When “As-Is” Doesn’t Mean “Anything Goes”:
Developer Sues County Treasurer for Conveying Nonexistent Condominium Units

Governmental entities and condominium and homeowners associations frequently dispose of foreclosed properties to private purchasers or developers through settlement agreements or deeds that include “as-is, without warranty” clauses. These provisions are intended to protect sellers from liability over the property’s physical condition. However, such language does not excuse a party from attempting to sell property it does not actually own. In Soho Land Development, Inc. v Oakland County Treasurer, unpublished per curiam opinion of the Court of Appeals, issued December 16, 2024 (Docket No. 368567), 2024 WL 5126858, 5, the Michigan Court of Appeals considered whether Oakland County breached a settlement agreement by conveying twenty condominium units that no longer existed under MCL 559.167. The trial court ruled in favor of the County, holding that the “as-is, without warranty” language barred the plaintiff’s claims. On appeal, however, the Michigan Court of Appeals disagreed, holding that while “as-is” language applies to the condition of the property, it does not protect a seller who attempts to convey property interests that have ceased to exist by operation of law. As discussed below, this case highlights the limitations of “as-is” disclaimers and underscores the risks associated with failing to verify ownership and condominium status prior to entering into a settlement agreement or conveying property.

 

Background: Soho Land Development v Oakland County Treasurer (Michigan Condominium Dispute)

Soho Land Development, Inc. (“Soho”) previously owned certain parcels in Oakland County that were lost through tax foreclosure. In 2015, Soho sued the Oakland County Treasurer, alleging wrongful foreclosure. The parties reached a settlement in 2016. Under the settlement, the Treasurer agreed to convey several properties “as-is, without warranty,” including twenty vacant condominium units located on Lone Oak Circle in Holly, Michigan (the “vacant lots”) and a residential property.

The settlement expressly stated that the Treasurer “conveys in fee simple” these properties to Soho, and Soho accepted them “as-is, without warranty, express or implied.” In 2021, Soho discovered that the twenty vacant condominium units no longer existed, and under MCL 559.167(3), the vacant condominium units had automatically reverted to the condominium’s common elements by operation of law.

In 2022, Soho filed a lawsuit alleging that the Treasurer breached the settlement agreement by purporting to convey non-existent condominium units and misrepresenting the condition of the residential property, which had been demolished before conveyance. The trial court granted summary disposition in favor of the Treasurer, finding that the “as-is, without warranty” language protected the County from all claims related to both properties. The trial court reasoned that Soho assumed the risk of title defects and condition issues when it accepted the conveyance. Soho appealed.

 

How MCL 559.167(3) Changes Ownership of Undeveloped Michigan Condominium Units

Prior to 2016, MCL 559.167(3) provided that, if a developer had not completed the development and construction of condominium units within 10 years after the commencement of construction, the undeveloped portions of the project would automatically revert to the condominium’s common elements by operation of law:

“[I]f the developer has not completed development and construction of units or improvements in the condominium project that are identified as “need not be built” during a period ending 10 years after the date of commencement of construction by the developer of the project, the developer, its successors, or assigns have the right to withdraw from the project all undeveloped portions of the project not identified as “must be built” without the prior consent of any co-owners, mortgagees of units in the project, or any other party having an interest in the project . . . If the developer does not withdraw the undeveloped portions of the project from the project before expiration of the time periods, those undeveloped lands shall remain part of the project as general common elements and all rights to construct units upon that land shall cease”

In 2016, MCL 559.167(3) was amended, requiring a condominium association to vote on and declare the revision of the undeveloped lands to the condominium’s common elements, as well as record it with the register of deeds. However, the Michigan Court of Appeals has held that this amendment did not operate retroactively. In the present case, the twenty undeveloped condominium units automatically reverted to the general common element land collectively owned by the condominium’s co-owners in 2015 when the ten-year period expired, and prior to the 2016 settlement agreement being entered by the parties.

 

Michigan Court of Appeals: “As-Is” Clauses Cannot Justify Selling Nonexistent Condo Units

The Court of Appeals held that, with respect to the twenty vacant condominium units, the trial court erred in granting summary disposition to the Treasurer. The Court of Appeals found that the settlement agreement expressly stated that the Treasurer “conveys in fee simple” the vacant lots to Soho. The Court of Appeals reasoned that because the Treasurer purported to convey its fee simple interest in the vacant lots to Soho, it agreed to convey total and absolute control of the land to Soho. Specifically, the Court of Appeals found that because the units had already reverted to the condominium association’s common elements under MCL 559.167(3) in 2015, the Treasurer lacked any ownership interest to convey when the settlement agreement was reached in 2016. The Court of Appeals emphasized that a seller cannot convey what it does not own and that a disclaimer of warranties cannot validate a transaction for property that no longer legally exists. Ultimately, the Court of Appeals disagreed with the Treasurer’s argument that the “as-is, without warranty” clause protected it from any claims related to the twenty vacant condominium units, as the clause could only apply to the condition of the properties, not to the title or existence of the units.

 

The Court of Appeals Reverses in Part and Affirms in Part the Trial Court’s Decision

The Court of Appeals reversed the dismissal of Soho’s claim related to the twenty vacant condominium units and affirmed the dismissal of Soho’s claim related to the residential property. The Court of Appeals found that the “as-is” clause properly covered the residential property’s physical condition, and since Soho had expressly accepted the property “in its present condition,”  the settlement agreement released the Treasurer from liability for any known or unknown defects, including the demolition. Following the Court of Appeals decision, the Treasurer sought leave to appeal to the Michigan Supreme Court. The Michigan Supreme Court denied review.

 

Key Takeaways for Conveyances of Condominium Units

The Court of Appeals’ decision in Soho Land Development, Inc. v. Oakland County Treasurer highlights the importance of confirming ownership before entering a settlement or conveyance agreement involving condominium property and the potential impact of MCL 559.167 on the conveyance of undeveloped or vacant condominium units.

“As-Is” Clauses Do Not Excuse Conveying Nonexistent Property.

Disclaimers about conditions do not protect sellers from liability when the property itself no longer exists under the law.

Verify Condominium Status Under MCL 559.167.

Developers and sellers must confirm whether unbuilt condominium units have reverted to common elements before attempting to convey them. Having an experienced condominium and homeowners association attorney carefully review and verify the title and status of condominium units through the master deed, amendments, and property records is important before closing any transaction involving foreclosed or condominium property.

 

Need Help Navigating Condominium Reversions and Property Conveyances?

If you are purchasing, selling, or settling disputes involving condominium units affected by MCL 559.167 or “as-is” property conveyances, contact Hirzel Law. Our experienced community association attorneys can help you interpret condominium law, assess title risks, and draft settlement documents that prevent costly mistakes.