Michigan Condo & HOA Law

Avoiding Defamation

2010-08-09T21:45:14Z

I was recently asked by an association board to define defamation and for suggestions on how an association board might avoid defamation lawsuits regarding communications to the homeowners.

Defamation is a statement that makes a false claim, either expressly stated, or implied to be factual, that may harm the reputation of an individual. In a community association context, defamation lawsuits typically arise when an association distributes information on delinquent co-owners. While I am generally not in favor of delinquency lists, it is my belief that you can distribute names of members who are delinquent in their payments, but you should be extremely careful about how you do so and consider the ramifications if you do so.

Ultimately, there are two items that one must carefully observe: First, print only the facts that you can verify. For example, specify the date when the member became delinquent. If you simply state the member is delinquent and the member becomes current in his payment obligations by the time the community newsletter and meeting minutes are printed and disseminated, you will have published something factually untrue. Never specify the amount that is past due; if you are off by even a penny, you may have published an untruth. Secondly, do not publish delinquency lists under a headline that has a negative connotation; if you decide to publish delinquencies, which I am not generally in favor of, do so under a neutral title such as “delinquencies.” You are best advised to seek legal counsel prior to publishing the list.

2010-08-05T20:29:37Z

I recently heard from a homeowner who lives in a complex where all of the building has entirely stopped, and the developer has completely pulled out of the complex. The model home is finished, but there are still a number of other sites which are completed on the outside, but are in need of a lot of work on the inside. There are currently eleven buildings occupied, but only thirteen co-owner’s are paying their monthly assessments to the management company. The homeowners do not know who is running the association or to whom they should register their complaints.

Unfortunately, this is a sign of the times, as this association is suffering the same problem as many other homeowners and/or associations wherein the developer has bailed out. If you find yourself in a similar situation, you are best advised to get an experienced community association lawyer to advise you of your rights, and to assist in the continued operation of the association.

Association Website Issues

2010-08-04T03:17:50Z

I recently heard from board members of an association who are concerned that a committee chair has taken it upon herself to set up an interactive website using the association’s name on the home page. The website offers a calendar of association events and a downloadable architectural request form. Neighbors are having conversations on the website and the board members wish to have her take the site down because the association attorney is worried about the association’s potential liability for what residents might say. She has apparently refused to do so and the board asked if they could force her to remove the site.

My reply is that it depends on who owns the website and whether or not the association’s name is being used without its permission. I would suggest that if in fact the website purports to claim that it is an association website, that the association board may have a right to pursue the termination of the website as we have done in various instances on behalf of association clients. The association attorney should be consulted as to what actions he or she would recommend with regard to terminating the website.

Keeping your units highly marketable through FHA Certification

2010-07-29T20:15:44Z

Recently there has been much discussion regarding condominium associations needing project-wide FHA certification in order for individual units to receive FHA loan consideration. This discussion stems directly from the impact of the new 2009 FHA eligibility requirements for condominium associations pursuant to the directives of the Housing and Economic Recovery Act of 2008.

The new FHA regulations have eliminated “spot loan approvals” for condominium units (i.e. unit by unit approval for lending). The new FHA regulations now require project wide approval before issuing any FHA insured loans in a condominium project. Moreover, as part of these new standards, each association will need to be re-certified every two years.

Board members must realize that FHA certification for the entire project is going to be necessary in order to keep the units as marketable as possible by meeting the requirements of mortgage lenders in general.

The process of FHA certification requires a review of several factors:
1. Association documents may need to be amended;
2. Percentage of overall non-co-owner occupancies;
3. Percentage of assessment arrearages over 30 days;
4. Pending special and/or additional assessments;
5. Pending litigation where the association is a named defendant;
6. Total number of units owned by each co-owner;
7. Overall percentage of FHA loans at the project; and
8. Minimum insurance requirements.

If associations wish to better market their units and communities they are best advised to speak to a knowledgeable condominium association attorney in regard to FHA certification.

My Neighbor's Tree is the Problem

2010-07-29T19:53:19Z

I heard from a homeowner not long ago whose neighbor has a tree located several feet from the border line; however, the tree’s root system is causing damage to the homeowner’s retaining wall running along the boundary line as well as the patio, sewer, water pipes and the foundation of their townhouse. They wondered if they had any basis to seek damages or other relief.
The simple answer is yes; the homeowner should seek an injunction against the neighbor. In effect, one would have a basis to pursue the neighbor under a nuisance liability whenever trees and plants can cause actual harm or pose an imminent danger of actual harm to adjoining property. I encourage you to strongly seek legal counsel if you find yourself in such a position.

Association concerns over reverse mortgages diminishing equity in units

2010-05-27T19:27:54Z

Thank you for your feedback from the previous blog regarding reverse mortgages, and who is responsible at the end of the mortgage for the final payment. Many of you have further concerns regarding the diminishing equity of condominium units within your association and have inquired about language in your bylaws that would prohibit reverse mortgages.

While we understand your concerns that reverse mortgages will essentially diminish the equity in the unit, there is no legal basis for the association to interfere with a co-owner’s reverse mortgage loan application. In fact, if the board pursued such an action, they may have a potential unprotected liability exposure for tortuous interference, discrimination, or a similar claim.

If the association is concerned about diminishing equity as it relates to any liens it may need to file on units for co-owner delinquent assessments, the board is best advised to follow a consistent delinquent assessment collection policy and to be vigilant in the collection of those assessments before the reverse mortgage continues to increase and more equity is extracted from the unit. Please consult with Meisner & Associates, P.C., or your association attorney immediately if you have such concerns.

Is the Pet the Problem?

2010-05-18T15:41:33Z

I recently heard from a real estate agent who claims that her client’s condo unit is not selling because of a barking dog in an adjacent unit. The owner who is selling the unit has written to the dog owner twice and tried to call her but she is not responding.

As I stated to the real estate agent, in my opinion, the owner who is selling her unit should check the condominium documents to see if there is a limitation on the maintenance of dogs. Usually there is a provision that precludes dogs from “excessively barking.” Even though “excessively barking” is, of course, a subjective term, the unit owner should complain to the association and seek the association’s assistance in attempting to maintain some control over the barking of the dog to the extent that is possible since it is apparently hindering her chances of selling her unit.

Honesty & Transparency in Association Governance

2010-05-07T14:33:43Z

I was recently contacted by a co-owner who is completely frustrated with her board’s apparent lack of openness. The board of directors refused to pass an operating budget which lends itself to the appearance that something is amiss. After much complaining, the board finally adopted a proposed budget, but it did not include a retroactive collection of assessments for the current year. Upon this discovery, the president made a unilateral decision to advise owners that there would be a retroactive assessment. In complete frustration, this co-owner asked if one person could change the resolution of the board after it is passed.

The president alone, or any other board member for that matter, cannot make policy decisions for the association. Those decisions must be made by the board and the president only has authority to carry out the resolutions of the board. However, if the board members choose to allow the president to take these actions without their consent, they may be held accountable for the acts or omissions of the president. Board members must comply with the basic requirements of the condominium and corporate bylaws and if they require that a budget be established before the annual assessment is levied, then that must be done. In the case of our frustrated co-owner, she was correct in recognizing that the bylaws require the board to adopt an annual budget so the late budget should cover the entire year. Honesty may be the issue with this board, or it may be something simple such as mere incompetence.

Questionable Special Assessments

2010-05-05T15:12:57Z

I recently heard from a condominium association which is considering an additional assessment on certain co-owners who have moved into the association within the last three years in order to build up their reserve account.

My reply to this unusual action is that 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.

Who is responsible at the end of a reverse mortgage?

2010-04-29T19:17:20Z

I have received many inquiries by association board members lately regarding concerns involving reverse mortgages. More specifically, board members are apprehensive about who is actually responsible at the end of the mortgage for the final payment. Many of you may also have these concerns; therefore, I thought it best to discuss the issue in this forum.

As you may or may not know, a reverse mortgage is a special type of home loan that enables an owner who is over 62 years of age to exchange a portion of the equity in their home into a tax free income. The premise is that the owner does not make monthly payments, but, rather, the lender pays the owner out of the equity built up in the home. Over time, the owner’s equity in the home diminishes while the amount of the loan increases. The proceeds of a reverse mortgage can be taken in a lump sum, an open line of credit, or as monthly payments.
The reverse mortgage becomes due and payable in full when any of the following three conditions are met:

1. The home is no longer being used by the owner as a primary residence (i.e. it cannot be
leased)
2. The home is sold.
3. The owner passes away.

Within one (1) year after one of the three conditions is met, the loan must be repaid from the sale of the home or by refinancing the existing reverse mortgage, moreover. In the event of the owner’s death, all remaining equity belongs to the heirs and/or estate of the owner. While there is no such thing as a “free lunch,” associations need not worry that they will be left with the bill at the end of the reverse mortgage.

Assertive Board Members

2010-04-02T17:05:46Z

Lately I have heard complaints from several co-owners regarding the assertive personalities of board members at their associations. Some directors have even gone as far as attempting to impose fines upon co-owners who hold garage sales.

While board members may feel they are all-powerful, arbitrarily imposing fines is one power that they do not posses. I write about this very board member in my book, Condo Living: A Guide to Buying, Owning and Selling a Condominium (Momentum Books, 2005). “This outspoken person (I will call him a ‘dictator’) tends overtly, or covertly, to seize control of the board of directors. The dictator may believe that he or she is ‘destined’ to serve on the board for years to come. . . If the board harbors a dictator, and the dictator is able to cause the other directors to blindly follow his dictates or whims, be they altruistic or otherwise, the board is inevitably doomed to failure. On some occasions, the dictator is likely to lead the board astray or to impose his personal biases on the remainder of the members to the detriment of the association as a whole.”

In order to negate the effects of such a personality, you are best advised to stay involved as a co-owner in the decisions and processes of your association board.

Modification Requests

2010-01-21T19:20:02Z

I recently received a question for a co-owner regarding a modification request to the exterior of his unit to accommodate his sister-in-law who visits frequently and who is also in a wheelchair. He has asked the association for permission but the managing agent, it appears on his own, has denied his request.

The Michigan Condominium Act as well as the Michigan Handicappers Act and federal law clearly provide that you are entitled to reasonable access to your unit if you are handicapped. Moreover, the Michigan Condominium Act provides that if a person who regularly visits your unit is disabled, then you have a right to seek approval from the association to make modifications to provide access to that disabled person. The association is under an obligation to allow you to make the modification assuming it is reasonable although it will be at your cost. Moreover, if the managing agent is unilaterally denying you such approval, that matter should be brought to the attention of the board of directors as it is not the management company’s responsibility to unilaterally make such a decision which, in my judgment, would be a basis for that management company being terminated.

Attorney should draft Purchase Agreement

2010-01-20T15:04:20Z

I recently heard from a prospective client who stated that her realtor says that she does not need an attorney to draft her Purchase Agreement because it is a simple real estate transaction and her agent has experience in drafting such agreements. Plus, the agent is being paid a commission as a buyer’s agent. However, the individual was wondering just how prudent this would be.

Obviously, it may appear to sound self-serving, but I believe that you need a lawyer in any real estate transaction to protect your interests. Typically, your Purchase Agreement will also provide disclaimers and/or indemnification for the real estate firm, and realtors are not attorneys, and should be deferring to an attorney to review the Purchase Agreement. However, many realtors feel that lawyers by definition tend to try to kill the deal even though their intent is to protect the interests of their client. You are best advised to get an experienced real estate attorney to review any Purchase Agreement for real estate before you sign as it is extremely difficult to deal with the situation after the fact.

Real Estate Agent Wants Double Commission

2010-01-19T13:09:41Z

I received a question recently from a condominium owner attempting to rent her property. The real estate agent is offering her a three (3) year lease but wants a double commission as opposed to one (1) month’s rent, i.e. two (2) months’ rent because of that.

My reply to this is that it depends upon her listing agreement with the real estate agent. But I do not believe that the real estate agent should be attempting to collect more than one month’s rent regardless of the length of the lease unless the condo owner is willing, as a matter of gratuity, to pay same. Basically the terms of the listing agreement will apply but I have seen that several real estate agents are attempting to collect additional commissions even though they may not be strictly entitled to it under the listing agreement. It then becomes a matter of negotiations with her and the real estate agent should she wish to pay any more of a commission.

Deed Restrictions

2010-01-18T17:36:24Z

I recently heard form a co-owner who is concerned about the fact that they may have waived a deed restriction in regard to building a pool cabana next to a swimming pool. Now another co-owner wants to build a shed which needs their permission.

In a case based on similar facts, the Michigan Court of Appeals held that it is hard for a deed restriction to be considered waived. “The violations of the restriction must be that the original purpose of the restriction has been defeated,” and it went on to say that even “A relatively large number of violations do not necessarily establish waiver.” If your association is empowered to exercise architectural control, you may well have a basis to pursue it but you should, of course, get an opinion from a knowledgeable Community Association lawyer.