The Supreme Court decided the case on Application for Leave to Appeal. Rather than grant leave to appeal, the Court instead ordered that oral argument be held upon the application for leave to appeal, and reversed the Court of Appeals.

The Supreme Court essentially adopted the dissenting opinion from the Court of Appeals, ruling that although MERS did not own the mortgage note itself, MERS was “recordholder of the mortgage,” which was a sufficient “interest in the indebtedness” to satisfy the statutory requirement that the foreclosing entity be an “owner of an interest in the indebtedness.”  Essentially, the Supreme Court determined that the Court of Appeals improperly interpreted the meaning of the language of the foreclosure by advertisement statute.

This Supreme Court Order appears to definitively resolve the issue of whether MERS can foreclose a mortgage by advertisement in MERS’ name, rather than the name of the owner of the note, in the State of Michigan.

Therefore, pursuant to Michigan statute enacting Proposal A of 1994, the 2012 taxable value for your property, absent a transfer of the property in 2011, will be equal to the lesser of:

(a) the 2012 State Equalized Value; or

(b) the 2011 Taxable Value, multiplied by 1.027.

For example, if your 2011 Taxable Value was $100,000, and your 2012 State Equalized Value is $105,000, your 2012 Taxable Value will be $102,700 ($100,000 multiplied by 1.027).

However, if your 2011 Taxable Value was 100,000, and your 2012 State Equalized Value is 100,000, your 2012 Taxable Value will be $100,000 (as your SEV is lower than $102,700).

If you have any questions about your 2012 taxable value calculation, or you believe your 2012 assessment is too high, please contact David Nykanen of the Demorest Law Firm.

The deed with the least protection for the buyer, and conversely the least risk for the seller, is the quit claim deed. When conveying property using a quit claim deed, the seller is merely stating that the seller conveys to the buyer its interest, if any, to the property. There is no warranty of title given in this type of deed.

The second type of deed generally used in Michigan is a covenant deed. (This type of deed is sometimes referred to as a C-deed or a Special Warranty Deed.) When conveying property through a covenant deed, the seller says to the purchaser that it conveys its interest in the subject property to the buyer, and that seller will warrant that during the period of the seller’s ownership, the seller has not done anything to impair the title to the property, except as specifically stated in the deed as an exception.

Finally, in a warranty deed, the seller warrants title to the buyer without exception, except as stated.  The warranty of title runs from the beginning of time through the date of the property’s sale. While warranty deeds are the type of deed most commonly used in Michigan real estate transactions, these deeds present the most risk to a seller, because of the breadth of the warranty  of title included in the deed. Conversely, of course, this deed presents the most comfort to a buyer.

When selling property, and conveying title through a covenant deed or a warranty deed, it is highly advisable to obtain title search to ensure that there are no impairments to the title that you are warranting.

Before entering into any real estate transaction, is always advisable to consult with a knowledgeable real estate attorney. To consult with David Nykanen of the Demorest Law Firm, please click here.

When the phrase “gross lease” is used, that phrase generally refers to a lease in which the tenant pays a fixed amount each and every month for occupancy, and the landlord receives that fixed amount. Under a gross lease, a tenant knows the fixed expense and a landlord knows the total amount it will be receiving. However, risk of increases in expenses for maintenance and operation of the leased premises, together with tax and insurance increases, reside with the landlord in a gross lease.

Conversely, under a “net lease,” the tenant pays not only a fixed amount for possession of the leased premises, but also an additional amount for the payment of common area maintenance charges, taxes, and insurance for the leased premises. (These charges are often referred to as CAM charges.)  Therefore, under a net lease, the risk of increased costs for operations and maintenance, insurance, and taxes resides with the tenant, rather than the landlord.

You will often encounter a gross lease in space that is referred to as Class B or Class C space. You would more often encounter a net lease in space referred to as Class A space. The rationale for this is quite simple:  The more desirable the premises, the more likely the landlord is to attempt to shift the risk for variable costs to the tenant. Also, certain areas use gross leases historically, and other areas have historically used net leases. So, you could have a net lease or gross lease situation depending upon either of the relative negotiating power of the parties (based upon the desirability or demand for the leased space), or for historical reasons.

If you’re entering into lease negotiations, whether as a landlord tenant, or you are considering the lease of property, it is always advisable to contact an experienced real estate attorney to guide you through the process.  For more information regarding leasing of real estate, please contact Dave Nykanen of the Demorest Law Firm.

Dave Nykanen of the Demorest Law Firm is an experienced tax appeal practitioner. He has handled hundreds of appeals before the Michigan Tax Tribunal, obtaining significant tax relief for numerous clients. In many circumstances, our firm will handle these matters on a contingent fee bases, so that no attorneys fees are incurred until you receive tax savings.  If you would like to discuss a potential tax appeal please contact Dave Nykanen.

In Michigan, a mortgage can be foreclosed either judicially, or by advertisement (which does not require a court filing).  Mortgages secured by residential properties are almost universally foreclosed by advertisement, given that it is a quicker, less expensive option.  In Residential Funding Co, LLC v Saurman, a divided panel of the Michigan Court of Appeals ruled that MERS did not qualify to foreclose a mortgage by advertisement.

To qualify under the applicable Michigan statute, MERS would have to be either: (a) the owner of the indebtedness; (b) the owner of an interest in the indebtedness; or (b) the servicing agent of the mortgage.  It was undisputed that MERS was not the owner of the indebtedness or the servicing agent.  MERS argued it had an interest in the indebtedness, because its interest was derivative to the existence of the note.  The Court of Appeals disagreed with that argument, and ruled that MERS did not satisfy any of the three qualifiers.

Given the significance of this issue to residential lenders in the State of Michigan, and the existence of a dissenting opinion in the Court of Appeals, one should expect an application for leave to appeal to the Michigan Supreme Court.

In Bay City v. Bay County Treasurer, a unanimous panel of the Michigan Court of Appeals ruled that the Bay County Treasurer had no role in determining whether the City of Bay City’s proposed use of a home it desired to purchase after the home was foreclosed for failure to pay property taxes was indeed a “public purpose.”  The City intended to purchase a vacant lot, and was considering conveying the lot to Habitat for Humanity for the construction of a new home.  The County Treasurer refused to sell the parcel to the City, claiming the City would “not be able to achieve its public purpose . . .efficiently and expeditiously.”  Although the trial court ruled for the Treasurer, the Court of Appeals reversed, determining that: (a) there was no requirement that the public purpose be efficiently and expeditiously achieved; and (b) the Treasurer had no authority under the General Property Tax Act to make an independent assessment of the City’s purported public purpose.

One should not read this opinion too broadly, as the “efficiently and expeditiously” element discussed by the Court is likely a required element to “public purpose” if the property were being taken under the power of eminent domain, rather than being purchased at tax sale.

If you have questions regarding property tax forfeitures, foreclosures, appeals, or payment plans, please contact David Nykanen at Demorest Law Firm.

In Michigan Properties, LLC v Meridian Township, the Michigan Court of Appeals ruled that Meridian Township was barred from retroactively uncapping the taxable value of a parcel in 2007 for a transfer alleged to have occurred in 2004, when the Township had failed to uncap the taxable value in 2005 and 2006. The court ruled that, unlike the circumstance that exists when one fails to file a Property Transfer Affidavit, a community is barred from retroactively uncapping the taxable value when a Property Transfer Affidavit is filed.

The court left open the possibility that the March 2005 Board of Review may have had authority to correct the tax roll and uncap the taxable value, had the assessor failed to do so after the 2004 transfer.  However, once the March Board of Review is closed, the community loses the ability to uncap the taxable value for a transfer occurring in the prior calendar year, so long as a Property Transfer Affidavit was filed.  Thus, reason No. 101 why you should file a property transfer affidavit, even if you are claiming an exemption from uncapping.

If you have questions about an assessor’s attempt to retroactively uncap your taxable value, or you wish to discuss structuring a transaction to minimize its property tax impact, please contact David Nykanen at Demorest Law Firm.

In Michigan, a property’s tax bill is calculated by multiplying the applicable millage rate by the property’s taxable value. That taxable value remains “capped;” increasing only by the lesser of the rate of inflation or 5% in any one year, until the property is “transferred.”  A transfer for property tax purpose is defined by statute. However, numerous exemptions from the definition of “transfer” exist.

In Klooster v. Charlevoix, the Michigan Supreme Court ruled that the death of a joint tenant will be exempt from being a “transfer,” leading to an uncapping of taxable value if: (a) the departing joint tenant was an “original owner;” and (b) the remaining joint tenant was a joint tenant when the joint tenancy was initially created, and has continuously remained a joint tenant. However, unless one of the new joint tenants is an “original owner,” the creation of a subsequent joint tenancy may lead to an uncapping.  To be considered an “original owner,” a joint tenant must have continuously been an owner from the date the property’s taxable value was most recently uncapped.

The Klooster decision, although heralded in the media as a “victory” for municipalities, opens up substantial planning opportunities for owners of property to structure transactions in a manner that will not lead to an uncapping of the property’s taxable value. If you are interested in learning more about such opportunities, please contact Dave Nykanen of  Demorest Law Firm.

To understand the importance of that Notice of Assessment, a bit of background is necessary.  In 1994, the voters of the State of Michigan passed Proposal A, a school finance reform package that increased the sales tax from 4% to 6%, shifted the funding of school districts from primarily local to primarily state level, and introduced the concept of “taxable value,” in addition to the long-standing state equalized value (SEV). In order to determine if an appeal of an assessment would reduce your property taxes, you must determine whether the property’s value is less than twice the taxable value.  This is true because in order to reduce your taxes, you need to reduce the SEV to a number less than the taxable value.

There is a one or two-step process in Michigan to challenge a property’s assessment, depending upon the property’s classification.  For property classified as residential or agricultural, the first step is an appearance before the Board of Review, which is generally held sometime after the second Monday in March of each year.  (There are additional requirements for properties located in several communities, most notably, the City of Detroit).  A Board of Review is made up of 3, 6 or 9 members, who are generally appointed by the administration of the City.

If the Board of Review does not reduce the SEV to an amount acceptable to the property owner, the second, and final, step is an appeal to the Michigan Tax Tribunal. The Michigan Tax Tribunal is an administrative agency created by Michigan law.

For properties classified as commercial or industrial, appeals can be filed directly to the Michigan Tax Tribunal, without appearing before the local Board of Review.

For smaller cases, a hearing officer of the Tax Tribunal, who can either hold a telephonic hearing or an in-person hearing, may actually hear your case.  These hearings typically last 30 minutes.  For larger cases, a Michigan Tax Tribunal Judge in the City of Lansing will hear the case.  These hearings may last up to several days.

For residential and agricultural properties, an appeal must be filed before the Michigan Tax Tribunal on or before July 31, 2011.  Remember: you must appear before the local Board of Review in March for these properties in order to appeal to the Tax Tribunal.

For commercial and industrial properties, an appearance before the local Board of Review in March is optional.  The deadline for filing an appeal before the Michigan Tax Tribunal for properties with these classifications is May 31, 2011.

Because of the declining Michigan real estate economy, the number of appeals has grown exponentially in the past few years.  This has led to a significant backlog before the Michigan Tax Tribunal.  For smaller cases, which are heard by hearing officers, the waiting period before you receive a hearing may be 1 to 2 years.  For larger cases, which are heard by Michigan Tax Tribunal Judges, the waiting period can be anywhere from 2 to 4 years.  Of course, it is always possible settle the dispute with the local community prior to a hearing.  The likelihood of this occurring depends upon the attitudes of the particular community and assessor regarding the resolution of these appeals.

While an appeal is pending, a property owner should continue paying taxes at the amount billed by the community.  When the case is resolved, if a refund is generated based upon the terms of the resolution, that refund will also include interest from the date of payment of the tax to the date of refund.

A property owner who is unsure of whether an appeal is appropriate may receive a free preliminary review of the Notice of Assessment by forwarding it to our firm. We can evaluate the likelihood of success in an appeal.  In most cases, our firm will handle property tax appeals on a contingent fee basis, which means that the property owner will pay no attorney fees unless a refund is generated through the appeal.  Please contact Dave Nykanen if you have questions about property tax appeals in Michigan.

This article was written by David E. Nykanen, Principal of Demorest Law Firm.