The Michigan Uniform Assignment of Rents Act (MUARA) will come into effect on September 22, 2022 and will have significant implications for renters’ rights. If a tenant’s landlord defaults on their loan, who does the tenant pay the rent to, and how does the tenant avoid getting caught in the crossfire?
When a landlord defaults on their loan, their lender can notify tenants that rent should be paid to the lender rather than the landlord. MUARA provides a form of notice that the lender can use; however, the lender may use a different form if it includes details of how and where the tenant should make these payments and other related information, and the lender should advise the tenant that they may consult an attorney with any questions. .[1] Importantly, if the tenant complies with the lender’s notice and remits the rent due to the lender instead of the landlord, the tenant will have satisfied his obligation to pay the rent under his lease. This obligation to return the rent to the lender will continue until the tenant receives a court order directing them to pay the rent in a different manner or a signed document from the lender rescinding their notice, whichever comes first.[2] Further, once the Lender has provided such notice to the Lessee, any changes to the existing Lease do not bind the Lender unless the Lender has consented in writing to such changes.[3]
Renters should carefully consider and comply with these notices as they may have a significant impact on the rights and obligations of the Renter. For example, if a tenant continues to pay their landlord after receiving notice from the lender, the lender may still require the tenant to make the same payment to them – from the tenant’s perspective, a double payment. Luckily for tenants, MUARA is giving tenants extra time to review the notice with their lawyer before they have to make the next rent payment. MUARA specifically provides that a tenant will not be in default under their lease for rent payments becoming due within 30 days of receiving notice from the lender until the first of the following days: the 10th day after the due date of the next regularly scheduled rent payment or 30 days after the tenant receives notice from the lender.[4] Thus, if a tenant receives notice from the lender on the 28e day of the month and the rent is regularly due on the 1stthe tenant has until at least 10 to review the lender’s notice and return the rent to the correct party.
[1] Public Law No. 155 of 2022. MUARA comes into force on September 22, 2022.
[2] Identifier. 9(3)(d)
[3] Identifier. 9(3)(e)
[4] Identifier. § 9(4)(ab)
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