Update on Michigan Short-Term Rental Bill, House Bills 5437-5445; Right-to-List Homes Sales Bill, Michigan Senate Bill 602; Post-closing Occupancy Agreement, Michigan House Bill 5386
The candidate filing deadline of Tuesday, April 23rd just passed, the Michigan State Legislature has been staying active before things begin to wind down as candidates focus their efforts on their reelection efforts. Below are the Top 3, plus two quick hits (too many important bills to cover!) real estate-related bills that have seen some movement over the past month or two. Thank you to Michigan REALTORS Vice President of Public Policy & Legal Affairs, Brad Ward, for his insights, updates, and information on these pending state bills.
1. Update on Michigan Short-Term Rental Bill, House Bills 5437-5445
A recently proposed short-term rental bill package has been introduced in the Michigan State House (House Bills 5437-5445) on Feb. 13th, 2024. They are expected to have a hearing, however, it has not been scheduled yet. The key elements articulated in House Bill (HB) 5438 include:
- The establishment of a statewide short-term rental (STR) database, updated each year, created and operated by the Department of Licensing and Regulatory Affairs (LARA).
- Some of the key information STR Owners will need to include in their annual certificate to LARA, includes:
- certification that the owner has $1,000,000 or more of liability insurance on the STR.
- Emergency contact person who resides within 30 miles of the STR
- Every room of STRs will need to be equipped with a carbon monoxide detector, smoke detector and fire extinguisher
- A STR excise tax of 6% will be levied on the charge for the use or occupancy of a STR for anyone who rents a STR for more than 14 days per year.
- This excise tax would be in addition to other taxes, fees, or assessments, including the 5% convention or tourism marketing tax in our region
- Minus costs to LARA to administer this act, the balance of the excise tax will be paid to the local unit of government in which the short-term rental is located.
- STRs will have an annual registration fee with LARA of $100 per listing
- Local units of government may enact and enforce reasonable regulations and may uphold zoning decisions for short-term rentals, which could include:
- Setting the number of units allowed to operate
- May revoke a permit based on a violation of a local ordinance
- A local unit of government may not have any ordinance that has the effect of totally banning or prohibiting STRs.
At this time there appears to be limited support for these STR bills with Michigan REALTORS and the Michigan Association of Convention & Visitors Bureaus expressing their opposition to this bill package. However, Michigan REALTORS will continue to engage in efforts to establish reasonable regulation of rental activity, outside of zoning, which supports local government control and protects the rights of all property owners.
2. Right-to-List Homes Sales Bill, Michigan Senate Bill 602
As mentioned in previous GAD Top 3s a Michigan Right-to-List Homes Sales Bill was introduced in October of last year and has since unanimously passed the Michigan State Senate and now sits in the Michigan State House Regulatory Reform Committee for consideration in the Michigan State House. This bill would establish guardrails for a practice that increased in frequency across Michigan, including in our region in 2023 of brokerages offering an upfront amount of money for homeowners to sign an agreement that if the homeowner decides to sell their home that the agency has the exclusive right to list their home on commission for the next 40 years. These agreements are being recorded with the local register of deeds offices as a 40-year lien against the properties who signed into the agreement. The frequency of these “Right-to-List” agreements has subsided. However, Michigan Senate Bill (SB) 602 would establish guardrails or limitations for right-to-list home sale agreements, including:
- It cannot be for a period of more than 2 years
- It must provide an option for the owner to terminate the agreement before its expiration date
For the full details of SB 602, check it out here.
3. Post-closing Occupancy Agreement, Michigan House Bill 5386
Michigan House Bill (HB) 5386 along with supporting bills 5384 and 5385 unanimously passed out of the Michigan House Committee on Judiciary on Feb. 21st, 2024 for consideration by the Michigan State House. These bills would define and create standards for the timeframe for how long an occupant stays in a house after a home closing. More specifically, in HB 5386 an owner may recover possession under these circumstances:
- When a non-owner occupant fails or refuses to pay rent under a lease or agreement within 7 days after the owner has given a written demand for possession for nonpayment of the rent due.
- When a non-owner occupant remains on the premises for 24 hours following the service of a written demand for possession from the owner for termination of the lease as authorized in the lease because of the unlawful manufacturing, delivery, or possession of a controlled substance on the leased premises.
- After termination of the lease
- After expiration of an agreement under which a seller is given temporary occupancy of the premises after the sale of the premises
- When a non-owner occupant willfully or negligently causes a serious and continuing health hazard to exist on the premises
- When a non-owner occupant holds over premises for 7 days following service of a written notice to quit for termination of the lease after the tenant, has caused or threatened physical injury to an individual.
For the full details and list of circumstances under which an owner may recover possession in Michigan House Bill (HB) 5386, review HB 5386 here.
Two Additional Quick Updates
1. Deed Restriction Bill, Michigan Senate Bill 721
Michigan Senate Bill (SB) 721 was signed into law on March 28th and will go into effect in September 2024. Michigan REALTORS will be putting out more information on this bill prior to it going into effect.
2. Uniform Partition of Heirs Property Act, Michigan House Bill 4924
The Michigan Uniform Partition of Heirs Property Act, House Bill (HB) 4924, passed the Michigan State House on March 6th with overwhelming support and is now in the Michigan State Senate’s Civil Rights, Judiciary, and Public Safety Committee for consideration. This bill would establish timeframes and actions that may be taken for property that is jointly owned by descendants of a decreased person.
