In Carola Condominium Association v Dustin Chappell, issued July 19, 2016 (Docket No. 325851) (Unpublished Opinion) the Michigan Court of Appeals held that the Wayne County Treasurer could not foreclose on common elements that were identified as “garage spaces” in the master deed. Carola dealt with a situation in which common element garages were created by the second amendment to the master deed. The treasurer foreclosed on the common element garage spaces and obtained a judgment of foreclosure on March 28, 2013. The Carola Condominium Association later filed an action for injunctive relief and to quiet title on October 25, 2013 claiming that common elements are not subject to taxation and could not be subject to tax foreclosure.
The Wayne County Treasurer argued that the Michigan General Property Tax Act precluded the Carola Condominium Association’s claims. Specifically, the Wayne County Treasurer argued that once a judgment of foreclosure is entered, and the notice requirements for a tax sale under MCL 211.78 of the GPTA are satisfied, that the condominium association lost the right to bring an action to quiet title pursuant to according to MCL 211.78l(1). MCL 211.78l(1) provides as follows:
If a judgment for foreclosure is entered under section 78k and all existing recorded and unrecorded interests in a parcel of property are extinguished as provided in section 78k, the owner of any extinguished recorded or unrecorded interest in that property who claims that he or she did not receive any notice required under this act shall not bring an action for possession of the property against any subsequent owner, but may only bring an action to recover monetary damages as provided in this section.
The Michigan Court of Appeals held that MCL 211.78l(1) was not applicable as the limited common element garage spaces were not subject to taxation and could not be divided from units to which they appertained. Specifically, the Court stated that “Except to the extent otherwise expressly provided by this act, the undivided interest in the common elements allocated to any condominium unit shall not be altered, and any purported transfer, encumbrance, or other disposition of that interest without the condominium unit to which it appertains is void.” MCL 559.137(5). The Court also held that the Michigan Condominium Act mandates that “[s]pecial assessments and property taxes” be “assessed against the individual condominium units identified as units of the condominium subdivision plan and not the total property of the project or any other part of the project . . . ” MCL 559.231(1).
The Michigan Court of Appeals concluded that the trial court correctly set aside the judgment of foreclosure as it was void as a matter of law. Specifically, the judgment could not have prospective application as it attempted to divide the limited common element garages from the units, which was not allowed pursuant to MCL 559.137(5). Accordingly, Michigan condominium associations should be aware that county treasurers make mistakes and should be mindful that common elements cannot be taxed or foreclosed upon.
Kevin Hirzel is the Managing Member of Hirzel Law, PLC and concentrates his practice on commercial litigation, community association law, condominium law, Fair Housing Act compliance, homeowners association and real estate law. Mr. Hirzel is a fellow in the College of Community Association Lawyers, a prestigious designation given to less than 175 attorneys in the country. He has been a Michigan Super Lawyer’s Rising Star in Real Estate Law from 2013-2018, an award given to only 2.5% of the attorneys in Michigan each year. Mr. Hirzel was named an Up & Coming Lawyer by Michigan Lawyer’s Weekly in 2015, an award given to only 30 attorneys in Michigan each year. He represents community associations, condominium associations, cooperatives, homeowners associations, property owners and property managers throughout Michigan. He may be reached at (248) 478-1800 or kevin@hirzellaw.com.