• Principal Residence Exemption for Contiguous Property is Clarified
  • January 6, 2012
  • Law Firm: Miller Johnson - Grand Rapids Office
  • The Michigan Court of Appeals, in Eldenbrady v City of Albion, held that, in order to qualify for a principal residence exemption on contiguous property, it is unnecessary for the property owner to establish that the property is "vacant." Instead, it is sufficient to show the property is "unoccupied." Meaning that the property does not have tenants or residents and is not currently being used as a residence or dwelling.

    In this case, the Eldenbradys purchased property adjacent to their home. The property, consisting of approximately 10 acres, contained an old school building. Other than placing a fence around the perimeter of the property and using a small part of it for gardening, the Eldenbradys made no use of the property. The Eldenbradys tried unsuccessfully to obtain a principal residence exemption on the property from the City of Albion. After their request was denied by the City, they appealed to the Michigan Tax Tribunal. The Michigan Tax Tribunal agreed with the City and also denied the request for the principal residence exemption. The Michigan Tax Tribunal reasoned that the Eldenbradys had failed to establish that the property was being used in conjunction with their principal residence. The Eldenbradys appealed this decision to the Michigan Court of Appeals.

    The Michigan Court of Appeals explained that, in order to obtain a principal residence exemption on contiguous property, the property owner need only establish that the property is:

    • classified as residential;
    • adjoining or contiguous to a dwelling; and
    • unoccupied.

    The parties, in this case, agreed that the property was classified as residential and was contiguous to a dwelling. Thus, the only issue in dispute was whether the property was unoccupied.

    The Court of Appeals expressly stated that "unoccupied" did not require the property to be "vacant." The Court explained that the City of Albion and the Michigan Tax Tribunal had incorrectly relied on the fact there was a school building on the property to reach the conclusion that the property was ineligible for the exemption. The Court explained that the school building did not make the property "occupied." There were no tenants or residents living there. Further, demonstrating that the property is "unoccupied" as opposed to "vacant" is all that is required by the statute. For this reason, the Court concluded that the Michigan Tax Tribunal was incorrect in denying the exemption. The Court also expressly stated that the Eldenbradys were not required to demonstrate the school building was being used in conjunction with, or as an extension of, their principal residence. The Court pointed out that this requirement is completely absent from MCL 211.7dd(c), the statutory provision pertaining to this exemption. Accordingly, the Michigan Tax Tribunal's suggestion that the property owner should have demonstrated that the school building was being used for some purpose in conjunction with their residence, such as for storage, was inconsistent with the plain language of the statute.