CHANGES TO MICHIGAN CONDOMINIUM ACT

 

As you may have heard, Governor Engler signed a Bill last month making a number of changes to the Michigan Condominium Act.  The purpose of this letter is to highlight some of those changes that directly affect the Condominium Association. 

Those changes include:

•     Section 47(a) of the Condominium Act has been revised to clarify the maintenance responsibilities of an Association for modifications made by persons with disabilities.  Simply stated, the Association is responsible for the maintenance, repair and replacement of the improvement or modification only to the extent of the cost currently incurred by the Association for the maintenance, repair and replacement of the common elements covered or replaced by the improvement or modification.  All costs in excess of those expenses would be the responsibility of the co-owner.  This section also requires that a co-owner making such modifications is required to name the Association as an additional insured on adequate liability insurance covering the modification.  Also, the modifications must be allowed to a person with disabilities who resides in or regularly visits the unit, and if that person is temporarily absent from the unit for a period of less than 12 months, the Association may not require the removal of the alteration in the meantime.  This is an area that, in our opinion, requires an amendment to most Documents.

 

•    A new subsection to Section 67 of the Act deals with those “perpetually incomplete” condominiums where the Developer creates the additional units within the required time, but does not construct them.  Now, if all of the units are not completed within 10 years from the date of commencement or within 6 years from the date that the Developer last exercised its expansion rights, the project must be closed.  That is done by the Developer either removing the undeveloped lands and units from the condominium, or if it fails to do so, the undeveloped portions become general common element and the Developer’s rights to construct units upon that land terminates.  There is not, however, an automatic reallocation of the percentages of value, and the Association may be forced to request a Court to alter the percentage of values.

•    The amendment process, particularly the method of obtaining the consent of mortgagees has been streamlined which should hopefully make that process easier to accomplish and less expensive to the Association.  Mortgage companies are given a limited time to vote on a proposed amendment, or they are deemed to have consented to it.  Further, the Act now specifically defines materiality and what amendments must be submitted to the mortgage companies for their approval.

•     Previously, an Association being sued by a co-owner was unable to recover its costs and attorney fees even if it was successful in that defense.  Now, Section 107 has been revised to allow the recovery of the Association’s costs and reasonable attorney fees, IF the Condominium Documents expressly so provide.  We recommend that Associations  amend their documents to include such a provision.

•     Section 108 of the Act has been clarified to clearly provide that a co-owner has six months to redeem their unit from foreclosure of the Association’s condominium assessment lien.  Some Courts had previously allowed one year.  Further, now first mortgagees are also required to notify the Association upon their foreclosure of their first mortgage.  This was previously not required, and some times caused the Association to lose its lien position in the unit because it was unaware of a first mortgage foreclosure.  Now, the Association can take steps to protect its position.

•     Section 111 has also been clarified to provide that upon the sale of a unit, not only unpaid assessments but also all unpaid fines, collection charges, attorney fees, interest and late charges are due and payable from the Closing proceeds.

•     Section 112, dealing with co-owners renting their units, has also been changed.  Co-owners are now required to either provide a lease form to the Association or to provide the Association with the name and address of the potential lessees along with the rental amount and the due dates under the proposed agreement.  This would apply if there was a written lease or any other agreement granting possession to another party.  Further, that section, which previously had allowed the Association to “garnish” a tenant’s rent to the co-owner if the co-owner was in default, now authorizes the Association to evict the tenant if the tenant refuses to pay his rent to the Association when the co-owner is in arrears.

•    A new section has been added to the Act, Section 176, which clarifies the limitation period within which an Association can sue a Developer or contractor for construction or management problems.  Now, an Association has three years from the transitional control date (the date the co-owners take control from the Developer) or two years from the date the cause of action accrues, whichever occurs later.