CPIX Blog

Update: Most Recent Changes to Michigan Real Estate Law and Section 1031 Exchanges Arising From the Response to COVID-19

Earlier this week Governor Gretchen Whitmer issued two new Executive Orders directly impacting Michigan's real estate industry. In addition, the U.S. Internal Revenue Services extended certain key Section 1031 exchange time deadlines.

Stay Home, Stay Safe Order Extended and Expanded. On April 9, 2020, Governor Whitmer issued Executive Order 2020-42. This Order updated and strengthened her previous "Stay Home, Stay Safe" order. The newest Stay Home, Stay Safe mandate continues through April 30, 2020, with exceptions for employees necessary to sustain or protect life, to “conduct minimum basic operations” of any business, or who are "critical infrastructure workers" in certain important sectors. This does not change the Governor's prior position covered in a FAQ regarding licensed real estate professionals. The FAQ states "real estate agents, brokers, and real estate service employees do not constitute “critical infrastructure workers” and thus may not leave their homes for work. The only exception is, if they are providing food, shelter, and other necessities of life for economically disadvantaged or otherwise needy individuals, individuals who need assistance as a result of this emergency, and people with disabilities….. All work must be carried out remotely to the greatest extent possible." The new Order specifically provides travel between two residences is not permitted, including all travel to vacation rentals, and no one shall advertise or rent a short-term vacation property except as necessary to assist in housing a health care professional or volunteer aiding in the response to the COVID-19 crisis.

Expanded Use of Electronic Signatures and Remote Online Notarization. On April 8, 2020, Governor Whitmer issued Executive Order 2020-41. This Order encourages the use of electronic signatures and remote notarizations and witnessing during the COVID-19 pandemic. In the past Michigan has enacted a number of laws governing electronic transactions, electronic recordings and most recently remote online notarizations. This new order temporarily suspends strict compliance with these laws. The goal is to minimize in-person interaction and facilitate remote work during the state of emergency. While the order temporarily suspends strict compliance with certain portions of these laws, the Order still imposes several minimum conditions for what constitutes acceptable remote notarization and witnessing. One key factor is utilizing two-way real-time audiovisual technology. Other conditions include allowing direct interaction among participants where they can communicate with each other simultaneously by sight and sound, recording and retaining a record of the notarial act or witness signature, and the signer affirmatively representing he or she is physically present in Michigan unless other criteria are met. This Order takes immediate effect and continues through May 6, 2020.

Section 1031 Exchange Deadlines Extended. On April 9, 2020 the US Internal Revenue Service issued Notice 2020-23 extending a variety of time sensitive deadlines, including those pertaining to Section 1031 'like kind' exchanges of real property interests. Under the Notice, if any 45-day or 180-day deadline expires between April 1 and July 14, 2020, the deadline expiration is extended to July 15, 2020. Assume you or your client is in the middle of an exchange. You disposed of 'relinquished property' on March 1, 2020 and your 45 day period to identify one or more 'replacement properties' was set to expire on April 15, 2020. The 45 day period now expires July 15, 2020. Likewise, assume you disposed of relinquished property last year, and your 180 period to complete the exchange was set to expire April 30, 2020. The 180 period now expires July 15, 2020.

Note: This is meant to be a general description of the state of the law. If you are in the middle of a Section 1031 exchange or other real estate transaction, you cannot rely on this as legal advice but must consult with a competent real estate professional.

For further information on these or other new laws affecting Michigan's real estate industry, contact
Gregg A. Nathanson, Esq. of Couzens, Lansky Fealk, Ellis, Roeder & Lazar, P.C. via email at
gregg.nathanson@couzens.com
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