15 Jul Connecticut and Michigan Legislative Update
The Connecticut legislature recently enacted laws governing private transfer fees, effective June 24, 2013. The Michigan legislature recently amended its foreclosure laws and enacted laws governing loss mitigation procedures, effective July 3, 2013.
CONNECTICUT SENATE BILL 859
“Private transfer fee” means a fee or charge payable upon the conveyance and subsequent conveyance of an interest in real property located in Connecticut or for the right to make or accept the conveyance.
“Private transfer fee” does not include:
- Any consideration payable by a grantee to a grantor for the conveyance of an interest in real property located in Connecticut, including any subsequent consideration payable by the grantee for the real property based on subsequent appreciation, development, or sale of the real property, provided the subsequent consideration is payable on a one-time basis and the obligation to pay consideration does not bind successors in title to the real property;
- Any commission payable to a real estate broker or a real estate salesperson for the sale of real property located in Connecticut according to a contract or agreement between the broker or salesperson and a grantee or grantor, including any subsequent commission payable by the grantee or grantor for the real property based on subsequent appreciation, development, or sale of the real property;
- Any interest, fee, charge, or other amount payable by a borrower to a lender according to a loan secured by a mortgage against real property located in Connecticut, including any fee payable to the lender for consenting to an assumption of the loan or conveyance of the real property subject to the mortgage, any fee or charge payable to the lender for an estoppel letter or certificate issued by the lender, and any shared appreciation interest, profit participation, or other consideration payable to the lender in connection with the loan;
- Any rent, reimbursement, fee, charge, or other amount payable by a lessee to a lessor, including any fee or charge payable to the lessor for consenting to an assignment, sublease, or encumbrance of a rental agreement or lease;
- Any consideration payable to the holder of an option to purchase an interest in real property or the holder of a right of first refusal or first offer to purchase an interest in real property located in Connecticut, for the holder’s waiver, release, or non-exercise of the option or right;
- Any tax, assessment, fine, fee, charge, or other amount payable to or imposed by a governmental entity;
- Any dues, assessment, fine, contribution, fee, charge, or other amount payable to an association or a unit owners’ association, according to any declaration, covenant, law, association bylaw, association rule, or association regulation, including a fee or charge payable to the association for an estoppel letter or certificate issued by the association or its authorized agent;
- Any dues, assessment, fine, contribution, fee, charge, or other amount imposed by a declaration or covenant encumbering a municipality, county, or a neighborhood or other area, irrespective of boundaries or political subdivision, in Connecticut and payable only to a tax-exempt charitable organization for the purpose of supporting cultural, educational, charitable, recreational, environmental, conservation, or other similar activities that benefit the municipality, county, neighborhood, or other area; or
- Any dues, assessment, contribution, fee, charge or other amount payable for the purchase or transfer of a club membership related to real property located in Connecticut.
“Private transfer fee obligation” means an obligation arising under a declaration or a covenant recorded against the title to real property located in Connecticut or under any contractual agreement or promise, whether or not recorded, that requires or purports to require the payment of a private transfer fee upon a conveyance or a subsequent conveyance of an interest in the real property.
As of June 24, 2013, a person must not impose a private transfer fee obligation. Any obligation imposed after such date and any agreement that violates this requirement is void and unenforceable. Any person harmed by the imposition of a private transfer fee may bring a civil action for damages in the Superior Court.
Each contract offered or entered into on or after June 24, 2013 for the sale of real property located in Connecticut that is encumbered by a private transfer fee obligation imposed before June 24, 2013 must include a provision disclosing the existence of the obligation, a description of the obligation, and a statement that private transfer fee obligations are subject to the provisions above regarding private transfer fees. Any contract that violates the provisions above is void and unenforceable and a purchaser under the contract will not be liable to the seller for damages under the contract. A purchaser under a contract that is void and unenforceable is entitled to the return of all deposits made by the purchaser in connection with the sale of the real property.
For each private transfer fee obligation imposed before June 24, 2013, the person to which the fee was or is paid must record against the title of the real property before December 31, 2013 in the land records of the town within which the real property is located a separate document entitled, in not less than 14-point bold type, “Notice of Private Transfer Fee Obligation” that includes the following information:
- The dollar amount of the fee if the fee is a flat amount, the percentage of the sales price that constitutes the amount of the fee, or the other method by which the fee is calculated;
- If the real property is residential, actual dollar-cost examples of the fee for a home priced at $250,000, $500,000, and $750,000;
- The date or circumstances under which the obligation expires, if any;
- The purpose for which the funds from the fee will be used;
- The name of the person to which the fee was or is paid and the specific contact information for where the fee was or is sent;
- The acknowledged signature of the person to which the fee was or is paid; and
- The legal description of the real property encumbered by the obligation.
The person to whom the fee was or is paid may file an amendment to the notice of changes to the contact information for the person, provided the amendment includes the recording information of the notice and the legal description of the real property encumbered by the obligation.
Real property located in Connecticut that is encumbered by a private transfer fee obligation may become unencumbered by the obligation if:
- The person to which the fee was or is paid fails to comply with the notice requirements above prior to December 31, 2013; or
- A grantor of the real property requests in writing, to the person to which the private transfer fee was or is paid and the address shown in the contact information of the notice required above, a statement showing the private transfer fee amount that is payable upon the conveyance of the real property and the person fails to provide the statement in writing within 30 days of the date of the borrower’s written request.
In such event, a grantor of the real property must:
- Record an affidavit of the facts relating to title or interest in real estate in the land records of the town within which the real property is located; and
- Upon the filing of the affidavit, not be subject to the obligation. The borrower may convey the real property without paying the private transfer fee and the real property will be conveyed free and clear of the obligation and fee.
When the affidavit above has been recorded, it is admissible as prima facie evidence that:
- The grantor sent a written request to the person to whom the private transfer fee was or is paid for a statement showing the private transfer fee amount that is payable upon the conveyance of the real property; and
- The person failed to provide the statement in writing within 30 days of the date of the borrower’s written request.
MICHIGAN SENATE BILL 380
The requirement that a party not commence proceedings to foreclose a mortgage of property claimed as a tax-exempt, principal residence and its exceptions applies only to proceedings in which the first notice of foreclosure is published after July 5, 2009 and before January 10, 2014 (previously June 30, 2013).
After January 9, 2014, a party must not commence proceedings to foreclose a mortgage of property claimed as a tax-exempt, principal residence unless the party has complied with the applicable loss mitigation procedures required prior to foreclosing a mortgage.
MICHIGAN SENATE BILL 381
For a mortgage of residential property not exceeding 4 units, if the property is abandoned, the redemption period is 1 month (previously 3 months).
After the foreclosure sale and periodically throughout the redemption period, the purchaser at the sale may inspect the exterior and interior of the property and all ancillary structures. If inspection is unreasonably refused or if damage to the property is imminent or has occurred, the purchaser may immediately commence summary proceedings for possession of the property or file an action for any other relief necessary to protect the property from damage. A court will not enter a judgment for possession in an action to recover the premises if, before the hearing for possession, the borrower repairs any damage to the property that was the basis for the action. If a judgment for possession is entered in favor of the purchaser, the right of redemption is extinguished and full title to the property vests in the purchaser.
“Damage” includes, but is not limited to, any of the following:
- The failure to comply with local ordinances regarding maintenance of the property, if the failure is the subject of enforcement action by the appropriate governmental unit;
- A boarded up or closed off window or entrance;
- Multiple broken and unrepaired window panes;
- A smashed through, broken off, or unhinged door;
- Accumulated rubbish, trash, or debris;
- Stripped plumbing, electrical wiring, siding, or other metal material;
- Missing fixtures, including, but not limited to, a furnace, water heater, or air conditioning unit;
- Deterioration below, or being in imminent danger of deteriorating below, community standards for public safety and sanitation; or
- A condition that would justify recovery of the premises based on health hazards existing on the premises or physical injury to the premises.
MICHIGAN HOUSE BILL 4765
The provisions governing notice from a foreclosing party to borrowers and its contents, lists of housing counselors, and mortgage loan modifications do not apply to proceedings in which the first notice of foreclosure is published after January 9, 2014. Such provisions will remain effective until June 30, 2014 (previously June 30, 2013).
MICHIGAN HOUSE BILL 4766
The following provisions apply to the loss mitigation procedures that occur before the foreclosure of a mortgage, if all of the following apply:
- The mortgaged property is claimed as a tax-exempt, principal residence;
- The first notice of foreclosure is published after January 9, 2014; and
- The servicing agent of the mortgage is a defendant that entered into a consent judgment in United States of America, et al. v Bank of America Corp., et al., or a successor in interest to such a defendant. A person is not a successor in interest only because of a transfer of mortgage servicing rights and obligations to the person.
As part of the loss mitigation procedures, the person foreclosing the mortgage must do all of the following:
- Designate an individual who is an employee or agent of the person or of another entity that is an agent of the person or designate a specific department or unit of the person or of an entity that is an agent of the person to serve as a contact;
- Authorize the individual designated above or, if the designee is a department or unit, a representative of the department or unit to facilitate negotiations and attend meetings with the borrower;
- Include in the written notice the person sends to the borrower under federal Regulation X, or enclose with the notice a separate written notice that contains, all of the following information:
- The name and address and a dedicated telephone number and dedicated electronic mail address of the individual, department, or unit designated above; and
- A statement that the borrower may, within 30 days, either by contacting the individual, department, or unit designated above directly or by contacting a homeownership counselor or counseling organization from a list referred to in the written notice under Regulation X, request a meeting with the individual, department, or unit designated above to attempt to work out a modification of the mortgage loan to avoid foreclosure; and
- If the borrower requests a meeting, not commence foreclosure proceedings unless the meeting has been held. This provision does not apply if the borrower has not cooperated by scheduling a meeting at a time and place that is convenient to all parties, or in the county where the property is situated, or has not attended a scheduled meeting.