In a recent opinion, the Sixth Circuit Court of Appeals (available at http://www.law.justia.com/cases/federal/appellate-courts/ca6/10-1498/11a0580n-06-2011-08-18.html) ruled that proceeds from a tax sale of property held as tenants by the entirety between a husband and wife should, presumptively, be split 50-50. Under a tenancy by the entirety, a husband and wife hold joint title with a right of survivorship. This form of ownership is only available to married couples and does not allow one spouse to sell or transfer the property without the other spouse’s consent.

In US v. Barczyk, the Internal Revenue Service sought foreclosure of a home owned by a married couple in tenancy by the entirety. The married couple filed individual tax returns under the status of “married filing separately,” and the husband owed over $500,000 in back taxes. The house was worth approximately $200,000 and litigation ensued between the wife and the United States to determine two issues. First, the court had to determine whether the federal government had the authority to sell the property when the Barczyk’s holding the property as tenants by the entirety. Second, if the United States could foreclose on the property, to what percentage of the property was Mrs. Barczyk entitled.

In reaching the first issue, the Sixth Circuit had to determine whether the peculiarities of the tenancy by entirety prevented attachment of a tax lien. After noting that federal tax liens attach to property held as tenants by the entirety, the court ruled, that the United States had the authority to foreclose on the property under IRC § 7403, despite Michigan law.

After determining that the federal government could foreclose on, and sell the property, the court then considered what percentage of the house the woman owned. The Sixth Circuit determined that there is a presumption that a husband and wife each have an equal ownership interest in property held as tenants by the entirety. Mrs. Barczyk argued that she had a greater interest in the property based on actuarial evidence. The court rejected this argument by noting that the Mr. and Mrs. Barczyk were only five years a part in age and that both were in comparable health. As a result, Mrs. Barczyk was entitled to half of the proceeds acquired after the foreclosure sale of the property.

Although a significant property right is undercut by this ruling, it should be noted that the scope of the ruling is quite narrow. The ruling applies only to the federal government. Michigan law still protects property held jointly by husband and wife against creditors other than the federal government.

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.

In a recently decided case, Township of Blair v. Lamar OCI North Corp., (available at: http://milawyersweekly.com/fulltext-opinions/2011/11/01/township-of-blair-v-lamar-oci-north-corp-michigan-court-of-appeals-unpublished/)  the Michigan Court of Appeals discussed whether improvements may be made to a non-conforming use without destroying the protection from having to comply with the current regulations. In that case, a billboard violated the zoning laws in three ways. First, the billboard’s surface area was too large. Second, the billboard was too close to other billboards. Finally, the billboard was too tall. The owner of the billboard made changes to the height and surface area of the billboard, bringing them in conformity with the zoning laws. However, the billboard still violated the zoning regulation concerning distance between other billboards.  In other words, two of the three violations had been eliminated by the modifications.

After the modifications were made, the Township brought suit against the owners of the billboards to compel their removal. Even though the owner of the billboard fixed two of three non-conformities, the Court of Appeals ruled that the billboard still violated the current zoning regulations and ruled for the Township. Although this might seem unfair—after all, the billboard was in better conformity after the changes—it is important to note that the purpose of allowing non-conforming uses are for fairness. Once any changes have been made, it is expected that those changes will make bring the property into full compliance with applicable regulations.

Because of the quirks and intricacies of zoning laws, it is important for those who have been granted variances for non-conforming uses to seek legal advice prior to making improvements or changes to their property. Without help, those with non-conforming use variances might end up unintentionally losing those rights.

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 law allows property owners who have established a new principal residence to retain a Principal Residence Exemption on property once exempt as the owner’s principal residence for up to three years if (1) the property is not occupied (2) the property is for sale, (3) the property is not leased and, (4) the property is not used for any business or commercial purposes.

In order to take advantage of this law, one must file a Conditional Rescission of Principal Residence Exemption (Form 4640) to the assessor for the city or township where the property is located on or before May 1 of the first year of the claim. For example, in order to qualify for the 2012 exemption a property owner must file the form by May 1, 2012. This exemption is available for up to three years so long as all the above requirements are met. In addition to the May 1 filing requirement, the owner must annually submit form 4640 on or before December 31 verifying to the assessor that the property for which the Principal Residence Exemption meets the above requirements. In the example above, if the conditional rescission was approved for 2012, the owner would have to submit a new form by December 31, 2012 to verify qualifications for the 2013 tax year.

In Price v. High Pointe Oil Company (available at: http://coa.courts.mi.gov/documents/OPINIONS/FINAL/COA/20110825_C298460_35_298460.OPIN.PDF) the plaintiff homeowner sued the defendant oil company after her home was flooded with oil. The plaintiff had previously used the defendant to fill up her oil-burning furnace. After some time, the plaintiff purchased a new, non oil-burning furnace and discontinued purchasing oil from the defendant. After purchasing the new furnace, the plaintiff sold her old furnace and the oil tank to a third party. After a clerical error, the oil company set up an oil delivery. The oil company began to pump oil into the line that used to be connected to the oil tank. Because the oil tank was no longer in place the oil pumped directly in the plaintiff’s basement. In all, just under 400 gallons of oil were pumped into the basement.

As a result of the oil company’s negligence, the plaintiff’s home had to be demolished and the plaintiff lost a number of personal items. In addition to economic damages the defendant was depressed over the loss of her home. She felt great shame, embarrassment and humiliation in moving into her parents’ house. The plaintiff was awarded $100,000 in non-economic damages and the defendants challenged the award.

In Price, the Michigan Court of appeals ruled that non-economic plaintiffs may seek non-economic damages in negligence actions for the destruction of real property. The court’s decision turned on the historical and theoretical differences between personal property and real property. One of the most important distinctions between real property and personal property (generally) is that the former is completely unique. No piece of land is exactly the same. While Michigan courts have refused to allow non-economic damages for the destruction personal property (like a dog, car, or bicycle), the court failed to extend those prior holdings to real property.

In addition to each parcel of land’s unique characteristics, the court noted that homes have a unique value “which often provides as much if not more feelings of emotion and memories as it does shelter.” Moreover, the court noted that property allows special remedies for the breach of contracts for the sale of land such as specific performance.

This case is just one of many that highlights the special importance that land plays in our society. The implications of this case remain unclear, although it could often be cited for the enduring proposition that real property, above all else, holds a special place under the law.

In Premer, the Michigan Court of Appeals confirmed how to properly state a claim for unjust enrichment. In order to state a claim for unjust enrichment the party making the claim must make two showings: First, the claiming party must show that the other party received some benefit; Second, there must be an inequity. In showing that a benefit was conferred, the Premer Court considered a number of factors, but reaffirmed that the key factor in these cases is that unjust enrichment must be determined by the benefit conferred on the defendant, such as the increase in value provided by the work.

For example, in Premer, the plaintiffs sued under a theory of unjust enrichment. The plaintiffs argued that they should be compensated based on value of the services they provided in improving the land. The court rejected this argument and stated that unjust enrichment is determined based on the value added to the land based on the work completed. Additionally the court noted that additions in value to the land needed to be offset by the costs incurred by the defendant in foreclosing on the land. As a result, the plaintiff’s claims for unjust enrichment failed.

Despite the often-complicated world of contract law, it is important to remember that this area seeks to reach fair and equitable results. As a result, contract law often provides remedies where those unfamiliar with the topic might not realize. Unjust enrichment is one these doctrines that seeks to reach fair results.

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.

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.