Remodeling Your Residence: The Potential Impact to Your Property Tax Assessment

Under the General Property Tax Act, an assessor cannot increase the true cash value as a result of expenditures for “normal repairs, replacement, and maintenance” in determining the true cash value of property for assessment purposes until the property is sold.  The law provides that the following repairs are considered normal maintenance if they are not part of a structural addition or completion:

(a) Outside painting.

(b) Repairing or replacing siding, roof, porches, steps, sidewalks, or drives.

(c) Repainting, repairing, or replacing existing masonry.

(d) Replacing awnings.

(e) Adding or replacing gutters and downspouts.

(f) Replacing storm windows or doors.

(g) Insulating or weatherstripping.

(h) Complete rewiring.

(i) Replacing plumbing and light fixtures.

(j) Replacing a furnace with a new furnace of the same type or replacing an oil or gas burner.

(k) Repairing plaster, inside painting, or other redecorating.

(l) New ceiling, wall, or floor surfacing.

(m) Removing partitions to enlarge rooms.

(n) Replacing an automatic hot water heater.

(o) Replacing dated interior woodwork.

If your construction work includes any of the above, the assessor cannot consider it for purposes of assessment.  However, if the scope of your project is outside of those listed above, the assessor may consider the changes and increase the taxable value of your property.  Further, the assessor, in determining a property’s taxable value can add any “additions” to the previous year’s taxable value.  As defined in the Act, “additions” include “new construction,” which in turn is defined as property not in existence on the immediately preceding tax day and not replacement construction. New construction includes the physical addition of equipment or furnishings, subject to the above (a) through (o) list of normal maintenance. For purposes of determining the taxable value of property, the value of new construction is the true cash value of the new construction multiplied by 0.50. “Replacement construction” means construction that replaced property damaged or destroyed by accident or act of God.

Therefore, depending on the nature of what construction activities you ultimately engage, the assessor could take that into account and raise your taxable value.

If you are considering a remodel or renovation project, it is important to know how your taxes may be affected. The real estate attorneys at Smith & Johnson, Attorneys, P.C. stand ready to assist with any real estate tax matters, whether with your local taxing authority or with the State of Michigan Tax Tribunal.

Authored by:  Andrew K. Shotwell

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Michigan Storm Damage & Home Owner’s Insurance Claims

The storm that blew through NW MI last August 2, 2015, left a trail of property damage for many.   And with that, many property owners are looking to their homeowners’ insurers for help but are being surprised by unwelcome news.  First, the insured is learning that their local agent who sold them the policy is, oddly, completely out of the claim process picture; instead, the insured is directed “to deal with company’s home office” regarding the claim.  And with that, the anecdotes are starting to pile up by area residents already: for example, with tree debris cleanup, unless the tree is touching your dwelling — “CLAIM DENIED!”  And if it is touching a dwelling: “Here is $1,000.00, less your deductible; the rest is on you.”  For damaged homes, anecdotal stories include insurance “experts” crawling all over assessing “value” of the loss (at the deliberate least possible price), then subtracting depreciation (at the deliberate greatest possible price), leaving their insured’s with 1/3rd of the actual cost to replace or repair.  Many deliberate insurance claim traps exist within homeowners’ policies including time limitations to report a loss and what, exactly, must be included in the reported loss.  In short, though, you do not have to “accept” what your insurance company tells you it will pay.  You have every contractual right to contest their “value” assessment; their employee or agent in the field’s interests are aligned with their employer and not you.  Hire experts and get estimates from actual market driven service providers in the area.  Contest the claim and if necessary, file suit timely and get back what you paid for in the first place.

Authored by L. Page Graves

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Title Insurance Company Not Liable For Failure To Expeditiously Resolve Suit

A&A Property Management owned a gas station in the City of Detroit.  It purchased the gas station by taking out a secured loan from Comerica Bank. It also maintained its fuel supply through a mortgage arrangement with Armada Oil and Gas.  Armada recorded its mortgage first.  When A&A defaulted on its loan payments with Comerica, Comerica got a court-appointed receiver and was granted permission by the court to sell the gas station at auction.   The Court order specifically provided that any sale conducted on Comerica’s behalf would be subject to Armada’s first-recorded lien.

Plaintiff entered the winning bid at the auction.  At the time of sale, Plaintiff signed a purchase agreement specifically stating that the property was being sold “AS IS” and “WHERE IS” and “WITH ALL FAULTS”.   On the date of the sale, neither the Armada nor Comerica loan had been discharged.  Plaintiff purchased title insurance from Defendant.  The sale closed on January 24, 2008.  The defendant title insurance company issued an owner’s title insurance policy benefiting plaintiff, and this policy covered plaintiff against Armada’s claimed first lien on the property.

While plaintiff’s purchase was still pending, Armada filed suit against Comerica seeking payment of its undischarged mortgage debt.  Armada later added plaintiff as a named defendant in the lawsuit. When plaintiff notified its title insurance company, the company hired counsel to represent Plaintiff and covered all the costs involved in the litigation.  The title insurance company settled the Armada lawsuit and discharged the Armada mortgage.

Although the title company represented plaintiff in court and did ultimately clear the title, causing no harm to plaintiff, plaintiff filed suit against the title insurance company, complaining that the length of time that the litigation took was too long.  Plaintiff pointed to the fact that the title insurance policy stated that a defense would be provided “without unreasonable delay.”  The trial court dismissed the lawsuit and the Court of Appeals agreed.

The Court of Appeals held that while the policy requires defendants to provide a legal defense “without unreasonable delay”, it does not specify a particular length of time for the litigation.  Further, the plaintiff bought the property “as is” and “where is” and “with all faults,” which limits any liability.  And the policy gives the title insurance company, not the plaintiff, the right to decide whether to defend the case in court or simply pay the insured.    Finally, although the plaintiff accused the title insurance companies of fraud and misrepresentation, the plaintiff did not show the requisite reliance on the alleged fraudulent statements.

 What This Means For Persons Who Purchase Title Insurance:

     Once you have succeeded in turning a real estate lawsuit over to your title insurance company, the company has a lot of leeway in the steps it takes to defend the case.  It can vigorously defend the case or pay you and settle.   A claim that they are not pursuing the case in a timely manner would likely fail.

Authored by Barbara A. Assendelft

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Rural Development Loan and Grant Programs Available in Michigan

Congressman Dave Camp represents the people of the 4th Congressional District of Michigan, which spans from Owosso to Greenville and northward to Traverse City and the Leelanau peninsula. Camp is the top Republican on the Ways and Means Committee, which is one of the oldest and most powerful committees in the U.S. House of Representatives.

In his leadership role, Camp is one of the most influential policymakers in Washington, DC, helping to set the nation’s economic, health care and social welfare policies. His committee has sole jurisdiction over tax policy and oversees tariff and trade laws, Medicare, Social Security, and welfare and unemployment programs.

Representative Camp contacted our office to make sure we and our clients were aware of the many Rural Development Loan and Grant programs that were available to folks throughout Michigan. These loan and grant programs are available to families, farms, businesses, non profits, and public bodies like municipal and county governments.

The Development Programs include:

1. A Housing Program with available funds to repair, improve, winterize, construct, or purchase homes.

2. A Business and Cooperative Development Program with funding for acquisition, start-up and expansion. There are also monies available to provide economic planning for rural communities, technical assistance for rural entrepreneurs and economics development officials, as well as land acquisitions and construction of new businesses and community development projects.  Funding for project costs for renewable energy and efficiency projects such as wind, solar, biomass, geothermal and other renewable energy sources is also available.

3. Community Programs (Utilities and Community Facilities) with loans and grants for waste and water disposal, waste and water pre-development, solid waste management and the construction, equipment purchase and operation of facilities for fire and rescue.

4. Telecommunication Programs to assist with funding of electric and telecommunication programs for non-profits, cooperative associations and public bodies, as well as development and deployment of distance learning, telemedicine and broadband systems.

At Smith & Johnson, we are uniquely positioned to assist governmental entities, non profits, businesses and individuals who are looking to take advantage of the loan and grant opportunities made available through the hard work by Representative Camp.

Here’s  video of USDA Under Secretary of rural Development Dallas Tonsager discussing some of the challenges and opportunities facing the rural communities on a go forward.

Feel free to contact Louis Smith at 231.946.0700 or lsmith@smith-johnson.com with any questions or concerns about these programs.

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