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Changes to Michigan law could unravel restrictive covenants on real property
Changes to Michigan law that aim to clear up the issue of what property restrictions apply to a particular property could wind up producing big headaches for some homeowners unaware of the change.
Lame duck legislation at the close of 2018 created some significant changes in the Marketable Record Title Act. Initially passed in 1945, the act says a person who owns an unbroken chain of title to a piece of property for 40 years has a “marketable record title,” meaning nothing has been recorded within the chain of title within the last 40 years that conflicts with or denies the person’s interest in the property.
This Michigan law was the first of its kind, limiting how far back a title search must go. Prior to that time, someone with a purported interest in the same piece of property could claim it had been given to his or her family through a U.S. land patent from as long ago as 1745.
The act was amended in 1997 to limit the time period to 20 years for mineral interests. And it was amended again via Public Act 572, which went into effect March 29, to require property owners to file a notice within two years to preserve property restrictions or easements that were last recorded more than 40 years ago — or else risk losing those restrictions or easements.
Many developers, homeowners associations (HOA) and, more recently, condominiums put restrictions on what can and can’t be done with a piece of property. A restriction might say you can’t park a motorhome in your driveway or use your home as a business or keep pet goats. It also might require you to use a certain material for your shingles or color of paint when doing a renovation. An easement could spell out access to a shared beach or use of a shared driveway.
A person who buys property subject to those restrictions agrees to live by these deed restrictions, which are said to “run with the land.” When selling property, often it was enough to include “subject to easements and restrictions of record, if any” to preserve those restrictions in the deed to the property.
But Public Act 572 has changed that. Now any property owner relying on restrictive covenants last recorded more than 40 years ago must record a document within the next two years to preserve these restrictive covenants — or risk losing them. Even those relying on restrictions recorded less than 40 years ago will need to file a notice before the expiration of the 40 years.
The Michigan Land Title Association was a proponent of this change, noting that the “subject to existing restrictions” language contained in many deeds was too vague and often made it challenging to determine if old restrictions still were valid. Under the amendment, restrictive covenants can be maintained in one of two ways: having them spelled out specifically in the chain of title or by recording a notice that spells out some specifics, including:
Name and mailing address of claimant
Interest or restriction
Specific reference to the document containing the restrictive covenant
Legal description of the real property
Reference to specific Michigan laws
This amended act shifts the burden from title insurers to property owners as well as HOAs that often are run by volunteers and may have little to no experience dealing with sophisticated title issues. Property owners who want to preserve restrictive covenants now have two choices: They can either review their association documents to ensure restrictions are of record within the last 40 years or file a notice that captures and records all restrictions and easements.
Failing to do one or the other could mean a loss of restrictive covenants and easements by March 2021 and open condo and homeowners to expensive litigation dealing with the unchartered territory of the recent amendment to the act down the road.
Brian T. Lang is a partner at Warner Norcross + Judd LLP who concentrates his practice on complex real estate and commercial litigation. He can be reached at email@example.com.