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Posts Tagged ‘redemption’

Real Estate Law Update: Investors Purchasing at Foreclosure – Take Care in Handling Personal Property Left at the Property.

May 11, 2017 1 comment

Today I am posting about a Court of Appeals case decided on April 25, 2017  – Suzor v Kamlay 2016-07-22 13.10.20

Foreclosed Property = high risk/high reward.

Real estate investors are always wary of the many pitfalls when purchasing property at foreclosure.

I’ve previously posted on problems when someone is still occupying the Property after foreclosure.

The latest case talks about what happens if the holdover is no longer in the property – but has left personal belongings.

Should you take matters into your own hands and remove the stuff?

What liability does a purchaser have after foreclosure and the expiration of redemption if they remove any personal belongings?

FACTS:

  • Plaintiffs’ home was foreclosed on.
  • The property was sold at a sheriff’s sale.
  • Plaintiffs did not redeem the property.
  • Purchaser sued  and was given a judgment of possession and an order of eviction.
  • Purchaser hired defendant to secure and clean the property and remove any remaining personal property—a process commonly referred to as a “trash out.
  • Plaintiffs brought a claim for conversion, arguing that their attempts to get defendant to return the items of personal property he removed from the foreclosed property were to no avail
  • Defendant argued – I have immunity under the Anti-Lockout Statute, since I was operating pursuant to a Court Order.
  • Trial Court agreed.

 

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).

 

Here, Defendant claimed he was shielded from liability under MCl 600.2918(3)(a) which provides

that “[a]n owner’s actions do not unlawfully interfere with a possessory interest if . . . [t]he owner acts pursuant to court order.” Id. page 2.

The Court of Appeals held though that such immunity only shields from liability if the parties have a landlord-tenant relationship.

“However, the parties to this case did not have a landlord-tenant relationship.”

Also, The Court noted that

“While an owner has the right to lawfully enter the premises and remove belongings left therein pursuant to court order, the owner does not have title over the property removed.” Id. page 4.

 

The Court of Appeals would have presumably reversed on this point, but held that the trial court essentially “got it right, but for the wrong reasons.”   The Plaintiffs failed to provide any evidence to prove their case – that the defendant when he removed the personal property converted them by failing to allow the Plaintiffs to recover the property, or otherwise “that a bailment existed”. Id.  page 4.

 

Conclusion:

A purchaser at foreclosure should be careful in handling the personal property leftover.

 

As the Court of Appeals noted – the purchaser is not shielded from liability under the Anti-Lockout Statute, since there is no landlord-tenant relationship.

Also, the owner may have purchased title to the real estate, but not to the personal property.

 

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

Michigan Real Estate Law Update: Investors: If you Intend to Redeem, Better Record that Deed.

January 5, 2015 1 comment

Happy New Year!

A brief Michigan Legislative Update that affects real estate investors. HB 5795  was passed into law on December 29, 2014 and given immediate effect. The law amends the redemption from foreclosure statute. MCL 600.3140.

See the legislative analysis of the House Bill here

Purchasing Property at (and after) Foreclosure.

Under the prior language, anyone “lawfully claiming from or under the mortgagor or the mortgagor’s heirs, executors, or administrators” could redeem the property from foreclosure.

This effectively meant that an investor who missed the foreclosure sale could contact the homeowner (or their personal representative, if deceased) and purchase a quitclaim deed that would transfer the homeowner’s “redemption rights” in the property.

“Redemption Rights” One Stick in the Bundle of Rights.

As every lawyer who sat through Property Law in first year Law School was taught, Property Rights are akin to a “bundle of sticks” – multiple rights within that bundle, including, complete ownership (fee simple) possession, contingent rights, mineral rights, air rights, etc…and in the case of a homeowner, a right of redemption.

A quitclaim deed transfers “whatever” rights the homeowner had at the time of the transfer. In the case of a homeowner after foreclosure, this typically means only “the right of redemption” since that is the only stick left in the bundle.

When Do you have a Right to Redeem as the Owner of a Redemption Right?

The result of HB 5795, it doesn’t preclude a homeowner from assigning their interest, but it puts the burden of the “grantee” (or real estate investor who purchased the rights) to record the deed prior to redemption.

The practical effect is that it places no duty on a purchaser at foreclosure, or the register of deeds, to accept payment, unless they are presented with a “recorded interest.”

What’s the Purpose for this Amendment?

For real estate investors who pick up properties at foreclosures, there is nothing that irks them more than another investor who approaches them a few months after foreclosure sale and informs that they own the right to redeem the property via a quitclaim deed, and they intend to redeem.

All the investor’s time and energy in due diligence to investigate properties worth picking up, not to mention the amount of cash that was needed to purchase the Property at the foreclosure sale – all gone to waste.  When the investor expected to either rehab and flip the property, or make it into a long term rental investment, what does the investor get in return? a nominal short term interest payment on their funds.

It isn’t surprising that an investor is not too happy when they get the call asking for a pay off from one “lawfully claiming under the mortgagor” Now, rightfully, the investor could search the Register of Deeds and see if a quitclaim deed had been recorded. If not, it arguably gives them grounds to refuse a pay off.

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

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

October 2, 2014 2 comments
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.