Call Us: (248) 986-2290

      
 

Seven Instances When a Michigan Condominium Association Requires Mortgagee Approval to Amend Its Condominium Documents

The Michigan Condominium Act, MCL 559.101, et. seq., contains various provisions related to the manner in which a condominium association may amend its master deed, bylaws and condominium subdivision plan (the “Condominium Documents”).  Excluding special rules pertaining to developers, under most circumstances an amendment to the Condominium Documents simply requires 2/3 co-owner approval.  See MCL 559.190.  However, there are seven instances when the condominium association also requires 2/3 first mortgagee approval.  Often times, attorneys unfamiliar with this area of law do not realize that mortgagee approval must be sought and obtained before recording any amendments to the Condominium Documents in the Register of Deeds for the county where the property is located.  This article addresses the seven occasions a condominium association will need to obtain 2/3 mortgagee approval in order to amend its Condominium Documents.

General Rule: 2/3 Co-owner Approval to Amend Condominium Documents

At first glance, the Michigan Condominium Act may appear to indicate that any amendment of the Condominium Documents will require both co-owner and mortgagee approval.  MCL 559.190(2) states:
Except as provided in this section, the master deed, bylaws, and condominium subdivision plan may be amended, even if the amendment will materially alter or change the rights of the co-owners or mortgagees, with the consent of not less than 2/3 of the votes of the co-owners and mortgagees. A mortgagee shall have 1 vote for each mortgage held. The 2/3 majority required in this section may not be increased by the terms of the condominium documents, and a provision in any condominium documents that requires the consent of a greater proportion of co-owners or mortgagees for the purposes described in this subsection is void and is superseded by this subsection. Mortgagees are not required to appear at any meeting of co-owners except that their approval shall be solicited through written ballot.  (emphasis added).

While the above statute appears to require 2/3 of the votes of the co-owners and mortgagees, the Michigan Condominium Act was amended in 2001 and again in 2002 to include a new provision: MCL 559.190a.  The new provision enumerates the only circumstances when first mortgagees are permitted to vote.

Seven Exceptions to the General Rule: When Mortgagee Approval is Required

MCL 559.190a(9) states:
Notwithstanding any provision of the condominium documents to the contrary, first mortgagees are entitled to vote on amendments to the condominium documents only under the following circumstances:

    • Termination of the condominium project.
    • A change in the method or formula used to determine the percentage of value assigned to a unit subject to the mortgagee’s mortgage.
    • A reallocation of responsibility for maintenance, repair, replacement, or decoration for a condominium unit, its appurtenant limited common elements, or the general common elements from the association of co-owners to the condominium unit subject to the mortgagee’s mortgage.
    • Elimination of a requirement for the association of co-owners to maintain insurance on the project as a whole or a condominium unit subject to the mortgagee’s mortgage or reallocation of responsibility for obtaining or maintaining, or both, insurance from the association of co-owners to the condominium unit subject to the mortgagee’s mortgage.
    • The modification or elimination of an easement benefiting the condominium unit subject to the mortgagee’s mortgage.
    • The partial or complete modification, imposition, or removal of leasing restrictions for condominium units in the condominium project.
    • Amendments requiring the consent of all affected mortgagees under section 90(4) [related to changing the method or formula used to calculate the percentage of value of units other than for voting purposes].

Thus, while MCL 559.190(2) on its face requires both 2/3 co-owner and mortgagee approval, the Michigan legislature made clear in the 2001 and 2002 amendments to the Condominium Act that  MCL 559.190a(9) limits mortgagee approval to only those seven specific circumstances listed above.

 Conclusion

Given the 2001 and 2002 amendments to the Condominium Act, condominium associations should be aware of the seven circumstances that require mortgagee approval in order to amend Condominium Documents.  If your association is considering amending its Condominium Documents, please feel free to contact our office with any questions regarding the amendment process or whether your amendments will require first mortgagee approval.

The team at Hirzel Law, PLC is composed of award-winning real estate attorneys that can offer quality representation for Michigan clients. Regardless of if you are a commercial real estate developer or individual homeowner, our real estate attorneys can help. We fully understand how unique and complex the challenges that our clients may face, and our real estate attorneys are prepared to help in whatever way necessary. Contact Hirzel Law online or call 248-986-2921 (Farmington) or 231-486-5600 (Traverse City) or 616-319-9964 (Grand Rapids) to learn how our Michigan real estate lawyers can help protect your Michigan real estate investment today.

Print Friendly, PDF & Email
Share Post
Written by

info@hirzellaw.com

No comments

Sorry, the comment form is closed at this time.

%d bloggers like this:

Hi

Ask us anything, or share you feedback