Bulletin: MI2022005

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Bulletin: MI2022005

Bulletin Document
Date: September 22, 2022
To: All Michigan Issuing Offices
RE: UNDERWRITING - Elizabeth Trace Condo Assoc. v. American Global Enterprises, Inc.

Dear Associates:

In furtherance of Bulletin MI2016003, please be advised that on February 10, 2022, the Michigan Court of Appeals entered an Order in the matter of Elizabeth Trace Condo Association v. American Global Enterprises, Inc. (attached) which held [under MCL 559.167(3)] (attached) that if a developer of a condominium project does not withdraw undeveloped “need not be built” units from a project within 10 years from the start of the project, the undeveloped units become a part of the general common elements of the project, and the developer loses all its right to develop the units. 

In 2016, MCL 559.167 was modified to require that before an Association can claim that the undeveloped land become general common elements, the Association must record a Declaration of Reversion to the undeveloped units evidencing its claim to the units as general common elements to the project.  

The Court concluded that the amendatory provision requiring the recording of the Declaration is not retroactive, in effect, and that if the 10-year time frame had passed prior to September 21, 2016, that title to the undeveloped units passed to the Association and that failure to record the Declaration of Reversion did not divest the Association’s title to the undeveloped units. They did this, seemingly, without addressing the provisions of subsection (5), which subsection provides: 

(5) A reversion under subsection (4), whether occurring before or after the date of the 2016 amendatory act that added this subsection, is not effective unless the election, notice, and recording requirements of subsection (4) have been met (emphasis added).

The goal of the wording was to try to make the provision “retroactive”. But the Court didn’t address the provision in its decision. This case is on appeal to the Michigan Supreme Court which appeal may or may not address the provisions of subsection (5) or the issue of retroactive effect.      

In light of the above, if requested to insure a sale of undeveloped units in a project where the undeveloped units would have reverted to the Association at a date prior to September 21, 2016, we shall require: 

  • a contraction of the project by Amendment to Master Deed to remove the undeveloped units (by metes and bounds description) by the Association, and
  • a deed from the Association of the metes and bounds description to the proposed seller of the property.

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THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.


References

Bulletins Replaced:
  • None
Related Bulletins:
Underwriting Manual:
  • None
Exceptions Manual:
  • None
Forms:
  • None