Real Property Notes Blog

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In Vidolich v Saline Northview Condominium Association, an unpublished opinion of the Michigan Court of Appeals, a former board member’s relationship with the association went bitterly sour.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.

Short-Term Rentals Violate Restrictions to “Private Dwelling” and Prohibiting “Commercial Use"

In Eager v Peasley, a published Michigan Court of Appeals opinion, a property owner rented her house out through homeaway.com for short term rentals, consiting of periods between 2 nights and 7 nights.  Other lot owners filed suit seeking an injunction on the basis that the rentals violated covenants provideing that "[T]hat the premises shall be used for private occupancy only; that no building to be erected on said lands shall be used for purposes otherwise than as a private dwelling and that “that no commodity shall be sold or offered for sale upon said premises and no commercial use made thereof.  The trial court dismissed the case, but the Michigan Court of Appeals reversed.

After reviewing several prior cases interpreting restrictions to “private residence,” “one single private dwelling house,” and “residence purposes only,” the court held that the use here was inherently transient and violated the restrictions.  The court also found that the short term rentals violated the “no commercial use” restriction, adopting the reasoning of a previous, unpublished Court of Appeals opinion.

By a footnote, the court noted that it had not been asked to address, and did not comment on, whether long-term rentals of dwellings for private residential use would violate the “no commercial use” provision of the restrictions.

© Steve Sowell 2018