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By Scott E. Munzel, real estate lawyer at Pear Sperling Eggan & Daniels, PC; and Patrick A. McVeigh, Liberty Title Agency
Last year, the Legislature amended the 40 Year Marketable Title Act (the Act), and created a two year window during which holders of “older” property interests could preserve those interests by recording a notice of those interests with the Register of Deeds. That window ends March 29, 2021, leaving about one year left to record such a notice. As explained in the legislative history, the purpose of requiring a specific recorded notice was to reduce the uncertainty surrounding the validity of interests referred to simply as “restrictions of record” in a document, which could have been created more than 40 years ago. Now, such “older” restrictions that otherwise would have been included within the term “restrictions of record” must be preserved through the recorded notice, or else likely be terminated by operation of the Act. This could create issues for owners of property located in older subdivisions, or other properties affected by “older” restrictions or covenants.
By way of background, the purpose of the Act is to simplify and facilitate land title transactions by creating a statutory basis for “marketable title.” The Act accomplishes this by extinguishing by operation of law certain interests which arise out of any act or document that precedes the applicable 40 year period. (The Act contains a shorter 20 year period for certain mineral interests; for sake of brevity, mineral interests are not addressed in this article.) The recent amendment provides an opportunity for people benefiting from these “older” interests to preserve them by recording the notice; otherwise, they may well be extinguished by operation of the Act.
The language of the Act, MCL 565.101-.107, is somewhat opaque, but the Michigan Land Title Standards are very helpful in breaking the language down in to understandable parts. First, Standard 1.3 states that a person has an “unbroken chain of record title” if 1) there is a conveyance (or other title transaction) which creates an interest in that person and has been a matter of record for at least 40 years, or 2) there has been a series of conveyances (or other title transactions) which creates an interest in that person in which the first conveyance (or other title transaction) has been a matter of record for at least 40 years; and 3) there is nothing of record purporting to divest that person of title. Michigan Land Title Standards, 6th Edition; see also MCL 565.102.
Standard 1.2 then states that if a person has 1) an “unbroken chain of record title” for at least 40 years; and 2) there is no one else in hostile possession of the land, that person holds “marketable record title.” MCL 565.101. And then Standard 1.6 explains that “marketable record title” is title free of any interest or claim (the Other Interest), the existence of which depends upon any act or document preceding a 40 year chain of record title if 1) the minimum 40 year chain does not include any reference to the Other Interest, and no notice of such Other Interest has been recorded as required by the Act. MCL 565.106. (Importantly, there are other interests in property not affected by the Act’s operation, such as leases, mortgages, or visible easements, as stated in MCL 565.104.)
The effect of the Act and the amendment is that restrictions or other interests created by acts or documents older than 40 years ago and not otherwise preserved will be extinguished, unless a notice meeting the Act’s requirements is recorded before March 29, 2021. As such, it is important for property owners who benefit from these “older” interests to scrutinize them and determine if a notice should be recorded to preserve them.
The notice required under the Act to preserve such “older” interests is fairly simple. It requires 1) the legal description of all of the property impacted by the interest; 2) the liber and page of the original document which created the interest; 3) the claimant’s name and mailing address; 4) the interest to be preserved; 5) the claimant’s signature; and 6) all other requirements for recording a document. MCL 565.105. This form of notice notably does not require the identity of owners of the property impacted by the “older” interest described in the notice. A failure to include that information will present a practical difficulty for locating the recorded document in a chain of title, because it would not be easily referenced in the grantor-grantee index. As such, it may be advisable to include the identity of the owners of all land impacted by the notice.
The amendment to the Act will create some consternation as to what interests may be extinguished. Accordingly, property owners aware of some deed restrictions should review those documents and decide if a new notice should be recorded to preserve that interest. In making that determination, property owners should remain mindful of Michigan’s common law and statutory provisions (MCL 565.25 and MCL 565.108) regarding slander of title. The Act could also create issues if restrictions are preserved as to some lots in a subdivision, but not as to others. This may result in an uptick in litigation seeking to enforce restrictive covenants under the reciprocal negative easement theory.
It can be anticipated that, despite the amendment to the Act, title companies will remain conservative in assessing older restrictions. Prior to amendment, common practice was that a title company would not disregard building and use “restrictions of record” solely because of age. That practice is expected to continue following amendment to the Act and the passing of the March 29, 2021 deadline. That said, while title companies may note the “older” interests as exceptions to insured title, those “older” interests may no longer be enforceable if extinguished by operation of the Act.
Much remains to be settled in the application of this amendment to the Act. But in any event, the legal community should be aware of these “older” property interests and the March 29, 2021 deadline.
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