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Liability for Damage During Redemption Period

Posted December 6, 2018

The mortgagor and any other person liable on the mortgage is liable to the purchaser or any other holder of the title to the property for any physical injury to the property beyond wear and tear resulting from the normal use of the property if the physical injury is caused by or at the direction of the mortgagor or other person liable on the mortgage. MCL 600.3278(1).

Moreover, if the purchaser provided notice pursuant to MCL 600.3237 (notice regarding interior inspection) and the mortgagor intends to move from the property, the mortgagor must inform23 the purchaser at least 10 days before vacating the property so that the property may be secured. MCL 600.3278(2).If the purchaser provided notice under MCL 600.3237, two different rebuttable presumptions apply depending on the circumstances. There is a rebuttable presumption that the mortgagor is liable to the purchaser at the foreclosure sale for all damage to the property that occurs before the expiration of the redemption period if the mortgagor does any of the following:

  • Subject to MCL 600.3238, fails to consent to an initial inspection, comply with a request for information on the condition of the property, or consent to an inspection of the property after the initial inspection, if requested.
  • Fails to provide timely notice to the purchaser under this subsection.
  • Fails to surrender control of the property in a manner that reasonably provides the purchaser with the opportunity to secure it.

There is a rebuttable presumption that the mortgagor is not liable for damage to the property that occurs after the mortgager surrenders control of the property if the mortgagor does all of the following. Subject to MCL 600.3238, consents to an initial inspection, complies with a request for information on the condition of the property, and consents to inspections of the property after the initial inspection, if requested. Provides timely notice to the purchaser under this subsection. This information may be conveyed by electronic mail, certified mail, or any other method reasonably calculated to achieve actual notice. MCL 600.3278(2).

 

Forfeiture of Land Contracts

Posted November 8, 2018

If the terms of a land contract expressly provide for termination or forfeiture of the contract following nonpayment of moneys due or any other material breach of the contract, summary proceedings under MCL 600.5726 may be appropriate. Default alone is not forfeiture; notice of intent to forfeit is necessary. Purchasers of real property by land contract generally do not willingly surrender possession or forfeit their equity, and most sellers of real property by land contract seek payment not possession.

If a vendee does agree to forfeit his or her equity and return possession of the property to the vendor in response to a vendor’s notice of forfeiture, the vendor is then required to decide whether to accept possession or to seek a deficiency judgment.

Unless the parties have a written agreement for a longer time, a vendee or person holding possession under him or her has 15 days from the date he or she was served with a notice of forfeiture to pay the moneys required under the contract and to cure any material breaches, or to surrender possession of the property. MCL 600.5728(1).

Under MCL 600.5728(2), a notice of forfeiture must:

  • state the names of the contracting parties,
  • state the date the contract was executed,
  • provide the address of the premises (or a legal description),
  • specify the amount of money required to be paid under the contract that remains unpaid,
  • specify the dates on which the unpaid payments were due,
  • indicate whether any other material breaches of the contract occurred, and
  • declare the contract forfeited no less than 15 after the notice was served, unless the amount of money owed is paid and any other material breaches are cured within that time.

 

Foreclosure Sale and Proceeds

Posted October 20, 2018

If the mortgage is not reinstated or otherwise resolved, the property must be sold at a public foreclosure sale to the highest bidder. MCL 600.3216. The sale must be conducted between the hours of 9 a.m. and 4 p.m. at the circuit court in the county where all or part of the property is located, and the sale must be conducted by the person so appointed in the mortgage or by the county sheriff, undersheriff, or deputy sheriff.

Any member of the public, including the mortgagee, may bid at the sale. MCL 600.3228. A mortgagee that bids at the sale is not required to pay cash, but rather is permitted to make a credit bid because any cash tendered would be returned to it. Subject to the mortgagor’s right of redemption, the purchaser acquires all the rights and title of the mortgagor; his or her title is subject to any existing liens created prior to the mortgage. MCL 600.3236. However, his or her title is free and clear of any liens vested subsequent to the creation of the mortgage. The money from the sale is applied first to satisfying the outstanding debt on the mortgage and paying the costs of the sale. MCL 600.3252. Where the bid is greater than the debt owed, any surplus moneys may be paid over to the mortgagor on demand unless a claimant files a verified statement prior to the distribution of the surplus attesting that he or she has a subsequent mortgage or lien on the premises. Id. In the latter case, the person responsible for the distribution of the money files the statement with the circuit court and deposits the money in the court escrow. Upon motion, the court then holds a hearing to determine the proper distribution of the surplus.

Where a mortgagor elects not to exercise his or her right of redemption, the mortgagor is not liable for any interest, insurance costs, or taxes arising after the foreclosure sale. In contrast, a mortgagor who redeems the property is liable for any interest, insurance costs, or taxes arising between the foreclosure sale and the mortgagor’s redemption.

Talmer Bank & Trust v Parikh, 304 Mich App 373, 387 (2014)

 

 

 

 

 

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