by: Benjamin H. Hammond and Jill Miller, Hilger Hammond, PC
Every real estate contract must, unless agreed to otherwise, convey what is known as “marketable title”. The courts have defined marketable title as title that is free from encumbrances and assures the purchaser of quiet and peaceful enjoyment of the property. The Marketable Record Title Act (“MTA”) generally provides that a purchaser has marketable title if they have an unbroken chain of record title to any interest in Michigan real estate for 40 years (20 years for mineral interests), where there are no documents in the chain of title purporting to divest that person of title.
On December 28, 2018 the Michigan legislature passed Senate Bill 671 which amends the MTA. The bill took effect on March 29, 2019. Prior to the amendments, the MTA limited a title examination to the most recent 40 years (20 years for mineral interests) with any defects occurring prior to that time disregarded. While the amendments to the MTA attempt to clean up and simplify title in in certain situations, they may have unintended consequences for homeowners associations and condominium associations as affirmative actions will now be required to preserve certain use restrictions.
For example, if a homeowners association has a 40 year old subdivision deed restriction against building unattached garages or decks, a sale of a lot within the subdivision without a specific reference to that 40 year old restriction could wipe out that restriction with respect to that lot. In this situation it is not clear who should file notice under the amendments to preserve the restriction, the seller or the homeowners association. The homeowners association may ultimately be forced to review all deeds in the subdivision to make sure any old restrictions are properly referenced so they will continue to be enforceable against new purchasers.
Prior to the amendments, concerns were raised as to what exactly the MTA required to preserve an interest or use restriction. It is common for deeds to have generic statements such as “subject to anything of record”, “subject to existing use restrictions, if any” or “subject to easements and restrictions of record” and some title companies were reluctant to issue title insurance in these instances. The amendments to the MTA seek to clean up title in situations where deeds contain these generic statements or where title is subject to restrictions that are over 40 years old (20 years old for mineral interests). Simply using this generic language will no longer restart the 40 or 20 year time period and the amendments generally will invalidate a reserved interest or use restriction that is not specifically identified in the chain of title within the last 40 years.
The amendments to the MTA do provide for a 2 year window (from March 29, 2019) for recording a notice to preserve such interests or use restrictions that are more than 40 year old (20 years for mineral interests). The amendments require the notice to contain very specific information. After March 29, 2021 when the window closes, notice of interests or restrictions must be recorded within the 40 year time period (20 years for mineral interests) and must contain the required identifying information or the claimed interest or restriction will no longer be preserved and will be void as a matter of law.
Many questions are still left unresolved, including who is a claimant entitled to file notice under the amendments to MTA. Deed and use restriction may or may not go away and closings may be delayed as title companies, sellers and buyers seek to sort through the confusion and figure out what deed and use restrictions are still valid under the amended MTA.