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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 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 kevin@hirzellaw.com.

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kevin@hirzellaw.com

Kevin Hirzel is the Managing Member of Hirzel Law, PLC. Hirzel Law has offices in Farmington, Grand Rapids, and Traverse City, Michigan with a fourth office location in Chicago, Illinois. Mr. Hirzel focuses his practice on condominium law, homeowners association law, and real estate law. He is a fellow in the College of Community Association Lawyers (“CCAL”), a prestigious designation given to less than 175 attorneys in the country. Mr. Hirzel formerly served on the CCAL National Board of Governors and is a former member of the Community Associations Institute’s (“CAI”) Board of Trustees, an international organization with over 40,000 members worldwide that is dedicated to improving community associations. Mr. Hirzel has been recognized as a Leading Lawyer in Michigan by Leading Lawyers, a distinction earned by fewer than 5% of all lawyers licensed in Michigan. He has been named a Michigan “Rising Star” in real estate law by Super Lawyers Magazine, a designation is given to no more than 2.5% of the attorneys in Michigan each year. Mr. Hirzel was also named as a “Go-To-Lawyer” in condominium and real estate law by Michigan Lawyer’s Weekly. Hirzel Law was also voted the best law firm in Metro Detroit in the Detroit Free Press Best of the Best awards. He is the Co-Chairman of the State Bar of Michigan’s Real Property Law Section Committee for Condominiums, PUDs & Cooperatives. Mr. Hirzel has authored numerous articles on community association law for publications such as the Michigan Community Association News, Michigan Real Property Review, Macomb County Bar Briefs and the Washington Post. He is also the author of “Hirzel’s Handbook: How to operate a Michigan Condo or HOA”, which is available for purchase on amazon.com. Mr. Hirzel has been interviewed on community association legal issues by various media outlets throughout the country, such as CBS, CNBC, Common Ground Magazine, Community Association Management Insider, the Dan Abrams Show on SiriusXM Radio, the Detroit News, Dr. Drew Midday Live on KABC Radio, Fox Business News, Fox News, HOALeader.com, the Law & Crime Network, Michigan Lawyer’s Weekly, NPR, WWJ News Radio and WXYZ. Mr. Hirzel is a dynamic speaker and frequently lectures on community association law throughout Michigan, as well as nationally at the CAI National Law Seminar, and is a two-time winner of the best manuscript award at the CAI National Law Seminar.

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