Is your Michigan Condominium Association prepared to handle a co-owner’s request to inspect its books and records?
In Michigan, 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. Most condominium documents also contain provisions that require the books and records of a condominium association be made available for inspection by a co-owner. However, most condominium documents do not provide a detailed procedure for responding to a co-owner’s request for inspection. Accordingly, it is important for condominium associations and property managers are aware of the new timing requirements in the Michigan Nonprofit Corporation Act that relate to a request to inspect the books and records of a condominium association.
Specifically, MCL 450.2487 allows for a co-owner, either in person, by attorney, or through another agent to inspect the books and records of the condominium association after providing a written demand. The written demand must describe a proper purpose for the inspection and specify the records that the co-owner desires to inspect. If the request is made by an attorney, or agent of the co-owner, the written demand must include a power of attorney or other writing that authorizes the attorney or agent to perform the inspection. In the event that the condominium association does not permit an inspection within five (5) business days after a demand is received, a co-owner may file an action in the circuit court to compel an inspection of the books and records of the association. A condominium association may place reasonable restrictions on an inspection. However, if a court orders an inspection, a court may also order the condominium association to pay the co-owner’s costs, including reasonable attorney’s fees, unless the association can demonstrate that it had a good faith reasonable basis for the denial. Accordingly, it is extremely important for a condominium association and/or is managing agent to provide a timely response to a request for inspection of records.
However, the Articles of Incorporation or Bylaws can be amended to disallow an inspection of the association’s books and records if the condominium 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 association, or that it is not in the best interests of the association to permit an inspection. Similarly, a board resolution could be passed preventing an inspection on the above grounds as well. As such, condominium associations and managing agents should be aware of the new rules relating to requests to inspect the books and records of the association. In short, merely putting the request on the association’s “to do” list could be an expensive mistake based upon the new deadline in which an inspection must be permitted. Accordingly, associations and managing agents should take immediate action when receiving a request to inspect records and permit the inspection in a timely manner or disallow the inspection if the board of directors determines that the above criteria has not been satisfied.
Kevin Hirzel is a Partner at Cummings, McClorey, Davis & Acho, P.L.C. and runs the community association practice group. He frequently represents Builders, Community Associations, Condominium Associations, Cooperatives, Co-Owners, Developers, Homeowner Associations, Investors, Property Owners and Property Managers throughout the State of Michigan. Cummings, McClorey, Davis & Acho, P.L.C. has Michigan offices in Clinton Township, Grand Rapids, Livonia and Traverse City. Mr. Hirzel can be contacted at (734) 261-2400 or firstname.lastname@example.org. Please view The Michigan Community Association Law Blog at http://www.micondolaw.com for additional resources on Michigan Community Association Law.