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Home / Firm Blog / Insurance / Tenant improvements do not establish a homestead exemption in equity
18
January
2012

Tenant improvements do not establish a homestead exemption in equity

In an unpublished opinion, the Michigan Court of Appeals affirmed the lower court's summary disposition in Rule v. US Bank, stating that a mortgagee has no duty to investigate unrecorded property interests prior to foreclosure and is allowed to rely on the record of title.

In July 2006, Wayne and Raisa Rule executed a mortgage on their property that was later assigned to defedant US Bank. In February 2009, the Rules defaulted on the mortgage and the property was sold at a sheriff's sale.

Nine months after the redemption period expired, the Rules and their dependant adult daughter Wanda filed a complaint to determine their interests in the property. The Rules argued that the daughter had an unforeclosed homestead interest based on improvements to the property prior to the mortgage made to accommodate her disability.

The lower court granted summary disposition for US Bank. MCOA affirmed, pointing out that a homestead interest does not exist in property titled to another person, and the Rules conceded that Wanda does not own the property. MCOA concluded that however harsh the result, Wanda had no recorded interest in the property. Her claim was made in equity based on the modifications made to the home, which does not establish a homestead interest. Mortgagees are allowed to rely on a proper title search to disclose interests in land. Since Wanda had no recorded interest, the mortgagee was allowed to assume she had no interest. US Bank had no duty to investigate further.

  • Item Tag: foreclosure, Homestead Exemption

Author; Pat Gallagher Categories: Real Estate Law, Insurance

About the Author

Pat Gallagher

Pat Gallagher

Attorney Pat Gallagher is founder of The Gallagher Law Firm overseeing its day-to-day operations, as well as the long-term strategic planning of the firm. He focuses his law practice on the needs of businesses and specializes in a wide variety of transactional matters, litigation and mediation. He received his J.D. legal degree from the Washington University School of Law in St. Louis, Missouri. Mr. Gallagher has litigated cases throughout Michigan before the American Arbitration Association, State and Federal Courts, Michigan Court of Appeals, Michigan Supreme Court and the United States Court of Appeals.