Last year, we posted information about Michigan House Bill 5655 and asked our readers to write their legislators in opposition. Subsequently, we were led to believe that the author of the bill, Representative Peter Lucido, did not plan to pursue it any further, but unfortunately he has reintroduced the same legislation in this year’s 2017 session as HB 4015. Therefore, we are re-posting our analysis of this legislation below. We are again asking you to please contact your representative to oppose this legislation. You can download a sample letter here.

We hope you will join The Meisner Law Group, P.C. in strong opposition to House Bill 4015, which proposes to amend three (3) sections of the Condominium Act.

New section:  MCL 559.170 Annual Budget Meeting

This bill would amend the Michigan Condominium Act to add a requirement that a condominium association must obtain majority co-owner approval of the annual budget at an “annual budget meeting” of the co-owners. The result of the co-owners’ refusal to approve the annual budget would result in an association not being able to pay its bills, which would derail the successful administration and operation of the condominium development, and it would depreciate the value and marketability of the individual condominium units.  Adding to all of this are the increased costs to the association in connection with calling and holding potentially multiple special budget meetings each year, and the costs of printing and mailing the multiple meeting notices, renting a venue to hold the meeting, paying the manager and/or attorney to assist the volunteer board with all of this.  Most co-owners do not want the responsibility of approving the annual budget, and the average co-owner is not qualified nor knowledgeable of the Association’s overall administrative and long terms needs to make that decision.  That is one of the reasons why they elect a board in the first place, so they do not have to worry about managing the finances of the association.  Current sections of the Condominium Act already adequately protect co-owners’ rights to be informed of the Association’s finances where the Act requires the co-owners to be provided with a copy of the yearly financial statement and gives them the right to inspect the financial statements, books and records of the Association; see MCL 559.154(5) and 559.157(1), respectively. If the co-owners truly believe that the budget should be prepared differently, they can run for the board and get themselves elected. The proposed legislation reflects a lack of basic understanding about the real-world management of condominium associations.

Repeal: MCL 559.239 No Right of Offset for Assessments

Another potentially dangerous flaw in this proposed legislation is the proposed deletion of Section 139 of the Michigan Condominium Act:

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).

This section of the statute is currently in place to keep condominiums from being financially ruined by co-owners who will make up every excuse to not pay assessments bringing the association to grinding halt.  The obligation to pay assessments should remain separate from the obligation to provide services.

Update: a recent unpublished appellate court decision cited MCL 559.239 (above) – Shoreline East Condominium Association v. Gray (2017 WL 535552). The co-owners claimed they did not have to pay delinquent assessments due to alleged mismanagement of the association, but the court firmly rebuked that argument based on MCL 559.239. It is unclear what would have happened without this language in place.

Amended: MCL 559.207 Dispute Resolution

This pending addition proposes that a co-owner can request assistance of the “administrator” to resolve its dispute with the Association arising from violation of condominium documents or the Condominium Act, and the “administrator” may investigate, seek to resolve, or request the county prosecuting attorney or the State Attorney General to sue association for injunctive or other relief. This will encourage each and every co-owner who is in violation to file a claim with the state that the condominium documents have not been enforced properly, which will bring to a stranglehold the ability of the association to function.  Condominium associations must continue to have the ability to govern their projects efficiently and enforce their documents. Further, the language in the proposed legislation refers to the use of the “Administrator” in resolving disputes, and the Administrator was a position that functioned only as part of the former governing body overseeing Michigan condominiums, which has not existed since 1983!   Who will handle this at the state and pay for these increased costs (taxpayers?), as any delay due to a backlog could jeopardize the financial security, physical safety, or any number of issues that face condominium projects in their typical day to day administration.