Amendment to Michigan Marketable Record Title Act Requires Land Owners to Take Action to Preserve Certain Rights
Foster Swift Finance Real Estate & Bankruptcy Law News
May 25, 2020
A recent amendment to Michigan’s Marketable Record Title Act (the “Act”) requires, in certain circumstances, property owners to file a claim of interest with the register of deeds by March 28, 2021, in order to preserve restrictive covenants and other limitations related to property. Following passage of the amendment, generic statements contained in deeds or purchase agreements, such as “subject to anything of record” or “subject to existing use restrictions, if any,” may no longer be sufficient to preserve certain land use restrictions.
Michigan’s Marketable Record Title Act
One of the principal purposes of a contract for the sale of real property is to convey “marketable title.” Marketable title has been defined by Michigan courts as title “of such character which should assure the vendee the quiet and peaceful enjoyment of the property, which must be free from encumbrance.” Stover v Whiting, 157 Mich. App. 462 (1987).
Under the Act, a person has marketable title to an interest in land if he or she has an unbroken chain of title to the interest for 40 years or 20 years for mineral interests. However, in many instances, an interest in land that is being transferred may be subject to use restrictions or other interest established more than 40 years ago.
For example, a restriction in a deed, such as ‘the property shall not be used for commercial uses’ established more than 40 years ago, and which is not specifically referenced in a conveyance within forty years, would be unenforceable against a purchaser of the property outside such 40 year period of time. Often, there is confusion as to what language is required to preserve a prior interest in property. The amendment to the Act, which became effective on March 29, 2019, is meant to clear up that confusion.
According to the Michigan Senate Bill Analysis for SB 671, through which the amendment was proposed, the amendment is intended to provide more certainty regarding marketable title because “there are times when an extensive investigation or litigation is necessary to determine whether there are limitations on a title or whether old restrictions remain valid. It has been suggested that this is due to a lack of clarity in the Act regarding what must be specified in a claim to preserve an interest.”
Impact of the Amendment
The amendment sets forth what is required to preserve a restriction, or other interests or claims which came into existence before the 20-year period for mineral interests, and the 40-year period for other interests. Specifically, it provides that “an interest, claim, or charge may be preserved and kept effective by filing for record within 2 years after the effective date of the amendatory act that added section 2(2) or during the 20-year period for mineral interests and the 40-year period for other interests, a notice in writing, verified by oath, setting forth the nature of the claim in the manner required by section 5.”
Any claim of interest notice must be filed no later than March 28, 2021. The new requirements that must be contained in a notice of claim of interest, including a requirement to identify the liber and page or other county-assigned unique identifying number of the recorded instrument the claim is founded on, are set forth in MCL 565.105.