Real Property Notes Blog
Amendment to Bylaws Restricting Rentals Applies to “Lease” Existing Prior to Amendment
In Highfield Beach at Lake Michigan v Sanderson, a published Michigan Court of Appeals opinion, the condominium bylaws originally allowed rentals of units for periods of 14 days or longer. Although an amendment was proposed in 2008 and adopted by the membership changing leasing restrictions, there was no evidence that it was ever approved by mortgagees, and it was never recorded. Sanderson purchased a unit in 2013, constructed a 5600 square foot home, and entered into a 15-year agreement, entitled “Lease Agreement," with CRA Management whereby CRA would lease the property to vacationers for minimum terms of 14 days. In 2016, an amendment was adopted limiting rental of units to minimum terms of four consecutive months. When Sanderson continued to lease his unit for periods of less than four months, the association filed suit to enforce the new restriction. Sanderson defended on the basis of MCL 559.212, which provides that an amendment changing leasing restrictions "shall not affect the rights of any lessors or lessees under a written lease otherwise in compliance with this section and executed before the effective date of the amendment.” Sanderson also counterclaimed against the association and filed a third party complaint against board members for breach of contract, negligence, and breach of fiduciary duty. The trial court granted summary disposition in favor of the association on its complaint, dismissed the counterclaim and third party complaint, and awarded the association costs and attorney fees. Sanderson appealed.
On appeal, the decisions were affirmed. Regarding the “Lease Agreement,” the court held that, despite its title, the contract was in actuality a management contract, because CRA had no right of possession. Thus, MCL 559.212 did not apply to “grandfather” the contract.
Regarding the claim for breach of negligence and fiduciary duty against the board members, because they were not board members at the time of the 2008 purported amendment, the court held that they could not be held liable for Sanderson’s claims regarding the actions (or inactions) concerning the 2008 amendment. The court also held that, because the 2008 amendment was never recorded, the association did not breach the provision of the condominium documents requiring it to keep amendments available for review by co-owners. This provision could not be construed to apply to amendments that were not approved or effective.
Curiously, while all three judges affirmed the grant of attorney fees to the association, the panel split on whether the statutory provision was sufficient or whether the association also needed to allege and prove a breach of the bylaw provision regarding attorney fees. One judge held that the amendment to MCL 559.206 in 2000 which added the provision “to the extent the condominium documents expressly so provide” turned a claim for attorney fees into a contractual claim; if the condominium documents do not contain a provision for recovery of attorney fees, the association is not entitled to them.
Change in Leasing Restrictions Enforced Against Co-owner Who Failed to Comply with Changes
In Weatherstone Condo. Assn v Stoitsaides, an unpublished Michigan Court of Appeals opinion, the Defendants purchased their condominium unit in 2013 and rented it out, providing the association with a copy of the lease which expired by its own terms in 2015. In 2016, the condominium bylaws were amended to add leasing restrictions. In relevant part, the amended bylaws provided that "In the event of a sale or transfer of ownership of a leased Unit, or in the event such a Unit is no longer being leased or held out for lease, all automatic rights to lease that Unit shall terminate and no further leasing of the Unit shall take place without first obtaining the written approval of the Board of Directors in compliance with these provisions.” Despite repeated requests, the Defendants never provided the association with any other leases. Believing that the Defendants were again leasing the unit, the association filed suit asking for a declaration that it could evict any occupants who were not co-owners, for an injunction prohibiting defendants from violating the leasing restrictions, for a judgment for accrued fines and administrative fees, and for attorney fees and costs. The association moved for summary disposition on the basis there was no genuine issue of fact that the Defendants were not in compliance with the amendment or the leasing rules, and the trial court granted the association judgment. The defendants appealed.
The Court of Appeals affirmed. However, the opinion makes it clear that the association won only because the Defendants failed to support their arguments on appeal with either analysis or citation to relevant authority. In a footnote, the court also chided Plaintiff for not having offered several important exhibits into the trial court record, and chided the trial court for not having provided any analysis in its ruling.
The MI Condominium Act provides, in MCL 559.212(1), after the transitional control date, a condominium association may amend leasing restrictions by vote of the co-owners, but states that any such amendment “shall not affect the rights of any lessors or lessees under a written lease otherwise in compliance with this section and executed before the effective date of the amendment….” While it appears that there may have been a time period after the amendment was approved that Defendants’ unit was not leased, the record is simply not clear. This case has little, if any, persuasive value.
What Does It Mean to Rebuild a Condominium Unit “Substantially In Accordance with the Original Plans and Specifications”?
In DeCaminada v Hammond, an unpublished Michigan Court of Appeals opinion, the Hammonds purchased a site condominium unit containing a residence. The residence subsequently burned. The Hammonds rebuilt, but the new home, although within the “building envelope” specified in the condominium documents, was larger than the first home and approximately 30 feet closer to the DeCaminada’s home. The Hammonds received approval for their new home design from the condominium association. The DeCaminadas sued, claiming a breach of the condominium documents, arguing that the replacement home had to substantially match the plans and specifications of the original home unless the membership unanimously agreed otherwise. As relevant to this dispute, the Bylaws provides "Any such reconstruction or repair shall be substantially in accordance with the Master Deed and the original plans and specifications for any damaged improvements located within the Unit unless the Co-owners shall unanimously decide otherwise.” The Bylaws also provided "No co-owner shall make alterations, modifications or changes in any of the units or common elements, limited or general, without the express written approval of the board of directors.” The trial court granted summary disposition to the Hammonds, and the DeCaminadas appealed.
The Michigan Court of Appeals affirmed. While the first cited provision could support the DeCaminada’s argument, when read in context with the second provision, the court held that “plans and specifications” meant the original plans and specifications, such as building envelope and number of bedrooms specified elsewhere in the condominium documents. In context, the second provision allowed the board of directors to approve any building plans that conformed to the plans and specifications, even if those plans differed from the home that existed before the casualty.
Award of Attorney Fees Can Include Paralegal Fees if Paralegal is Qualified
In Wexford Parkhomes Condo. Assn. v Kajma, an unpublished Michigan Court of Appeals opinion, the association was awarded a judgment against a delinquent co-owner, but the court denied fees related to work by the firm’s paralegal and reduced some of the fee for work performed by the firm’s attorneys. The association appealed.
On appeal, the court noted that MCR 2.626 provides that an award of attorney fees can include time spent by a paralegal who contributed non-clerical legal support if the paralegal meets the criteria set forth in Article 1, §6 of the Bylaws of the State Bar of Michigan. However, although the firm claimed in its motion that the paralegal was so qualified, the law firm never provided evidence to the trial court of the paralegals qualifications.
The Court of Appeals also overturned the trial court’s decision reducing or adjusting some of the attorney time. In one instance, the trial court reduced the claimed time of 10 hours to prepare the summary disposition motion to three hours. The appeals court held that the 10 hours was not unreasonable in relation to the work needed to address the many issues raised by the pro per defendant.
The opinion contains a fairly good summary of the standards and burden of proof to be applied when a party makes application for attorney fees under the MI Condominium Act.