In Michigan, condominium developments are regulated by the Michigan Condominium Act, MCL §559.101 et seq. (“The Act”). The Act was adopted in 1978 and provides detailed regulations for most aspects of condominium living, including selling, voting, financing, assessing, and terminating a condominium association and its units. Below is a brief summary of some important provisions within the Act that developers, buyers and condo association members should all be aware of.
A condo owner cannot withhold assessment payments even if he is not satisfied with the condo association
The Act requires each condo unit owner to pay fees to cover the common expenses of the condo. MCL 559.169(3). The Act also specifically provides that an owner is not exempt from having to pay his share of common expenses if that owner claims nonuse, waiver of the use, or abandons his unit. MCL 559.169(4). As a result, even if an owner is not happy with the association’s management or services, the owner is not permitted to withhold all or part of his assessed fees for common expenses in an attempt to convey his dissatisfaction.
A condo unit can be foreclosed upon if the owner fails to pay association fees
If an owner fails to pay his monthly association fees, the owner is in default and the unpaid fees (along with late charges, collection costs, attorney fees and fines) constitute a lien on the condo unit. MCL 559.208. The Act authorizes an association to foreclose on a lien for nonpayment of association fees. MCL 559.239. In other words, even if a condo owner is up-to-date on all mortgage payments, the condo unit can still be foreclosed upon for not paying association fees.
An owner must file a lawsuit to force the association or another owner to comply with the Act, the Master Deed or the Bylaws
Under MCL 559.207, a condo owner is authorized to sue the condo association and its officers and directors to enforce the Act as well as the condo association’s documents, including its Master Deed and Bylaws. If the owner is successful, he can recover costs and reasonable attorney fees from the association. An owner can also sue another owner for injunctive relief and/or damages for failure to comply with the Act or the Master Deed and Bylaws.
There are special duties imposed on associations with revenue over $20,000
Based on certain amendments to the Act that became effective in January 2014, MCL 559.157 now requires condo associations that have annual revenues over $20,000 to do 1 of 2 things:
- Have an outside CPA perform a formal independent audit or formal independent review of the association’s year-end financial statements, or
- Have a majority of the association’s members, not just the Board of Directors, annually vote to opt out of Option #1.
Given the relatively low dollar amount threshold for these additional duties to come into play, the majority of condominium developments will likely need to abide by this rule.
The purpose of this amendment was to clarify prior ambiguities in the statutory language. Prior to the amendment, the Act required an association to have its financial records audited or reviewed annually but also stated that “[s]uch audits need not be certified.” Therefore, there was confusion as to whether the audit or review needed to be performed by an independent CPA.
A developer has a limited time to complete a condominium project
Under MCL 559.167(3), a developer can withdraw undeveloped portions of a project that are not completed within certain designated timeframes. Specifically, Section 167 allows a developer to withdraw all undeveloped portions of land from a particular project within 10 years of the date on which construction commenced, or within 6 years of the developer exercising its rights of conversion, contraction or expansion. If a developer does not withdraw the undeveloped land, the land automatically converts to common elements. The intended purpose of this provision was to create an end date for developing condo projects and prevent incomplete projects from becoming eyesores and create logistical and operational problems for the association.
This is just a brief summary of some of the many important provisions contained within the Michigan Condominium Act. If you have any specific questions about the Act, or about condominium developments in Michigan generally, feel free to contact us to discuss your questions. A full copy of the Act can be viewed here.
