Real Property Notes Blog

Litigation Approval Clause Upheld On Appeal

In Sawgrass Ridge Condominium Association v Alarie, an unpublished Michigan Court of Appeals opinion, the association filed suit claiming that the co-owner modified his deck without obtaining prior board approval as required by the condominium bylaws.  The association filed a motion for summary disposition.  The co-owner defended on the grounds that the association did not obtain co-owner approval prior to filing suit as required by the condominium bylaws.  The trial court granted the association summary disposition and the co-owner appealed.

The Court of Appeals reversed and remanded.  The condominium bylaws required the prior approval of the co-owners before filing suit.  The fact that the board approved the action was not sufficient.  Also, although a majority of co-owners signed a consent resolution ratifying the lawsuit after it was filed, the documents required that any vote be taken at a meeting; apparently the bylaws did not have an “action without a meeting” provision.  

Pre-litigation approval clauses in condominium documents have been upheld previously.

Homeowners Required to Re-Paint Home

In Hawthorne Ridge Homeowners Assn v Wang, an unpublished Michigan Court of Appeals opinion, the homeowners painted the exterior of their home without obtaining the prior written approval of the homeowners association as required by the bylaws.  The association filed suit.  The trial court granted summary disposition on two grounds:  that the color chosen by the homeowners was not an earth tone, and because the homeowners did not obtain prior approval.  The homeowners appealed.

On appeal, the Court of Appeals held that the trial court erred in deciding the disputed issue of whether the color was an earth tone, but affirmed because the trial court correctly ruled that the homeowners failed to obtain permission in accordance with the bylaws. 

The homeowners also defended on the basis that, at the time they painted, the association had been automatically dissolved for failure to file annual reports.  However, the Association reinstated subsequent to the painting and prior to filing suit under a provision of the MI Nonprofit Corporation Act allowing nonprofit corporations to reinstate by filing the last five years of annual report and paying the fees.  If an association does so, MCL 450.2925(2) provides that a corporation that does so has the same rights as if dissolution had not taken place.

The homeowners challenged the reinstatement, arguing that the association’s actions were fraudulent because it reinstated a corporation that had no connection with the subdivision so as to give it retroactive legal status.  However, the court dismissed this argument because the homeowners provided no documentary support for this claim and cited no legal authority.

Finally, the homeowners argued that the trial court erred by awarding the association its costs and attorney fees.  However, the homeowners failed to file a second appeal from the separate order awarding fees and costs; the Court of Appeals held that it lacked jurisdiction to determine this issue.

No Structure, No Principal Residence Exemption

In an intuitively obvious decision, the Michigan Court of Appeals held that, when the residence on the property has been demolished, the owner of the property is not entitled to a principal residence exemption on the property taxes.

In Anderson v Twp. of Leelanau, an unpublished opinion, the owner demolished the residence on the property in 2014, intending to build a new home.  The Township denied a principal residence exemption for the 2015 tax year.  The owner appealed to the Michigan Tax Tribunal, which originally overruled the denial, but subsequently reversed itself, holding that, because there was no longer a home on the property, there was no principal residence to return to.

The Court of Appeals affirmed.  No home on the property, no principal residence exemption.

Tax Foreclosure: County May Not Rely on Index of Register of Deeds Records

In Richardson v Spark Investment, LLC, an unpublished Michigan Court of Appeals opinion, the plaintiff purchased five lots in Westland and duly recorded his deed with the Wayne County Register of Deeds.  However, the property transfer affidavit was filed only for two of the five lots.  Tax bills were sent to the Plaintiff for the two lots, but tax bills were sent to the prior owner for the remaining three lots.  The taxes went unpaid.  Plaintiff apparently became aware of the delinquent taxes in time to pay for two of the three lots, but did not become aware of the tax foreclosure on the fifth lot until after it had been foreclosed.  Plaintiff filed suit seeking to set aside the tax foreclosure because of a lack of notice (due process grounds).  The county defended on the basis that it provided notice to the addresses on the county tax records.  The trial court agreed and granted summary disposition in favor of the county and the ultimate purchaser of the lot. 

The Court of Appeals reversed, and entered summary judgment in favor of the Plaintiff.  The court found that the tax statutes required the County to review not just the tax records but the register of deeds records for addresses for notice. A review of the register of deeds’ records whould have revealed Plaintiff’s interest in the property, as well as his business address.  Because no notice was provided to Plaintiff at the address stated in the deed, due process was not satisfied.

Easement for “Ingress and Egress” Not Limited to Residential Use

In Kovacs v Lesar, an unpublished Michigan Court of Appeals opinion, an easement for “ingress, egress, and utilities” was established by a consent judgment.  Both properties were used as residences.  The owner of the dominant tenement subsequently opened a gun shop in his home, resulting in approximately 4-5 customers a day using the easement.  The owner of the servient tenement sued, claiming that the easement was limited to residential purposes, and that the additional cars overburdened the easement.  The trial court dismissed the complaint and the Court of Appeals affirmed.

The words “ingress and egress” are well-established in Michigan law and confer a right of passage.  Without additional limiting language, the unambiguous grant would include all types of traffic across the easement.

With respect to the overburdening, the trial court found that an additional 4-5 cars a day did not overburden the easement.  The Court of Appeal agreed, but held that nothing in the decision prohibited the servient tenement from suing again should the the easement become impermissibly overburdened in the future.

Master Deed is “Private Deed Restriction” that Survives Tax Sale; Purchaser of Two out of 10 Units is Not a Successor Developer

In Ferry Beaubien, LLC v Centurion Place on Ferry Street Condo. Assn., an unpublished Michigan Court of Appeals decision, the developer built 8 of 10 condominium units in a condominium project before going under.  The two units, labeled in the master deed as “need not be built,” were subsequently sold at tax sale and purchased by Ferry Beaubien, LLC, who attempted to use the two units as an urban garden.  The association’s president recorded an affidavit against the property pointing out that the units were soon to become general common elements if not constructed within the deadlines provided in a predecessor version of MCL §559.167(3).  Ferry Beaubien claimed it recorded, as a developer, an amendment to the Master Deed removing the two units from the property prior to the passing of the deadline.

Ferry Beaubien filed suit seeking a declaration that the restrictions on use in the condominium documents no longer applied to the two units.  The court held otherwise, relying on Lakes of the North Association v TWIGA Ltd. P’ship, 241 Mich App 91, 614 NW2d 682 (2000), which held that a covenant to pay homeowner association assessments was a “private deed restriction” within the meaning of MCL 211.78k(5)(e) and survived the tax sale.

The court also ruled that Ferry Beaubien was not a successor developer within the meaning of the MI Condominium Act and therefore had no authority to file an amendment to the Master Deed withdrawing the two condominium units, even if an amendment had been timely filed.  The court also declined to award the association costs and attorney fees in defending under MCL 559.206(b), finding that this was not a proceeding arising out of a default by a co-owner, but a proceeding filed by Ferry Beaubien to determine interests in land.

Purchase on Land Contract is a “Complete Replacement” of Property Destroyed by Fire

In Batton-Jajuga v Farm Bureau, a published Michigan Court of Appeals opinion, the plaintiff’s real property, insured by Farm Bureau, was destroyed in a fire.  She purchased another property on land contract and submitted a claim under the policy for replacement cost coverage.  Farm Bureau denied the claim, arguing that purchasing property on land contract is not a complete replacement for property owned in fee simple, and that, since the insured only paid $40,000 down on the $200,000 payment price, she had not “actually” incurred replacement costs.  The trial court ruled in favor of the insured and the court of appeals affirmed.

The court discussed the legal interests created and exchanged when property is sold on land contract, noting that the purchaser obtains equitable title to the property while the seller retains legal title as security for payment of the balance. The court found that, under the plain meaning of the policy, the land contract purchase was a “complete” replacement of the destroyed property.  It further found that, under the doctrine of equitable conversion, the insured had paid the entire amount of the purchase price at the time of entry into the land contract such that it had actually incurred the price, entitling the insured to full replacement benefits under the policy.

Condo Association Sanctioned for Recording Lien for Developer Litigation Assessment not Approved by Membership

After the Court of Appeals held that an assessment levied without co-owner approval to fund developer litigation was invalid and remanded the matter for the grant of summary disposition in favor of the co-owner, the trial court granted sanctions against the association for filing a frivolous action.  The association again appealed.

On second appeal, the Court of Appeals held that the grant of sanctions against the association was warranted.  Because the association knew that the assessment had not been approved by the co-owners, the association had no reasonable basis to believe that its allegation in the complaint that the assessment was for the “expenses of administration, maintenance, and repair of the common elements” was true.

It seems clear, after two (here and here) opinions in addition to this follow up, that Michigan courts will uphold limitations on litigation contained on a condominium association’s documents.  There is pending legislation that would give at least partial relief from such provisions.

Court of Appeals holds: (1) Amendment of Bylaws by Board did not Violate Co-owners’ Rights; (2) Hypertechnical Adherence to Roberts Rules Not Required; (3) Providing Records Not Required if Co-owner has Improper Purpose for Requesting; and (4) Gratituitous Provision of Web Services Not Compensable

In Vidolich v Saline Northview Condominium Association, an unpublished opinion of the Michigan Court of Appeals, a former board member’s relationship with the association went bitterly sour.  The full facts were not recited by the Court of Appeals; only those facts necessary to support the court’s decisions.

First, the co-owner argued that an amendment to the condominium bylaws lowering the quorum requirements if a quorum was not met at a first scheduled meeting of co-owners violated the requirement that any amendment adopted by the board “not materially alter or change the rights of the co-owners , mortgagees, or other interested parties.”  The court found that, if co-owners failed to attend a meeting of the association such that a quorum was not obtained, lowering the quorum at a subsequent meeting did not violate their rights, because the non-attending co-owners failed to exercise their rights at all.

Next, the co-owner argued on appeal that the association failed to comply with its bylaws which required that meetings be held in accordance with Roberts Rules of Order, by adopting standing rules without a majority vote and by failing to address his “points of order” raised at a meeting.  The court held that the “in accordance with” language did not require strict compliance with Roberts Rules, that it was unclear from a reading of Roberts Rules that adoption of the standing rules was a violation, and that the co-owner left the meeting without appealing the decisions on his points of order, thereby waiving his right to challenge them.

Third, the court addressed what were apparently several requests for records, including one in which the co-owner apparently requested to review “all” records. The court discussed provisions of both the MI Condominium Act and the MI Nonprofit Corporation Act regarding review and copying of records and whether the co-owner stated a proper purpose under either act (finding that a proper purpose was at least implicit in the MI Condominium Act), agreeing with the trial court that, after his first request was granted (and to which he never followed up), he had no proper purpose for his subsequent requests.

Next, the court discussed the co-owner’s claim for reimbursement of time and expenses in maintaining a web site.  The co-owner originally set up the web site in the hope of being elected to the board.  After he obtained his board position, the web site was used for association business.  After he resigned from the board, he took down association information and used the web site as a “gripe site.”  The court found, after review of the evidence, that his initial set up of the web site was gratuitous and not compensable, that his claim for web services was barred by the statute of limitations, and that any other claims for compensation were barred by his unclean hands in using the web site as a “gripe site.”

The court also considered, and rejected, claims regarding derivative actions as well as “reverse domain name hijacking.”

Violation of Local Ordinance does not Grant Private Right of Action

In McMillan v Douglas, an unpublished Michigan Court of Appeals opinion, the tenant sued the landlord to recover 39 months of rent paid when the landlord never obtained a rental permit as required by Battle Creek ordinance.  The ordinance provides that "no rent shall be accepted, retained or recoverable” during the period a landlord does not have a valid permit.  The landlord defended on the basis that the ordinance does not create a private cause of action.  The trial court agreed, and the court of appeals affirmed.

Absent an express indication to the contrary, an ordinance imposing a duty on a property owner does not give rise to a private cause of action.  After a careful examination of the ordinance, the court of appeals affirmed that the Battle Creek ordinance does not contain any provision from which a private cause of action could be inferred.

© Steve Sowell 2017