Michigan Laws 554.1064 – “Good faith” defined; collection by assignor; remedies; priority
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Terms Used In Michigan Laws 554.1064
- Assignee: means a person entitled to enforce an assignment of rents. See Michigan Laws 554.1052
- Assignor: means a person that makes an assignment of rents or the successor owner of the real property from which the rents arise. See Michigan Laws 554.1052
- Cash proceeds: means proceeds that are money, checks, deposit accounts, or the like. See Michigan Laws 554.1052
- Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- Foreclosure: A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default. Source: OCC
- Notification: means a document containing information that this act requires a person to provide to another, signed by the person required to provide the information. See Michigan Laws 554.1052
- Person: means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government, or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. See Michigan Laws 554.1052
- Proceeds: means personal property that is received or collected on account of a tenant's obligation to pay rents. See Michigan Laws 554.1052
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- Rents: means any of the following:
(i) Sums payable for the right to possess or occupy, or for the actual possession or occupation of, real property of another person. See Michigan Laws 554.1052Security interest: means an interest in property that arises by agreement and secures performance of an obligation. See Michigan Laws 554.1052 State: means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. See Michigan Laws 554.1052
(1) In this section, “good faith” means honesty in fact and the observance of reasonable commercial standards of fair dealing.
(2) If an assignor collects rents that the assignee is entitled to collect under this act, both of the following apply:
(a) The assignor shall turn over the proceeds to the assignee, less any amount representing payment of expenses authorized by the assignee.
(b) The assignee continues to have a security interest in the proceeds so long as they are identifiable.
(3) For purposes of this act, cash proceeds are identifiable if they are maintained in a segregated account or, if commingled with other funds, to the extent the assignee can identify them by a method of tracing, including application of equitable principles, that is permitted under law of this state other than this act with respect to commingled funds.
(4) In addition to any other remedy available to the assignee under law of this state other than this act, if an assignor fails to turn over proceeds to the assignee as required by subsection (2), the assignee may recover from the assignor or a person liable under the uniform voidable transactions act, 1998 PA 434, MCL 566.31 to 566.45, or both, in a civil action, both of the following:
(a) The proceeds, or an amount equal to the proceeds, that the assignor was obligated to turn over under subsection (2).
(b) Reasonable attorney fees and costs incurred by the assignee to the extent provided for by agreement and not prohibited by law of this state other than this act.
(5) The assignee may maintain an action under subsection (4) without bringing an action to foreclose any security interest that it may have in the real property, and an action under subsection (4) does not bar a foreclosure by advertisement under chapter 32 of the revised judicature act of 1961, 1961 PA 236, MCL 600.3201 to 600.3285. Any sums recovered in the action must be applied in the manner specified in section 12.
(6) Unless otherwise agreed, if an assignee entitled to priority under section 5(3) enforces its interest in rents after another creditor holding a subordinate security interest in rents has enforced its interest under section 8 or 9, the creditor holding the subordinate security interest in rents is not obligated to turn over any proceeds that it collects in good faith before the creditor receives notification that the senior assignee has enforced its interest in rents. The creditor shall turn over to the senior assignee any proceeds that it collects after it receives the notification.