Frequently Asked Questions

2 Crocker Blvd. Suite 301 • Mount Clemens, MI  48043 • (586) 465-9529 • Fax 465-9577 •

DISCLAIMER: the questions and answers on this page is intended to be general; you should not act or refrain from acting based upon what you read here. Always consult an attorney or other professional for advice before undertaking an action that may have significant ramifications or consequences. Unless the answer specifically mentions homeowner associations or cooperatives, you should not assume that the advice given applies to them.

What is the difference between a homeowner association, a condominium, and a co-operative?

A condominium is a form of property development and ownership whereby an owner owns his or her "unit" and an undivided interest in the remaining parts of the project. A developer has a great deal of flexibility in defining a unit: it can be the airspace inside the four walls of a building; it can be a boat well in a marina; it can be a lot on which the owner has the right to construct a residence; it can be parking space in a parking lot. The remaining parts of the project are divided into general common elements and limited common elements. Limited common elements are limited to the use of particular owners: a balcony or garage may be limited in use to one owner. A hallway or elevator may be limited to those owners who have a unit fronting off that hall or located in the building serviced by the elevator. General Common Elements are those parts of the project which may be used by all owners: sidewalks, roads, utility mains, swimming pools all fall within this category. A non-profit corporation is formed and is designated to administer the affairs of the condominium. In Michigan, condominiums are regulated by the Michigan Condominium Act (codified as MCL §559.101 et. seq.), although other laws also apply to condominiums.

A homeowner association is usually (but not always) a non-profit corporation organized to represent the owners of lots in a traditional subdivision. Membership in the corporation is tied to ownership of a lot; one cannot be a member of the corporation without owning a lot, and one's membership automatically terminates when one sells his lot. Each lot is subject to restrictions, usually contained in a Declaration of Restrictions, which are recorded in the chain of title to the lot. Restrictions may be such things as minimum lot setbacks and house sizes, prohibitions on commercial activities, and fencing regulations. The association is usually charged with enforcing the restrictions. Lots in a subdivision are usually required to pay an annual assessment to fund the activities of the association.

A cooperative, or cooperative apartments, are another form of property ownership. A non-profit corporation is set up and made the owner of real property, which is developed (usually) in the form of apartments. A person buys stock in the cooperative; ownership of the stock gives the owner the right to occupy one of the apartments. Occupants are charged occupancy charges (rent) which covers the cost of utilities, maintenance, and retirement of any debt owed by the association, as well as contingency reserves. Failure to pay can result in eviction from the apartment.

What's the difference between a board member, a director, and an officer of a condominium?

A board member and a director are one and the same: each condominium is governed by a board of directors, which consists of anywhere from 1 to 9 or more members. The number is specified by the condominium documents. The board of directors are elected by (and can be removed by) the co-owners; i.e., the membership of the project. The board of directors sets the policies for the association and determines the annual and additional assessments.

Officers are elected by (and may be removed by) the board of directors to carry out the day-to-day operations of the project. Most condominium documents call for a president, vice president, secretary, and treasurer.

Directors may be officers, and the officers of a condominium are, more often than not, also directors of the association. However, most condominium documents do not require officers to be directors and indeed some do not even require officers to be co-owners. The major distinction is in who elects them: directors are elected by co-owners, while officers are elected by directors.

What are the duties and responsibilities of a board member?

The duties and responsibility of the board of directors are set forth in the condominium documents, usually the condominium bylaws. Typical duties may include maintaining the common elements, developing an annual budget, employing and dismissing personnel, adopting and amending rules and regulations, opening bank accounts, borrowing money, obtaining insurance, purchasing a unit for use by a managing agent, granting concessions and licenses, authorizing the signing of contracts, easements, and rights-of-way, and asserting, defending, or settling claims on behalf of all co-owners. Board members are fiduciaries; see below.

What are the duties and responsibilities of officers?

Officers are charged with implementing board policy. If the board has authorized a painting project, the officers may negotiate the terms and sign the contract. The treasurer reviews and pays the bills of the association and collects assessments. The president presides at member meetings. The vice president presides when the president is temporarily unable to act. The secretary maintains minutes of the meetings of the association and conducts board correspondence. The treasurer is charged with collecting assessments and paying the association's bills. Most community association documents provide for other officers in the board's discretion. Officers are fiduciaries; see below.

What is a fiduciary?

A fiduciary is a person who holds a position of authority and trust with respect to another person or entity. Both board members and officers of a community association are fiduciaries with respect to the association. This means that the board members must act prudently, must exercise ordinary care, must exercise sound business judgment in the operation of a community association. This means no self-dealing between officers/directors and the association, no "sweetheart" deals, no kick-backs from contractors, etc. While an individual member of the association is not a fiduciary and may act in his or her own self-interest even if that interest is adverse to the association, a board member or an officer must put the needs of the association above his or her own personal interests.

Who does a community association attorney represent?

The attorney for a community association represents the association as a whole; his client is the non-profit corporation formed to administer the project. The corporation speaks through resolutions passed by its board of directors and communicated and implemented by its officers, but the attorney does not represent either the board members or the officers. The association is composed of members who own a unit or lot or apartment in the community association, but the attorney is often called upon to sue a member, as for collection of assessments or to enforce the bylaws. The attorney's client is the entity, not its members, officers, or directors.

Are homeowner associations covered by the Michigan Condominium Act? If not, is there a statute that regulates homeowner associations?

Homeowner associations are not covered by the Michigan Condominium Act. There is no comprehensive statutory scheme that regulates homeowner associations as such. The Michigan Non-Profit Corporation Act provides some guidance to homeowner associations whose governing body is a non-profit corporation. Certain summer resort and park associations are governed by the Summer Resort and Park Act. While Steve has heard anecdotal evidence that some exist, he has never actually encountered (or represented) a summer resort or park association.

What is the process for amending our documents?

Your documents themselves will specify the manner of amendment and the number of affirmative votes required to amend the document. Bear in mind that a community association usually is governed by more than one document; for instance, a condominium association may have a Master Deed, Condominium Bylaws, Corporate Bylaws, Articles of Incorporation, and Rules and Regulations. Each of these may have different amendment requirements and I cannot tell you what your particular document requires until I review it. However, with that in mind, the process is generally as follows:

Decide what you want to accomplish. This may seem incredibly obvious, but what you want to accomplish determines what document you amend.

Draft the amendment. It is very tempting to present just an idea to the membership, such as "a new amendment transferring responsibility for doors and windows to the members." However, drafting the specific language you will present to the members forces the board to think about exactly what the problem is: are members breaking the glass through negligence? This might entail an amendment to the condominium bylaws. Are the seals between the panes of a double-paned window breaking (which is a cosmetic problem) or are the windows falling apart (which is a safety and security issue)? This might entail an amendment to the allocation of responsibility provisions of the Master Deed. Are we transferring responsibility because the association has not been maintaining reserves? This might entail amendments to both the Master Deed and the Condominium Bylaws. Drafting specific language helps frame the issues.

Determine if a meeting is necessary. Older community association documents require an actual meeting to be called and held at which the members vote on the amendment. New documents may allow a vote to be taken without an actual meeting. If your documents are of the former category, you may wish to change them as a part of the process: hey, if you're going to all the trouble, why not make it easier the next time around.

Call a meeting (if necessary) or send out the appropriate ballots (if no meeting is necessary). Again, the document you are trying to amend will set the parameters of how far in advance notice must go out, how many members are necessary for a quorum, how the votes are counted, whether proxies are allowed, etc.

Tally the vote. Keep a record of the vote for at least two years from the date of the vote.

If necessary, poll the mortgagees. Certain amendments to the Master Deed and Condominium Bylaws are required by law to be approved by the first mortgagees of units in a condominium. The Michigan Condominium Act contains a specific procedure to get mortgagee approval. This procedure may override the provisions of your particular documents.

Record the amendment (if necessary). An amendment to the Master Deed, Declaration of Restrictions, or Condominium Bylaws will need to be recorded before it takes effect. An amendment to the Article of Incorporation will need to be filed with Lansing.

Distribute the amendment as recorded (or as approved, if recording is not necessary) to the membership. A copy of the amendment must be distributed to each member (mailing or hand delivery), although the fact that a particular member did not actually receive his copy is not a bar to enforcement of the amendment.

A member wants copies of association records; do we have to make copies?

If your governing body is a nonprofit corporation, the answer is “yes.”  The Michigan Nonprofit Corporation Act provides that a member may submit written notice to the corporation at its registered office to review the records for a proper purpose.  The corporation must allow access to the records within 5 business days of the demand.  If the corporation fails to comply, the member may file suit in the circuit court seeking an order allowing access.  If the circuit court grants the order, it can also order the corporation to pay the member’s reasonable costs and attorney fees.

The Michigan Condominium Act (applicable to all condos but not applicable to homeowner associations or co-operatives) provides, in MCLA §559.157, that “the books, records, contracts, and financial statements concerning the administration and operation of the condominium project shall be available for examination by any of the co-owners and their mortgagees at convenient times. 

Without exception, Steve Sowell has never seen a condominium that was not governed by a nonprofit corporation (although some associations have allowed their corporate existence to lapse through failure to file annual reports).  While both the Nonprofit Corporation Act and the Condominium Act allow access, it is the Nonprofit Corporation Act which has some “bite” to its provisions.

How long should we maintain records?

There are various statutes of limitations which apply to maintenance of records, and some records are more important than others.  The safest course of action, of course, is never to throw anything away.  However, due to space limitations this is not always practical.  Governing documents, such as Master Deeds, Bylaws, Site Plans, Declarations of Restrictions, easements,and the like, should be kept forever.  Similarly, documents pertaining to modifications of units (permission for a deck, or a hot tub, for example) should be kept as long as the modification exists.

Documents pertaining to violations of covenants should be kept for at least 10 years.  All other records should be maintained for a minimum of six years.

Can we have "adults only" time at our [pool, clubhouse, tennis court, jogging path, etc.]?

Probably not. The Fair Housing Amendments Act of 1988 (federal law) prohibits discrimination in the sale or rental of housing, or the provision of amenities in housing, on (among other things), age and familial status. A rule or regulation that prohibits use of an amenity (such as a pool) by a certain age group runs afoul of the law. A restriction to lap swimming for certain hours is an example of a restriction that might accomplish the same purpose (after all, most kids come to the pool to play, not for exercise) but would not violate the law.

Can we limit the number of rental units in our project?

Since 2000, the Michigan Condominium Act has allowed associations to modify leasing restrictions in their condominium documents, although modification of leasing restrictions requires the vote of both co-owners and mortgagees.  In view of FHA guidelines, a condominium association should seriously consider inserting limitations on the number of non-owner-occupied units.  Bear in mind that, since condominium documents require the approval of 66-2/3% of co-owners to amend, if you wait until more than 1/3 of your units are investor-owned, it is not likely that you will obtain the votes necessary to put leasing restrictions in place.

How do we handle bylaw violations? What are our remedies?

There are a host of remedies available to a condominium association. Steve wrote an entire article outlining the various methods an association has to compel compliance with the bylaws.

Can we assess fines for bylaw violations? If so, how do we go about it?

The Michigan Condominium Act allows the assessment of fines after "notice and a hearing."  This means that you must give notice to the co-owner and hold a hearing (even if the co-owner does not attend) BEFORE you can impose a fine.  Your documents must either specify a fines procedure or authorize the board to enact a fines procedure in order to levy fines. Steve discusses fines in his article outlining the various methods an association has to compel compliance with the bylaws. If your association does not have a fines procedure in place, you may wish to consult with Steve about drafting and enacting one.

A co-owner has posted a sign in the window of his unit and our bylaws prohibit signs; what do we do?

A "for sale" sign is only going to go up for a limited period of time, and will be taken down when the unit is sold. Just because the bylaws prohibit them does not mean that the association immediately has to call out the big guns. Doing so will only cause the seller to leave the condominium on a sour note. I recommend that associations adopt a friendly letter to send to selling co-owners reminding them of the bylaws, but noting that the board of directors will allow the sign to remain until the unit is sold or for 90 days, whichever is shorter.

If the sign is a political sign, again these go up for limited periods of time and are taken down after the election. The board may wish to adopt a policy allowing a limited number of these signs (maybe one per candidate or one per unit) a limited size, allow them to be posted only in a designated area, limit them to being erected not more than [insert your figure here] days before the election, and provide that the association will dispose of them if not removed within [again, insert your figure here] days after the election.

Other signs should be considered on the basis of what they are advertising; I have yet to have a board ask if they can remove a yellow ribbon around a tree, but most boards would remove or request removal of a sign advertising a commercial business.

I occasionally get a co-owner who argues that the sign restriction violates his "constitutional right to free speech." While the First Amendment to the United States Constitution and Article 1 Section 5 of the Michigan Constitution both provide that the government shall make no law abridging the freedom of speech, a condominium association is not the government, it is a private corporation. As the Michigan Court of Appeals has noted, by purchasing a unit in a condominium, "each unit owner [gives] up a certain degree of freedom of choice which he might otherwise enjoy in separate, privately owned property." One of those freedoms may be the display of a sign under the condominium documents of his project.

If the association wishes to enforce a sign restriction, the proper remedy is to file suit in the circuit court seeking an injunction requiring removal of the sign.

A co-owner is flying a flag outside his unit and refuses to take it down; what do we do?

Both Michigan and federal statutes protect the right of a co-owner or homeowner association member to fly an American flag, under certain conditions.

If the flag is an American flag and does not exceed 3 feet by 5 feet and does not cause a hazard to the health and safety of other residents the Michigan Condominium Act allows a co-owner is allowed to fly such a flag "outside" of his unit.

Under federal law, "A condominium association, cooperative association, or residential real estate management association may not adopt or enforce any policy, or enter into any agreement, that would restrict or prevent a member of the association from displaying the flag of the United States on residential property within the association with respect to which such member has a separate ownership interest or a right to exclusive possession or use.

If the flag is another type of flag, then the condominium documents may authorize the association to compel the owner to take it down; see the section on handling bylaw violations above.

What are the rules on satellite dishes?

Setting forth all the rules is beyond the scope of this FAQ page, so consult your attorney for specifics, but the general rules are:

  • Dishes larger than one meter in diameter can be prohibited anywhere within the project.
  • A dish one meter or smaller may be located anywhere within the confines of the condominium "unit." Look to the condominium documents to see what defines a "unit" for your project.
  • A dish one meter or smaller may be located anywhere on a limited common element which appertains to the unit whose owner owns the dish. Again, look to your documents, but this might mean a balcony, patio, within a garage, etc. The association may require cosmetic screening of the dish as long as the screening does not interfere with reception.
  • An association may prohibit a dish anywhere on the general common elements, even if the co-owner cannot get reception from within his unit or from his limited common elements.

Again, these rules are very general. The FCC takes a dim view of associations' interfering with an individual's reception, so care is needed to make sure that the associations' policies, and enforcement of those policies, do not run afoul of the FCC's regulations or the association may wind up taking a trip to Washington, DC to defend itself.

Parking is limited at our complex and problems continually arise. How do we address the issue?

Parking is an issue that comes up so regularly that Steve wrote an entire article about it.

A co-owner wants to modify his unit; do we permit it? Can we prohibit it?

The first question to ask is whether the co-owner is disabled and is requesting the modification to accommodate the disability. If so, special rules apply and you should consult an attorney to make sure that you don't run afoul of federal and state disability laws. Failure to comply can make the association liable for actual damages, in some cases punitive damages, and for the co-owner's costs and attorney fees.

If the co-owner is not disabled, the Michigan Condominium Act provides that a co-owner may make alterations and modifications to his unit subject to the terms and conditions of the condominium documents. Most condominium documents prohibit alterations without the express written approval of the association. If yours contains this prohibition, then the board may condition approval on such terms as the board considers appropriate. If the alteration or modification affects the structural integrity of the unit or common elements, the board may wish for plans and drawings to be certified by an architect or engineer. In most cases, the association will wish to enter into a written agreement with the co-owner which specifies how long the improvement will stay, who pays the cost to maintain it, and under what conditions the premises have to be restored to their pre-existing condition. This agreement should be recorded in the chain of title to the unit so that subsequent purchasers are on notice of the terms of the association's grant of consent.

Someone sold their unit on a land contract; do we treat the seller or the purchaser as the "owner" of the unit?

The Michigan Condominium Act provides that " 'Co-owner' includes land contract vendees [purchasers] and land contract vendors[sellers], who are considered jointly and severally liable under this act and the condominium documents, except as the recorded condominium documents provide otherwise." Unless your documents provide otherwise, both the seller and the purchaser are liable for unpaid assessments, bylaw violations, damages caused by negligence, etc.

Sometimes I get sellers who claim their land contract obligates the purchaser to pay assessments or otherwise comply remedy the alleged violation. This provision of the act means an association does not get caught in the middle of such finger pointing between the seller and the purchaser.

Some condominium documents provide that a land contract seller is not personally liable for unpaid assessments until such time as the seller forfeits or forecloses the land contract and regains possession of the premises.  Even under these types of provisions, nothing prevents the association from foreclosing its lien against both the land contract seller and the land contract purchaser.  Even if the seller is not personally liable, his interest can be terminated by foreclosure of the association’s lien.

What should the association's insurance cover, and what should the co-owner's insurance cover?

The short answer is that the governing documents will apportion and assign insurance responsibility between the association and the co-owner, so read your documents.  In general, the association’s hazard (fire and extended coverage) insurance should cover those items for which the association has maintenance, repair, and/or replacement responsibility, for their true replacement value. The association should also carry liability insurance to cover slip-and-fall type accidents. If the association has employees, it needs workmen's compensation insurance. If it owns a vehicle, it needs auto insurance. Your best bet is to find a competent insurance agent who is familiar with the needs of condominiums, provide him with a complete set of the association's documents, and ask him to provide coverage appropriate for the associations's risks as stated in the documents.

A co-owner's insurance should cover "everything else," but what that may entail depends upon the risks the co-owner is willing to assume.  A prudent co-owner will insure his unit (however that may be defined), any betterments and improvements, his contents (clothing, furniture, personal property), and liability for negligence/personal injury lawsuits.

HINT: a smart co-owner will obtain a homeowner's policy from the same company that issued the association's policy, even if the premium may be higher than another company's policy. On many occasions, Steve has seen a co-owner's company deny coverage on the basis that something should be covered by the association's policy, and have the associations company deny coverage on the basis that the homeowner's policy should cover the loss. If the co-owner has insurance from the same company as the association, the co-owner will not be caught in the middle of this finger pointing game because the company is going to cover the loss under one or the other policies.

Our documents specify that our meetings will be conducted in accordance with Robert's Rules of Order; what are Robert's Rules of Order?

Henry Martyn Robert wrote a book in 1907 setting forth procedures by which an assembly conducts its meetings and its business in an orderly fashion. As noted in the Foreword to the 1978 edition "The enduring principle underlying Robert's Rules of Order is that, though the minority shall be heard and absentees protected, the majority shall decide.”

There have been no less than 11 editions of Roberts Rules of Order published over the years, according to the official website.

Unless one has had a class in parliamentary procedure or was on the debate team in high school or college (or is a community association lawyer), one has probably never heard of Robert's Rules of Order. The main point of this provision of your documents is that everyone gets to speak his peace at association meetings and the business of the association gets accomplished. For all but the very largest community associations, the formality of Roberts is probably not necessary. If you do get a member of your association who delights in interrupting with "points of order," I recommend appointing him on the spot to be the parliamentarian for the meeting. Usually, this person either wants to make his or her point or to try to befuddle the meeting leader; if you try to appoint him parliamentarian you will very quickly know which is his purpose.

How much money should we have in our reserves?

It is instructive to quote directly from the administrative regulations:

    (1) The bylaws shall provide that the association of co-owners shall maintain a reserve fund for major repairs and replacement of common elements in accordance with section 105 of the act. The co-owners’ association shall maintain a reserve fund which, at a minimum, shall be equal to 10% of the association’s current annual budget on a noncumulative basis.

    (2) The funds contained in the reserve fund required to be established by section 105 of the act shall only be used for major repairs and replacement of common elements.

    (3) There shall be set aside the amount of funds required by subrule (1) of this rule by the time of the transitional control date. The developer shall be liable for any deficiency in this amount at the transitional control date.

    (4) The following statement shall be contained in the bylaws: “The minimum standard required by this section may prove to be inadequate for a particular project. The association of co-owners should carefully analyze their condominium project to determine if a greater amount should be set aside, or if additional reserve funds should be established for other purposes.”

An example may help clarify what is meant by a "noncumulative" basis. If the budget is $10,000 for fiscal year 2005, and the association has no reserves, it should budget and set aside (at least) $1,000 to fund the reserves. Assuming that nothing is spent from reserves in 2005 and the budget increases to $11,000 for fiscal year 2006, the association should budget and set aside (at least) an additional $100 to add to the reserves so that the reserve equals $1,100. If $500 is spent from reserves in 2006 and the 2007 budget goes up to $12,000, then the association should budget and set aside (at least) $700 to bring the reserve to $1,200.

As noted by subsection 4, this 10% minimum standard will rarely be sufficient. In a perfect world, the association would have been adequately funding its reserves so that, as capital replacements become necessary (roads, roofs, etc.), the association has sufficient funds in reserve to pay for these without the necessity of an additional assessment.

If 10% is rarely sufficient, how does one determine what an adequate reserve is? The concept is fairly simple: look at each item the association is responsible for replacing. Determine its expected useful life. Determine where you are in its expected useful life. Determine the cost of replacing the item. Then do the math. As an example: a roof can reasonably be expected to last 15 years. If the project is new, or if the roofs were just replaced last year, then there are 15 years left in the expected useful life. If the cost of replacement is $1,500, then the association should be placing in reserves $100 per year for the next 15 years so as to have sufficient reserves to replace the roof at the end of the useful life. If the roofs are 10 years old, the association should be setting aside $300 per year for the next five years to have sufficient reserves at the end of the roof's useful life. One makes this analysis for each and every item for which the association has replacement responsibility under the condominium documents. Discount inflation because the association will be (should be) earning interest on the reserves. If the reserve analysis does not work out exactly (roofs fail early, costs rise faster than inflation, etc.), the difference can be funded by an additional assessment.

If this sounds difficult and time consuming, know that there are several companies who will do a reserve study for an association, providing the association with both a valuable "check-up" on the health of the physical plant of the condominium project as well as a detailed roadmap for funding the reserves. Steve shared the stage with one such company, Reserve Advisors, at a recent CAI-Michigan annual conference.

What's the difference between an "additional" assessment and a "special" assessment?

Most condominium documents differentiate between "additional" assessments and "special" assessments. An additional assessment may be levied by the board of directors without a vote of the co-owners. A special assessment requires approval of the co-owners by a certain majority or percentage as stated in the condominium documents.

Additional assessments (levied by the board) are usually authorized for budgetary shortfalls, repair or replacement of existing common elements, additions to the common element not exceeding a specified sum each year, or for emergencies. A 50% increase in the insurance premium, replacement of roofs, or working capital to get past a hurricane would be examples of conditions that might require an additional assessment.

Special assessments (which require a vote of the co-owners) are basically anything else not covered as an additional assessment. Funding the installation of a pool or tennis court where none existed before would be an example of an item requiring a special assessment.

Can we fund the cost of repairing our [roofs, roads, swimming pool, etc.] with a loan?

Maybe. Steve has sheparded several associations through the loan process, and there are lenders (see below) who will lend to condominium associations.  Your documents may require approval of members before the board can borrow money, and you may have to amend your documents to grant a lien to or otherwise satisfy your prospective lender.

Steve's fundamental objection to funding replacements and repairs by loan is that there is already a mechanism in place to fund these: additional assessment of members. Borrowing the money from a lender just injects additional costs (closing costs, fees, interest) to the costs of the repairs. Why not simply assess the membership and avoid the additional cost and paperwork? There is an argument to be made that borrowing the money and paying it back over time lessens the blow of a one-time assessment due immediately, but if the association has been adequately funding its reserves, the additional assessment should not be that much anyway.

Lenders include Mutual of Omaha BankFirst Bank and Trust and HOA Lending Solutions.  Steve Sowell lists these lenders as a courtesy and makes no recommendations.  Investigate carefully and make your own informed decision as to which lender to borrow from.

We have some "snowbirds" who go to Florida (or Nevada, or California, etc.) for the winter. How do we gain access to their unit in the event of emergencies?

Most documents provide that an association has access to a unit on prior notice for inspection or repair of general or limited common elements, and without notice in the event of emergencies.  Some documents provide that, if the co-owner does not provide access, the association can gain acces by any reasonably necessary means and charge the cost back to the owner.  For non-emergencies, I recommend a first letter to the owner asking them to contact the association to set up a date and time for the inspection.  If no contact is made, follow up with a second letter advising that the association will be at the unit on a specified date and, if no one is there to grant the association access, the association will obtain access through a locksmith and (if applicable) charge the cost back to the unit.

In any event, if the owner objects to entry, the association cannot "breach the peace" in gaining access to a unit.  At that point, the association must seek a court order granting access.

Can you give us some guidelines for moving from self-management to hiring a management company?

First, do your homework.  There are some excellent management companies, quite a few mediocre management companies, and a few really poor management companies in Michigan.  Interview the president.  Review the web site.  Ask for, and contact, references.

Second, recognize that the management company is going to do things differently than the board is used to doing them.  The financial report may be in a different format if the management company uses different software.  The management company will have its own methods and processes for handling maintenance requests and there will be a learning curve for your members to start using them. Give the management company the benefit of the doubt; it may take six months for the the transition to be completed, but the board should thereafter find that its burden has been significantly lessened by transitioning to professional management.

The developer is about to turn over control of the association to the owners? What do we need to know about turnover?

The following is a nonexclusive checklist of things to ask of the developer at turnover:

1) Control or possession of all funds of the association (transfer of signatories on the accounts)

2) Books and records of the association:

a) Complete set of Master Deed, Condominium Bylaws, Site Plan, Corporate Bylaws, and all amendments to any of these documents

b) Copies of all bank statements

c) Unit files (including unit payment histories)

i) permissions for pets

ii) consents to alterations of common elements

iii) correspondence with co-owners

d) all contracts entered into by the developer on behalf of the association

i) management contract

ii) snow plowing/landscaping

iii) pool or other facility maintenance

iv) garbage removal

v) utilities

e) warranties or guarantees for general or limited common elements

f) association directory (owner list with phone numbers and addresses of designated representatives/contacts)

g) any keys to units entrusted for unit access in emergency

h) annual meeting/advisory meeting/board meeting minutes

i) corporate records (articles of incorporation, annual reports)

j) insurance policies

k) employee records

l) tax returns filed on behalf of the association

m) proxies for the board of directors that have not expired

3) Keys/access codes, keycard machines necessary for access to general or limited common elements

4) Copies of any lawsuits/regulatory actions in which the association is involved

5) Title and keys to any vehicles purchased in the name of the association

6) Any specifications developed for requests for alteration (i.e., specifications for storm doors, fences, etc.)

Our developer is not addressing legitimate repair issues for units and the common elements. How long do we have to pursue the developer for these issues?

A new section of the Michigan Condominium Act, adopted on December 31, 1999, provides:

         Sec. 176. (1) The following limitations apply in a cause of action arising out of the development or construction of the common elements of a condominium project, or the management, operation, or control of a condominium project:

        (a) If the cause of action accrues on or before the transitional control date, a person shall not maintain an action against a developer, residential builder, licensed architect, contractor, sales agent, or manager of a condominium project later than 3 years after the transitional control date or 2 years after the date on which the cause of action accrued, whichever occurs later.

        (b) If the cause of action accrues after the transitional control date, a person shall not maintain an action against a developer, residential builder, licensed architect, contractor, sales agent, or manager of a condominium project later than 2 years after the date on which the cause of action accrued.

        (2) Subsection (1) applies only to condominium projects established on or after the effective date of the amendatory act that added this subsection.

If your project was established (your Master Deed was recorded) prior to December 31, 1999, the issue is less clear; you really should consult an attorney as soon as possible about your repair issues.

My country club posts the names of members who are behind on their dues on the [bulletin board, web site, etc.] and it seems to get results. Can we do the same?

No.  The Michigan Regulation of Collection Practices Act (MRCPA) specifically prohibits:

(l) Publishing, causing to be published, or threatening to publish lists of debtors, except for credit reporting purposes, when in response to a specific inquiry from a prospective credit grantor about a debtor, and

(m) Using a shame card, shame automobile, or otherwise bring to public notice that the consumer is a debtor, except with respect to a legal proceeding which is instituted.

The MRCPA applies both to the association itself and to any debt collectors as defined by the Act, which includes the associations management company and its attorneys.

Our receivables (unpaid assessments) are getting out of hand. What do we do?

Steve gave a seminar at a CAI-Michigan annual conference on collecting assessments. Basically, the association needs a collection policy and needs to enforce it uniformly.

Can we impose late fees? If so, how much?

The Michigan Condominium Act provides that an association may collect late charges “in accordance with the condominium documents.”  Your condominium documents must provide for late charges in some fashion; otherwise, you are not entitled to collect late charges.

Some documents specify a late fee of a set amount; if so, that is the amount you can collect until the document is amended.  Some documents allow the board to issue a schedule of late fees.  Some documents provide for the assessment of “fines” for late payment; as noted above, fines require notice and a hearing, which significantly complicates the process.

Generally, a creditor may charge one late fee per late payment, as long as the late fee charged is reasonable. For example, if a co-owner misses paying his January assessment within the grace period, an association may impose a reasonable late fee. If the co-owner then makes his February assessment on time, the association may not then impose a second late charge, on the argument that the payment received in February was applied to the January assessment and thus the February payment is therefore late.

"Reasonable" means that the amount of the fee must bear some relationship to the increased burden imposed on the association by the lateness of the payment. The association probably had to send out a delinquency letter. A fee of $25 is probably reasonable, whereas a late fee of $125 probably is not. As a rule of thumb, the mortgage industry routinely charges a late fee of 4-5% of the outstanding payment; if the mortgage payment is $1,000, a late fee of $50 is imposed.

An association should keep in mind that late fees are intended to discourage late payments; they are not intended to supplement the association's income. If the co-owner has a reasonable explanation for the lateness of the payment and does not otherwise have a history of chronic lateness, the association should consider waiving the late charges in exchange for prompt payment of the remaining balance.

We want to record our own liens for unpaid assessments; where can we find a form?

I don't know. I will not provide you with a copy of my "form", because the value of my services is not in the form itself but what I do to ensure that the lien is proper. "Proper" does not just mean that the margins are correct and the document is notarized. I also confirm the balance due, make sure that the lien has been properly authorized by the board, review the condominium documents to make sure that the lien is properly served, prepare a professionally worded demand letter to the co-owner, comply with the various federal and state debt collection laws, communicate with the debtor, the treasurer, and/or the managing agent, and I follow up to see that the lien is promptly discharged when the balance is paid.

I think associations (or managing agents) recording their own liens are a very bad idea:

Directors and officers insurance generally does not cover clouds on or slander of title (the cause of action the co-owner will use to sue you when you record the lien against the wrong unit or when you fail to discharge the lien promptly after it is paid off).

A non-attorney preparing and recording the form may be engaged in the unauthorized practice of law (the law is not fully settled on this issue).

Michigan law allows condominium lien foreclosure either by advertisement or by judicial action. Which do you recommend?

Steve recommends foreclosure by advertisement of condominium liens.  The reasons are stated in this article.

We received notice that a mortgage company is foreclosing against one of our co-owners; what do we do?

Track the sale and see if it goes forward.  A percentage of foreclosures are canceled when the co-owner scrapes together the money to reinstate the loan.  If not, confirm that the sale actually took place (many are adjourned week-to-week).

Notify the mortgagee in writing if the unit contains general common elements that need to be maintained, such as a building’s sump pump or central water lines.  While the mortgagee may do nothing, at least you have put it on notice should it take possession and winterize the unit.

Track whether the unit is occupied, especially in cold weather.  The typical redemption period on mortgage foreclosure is six months from the date of sale.  If the co-owner moves out and shuts off utilities, the pipes in the unit may freeze.  It is cheaper for the association to turn on the utilities in the association’s name than it is to clean up and repair water damage.

Monitor the redemption period, and notify the mortgagee upon expiration of its responsibility to pay assessments.  Once the redemption period expires, the mortgagee becomes the co-owner and is liable for assessments like any other co-owner, with the exception that it is not liable for assessments which accrued prior to its acquisition of title.

We can collect attorney fees from defaulting co-owners, so why can't we collect attorney fees when we have to sue our [roofer, snow plow service, painters, etc.]

Michigan follows the "American Rule" regarding recovery of attorney fees, which means that each party pays their own attorney fees and costs unless a statute, court rule, or contractual provision requires the losing party to pay the prevailing party's attorney fees.  The Michigan Condominium Act contains one of these exceptions:  MCLA §559.206(b) provides that "In a proceeding arising because of an alleged default by a co-owner, the association of co-owners or the co-owner, if successful, shall recover the costs of the proceeding and reasonable attorney fees, as determined by the court, to the extent the condominium documents expressly so provide."  Most condominium documents allow the association to recover its costs and attorney fees from a defaulting co-owner.  However, this provision of the act applies only to defaults by co-owners, and then only if the association is successful.  It does not apply to disputes with other persons, such as roofers, landscapers, etc.

It is possible to negotiate a provision in your contract with your contractor for the loser to pay the winner's attorney fees, but bear in mind that there has to be ameeting of the minds to form a contract.  Your contractor may not agree to such a provision.

One of our members just filed bankruptcy. What do we do?

Steve has written several articles regarding co-owners filing bankruptcy.  An explanation of what an association board should do when a co-owner files bankruptcy can be found here.

We have a co-owner who is a regular nuisance; always complaining, verbally attacking board members, circulating petitions, etc. How do we deal with this person?

There are no magic bullets for dealing with the toxic co-owner. There is nothing the board can do to force them to sell their unit. The board should be careful about tuning this person out. Sometimes, amid all of the noise is a legitimate repair issue or bylaw violation that needs to be addressed, and the board can get itself in trouble if the legitimate repairs are ignored along with all of the noise.

Attendance at our annual meetings is always dismal; how can we improve it?

An article about improving meeting attendance can be found on the CAI-Michigan web site. One thing I discourage is the offering of raffles or games to improve attendance unless you have qualified with the State. Even a 50-50 raffle requires a license from the State; you may wish to download the State's Raffle Guide (PDF document).

© Steve Sowell 2018