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SBM Real Property Law Section eNewsletter

June 2011

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Co-Editors:
Howard A. Lax, Lipson, Neilson, Cole, Seltzer & Garin, PC

Patricia Paruch, Kemp Klein Law Firm

 

Certainty Returns to Great Lakes Development

By Jeffrey R. Dobson, Jr., Dickinson Wright PLLC

The Michigan Court of Appeals' decision in Burleson v. Department of Envtl. Quality
(Mich App No. 292916, May 12, 2011) resolves an important dispute about the DEQ's jurisdiction over setbacks from the Great Lakes' shorelines. My article discussing in detail the history of Burleson appears in the May issue of the Michigan Bar Journal. Landowners should appreciate the clarity this ruling lends to development rights.

The DEQ regulates construction setbacks from the Great Lakes' shorelines in accord with the Great Lakes Submerged Lands Act (GLSLA). MCL 324.32502. The GLSLA contains a fixed-datum "ordinary high water mark" elevation for each Great Lake. Id. Traditionally, the State did not regulate construction above these marks.

In 2008, the DEQ asserted jurisdiction over land above a GLSLA ordinary high water mark and below what the DEQ deemed the "natural ordinary high water mark," which changes from time to time in accordance with water levels.

The strongly-worded Burleson opinion rejected the DEQ's assertion of jurisdiction. But, an equally firm dissent indicates that this case may not be over yet.

While the fixed-data ordinary high water marks found in the GLSLA may be artificial and inflexible, they do provide certainty as to development rights.

Practice Tips
If you are representing a client considering the purchase or development of Great Lakes coastline property, obtain a precise land survey delineating the GLSLA's ordinary high water mark as part of the due diligence process.

The cautious practitioner should further recommend obtaining a professional opinion as to the "natural ordinary high water mark," and then price or allocate risk accordingly.

Always check all State, county, and municipal regulations. Do not assume a property is developable just because there is space above the GLSLA's ordinary high water mark.

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July 20–23, 2011
2011 Summer Conference
Finding the Silver Lining: Real Estate Opportunities Arising from the Economic Crisis
Grand Traverse Resort & Spa, near Traverse City

Another Casualty of the Foreclosure Crisis

By George Sumnik, Jaffe Raitt Heuer & Weiss, PC

In Residential Funding Co.,LLC v. Saurman, (Mich App No. 290248, April 21, 2011) Michigan's Court of Appeals concluded that the Mortgage Electronic Registration System (MERS) as "nominee for the lender" did not have a sufficient interest in the property to foreclose by advertisement. The "foreclosure by advertisement" language in the Michigan statute is unambiguous--only the owner of the debt, the owner of an interest in the debt, or the mortgage servicing agent can foreclose by advertisement. MCL 600.3204(1)(d).

The Saurman facts are important. After MERS foreclosed, MERS transferred its interest in the properties to the holders of the notes, who then evicted the borrowers. The circuit court affirmed. Because it was not the owner of the debt or the servicing agent, MERS could not employ the streamlined foreclose process of MCL 600.3201 et seq. The Saurman court concluded that MERS' only interest in the properties was security for the promissory notes. The Court strictly construed the language of MCL 600.3204(1)(d) to find that the foreclosure was void ab initio and the eviction proceeding was improper because the plaintiffs did not own the properties.

The Saurman holding will impact both residential and commercial mortgage foreclosures because it concludes that a foreclosure sale is void where the lender does not rigidly adhere to MCL 600.3204(1)(d). Saurman can form the basis of objections to a foreclosure by advertisement, a challenge to subsequent title, and claims for breach of title warranties.

In foreclosing by advertisement, always ask: who owns the note, who is the servicing agent, and who has the right to foreclose by advertisement. When in doubt, turn to a judicial foreclosure where these factual matters can be properly adjudicated, ensuring complete confidence in the resulting title.