Michigan House Bill 5980 was introduced on October 19, 2016. House Bill 5980 would amend MCL 559.154, Section 54 of the Michigan Condominium Act, and require that all disputes between co-owners and/or the Association, including those that involve the interpretation of the condominium documents, be submitted to mediation prior to any party commencing a lawsuit, unless the dispute is submitted to arbitration. House Bill 5980 proposes amending MCL 559.154, in pertinent part, as follows:
(8) The bylaws shall contain a provision providing that arbitration of provide that disputes, claims, and grievances arising out of or relating to the interpretation of the application of the condominium document documents or arising out of disputes among or between co-owners shall be submitted to arbitration and that the parties to the dispute, claim, or grievance shall accept the arbitrator’s decision as final and binding, upon the election and written consent of the parties to the disputes, claims, or grievances and upon written notice to the association. The commercial arbitration rules of the American arbitration association Arbitration Association are applicable to any such arbitration.
(9) In the absence of the election and written consent of the parties under subsection (8), neither after mediation under subsection (12) a co-owner nor or the association is prohibited from petitioning may petition a court of competent jurisdiction to resolve any dispute, claim, or grievance.
(10) The Ongoing mediation under subsection (12) or the election by the parties to submit any dispute, claim, or grievance to arbitration prohibits the parties from petitioning the courts regarding that dispute, claim, or grievance.
(11) Subsections (8), (9), and (10) apply only to condominium projects established on or after May 9, 2002. the effective date of the amendatory act that added this subsection.
(12) The bylaws shall require mediation of disputes, claims, and grievances described in subsection (8), unless the matter is arbitrated under subsection (8). Legal counsel for or a member of the board of directors of the association of co-owners shall not serve as a mediator.
While mediation can be an effective way to resolve disputes between co-owners and/or a condominium association in certain circumstances, mandatory mediation as proposed in House Bill 5980 poses numerous practical problems.
- Lack of Resolution for Emergencies. In cases of emergency, where there are issues that relate to the health, safety and welfare of the co-owners, the condominium association would not be able to obtain a temporary restraining order or otherwise resolve an issue that needs immediate attention. Examples would include situations where a condominium association needs immediate access to a unit that has been water damaged to prevent mold growth, gaining access to a unit that has attracted rats due to uncleanliness, obtaining an injunction to prevent marijuana from being illegally grown on the premises, etc.
- Lack of Mechanism to force Mediation to occur. Mediation will not occur if the parties cannot agree on a mediator, they are unwilling to pay a mediator, they do not respond to a request to mediate or a co-owner simply cannot be found. In any of these scenarios, House Bill 5980 appears to be a complete roadblock to pursuing legitimate claims in court. A co-owner could simply indicate that they are unwilling to participate in mediation or arbitration to avoid a potential claim by the condominium association. Similarly, a condominium association could simply indicate that it is unwilling to participate in mediation or arbitration to avoid a claim by an aggrieved co-owner.
- Gamesmanship in Mediation. There is no time limit on the proposed mediation and if a party attempts to stay in mediation forever, as a means to bar a lawsuit, the dispute is exacerbated instead of resolved.
- Judges are better arbiters of the law. Interpretation of condominium documents is something that is done as a matter of law. See Hastings Mut Ins Co v Safety King, Inc, 286 Mich App 287, 292; 778 NW2d 275, 278 (2009) (“If the contractual language is unambiguous, courts must interpret and enforce the contract as written because an unambiguous contract reflects the parties’ intent as a matter of law.”) Specifically, the condominium documents constitute a contract and the interpretation of a contract is best left to a judge, who has formal training in interpreting contracts, and not a mediator that may have never attended law school. See Rossow v Brentwood Farms Dev, Inc, 251 Mich App 652, 656; 651 NW2d 458, 460–61 (2002) (“The Master Deed and Bylaws ran with Plaintiffs property as a matter of law and contract.”).
- Increased costs. House Bill 5980 may make it more expensive to resolve disputes between co-owners and/or a condominium association. By way of example, if a co-owner disputed that they owed assessments, and mediation was required, the association would be entitled to bill the costs of collection, i.e. 100% of the cost of the mediator and the legal fees incurred by the association to the co-owner under MCL 559.206 and the condominium documents. Accordingly, while mediation may resolve some disputes, for disputes that are not resolved, it may unnecessarily create additional fees for a co-owner to pay.
Accordingly, the best approach would be to make mediation optional in disputes between co-owners and/or condominium associations. Similar to the current version of MCL 559.154, which allows for disputes to be arbitrated if all parties agree, mediation should only occur if all parties are in agreement. If all parties do not agree to mediation, it is not likely to be productive as mediation is only effective if all parties are interested in resolving their dispute. Forcing unwilling participants to participate in mediation is unlikely to yield positive results.
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 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. He has been a Michigan Super Lawyer’s Rising Star in Real Estate Law from 2013-2018, an award given to only 2.5% of the attorneys in Michigan each year. Mr. Hirzel was named an Up & Coming Lawyer by Michigan Lawyer’s Weekly in 2015, an award given to only 30 attorneys in Michigan each year. He represents community associations, condominium associations, cooperatives, homeowners associations, property owners and property managers throughout Michigan. He may be reached at (248) 480-8758 or email@example.com.