Can a co-owner withhold assessment payments if they are dissatisfied with their condominium association?

Condominium assessments are the lifeblood of any condominium association. A condominium association cannot function and provide essential services to co-owners unless assessments are collected. Unfortunately, dissatisfied co-owners often threaten to escrow or withhold assessments as a means to get what they want. Examples of situations where co-owners commonly threaten to withhold assessments and/or withhold assessments are as follows:

  1. A co-owner has suffered damage to their unit and/or the appurtenant common elements and the condominium association has not responded as quickly as the co-owner desires.
  2. A co-owner has suffered damage to their unit and/or the appurtenant common elements and the co-owner is not satisfied with the quality of repairs.
  3. A co-owner is under the mistaken belief that they are a tenant and that they are allowed to deduct the costs of repairs and make repairs as set forth in Rome v Walker, 38 Mich App 458, 196 NW 2d 850 (1972).
  4. A co-owner withholds assessments on the basis that they are dissatisfied with accounting practices and/or financial decisions made by the board of directors.
  5. A co-owner is dissatisfied with the board of directors and withholds payment for political reasons and/or encourages other co-owners not to pay assessments.

While a co-owner may believe that they are justified in withholding assessments for the above reasons, or other reasons, Michigan law does not allow for a co-owner to withhold an assessment that was properly assessed under the Michigan Condominium Act and the condominium documents. Specifically, the Michigan Court of Appeals has held as follows:

MCL 559.165; MSA 26.50(165) requires each condominium unit owner to comply with the project’s master deed, bylaws, and the rules and regulations found in and promulgated under the Condominium Act. In this case both the bylaws and the act require the assessment of fees to cover the common expenses of the project. MCL 559.169(3); MSA 26.50(169)(3); Newport West Condominium Bylaws, art II, § 4. Under MCL 559.169(4); MSA 26.50(169)(4) a co-owner may not be exempted from contributing his or her share of the common expenses by nonuse or waiver of the use of any common element or by abandonment of his or her unit. The sums assessed against a co-owner by the association that remain unpaid constitute a lien upon the delinquent co-owner’s unit. MCL 559.208; MSA 26.50(208). This section of the act empowers the association to foreclose on the lien or to seek a money judgment. Section 139 of the act, MCL 559.239; MSA 26.50(239), provides:

“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).”

In our view the phrase “services or management” as employed in the above section embraces the audits and properly funded reserves desired by defendant. Simply stated, the Condominium Act does not provide a co-owner with the self-help remedy of withholding part or all of his assessed fees.

Newport West Condominium Ass’n v Verner, 134 Mich App 1, 11; 350 NW2d 818 (1984).

A co-owner that withholds a properly levied assessment risks being subject to collection action by the condominium association as this would constitute a default under the condominium documents. MCL 559.206 provides in pertinent part as follows with respect to a default under the condominium documents:

A default by a co-owner shall entitle the association of co-owners to the following relief:
(a) Failure to comply with any of the terms or provisions of the condominium documents, shall be grounds for relief, which may include without limitations, an action to recover sums due for damages, injunctive relief, foreclosure of lien if default in payment of assessment, or any combination thereof.
(b) In a proceeding arising because of an alleged default by a co-owner, the association of co-owners or the co-owner, if successful, shall recover the costs of the proceeding and reasonable attorney fees, as determined by the court, to the extent the condominium documents expressly so provide.

A co-owner that withholds assessments will likely be faced with having to pay late fees, interest, legal fees and/or a lawsuit. Additionally, MCL 559.208 allows for the foreclosure of a lien to collect unpaid assessments, which would also include improperly withheld assessments. Accordingly, a co-owner that withholds assessments risks losing their condominium unit by doing so. In closing, if a condominium association encounters a situation where a co-owner has improperly withheld assessments, they should contact the association’s counsel to take appropriate action to collect the assessments as co-owners are not allowed to escrow or withhold properly levied assessments under Michigan law.

 

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 khirzel@cmda-law.com. Please view The Michigan Community Association Law Blog at http://www.micondolaw.com for additional resources on Michigan Community Association Law.