Guest Blogger: Timothy G. Orlando, Esq.
With no press or fanfare, the lame duck amendments to Michigan’s Marketable Record Title Act (the “Act”), MCL § 565.101 et. seq., went into effect on March 29, 2019. The intent of the amendment is to eliminate the enforceability of certain restrictions contained in documents that were recorded more than 40 years ago. Prior to the amendment, most deeds contained generic statements indicating that the purchaser of property acquired the property “subject to easements and restrictions of record” or “subject to building and use restrictions of record”. Given that no specific language was required to bring a restrictive covenant into the chain of title, any recorded restrictions would be deemed to be in the chain of title, whether they were specifically identified in the deed or not.
Under the amendment to the Act, if a property owner has an unbroken chain of title of more than 40 years that does not specifically identify the restrictive covenants, the restrictive covenants may no longer be enforceable as to that owner. For instance, if in 1985 the developer of a commercial building, industrial park, or residential subdivision recorded restrictions limiting the property to certain uses or regulating the square footage, height, or color of the buildings, those restrictions will automatically terminate in 2025 if the current property owner does nothing to preserve them. Even if an existing deed has been recorded for many years, the generic language may no longer be enough to indicate that restrictive covenants remain within the chain of title for a property.
Under the amendments to the Act, if a property owner wants to preserve a recorded restriction, the restriction must be referred to by liber and page in a later recorded document. Section 3 of the amended Act provides a two-year window from the effective date of the statutory amendment to record a notice of claim to preserve the effectiveness of documents recorded more than 40 years ago. After the two-year window closes, a deed or notice of claim referencing the prior document by liber and page, must be recorded within 40 years from the date of the original or last recording of the restriction being extended. If a property owner fails to record a proper deed or notice of claim, the restriction terminates automatically by operation of law, and it is no longer enforceable. The notice of claim must contain all of the information required by Section 5 of the amended act to preserve the restrictive covenants.
While the amendments are intended to clear titles to properties, the Legislature has, in all likelihood, created more room for error. Questions abound concerning the seemingly benign nature of the amendments. For instance, Section 3 of the Act allows a “claimant” to file a notice of claim, but the term “claimant” is not defined. In the context of a subdivision, there may be covenants or deed restrictions that were recorded more than 40 years ago. If so, who has the ability to file a notice of claim that would revive the restrictive covenants? The association? An individual homeowner? And, if it is an individual homeowner, to what property would the restrictive covenants apply? All of the properties in the subdivision or just the property of the homeowner who filed the notice of claim? Time, and possibly litigation, may be the only way for these questions to be answered.
Timothy G. Orlando is an attorney with Aloia & Associates, P.C., who concentrates his practice on real estate transactions, business transactions and related litigation. He can be reached at (586) 783-3300 or firstname.lastname@example.org.