in the author’s mind.  

First, it appears that the association sued only the county for the unpaid assessments and not the purchaser of the units. Since a purchaser who does not request a statement from an association prior to conveyance of a unit is fully liable with the seller, why was the purchaser not a party defendant?

Second, why had the association apparently not recorded a lien against the unit?  A lien would have required the county to pay the assessments, or would have put the purchaser on notice of the obligation.

At any rate, it appears clear that a county cannot be held personally liable for assessments which accrue while it holds title pursuant to a tax foreclosure.  It remains unclear whether the assessments are simply uncollectible at all, or whether they continue to accrue and can be collected from the purchaser from the county.

Recording Saurman affidavit did not void mortgage foreclosure sale

In Trademark Properties of Michigan, LLC v Fannie Mae, a published Court of Appeals decision, the original owner granted a mortgage on a condominium unit.  The mortgagor defaulted and the mortgage was foreclosed.  Fannie Mae was the successful purchaser at the sale.  The condominium association subsequently recorded a lien for nonpayment of assessments and foreclosed the lien by advertisement.  Trademark was the successful purchaser.  Before the redemption period on the lien foreclosure expired, the attorney for Fannie Mae recorded an affidavit claiming that, pursuant to the decision in Residential Funding Co., LLC v Saurman, 292 Mich.App. 321; 807 N.W.2d 412 (2011), the sale was void ab initio.

However, the Court of Appeals decision was reversed by the Michigan Supreme Court.  Residential Funding Co, LLC v Saurman, 490 Mich. 909; 805 N.W.2d 183 (2011). Trademark sued to quiet title, claiming that the affidavit was not sufficient to set aside the sheriff’s sale.  The trial court granted summary disposition for Fannie Mae, but the Court of Appeals reversed.

The Court of Appeals did not specifically address whether an affidavit to expunge a sheriff’s sale was effective to do so.  Instead, the court held that, since the Supreme Court decision held that Saurman-type foreclosures were not void, the affidavit was ineffective because the sale was valid.

The author hopes that the Court of Appeals eventually squarely address the issue of whether an affidavit is sufficient to expunge a sheriff’s sale validly held.  Mortgagees use these frequently to set aside foreclosures for a multitude of reasons; however, prior Michigan case law has held that a validly held sheriff’s sale cannot be set aside absent fraud or some irregularity in the sale process.  For Michigan condominiums, the difference between a sale set aside and a valid sale can mean years of assessments that are collectible from a solvent bank rather than uncollectible from an insolvent co-owner.

© Steve Sowell 2018