§ 445.1593 — Post closing solvency covenant; prohibited use.

Michigan § 445.1593

• Jurisdiction: Michigan
• Ch. 445: TRADE AND COMMERCE
• Act 67 of 2012: NONRECOURSE MORTGAGE LOAN ACT (445.1591-445.1595)

Text

NONRECOURSE MORTGAGE LOAN ACT (EXCERPT) Act 67 of 2012 445.1593 Post closing solvency covenant; prohibited use. Sec. 3. (1) A post closing solvency covenant shall not be used, directly or indirectly, as a nonrecourse carveout or as the basis for any claim or action against a borrower or any guarantor or other surety on a nonrecourse loan. (2) A provision in the documents for a nonrecourse loan that does not comply with subsection (1) is invalid and unenforceable.

Legislative History

2012, Act 67 , Imd. Eff. Mar. 29, 2012 Compiler's Notes: Enacting section 1 of Act 67 of 2012 provides:"Enacting section 1. The legislature recognizes that it is inherent in a nonrecourse loan that the lender takes the risk of a borrower's insolvency, inability to pay, or lack of adequate capital after the loan is made and that the parties do not intend that the borrower is personally liable for payment of a nonrecourse loan if the borrower is insolvent, unable to pay, or lacks adequate capital after the loan is made. The legislature recognizes that the use of a post closing solvency covenant as a nonrecourse carveout, or an interpretation of any provision in a loan document that results in a determination that a post closing solvency covenant is a nonrecourse carveout, is inconsistent with this act and the nature of a nonrecourse loan; is an unfair and deceptive business practice and against public policy; and should not be enforced. It is the intent of the legislature that this act applies to any claim made or action taken to enforce a post closing solvency covenant on or after the effective date of this act; to any claim made to enforce a post closing solvency covenant that is pending on the effective date of this act; and to any action to enforce a post closing solvency covenant that is pending on the effective date of this act, unless a judgment or final order has been entered in that action and all rights to appeal that judgment or final order have been exhausted or have expired."