New Michigan Redemption Laws

Last month, Michigan law experienced a major change threatening a Debtor’s redemption period rights after a foreclosure sale.  The new laws were signed by the Governor on July 3, 2013.  While there is still some legislation coming that should help clarify the new rules, homeowners need to be aware these new laws become effective January 10, 2014.

The six month redemption period is being kept in place for residential property after foreclosure.  At the same time, the new law provides for shortening a major consumer protection when a creditor (or whoever purchased at the foreclosure sale) can show there is a threat of damage to the property.  As discussed below, that “threat” may not even need to be all that serious.

At any time during the redemption period, the foreclosure sale purchaser can demand to inspect both the interior and exterior of the property.  This demand can be without notice at any time.  If the request for inspection is refused and that refusal is found unreasonable, or if damage to the property seems imminent (or has already occurred), then the purchaser may immediately begin proceedings to gain immediate possession of the property.

Types of damage leading to termination of redemption rights could include things like a boarded up or closed off window or entrance; broken or unrepaired window panes; a damaged or broken door;  rubbish or trash; stripped electrical wiring, plumbing, or siding; or even missing fixtures, including items like furnaces, water heaters or air conditioning units.

In signing the new legislation, Gov. Snyder did share some concerns regarding how the inspection rights will actually be granted.  This hoped for new legislation needs to clarify what types of inspection demands are reasonable and what are not reasonable.  It also should further clarify the level of damage a creditor needs to show to protect good faith debtors from losing their homes during the redemption period.

The new law obviously creates huge concerns for good faith debtors and those advising them where there simply hasn’t been enough money to keep up with normal maintenance.  Will only those debtors with reasonable cash flow, meaning those able to properly maintain their homes, be able to enjoy a redemption period?

For further information about these new laws and ways to protect yourself, feel free to give me a call at (269) 344-0700.