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Can You Eliminate Prohibitive Restrictive Covenants On Property Deeds In Michigan?

by | Jan 16, 2023 | Property Law |

 

Many homeowners may be surprised that, if they were to go to the local register of deeds office and research the history of their property deed, they may find restrictive covenants in the plain language of the title prohibiting non-white races or certain nationalities from owning or occupying the property.  It used to be perfectly legal in this state for entire neighborhoods to have these types of covenants built right into the deed to perpetuate racial segregation and keep entire groups of people out of the neighborhood.  There was a time when a homeowners association could even go to a court of law and get a judge to invalidate a conveyance of property to the type of person mentioned in a restrictive covenant solely on the basis of skin color, country of origin, or even sexual orientation.

However, the U.S. Supreme Court eventually stepped in to halt the enforcement of these restrictive covenants.  In Shelley v. Kraemer, 334 U.S. 1; 68 S.Ct. 836; 92 L.Ed. 1161 (1948), a black man purchased a parcel by warranty deed in August 1945 but had no actual knowledge that the chain of title contained a racially restrictive covenant at the time of sale.  In October 1945, neighbors on other nearby properties subject to the terms of the restrictive covenant filed suit to obtain an injunction preventing the black owner from taking possession and a judgment divesting them of any ownership interest in the property.  The trial court refused to grant the relief sought, but the Missouri Supreme Court reversed and compelled the trial court to enforce the provisions therein.  This matter was also incorporated by a companion case in Michigan where a black couple in Wayne County purchased land subject to a covenant stating: “This property shall not be used or occupied by any person or persons except those of the Caucasian race.”  The neighbors also subject to this restrictive agreement filed suit to enforce the terms and the Wayne County Circuit Court granted the relief sought.  The Michigan Supreme Court upheld this decision and determined the property owners’ Fourteenth Amendment rights were not violated.  Both cases reached the U.S. Supreme Court which ultimately concluded that enforcement of these racially restrictive covenants was state action and therefore denied these property owners the equal protection of the law under the Fourteenth Amendment.  From that point on, racially restrictive covenants became unenforceable even if they appeared in the plain language of the deed.

Soon after, the Michigan Supreme Court incorporated the holding in Shelley v Kraemer to become part of state law.  In Phillips v Naff, 332 Mich 389; 52 NW2d 158 (1952), the plaintiffs sued in Wayne County Circuit Court to recover damages for breach of a racial restrictive covenant by alleging that the defendants violated these terms by conveying restricted property to black people and placing them in possession and occupancy.  The circuit court granted the motion to dismiss, and the Michigan Supreme Court upheld the decision on appeal finding that the Fourteenth Amendment prevents the maintenance of an action for breach of racial restrictive covenants.

Despite the invalidity of enforcement, there was not a mechanism in the law that actually provided for the removal of these invalid restrictive covenants from legal title.  But, finally, Governor Gretchen Whitmer signed into law the Discharge of Prohibited Restrictive Covenants Act, Public Act 234 of 2022, which took immediate effect on December 13, 2022 and both codifies the principles of Shelley v Kraemer into statute and provides a mechanism to remove certain restricted covenants from legal title.  This blog article will explain how this new law works and how you can utilize it.

 

WHICH RESTRICTIVE COVENANTS ARE PROHIBITED?

Under the Discharge of Prohibited Restrictive Covenants Act, “prohibited restriction” means “a restriction, covenant, or condition, including a right of entry or possibility of reverter, that purports to restrict occupancy or ownership of property on the basis of race, color, religion, sex, familial status, national origin, or other class protected by the Fair Housing Act, Title VIII of the Civil Rights Act of 1968, Public Law 90-284, in a deed or other instrument.”  MCL 565.862(c).

The following acts are specifically outlawed:

  • “A person shall not record in the records of the register of deeds a deed or other instrument that contains a prohibited restriction.” MCL 565.863.
  • “A prohibited restriction is void and has no legal effect”, and “[a] court or other person shall not enforce a prohibited restriction.” MCL 565.864.

 

HOW CAN A PROHIBITED RESTRICTION BE DISCHARGED?

A prohibited restriction on a real estate parcel may be removed by a “discharge form” executed and filed with the register of deeds office.  “A property owner may record in the records of the register of deeds for the county where the property is located a discharge form to remove any prohibited restriction”, and the document “may be executed solely by the property owner.”  MCL 565.867.  In addition, “[a] homeowners’ or property owners’ association, acting through a simple majority vote of its board, may record a discharge form to remove any prohibited restriction in a deed or other instrument that affects a property governed by the homeowners’ or property owners’ association.”  MCL 565.866(1).  The vote or approval of the property owners in the homeowner’s association is not required.  MCL 565.866(3).  The discharge form may be executed by any officer authorized by the association board.  MCL 565.866(4).  Finally, “[t]he board of directors of an association of co-owners of a condominium, acting through a simple majority vote of the board, may record a discharge form to remove any prohibited restriction in a deed or other instrument that affects a property governed by the board.”  MCL 565.866(5).  The vote or approval of the condominium co-owners or mortgagees is not required.  MCL 565.866(7).  The discharge form may be executed by any officer authorized by the condominium board.  MCL 565.866(8).

According to MCL 565.865, the discharge form to be recorded at the register of deeds must substantially conform to the following form:

DISCHARGE OF PROHIBITED RESTRICTION

The document recorded at Liber ____ Page ____ or Instrument number ___ contains language that violates the discharge of prohibited restrictive covenants act.

This document removes and abolishes from the original document any restriction, covenant, or condition, including a right of entry or possibility of reverter, that purports to restrict occupancy or ownership of property on the basis of race, color, religion, sex, familial status, national origin, or other class protected by the fair housing act, title VIII of the civil rights act of 1968, Public Law 90-284, and the discharge of prohibited restrictive covenants act.

[___] If this box is checked, a transcription or copy of the original document with language redacted or removed must be attached to this form.

The undersigned is/are the legal owner(s) of the property described in the document referenced above or an officer of the homeowners’ or property owners’ association, or the association of co-owners of the condominium, for the property described in the document referenced above.

Property description: _______________________________

_______________________ (Signature)

_______________________ (Typed or printed name)

STATE OF MICHIGAN

____________ COUNTY

Acknowledged before me in _________ County, Michigan, (or) before me using an electronic notarization system under MCL 55.286a in ___________ County, Michigan, (or) before me using a remote electronic notarization platform under MCL 55.286b on (date), by (name of person acknowledged).

____________________ (Notary’s signature)

____________________ (Notary public’s name, typed, as it appears on application for commission)

Notary public, State of Michigan, County of ________________.  My commission expires ____________.

(Or, if acting in county other than county of commission) Acting in the County of ________________.

Prepared by: _________ (Name and address of preparer).

 

CAN A COURT COMPEL THE FILING OF A DISCHARGE FORM IF THE PROPERTY OWNER, HOMEOWNER’S ASSOCIATION, OR CONDOMINIUM ASSOCIATION REFUSES TO DO SO?

Yes.  “If a recorded deed or other recorded instrument contains a provision that is prohibited under [the Discharge of Prohibited Restrictive Covenants Act], the owner, occupant, or tenant of the property that is subject to the provision or any member of the board of a homeowners’ or property owners’ association or of the board of directors of an association of co-owners of a condominium that would have a right to enforce the provision may bring an action in the circuit court in the county in which the property is located to have a discharge form recorded with the register of deeds.”  MCL 565.868(1).

“An action under [the Discharge of Prohibited Restrictive Covenants Act] must be brought as an in rem, declaratory judgment action and the title of the action must be the description of the property. The owners, occupants, and tenants of the property or any part of the property are necessary parties to the action.”  MCL 565.868(2).

“In an action under [the Discharge of Prohibited Restrictive Covenants Act], if the court finds that any provisions of the deed or instrument are prohibited under this act, it shall enter an order requiring a discharge form to be recorded with the register of deeds in accordance with this act.”  MCL 565.868(3).

“A person that refuses, before recording, to remove from a deed or other instrument a prohibited restriction is liable for all actual court costs and reasonable attorney fees incurred in an action before a court of competent jurisdiction to enforce the provisions of [the Discharge of Prohibited Restrictive Covenants Act].”  MCL 565.870(1).  This liability does not apply to the register of deeds or an employee of the register of deeds.  MCL 565.870(2).

In addition to the remedies in the Discharge of Prohibited Restrictive Covenants Act, a person whose civil rights is violated by a prohibited restriction in a deed may bring a civil action for injunctive relief and damages under the Elliott-Larsen Civil Rights Act.  MCL 37.2801(1).  An award for damages means compensation for injury or loss caused by the violation including reasonable attorney fees.  MCL 37.2801(3). 

 

DOES THE DISCHARGE OF PROHIBITED RESTRICTIVE COVENANTS ACT CREATE A DUTY TO CLEAR UP THESE ISSUES?

Generally no, with some exceptions.  “[The Discharge of Prohibited Restrictive Covenants Act] does not create a duty on the part of an owner, occupant, tenant, association, board, or member or officer of a board to… [r]ecord a discharge form… [or] bring a [court] action.”  MCL 565.871(1).  Further, “[a]n owner, occupant, tenant, association, board, or member or officer of a board is not liable for failing to… [r]ecord a discharge form… [or] bring a [court] action.”  MCL 565.871(2).

However, “[i]f the board of a homeowners’ or property owners’ association receives a written request by a member of the association that the board exercise its authority [to record a discharge form], the board shall determine within a reasonable time whether a prohibited restriction is present in a deed or other instrument. If the board determines that a prohibited restriction is present in a deed or other instrument, the board shall record a discharge form.”  MCL 565.866(2).  This request imposes a duty on the homeowners’ association to act, and if it fails to do so then it may be liable for all actual court costs and reasonable attorney fees incurred in a court action under MCL 565.870(1).

Likewise, “[i]f the board of directors of an association of co-owners of a condominium receives a written request by a co-owner that the board exercise its authority [to record a discharge form], the board shall determine within a reasonable time whether a prohibited restriction is present in a deed or other instrument. If the board determines that a prohibited restriction is present in a deed or other instrument, the board shall record a discharge form.”  MCL 565.866(6).  This request imposes a duty on the condominium association to act, and if it fails to do so then it may be liable for all actual court costs and reasonable attorney fees incurred in a court action under MCL 565.870(1).

The Discharge of Prohibited Restrictive Covenants Act also does not do any of the following:

  • “Impose a duty on a register of deeds or employee of a register of deeds to inspect a deed or other instrument to determine whether recording the deed or instrument would violate this act.” MCL 565.872(a).
  • “Create a duty, a responsibility, a requirement, or an obligation on the part of a title insurance company or title insurance agency, or the officers, directors, shareholders, employees, or contractors of a title insurance company or title insurance agency, to inspect a deed or other instrument to determine whether recording the deed or instrument would violate this act. A title insurance company or title insurance agency, or the officers, directors, shareholders, employees, or contractors of the title insurance company or title insurance agency, are expressly excluded from any liability or cause of action that may be brought by any person under this act.” MCL 565.872(b).

 

OUR SKILLED LAWYERS ARE AVAILABLE TO ASSIST YOU

The Discharge of Prohibited Restrictive Covenants Act is another step forward in trying to heal and erase the legacy of racial prejudice in the past.  But real estate laws can be complicated and attempting to do anything on your own without sufficient legal knowledge and training can cause damage to the quality of title to your property.  You should seek the advice of a good property law lawyer to ensure that all the steps to remove a prohibited restrictive covenant are done properly.

If you or a loved one have further questions or need legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC today.

 

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