Court Rules Condo Association is Entitled to Attorney’s Fees for Bylaw Violations
One of the fundamental concepts of condominium living is that anyone acquiring an interest in the condominium must comply with the condominium documents. The Michigan Condominium Act, specifically MCL 559.165, states that, “[e]ach unit co-owner, tenant, or nonco-owner occupant shall comply with the master deed, bylaws, and rules and regulations of the condominium project and this act.” In most cases, the condominium bylaws will also contain a provision that mirrors MCL 559.165 and requires compliance with governing documents. However, it is not uncommon for co-owners to violate the condominium bylaws, either due to ignorance, misinterpretation of the condominium documents or willful noncompliance. Accordingly, at some point in time, the board of directors is likely going to be required to take action to enforce the condominium bylaws.
As previously discussed in our article “Does the Board of Directors of a Michigan Condominium Association or HOA have a duty to enforce the Master Deed, Bylaws or other Restrictive Covenants as Written?”, the board of directors has an obligation to enforce the governing documents. In fact, MCL 559.207 states that a co-owner may maintain an action against a condominium association, it offers and directors to compel the officers and directors to enforce the condominium documents if they fail to do so.
Unfortunately, enforcing violations of the condominium documents is often an unbudgeted expense. While it is advisable for condominium associations to budget for unanticipated legal issues, such as bylaw violations, it is not unusual for the board of directors to debate whether they should spend money on remedying bylaw violations due to budgetary constraints. In considering whether to pursue a bylaw enforcement action, condominium associations should be aware that in most cases they are entitled to a mandatory award of attorney’s fees and costs if they prevail in a bylaw enforcement action against a co-owner. Specifically, MCL 559.206(b) provides as follows:
A default by a co-owner shall entitle the association of co-owners to the following relief:
(b) In a proceeding arising because of an alleged default by a co-owner, the association of co-owners or the co-owner, if successful, shall recover the costs of the proceeding and reasonable attorney fees, as determined by the court, to the extent the condominium documents expressly so provide.
Michigan Court of Appeals Rules in Favor of Condo Associations
As will be discussed below, in Homestead Shores Assn v Entwistle, unpublished opinion of the Court of Appeals, issued February, 11, 2021 (Docket No. 351952), the Michigan Court of Appeals ruled that a trial court committed reversible error in failing to award a condominium association attorney’s fees and costs after it prevailed in a bylaw enforcement action.
Understanding the Facts of the Case: Homestead Shores Assn v Entwistle
Homestead Shores Association is a condominium association located in Oakland County, Michigan that is charged with administering the affairs of the Homestead Shores Condominium. Russel and Tina Entwistle are co-owners in the condominium. The condominium association filed a complaint alleging that the co-owners failed to properly maintain the exterior of their condominium unit in violation of the condominium bylaws. The co-owners failed to answer the complaint and were defaulted. The plaintiffs filed a motion for entry of a default judgment and requested an award of attorney’s fees and costs pursuant to MCL 559.206 and the condominium documents. The trial court awarded the condominium association costs but declined to award any attorney’s fees in entering the default judgment. The condominium association appealed the trial court’s denial of attorney’s fees for establishing a violation of the condominium bylaws.
Analyzing The Outcome of the Case: Homestead Shores Assn v Entwistle
In reversing the trial court, the court of appeals determined that the trial court judge abused their discretion in failing to award attorney’s fees under the Michigan Condominium Act and the condominium bylaws. Specifically, the Court held that an award of attorney’s fees was mandatory as the condominium association prevailed by obtaining a default judgment. The court of appeals reasoned as follows:
Attorney fees are also recoverable if they are part of a contractual agreement between the parties. Fleet Business Credit, LLC v. Krapohl Ford Lincoln Mercury Co., 274 Mich. App. 584, 589; 735 N.W.2d 644 (2007). The Condominium Act discusses an award of attorney fees in the context of litigation between a homeowners’ association and co-owners, stating, “In a proceeding arising because of an alleged default by a co-owner, the association of co-owners or the co-owner, if successful, shall recover the costs of the proceeding and reasonable attorney fees, as determined by the court, to the extent the condominium documents expressly so provide.” MCL 559.206(b)….Article XIX, § 2 of the Homestead Shores bylaws states:
In any proceeding arising because of an alleged default by any Co-owner, the Association, if successful, shall be entitled to recover the costs of the proceeding and such reasonable attorney’s 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’s fees.
In a case involving an analogous bylaws provision, this Court has previously found error requiring reversal when a trial court denied an award of attorney fees to a prevailing condominium association. Windemere Common I Ass’n, 269 Mich. App. at 683-684. For the same reasons, we conclude that the trial court abused its discretion when it ignored the clear and unambiguous language of MCL 559.206(b) and Article XIX, § 2 of the bylaws. The operative language of Article XIX, § 2 calls for plaintiff’s recovery of reasonable attorney fees in any “successful” proceeding arising from an alleged default by a co-owner. Plaintiff’s complaint alleged that defendants were in violation of restrictions regarding exterior home maintenance, and plaintiff was successful in that it obtained a default judgment against defendants…. In other words, the bylaws not only allow, but require, an award of reasonable attorney fees. (emphasis added).
Accordingly, the court of appeals remanded the case to the trial court and ordered that the trial court award attorney’s fees and costs to the condominium association as the prevailing party.
Court Concludes Co-Owners Who Violate Bylaws Must Pay Attorney Fees and Costs
The decision in Homestead Shores Assn v Entwistle, unpublished opinion of the Court of Appeals, issued February, 11, 2021 (Docket No. 351952) affirms the long settled principle in Michigan that a co-owner who violates the condominium bylaws will be responsible for paying for the condominium association’s attorney fees and costs if the condominium association is the prevailing party in court. Given that most condominium associations are organized as nonprofit corporations, with limited funds, it only makes sense that the wrongdoer would be responsible for paying attorney’s fees and that the co-owners that comply with the condominium documents should not bear these expenses. Accordingly, condominium associations that are debating on whether to take a violating co-owner to court should remember that they have an obligation to enforce the condominium bylaws and the ability to recover attorney’s fees and costs. Failing to enforce the condominium bylaws may lead to a decrease in property values in the long term or may be seen by other co-owners as an invitation to violate the condominium bylaws. Accordingly, pursuing condominium bylaw violations should be viewed as an investment in the long-term success of the community as opposed to an unnecessary expense for a condominium association.
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 is also a member of the Community Associations Institute’s (“CAI”) National Board of Trustees. Mr. Hirzel has been a Michigan Super Lawyer’s Rising Star in Real Estate Law from 2013-2020, 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 from 2018-2020, 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) 397-6596 or email@example.com.