Michigan Court rules that MCL 559.132 does not allow for a Condominium to be expanded to add units after 6 years.
On December 1, 2016, the Grand Traverse County Circuit Court ruled that units could not be added to a condominium after the expiration of the six (6) year time frame contained in MCL 559.132 in Irish v Scheppe Investments, Inc., et. al., Grand Traverse County Circuit Case No. 2016-031750-CH. As was discussed in Was your Condominium Properly Expanded under the Michigan Condominium Act, MCL 559.132(c) provides a six (6) year time cap on an expansion to a condominium that adds units. MCL 559.132 provides in pertinent part:
If the condominium project is an expandable condominium project, the master deed shall contain the following:
(a) The explicit reservation of an election on the part of the developer or its successors to expand the condominium project.
(b) A statement of any restrictions on the election in subdivision (a), including, without limitation, a statement as to whether the consent of any co-owners is required, and if so, a statement as to the method whereby the consent is ascertained; or a statement that the limitations do not exist.
(c) A time limit based on size and nature of the project, of not more than 6 years after the initial recording of the master deed upon which the election to expand the condominium project expires. (emphasis added).
In the above case, the Traverse Bay RV Park Condominium, a recreational RV condominium located in Acme Township, Michigan and was established on August 31, 2001 by the recording of its Master Deed and Condominium Bylaws. On August 12, 2005, the Developer, Traverse Bay RV Park, Inc., recorded a First Amendment to Master Deed (the “First Amendment”). Article X of the First Amendment purported to reserve to the Developer a subsequent right to enlarge the Condominium from 217 units to 350 units up to six (6) years after the recording of the First Amendment, inter alia. On June 7, 2007, Traverse Bay RV Park, Inc. assigned its rights as the Developer of the Condominium to Defendant, Scheppe Investments, Inc. (“Scheppe”). On July 2, 2009, Scheppe recorded a Second Amendment to Master Deed (the “Second Amendment”). On August 2, 2010, Scheppe recorded a Third Amendment to Master Deed (the “Third Amendment”). The Third Amendment did not purport to affect the size of the Condominium or the expandability of the Condominium.
On September 3, 2010, Defendants Scheppe and the Traverse Bay RV Park Condominium Association recorded a First Amendment and Restatement to Third Amendment to Master Deed (the “Restatement”). The Restatement attempted to reserve the right to expand the Condominium from 217 units to 350 units at any time, and without any limitation or reference to the six (6) year period set forth in Article X of the First Amendment. On September 28, 2015, Scheppe and the Traverse Bay RV Park Condominium Association recorded a Statement of Clarification to the First Amendment and Restatement to the Third Amendment to the Master Deed (the “Clarification”). The Clarification purported to reflect the intention of the Restatement to “renew” the six (6) year period to expand the Condominium as set forth in Article X of the First Amendment. On January 12, 2016, Scheppe recorded a Fourth Amendment to Master Deed (the “Fourth Amendment”) that purported to “renew” the six (6) year period in the First Amendment for an additional and six (6) years.
In granting summary disposition, the Court held that the Developer and Condominium Association’s attempts to reserve the right to expand the condominium outside of the six (6) year time period were illegal, unenforceable and void ab initio and that MCL 559.190 did not allow for the the six (6) year time period to be extended. A copy of the court’s order can be found here. Accordingly, while some condominium associations and developers attempt to expand condominiums outside of the six (6) year time period contained in MCL 559.132, the safer course of action is to create a separate condominium in the expandable condominium if the land is going to be developed.
Kevin Hirzel is a Partner at Cummings, McClorey, Davis & Acho, P.L.C. and leads 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://micondolaw.com for additional resources on Michigan Community Association Law.