Court of Appeals Opinion on Mortgagee Liability for Assessments

The Michigan Court of Appeals issued an opinion on March 18, 2014, determining that a mortgagee’s liability for assessments after foreclosure of a mortgage accrues as of the date of the sheriff’s sale, not as of the date of expiration of the redemption period.  This has been a bone of contention between condominium associations and mortgagees for as long as I have been practicing law.

The Michigan Condominium Act provides that a mortgagee of a unit is not liable for assessments which accrued prior to the mortgagee’s “acquisition of title” to the condominium unit through foreclosure.  In a foreclosure by advertisement (the preferred method of foreclosing a mortgage), there is a redemption period after the date of the sheriff’s sale, usually six months.  Mortgagees have argued that, because the co-owner/mortgagor may redeem the property during that six month period, the mortgagee does not acquire title until the end of the redemption period.

After analyzing the case law and statutes, the Michigan Court of Appeals held that the foreclosing mortgagee acquires equitable title on the date of the foreclosure sale, even though it does not acquire indefeasible title until the end of the redemption period.  It is the acquisition of any form of title which triggers liability under the Michigan Condominium Act.

This is a major decision for condominium associations, finally putting to rest mortgagee arguments regarding when liability for assessments accrues.

A copy of the opinion is available at <http://www.michbar.org/opinions/appeals/2014/031814/56638.pdf>.

© Steve Sowell 2017