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Real Estate Law Update: The Most Vulnerable Are Affected in an Affordable Housing Crisis.

Today, is a gray rainy cold day in Grand Rapids, Michigan.

Yesterday, like most every Thursday during the school year, I spend the noon hour with an elementary school-aged kid in one of the most economically depressed school districts in Grand Rapids, Michigan.

5.11

 

Over the last 4 or 5 years I have had 4 different students that I mentored.

Inevitably, they all move. Their families end up getting evicted, become homeless, or just leave to find new housing that they can afford.

 

Poverty in your Backyard

If you live in West Michigan, I urge you to pause and consider the poverty and vulnerability that exists in your own backyard. It is astounding to me that just a 15 minute drive from the suburbs kids are experiencing hunger and homelessness.

Right now.

It is no secret that Grand Rapids is experiencing an Affordable Housing Crisis.

 

The American Bar Association Journal reported recently that nearly 1 million U.S. households were ordered evicted in 2016. 

 

At the school where I mentor, the stories that I hear about infestations are sad.

Kids talk about roaches, bed bugs, mice.

Particularly, I hear a sense of dread about bed bugs.

I have previously blogged about some proposed Michigan legislation that would establish rights and duties concerning bed bug infestation in residential Landlord Tenant relationships.

 

Beg Bug Legislation.

One June 9th  2017 Michigan House Bill 4719 was introduced – by Representative Brandt Iden -himself a Developer and Property Manager in South West Michigan. check out the text here – the Bill would amend the Michigan statute governing landlord tenant relationships to include addressing the control of certain pests – including bed bugs.

 

Update

There has been no noticeable progress and this Bill appears to be dead. The House Fiscal Agency prepared its legislative analysis back in October 2017 – you can check it out here for details

 

What the Bill seeks to do:

Impose certain duties on landlords regarding bed bugs:

1. Mandates specifically that the Landlord is to keep the rental space free from bed bugs and provide educational literature about bed bug infestations to new tenants.

2. Prohibits Landlords from renting out space that the landlord knows is infested with bedbugs

3. Provides specific requirements for a landlord to respond to a complaint of bed bugs:

  • within 7 days of receiving a complaint, Landlord shall order an inspection for bed bugs;
  • within 7 days of confirming infestation, Landlord shall begin control and schedule inspections of adjoining rental units.

4. Limits damages against Landlord for infestations unless caused by Landlord’s Negligence.

Impose certain duties on tenants regarding bed bugs:

1. Tenant shall inspect for bed bugs when first occupying the space;

2. Tenant shall not move “infested property” into a rental unit

3. Tenant shall notify Landlord within 2 days of notice of infestation.

4. Tenant responsible for damages due to bed bugs caused by Tenant, or guest.

The bill was referred to the Committee on Law and Justice.

Something that the legislative analysis highlights –

“Notwithstanding any other provision of the Landlord-Tenant Act, the landlord and tenant could agree in writing (by hard copy) or electronic mail how responsibility would be assigned for costs resulting from an infestation, including, but not limited to, costs of
control or treatment.

This would provide some discretion among the parties to craft a resolution.

 

 

Michigan Poverty  Law Program’s Opposition

The House Law and Justice Committee met in October 2017.  The Apartment Association and Property Management Association affirmed its support of the Bill. The Michigan Poverty Law Program testified in opposition to the Bill.

You can review the Michigan Poverty Law’s written statement in opposition here

The Poverty Law Program acknowledged in its remarks that bed bugs are a serious problem in many communities, but opines that this Bill is not the answer.

Bedbug infestation is a problem. It can cause tenants problems, particularly in lower income housing. As reference, I would highly recommend reading Matthew Desmond’s book “Evicted” It is no secret that Michigan, particularly Kent County, is experiencing an Affordable Housing Crisis.  Further, unhappy tenants who withhold rent can cause landlord problems that end up in court.

 

In my opinion, this type of bill could provide clarity to landlords and tenants on their reciprocal duties and rights in such circumstances. It could also provide them flexibility to come up with a resolution to get rid of any infestations.

I am grateful for those like the Michigan Poverty Law Program who are advocating for the vulnerable in our communities – people like the kids I mentor every week.

I would also call on opponents of this Bill to propose a solution.  If the Bill proposed back in June 2017 is not good policy, then please propose one that you believe is good policy.

 

 

 

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

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Real Estate Law Update for Investors and Lenders: Court of Appeals Holds “Admittedly Curious Practice” “Expungement Affidavit” is Not Permitted under Statute.

April 20, 2018 Leave a comment

Happy Friday, all! I took this photo today – the sun is shining and it is starting to feel like spring.

4.20

 

 

In what was already a shocking day for a major lender, Wells Fargo, the Michigan Court of Appeals, in a case of binding precedent, invalidated an efficient tool lenders and investors routinely utilized to undo a foreclosure and revive a mortgage.

I just reviewed a published Court of Appeals decision that came out yesterday that will change the way investors, lenders, and mortgage holders set aside foreclosures.

 

 

The Case: Wilmington Savings Fund Society, et al. v Clare

The Facts are a bit complex, however they can be summarized as follows:

Defendant owned property in Hemlock, Michigan. The original lender held a mortgage on the Property; this mortgage was assigned numerous times. Id. page 2.

In 2010 lender’s assignee (“new lender”) foreclosed on the mortgage. After the redemption period expired, the new lender filed an action to evict the mortgagors/homeowners (“homeowners”).

After trial, the Court found in favor of the homeowners.

the court basically held that the new lender could not provide sufficient evidence that there was a proper chain of title passing on to new lender. Id.

In 2014 new lender’s servicer, Ocwen filed an “Affidavit of Expungement” – which stated that, among other things, the new lender:

agrees to set aside the above Sheriff’s Deed, making it void and of no force or effect, thus reinstating and reviving the above mortgage and Note”  Id.

 

Expungement Affidavit

The Expungement Affidavit has been a common tool used by lenders/mortgage holders  who have foreclosed on mortgages to record an affidavit that would, in theory, and relying on MCL 565.41a, set aside the foreclosure sale, sheriff’s deed, and reinstate the underlying mortgage. See Id, page 6.

The Sixth Circuit Court of Appeals indicated that this is a “admittedly curious practice” other states with similar statutes have not interpreted the statute to allow the affidavit to be used in this way. Id. Citing Wuori v Wilmington Savings Fund Society, 666 Fed Appx 506, 510 (CA 2016).

 

The Court of Appeals agreed and held, as an issue of first impression:

“a Party cannot set aside a foreclosure sale simply through the unilateral filing of an expungement affidavit.” Wilmington, Page 5.

The Court analyzed the statute and held “the plain language of the statute does not include any indication that an affidavit may be used to create a condition. It necessarily follows that a party cannot unilaterally revoke a foreclosure sale by recording an affidavit that is itself the claimed condition.” Id. pg 6. (emphasis in the original).

 

 

Lesson

So, investors and lenders have one less tool at their disposal for what was an efficient method to clear up title if there was a problem with foreclosure.  Since this case is binding precedent, lenders showed take note of this.

 

 

 

 

 

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

www.dwlawpc.com

 

 

 

 

 

Lessons from Court: Real Estate Investors combating the Affordable Housing Crisis

February 1, 2018 2 comments

I took this photo this morning. Even when its cold outside, there is just something about the morning sun rising over Grand Rapids that gets me excited.

IMG_2115

 

Wearing Multiple Hats.

Life is complicated when we wear multiple hats. I’ve written about the multiple hats I wear.

We all wear multiple hats. For example – I am a Christ Follower, a husband, a father, an attorney, a (recent) church elder, a volunteer, a mentor, etc…

 

The two roles that I find colliding most often are as follows:

 

Hat 1. I am an attorney representing business owners including real estate investors.

Hat 2. I am the past-board Chair at Mel Trotter Ministries – and am committed to ending homelessness, one life at a time.

 

Two Universes colliding

My two universes often collide and bring me right into the middle of a thick tension. That tension is highlighted by a scenario I often find myself in, such as the one a few days ago.

 

Recently I walked into the courthouse with a relatively simple task: obtain a Judgment for my client.

 

My client, real estate investor, recently purchased property that had an existing holdover tenant. This tenant had not paid any rent in months.

 

The complicating factor that I discovered when I met the tenant outside the courtroom:

the tenant was a single woman with young children, with no place to go.

 

These are the situations that law school doesn’t prepare you for.

How do I advise my client in this situation?

 

An Affordable Housing Crisis.

I just read an article today from Nick Manes at MIBiz on how in Grand Rapids there is still a Strong Demand for rental real estate.

This article is one of many constant reminders that it is hard to find housing in Grand Rapids, even if you can afford it.

The young lady I met at court, and others similarly situated, could very well find herself homeless.

I am thankful for places like Mel Trotter Ministries where in 2017 over 400 individuals found housing.

 

 

Three Examples of Real Estate Investors being part of the Solution.

I am thankful for those who are willing to work with tenants. In the case above, my client agreed to provide additional time for the tenant to find other housing.

See here for my article on the Eviction Prevention Program – a program implemented last month intended to address the affordable housing crisis in Grand Rapids.

 

Another client scenario comes to mind. This particular client is a well-to-do business owner with a big heart, and entered into the residential real estate rental industry truly to be part of the solution – to provide affordable housing to those in need without gouging those on a fixed budget – even though the market would allow my client to charge higher rent.

This is social entrepreneurship at its finest!

However, in this particular client’s case, my client was “too nice”. He was taken advantage of by a tenant.  In the end, I believe the Landlord’s generosity actually did a disservice to the Tenant by allowing the Tenant to stay months in the property without paying. Certainly the tenant wasn’t helping the landlord by failing to make any efforts to pay.

Many of my clients can’t afford not to receive regular rent. They rely on the rent to pay the mortgage.

This is why it is often said that the affordable housing crisis is complicated.

 

I also think of the private investor who decided last year to work with Mel Trotter Ministries to house and case manage homeless youth – to get them into their own stable housing. This investor knows that he could get more profit on this rental, but is willing to take less money in hopes of changing the lives of homeless male youths.

 

 

A Lesson from these 3 Real Estate Investors….

There are no easy answers here. But what I appreciate about all three of the investors I mentioned above, is that they were all committed to “do something” – maybe somewhat awkwardly at times, maybe with mixed results, but their hearts were in the right place and they all did something to be part of the solution to transforming lives out of homelessness. They were committed to making their community better.

 

Are we willing to step up and be part of the solution, in some capacity?

We can’t do everything, but we can all do something.

 

How are we working to build a better community?

 

E-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Twitter: @JeshuaTLauka

 

 

Legal Update for Real Estate Investors: Fraud, Harassment, and a Bill to Penalize Falsely Representing Need for a Service Animal.

December 19, 2017 Leave a comment

 

A beautiful end to Tuesday.IMG_2014

Here’s a profound truth those in the real estate industry will readily acknowledge:

Owning and Managing Real Estate is uniquely challenging.

 

I hear it from my Property Owner/Manager clients. I experience it when I am involved in negotiating in landlord/tenant disputes.

If you own or manage investment real estate, you are involved in messy business.

 

I believe that is why, at least in West Michigan, there is an opportunity for good property management companies – and a handful of companies I work with locally do it really well.

DOJ Sues Landlord for Sexual Harassment Allegations

Some of the pitfalls property owners/managers have to watch out for are illustrated in a recent press release announce by the Department of Justice.

Yesterday the Department of Justice announced that it filed suit against Owners and Managers related to allegations of sexual harassment in Kansas properties.

According to the press release, the owner and manager:

 

sexually harassed female residents at the rental properties from at least 2010 to 2014.  According to the complaint, Thong Cao engaged in harassment that included, among other things, making unwelcome sexual advances and comments, engaging in unwanted sexual touching, and evicting tenants who refused to engage in sexual conduct with him.

 

Sexual harassment is a violation of several Federal and State laws.

 

Georgia Real Estate Investor Sentenced to 16 months in Prison

Today, the DOJ announced that a Georgia Real Estate Investor was sentenced to 16 months in Prison for bid rigging public foreclosure sales.

According to the Press Release:

The evidence at trial showed that Purdy and his co-conspirators agreed not to compete for residential real estate at foreclosure auctions in Forsyth County and defrauded lender banks and homeowners.  Among other methods, the conspirators held secret “second auctions” of properties, dividing among themselves the auction proceeds that should have gone to pay off debts against the properties and, in some cases, to homeowners.

 

In today’s real estate market, bidding is competitive. If you are asked to take part in anything like this at your local sheriff’s sale – DON’T DO IT.
Lying About Emotional Support Animals, a Crime?

 

Michigan Law requires a public accommodation to permit the use of a service animal by a person with a disability.

Among other things:

“A public accommodation shall not ask a person with a disability to remove a service animal from the premises due to allergies or fear of the animal. A public accommodation may only ask a person with a disability to remove his or her service animal from the premises if either of the following applies:

(a) The service animal is out of control and its handler does not take effective action to control it.

(b) The service animal is not housebroken” MCL 750.502c

Landlords and property owners should heed the warning of General Deputy Assistant Secretary Bryan Greene of the U.S. Department of Housing and Urban Development’s Fair Housing and Equal Opportunity.

“Many people with disabilities require the assistance of an animal to carry out major daily activities,” said  “Complaints alleging disability discrimination now account for the majority of the complaints HUD receives. HUD will continue to enforce the law and educate the public on the rights of people with disabilities in housing.”

.

However, a Michigan Senate bill proposed on November 28, 2017 would make it a crime to falsely represent the need for a service animal to a landlord. Violation would also give right to a Landlord to evict such tenant.

 

This is an interesting bill. I look forward to seeing if it gains any traction.

 

 

Two takeaways from this news headline:

 

1. It is worth being proactive and engaging legal counsel. 

Issues arise. When in doubt, e-mail or call your attorney.

 

2. Residential Real Estate Investment is highly regulated.

If you are a landlord leasing out “residential” property as opposed to purely commercial property (business tenant), you are under much more stringent regulations. You must comply with Federal laws, like the Fair Housing Act and state laws, like the Michigan Truth in Renting Act. Make sure you are operating lawfully.

 

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Legal Update for Commercial and Residential Property Managers, Investors: Winter is Here. Are you Prepared?

December 11, 2017 Leave a comment

The snow is coming down in Grand Rapids! I took this photo last week from my office – ice skating has officially started.

IMG_1951

 

With the winter months – comes an issue for landlords, property managers, and real estate investors…

icy sidewalks and parking lots.

These types of conditions are a primary reason why investors hold real estate in LLCs.

Two recent Michigan court cases came out where tenants sued their landlords for injuries related to slip and falls on icy sidewalks/parking lots:

Schuster v River Oaks Garden Apartments

Ferguson v Lautrec LTD

The claims in both cases had to do with a Landlord’s statutory duty under Michigan Compiled Laws 554.139(1)(a) to keep the Property kept fit for its intended use.

 

In General:

A Difference Between Commercial and Residential Leases – FREEDOM OF CONTRACT

The above mentioned duty is one created by Michigan statute. It does not apply to Landlords/Property Managers or owners of commercial real estate with commercial tenants.

In the residential context, tenants have certain statutory rights, in addition to contractual. These rights provide extra protection from a landlord’s ability to evict the tenant and are found in such places as “Landlord Tenant Relationship Act” and “Truth in Renting Act”.

One such right of a tenant – the residential property must be kept fit for its intended use and in reasonable repair. These conditions must be met in order for a landlord to otherwise evict a breaching tenant. Stated otherwise, the covenant to pay rent is not an independent covenant to a landlord’s duty to keep the property fit for its intended use and in reasonable repair.

In a commercial context the courts’ mantra is “Freedom of Contract“. The Court will look at the contract that the parties’ agreed to, and, absent extraordinary circumstances, enforce it by its term. (therefore in  a commercial lease you might see language such as the following “rent is due with no right of offset, setoff, counterclaim…”) In such instance, the landlord is telling the tenant that tenant has no right to withhold rent just because landlord may have breached a duty under the lease.

The Courts have recognized that commercial landlords and tenants are “free to contract”

 

Going back to our Case Studies…

Two Cases of Icy Conditions – different results

Ferguson Case

Ferguson was a tenant who slipped and fell on the sidewalk outside of her apartment building. In court, she argued that defendant was  “liable for her injuries because it breached its duty to maintain the common area of the apartment, i.e., the sidewalk, in a condition fit for its intended use as required under MCL 554.139(1)(a).” Id. page 1.

The Court disagreed.

On appeal, the Court of Appeals affirmed the trial court.
MCL 554.139(1)(a) provides the following:

(1) In every lease or license of residential premises, the lessor or licensor
covenants: (a) That the premises and all common areas are fit for the use intended by the
parties.

Courts have held that “sidewalks . . . constitute ‘common areas’ under MCL 554.139(1)(a).”).

The question the Court asked was: what is “fit” mean in this context?

“Our Supreme Court defined “fit” as “adapted or suited; appropriate,” Allison v AEW Capital Mgt, LLP, 481 Mich 419, 429; 751 NW2d 8 (2008), quoting Random House Webster’s College Dictionary (1997) (quotation marks omitted), and a sidewalk’s intended purpose is for walking, Benton, 270 Mich App at 444.” Id. page 2-3

Defendant, therefore, has a duty to keep the sidewalk adapted or suited for walking.

The court reviewed the facts, as presented in the trial court and affirmed that “In this case, the sidewalk was not unfit simply because there was a patch of ice”. Id. 3

 

Schuster

“According to plaintiff, [Schuster,] the fall occurred as she took her first steps onto the sidewalk surrounding the complex’s mailbox kiosk. As a result of her fall, plaintiff broke her ankle requiring surgical repair with hardware placement.” Id pg 1.

The Court dismissed her claim, finding that Schuster failed to present evidence that the sidewalk was not fit for its intended use.

On appeal, Defendant does not dispute that the sidewalk was intended for walking and specifically for access to the apartment complex mailboxes. However it argues that the sidewalk, even if ice covered,  was fit for its intended purpose.” Id. pg 3-4.

The Court, like in Ferguson, relied on the Michigan Supreme Court decision of Allison:

“In Allison v AEW Capital Mgt, LLP, 481 Mich 419; 751 NW2d 8 (2008), the Supreme
Court considered a landlord’s statutory duty regarding common areas, particularly as concerns natural accumulations of snow and ice. It held that “the natural accumulation of snow and ice is subject to the lessor’s duty established in MCL 554.139(1)(a)” to keep the premises and common areas “fit for the use intended by the parties.” Id. at 438.

The Court held that  the duty of the Landlord was to provide “reasonable access” to
pedestrians seeking to use it. Id. pg 4.

The Plaintiff, Schuster, claimed the sidewalk was “dangerous”.

The Court of appeals noted; “[t]here is substantial evidence that the conditions, as predicted, developed overnight and that by the time of plaintiff’s fall, they were severe.” Id page 3.

The  Defendant Apartment Complex claimed that the presence of snow/ice was merely “inconvenient”.

The Court held that such “genuine dispute” of fact must be presented to a judge or jury. The Court reversed the trial court and sent it back.

 

Another interesting argument – Defendant claimed that it had no “notice” of the icy conditions.

The Court held that “notice” was not a prerequisite to the landlord’s duty to keep the property in good condition.

“We initially note, as we did in our previous opinion in this case, that there do not appear to be any published decisions that establish that notice of the condition is required to establish a breach of the duty under MCL 554.139(1)(a).” Id. Page 5.

Lessons:

  • Whether or not the presence of ice or snow on sidewalks presents a breach of a Landlord’s duty to keep the property fit for its intended use is a “highly factual inquiry”.  It depends on the facts of each case – which is what Schuster and Ferguson demonstrate.

 

  • A Landlord likely cannot avoid its duty to keep the property fit for its intended use by claiming a “lack of notice” of the existence of an icy condition.

 

  • If you are a commercial landlord with a commercial tenant – FREEDOM OF CONTRACT.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Grand Rapids Combats Affordable Housing Crisis – Eviction Prevention Program

November 21, 2017 2 comments

 

You know winter is approaching when Rosa Parks Circle begins to freeze over and the ice rink begins to form. See the photo I took from my office yesterday.

In fact, the Ice Rink officially opens on Friday!

IMG_1926

 

Before we know it, downtown will look like a snow globe – see the photo, below, I took from last Christmas.IMG_1927
There is an Address Affordable Housing Crisis

As many of you know, Kent County, like much of the U.S. is experiencing a serious lack of Affordable Housing.

The City of Grand Rapids has made concerted efforts to address problem through an advisory board, which has come up with strategies for addressing the Affordable Housing Crisis

 

 

 

Kent County Eviction Prevention Program

Beginning January of 2018, the 61st District Court will begin a pilot program – the “Eviction Prevention Program” (EPP). Judges Faber and Distel are the initial judges presiding over the EPP.

The EPP was developed as a collaborative effort between the City of Grand Rapids, Salvation Army of West Michigan, The Kent County Court System, the Michigan Department of Human Services and with funding provided by Steelcase.

 

Purpose of the Eviction Prevention Program

The EPP is intended to keep those tenants in housing, who truly want to stay in their housing.

The program will not be appropriate for every tenant.

The EPP appears best suited for those on the margin of being homeless due to an emergency situation (as opposed to those tenants chronically behind in rent).

The EPP provides one-time rent assistance and would allow a Landlord to hold a possession and money judgment in abeyance, pending the Tenant’s payment of rent.

The program is, essentially,  intended as a one-time emergency for those on a fixed or low income, who are essentially faced with the difficult choice of either paying an outstanding medical bill, car repair bill, groceries, etc.., or pay their rent.

 

What Property Managers and Landlords need to know about this program:

Landlords – any tenants behind in rent which have been served a summons and complaint for eviction, beginning in January 2018, should be receiving information about the EPP along with the summons and complaint.

Tenants will know that this is a potential resource to keep them in housing.

What you need to know:

1. The program is entirely voluntary. Landlords can choose to opt out.

2. Not every tenant will qualify. A tenant needs to have income to make the next month’s rent payment.

3. The program is geared towards keeping tenants in housing. If a tenant wants out of your property, the program will likely not be the right fit.

 

Why I like this program.

This program provides an opportunity to keep people in housing who are on the verge of being homeless. The fact is, families are experiencing homelessness in Grand Rapids every day.

Practically speaking, the program works for tenants who have the potential to get caught up, who otherwise are good tenants.

The program is an opportunity for Landlords to get paid and to be part of the solution to the affordable housing crisis.

Housing is a community problem. It is encouraging to see the great collaboration between government, private sector, non-profit sector.

 

 

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

www.dwlawpc.com

Real Estate Law Update: Real Estate Investors Be Careful When Interacting with Occupants of Foreclosed Property.

October 23, 2017 Leave a comment

It is a rainy Monday afternoon. It has beenIMG_1873 dark all day long.  I took this picture earlier today and the rain isn’t letting up.

As a way to distract from the gloomy weather I thought it might be a good opportunity to share some of my thoughts about a court case that came out a few days ago involving a real estate investor, property manager, and a hold over occupant of property.

This case illustrates ways that real estate investors and property managers can go wrong when dealing with occupants of foreclosed property.

 

The Case:

Anderson v Great Lakes Property and Investment, Inc.

Facts: 

“This case arises from defendants’ actions in removing plaintiff and his personal belongings from the rental property, on two occasions, without resort to summary  proceedings in the court.” Id. page 1.

  • In 2008 Plaintiff entered into a month-to-month lease with the property owner.
  • Owner lost the property to a tax foreclosure in 2015.
  • Real Estate Investor purchased the property at tax sale in the fall of 2015, and hired defendant Great Lakes to manage the property.
  • After the purchase, Investor and Property Manager, sent a letter of ownership to all occupants of the property, including plaintiff, which gave plaintiff 10 days to vacate the property.
  • Thereafter, defendant Great Lakes’s sole shareholder, defendant McMorris, came to plaintiff’s unit and demanded that he vacate within 3 days.
  • When plaintiff did not vacate the premises, defendants came to the property on January 15, 2016, and removed plaintiff’s personal belongings from his unit.
  • After defendants left, plaintiff returned to the property, purchased and installed a new lock on his door, repaired the door, and placed his personal belongings back into his unit.
  • The next day, defendants returned and once again, removed plaintiff’s possession from the property.
  • Plaintiff filed a six-count complaint against defendants for a violation of the anti-lockout statute. Id. Page 2.

 

Law:

Anti-Lockout Statute – MCL 600.2918 

Any landlord who has gone through the process of evicting a tenant knows that, in the residential leasing context, there are heightened duties of landlords, and heightened rights of tenants.  Tenants have the right not to have their possessory interest in the property interfered with, without the proper court procedure being complied with (Summary Proceeding Action in District Court)

The Anti-Lockout statute provides damages for forcible ejectment from property or unlawful interference with a possessory interest in property.

 

Subsection (1) (forcible ejection) applies to any person. 

Subsection (2) (unlawful interference) applies to any tenant in possession.

Violating the statute can cause a property owner/landlord to be liable for statutory damages (3 times the amount of actual damages or $200.00 whichever is greater.)

 

Here, the District Court sided with the new Owner – basically holding that the Plaintiff was simply “a squatter”, entitling him to no rights or protections.  Id. page 2.

The Court of Appeals REVERSED!

 

As the Court of Appeals noted, “[t]he Michigan anti-lockout statute, MCL 600.2918, “virtually eliminates the self-help remedy in Michigan in favor of judicial process to remove a tenant wrongfully in possession.” Id. Page 3 citing Deroshia v Union Terminal Piers, 151 Mich App 715, 719; 391 NW2d 458 (1986).

The Court also held that “There is no statutory or caselaw definition of squatter.” Id. Page 4.

The Court also questioned whether the Investor or its Manager gave proper notice to terminate. It was questionable whether the “Notice” mailed to each tenant satisfied the requirements to recover possession of property under Michigan law. MCL 554.134(1) – (holding that “[a] tenant is entitled to one month’s notice to quit in order to terminate a month-to month tenancy at will” Id. Page 4.

 

 

In short – if you purchase property that is occupied, you need to properly use the court systems to remove tenants.

 

Lesson:

 

To avoid any unfounded claims by holdovers, it always makes sense after purchasing property at foreclosure, when there are any occupants present, to go through the lawful channels for a court proceeding to extinguish any possessory rights and to make sure any personal belongings are handled appropriately.

You don’t want to expose yourself to undue liability.

 

Questions? Comments?

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka