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December 2017
 
 
Detroit Rental Property Ordinance Amended

By Nickolas M. Guttman, Zausmer August & Caldwell PC

The City of Detroit, by amending Chapter 9 of the Detroit City Code, is easing regulations on landlords who comply with ordinance requirements while cracking down on landlords owning noncompliant rental properties. All rental properties have always had to maintain a valid certificate of compliance, but that requirement was rarely enforced. In order to build stronger neighborhoods, the revised code will allow the city to suspend or deny a property’s certificate of compliance when (a) the property receives a blight violation or (b) property taxes are delinquent for one year or more. If a property owner violates either of these provisions or any other provision of Article I, the owner must renew the certificate annually for a three-year period. However, if a property owner has owned the property, stayed current on property taxes, and remained violation-free since January 1 of the preceding year, the owner needs to renew the certificate only once every three years for one- and two-family dwellings and every two years for multi-family dwellings.

Landlords receiving a suspension or denial of a certificate of compliance should not delay. Requests for hearings must be submitted in writing within seven days of the suspension or denial. The city will schedule a hearing pursuant to a timely request no later than 30 days after receipt. If a request is not made within seven days, the suspension or denial is deemed final. Perhaps most importantly, the ordinance prohibits landlords from collecting rent without a valid certificate of compliance and tenants of such properties must pay rent into an escrow account. If the landlord does not obtain a certificate within 90 days, the tenant receives the escrowed rent. This process continues every 60 days until the landlord obtains a certificate of compliance.

 
 
 
 
Individuals Only: Limitations on Personal Residence Exemption Eligibility

By Jonathan L. Kirkland, Abbott Nicholson PC

PACEPractitioners should advise their clients to proceed with caution when transferring property to related business entities.

In Alli v. Department of Treasury, (Mich App No. 333915, October 10, 2017, unpublished) the Michigan Court of Appeals held that “the definition of an owner eligible for a personal residence exemption under MCL 211.7cc does not include business entities.”

The ruling prevented a limited partnership from claiming a personal residence tax exemption. See also VanderWerp v. Plainfield Charter Twp., 278 Mich App 624, 629; 752 NW2d 479 (2008) holding that a limited liability company was not eligible for the homestead exemption because it was not an individual.

The Alli court reasoned that the limited partnership “was not an individual and, thus not an owner” eligible for a personal residence exemption. Under MCL 211.7cc(1), “a tax exemption is available to the owner of a principal residence.” The court stated, “MCL 211.7dd(a)(i) defines an owner as a ‘person who owns property or who is purchasing property under a land contract.’ As it relates to section 7cc, a person is ‘an individual[,]’ MCL 211.7dd(b), i.e., ‘a single human being’” (quoting VanderWerp, 278 Mich. App. at 630 n 3, quoting Random House Webster's College Dictionary (2001)). Therefore, “the definition of an owner eligible for a personal residence exemption under section 7cc does not include business entities.”

Practitioners should advise clients they will be ineligible for the personal residence tax exemption if they transfer ownership interest of a primary residence to a business entity. The court’s reasoning may also prevent eligibility if the client transfers ownership of a primary residence to a revocable trust or qualified personal residence trust if the client is not the grantor of the trust. MCL 211.7dd(a)(vi).

 
 
 
 
 
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