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HB 4676: New Procedures for Removing Discriminatory Provisions from Covenants and Master Deeds

On May 24, 2019, Rep. Sarah Anthony introduced HB 4676 in order to make it easier for Michigan condominium associations and homeowners associations to remove discriminatory provisions from a covenant, declaration or master deed.  42 U.S.C. § 3604 of the Federal Fair Housing Act makes it unlawful to:

(c) To make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement, with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familial status, or national origin, or an intention to make any such preference, limitation, or discrimination.

Similarly, the Michigan Elliott-Larsen Civil Rights Act, specifically, MCL 37.2505, provides as follows:

(1) A condition, restriction, or prohibition, including a right of entry or possibility of reverter, that directly or indirectly limits the use or occupancy of real property on the basis of religion, race, color, national origin, age, sex, familial status, or marital status is void, except a limitation of use as provided in section 503(1)(c) or on the basis of religion relating to real property held by a religious institution or organization, or by a religious or charitable organization operated, supervised, or controlled by a religious institution or organization, and used for religious or charitable purposes.

(2) A person shall not insert in a written instrument relating to real property a provision that is void under this section or honor such a provision in the chain of title.

While provisions that discriminate based on race, sex, national origin, familial status, sexual orientation, gender identity or disability are illegal and not enforceable, the current procedure for removing these repugnant provisions from governing documents is not efficient.   Other than filing an administrative or court action for a violation of the Fair Housing Act or Michigan Elliott-Larsen Civil Rights Act, the options to remove the unenforceable restrictive covenants are limited.

The Michigan Condominium Act, specifically MCL 559.190(1), provides as follows with respect to amending a master deed without a co-owner vote:

(1) The condominium documents may be amended without the consent of co-owners or mortgagees if the amendment does not materially alter or change the rights of a co-owner or mortgagee and if the condominium documents contain a reservation of the right to amend for that purpose to the developer or the association of co-owners. An amendment that does not materially change the rights of a co-owner or mortgagee includes, but is not limited to, a modification of the types and sizes of unsold condominium units and their appurtenant limited common elements. (emphasis added)

Accordingly, unless the condominium documents contain an express reservation that permits the board of directors to make non-material amendments, such as removing an illegal provision, a co-owner vote would be required under MCL 559.190.  While a board of directors should certainly refuse to enforce any discriminatory provision, it is advisable to also take the next step of removing any discriminatory provisions from the governing documents as well.

Similarly, in the context of homeowners associations, a declaration or other restrictive covenant can only be amended as a matter of contract.  As previously discussed in a prior blog article, in Conlin v Upton, 313 Mich App 243 (2015), the Michigan Court of Appeals held that that unanimous consent is required to amend a restrictive covenant unless the covenant contains an express amendment provision.  Accordingly, it is even more difficult to remove discriminatory provisions from restrictive covenants.

HB 4676 would greatly simplify the process for removing illegal and unenforceable discriminatory covenants.  Specifically, HB 4676 would  preclude any person or the register of deeds from recording a discriminatory covenant. HB 4676 would also allow condominium and homeowners associations to remove discriminatory covenants through a majority vote of the board of directors.  Finally, HB 4676 would also allow for a court action to remove discriminatory provisions from existing deeds, after notice to all involved.  The language of HB 4676 provides in pertinent part as follows:

Sec. 5. (1) A homeowners’ or property owners’ association, acting through a simple majority vote of its board, may amend the association’s governing documents for the purpose of removing any restriction, covenant, or condition, including a right of entry or possibility of reverter, that directly or indirectly prohibits or limits the conveyance, encumbrance, rental, occupancy, or use of real property on the basis of race, sex, national origin, familial status, sexual orientation, or gender identity, or on the basis of an individual having a sensory, mental, or physical disability or using a trained dog guide or service animal because the individual is blind or deaf or has a physical disability.

(2) If the board of a homeowners’ or property owners’ association receives a written request by a member of the association that the board exercise its amending authority under subsection (1), the board shall, within a reasonable time, amend the governing documents, as provided under this section.

 (3) Board action under this section does not require the vote or approval of the property owners.

(4) An amendment under subsection (1) may be executed by any board officer.

(5) An amendment under subsection (1) must be recorded with the register of deeds for the county where the property is located and state the following:

“This amendment strikes from these restrictions, covenants, and conditions the provisions that are prohibited under the prohibited restrictive covenants act. Specifically, this amendment strikes the provisions that directly or indirectly prohibit or limit the conveyance, encumbrance, rental, occupancy, or use of the property on the basis of race, sex, national origin, familial status, sexual orientation, or gender identity, or on the basis of an individual having a sensory, mental, or physical disability or using a trained dog guide or service animal because the individual is blind or deaf or has a physical disability.”

Sec. 6. (1) A property owner may record in the records of the register of deeds for the county where the property is located an amended deed or other instrument to remove any restriction, covenant, or condition, including a right of entry or possibility of reverter, that directly or indirectly prohibits or limits the conveyance, encumbrance, rental, occupancy, or use of real property on the basis of race, sex, national origin, familial status, sexual orientation, or gender identity, or on the basis of an individual having a sensory, mental, or physical disability or using a trained dog guide or service animal because the individual is blind or deaf or has a physical disability.

(2) An amended deed or other instrument under this section may be executed solely by the property owner. The deed or instrument must be executed and acknowledged in the manner required by law.

(3) An amended deed or other instrument under this section must state the following:

“This amended instrument strikes from an original instrument restrictions, covenants, or conditions that are prohibited under the prohibited restrictive covenants act. Specifically, this amended instrument strikes the provisions that directly or indirectly prohibit or limit the conveyance, encumbrance, rental, occupancy, or use of the property on the basis of race, sex, national origin, familial status, sexual orientation, or gender identity, or on the basis of an individual having a sensory, mental, or physical disability or using a trained dog guide or service animal because the individual is blind or deaf or has a physical disability.”

Sec. 7. (1) If a deed or other instrument contains a provision that is prohibited under this act, the owner, occupant, or tenant of the property that is subject to the provision or any member of the board of a homeowners’ or property owners’ association that would have a right to enforce such a provision may bring an action in the circuit court in the county in which the property is located to have the provision stricken from the records of the register of deeds.

(2) An action under this section must be brought as an in rem, declaratory judgment action and the title of the action must be the description of the property. The owners, occupants, or tenants of the property or any part of the property are necessary parties to the action.

(3) In an action under this section, if the court finds that any provisions of the deed or instrument are prohibited under this act, it shall enter an order striking the provisions from the records of the register of deeds and eliminating the provisions from the deed or other instrument for the property described in the complaint.

Sec. 8. A person that refuses, before recording, to remove from a deed or other instrument a restriction, covenant, or condition, including a right of entry or possibility of reverter, that directly or indirectly prohibits or limits the conveyance, encumbrance, rental, occupancy, or use of real property on the basis of race, sex, national origin, familial status, sexual orientation, or gender identity, or on the basis of an individual having a sensory, mental, or physical disability or using a trained dog guide or service animal because the individual is blind or deaf or has a physical disability is liable for any damage sustained by another person because of the refusal.

Sec. 9. (1) Except as otherwise provided in section 5(2), this act does not create a duty on the part of an owner, occupant, tenant, association, board, or member or officer of a board to amend a recorded deed or instrument or a governing document as provided in this act, or to bring an action as authorized under this act.

(2) An owner, occupant, tenant, association, board, or member or officer of a board is not liable for failing to amend a recorded deed or instrument or a governing document or to pursue an action in court as authorized under this act.

However, before HB 4676 is enacted into law, some of the procedural aspects of the bill should be clarified.  Specifically,

  1. The term “homeowners’ or property owners’ association” should be specifically defined so that it includes condominium associations so there is no confusion that condominium association boards can utilize the procedure contained in the bill.  Alternatively, similar language could be added to MCL 559.190.
  2. HB 4676 contains a procedure that allows individual owners to record a document striking provisions of covenants that are discriminatory.  There are concerns that the bill does not have a requirement that an individual owner provide notice to any other owners that would be impacted by the removal of a covenant or restriction.  
  3. There is also a concern that the bill allows for the striking of provisions that “indirectly” discriminate and that the term “indirectly” is not defined.  The proposed  procedure could potentially allow an owner to file a document that purports to remove restrictions that the owner does not want to comply with under the guise that the restrictions are indirectly discriminatory, when in fact they are not.  By way of example, somebody could claim that they are not allowed to rent their unit because they are a certain race, religion, gender, etc. and then record a document purporting to eliminate a restriction on renting altogether.  It is necessary to have a gatekeeper, such as the board of directors of a community association or a judge to make these decisions.

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) 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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