August 9, 2022

Volume XII, Number 221

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August 08, 2022

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Hotel Revenues Are "Rents" Under New Michigan Law

On June 24, 2022, Michigan passed the Michigan Uniform Assignment of Rents Act (MUARA). When it did, Michigan became the first state with a Uniform Assignment of Rents Act that expands the definition of "rents" to include hotel revenues.[1] This distinction makes a significant difference and, perhaps surprisingly, is not clear in many states.

Michigan had not previously addressed this question directly. Although lenders in Michigan and elsewhere often act as though hotel receipts are rents, the majority position among courts is actually that hotel room revenues are personal property.[2] Whether they are rents or personal property changes how a lender perfects and enforces its interest: security interests in rents are typically perfected through recording a mortgage or assignment of rents, while personal property security interests are established in accordance with the Uniform Commercial Code (UCC). For example, if rents are personal property, a lender with a recorded mortgage or deed of trust who inadvertently files a financing statement in the wrong state or allows it to lapse might find itself behind other creditors in priority as to the hotel’s revenue stream.

With the MUARA, Michigan provides lodging lenders with a level of comfort that does not exist in many other states. The MUARA applies to any loan that is enforced after its enactment, even loans made before its enactment.[3] This may affect how loans secured by such properties are underwritten, documented, and enforced going forward. Critically, though, multistate loans will still require examining each State’s law separately.


FOOTNOTES

[1] Public Act 115 of 2022, § 2(m)(vi). Nevada, New Mexico, Texas, Utah, and North Dakota have also implemented versions of the Uniform Assignment of Rents Act, but at most contain general “catch-all” language.

[2] See, e.g.In re Ocean Place Dev., LLC, 447 B.R. 726, 732-33 (Bankr. D. N.J. 2011).

[3] Public Act 115 of 2022, § 19(1).

© 2022 Miller, Canfield, Paddock and Stone PLC National Law Review, Volume XII, Number 186
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About this Author

George Ryan Holton Troy Real Estate Attorney Miller Canfield
Associate

George Ryan Holton helps clients with the purchase, sale, lease, and development of real estate in a wide range of commercial and industrial matters. His experience includes drafting and negotiating real estate sale, lease, private financing, construction, and easement documents, as well as helping clients work with municipalities on zoning and land use permitting issues.

George previously served as a law clerk for the Little Traverse Bay Band of Odawa Indians Tribal Court and the Republican National Committee, and as an intern for the Hon....

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Scott R. Lesser Real Estate Attorney Miller Canfield
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As a leader on Miller Canfield's highly experienced Commercial Real Estate Workout Team, Scott uses his knowledge and expertise to avoid and resolve his clients' concerns before they develop into true issues. Although this often means employing creative strategies to amicably resolve disputes in a way that serves his clients' underlying business purpose, Scott does not shy away from receivership, foreclosure, guaranty or other litigation actions when appropriate.

Scott prides himself on guiding his clients and fellow practitioners alike to practical solutions to distressed real...

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