Real Property Notes Blog
Can a Condominium Association Levy Fines?
The Michigan Condominium Act provides that a default by a co-owner shall entitle the condominium association to certain types of relief, including "the levying of fines against co-owners after notice and hearing thereon and the imposition of late charges for nonpayment of assessments as provided in the condominium bylaws or rules and regulations of the condominium.”
The key words are “after notice and a hearing thereon” and “as provided in the condominium bylaws or rules and regulations.”
“After notice and a hearing” means that an association must first give notice of an alleged violation to the co-owner and conduct a hearing BEFORE levying a fine. So many times I see an association’s first letter to a co-owner advising that a fine is being levied for a violation. That fine is not enforceable because there was no notice or hearing before it was levied.
The condominium documents must contain a fines procedure. Either the condominium bylaws must contain an article for the levying of fines, or, if the documents allow the board to adopt rules and regulations, the board must adopt a fines procedure in accordance with the provisions of the documents. That fines procedure must provide a mechanism to give the co-owner notice of the alleged violation and an opportunity for a hearing before the fine is imposed.
The author has posted both a model fines procedure for an association to adopt and a fines complaint form to consider. Note: these documents are provided as an example and probably need to be customized for your particular circumstances. Use at your own risk, or contact the author for assistance.
Court of Appeals Opinion on Mortgagee Liability for Assessments
The Michigan Court of Appeals issued an opinion on March 18, 2014, determining that a mortgagee’s liability for assessments after foreclosure of a mortgage accrues as of the date of the sheriff’s sale, not as of the date of expiration of the redemption period. This has been a bone of contention between condominium associations and mortgagees for as long as I have been practicing law.
The Michigan Condominium Act provides that a mortgagee of a unit is not liable for assessments which accrued prior to the mortgagee’s “acquisition of title” to the condominium unit through foreclosure. In a foreclosure by advertisement (the preferred method of foreclosing a mortgage), there is a redemption period after the date of the sheriff’s sale, usually six months. Mortgagees have argued that, because the co-owner/mortgagor may redeem the property during that six month period, the mortgagee does not acquire title until the end of the redemption period.
After analyzing the case law and statutes, the Michigan Court of Appeals held that the foreclosing mortgagee acquires equitable title on the date of the foreclosure sale, even though it does not acquire indefeasible title until the end of the redemption period. It is the acquisition of any form of title which triggers liability under the Michigan Condominium Act.
This is a major decision for condominium associations, finally putting to rest mortgagee arguments regarding when liability for assessments accrues.
A copy of the opinion is available at <http://www.michbar.org/opinions/appeals/2014/031814/56638.pdf>.
Withholding Assessments
May a co-owner escrow assessments because he is unhappy with a decision of the board of directors, or because a repair has not been made (or made to his satisfaction)?
The short answer is “no.” The Michigan Condominium Act provides that A co-owner may not assert in an answer, or set off to a complaint brought by the association for non-payment of assessments the fact that the association of co-owners or its agents have not provided the services or management to a co-owner(s).” In real estate law, this is sometimes referred to as independent covenants: the co-owner’s obligation to pay assessments is independent of the association’s obligation to provide managmeent or services.
Condominiums are funded by assessment of members. If a member refuses to pay his or her assessments, the other members have to pick up the slack. If a group of members were allowed to withhold assessments because they disagreed with board action, it could cripple the operation of the association by depriving the association of the funds necessary to stay in operation. This provision of the Michigan Condominium Act is a recognition of that.
What should a member who is dissatisfied with board action do? Under most condominium documents, the owner’s recourse is either to petition for recall of the board members, or to simply elect a different board at the next annual election.
If you don’t like what Congress does, you impeach its members, or you vote for someone else at the next election. You don’t get to withhold your taxes.
American Flags and Condominiums
Our condominium bylaws prohibit the display of flags without express written approval of the association. One member flies an American flag from his porch night and day, claiming federal law allows him to do so. Is there such a law?
Not only is there a federal law, there is a provision of the Michigan Condominium Act which sanctions display of american flags.
The Freedom to Display the American Flag Act of 2005, 4 USC §5, provides in pertinent part that "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.”
Under this federal law, a co-owner may display his flag on limited common elements to which he has exclusive possession (e.g., a porch or patio or deck not shared with another co-owner) or anywhere within his unit.
This federal law specifically provides that the right to display is subject to "any reasonable restriction pertaining to the time, place, or manner of displaying the flag of the United States necessary to protect a substantial interest of the condominium association, cooperative association, or residential real estate management association.”
A flag that is displayed from a deck such that it hangs onto a general common element sidewalk and blocks the sidewalk would be subject to the association’s substantial interest in the free use of the sidewalk and the association could require the flag to be hung in such a fashion that it did not block pedestrian traffic.
The Michigan Condominium Act provides, in MCLA §559.156a, that "A developer or association of co-owners shall not prohibit a co-owner from displaying a single United States flag of a size not greater than 3 feet by 5 feet anywhere on the exterior of the co-owner's condominium unit. A developer or association of co-owners shall not enforce a prohibition in existence before the effective date of this section on or after that effective date.”
This provision is more problematic, because of the widely varying definition of “unit.” Under the Michigan Condominium Act, MCLA §559.104, “condominium unit" means that portion of the condominium project designed and intended for separate ownership and use, as described in the master deed, regardless of whether it is intended for residential, office, industrial, business, recreational, use as a time-share unit, or any other type of use.
In a traditional condominium project built with multiple units under a single roof, “unit” means the air space inside the four walls, ceiling, and floor: the exterior of the building in which the unit resides is defined as general common elements. Does the co-owner have the right to display a 3 x 5 flag on the exterior wall of the building?
The short answer is that a court has not yet interpreted this provision of the Michigan Condominium Act. My advice to associations is that, if the co-owner’s flag is 3 x 5 feet or smaller, and is appropriately attached to the general common elements in a way that does not cause damage or obstruct use of the common elements by others, do not try to make the co-owner take it down.
Medical Marihuana and Condominiums
The Michigan Medical Marihuana Act (“MMMA”) allows a qualifying patient to grow up to 12 marihuana plants in an enclosed locked facility. Does this Act allow a co-owner to grow marihuana in his or her condominium unit?
The MMMA provides that a qualifying person "shall not be subject to arrest, prosecution, or penalty in any manner, or denied any right or privilege, including but not limited to civil penalty or disciplinary action by a business or occupational or professional licensing board or bureau, for the medical use of marihuana in accordance with this act.” This does NOT mean that use or growing of marihuana is now legal; it remains illegal, but the qualifying person is exempt from prosecution.
Most condominium bylaws contain a provision that no co-owner shall engage in any “unlawful” activity. Because possession or manufacture of marihuana is still illegal (unlawful) under both state and federal law, growing marihuana plants in a condominium unit or on the common elements is a violation of the condominium bylaws.
Is an action by a condominium association to stop the co-owner a “penalty,” or a "denial of a right of privilege,” or a “disciplinary action”? In this author’s opinion, no. “Penalty" occurs in the clause “subject to arrest, prosecution or penalty in any manner” which refers to state action. Because possession or manufacture of marihuana is still illegal and the qualifying person is only exempt, then an action by an association to prohibit growth of marihuana does not deny the co-owner of any “right or privilege.” Finally, “disciplinary action” is modified by the additional words “business or occupational or professional licensing board or bureau” and a condominium association is not such a licensing board or bureau.
As of this writing, this is only an opinion. To the author’s knowledge, the MMMA has not been tested in the condominium context by a court.