HOUSING: TRANSFER OF OWNERSHIP                                                     S.B. 16:

                                                                                    ANALYSIS AS ENACTED

 

 

 

 

 

Senate Bill 16 (as enacted)                                             PUBLIC ACT 14 of 2021

Sponsor:  Senator Dale W. Zorn

Senate Committee:  Local Government

House Committee:  Local Government and Municipal Finance

 

Date Completed:  12-15-22

 


RATIONALE

 

Formerly, in many municipalities, when the ownership of a rental property was transferred from one entity to another, the property needed to be reinspected and recertified, and any applicable fees had to be paid, even if the same individual controlled both entities. As a result, a property owner who transferred a certified and code-compliant property from personal ownership to a limited liability company, individual retirement account, or a trust was required to have the property reinspected and recertified, at what some said was a considerable cost, even if the property had been recently certified. To address this issue, it was suggested that, for the purposes of the Housing Law of Michigan, a transfer of ownership should not constitute a change of ownership under certain circumstances.

 

CONTENT

 

The bill amended Article 7 (Enforcement) of the Housing Law of Michigan to specify that a transfer of ownership does not constitute a change of ownership if both of the following apply:

 

 --   The transferring party and receiving party are the same or otherwise both under common control.

 --   The property was inspected in accordance with the Law during the two-year period immediately preceding the date of the transfer or a longer period, if previously determined by a local municipality inspection ordinance.

 

The bill took effect on August 17, 2021.

 

Under the Law, an enforcing agency may maintain a registry of owners and premises regulated by the Law. If it does so, the owner of multiple dwelling or rooming house containing units that will be offered to let, or to hire, for more than six months of a calendar year, must register the following information with the enforcing agency:

 

 --   The owner's name.

 --   The address of the owner's residence or usual place of business.

 --   The location of the multiple dwelling or rooming house.

 

If the premises are managed or operated by an agent, the agent's name and place of business must be entered with the name of the owner in the registry.

 

The bill species that a transfer of ownership to another person is not a change of ownership if the owner, owners, trustors, grantors, or members of the transferring person are the same as the owner, owners, trustees, grantees, or members of the recipient person, or both the transferring person and recipient person are under common control, and the property to be transferred was


inspected in accordance with the Act during a two-year period immediately preceding the date of transfer or a longer period, if previously determined by a local municipality inspection ordinance.

 

"Person" means an individual or corporation, limited liability company, partnership, limited liability limited partnership, trust, individual retirement account, or other legal person recognized in the State.

 

(Under the Law, "multiple dwelling" means a dwelling occupied otherwise than as a private dwelling or two-family dwelling. Multiple dwelling are divided into either class a, which are occupied more or less permanently and in which the rooms allow for cooking, kitchen, and toilet accommodations, such as apartment buildings; or class b, which are occupied, as a rule, transiently, and generally without any attempt to provide cooking or kitchen accommodations, such as hotels or boarding houses. Generally, a "rooming house" means a dwelling occupied in such a manner that certain rooms in excess of those used by the members of the immediate family and occupied as a home or family unit, are leased or rented to individuals outside of the family without an attempt to provide cooking or kitchen accommodations for individuals leasing or renting rooms.)

 

MCL 125.525

 

ARGUMENTS

 

(Please note:  The arguments contained in this analysis originate from sources outside the Senate Fiscal Agency.  The Senate Fiscal Agency neither supports nor opposes legislation.)

 

Supporting Argument

The nominal transfer of a certified and code-compliant rental property does not change the property's underlying characteristics, as the owner, tenants, and the property itself remain the same. Nonetheless, some municipalities considered the transfer to be a change of ownership and required fees for reinspection and recertification. This was true even if the inspection and certification process had been completed recently (i.e., within the preceding two years). The bill prohibits municipalities from engaging in this practice, which will protect property owners from redundant fees.

                                                                        Legislative Analyst:  Eleni Lionas

 

FISCAL IMPACT

 

The bill will have no fiscal impact on the State and will have an indeterminate fiscal impact on local governments. The bill's provisions will allow certain local governments to increase the interval between certain inspections, which will allow for fewer total inspections. Local units that choose not to conduct inspections likely will receive less revenue and will incur fewer expenses. Given that the Law requires inspection fees to be reasonable and that they not exceed the actual cost of the inspection, the net impact likely will be approximately zero.

 

                                                                             Fiscal Analyst:  Ryan Bergan

This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.