Real Estate Law Update: Real Estate Investors Be Careful When Interacting with Occupants of Foreclosed Property.

It is a rainy Monday afternoon. It has been dark all day long.  I took this picture earlier today and the rain isn’t letting up.

As a way to distract from the gloomy weather I thought it might be a good opportunity to share some of my thoughts about a court case that came out a few days ago involving a real estate investor, property manager, and a hold over occupant of property.

This case illustrates ways that real estate investors and property managers can go wrong when dealing with occupants of foreclosed property.

 

The Case:

Anderson v Great Lakes Property and Investment, Inc.

Facts: 

“This case arises from defendants’ actions in removing plaintiff and his personal belongings from the rental property, on two occasions, without resort to summary  proceedings in the court.” Id. page 1.

• In 2008 Plaintiff entered into a month-to-month lease with the property owner.
• Owner lost the property to a tax foreclosure in 2015.
• Real Estate Investor purchased the property at tax sale in the fall of 2015, and hired defendant Great Lakes to manage the property.
• After the purchase, Investor and Property Manager, sent a letter of ownership to all occupants of the property, including plaintiff, which gave plaintiff 10 days to vacate the property.
• Thereafter, defendant Great Lakes’s sole shareholder, defendant McMorris, came to plaintiff’s unit and demanded that he vacate within 3 days.
• When plaintiff did not vacate the premises, defendants came to the property on January 15, 2016, and removed plaintiff’s personal belongings from his unit.
• After defendants left, plaintiff returned to the property, purchased and installed a new lock on his door, repaired the door, and placed his personal belongings back into his unit.
• The next day, defendants returned and once again, removed plaintiff’s possession from the property.
• Plaintiff filed a six-count complaint against defendants for a violation of the anti-lockout statute. Id. Page 2.

 

Law:

Anti-Lockout Statute – MCL 600.2918 

Any landlord who has gone through the process of evicting a tenant knows that, in the residential leasing context, there are heightened duties of landlords, and heightened rights of tenants.  Tenants have the right not to have their possessory interest in the property interfered with, without the proper court procedure being complied with (Summary Proceeding Action in District Court)

The Anti-Lockout statute provides damages for forcible ejectment from property or unlawful interference with a possessory interest in property.

 

Subsection (1) (forcible ejection) applies to any person. 

Subsection (2) (unlawful interference) applies to any tenant in possession.

Violating the statute can cause a property owner/landlord to be liable for statutory damages (3 times the amount of actual damages or $200.00 whichever is greater.)

 

Here, the District Court sided with the new Owner – basically holding that the Plaintiff was simply “a squatter”, entitling him to no rights or protections.  Id. page 2.

The Court of Appeals REVERSED!

 

As the Court of Appeals noted, “[t]he Michigan anti-lockout statute, MCL 600.2918, “virtually eliminates the self-help remedy in Michigan in favor of judicial process to remove a tenant wrongfully in possession.” Id. Page 3 citing Deroshia v Union Terminal Piers, 151 Mich App 715, 719; 391 NW2d 458 (1986).

The Court also held that “There is no statutory or caselaw definition of squatter.” Id. Page 4.

The Court also questioned whether the Investor or its Manager gave proper notice to terminate. It was questionable whether the “Notice” mailed to each tenant satisfied the requirements to recover possession of property under Michigan law. MCL 554.134(1) – (holding that “[a] tenant is entitled to one month’s notice to quit in order to terminate a month-to month tenancy at will” Id. Page 4.

 

 

In short – if you purchase property that is occupied, you need to properly use the court systems to remove tenants.

 

Lesson:

 

To avoid any unfounded claims by holdovers, it always makes sense after purchasing property at foreclosure, when there are any occupants present, to go through the lawful channels for a court proceeding to extinguish any possessory rights and to make sure any personal belongings are handled appropriately.

You don’t want to expose yourself to undue liability.

 

Questions? Comments?

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka