Disappearing Units II: Condominium Wins Big Against County Treasurer and Prospective Builders Looking To Build Hundreds of Units

Feb 6, 2020 | Articles, Common Elements

Shortly after the case of Cove Creek Condominium Association v Vistal Land & Home Develop, LLC, __Mich App__, Nos. 342372 & 343144 (2019) was decided in late December 2019, the Michigan Court of Appeals decided another case involving disappearing units. Wellesley Gardens Condo Ass’n v Manek et al., No. 344190 (Mich Ct App Jan 9, 2020) (unpublished) was somewhat similar to Cove Creek in that it involved unbuilt “need not be built” units, except that instead of just the builder, Wellesley Gardens was also fighting the county treasurer who argued that tax foreclosure revived the rights to build. The Court confirmed, as in Cove Creek, that under MCL 559.167(3), also known as Section 67, the unbuilt units in fact disappeared by automatic operation of law, and further confirmed that the units were not revived into existence even though they went through tax foreclosure and were actually sold to prospective builders. If you live in an incomplete condominium and the unbuilt units are “need not be built,” you should act quickly to assert your vested ownership rights in the undeveloped lands, even if those units went through tax foreclosure and a new owner claims a right to build.

Wellesley Gardens Condominium was created in 2002 and was eventually expanded via master deed amendments to 426 total units. Though the roads were all laid down, and some building pads and utility leads were built, approximately half of the condominium units were never completed. The Association had previously litigated against a prospective builder in 2014 and obtained a judgment that unbuilt units 210 through 427 ceased to exist after July 8, 2011. However, in 2015 and 2016, despite the Association objecting to tax foreclosure on the non-existent units, the county treasurer proceeded to foreclose for unpaid taxes, enter judgments of foreclosure, and sell to new buyers looking to build. Wellesley Gardens ended up in litigation with the buyers of those tax foreclosed units over whether the units could be built. The county treasurer intervened and argued that tax foreclosure stopped the Association from asserting the units did not exist.

The Court of Appeals generally followed Cove Creek and held that the unbuilt “need not be built” units had disappeared in 2011 automatically without any action on the part of the Association. In a portion of the ruling unique from the issues in Cove Creek, the Court rejected the argument that the tax foreclosure somehow revived the units into existence. The Court of Appeals also rejected the unique argument that Section 67 only caused units to disappear automatically if they were owned by a “developer” on the disappearance date. That meant that Units 165 through 167 also disappeared in 2011 even though owned by a non-developer at that time.

Depending on when your project was created, and how units were designated in the condominium plans, your community may be similarly situated to the associations in Wellesley Gardens and Cove Creek. Our firm will counsel you on this unique area of the law and whether you have the same rights as those condominiums to regain control over undeveloped land.