“As‑Is” Disclaimers Do Not Shift the Risk of Unknown Title Nonexistence: Mutual Mistake and Rescission After Condominium Reversion under MCL 559.167

Introduction

In Soho Land Development, Inc. v. Oakland County Treasurer, the Michigan Supreme Court denied leave to appeal from a December 16, 2024 unpublished Court of Appeals decision that partially revived claims stemming from a 2016 settlement between a developer and the county treasurer. The settlement contemplated the transfer of multiple parcels, including vacant condominium lots the county had acquired through tax foreclosure. Unknown to both sides, those condominium lots had already ceased to exist as separate parcels and had automatically reverted to the condominium association’s general common elements under MCL 559.167(3), as amended by 2002 PA 283, approximately a year before the settlement. Consequently, the Treasurer never had title to convey.

The dispute turns on three interlocking issues:

Whether an “as is, without warranty” clause allocates to the buyer the risk that the seller lacks title or that the subject parcels legally do not exist;
Whether the parties’ mutual mistake about title (and even the existence of the parcels) justifies equitable rescission or reformation of the settlement; and
What procedural posture and remedies are available on remand where rescission was not expressly pleaded or requested in the trial court.

Justice Welch concurred in the denial of leave, endorsing the Court of Appeals’ core reasoning and offering guidance for the circuit court on remand. While the order itself sets no new binding precedent, the concurrence clarifies the proper application of longstanding Michigan law on mutual mistake and the limited reach of “as‑is” clauses in property transfers—especially where the seller’s title proves nonexistent due to statutory reversion.

Summary of the Opinion

The Supreme Court denied the Treasurer’s application for leave to appeal, concluding the case did not warrant further review. Justice Welch concurred, agreeing that:

The “as is, without warranty” language is best read as relating to the physical condition of the properties, not as a representation or disclaimer of legal title. The parties’ documents and conduct showed the Treasurer represented it held title to the condominium lots and could convey them.
Both parties were mutually mistaken: they believed the Treasurer owned the vacant condominium lots by virtue of tax foreclosure, when in fact those lots had automatically reverted to the condominium association under MCL 559.167(3), as amended by 2002 PA 283, and therefore “ceased to exist as individual taxable parcels.”
This is the kind of mutual mistake that can justify rescission—if requested. The trial court did not abuse its discretion by declining to order rescission sua sponte, because neither party properly sought that remedy. The Court of Appeals correctly remanded and left open the possibility of amendment to assert rescission or reformation, subject to the trial court’s discretion and procedural rules (including inexcusable delay).

The Court of Appeals had reversed summary disposition for the Treasurer on the vacant-lot claims, rejecting the argument that the developer assumed the risk via “as is, without warranty.” It also noted in a footnote that, because it was reversing as to the vacant lots, it did not need to address the developer’s alternative request to amend to add rescission or reformation claims for those lots (while indicating amendment regarding a separate “Hazel Park property” would be futile due to clear contractual language).

Analysis

Precedents Cited

Lenawee County Board of Health v. Messerly, 417 Mich 17 (1982)
The cornerstone Michigan case on mutual mistake and risk allocation. Messerly defines contractual mistake as a belief not in accord with the facts, relating to an existing fact at the time of contracting (Restatement (Second) of Contracts §151). It adopts a case-by-case, equitable approach: rescission may be granted where the mistake concerns a basic assumption that materially affects the agreed performances, but not where the party seeking relief assumed the risk (Restatement §154). Messerly refused rescission when a buyer accepted property “as is,” allocating unknown defects in physical condition to the buyer. Justice Welch emphasizes a crucial distinction: Messerly’s “as is” clause addressed defects in condition and habitability, not title or the legal existence of the subject parcels. That distinction is dispositive here.
Restatement (Second) of Contracts §§151, 154
Adopted in Messerly. Section 151 defines “mistake.” Section 154 addresses when a party bears the risk of a mistake, including by agreement (“as is”) or conscious ignorance. Justice Welch invokes these to underscore that the risk allocated in this case (read in context) concerned physical condition only, not title.
Cove Creek Condominium Ass’n v. Vistal Land & Home Dev, LLC, 330 Mich App 679 (2019)
Published Court of Appeals authority holding that the 2016 amendment to MCL 559.167 (requiring association vote, notice, and recording for reversion) does not apply retroactively to reversions that occurred before its effective date. This case confirms that pre‑2016 automatic reversions were self-executing and could occur without public notice or recording. That framework explains why both parties could have been genuinely unaware that the condominium lots had already reverted and no longer existed as taxable parcels susceptible to foreclosure.
Equitable reformation line of cases (Dykstra v. Huizinga, 362 Mich 420 (1961); Schwaderer v. Huron-Clinton Metro Auth, 329 Mich 258 (1951); Scott v. Grow, 301 Mich 226 (1942); Goldman v. Century Ins. Co., 354 Mich 528 (1958); Urick v. Burge, 350 Mich 165 (1957); Modern Displays, Inc. v. Hennecke, 350 Mich 67 (1957); Heath Delivery Serv. v. Mich. Mut. Liability Co., 257 Mich 482 (1932))
These decisions illustrate Michigan courts’ willingness, in limited circumstances, to reform written instruments (often deeds or insurance policies) to reflect the parties’ actual agreement where a mutual mistake occurred. Justice Welch notes reformation as a potential remedy the parties raised, though the core of her concurrence focuses on rescission grounded in mutual mistake.
Ormsby v. Capital Welding, Inc., 471 Mich 45 (2004); MCR 2.116(I)(5); MCR 2.118(A)(2), (A)(3)
Ormsby, citing the court rules, instructs that leave to amend should be freely granted after summary disposition unless amendment is unjustified or futile; however, the trial court retains discretion, including to consider inexcusable delay (MCR 2.118(A)(3)). The Court of Appeals’ footnote recognized this framework and suggested that amending to add rescission or reformation claims may be appropriate as to the vacant lots.
MCL 211.78k(5), (6)
The General Property Tax Act provisions that vest title in the foreclosing governmental unit after the foreclosure process. The concurrence stresses that, because the condominium lots had already reverted into common elements under MCL 559.167(3), there were no individual taxable parcels to foreclose upon. In other words, the Treasurer could not acquire title through foreclosure to something that no longer legally existed as a separate parcel.
MCL 559.167(3), as amended by 2002 PA 283; MCL 559.167(4), as amended by 2016 PA 233
The 2002 version effectuated automatic reversion of undeveloped condominium lands to common elements after the statutory time period, without vote or recording. The 2016 amendment added procedural safeguards (vote, notice, recording) but is not retroactive per Cove Creek. This statutory context is the pivot point that transformed the parties’ belief about title into a material mutual mistake.

Legal Reasoning

Justice Welch’s concurrence proceeds in three steps.

Interpreting “as is, without warranty” in context. Reading the settlement and related documents alongside the parties’ conduct, the only sensible interpretation is that the Treasurer represented it had legal title to convey the vacant condominium lots and that the “as‑is” language addressed the physical condition of the properties. This aligns with ordinary usage: “as is” clauses typically disclaim representations about condition, not about whether the seller owns what it purports to sell. The lower courts were correct to treat the Treasurer’s “as‑is” defense as inapplicable to a title nonexistence problem.
Mutual mistake about a basic assumption that materially affected performance. Both parties believed the Treasurer held title via tax foreclosure to the vacant condominium lots. In reality, those lots had already reverted to common elements, extinguishing separate parcel status and foreclosability. This error struck at a basic assumption of the bargain—indeed, the subject matter itself. The parties’ performance (conveying and receiving title) was materially affected.
Rescission is potentially appropriate but must be requested and is discretionary. Under Messerly, rescission is an equitable remedy applied case-by-case. The trial court recognized the mutual mistake but declined rescission in part by invoking the “as‑is” clause and in part because rescission was not sought. The Court of Appeals rejected the “as‑is” risk-allocation rationale on the vacant lots and remanded. Justice Welch agrees with the remand and clarifies that the circuit court did not abuse its discretion by not ordering rescission sua sponte. On remand, the parties may seek to amend pleadings to pursue rescission or reformation; the circuit court retains discretion to allow or deny amendment (considering delay or futility) and to evaluate equitable remedies on a developed record.

Critically, the concurrence draws a clean doctrinal line: “as‑is” clauses may allocate the risk of unknown physical defects (as in Messerly), but they do not, without more, allocate the risk that the seller lacks title or that the parcels legally do not exist. Where the mistake goes to title or subject-matter existence—and not to condition—Messerly’s risk-allocation analysis does not bar rescission.

Impact

Although the Supreme Court’s denial of leave sets no new binding precedent, the concurrence—combined with the Court of Appeals’ decision—has practical and persuasive implications across Michigan real estate and tax-foreclosure practice.

Drafting and due diligence in property settlements. Parties, especially public entities disposing of tax-foreclosed property, should explicitly address title risk and subject-matter existence. If a seller intends to shift all title-related risks—including the risk that it holds no interest whatsoever—the agreement should say so unequivocally (e.g., no representation of ownership, no representation that the property legally exists as a separate parcel, and acceptance “as is” as to both title and condition). Absent clear drafting, generic “as‑is” language will likely be read as limited to physical condition.
Condominium projects and legacy “automatic reversion.” The period between the 2002 automatic-reversion statute and the 2016 amendment produced many condominiums where undeveloped land silently reverted to common elements without vote or recording. That history can defeat tax foreclosure and subsequent conveyances. Title examiners and treasurers must specifically diligence MCL 559.167 timelines when dealing with legacy condominium projects.
Litigation strategy: plead equitable remedies early and in the alternative. Because rescission is equitable and discretionary, trial courts typically will not grant it sua sponte. Parties should plead rescission (and, where appropriate, reformation) as alternative remedies to breach-of-contract claims. Ormsby and the court rules allow liberal amendment after summary disposition, but delay can matter.
Remedies on remand. If rescission is granted, the court will unwind the transaction to restore the status quo ante, which may require adjusting consideration or addressing other parcels included in the settlement. Alternatively, the court could consider partial equitable relief (e.g., reformation or targeted monetary adjustments) to avoid unfairness where a complete unwind is impractical.
Title insurance and risk allocation. Expect tighter underwriting and explicit exclusions related to MCL 559.167 issues in older condominium projects. Buyers may press for title warranties or price concessions where risks cannot be fully eliminated.
County treasurers’ operational practices. Foreclosing governmental units should implement checks for condominium reversion before foreclosure and before post-foreclosure conveyances. Conveying property that was not foreclosable invites rescission or damages and undermines public confidence in the tax-foreclosure system.

Complex Concepts Simplified

“As‑is, without warranty.” This common clause usually means the buyer accepts the property’s physical condition with all defects, visible or not. It does not, by itself, mean the buyer accepts the risk that the seller does not own the property or that the property does not legally exist as a separate parcel. To shift title risk, the contract must speak clearly to title representations and disclaimers.
Mutual mistake. Both parties share the same incorrect belief about a fact existing at the time of the contract. If that mistaken belief concerns a basic assumption of the deal and materially affects performance, a court may grant rescission—unless the party seeking relief assumed the risk via contract or conscious ignorance.
Rescission. An equitable remedy that unwinds the contract and restores the parties to their pre-contract positions. It is discretionary and must be requested; courts rarely grant it on their own.
Equitable reformation. A remedy that corrects a written instrument to reflect the parties’ true agreement where a mutual mistake occurred. It does not create a new deal; it fixes the writing to match the actual bargain.
Automatic reversion under MCL 559.167 (2002 version). If a developer did not timely build within six or ten years (depending on the project), undeveloped lands automatically became part of the condominium’s common elements. No vote, notice, or recording was required back then. After September 21, 2016, reversions require a vote, notice to the developer, and recording, but this change does not apply retroactively to earlier automatic reversions.
Denial of leave to appeal. When the Michigan Supreme Court denies leave, it does not endorse or reject the lower court’s reasoning; it simply declines review. The Court of Appeals’ decision stands. Separate writings, like Justice Welch’s concurrence here, can be persuasive guidance even if not binding precedent.

Conclusion

Soho Land Development underscores a fundamental but often blurred distinction in real estate transactions: “as‑is” language is about condition, not about title or the legal existence of the subject property. When both sides mistakenly believe that the seller owns what it is purporting to sell—but statutory reversion has already collapsed the parcels into condominium common elements—there is a classic mutual mistake about a basic assumption of the bargain. Under Michigan law, that mistake can support rescission, provided the remedy is actually requested and equitable factors favor it.

The Supreme Court’s denial of leave leaves intact the Court of Appeals’ reversal as to the vacant condominium lots and Justice Welch’s persuasive clarification. On remand, the circuit court may allow the developer to amend to add rescission or reformation, weigh any delay, and then decide, on a full record, whether equitable relief is warranted. Looking beyond this dispute, public sellers, developers, and title professionals should tighten due diligence and contract drafting, especially when dealing with legacy condominium projects touched by MCL 559.167’s pre‑2016 automatic reversion regime. The message is clear: do not expect a generic “as‑is” clause to rescue a transaction when the problem is not a leaky roof, but a missing title—or a parcel that, in the eyes of the law, no longer exists.