Court rules that the Michigan Condominium Act permits bylaws to allow for an Association to recover attorney’s fees for defending a lawsuit

In Stadler v Fontainebleau Condominiums Association, unpublished opinion of the Court of Appeals, issued April 11, 2019 (Docket No. 343303), the Michigan Court of Appeals held that the plain language of the condominium bylaws permitted the condominium association to recover attorney’s fees and costs for successfully defending a co-owner’s lawsuit.  The court further held that the condominium bylaws were enforceable and did not conflict with the Michigan Condominium Act, MCL 559.101, et seq., specifically MCL 559.206 and MCL 559.207.

Facts

Plaintiff, Donna Stadler, owned a unit in the Fontainebleau Condominium. In June 2016, Stadler attempted to lease her unit and submitted a lease application to Defendant, Fountainbleu Condominium Association (the “Association”). The condominium bylaws required that a co-owner submit a lease application for approval at least 10 days before entering into a lease.  Stadler did not receive a response to her application for 22 days and lost a potential tenant.  Stadler then entered into a lease with another tenant without obtaining the Association’s approval.  The Association later advised Stadler that the lease was not approved and Stadler was in violation of the condominium bylaws.

In July 2016, Stadler filed a complaint against the Association seeking damages of $371 plus costs and fees for the 12 days of lost rent for the Association’s alleged failure to timely approve the initial lease.  Stadler and the Association agreed to dismiss the case without costs.  The Association then filed a lien on Stadler’s unit for the attorney’s fees and costs incurred in defending the lawsuit, pursuant to Article XVIII, Section 3 of condominium bylaws, which stated:

In any proceeding arising because of an alleged default by a Co-owner, lessee, tenant, non Co-owner resident and/or guest, the Association, if successful, shall be entitled to recover the costs of the proceeding and such reasonable attorney fees (not limited to statutory fees) as may be determined by the Court, but in no event shall any Co-owner be entitled to recover such attorney fees. The Association, if successful, also shall be entitled to recoup the costs and attorney’s fees incurred in defending any claim, counterclaim or other matter asserted against the Association from the Co-owner asserting the claim, counterclaim or other matter ….

Stadler filed another complaint against the Association seeking to void the lien, but the parties later stipulated to dismiss that action as well.  In October 2017, Stadler filed another complaint seeking to enjoin the Association from foreclosing on its lien and seeking declaratory relief that the lien was invalid under the Michigan Condominium Act.  The trial court granted summary disposition in favor of the Association and Stadler appealed.

Analysis

The Court of Appeals upheld the trial court as it determined that the condominium bylaws constituted “a binding contractual agreement between the governing entity and its members to the extent that the bylaws do not conflict with or are “not inconsistent” with state law.”  Conlin v Upton, 313 Mich App 243, 254-255; 881 NW2d 511 (2015); See also MCL 559.156(a) (stating that bylaws may contain provisions appropriate for administering the condominium association that are “not inconsistent with this act or any other applicable laws.”).  The court further held that:

Condominium bylaws are interpreted according to the rules governing the interpretation of a contract. Accordingly, this Court begins by examining the language of the bylaws. Words are interpreted according to their plain and ordinary meaning….In interpreting contractual agreements, this Court assumes that contracting parties want their contract to be valid and enforceable….Consequently, this Court is “obligated to construe contracts that are potentially in conflict with a statute, and thus void as against public policy, where reasonably possible, to harmonize them with the statute.” (citations omitted).

The Court of Appeals held that Stadler’s argument that the condominium bylaws conflicted with the Michigan Condominium Act, MCL 559.101, et seq., was without merit.  Specifically, it held that:

Under MCL 559.206(b), in an action arising from an alleged default by a condominium owner, a successful owners’ association “shall recover the costs and reasonable attorney fees associated with the action, ‘as determined by the court, to the extent the condominium documents expressly so provide.’ ” Windemere Commons I Ass’n v O’Brien, 269 Mich App 681, 683; 713 NW2d 814 (2006), quoting MCL 559.206(b). A successful association or owner may also recover attorney fees, “to the extent that the condominium documents expressly so provide[ ]” in an action by an owner against the association to compel enforcement of the bylaws’s terms. MCL 559.207.

Plaintiff argues that, because the article of defendant’s bylaws at issue in this case allows for the recovery of attorney fees in situations other than those contemplated by MCL 559.206(b) and 559.207, they are in conflict with the Condominium Act. We disagree. The bylaws state, in pertinent part, that “[t]he Association, if successful, also shall be entitled to recoup the costs and attorney fees incurred in defending any claim, counterclaim or other matter asserted against the Association from the [co-owner] asserting the claim, counterclaim or other matter[.]” Article XVIII, Section 3 of defendant’s bylaws thus allows for the recovery of attorney fees by defendant when it successfully defends itself from any claim asserted by any owner, and therefore allows for a broader recovery of attorney fees by defendant than does MCL 559.206(b) and MCL 559.207.


Article XVIII, Section 3 does not conflict with or contradict either of the cited statutory provisions; rather, it merely provides for the recovery of attorney fees by defendant in additional circumstances….There is no provision in the Condominium Act that restricts an association’s recovery of attorney fees to the situations described in the act. We conclude that Article XVIII, Section 3 of defendant’s bylaws is enforceable and may be “harmonized” with MCL 559.206(b) and MCL 559.207….Therefore, defendant may recover attorney fees under the bylaws if it meets the contractual requirements set forth in the bylaws.

However, it is important to note that the Court of Appeals did not determine that the Association was entitled to attorney’s fees and costs, as it would need to be determined in a later proceeding whether the Association was a “successful party” in any of the lawsuits.  Specifically, the Court held that:

Plaintiff’s complaint was for injunctive and declaratory relief only, and related only to whether the lien on her property for attorney fees was unenforceable as a matter of law. While the trial court ruled in favor of defendant on that issue, it was not presented with the issue that plaintiff now contends it should have decided. Plaintiff did not seek in this action a determination that defendant was not a “successful party” under the bylaws. And defendant did not seek in this action an award of attorney fees or attempt to foreclose on the lien. In other words, the issue of whether defendant meets the contractual prerequisites for an award of attorney fees, or of the specific amount of attorney fees, was not presented to the trial court and is therefore not yet ripe for appellate review. Plaintiff’s claim is a “hypothetical or contingent” claim that occurred before plaintiff sustained “an actual injury” in the form of a factual determination by the trial court regarding whether defendant is entitled to attorney fees. Huntington Woods, 279 Mich App at 615. Plaintiff may raise the issue of whether defendant was a “successful party” in an action by defendant to recover attorney fees, or, if relevant, as a defense to an action to foreclose on the liens at issue.

Conclusion

While most condominium bylaws have provisions that mirror the requirements of MCL 559.206 and MCL 559.207, and permit the Association to recover attorney’s fees and costs in the context of an action to enforce the condominium documents, many condominium bylaws do not have language permitting the condominium association to recover attorney’s fees and costs solely for defending an action initiated by a co-owner.  Michigan condominium associations should amend their condominium documents to ensure that the enforcement provisions contained in the condominium bylaws are broad enough to recover attorney’s fees and costs if the Association is forced to defend a claim by a co-owner and the Association does not also bring a claim to enforce the condominium bylaws in the same action.

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 2013-2019, an award given to only 2.5% of the attorneys in Michigan each year. Mr. Hirzel has been named a Leading Lawyer in Condominium & HOA law by Leading Lawyers Magazine in 2018 and 2019, an award given to less than 5% of the 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) 478-1800 or kevin@hirzellaw.com.