In Wells Fargo Bank v. Country Place Condominium Association, the Michigan Court of Appeals addressed an issue of first impression and resolved an issue that had been disputed for many years in Michigan between condominium associations and banks. The case involved a dispute as to when the mortgagee bank, which was also the purchaser at foreclosure sale, became responsible for the payment of condominium assessments. The relevant statute states that a foreclosing mortgagee is not liable for condominium assessments “prior to the acquisition of title by that mortgagee or purchaser.” MCL 559.158. The statute does not define “acquisition of title,” and the bank took the position that its responsibility to pay condominium dues began after the redemption period expired, when the bank acquired full legal title to the property.

The Court of Appeals disagreed, stating that the bank acquired title at the time that it obtained equitable title by means of the sheriff’s deed. The court reasoned that, although the “original mortgagee could physically remain in the condominium during the foreclosure period, as he still had legal title for the unit,” the purchaser at sheriff’s sale becomes the owner of an equitable interest in the property, which becomes absolute once the redemption period expires, which equitable title interest is capable of being assigned or sold. Once the redemption period expires, the Court of Appeals held that “legal title to the property becomes ‘absolute’ and relates back to the date of the purchase at the sheriff’s sale.” The court noted that “the statute does not require that the purchaser have ‘absolute title,’ just a ‘title,’ and an equitable title is a form of title,” and thus concluded that the Wells Fargo acquired title pursuant to MCL 559.158 on March 8, 2011, the date of the foreclosure sale.

Following the Court of Appeals’ March 18, 2014 decision, the purchaser at mortgage foreclosure sale is responsible for paying condominium association dues from the date of the sheriff’s sale forward. Given the impact of this decision, Wells Fargo Bank may choose to file an application for leave to appeal to the Michigan Supreme Court.