When purchasing a condominium unit in Michigan, buyers are often surprised at the number of legal documents governing not only the condominium project itself, but also the association tasked with administering, managing and maintaining the condominium. Given the length and complexity of most governing documents, there can be conflicting provisions by, amongst and within the governing documents. This article explores what a Board of Directors should do when the documents conflict and the importance of including a hierarchy of what documents control within the governing documents.
Governing Documents of a Condominium and Its Association
At a minimum, a condominium in Michigan will have a Master Deed, Condominium Bylaws and the Condominium Subdivision Plan. See MCL 559.108. The association governing the condominium will have Articles of Incorporation and may have Association Bylaws (a/k/a Corporate Bylaws) and Rules and Regulations. See generally, MCL 450.2304 and MCL 559.165. Therefore, it is fairly common for most condominiums in Michigan to have six different documents typically totaling over 100 pages to review, analyze and coordinate. Given that governing documents are often amended over time, conflicts can and do arise between and amongst the documents and even within the documents themselves. What should a Board of Directors do when faced with this dilemma?
Tiered Approach to Resolving Conflicts
Unfortunately, neither the Michigan Condominium Act, MCL 559.101, et seq. nor the Administrative Rules interpreting the Condominium Act, R. 559.101, et seq., contain a hierarchy of what governing document takes precedence over the other documents. Thus, the Board of Directors should answer the following questions:
1. Do the Documents Actually Conflict? The first issue is to determine whether the governing documents, in fact, actually conflict. This may sound glaringly obvious, but often a Board of Directors will receive an inquiry from a Co-owner stating that the documents conflict when in reality they do not.
2. Does the Condominium Act Address the Situation? In Michigan, the Condominium Act takes precedence over anything in the governing documents that conflicts with the statute. See generally, Allied Supermarkets, Inc v Grocers’ Dairy Co, 391 Mich 729, 735; 219 NW2d 55, 58-59 (1974). If the governing documents conflict, but the Condominium Act is clear, then the Condominium Act controls. Thus, there are circumstances when the governing documents conflict, but it does not matter because the Condominium Act controls.
3. Do the Governing Documents Contain a Hierarchy? Some more recent condominium documents in Michigan will include a hierarchy of what documents take precedence in the event of a conflict. Such forward looking provisions are rare in most condominium documents, particularly documents drafted by Developers. Below is a sample provision:
In the event that any provision of this Master Deed conflicts with the Condominium Act, the Condominium Act will control. In the event that any provision of this Master Deed conflicts with any provision of the Condominium Bylaws, the Condominium Subdivision Plan, any Association Bylaws, the Articles of Incorporation and any Rules and Regulations, the following order of priority from greater to lesser precedence controls:
1. Master Deed
2. Condominium Subdivision Plan
3. Articles of Incorporation
4. Condominium Bylaws
5. Association Bylaws
6. Rules and Regulations
If any provision of this Amended and Restated Master Deed is held in whole or in part to be unenforceable for any reason, the remainder of that provision and the Master Deed will be severable and remain in effect.
4. If the Governing Documents Do Not Have a Hierarchy, Can the Association Amend the Governing Documents? If the documents are clearly contradictory, the question becomes whether the Board of Directors can garner enough votes to amend the documents to reflect the will of the Co-owners. If the resolution is not contentious, it may be easier to amend the governing documents in order to remove any ambiguity. On the other hand, if the resolution is contentious, then it may be difficult to gather the requisite 66 and 2/3% of eligible Co-owners to amend the documents.
5. Can the Board of Directors Rely on the Advice of an Attorney? If the Board of Directors is unsure whether the provisions conflict, one way to protect the Board’s decision is to have an attorney write an opinion letter for the Board to rely upon. Under the Michigan Nonprofit Corporation Act, specifically MCL 450.2541, the Board of Directors may rely upon the advice of an attorney. The attorney may determine that the provisions do not conflict, that one provision controls over another conflicting provision or make other recommendations to the Board of Directors. For example, there are additional considerations for an attorney to review, such as 1) whether the documents were appropriately enacted, 2) the timing of when the documents were drafted, 3) whether recorded documents take precedence over unrecorded documents, etc.
Conflicting provisions can and do arise in condominium documents. The question often boils down to “What should the Board of Directors do about it?” If you are in need of an attorney to review and provide advice in such circumstances, please contact our office.
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.