In Michigan, the Michigan Condominium Act, MCL 559.157, requires that the “…books, records, contracts, and financial statements concerning the administration and operation of the condominium” be available for examination by the co-owners at convenient times. Accordingly, most condo documents also contain provisions that require the books and records of a condo association to be made available for inspection by a co-owner. However, most condo documents do not provide a detailed procedure for responding to a co-owner’s request for inspection. Accordingly, it is important for condo associations and property managers to be aware of the requirements in the Michigan Nonprofit Corporation Act, MCL 450.2101, et seq., that relate to a request for condo association document inspections. If a condominium association is organized as a Michigan Nonprofit Corporation, the Michigan Court of Appeals has held that the requirements of MCL 450.2487 must be complied with as well, and has held as follows:
…MCL 450.2487(2) and (3) explicitly condition a right to examine records on having a “proper purpose” for so doing. The Condominium bylaws and MCL 559.157(1) do not, but because legally vindicating a frivolous or vexatious request would at least theoretically be impossible, we think that a “proper purpose” is nevertheless an implicit condition of making any such request to examine records. Additionally, “our courts have recognized a stockholder’s common-law right to inspect corporate records for a proper purpose,” noting that a proper purpose might include “raising doubts whether corporate affairs had been properly conducted by the directors or management” but would not include “requests to satisfy idle curiosity or aid a blackmailer” or “mere speculation of mismanagement.” North Oakland Co Bd of Realtors v Realcomp, Inc, 226 Mich App. 54, 58–59; 572 NW2d 240 (1997). At its heart, the development of legal rights such as this one has always been for the purpose of providing people with tools to maintain order and decorum, not to provide people with swords with which to create chaos and harm.
Vidolich v Saline Northview Condo Assn, unpublished opinion of the Court of Appeals, issued December 5, 2017 (Docket No. 334579), 2017 WL 6028112, p *7.
The Michigan Nonprofit Corporation Act, specifically MCL 450.2487, allows for a co-owner to perform a document inspection of the books and records of the condo association after providing a written demand. The written demand must describe a proper purpose for the inspection and specify the records desired for the document inspection. If the document inspection request is made by an attorney, or agent of the co-owner, the written demand for the document inspection must include a power of attorney or other writing that authorizes the attorney or agent to perform the inspection. If the condo association does not permit a document inspection within five (5) business days after a proper document inspection demand is received, a co-owner may file an action in the circuit court to compel a document inspection of the books and records of the association. A condo association may place reasonable restrictions on a document inspection. However, if a court orders a document inspection, a court may also order the condo association to pay the co-owner’s costs, including reasonable attorney’s fees, unless the condo association can demonstrate that it had a good faith reasonable basis for the denial of the document inspection. Accordingly, it is extremely important for a condo association and/or its managing agent to provide a timely response to a request for document inspection.
However, the Articles of Incorporation or Bylaws can be amended to disallow a document inspection of the condo association’s books and records if the condo association makes a good faith determination that it would impair the privacy rights or free association of the co-owners, would impair the lawful purpose of the condo association, or that it is not in the best interests of the condo association to permit a document inspection. Similarly, a board resolution could be passed preventing a document inspection on the above grounds as well. As such, condo associations and property managers should be aware of the rules relating to document inspection requests pertaining to the books and records of the condo association. In short, merely putting the document inspection request on the condo association’s “to-do” list could be an expensive mistake based upon the five (5) business day response period.. Accordingly, condo associations and managing agents should take immediate action when receiving a document inspection request and permit the document inspection in a timely manner or disallow the document inspection if the board of directors determines that the above criteria have not been satisfied.
Kevin Hirzel is the Managing Member of Hirzel Law, PLC and concentrates his practice on commercial litigation, community association law, condominium law, Fair Housing Act compliance, homeowners association law and real estate law. Mr. Hirzel is a fellow in the College of Community Association Lawyers, a prestigious designation given to less than 175 attorneys in the country. Mr. Hirzel has been recognized as a Michigan Super Lawyer’s Rising Star in Real Estate Law by Super Lawyers Magazine, a Leading Lawyer in Condominium & HOA law by Leading Lawyers Magazine, and as a Best Lawyer in Real Estate Law by U.S News and World Report’s Best Lawyers Publication. He represents community associations, condominium associations, cooperatives, homeowners associations, property owners and property managers throughout Michigan. He may be reached at (248) 450-0339 or kevin@hirzellaw.com.
