Home > Uncategorized > Real Estate Professionals: New Michigan Law Can Extinguish Redemption Rights

Real Estate Professionals: New Michigan Law Can Extinguish Redemption Rights

Real estate law is complicated.

 

I am just going to throw that out there.

 

Particularly when dealing with a mortgagor (borrower’s) rights associated with the redemption period at a foreclosure sale.

 

I. Purchasers at Foreclosure Sales – what do they own?

In general, if a third party is the bidder at a foreclosure sale, they have certain restrictions on their ownership. They get a sheriff’s deed.

 

That deed doesn’t ultimately “vest” them with full legal title until the redemption period expires. Until that “vesting” occurs, Michigan Courts have described a purchaser’s rights as “equitable title” while legal title still remains with the borrower/homeowner/mortgagor.

 

II. Answer: “Equitable Title” Subject to a Possible Redemption by the Homeowner

 

The sheriff’s deed becomes “void if the mortgagor, the mortgagor’s heirs or personal representative, or any person lawfully claiming under the mortgagor or the mortgagor’s heirs or personal representative redeems the entire premises sold by paying the amount required” prior to the redemption period expiring. MCL 600.3240.

 

Therefore there is this period of time, typically ranging from 1 month to 1 year, where the owner of the sheriff’s deed does not have complete legal title.

 

III. This Creates Problems for the Purchaser

 

Obviously, this causes problems from the purchaser’s point of view.

 

How to get access to the property to rehabilitate it, improve it, etc…?

 

 

IV. Enter: New Law To Extinguish Redemption Rights if Property is Damaged and Remains Unrepaired

 

A new Michigan law became effective January 10, 2014 and provides a mechanism to cut off the redemption period of a home owner who is allowing their property to become blighted.

 

 

Under MCL 600.3240(13):

” After foreclosure sale and periodically throughout the redemption period, the purchaser at the sale may inspect the exterior and interior of the property and all ancillary structures. If inspection is unreasonably refused or if damage to the property is imminent or has occurred, the purchaser may immediately commence summary proceedings for possession of the property…A court shall not enter a judgment for possession…if, before the hearing for possession, the mortgagor repairs any damage to the property that was the basis for the action. If a judgment for possession is entered in favor of the purchaser, the right of redemption is extinguished and full title to the property vests in the purchaser.
The statute provides a non-exhaustive list of what may qualify as damages sufficient to allow for a lawsuit extinguishing redemption rights:
  • The failure to comply with local ordinances regarding maintenance of the property, if the failure is the subject of enforcement action by the appropriate governmental unit.
  •  A boarded up or closed off window or entrance.Multiple broken and unrepaired window panes. 
  • A smashed through, broken off, or unhinged door.
  • Accumulated rubbish, trash, or debris.
  • Stripped plumbing, electrical wiring, siding, or other metal material.
  • Missing fixtures, including, but not limited to, a furnace, water heater, or air conditioning unit.
  • Deterioration below, or being in imminent danger of deteriorating below, community standards for public safety and sanitation.
 

In theory it should sufficiently protect the interests of both a purchaser at foreclosure, as well as a homeowner who intends to redeem, giving them the opportunity to cure any such defect before a court would extinguish their redemption rights.

 

However, it will be interesting to see how this law is utilized, and how courts apply it.

 

Questions? Comments?

 

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

 

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