Michigan Passes Law Allowing Owners and HOAs to Remove Discriminatory Restrictions from Deeds and Other Recorded Documents

The time is always right to do what is right.

Martin Luther King, Jr.
 

A new Michigan law went into effect on December 13, 2022 called the Discharge of Prohibited Restrictive Covenants Act (“Act”). This Act gives Michigan property owners and Michigan community associations a new and easy way to affirmatively remove discriminatory restrictions from deeds and other recorded documents. If a restriction is found in recorded community association documents such as a subdivision declaration or condominium master deed, the Act removes the requirement for owner approval and instead empowers the board to act either on its own or at the urging of an owner. Indeed, if an owner makes written demand on a community association board to act to remove such discriminatory language, the Act requires the board to act.

I. Brief American History of Discrimination in Housing

Our nation’s history is littered with relics and remnants of overt racial and religious prejudice. There was a time in the not-so-distant past when land owners would place facially discriminatory restrictions into deeds trying to prohibit certain racial or religious groups from owning or leasing homes. Those restrictions sought to control who could and could not own or use land in a residential neighborhood. Those original owners were motivated by notions of racial or religious purity in a horribly misguided belief that segregation was necessary to preserve the “American” way of life.

Deed restrictions that discriminated on the basis of race or religion were more common in residential developments created prior to the mid-1960s. After enactment of the federal Civil Rights Act of 1964, as well as passage of the federal Fair Housing Act of 1968 (“FHA”), such provisions generally stopped showing up in new residential development governing documents.

But racial and religious groups are not the only ones protected from housing discrimination under the FHA and other comparable state civil rights laws. Today, one can occasionally find community association documents created within the last 30 years or so that still discriminate on the basis of family status (including discrimination against children, families with children, or unmarried persons), sex (including homosexuals or married same sex couples), or age.

For example, our firm will still find in relatively modern documents restrictions that purport to limit or ban families with children, limit where or how children specifically can play within the community, or potentially limit the number of children who can reside in a single home. Another version of this shows up as restrictions setting a minimum age for all occupants, with the practical effect being all children under 18 years old are banned. Now there is a legal way under the FHA to establish a 55 and up retirement-style community. But if a recorded restriction was not drafted properly, or if the Association does not follow the FHA’s specific requirements, then the community could end up illegally discriminating against people.

The FHA and other similar state laws made great strides towards affirming that discriminatory housing restrictions are illegal and will not be enforced by courts. While courts will no longer enforce such unlawful discriminatory restrictions, they remain in the chain of title for many older, and even some newer, homes and communities. These restrictions sully the dignity of all owners, and in particular an owner who may have been the target for such discriminatory language in the first place.

For restrictions found in subdivision or condominium documents, persons seeking to erase these sorts of illegal restrictions from their documents face an uphill battle in organizing an agreement of a sufficient number of owners to amend the relevant restrictions. This is often due to owner apathy and requirements for supermajority approval in order to pass an amendment. The Act eliminates this obstacle entirely, allowing a mere majority of a board to vote to remove discriminatory restrictions.

II. Prohibited Restrictions Generally

Section 2 of the Act defines “prohibited restriction” to mean:

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.

In other words, a prohibited restriction is one that seeks to restrict rights of occupancy or ownership of any class of persons protected from housing discrimination under the FHA.

While one would hope that new discriminatory provisions would not be recorded, Section 3 of the Act reaffirmed a prohibition on anyone recording a deed or other instrument with the register of deeds that contains a prohibited restriction. Section 10 exposes such a person to attorney’s fees and costs if they refuse to remove the restriction before recording and someone sues to enforce the Act. Section 4 makes all prohibited restrictions void and unenforceable by any person.

The Act is effectively in line with existing fair housing laws and makes clear these sorts of prohibited restrictions cannot be enforced and should not be recorded, and that individuals may be exposed to potential financial sanctions for failing to remove these types of restrictions.

III. Discharge of Prohibited Restriction Form

The real innovation of the Act is that it simplifies the process of removing discriminatory provisions through its creation of a Discharge of Prohibited Restriction Form (“Discharge Form”). Section 5 of the Act provides the text for a specific statutory form that can be recorded in the register of deeds in the county where the property is located. That form simply requires reference to the recorded document that contains a prohibited restriction, and then contains a statement that such prohibited restriction is “remove[d] and abolishe[d]” from the recorded document. A redacted copy of the original document, with the prohibited restriction physically redacted or removed, can be attached to the Discharge Form.

The form can be recorded either by the owner(s) of the referenced property, or an officer of a homeowners’ or property owners’ association, or any board member of an association of condominium owners.

IV. Boards Have Duty to Act When Notified by Owner

The Act provides that if an owner demands in writing that a subdivision association or condominium association record a Discharge Form to remove a prohibited restriction from governing documents affecting the entire community (such as a subdivision declaration or condominium master deed), the board must investigate within a “reasonable” amount of time. If a prohibited restriction exists, Section 6 of the Act requires a board to act. It is not optional.

In doing so, the Act eliminates any requirement of owner approval (and mortgagee approval in a condominium) to record the form. Again, this removes a major hurdle in that it sidesteps the need for obtaining what is often a supermajority vote to amend governing documents, allowing a simple majority of the board to act.

V. Various Enforcement Options

Section 8 of the Act provides that any owner, occupant, tenant, or any board member of an HOA or condominium association can enforce the Act by bringing suit in circuit court to have a Discharge Form recorded. This type of legal action would be an in rem declaratory judgment action (meaning the case name is the property description), and all owners, occupants, and tenants of the affected property would be necessary parties to the lawsuit.

Although Section 11 of the Act makes clear that boards and board members have no duty to affirmatively seek out, locate, or otherwise remove discriminatory restrictions, the Act does make board action mandatory when a prohibited restriction is identified and written demand is made for its removal.

As previously mentioned, Section 10 of the Act imposes penalties on any person who “refuses” to remove a prohibited restriction before recording a new document. The penalty is exposure to the legal fees and costs of anyone entitled to enforce the Act against that prohibited restriction.

Lastly, Section 12 of the Act at does not require the register of deeds search for any recorded prohibited restrictions, nor are title companies required to search for such restrictions when completing a sale. In fact, title companies are expressly excluded from liability under the Act.

VI. Board Refusal to Act Might Expose Board to Claims of Housing Discrimination

If a board refuses to act against a prohibited restriction, that might well lead an aggrieved owner, occupant, or tenant to assert other claims of housing discrimination under the FHA, the Elliott-Larsen civil rights act, MCL 37.2101 et seq., or reporting the alleged discrimination to the Michigan Department of Civil Rights or the U.S. Department of Housing and Urban Development. Simply put, there are numerous reasons for a board to take action under the Act and eliminate prohibited restrictions, and no good reasons for refusing to do so.

VII. Conclusion

The Discharge of Prohibited Restrictive Covenants Act is a fairly simple and useful tool any owner, occupant, tenant, or HOA board member can use to physically redact and remove prohibited restrictions in recorded documents. It serves the laudable goal of empowering owners and community association boards to make it clear to the world that they will not stand for vile and discriminatory language in documents affecting their homes, property, and community.

Our country has made strides in combating discrimination in housing with laws like the FHA, and the Act provides another way for a person to make a statement about who they are and what kind of community they want to live in. And part of that process involves doing the right thing and eliminating prohibited restrictions from recorded documents by first exposing them to the light, and then erasing them.

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If you are a Michigan community association board member and have questions regarding the Discharge of Prohibited Restrictive Covenants Act, the experienced lawyers at Makower Abbate Guerra Wegner Vollmer can help guide you through this new legislation so you can confidently advance the interests of your community.