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Real Estate Investors: A Discussion on Laches

If you aren’t into real estate investment in Grand Rapids – maybe you should be.

According to an MLIVE article posted last week, Grand Rapids has one of the hottest real estate markets in the country.

As reported by MLIVE:

“For landlords and real estate investors, Grand Rapids is the second best rental market in the Midwest and one of the hottest markets in the U.S., according a study of 75 real estate markets by All Property Management (APM)

Great news!

Now on to some legal stuff…

Laches.

A few years back I wrote a post about the legal doctrine of Laches and how laches relates to real estate disputes.  

Since then, I consistently get a lot of hits on that post – and a lot of searches for “laches in real estate.

Why?

I don’t know. Maybe because its an unfamiliar term, unless you went to law school (even then).

Maybe because it is a valid defense to some real estate related actions. (which it is if you read my previous post).

A recent Michigan court of appeals decision came out on the subject, so I thought I would write about it.

As a recap…

The Equitable Doctrine of Laches:

“Laches is an equitable tool used to remedy the inconvenience resulting from the plaintiff’s delay in asserting a legal right that was practicable to assert.” Public Health Dept v. Rivergate Manor, 452 Mich. 495, 507; 550 NW2d 515 (1996).

As such, “when considering whether a plaintiff is chargeable with laches, we must afford attention to prejudice occasioned by the delay.” Lothian, 414 Mich. at 168. It is the prejudice occasioned by the delay that justifies the application of laches.Dunn v. Minnema, 323 Mich. 687, 696; 36 NW2d 182 (1949) .

Therefore in deciding on the issue of Laches, a Court will ask two questions:

1. was there a delay in bringing the claim and, if so,

2. did it prejudice the Defendant?

Question: Why is laches relevant to real estate disputes?

Answer: Because many real estate claims are based in “equity” as opposed to “law”-  e.g. –an injunction, specific performance, action for quiet title… 

Another Question: If someone fails to bring a legal claim in a timely manner can it be barred by laches?

Another Answer: See Hamilton v Jeannot.

Let’s fast forward to the September 3, 2015 case of Hamilton v Jeannot

Facts:

Like most cases that end up going to trial, the facts of this case are a bit complex, including various business entities, bank work outs, and various individual investors. You can tell that what appeared to start out as a good business relationship turned south quite abruptly.

The case surrounds the various “parties’ efforts to renovate and reopen the Brookside Inn and Restaurant in Benzie County, Michigan.”Hamilton v. Jeannot, 2015 Mich. App. LEXIS 1654, *2 (Mich. Ct. App. Sept. 3, 2015)

It lead to one of the parties, Hamilton, filing suit against the others for conversion, claim and delivery, defamation, and unjust enrichment.

The Trial Court dismissed all of those claims.

relevant to our discussion on laches, the trial court  determined that “Hamilton’s long delay in bringing his claims for conversion and claim and delivery prejudiced the ability of the Jeannots and Eden Brook to present a defense to those claims. Accordingly, it applied the equitable doctrine of laches to bar those claims.”

On Appeal, the Court answered the question: is Laches only an “equitable defense” or does it apply to a legal claim?

Laches: Equity versus Law.

The Court of appeals explained at some length and cited historic case law and legislative history that show a clear intent that “laches” applies to equitable claims, but not to legal claims.

Legal claims are governed by “statutes of limitations” – e.g. if you don’t bring a breach of contract claim within 6 years of the date it was breached, you are likely to be barred from recovery.

However, in Hamilton the Court was “compelled” to apply laches to legal claims, given the binding case law precedence. Per the Court: “[t]his Court has held that courts may apply the doctrine of laches to bar actions at law, even when the period of limitations set by the Legislature has not passed.” Id, page 14.

So, even though the Court of Appeals really did not want to apply laches as a defense to a claim at law, it did.

But, the court decided that the facts of the case did not justify compel applying laches, so it reversed the trial court on that point.

Two take aways:

1. If you own investment real estate and are sued, the doctrine of laches may apply as a defense to bar the party that is suing you from recovery.

2. Much to the Hamilton Court’s dismay, even if there is a relevant statute of limitations that has not yet passed, laches may bar recovery if you can show a delay in bringing the claim that has caused you to be prejudiced.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

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