Real Estate Laws in Michigan

Real Estate Law in Michigan: Overview

Michigan real estate law features a non-judicial foreclosure process with a significant redemption period, a property tax system with assessment "uncapping" upon transfer, and comprehensive seller disclosure requirements. The state uses mortgages and permits non-judicial foreclosure through advertisement (publication), which is the most common method. Michigan imposes both a state transfer tax and a county transfer tax on real estate conveyances. The state requires detailed seller disclosure through the Seller's Disclosure Statement. Michigan follows a common law property system with equitable distribution in divorce. The Proposal A property tax system, adopted in 1994, limits annual assessment increases to the rate of inflation or 5%, whichever is less, but "uncaps" the taxable value to the state equalized value upon transfer. Michigan has a basic landlord-tenant framework with no statewide rent control provisions.

Key Statutes & Deadlines

Property Tax Uncapping on Transfer

Michigan's Proposal A property tax system, adopted in 1994, limits annual increases in taxable value to the rate of inflation or 5%, whichever is less, but "uncaps" the taxable value to the current state equalized value (SEV, which is 50% of market value) upon a transfer of ownership. This means that a property held by the same owner for many years may have a taxable value significantly below its current SEV, and the new buyer's property taxes will jump to reflect the current market value. The tax increase upon transfer can be substantial, particularly for properties that have appreciated significantly during the prior owner's tenure. Buyers should always research the current SEV and calculate the uncapped tax liability before purchasing, as relying on the seller's current tax bill can be misleading. Certain transfers, such as those between spouses or to a trust, may qualify for exemptions from uncapping.

Non-Judicial Foreclosure by Advertisement

Michigan's primary foreclosure method is non-judicial foreclosure by advertisement, where the lender publishes a notice of foreclosure sale in a newspaper for four consecutive weeks and posts notice on the property. The sale is held at public auction, typically at the county courthouse. Michigan provides a six-month redemption period after the foreclosure sale during which the former owner may reclaim the property by paying the purchase price plus interest. For properties of three acres or more used for agricultural purposes, the redemption period is extended to one year. If the property is abandoned, the redemption period may be reduced to one month. During the redemption period, the former owner generally retains possession. Michigan law also permits judicial foreclosure, which may be used when deficiency judgments are sought, as deficiency judgments are not available after non-judicial foreclosure by advertisement.

Comprehensive Seller Disclosure Requirements

Michigan requires sellers of residential property to provide buyers with a detailed Seller's Disclosure Statement covering a wide range of property conditions and known defects. The disclosure form addresses the property's structural condition, roof, basement, plumbing, electrical, heating and cooling systems, water supply, sewage disposal, environmental hazards (including lead paint, asbestos, and underground storage tanks), and any known defects in common areas for condominiums. Michigan law provides that sellers who fail to disclose known material defects may be liable for actual damages, and buyers may terminate the purchase agreement if disclosures are not provided timely. The disclosure must be delivered before the buyer makes a binding offer or within a specified period after acceptance. Certain transfers are exempt from disclosure requirements, including foreclosure sales, estate sales, and new construction.

Michigan Court System

Michigan Circuit Courts serve as the general jurisdiction trial courts in each of the 57 judicial circuits and handle real estate disputes including foreclosure defense, title disputes, and partition proceedings. District Courts handle landlord-tenant matters, eviction (summary proceedings), and civil cases up to $25,000. Probate Courts handle some real estate matters involving estates and trusts. The Michigan Tax Tribunal handles property tax assessment appeals. The Michigan Court of Appeals and Michigan Supreme Court handle appellate matters. Michigan does not have specialized housing or land courts.

Damages & Penalties

Michigan real estate remedies include specific performance for breach of purchase contracts and compensatory damages for seller disclosure violations. In landlord-tenant disputes, security deposits are limited to one and one-half months' rent, and landlords who wrongfully withhold deposits may be liable for twice the amount wrongfully withheld. Michigan law provides that deficiency judgments are not available after non-judicial foreclosure by advertisement; lenders must pursue judicial foreclosure to obtain a deficiency. For seller disclosure violations, buyers may recover actual damages caused by the seller's knowing failure to disclose material defects. Real estate licensees face discipline by the Michigan Department of Licensing and Regulatory Affairs. Michigan's Consumer Protection Act provides additional remedies for deceptive real estate practices.

Recent Legislative Changes

Michigan has updated its foreclosure procedures and strengthened borrower notice requirements. The state has modified property tax uncapping exemptions for certain family transfers. Michigan authorized remote online notarization and has addressed concerns about property tax foreclosure practices affecting low-income homeowners in cities like Detroit.

Frequently Asked Questions