SBM Real Property Law Section eNewsletter

July 2014

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Co-Editors:
Howard A. Lax, Bodman PLC

Patricia Paruch, Kemp Klein Law Firm

Blight vs Right; Demolition of Unsafe Buildings

By David Pierson, McClelland & Anderson, LLP

The Supreme Court decision in Bonner v. City of Brighton, 495 Mich. 209 (April 24, 2014), presents the tension between municipal interests in removing unsafe structures and an owner's right to preserve property, not demolish it. The case also shows how differently two courts can interpret an ordinance and the "right" at issue.

If Brighton finds the cost to repair an unsafe structure exceeds true cash value on the tax roll, repair is presumed unreasonable and demolition ordered; the owner has no right to repair.

Michigan substantive due process tests whether regulation unreasonably or arbitrarily restricts an owner's right to use her property. The lower courts agreed that the ordinance violates substantive due process in requiring the owner to prove the cost of repair is less than true cash value. Either repair or demolition will eliminate the danger; Michigan precedent favors repair over forced demolition. The COA explained that an owner may prefer repair for sentimental, familial, or historic reasons and cost is irrelevant if the owner is willing to repair.

The Supreme Court reversed, finding that a "right to repair" is not a fundamental right; the decision of the municipality to choose one over the other is a policy judgment—"not a constitutional mandate." The ordinance is not arbitrary because it does not completely prohibit a property owner from repairing an unsafe structure.

Strikingly, the Supreme Court read into the ordinance an option for the owner to show cultural, historical, familial, or artistic reasons to repair. The essential premise of the COA was that the ordinance denies due process because it denies an owner the option to repair "simply on the basis that the city deems repair efforts to be economically unreasonable." The decision evinces remarkable unanimity on the need to address blight.

Limited Space Available

July 16-19, 2014
Summer Conference 2014
Grand Traverse Resort & Spa

Foreclosure Mediation Repeal and Inspection Process Update

By Tobias Lipski, Schneiderman & Sherman, PC

PA 125 of 2014 eliminates all Michigan loss mitigation/mediation pre-foreclosure requirements (formerly MCL 600.3204(4-7); MCL 600.3205, 600.3206). Servicers must continue to comply with the federal CFPB early intervention and loss mitigation procedures (12 CFR 1024.39/41), which require live contact with the borrower within 36 days of delinquency and written notice of loss mitigation options within 45 days. The federal rules also prohibit foreclosure before 121 days and prohibit foreclosure filing/publication/sale if borrower has "applied" (as defined by 12 CFR 1024.41) for loss mitigation alternatives. See CFPB Small Entity Compliance Guide.

PA 125 also outlines the procedures for a sheriff's sale purchaser to lawfully inspect the property's interior, and to commence an action for possession during the redemption period.  The purchaser must serve a notice of purchaser's right to inspect and a separate notice of inspection. If the purchaser's inspection reveals no issues, he must provide either a subsequent notice requesting information on the property's condition or, if the inspection reveals damage, a notice of intent to commence an action for possession. MCL 600.3237; MCL 600.3238.

Lastly, PA 125 details certain notice and cooperation requirements (e.g. intent to vacate) for foreclosed mortgagors. Failure to comply creates a rebuttable presumption of liability for damage if purchaser is PA 125 compliant. MCL 600.3238(2)-(3).

Practitioners moving forward with foreclosures previously on hold for compliance with the repealed laws should ensure the servicer takes the actions necessary to avoid claims for dual tracking under the CFPB rules. With respect to the new amendments affecting the redemption period, practitioners should note that purchasers must provide actual notices. The success of the district court action will depend heavily on the proof of notice and objective proof of damage as defined by MCL 600.3238.

Interested in writing a future article for the e-Newsletter?
Please contact co-editors:
Howard Lax at HLax@bodmanlaw.com or Patricia Paruch at Pat.Paruch@kkue.com.

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The views and opinions expressed in these articles are those of the authors, and they do not reflect in any way the positions of the State Bar of Michigan or the Real Property Law Section. These columns are meant for informational purposes only and should not be construed as legal advice.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, by any person for the purpose of (i) avoiding tax-related penalties or (ii) promoting, marketing, or recommending to another person any transaction or matter addressed in this communication.