The Amended Marketable Title Act: Opportunities for Mischief?

The Michigan legislature amended the Marketable Title Act to clear titles. In the process,

they may have created more room for error.

At the end of 2018, the Michigan Legislature amended the Marketable Title Act. The intent was to clarify the meaning of the phrase “subject to easements and restrictions of record”, which appears in many title policies.

Under the law as revised, that customary phrase will not save a property restriction more than 40 years old (20 years for mineral rights), unless a notice is filed within that designated period specifically identifying the restriction specifically, usually by liber and page number. This provision is intended to make it easier for title companies to declare a title marketable and not subject to unidentified restrictions.

Despite the seeming benign character of this amendment, the professional classes predict at least some measure of chaos. One of the primary questions is who can file a qualifying notice. The Amended Act answers this question by stating a “claimant” can file. The term claimant is not defined in the Amended Act, thus leaving room for mischief.

Let’s look at the primary possibilities, using the frequently invoked example of a Subdivision Association working under Subdivision Covenants (a “Declaration”) more than 40 years old. Under the Amended Act, the Association must file a qualifying notice by March 2021, or the Declaration will be rendered a nullity. The Association is virtually certain to qualify as a “claimant” under the Amended Act, because the Association is named and directly claims the benefit of the Declaration.

What about an individual homeowner within the Subdivision? This person claims the benefit of the Declaration but is not specifically named in that instrument as a beneficiary. The failure of the Amended Act to define the term “claimant” or limit the Act’s reach supports the homeowner’s right to make a filing, absent any provision in the Association’s Declaration or Bylaws inhibiting such action. A fair argument can be made either way.

How about a homeowner in an adjacent subdivision? This owner is not a direct beneficiary of the Declaration but can claim reliance on the neighboring Subdivision’s Declaration when purchasing a home nearby. To my mind, this example stretches the Amended Act beyond the breaking point. The Act’s use of the term “claimant” suggests the filer must have at least some legal right arising from the document to be extended. The owner in a neighboring subdivision has no such connection. If the Amended Act meant to empower anyone to file a notice, there would be no need for the term “claimant.”

Other questions have arisen from the Amended Act:

1. What property is affected? Answer: uncertain. Look, a good argument can be made that the extension notice must conform to the original instrument to which it relates. Yet the power to extend or more particularly, allow the instrument to lapse, implies the power to destroy. The Amended Act does not expressly prohibit an extension notice altering the affected property. In our example of the Subdivision Declaration, the extension filer could omit some of the lots in the Subdivision the filer doesn’t want encumbered by the Declaration. This is a likely debate for a future court case.

2. Who should receive notice? Answer: existing law states that a recorded instrument is general notice to the public. Those impacted are obliged to check the public record. The Amended Act does not change this legal principle. While sending notice to affected parties may be good practice, it is not legally required.

The first arbiter of these issues will be the Register of Deeds. My expectation is they will not prohibit the filing of any extension notice based upon any of the concerns listed above. Registers of Deeds have no authority to refuse recordation of a notice which complies with the revised Act and does not otherwise violate applicable recording standards. They have no good reason to “poke the bear” on this matter.

Next up: the Title Companies. They now have additional certainty on their side when confronted with a conforming recorded extension notice. What they don’t have are answers to the questions posed above. Much of the early resolution of these questions will come from the Title Companies. The choices they make, or the guidance they offer, could very well lead to the litigation expected by the chattering classes.

The law takes effect March 29, 2019. Buckle up.

Caution: This article provides general information and is not intended to be legal advice. You should contact Lambert Law if you are seeking specific legal advice regarding the topics discussed above.
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