Real Estate Law in Michigan

Exclusion for Qualified Principal Residence Indebtedness Extended until December 31, 2012

2009-07-21T17:15:00.002-04:00

In my previous article When You Can Avoid Paying Income Tax on a Forgiven Mortgage, I discussed how the Mortgage Forgiveness Debt Relief Act of 2007 provided that qualified debt on a principal residence discharged between January 1, 2007 and December 31, 2009 was tax exempt.

Please be aware that pursuant to the Emergency Economic Stabilization Act of 2008, the discharge deadline has been extended until December 31, 2012. This is critical information for individuals facing the prospect of discharging mortgage debt in this difficult economy.

What Disclosure Requirements Does a Seller of Michigan Residential Property Have to a Buyer?

2009-06-11T13:50:00.000-04:00

Buying a home is one of the largest purchases that a person can make. Diligent home buyers obtain inspections to determine the condition of the property. However, the typical home inspection takes a few hours during one day and is largely based on what the inspector can see on that particular day. The weather, time of day, and time of year all may influence what an inspector observes. Furthermore, unless the home buyer seeks specific inspections and specific expertise, the inspector may not be able to fully evaluate certain aspects of the property (e.g. sewer line connection).

In order to determine what inspections are needed, buyers often rely on the disclosures that sellers make concerning the condition of the property. One of the leading causes of legal disputes between buyers and sellers is when the actual condition of the property differs from what the seller has disclosed to the buyer.

Seller Disclosure Act

In Michigan, the Seller Disclosure Act (MCL 565.951, et seq)(the "Act") governs a seller's disclosure requirements with respect to residential real estate transactions. Some of the key provisions of the Act include, but are not limited to, the following:

1. Unless an exception applies, a transferor of residential real estate must deliver to the transferee or the transferee's agent a written disclosure statement concerning the condition of the property which conforms to the Act. MCL 565.954. The form required by the Act is set forth in MCL 565.957.

2. Each disclosure required by the act is to be made in good faith. Under the Act "good faith" means honesty in fact in the conduct of the transaction. MCL 565.960.

3. The Act applies to the transfer of real estate consisting of not less than 1 or more than 4 residential dwelling units. MCL 565.952.

4. Under the Act transfers of Real Estate include sale, exchange, installment land contract, lease with an option to purchase, any other option to purchase, ground lease coupled with proposed improvements by the buyer or tenant, or transfer of stock or an interest in a residential cooperative. MCL 565.952

5. The seller disclosure requirements of the Act do not apply in all residential real estate transfers. MCL 565.953. Specific exceptions include, but are not limited to (see MCL 565.953 for all exceptions):

(a) Transfers pursuant to a court order.

(b) Transfers to a mortgagee by a mortgagor who in in default.

(c) Transfers by a sale under a power of sale.

(d) Transfers by a nonoccupant fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust.

(e) Transfers from 1 co-tenant to 1 or more other co-tenants.

(f) Transfers made to a spouse, parent, grandparent, child, or grandchild.

(g) Transfers between spouses resulting from a judgment of divorce.

(h) Transfers or exchanges to or from any governmental entity.

(i) Transfers made by a person licensed under article 24 of Michigan's occupational code (i.e. residential builders, residential maintenance and alteration contractors, and related salespersons) of newly constructed residential property that has not been inhabited.

6. The seller's disclosure statement must be delivered before the transferor executes a binding purchase agreement with the transferee or, in the absence of purchase agreement, before a binding installment sales contract is executed. Otherwise, the transferee will have the right to terminate the purchase agreement for a period of 72 hours after delivery of the seller's disclosure statement if it is delivered in person or for a period of 120 hours after delivery of the seller's disclosure if it is delivered by registered mail. In any event the transferee's right to terminate the purchase agreement expires after the property is transferred by deed or installment sales contract. MCL 565.954.

7. A transferor or the transferor's agent is not liable for any error, inaccuracy, or omission in any information provided in a seller's disclosure statement if the error, inaccuracy, or omission was not within the personal knowledge of the transferor, or was based entirely on information provided by public agencies or provided by certain experts (e.g. licensed professional engineers, professional surveyors, contractors, etc.), and ordinary care was exercised in transmitting the information. MCL 565.955.

8. An agent of a transferor is not liable for any violation of the Act by the transferor unless the agent knowingly acted in concert with the transferor to violate the Act. MCL 565.965.

9. It is not a violation of the Act if the transferor fails to disclose information that could be obtained only through inspection or observation of inaccessible portions of real estate or could be discovered only by a person with expertise in a science or trade beyond the knowledge of the transferor. MCL 565.955.

10. If information disclosed in accordance with the Act becomes inaccurate as a result of any action, occurrence, or agreement after delivery of the required disclosures, the resulting inaccuracy does not constitute a violation of the Act. MCL 565.956.

11. A city, township, or county may require disclosures in addition to those disclosures required by the Act and may require disclosures on a different disclosure form in connection with transaction subject to the Act. MCL 565.959.

12. The specification of items for disclosure in the Act does not limit or abridge any obligations for disclosure created by any other provisions of law regarding fraud, misrepresentation, or deceit in transfer transactions. MCL 565.961.

13. A transfer subject to the Act is not invalidated solely because of the failure of any person to comply with the Act. MCL 565.964.

Conclusion

Being aware of the requirements of the Seller Disclosure Act are critical to both buyers and sellers of Michigan residential property. Buyers need to understand what obligations a seller has to disclose property conditions so that they can adequately determine what inspections they need to obtain. This is especially true in an era of increasing foreclosures and more and more bank owned properties. Assuming seller disclosure requirements that don't exist can be a disaster for a prospective buyer. Similarly, sellers need to understand their legal obligations under the Act to avoid exposing themselves to liability. Understanding and complying with the Seller Disclosure Act can reduce risks for all parties involved in a residential real estate transaction.

Michigan's Seller Disclosure Act can be reviewed here: Seller Disclosure Act.

The Most Important Part of a Real Estate Transaction: The Legal Description

2009-04-06T20:11:00.000-04:00

You walk into a bookstore, you pick out a book, you pay for it, the clerk places the book into a bag, hands you a receipt, and you leave the store with the book. There is no question in anyone's mind about who now owns that book. You know you own the book. The store knows you own the book. You have a receipt confirming your purchase of the book. No one is challenging your ownership of the book. Another shopper isn't going to come up to you after you bought the book and suddenly claim that the book is actually their book and demand that you give it to them. You aren't going to arrive home and find your neighbor demanding ownership of the last three chapters of the book.

However, what if the property that you desire to purchase is real estate? To purchase real estate buyers and sellers enter into contracts and to transfer ownership the seller must deed the property to the buyer. But when real estate is sold, how do the parties know what is actually being sold? A buyer doesn't walk into the house store, pick out their house, pay for it, receive a receipt, and drive away with the house in the trunk of his or her car. Accordingly, how do the parties know what is actually the subject of their transaction? The answer: the legal description.

The legal description is the most important part of any real estate transaction. As the name indicates, it legally describes the real estate involved. If the transaction is a sale, then it describes what a buyer is buying and what a seller is selling. However, the legal description is used to describe property in all kinds of real estate transactions, not simply sales transactions. For example, legal descriptions are used in mortgages, claims of lien, easements, title insurance policies, and leases. Failing to understand and verify legal descriptions can be a costly mistake.

Accordingly, here are ten things that you must know about legal descriptions in Michigan real estate transactions:

1. In any real estate transaction, property should be legally described. Relying on a post office address or a tax identification number is not sufficient.

2. There are four methods to describe real estate: (1) by sections and divisions of sections, (2) by metes and bounds, (3) by reference to a platted subdivision, and (4) by reference to a condominium.

a. Sections and Subsections: With a few exceptions, the state of Michigan is divided into square units consisting of townships, ranges, and sections by federal government surveys from the 1800s.

b. Metes and Bounds: Metes refers to units of measurement and bounds refers to boundaries that may be either natural or artificial. A metes-and-bounds description begins at a specified point and proceeds for certain specified distances until it returns to the point of the beginning. Directions are given by degrees.

c. Plats: A plat is a scaled diagram of property that is subdivided into lots based on a recorded survey. A platted lot may be described by referencing the lot number in the plat and the recording information of the plat.

d. Condominiums: A condominium is property that is divided into condominium units with various portions of the development under common ownership. A master deed is recorded with a a subdivision plan to establish the condominium and the condominium units. A condominium unit may be legally described by referencing the unit number and the recording information for the condominium master deed.

3. Metes-and-bounds descriptions may be combined with the other methods of describing property.

4. If there is any doubt about the validity of a legal description, obtain a survey.

5. Don't assume that a legal description in a prior real estate document or a tax bill is accurate.

6. Make sure the legal description is complete. For example, in a metes-and-bounds description ensure that the property lines trace back to the point of beginning.

7. Double check the work of surveyors and title companies. Anyone can make a mistake. Also, consider obtaining a survey endorsement to a title insurance policy to insure against the loss resulting from an inaccurate survey.

8. Cross-reference all legal descriptions in a real estate transaction. Begin with the title commitment and the survey and then look at the other documents.

9. Visit the property to ensure the legal description fits.

10. Make sure the legal description includes any additions that are subject to the transaction (e.g. easements).

Understanding legal descriptions is a vital part of any real estate transaction. Real estate transactions often involve large sums of money. Failing to properly evaluate a legal description is like buying a book without reading the cover. You might get lucky and love what you've bought, or you might not and the cost could be substantial.

Michigan Municipalities are Not Shielded From Claims Brought Pursuant to the Doctrine of Acquiescence

2009-03-28T12:06:00.012-04:00

In Michigan, under the doctrine of acquiescence a property owner may obtain legal ownership of property running to an incorrect boundary line, if the property owner can prove by a preponderance of the evidence that both property owners treated this line as the boundary line for a period of at least 15 years (See MCL 600.5801).

Under Michigan law, the State of Michigan is not limited by the 15 year period and therefore may defeat a property claim brought pursuant to the doctrine of acquiescence (See MCL 600.5821(1)). However, in its recent decision in the case of Gerald Mason and Karen Mason vs. City of Menominee (click link for entire text of decision), the Michigan Court of Appeals held that municipalities are not shielded from property claims brought pursuant to the doctrine of acquiescence if the municipality did not bring the action to recover the property.

In this case, the Masons brought an action to quiet title to certain property owned by the City of Menominee. The lower court determined that the Masons had acquired the property pursuant to the doctrine of acquiescence. The City argued that under MCL 600.5821(2), they were shielded from a doctrine of acquiescence claim. MCL 600.5821(2) states, "Actions brought by any municipal corporations for the recovery of the possession of any public highway, street, alley, or any other public ground are not subject to the periods of limitations."

The Court looked closely at MCL 600.5821(2) and based on a plain reading of the statute noted that because the Masons brought the suit and not the City of Menominee, the City could not use the statute as a defense to defeat the Mason's quiet title action. Accordingly, the Court of Appeals affirmed the decision of the lower court awarding the Masons the disputed property.

This decision raises interesting questions about whether the Michigan Legislature intended to provide different levels of protection for property owned by the State as opposed to property owned by municipalities. If the legislature did not intend this result, there will certainly be future legislation. Also, this decision provides a significant incentive for property owners and municipalities to be the first to file in future property disputes, as the winner will obtain a huge advantage in litigating their claim.

American Recovery and Reinvestment Act Modifies Tax Laws Affecting Real Estate

2009-03-05T16:31:00.013-05:00

On February 17, 2009 the President signed the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) into law. This massive piece of legislation introduced a number of changes to United States tax law.

Some of the key changes involving real estate include modifying: (1) the First-Time Homebuyer Tax Credit, (2) the Residential Energy Property Credit, and (3) the Residential Energy Efficient Property Credit.

CCH Incorporated has a helpful summary of the law's tax changes here: American Recovery and Reinvestment Act of 2009 Special Report.

You can view the entire text of the American Recovery and Reinvestment Act of 2009 here: P.L. 111-5.

Can the Taxable Value of Michigan Property Increase in a Declining Real Estate Market?

2009-02-08T14:33:00.005-05:00

Yes, the taxable value of Michigan property can increase, even in a declining real estate market. As a result, the press, politicians, and the public are grappling with Michigan property tax law and debating whether changes need to be made.

I discussed how Michigan property is taxed in my prior article "Why a Transfer of Ownership May or May Not Increase the Taxable Value of Your Home." As a reminder, the taxable value of property in Michigan (which has not been transferred) is equal to the lessor of:

(a) The property's taxable value in the immediately preceding year minus any losses, multiplied by the lesser of 1.05 or the inflation rate, plus all additions.

(b) The property's current state equalized valuation. MCL 211.27a.

The state equalized valuation of the property is equal to the assessed value of the property as adjusted following county and state equalization (oftentimes, a property's assessed value is equal to its state equalized valuation). The assessed value of the property equals 50% of the true cash value of the property. MCL 211.27a(1). Michigan law defines the "true cash value" of property as the usual selling price at the place where the property to which the term is applied is at the time of assessment, being the price that could be obtained for the property at private sale, and not at auction sale except as otherwise provided in MCL 211.27a, or at forced sale. Put another way, generally, "true cash value" is the usual selling price of the property where it is located in a private sale. See MCL 211.27a for further information on how the "true cash value" of property is determined.

MCL 211.27a acts as a cap preventing taxable value from exceeding a 5% increase per year if the property has not been transferred. When property values are rising, the cap benefits taxpayers. However, what happens when property values fall?

If a property's taxable value is less than its state equalized valuation, then the taxable value of the property will still increase at the lesser of the rate of inflation or 5% even if the property's overall value has decreased. However, note that under no circumstances can a property's taxable value exceed its state equalized valuation. In other words, if in 2007your property's taxable value in 2008 could not exceed $180,000. However, if in 2007 your home's taxable value was $100,000 and its state equalized value was $200,000 and in 2008 its state equalized value dropped to $180,000, your property's taxable value in 2008 would still increase by the lesser of the rate of inflation or 5% (minus losses and plus additions).

Some in the press and in politics are claiming this development is a "glitch" in the law that needs to be corrected. Some are arguing that if a property's value declines or remains the same, then its taxable value should not increase under any circumstances. In fact, Michigan State Representative Brian Calley recently introduced House Joint Resolution B which is legislation designed to ban property tax increases when the value of the property falls or stays the same. It is anticipated to be an interesting legislative battle, as those that rely on property tax revenue are not likely to be in favor of such a ban.

What do you think? Should the law be changed? Should there be a ban on property tax increases when property values fall? Please post your thoughts in the comments section below.

Michigan's State Real Estate Transfer Tax Act Expands

2009-01-19T09:41:00.005-05:00

On January 9, 2009 House Bill 6122 was signed into law and designated as 2008 PA 473. The law, effective retroactively to January 1, 2007, extends Michigan's State Real Estate Transfer Tax to contracts for the transfer or acquisition of a controlling interest in any entity if the real property owned by that entity comprises 90 percent or more of the entity's fair market value.

Under the new law "controlling interest" means more than 80 percent of the total value of all classes of stock of a corporation, more than 80 percent of the total interest in capital and profits of a partnership, association, limited liability company ("LLC"), or other unincorporated form of doing business, or more than 80 percent of the beneficial interest in a trust.

However, the law exempts from the tax a conveyance that is one of the following: (1) a transfer between any corporation and its stockholders or creditors, between any LLC and its members or creditors, between any partnership and its partners or creditors, or between a trust and its beneficiaries or creditors, when the transfer is to effectuate a dissolution of the corporation, LLC, partnership, or trust, and it is necessary to transfer the title of real property from the entity to the stockholders, members, partners, beneficiaries, or creditors; (2) a transfer between any LLC and its members or between any partnership and its partners if the ownership interests in the LLC or partnership were held by the same people and in the same proportion as in the LLC or partnership before the transfer; (3) a transfer of a controlling interest in an entity with an interest in real property if the transfer of the property would qualify for exemption if it had been accomplished by deed to the property between the people who were parties to the transfer; and (4) a transfer in connection with the reorganization of an entity if the beneficial ownership does not change.

To read the entire text of the new law, including all circumstances when Michigan's State Real Estate Transfer Tax applies and all applicable exemptions, click here: House Bill 6122.

Issues to Consider When Negotiating a Commercial Lease

2009-01-09T13:25:00.000-05:00

Every commercial leasing transaction is unique and presents its own series of issues and concerns. However, whether you are a landlord or a tenant, listed below are a series of common issues to consider as you negotiate your lease relationship. Again, these are simply issues to consider, whether or not (or in what manner) they should be addressed in the lease will depend on your specific situation.

1. Description of the Property: Does the lease contain a clear and exact description of the property being leased including any access rights, parking privileges, etc.? Does the lease specify square feet, use an accurate legal description of the land, and use drawings for clarity?

2. Term: Does the lease indicate when it begins, when it ends, and any extension terms (including how the extensions are exercised)? Does it indicate when the lease becomes effective and when occupancy by the tenant can occur?

3. Condition of the Property/Improvements: Does the lease indicate whether the tenant is taking the property on an "as is" basis or is the landlord representing whether the property complies with local, state, and federal laws? Also, does it specify any improvement/build-out obligations either the landlord or tenant are undertaking? Does it indicate when those obligations will be completed and any oversight or approval related to any improvements? Does it indicate who will be the owner of any improvements or fixtures added to the property? Does it indicate the condition of property at the end of the lease?

4. Rent: Does the lease clearly indicate the amount of rent including any terms for fixed rent, additional rent, or percentage rent, if applicable? Does the lease include any escalator clauses that increase rent in accordance with a common index such as the consumer price index? Does the lease include any fees for late payment of rent?

5. Taxes: Does the lease indicate who is responsible to pay real estate taxes for the property and how and when that amount is calculated and paid?

6. Expenses: Does the lease indicate who is responsible for expenses such as utilities, snow removal, repairs, maintenance, janitorial service, capital improvements, easement related expenses, etc.? Are there common area maintenance charges? Does the lease indicate how and when these expenses are paid?

7. Indemnification: Does the lease indicate whether a party is responsible for any liability incurred by the other party, its employees, agents, visitors, etc.? Does the lease allocate liability related to damage to the property caused by a party or otherwise?

8. Insurance: Does the lease indicate who is responsible for insurance? Does it indicate required amounts, types of coverage, and notice concerning changes in insurance? Does it address waiver of subrogation to avoid lawsuits by a party's insurance company?

9. Repairs/Maintenance: Does the lease clearly indicate which party is responsible for maintaining or repairing each part of the property? Does it indicate when repairs will be completed? Does it address maintaining the property in accordance with local, state, and federal laws?

10. Use of the Property: Does the lease clearly indicate for what purposes the property may be used or may not be used?

11. Eminent Domain/Damage: Does the lease indicate what happens in the event the property (or any part of it) is damaged or taken by a public authority? Does it indicate who is entitled to any insurance proceeds or just compensation award? Does it indicate under what circumstances the lease would terminate or a party would be required to repair the property?

12. Access to the Property: Does the lease indicate when, under what circumstances, and for what purposes the landlord will have access to the property?

13. Assignment/Subletting: Does the lease indicate whether and under what circumstances the lease may be assigned or whether the tenant may sublet the property?

14. Environmental Matters: Does the lease clearly address any environmental obligations of the parties including any limitations on storage, transportation, or use of hazardous materials on the property? Does the lease define "hazardous materials"? Does the lease allocate responsibility for any "clean-up" or "testing"costs?

15. Bankruptcy/Transfer of Ownership: Does the lease address what happens in the event one of the parties becomes bankrupt or transfers ownership through a sale, merger, or otherwise?

16. Breach/Default: Does the lease clearly indicate what rights and remedies a party is entitled to upon the breach or default of the other party? Does it define what constitutes a default or breach of the lease? Is there a cure period and are there notice provisions with respect to the defaulting party? Does it address attorney fees, expenses, interest, re-letting, re-entry, and the removal of a tenant's property? Does the lease include a force majeure clause protecting parties from a default caused by events beyond their control such as war or acts of God?

17. Jury Trial/Counterclaim: Does the lease address whether a party may demand a jury trial or bring a counterclaim in a lawsuit related to the lease?

18. Holding over: Does the lease address what happens if a tenant remains in possession of the property after the lease term ends?

19. Subordination/Nondisturbance: Does the lease address whether it is surbordinate to any mortgages on the property and whether a tenant shall be required to execute a subordination and attornment agreement? Does the lease provide that any mortgage lenders will execute nondisturbance agreements to protect the tenant's leasehold rights in the event of foreclosure?

20. Quiet Enjoyment: Does the lease indicate whether a tenant is entitled to quiet enjoyment and whether or not that quiet enjoyment is conditioned upon the performance of certain obligations?

21. Estoppel Certificate: Does the lease provide any obligation for a tenant to provide an estoppel certificate?

22. Security Deposit: Does the lease provide for a security deposit and clearly indicate how and when the security deposit shall be returned?

23. Security Agreement: Does the lease provide that the landlord may take a security interest in the tenant's property? Does it indicate how and when any such security interest would be evidenced and released?

24. Waiver: Does the lease contain a waiver clause indicating that certain actions by a party will not waive other provisions of the lease?

25. Amendment: Does the lease clearly address how it may be amended?

26. Severability: Does the lease contain a severability clause indicating that the invalidity of one provision of the lease will not invalidate the entire lease?

27. Time: Does the lease indicate whether time is of the essence?

28. Binding Effect: Does the lease indicate whether the lease is binding on the parties and their respective heirs, executors, administrators, personal representatives, successors, and assigns?

29. Governing Law: Does the lease indicate what law controls the lease?

30. Notice: Does the lease clearly indicate how parties are to be notified for matters concerning the lease or property?

31. Signage: Does the lease address whether and under what conditions a tenant may place signs on the property?

32. Rules: Does the lease specify any rules of the landlord?

33. Recording: Does the lease address whether or under what conditions the lease or a memorandum of the lease may be recorded to provide record notice of the tenant's leasehold interest?

34. Accord and Satisfaction: Does the lease contain an accord and satisfaction clause where acceptance of partial payment does not constitute full payment, even if the payor provides a written statement to that effect?

35. Entire Agreement: Does the lease contain a clause indicating that it constitutes the entire agreement of the parties notwithstanding any other oral or written communications between them?

Michigan's Land Division Act Cannot Create Substantive Property Rights

2009-01-03T10:44:00.004-05:00

On December 30, 2008 the Michigan Supreme Court held in the case of Frank J. Tomecek, Jr., et al. vs. Andrew Lucian Bavas, et al. that Michigan's Land Division Act ("LDA") cannot create substantive property rights.

In this case the Plaintiffs sought an easement for the purpose of connecting to a city sewer across the lot of their neighbors. The Michigan Court of Appeals ("COA") held that the LDA permits the trial court to make substantive changes to property rights. In this instance, the COA held that the LDA empowered the trial court to revise the plat to include utilities in a preexisting easement. The Michigan Supreme Court disagreed.

The Michigan Supreme Court held that while the LDA allows a circuit court to order a recorded plat or any part of it to be vacated, corrected, or revised (See MCL 560.221), it limits those changes to property rights already in existence as opposed to enabling the court to establish an otherwise nonexistent property right. By analogy the Court stated, "If one 'revises' a map of the United States to show Michigan encompassing half of the country it does not make it so."

Although, the Michigan Supreme Court reversed the COA with respect to its analysis concerning the LDA, the Court ultimately upheld the COA's judgment in favor of the Plaintiffs by determining that the original grantors of the property intended that the easement in question include utilities.

The Michigan Supreme Court decision can be found here: Frank J. Tomecek, Jr., et al. vs. Andrew Lucian Bavas, et al. The Michigan Land Division Act can be found here: MCL 560.101 et seq.

This is Exactly Why You Must Carefully Read a Commitment for Title Insurance Before Closing

2008-12-31T18:19:00.008-05:00

On December 18, 2008, the Michigan Court of Appeals offered a brutal reminder of what can happen when you fail to carefully review a commitment for title insurance. In the case of Waad F. Seba vs. Lawyers Title Insurance Corporation, Tri County Title Agency, et. al. the Plaintiff land developer purchased title insurance from the Defendant title company on two parcels of property he intended to develop.

However, after the Plaintiff began developing the property he learned of a recorded settlement agreement that significantly impaired his development plans, resulting in financial losses. When Plaintiff filed a claim under his owner's policy of title insurance, the Defendant denied coverage based on an exclusion which excluded coverage of loss or damage arising from “easements and restrictions, if any of record, affecting the use of [the property]."

When Plaintiff sued Defendant to enforce coverage, the Court upheld Defendant's denial even though (1) the Defendant had conducted the title search and failed to discover the settlement agreement, and (2) there was a genuine factual issue as to whether Defendant delivered the title commitments at the closing. The Court found that the Defendant did not have an enforceable obligation to do either.

This case emphasizes how critical it is to receive a commitment for title insurance before closing and to carefully review it. The commitment is the contract to issue the title insurance policy that allocates risk concerning a property's title (e.g. the risk of failing to discover a recorded instrument affecting the property). It is up to the buyer to understand what risks they are assuming and to craft the transaction to their liking before purchasing property.

The title company will perform the services they are contracted to perform, but they do not represent the buyer. As this Plaintiff discovered, relying on the title company to ensure that the buyer's interests are protected can be a disaster.

Read my prior article Getting the Most From Your Owner's Policy of Title Insurance for more information on title insurance.

Taking Advantage of a State Transfer Tax Exemption in a Declining Real Estate Market

2008-12-24T13:10:00.014-05:00

Michigan real estate sales are subject to state and county transfer taxes unless an exemption applies. The state transfer tax rate is $3.75 for each $500 or fraction of $500 of the total value of the property being transferred. See MCL 207.525. The county transfer tax rate is $.55 (not more than $.75 in a county with a population of more than 2,000,000) for each $500 or fraction of $500 of the total value of the property being transferred. See MCL 207.504. The state transfer tax exemptions are set forth in MCL 207.526. The county transfer tax exemptions are set forth in MCL 207.505.

The MCL 207.526(t) tax exemption permits a property for which a principal residence exemption (a/k/a homestead exemption)("PRE") is claimed to be exempt from state transfer tax if (1) the state equalized valuation (“SEV”) of the property is equal to or lesser than the SEV on the date of its acquisition by the transferer, and (2) the property is transferred for not more than its true cash value (“TCV”). See Michigan Attorney General Opinion 7214 which clarified that a property would be ineligible for the exemption if it sold for more than its TCV, but not if it sold for less than its TCV. See also Why a Transfer of Ownership May or May Not Increase the Taxable Value of Your Home for a further explanation of SEV and TCV.

In other words, if you intend to sell your home and (1) you have claimed a PRE on the property, (2) on the date of sale the SEV is equal to or lesser than the SEV on the date you purchased the home, and (3) the home is not sold for more than its TCV, it would be exempt from state real estate transfer tax. Please note that there is not an equivalent county transfer tax exemption.

In order to qualify for a PRE the property must be your principal residence. See MCL 211.7cc. Under applicable Michigan law, “principal residence” means the 1 place where an owner of the property has his or her true, fixed, and permanent home to which, whenever absent, he or she intends to return and that shall continue as a principal residence until another principal residence is established. See MCL 211.7dd(c).

Also, please note that if an exemption is claimed under MCL 207.526(t) and the property is transferred for an amount greater than its TCV, the exemption will not apply and a penalty equal to 20% of the tax will be assessed in addition to the tax due. See MCL 207.526(t).

See the following examples for use of the MCL 207.526(t) exemption in practice (for purposes of these illustrations assume that the PRE applies):

Example 1

SEV when acquired in 2005 = $60,000

SEV when transferred in 2008 = $58,000

TCV is 2008 = $116,000

Transfer or sale price in 2008 = $112,000

Outcome: This transfer qualifies for exemption because the SEV for the year of sale is less than the SEV for the year of acquisition and the sales price does not exceed TCV.

Example 2

SEV when acquired in 2005 = $60,000

SEV when transferred in 2008 = $58,000

TCV in 2008 = $116,000

Transfer or sale price in 2008 = $120,000

Outcome: This transfer does not qualify for exemption because the sales price exceeds TCV.

Example 3

SEV when acquired in 2005 = $60,000

SEV when transferred in 2008 = $62,000

TCV in 2008 = $124,000

Transfer or sale price in 2008 = $124,000

Outcome: This transfer does not qualify for exemption because the SEV for the year of sale is greater than the SEV for the year of acquisition.

Example 4

SEV when acquired in 2005 = $60,000

SEV when transferred in 2008 = $60,000

TCV in 2008 = $120,000

Transfer or sale price in 2008 = $120,000

Outcome: This transfer qualifies for exemption because the SEV for the year of sale is equal to the SEV for the year of acquisition and the sales price does not exceed TCV.

Why a Transfer of Ownership May or May Not Increase the Taxable Value of Your Home

2008-12-20T06:16:00.015-05:00

Under Michigan law, upon a transfer of ownership of property, the taxable value of the property equals the state equalized value of the property for the calendar year following the transfer. See MCL 211.27a(3). The state equalized value of the property is equal to the assessed value of the property as adjusted following county and state equalization. The assessed value of the property equals 50% of the true cash value of the property. See MCL 211.27a(1). Michigan law defines the "true cash value" of property as the usual selling price at the place where the property to which the term is applied is at the time of assessment, being the price that could be obtained for the property at private sale, and not at auction sale except as otherwise provided in MCL 211.27, or at forced sale. Put another way, generally, "true cash value" is the usual selling price of the property where it is located in a private sale. See MCL 211.27 for further information on how the "true cash value" of property is determined.

If a transfer of ownership does not occur, the taxable value of the property is equal to the lesser of:

(a) The property’s taxable value for the preceding year, minus losses, multiplied by the lesser of 1.05 or the inflation rate, plus construction additions,or

(b) The property’s current state equalized value. See MCL 211.27a(2).

In other words, if real estate appreciates in value, and there has not been a transfer of ownership, then the property's taxable value will not, subject to construction additions, exceed a 5% increase in value in any given year. This concept is referred to as a property tax cap. However, as stated above, if there is a transfer of ownership, then there will be an uncapping of the property's taxable value and it will rise to its current state equalized value.

The consequences of a property tax uncapping can be significant. Therefore, it is critical to understand what constitutes a transfer of ownership. For the purpose of determining a property's taxable value Michigan law defines a "transfer of ownership" as the conveyance of title to or a present interest in property, including the beneficial use of the property, the value of which is substantially equal to the value of the fee interest. See MCL 211.27a(6). "Beneficial use" is defined as the right to possession, use, and enjoyment of property, limited only by encumbrances, easements, and restrictions of record. See MCL 211.27a(11)(b).

Transfer of Ownership

Michigan law sets forth a list of what constitutes a "transfer of ownership" for purposes of determining a property's taxable value. See MCL 211.27a(6). This list is not intuitive and it is not exhaustive. Note that under certain circumstances a lease, the change in the beneficiary of a trust, and the change of more than 50% of the ownership of a business entity all could constitute a "transfer of ownership." Items under Michigan law that constitute a "transfer of ownership" include:

(a) A conveyance by deed.

(b) A conveyance by land contract. The taxable value of property conveyed by a land contract executed after December 31, 1994 shall be adjusted under MCL 211.27a(3) for the calendar year following the year in which the contract is entered into and shall not be subsequently adjusted under MCL 211.27a(3) when the deed conveying title to the property is recorded in the office of the register of deeds in the county in which the property is located.

(c) A conveyance to a trust after December 31, 1994, except if the settlor or the settlor’s spouse, or both, conveys the property to a trust and the sole present beneficiary of beneficiaries are the settlor or the settlor’s spouse, or both.

(d) A conveyance or distribution from a trust, except if the distributee is the sole present beneficiary or the spouse of the sole present beneficiary, or both.

(e) A change in the sole present beneficiary or beneficiaries of a trust, except a change that adds or substitutes the spouse of the sole present beneficiary.

(f) A conveyance by distribution under a will or by intestate succession except if the distributee is the decedent’s spouse.

(g) A conveyance by lease if the total duration of the lease, including the initial term and all options for renewal, is more than 35 years or the lease grants the lessee a bargain purchase option. As used in this subdivision, "bargain purchase option" means the right to purchase the property at the termination of the lease for not more than 80% of the property's projected true cash value at the termination of the lease. After December 31, 1994, the taxable value of property conveyed by a lease with a total duration of more than 35 years or with a bargain purchase option shall be adjusted under MCL 211.27a(3) for the calendar year following the year in which the lease is entered into. This subdivision does not apply to personal property except buildings described in MCL 211.14(6) and personal property described in MCL 211.8(h), (i), and (j). This subdivision does not apply to that portion of the property not subject to the leasehold interest conveyed.

(h) A conveyance of an ownership interest in a corporation, partnership, sole proprietorship, limited liability company, limited liability partnership, or other legal entity if the ownership interest conveyed is more than 50% of the corporation, partnership, sole proprietorship, limited liability company, limited liability partnership, or other legal entity. Unless notification is provided under MCL MCL 211.27a(10), the corporation, partnership, sole proprietorship, limited liability company, limited liability partnership, or other legal entity shall notify the assessing officer on a form provided by the state tax commission not more than 45 days after a conveyance of an ownership interest that constitutes a transfer of ownership under this subdivision.

(i) A transfer of property held as a tenancy in common, except that portion of the property not subject to the ownership interest conveyed.

(j) A conveyance of an ownership interest in a cooperative housing corporation, except that portion of the property not subject to the ownership interest conveyed.

Exceptions to Transfer of Ownership

Michigan law also sets forth specific exceptions to what constitutes a "transfer of ownership" for purposes of determining a property's taxable value. See MCL 211.27a(7). These include:

(a) The transfer of property from 1 spouse to the other spouse or from a decedent to a surviving spouse.

(b) A transfer from a husband, a wife, or a husband and wife creating or disjoining a tenancy by the entireties in the grantors or the grantor and his or her spouse.

(c) A transfer of that portion of property subject to a life estate or life lease retained by the transferor, until expiration or termination of the life estate or life lease. That portion of property transferred that is not subject to a life lease shall be adjusted under MCL 211.27a(3).

(d) A transfer through foreclosure or forfeiture of a recorded instrument under chapter 31, 32, or 57 of the revised judicature act of 1961, 1961 PA 236, MCL 600.3101 to 600.3280 and MCL 600.5701 to 600.5759, or through deed or conveyance in lieu of a foreclosure or forfeiture, until the mortgagee or land contract vendor subsequently transfers the property. If a mortgagee does not transfer the property within 1 year of the expiration of any applicable redemption period, the property shall be adjusted.

(e) A transfer by redemption by the person to whom taxes are assessed of property previously sold for delinquent taxes.

(f) A conveyance to a trust if the settlor or the settlor’s spouse, or both, conveys the property to the trust and the sole present beneficiary of the trust is the settlor or the settlor’s spouse or both.

(g) A transfer pursuant to a judgment or order of a court of record making or ordering a transfer, unless a specific monetary consideration is specified or ordered by the court for the transfer.

(h) A transfer creating or terminating a joint tenancy between 2 or more persons if at least 1 of the persons was an original owner of the property before the joint tenancy was initially created and, if the property is held as a joint tenancy at the time of conveyance, at least 1 of the persons was a joint tenant when the joint tenancy was initially created and that person has remained a joint tenant since the joint tenancy was initially created. A joint owner at the time of the last transfer of ownership of the property is an original owner of the property. A person is an original owner of property owned by that person’s spouse.

(i) A transfer for security or an assignment or discharge of a security interest.

(j) A transfer of real property or other ownership interests among members of an affiliated group. As used in this subsection, "affiliated group" means 1 or more corporations connected by stock ownership to a common parent corporation. Upon request by the state tax commission, a corporation shall furnish proof within 45 days that a transfer meets the requirements of this subdivision. A corporation that fails to comply with this request by the state tax commission is subject to a fine of $200.00.

(k) Normal public trading of shares of stock or other ownership interests that, over any period of time, cumulatively represent more than 50% of the total ownership interest in a corporation or other legal entity and are traded in multiple transactions involving unrelated individuals, institutions, or other legal entities.

(l) A transfer of real property or other ownership interests among corporations, partnerships, limited liability companies, limited liability partnerships, or other legal entities if the entities involved are commonly controlled. Upon request by the state tax commission, a corporation, partnership, limited liability company, limited liability partnership, or other legal entity shall furnish proof within 45 days that a transfer meets the requirements of this subdivision. A corporation, partnership, limited liability company, limited liability partnership, or other legal entity that fails to comply with a request by the state tax commission under this subdivision is subject to a fine of $200.00.

(m) A direct or indirect transfer of real property or other ownership interests resulting from a transaction that qualifies as a tax-free reorganization under section 368 of the internal revenue code, 26 USC 368. Upon request by the state tax commission, a property owner shall furnish proof within 45 days that a transfer meets the requirements of this subdivision. A property owner who fails to comply with a request by the state tax commission under this subdivision is subject to a fine of $200.00.

(n) A transfer of qualified agricultural property, if the person to whom the qualified agricultural property is transferred files an affidavit with the assessor of the local tax collecting unit in which the qualified agricultural property is located and with the register of deeds for the county in which the qualified agricultural property is located attesting that the qualified agricultural property shall remain qualified agricultural property. The affidavit under this subdivision shall be in a form prescribed by the department of treasury. An owner of qualified agricultural property shall inform a prospective buyer of that qualified agricultural property that the qualified agricultural property is subject to the recapture tax provided in the agricultural property recapture act, 2000 PA 261, MCL 211.1001 to 211.1007, if the qualified agricultural property is converted by a change in use. If property ceases to be qualified agricultural property at any time after being transferred, all of the following shall occur:

(i) The taxable value of that property shall be adjusted as of the December 31 in the year that the property ceases to be qualified agricultural property.

(ii) The property is subject to the recapture tax provided for under the agricultural property recapture act, 2000 PA 261, MCL 211.1001 to 211.1007.

(o) A transfer of qualified forest property, if the person to whom the qualified forest property is transferred files an affidavit with the assessor of the local tax collecting unit in which the qualified forest property is located and with the register of deeds for the county in which the qualified forest property is located attesting that the qualified forest property shall remain qualified forest property. The affidavit under this subdivision shall be in a form prescribed by the department of treasury. An owner of qualified forest property shall inform a prospective buyer of that qualified forest property that the qualified forest property is subject to the recapture tax provided in the qualified forest property recapture tax act, 2006 PA 379, MCL 211.1031 to 211.1036, if the qualified forest property is converted by a change in use. If property ceases to be qualified forest property at any time after being transferred, all of the following shall occur:

(i) The taxable value of that property shall be adjusted as of the December 31 in the year that the property ceases to be qualified forest property.

(ii) The property is subject to the recapture tax provided for under the qualified forest property recapture tax act.

(p) Beginning on the effective date of the amendatory act that added this subdivision, a transfer of land, but not buildings or structures located on the land, which meets 1 or more of the following requirements:

(i) The land is subject to a conservation easement under subpart 11 of part 21 of the natural resources and environmental protection act, 1994 PA 451, MCL 324.2140 to 324.2144. As used in this subparagraph, "conservation easement" means that term as defined in section 2140 of the natural resources and environmental protection act, 1994 PA 451, MCL 324.2140.

(ii) A transfer of ownership of the land or a transfer of an interest in the land is eligible for a deduction as a qualified conservation contribution under section 170(h) of the internal revenue code, 26 USC 170.

Final Thoughts

It is worth noting that while Michigan law specifically lists the exceptions to what constitutes a "transfer of ownership", the list of what does constitute a "transfer of ownership" is not exclusive. Therefore, even if a transaction is not on the list, that does not mean it isn't a "transfer of ownership" for purposes of determining a property's taxable value.

Finally, a "transfer of ownership" is reported by filing a property transfer affidavit with the assessor for the city or township where the property is located within 45 days of a transfer. A "transfer of ownership" must be reported even if an instrument of transfer is not recorded. Failing to timely report a "transfer of ownership" can subject a property owner to financial penalties.

When You Can Avoid Paying Income Tax on a Forgiven Mortgage

2008-12-16T21:09:00.013-05:00

As discussed in "Strategies for Avoiding Foreclosure", if you sell your home in a short sale or return it to your lender by providing a deed in lieu of foreclosure, you still could be responsible to pay income tax on the forgiven mortgage. Historically, forgiven debt (also known as cancellation of debt income or "COD") had to be included in a taxpayer's gross income for tax reporting purposes unless it (1) occurred in a Title 11 bankruptcy case, (2) occurred when the taxpayer was insolvent, (3) was a discharge of qualified farm indebtedness, or (4) was a discharge of qualified real property business indebtedness.

During the Subprime Mortgage Crisis of the past two years, more and more taxpayers have faced the realization of COD income on a variety of loans, including credit cards, student loans, car loans, and home loans. In order to offer some relief to taxpayers, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007. The Act amended provisions of 26 USC § 108 of the Internal Revenue Code (Income from Discharge of Indebtedness).

A key feature of the Act is that taxpayers do not have to pay federal income tax on up to $2 million ($1 million for married individuals filing separately) of debt forgiven for a loan secured by their principal residence if the forgiven debt meets certain criteria. The criteria to qualify for this principal residence exclusion are as follows:

The Criteria

1. This exclusion only applies to debts discharged from January 1, 2007 to December 31, 2009.

2. The exclusion applies to qualified principal residence indebtedness, which is the original purchase price, plus improvements, of the taxpayer’s principal residence. It doesn’t apply to discharges of second mortgages or home equity loans, unless the loan proceeds were used to acquire, construct, or substantially improve the taxpayer’s principal residence.

3. If the amount of the original mortgage is more than the cost of any substantial improvements, only the debt that is not more than the cost of the principal residence plus improvements qualifies for the exclusion.

4. Refinanced indebtedness qualifies to the extent it doesn’t exceed the amount of indebtedness being refinanced (i.e. cash-outs don’t qualify for the exclusion).

5. The exclusion only applies to forgiven debt on a taxpayers’ principal residences not second homes, vacation homes, business property, or investment property. A taxpayer can only have one principal residence. It is the place where the taxpayer ordinarily lives most of the time.

Final Thoughts

This principle residence exclusion can be a tremendous benefit. However, if you are eligible, keep in mind the following:

1. Taxpayers report COD income, including whether it is subject to a exclusion, on IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), which is filed with the Taxpayer’s federal income tax return.

2. When the exclusion applies, the basis of the taxpayer’s principal residence exemption is reduced by the amount excluded from income. The discharged indebtedness is subject to taxation when the taxpayer sells or exchanges the principal residence. However, in many cases the reduction will not result in additional tax, because any gain on that sale or exchange will qualify for the $250,000 ($500,000 for married couples filing jointly) home-sale exclusion.

3. If only a part of discharged debt qualifies for the principal residence exclusion, the remainder of the discharged debt may qualify for another exclusion under 26 USC § 108 of the Internal Revenue Code (Income from Discharge of Indebtedness).

Getting the Most from Your Owner's Policy of Title Insurance

2008-12-13T20:55:00.003-05:00

An owner's policy of title insurance insures that a property owner has ownership of the property. However, just as in the case of car insurance or home insurance, all title insurance policies are not equal. If you or your representatives do not give attention to this issue during the purchase process, you will become profoundly aware of this fact should you ever need to make a claim. In order to ensure that you are getting the best possible coverage under your title insurance policy you should take the following steps.

1. Carefully Review the Title Commitment

After title insurance is ordered, the title insurance company will issue a commitment for title insurance which obligates the insurance company to issue title insurance on a specific property by a specific date. Verify the accuracy of information in the policy including the name of the insured, the name of the property owner, the legal description of the property, the name of the lender, and the coverage amount. Also, review the exclusions and exceptions listed in the commitment which indicate any items that the insurance policy will not cover. Finally, review all other conditions and stipulations so that you are aware of the terms of the title insurance policy.

2. Ask to have Your Policy Issued "Without Standard Exceptions"

The owner's policy of title insurance will be issued with a series of standard exceptions unless they are removed. Oftentimes, the title insurance company is willing to remove the standard exceptions if the owner provides an ALTA/ASCM survey (sometimes a mortgage survey will suffice) and affidavit regarding title matters.

3. Ask for and Review the Underlying Documents Creating any Specific Exceptions

In addition to standard exceptions the commitment will list a series of specific exceptions the final policy will exclude. In order to fully understand the implications of these standard exceptions, it is necessary to review the documents upon which they are based. A review of these documents may affect whether you want to pursue the purchase, whether the exception is properly listed, or whether you need to obtain an endorsement from the title company to insure over the exception.

4. Satisfy any Requirements to Remove Specific Exceptions

Sometimes there will be specific requirements listed on the commitment which, if satisfied, will cause the title company to remove certain specific exceptions. Examples of such requirements include, but are not limited to, executing an affidavit, recording certain documents, or providing proof that the exception is no longer an issue.

5. Determine Whether Michigan Land Title Standards Can Clear Exceptions

The Real Property Law Section of the State Bar of Michigan publishes standards setting forth what constitutes marketable title in Michigan. You should review these standards to determine if any apply to exceptions listed on the commitment. If so, the title company may be willing to remove the exception. A copy of the standards can be found here: Michigan Land Title Standards 6th.

6. Ensure that the Policy is Issued Using the Most Current ALTA Form

The American Land Title Association ("ALTA") has issued standardized title insurance policy forms that have been approved by the State of Michigan. The forms have changed over the years to deal with changes in the law. The most recent version was issued on June 17, 2006. Also, note that there is a specific residential policy for use with a one-to-four family home.

7. Make Sure the Policy Covers Easements and Rights of Way

If the policy covers only the property lot, there could be access rights and use rights which are not insured thereby greatly reducing the marketable value of the property. The legal description of the property should include any easements, rights of way, or other property rights that you are seeking to insure. You do not want your property to end up landlocked because you missed this point.

8. Obtain Special Endorsements

Special endorsements are riders to the title insurance policy adding additional insurance coverage. The title company may offer certain special endorsements for free upon request. Also, you may be able to obtain special endorsements at an additional fee to insure over certain specific exceptions.

9. Obtain a "Marked Up" Title Commitment

At the closing, the title commitment should be "marked up" to reflect any changes on the final policy (e.g. removing standard exceptions, satisfaction of requirements, etc.). You should carefully review the "marked up" commitment to ensure it captures all changes. The title company may even be willing to approve the form of a "marked up" commitment in advance of the closing. In order to avoid any gap in coverage, it is particularly critical that the title company representative sign the commitment with an effective date for the final policy as of the date of closing.

10. Review the Final Policy

You will usually receive the final owner's policy of title insurance several weeks after the closing. When you finally do receive the final policy it is important that you compare it to your "marked up" commitment and notify the title insurance company if there are any changes that were not made. They should issue a revised policy if necessary.

How to Qualify for a Second Principal Residence Exemption

2008-12-05T08:49:00.008-05:00

Michigan law permits a homeowner to claim a principal residence exemption (a/k/a homestead exemption)("PRE") which exempts the homeowner from the tax levied by their local school district for school operating purposes. Historically, a homeowner was only allowed to claim one PRE and was required to rescind the PRE within 90 days after the home was no longer used as the principal residence. However, earlier this year the State of Michigan passed a new law which permits a homeowner to claim a second PRE under certain circumstances. If you bought a new Michigan home and you are having trouble selling the old one, then you can claim a second PRE on the old homestead for up to three years if the property is not occupied, is for sale, is not leased, and is not used for any business or commercial purposes.

In order to claim the second PRE exemption, the homeowner must file a conditional recission form with their local assessor by May 1 and verify annually on or before December 31 that the property is still eligible for the special examption.

A copy of the PRE law can be found here: MCL 211.7cc. Section 5 describes the new exemption in detail. A copy of the conditional recission form with instructions can be found here: Form 4640. Also, the Michigan Department of Treasury has published Conditional Recission of PRE "Frequently Asked Questions" to help guide taxpayers in understanding this new exemption. A copy of this FAQ can be found here: Form 4643.

Six Laws to Know Before You Rent Your Michigan Home

2008-12-01T10:52:00.001-05:00

As the real estate market continues to slow down, more and more prospective sellers are renting their homes until a sale can be made. By renting their homes sellers can alleviate the costs of home ownership until their property sells. This is particularly important for sellers that must relocate before a sale can occur.

However, residential rental relationships are heavily regulated by Michigan and Federal law. Failing to follow these laws could, depending on the law, subject a landlord to financial or criminal penalties or permit a tenant to terminate their rental agreement before the end of the term. Therefore, if you decide to rent your Michigan home, you should be aware of these six important laws:

1. Truth in Renting Act

The Truth in Renting Act ("TRA") is a Michigan law that regulates residential rental agreements. The TRA indicates what must be included and what may not be included in residential rental agreements. You can find a copy of the TRA here: MCL 554.631 et seq.

2. Landlord and Tenant Relationships Act

The Landlord and Tenant Relationships Act ("LTRA") is a Michigan law that regulates the holding and retention of security deposits by landlords. The LTRA sets forth the terms and conditions under which a landlord may hold a security deposit and the procedure for retaining and refunding a security deposit. You can find a copy of the LTRA here: MCL 554.601 et seq.

3. Elliott-Larsen Civil Rights Act

The Elliott-Larsen Civil Rights Act ("ELCRA") is a Michigan law that regulates civil rights concerning real estate leasing transactions. The ELCRA prohibits those engaging in real estate transactions from discriminating against tenants or prospective tenants on the basis of religion, race, color, national origin, age, sex, familial status, or marital status. You can find a copy of the ELCRA here: MCL 37.2501 et seq.

4. Michigan Persons with Disabilities Civil Rights Act

The Michigan Persons with Disabilities Civil Rights Act ("MPDCRA") is also a Michigan law that regulates civil rights concerning real estate leasing transactions. The MPDCRA prohibits those engaging in real estate transactions from discriminating against tenants or prospective tenants on the basis of a disability that is unrelated to the individual's ability to acquire, rent, or maintain property or use by an individual of adaptive devices or aids. You can find a copy of the MPDCRA here: MCL 37.1101 et seq.

5. Michigan Consumer Protection Act

The Michigan Consumer Protection Act ("MCPA") is a Michigan law that regulates practices in trade and commerce involving consumers. The MCPA protects consumers from practices that are unfair, unconscionable, and deceptive. You can find a copy of the MPCA here: MCL 445.901 et seq.

6. Residential Lead-Based Paint Hazard Reduction Act

The Residental Lead-Based Paint Hazard Reduction Act ("RLBPHRA") is a federal law that regulates the disclosure of lead-based paint hazards to tenants for properties built before 1978. The RLBHRA mandated the U.S. Environmental Protection Agency and the U.S. Department of Housing and Urban Development to develop regulations concerning how and when disclosures need to be made. You can find a copy of the RLBPHRA here: 42 U.S.C. 4852d and a copy of the HUD and EPA regulations here: 24 CFR Part 35 and 40 CFR Part 745.