Home > business, Real Estate > Real Estate Investors: Recent Case Law Highlights Certain Pitfalls of Purchasing at Sheriff Sales

Real Estate Investors: Recent Case Law Highlights Certain Pitfalls of Purchasing at Sheriff Sales

Those who pick up properties at sheriff sales know there are pitfalls to watch out for.
A recent Michigan Court of Appeals unpublished case highlights one of those pitfalls
The case is WW Michigan Properties v Repokis, No. 316555, 2014 WL 4723822 (Mich Ct App September 23, 2014).
Facts:
  • Daryl and his ex-wife, Karen Repokis, owned the property and defaulted on the terms of a loan, which ultimately resulted in foreclosure and a sheriff’s sale on December 15, 2011.
  • Two sheriff’s deeds were issued to Michigan Properties on December 15, 2011.
  • Michigan Properties did not record the two sheriff’s deeds until January 5, 2012,  (21 days after the date of their issuance.)
  •  Daryl redeemed the property on January 4, 2013, and then quitclaimed his interest in six of the seven parcels to Harsens Properties the same day.
  • Michigan Properties claimed the redemption was late, and filed a lawsuit to stop Daryl’s redemption.

Question:

When does the redemption period end?  Does the clock start ticking at the day of the foreclosure sale, or does it start when the deeds were actually recorded (since they were not recorded within 20 days of the sale)

Law: 

You Must Record a Sheriff’s Deed Within 20 Days of the Sale

MCL 600.3232 provides the procedure when property is sold at sheriff’s sale in pertinent part:
The officer or person making the sale shall forthwith execute, acknowledge, and deliver, to each purchaser a deed of the premises bid off by him…And he shall endorse upon each deed the time when the same will become operative in case the premises are not redeemed according to law. Such deed or deeds shall, as soon as practicable, and within 20 days after such sale, be deposited with the register of deeds of the county in which the land therein described is situated, and the register shall endorse thereon the time the same was received …. [Emphasis added.]
As the Court held: “The plain language of MCL 600.3232 provides that a sheriff’s deed must be filed as soon as practicable, and within 20 days after the foreclosure sale. “Shall” designates a mandatory provision, Smitter, 494 Mich. at 136, and by not filing the sheriff’s deeds with the register of deeds within 20 days of the foreclosure sale, Michigan Properties failed to comply with MCL 600.3232.
“However, MCL 600.3232 does not provide the consequences for its violation. And, in Mills v. Jirasek, 267 Mich. 609, 614–615; 255 NW 402 (1934), our Supreme Court held that the recording provision in MCL 600.3232 is “directory,” as distinct from “mandatory,” and that an untimely recorded sheriff’s deed generally remains valid absent a showing of material harm or prejudice.” WW Michigan Properties v Repokis, No. 316555, 2014 WL 4723822 (Mich Ct App September 23, 2014)”
Conclusion: The Court of Appeals held that the trial court properly concluded that the redemption period ended one year from the date of the recording of the deeds.
Therefore, WW Michigan Properties’ failure to record its deed caused unfair surprise – the general public, particularly the borrower, Daryl, should have relied on when the deed was recorded, if it was recorded much later, otherwise, they do not know who owns the Property, and when they can redeem.
Lesson: There are consequences for failing to record a deed timely. WW Michigan Properties went an entire year with a sheriff’s deed and ultimately had to return the property, think of the costs they incurred, not to mention the legal fees.
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