Michigan Condo & HOA Law

I recently had a conversation with an individual who serves on the board of directors of a co-operative. This director and his board had been approached by a developer who was interested in converting their co-operative into a condominium, and his simple question was “What are the benefits to us if we convert?”

Many co-operatives are considering converting to a condominium for a multitude of reasons. Conversion can offer increased resale ability of the units, the ability to obtain financing more easily, as well as to come within the condominium statutes and laws which are, in many instances, better suited to community association development then landlord tenant law is as it relates to co-operatives.

In addition to co-operatives, developers are interested in converting marinas, industrial parks, parking garages, old warehouses (i.e., “lofts”), apartment buildings, as well as mobile home parks just to name a few of the ever increasing real estate properties which are being transformed from a leasing situation to fee ownership in the form of a condominium. The owners of these various types of properties now find it financially feasible to convert them into condominiums.

In short, there is a substantial movement not only in Michigan but around the country towards conversions of various real properties into condominium units with the intended benefits of condominium development and operation. Of course the owners of these properties should retain an experienced condominium attorney before considering the conversion process to insure that it is done in a proper fashion which will maximize the benefits to the members of the properties.

Posted by Robert Meisner at 11:29 AM | Permalink

A condominium director asked me the other day if I thought one of their co-owners had a legal argument in withholding his association dues. The co-owner is refusing to pay his monthly assessment because he claims that the board of directors did not have enough members when the budget was established, and, therefore, he is arguing that all assessments and fees are null and void.

There was a similar case out of Connecticut wherein the court ruled that even though the association’s bylaws required four (4) board members, the fact that only three (3) people were seated on the board at the time the budget was adopted was irrelevant to the budget’s validity. The court said that it is common for boards to have temporary vacancies, and that as long as a quorum was present at the meeting at which time the budget was adopted, the budget is valid.

In Michigan, the Condominium Act clearly states that co-owners may not withhold their association assessments even though the condominium association and/or its management company may not be providing adequate services in the eyes of the co-owners.

Ultimately, it appears to me that the co-owner’s argument of withholding assessments is specious, but associations are best advised to consult with a knowledgeable community association attorney if confronted with such an issue.

Posted by Robert Meisner at 9:56 AM | Permalink

I had an interesting conversation with a board member the other day. His association is considering assessing an additional assessment on certain co-owners who have moved into the association within the last three years. My first question to him was “Why?” It appears that the association wanted to build up their reserve account and thought that this was one way of doing it.

My reply is simply this: unless there is a specific reason as to why certain co-owners should be specially assessed over others, (such as improvements specifically benefiting their units only and not the other units within the community) I do not see how an association can arbitrarily assess co-owners because they were late comers in order to build up reserve accounts. The real issue here is why the association has not been building reserves over the years and waiting until now to make up for lost time, but we will save that argument for another day. The bottom line is that associations are best advised to consult with a community association lawyer and obtain a written opinion before making any such move which is at best questionable.

Posted by Robert Meisner at 12:15 PM | Permalink

I had a recent conversation with a new incoming board member who stated that the former boards of his association had not enforced the rules consistently and effectively. He wondered if the new board could immediately begin enforcing overlooked rules or must they let members who have been violating such rules for years continue to get away with impunity.

Though it may be difficult and can even lead to lawsuits with members, incoming association boards should enforce previously overlooked rules and take charge to do so. The longer the board waits to enforce these rules, the more difficult it will be in the long run. One of my long standing maxims has been, “The more things change on the board of directors, the worse they get!” However, in this situation, this maxim does not hold true.

In this case, the newly elected board should definitely give the membership notice of the fact that they intend to enforce these rules, and they should most certainly consult with their attorney as to the best way to let co-owners know that they will be held responsible for these overlooked rules that have not been enforced in the past. The new board will most likely find that the majority of the association members will be glad to hear of the decision and will respect them for it.

Posted by Robert Meisner at 10:01 AM | Permalink

I was recently interviewed by a local news reporter who asked if condominium associations have legal standing to evict renters within their association. The laws in Michigan are very clear on this issue. First, according to MCL 559.212, a co-owner who desires to rent his or her unit must notify the association in writing at least ten (10) days before leasing the unit, as well as provide the association with the exact lease so that it can be determined to be in compliance with all condominium documents.

Tenant in Default
The tenant occupying the unit, while not a co-owner, must nonetheless comply with all of the conditions of the condominium documents. If the association determines that the tenant is not complying with the documents, the association can take the following actions: 1) Notify the co-owner of the alleged violations by the tenant. The co-owner then has fifteen (15) days after receipt of the notice in which to either correct the alleged violations or advise the association that no violation has occurred; 2) If after fifteen (15) days, the association deems that the alleged violation has not been cured or that it may be repeated, the association may proceed with an eviction against the tenant as well as money damages against the tenant and co-owner for breach of the conditions of the condominium documents.

Co-owner Delinquent in Assessments
Furthermore, if a co-owner who is renting his or her unit is found to be in arrearage for assessments, the association may give written notice to the tenant that they are deducting the assessment amount due the association from the tenant’s lease payment to the co-owner. If the tenant then refuses to remit payment to the association, the association can proceed with the process of evicting the tenant and procuring money damages from the tenant and co-owner.

The laws in Michigan are very clear on this matter that associations do indeed have the legal authority to evict tenants residing within their community. However, I strongly urge your association to consult with experienced community association legal counsel before proceeding down such a path.

Posted by Robert Meisner at 12:36 PM | Permalink

With economic times being as tough as they are, many condominium and community associations are concerned about their ability to borrow money, and what complications may arise in so doing. There are many banks and lending institutions that are now providing loans to community associations; however, associations are advised to proceed with caution as the loan terms may require substantial collateral, including the right to take over the collection procedures from the association. Moreover, the loan documents may be, in some cases, onerous and not necessarily even handed.

Lenders strongly recommend that the association retain counsel from the onset to review the community association documents to determine what requirements will be necessary to effectuate the loan; particularly since the lender will want a legal opinion from counsel for the association indicating the authority of the association to borrow money. The association’s attorney may be in the position to assist in negotiating more favorable terms for the loan with a lending institution. It has been my experience in this area that the association proceed with caution while considering all options for raising the necessary funds.

Posted by Robert Meisner at 10:03 AM | Permalink

I recently heard from a condominium board member who stated that their declaration of covenants and conditions could only be amended every ten years, but the association was 30 years old and they where having trouble collecting assessments because of the archaic way in which the documents were established and written.

If homeowner associations have in their declaration a provision which only allows for an amendment every ten years or so, these associations should seriously consider passing an amendment to their documents to eliminate that requirement. It is simply a bad provision to have in the documents since federal, state and local laws affecting community associations could change long before the ten years cycle comes full term.

An upgrade and/or amendment to the association documents would provide the association and the co-owners with all the protections to which they are entitled. Associations in these predicaments should consult with an experienced community association attorney to assist them in the endeavor of amending their documents.

Posted by Robert Meisner at 11:24 AM | Permalink