HB 5611: Michigan extends deadline to preserve covenants under the Marketable Record Title Act

The Michigan legislature amended the Marketable Record Title Act, MCL 565.101, et seq, on December 31, 2018, which had the potential to automatically eliminate certain types of restrictive covenants.  Fortunately, the Michigan legislature recently amended the Marketable Record Title Act via HB 5611, and extended the time period for a property owner or homeowners association to record a notice to preserve restrictive covenants until March 29, 2024.  HB 5611 was signed by Governor Whitmer on December 30, 2020 and was enacted into law via 2020 PA 294.

Under the 2018 amendment, if a property owner has an unbroken chain of title of more than 40 years, that did not specifically identify the restrictive covenants by liber and page number, the restrictive covenants could have been removed from that owner’s property.  However, the filing of a claim of interest by a property owner or a homeowners association, which specifically describes the property subject to the restrictions, would have preserved the restrictive covenants if it was done within 2 years of March 29, 2019, if the restrictions were more than 40 years old, or prior to the expiration of the 40-year time-period if the restrictions are less than 40 years old.  Prior to the enactment of the 2018 amendment, many deeds stated that a purchaser of property acquired the property “subject to building and use restrictions of record”, or similar language.  No specific language was required to bring a restrictive covenant within the chain of title.  If a deed contained such generic language, any recorded restrictions would be deemed to be in the chain of title, whether they were specifically identified in the deed or not.  Accordingly, the 2018 amendment created a lot of confusion with respect to title issues and what, if anything, that needed to be done to maintain certain types of restrictions that contained the generic language identified above.

Given the confusion caused by the 2018 amendment, the legislature extended the deadline to record a notice to preserve restrictions for another five years.  The 2020 amended Section 3 of the Marketable Record Title Act as follows:

Sec. 3. (1) Marketable title is held by a person and is taken by his or her successors in interest free and clear of any and all interests, claims, and charges the existence of which depends in whole or in part on any act, transaction, event, or omission that occurred before the 20-year period for mineral interests, and the 40-year period for other interests, and all such interests, claims, and charges are void and of no effect at law or in equity. However, an interest, claim, or charge may be preserved and kept effective by filing for record within 5 years after March 29, 2019 or during the 20-year period for mineral interests and the 40-year period for other interests, a notice in writing, verified by oath, setting forth the nature of the claim in the manner required by section 5.

(2) A disability or lack of knowledge of any kind on the part of anyone does not suspend the running of the 20‑year period for mineral interests or the 40-year period for other interests.

(3) For the purpose of recording notices of claim for homestead interests, the date from which the 20-year period for mineral interests and the 40-year period for other interests run is the date of recording of the instrument that contains the basis for the claim.

(4) A notice under this section may be filed for record by the claimant or by any other person acting on behalf of any claimant if 1 or more of the following conditions exist:

(a) The claimant is under a disability.

(b) The claimant is unable to assert a claim on his or her own behalf.

(c) The claimant is 1 of a class but whose identity cannot be established or is uncertain at the time of filing the notice of claim for record.

Conclusion

Michigan homeowners associations, especially those that govern platted subdivisions, can at least breath a temporary sigh of relief that their restrictions can no longer be automatically eliminated on March 28, 2021.  However, HB 5611 is only a temporary band aid, as it did not directly resolve the open issue on whether the Marketable Record Title Act can be used to eliminate recorded condominium documents, declarations and other restrictive covenants.  Accordingly, the good news is that homeowners associations will not need to rush to record a claim of interest in 2021 to preserve their recorded restrictions.  The Real Property Law Section of the State Bar of Michigan will be seeking to advance a bill during the next legislative session that would be a permanent fix to this issue and clarify that the Marketable Record Title Act could not be used to eliminate restrictive covenants in condominium and platted subdivisions that are governed by homeowners associations.  Accordingly, we urge all community associations, especially homeowners associations, to keep an eye on the introduction and progress of this legislation over the next 2 years as it could have a major impact on homeowners and condominium associations.  Until any such legislation is introduced, and signed into law, homeowners association should consult with their lawyers to determine whether the recording of a claim of interest is necessary and the appropriate timing of the same to avoid the potential risks of having their restrictive covenants eliminated in the future.

Kevin Hirzel is the Managing Member of Hirzel Law, PLC and concentrates his practice on commercial litigation, community association law, condominium law, Fair Housing Act compliance, homeowners association and real estate law. Mr. Hirzel is a fellow in the College of Community Association Lawyers, a prestigious designation given to less than 175 attorneys in the country. He is also a member of the Community Associations Institute’s National Board of Trustees. Mr. Hirzel has been a Michigan Super Lawyer’s Rising Star in Real Estate Law from 2013-2020, an award given to only 2.5% of the attorneys in Michigan each year. Mr. Hirzel has been named a Leading Lawyer in Condominium & HOA law by Leading Lawyers Magazine from 2018-2020, an award given to less than 5% of the attorneys in Michigan each year. He represents community associations, condominium associations, cooperatives, homeowners associations, property owners and property managers throughout Michigan. He may be reached at (248) 480-8758 or [email protected].