Til Death Do Us Part, Or Do We?: Collecting Community Association Assessments from a Deceased Owner in Michigan
The 2021 Michigan Community Association Fact Book (the “Fact Book”) compiled by the Foundation for Association Research estimates that from July 1, 2019, to July 1, 2021 the Michigan population aged 65 and over residing in Community Associations increased from 17.7% to 18.1%. These percentages exceeded the national average for Community Association residents aged 65 and over by 1.2% in 2019 and 1.3% in 2021. (See 2020 Fact Book and 2021 Fact Book. As the population of their communities age, Community Associations will be faced with the question of who is responsible for payment of Association assessments when an Owner passes away. This article examines the various scenarios when an Owner passes away and the steps an Association should and can take to recover unpaid assessments.
The first and easiest scenario is one where there is 1. a surviving joint tenant (i.e., the deed is in the name of the deceased owner and another surviving person or entity); 2. the Owner has deeded the property by recorded Lady Bird or Enhanced Life Estate Deed to their heirs; or 3. the Owner deeds the property into a Trust. With a Lady Bird or Enhanced Life Estate Deed, the Owner maintains complete ownership and control of the property during their lifetime and the property passes to the heirs named in the Lady Bird or Enhanced Life Estate Deed upon the Owners death. With a Trust, the property is deeded to the Trust and the Trust retains ownership and control of the property under the direction of the Trustee or Successor Trustee of the Estate. In these situations, the joint tenant, heirs, or the Trust retain title to the property and remain responsible for all delinquent and future assessments. The Association would be able proceed with its collections process as set forth in its Governing Documents in either one of these situations.
The second scenario, one where the deceased Owner is the sole title holder to the property, does not leave the Association without options for the collection of unpaid assessments, but does take some additional research and steps for the Association to realize any collection of the debt. In this situation, the Association should send the file to its counsel as soon as it learns of the Owner’s death. The counsel can review information provided by the Association and public records to determine if the deceased Owner’s heirs opened a probate estate for the deceased owner. If an open probate estate is found, the Association’s counsel can file a claim in the estate to be paid from the sale of any estate assets. The claim puts the heirs and other Creditors of the estate on notice that the Association has an outstanding balance and interest in the proceed from the sale of any estate assets. Simultaneous to making the claim, the Association counsel can, subject to the Association’s governing documents, also record a lien with the County Register of Deeds to further secure the Association’s claim. If the proceeds from the sale of estate assets is not sufficient to pay the Association’s claim, and the mortgage or County taxing authority have not foreclosed on the property, the Association would be able to proceed with foreclosing its lien on the property and recovering the amounts it is owed.
If there is no open probate estate, the Association’s counsel can, subject to the Association’s governing documents, record a lien with the County Register of Deeds to put any heirs and other Creditors on notice that there are delinquent assessments owed on the property. If the delinquency in assessments is not cured after the recording of the lien, the Association can proceed with foreclosure on the property to recover the debt it is owed, but must follow any foreclosure procedures set forth in its documents or the Michigan Foreclosure Statute.
While other scenarios may exist, those laid out above are the most common. It is important that the Association contact its counsel as soon as possible after receiving notice or discovering that an Owner is deceased so that the counsel can investigate the situation and meet any deadlines laid out by the Court in the event a probate estate is open. The bottom line is that Til Death Do Us Part is not the end of the relationship between an Owner and a Community Association.
Melissa Francis is an attorney with Hirzel Law, PLC, and focuses her practice on community association law, collections, bankruptcy, and estate planning. Ms. Francis received her Bachelor of Arts in International Relations from Michigan State University James Madison College and her Juris Doctor degree from the Wayne State University Law School. Ms. Francis was an associate at Zelmanski, Danner & Fioritto, PLLC before joining Hirzel Law, PLC. She has been a presenter at several conferences, including the 2019 Community Associations Institute National Conference in New Orleans where she presented on Bankruptcy and Associations. Ms. Francis can be reached at (248) 478-1800 or firstname.lastname@example.org.