Hilger Hammond Case Study
Restored Personal Residence Exemption After False Claim by Roommate
Hilger Hammond helped win a case in 2023 that is informative and important for homeowners who rent rooms within their residences. The case involved restoring a homeowner’s personal residence exemption (PRE) from real property taxes. If fully available, the PRE saves a homeowner approximately 40% of the property tax that would otherwise be assessed and collected. In Wilson v City of Grand Rapids, Court of Appeals Docket No. 358657 (2023), the three-panel Court published its unanimous decision, meaning it is binding on all Michigan courts with similar facts. Here, we share the details of this critical case, our approach, and the significance of the results.
Case Description
Ms. Wilson owns a single-family residence in Grand Rapids, Michigan. She rents bedrooms to “roommates” under agreements, giving each exclusive use of a bedroom but permissive, cooperative use of her other spaces in the house. The leased bedrooms are less than 50% of the occupied space in the home.
A disgruntled roommate made a spurious, untrue claim to the city that the house was a duplex and that she had rented one of the two units. Ms. Wilson offered proof that the claim was untrue – that the home is a single residence with some rented bedrooms and that she rented less than 50%. Still, the city believed the house was a duplex and reduced Ms. Wilson’s PRE to 50% under existing rules. While the dispute arose from unique facts, the legal question would likely come up again if not for the Court’s ruling.
Client’s Legal Efforts
Ms. Wilson appealed the decision to the Michigan Tax Tribunal. The tribunal held in favor of Ms. Wilson, concluding that the home was not a duplex. But surprisingly, without such a claim from the city, the tribunal held that by allowing roommates cooperative access to other areas of her home, Ms. Wilson rented the entire house. The tribunal denied Ms. Wilson any PRE at all.
Hilger hammond’s strategy & approach
Hilger Hammond represented Ms. Wilson and brought the matter to the Michigan Court of Appeals. Fortunately, we obtained a reversal of the tribunal’s decision. The Court of Appeals held that Ms. Wilson rented less than 50% of the house to roommates. The Court also restored her 100% PRE for the years in question and into the future based on the facts of this case.
final result
Not only did Ms. Wilson win her case and restore her PRE, but the decision allows a homeowner in Michigan to rent a room without sacrificing their PRE, an extremely valuable tax exemption. The win ensures other similar homeowners with roommates can maintain their PRE in the future. Roommate practice is essential for students and people with temporary job placements.
What to do next
If you have any questions regarding the personal residence exemption, real estate law, or need legal advice on a different matter, please don’t hesitate to reach out so we can provide assistance to your specific situation.
Author: Jon Vanderploeg
