A necessary component of running a functional condo association is the collection of delinquent maintenance assessments. While many condo associations can yield account resolution through a demand letter and/or recording a lien against the unit, some delinquent accounts may require the initiation of foreclosure, which is provided for by Michigan Condominium Act, MCL 559.101, et seq. Foreclosure can be a daunting task for many condo associations, due to the specific statutory requirements and procedures involved. Hirzel Law, PLC, can assist condo associations throughout the collection process and ensure claims, like those exhibited in Mary Frye v Golfpointe Village Condominiums at Plumbrook, unpublished opinion of the Court of Appeals, issued March 10, 2022 (Docket No. 355864), are validly defended.
Factual Background
Golfpointe Village Condominiums at Plumbrook is a condo project governed by a Master Deed and Bylaws, in accordance with the Michigan Condominium Act, MCL 559.101, et seq. Pursuant to the bylaws, the condo association was authorized to levy assessments against each of the condo units to cover expenses of administration. If a co-owner failed to pay the required assessments, the bylaws authorized the association to apply late fees and fines, and to collect any additional expenses incurred in collecting unpaid assessments, such as such as attorney fees and costs. Should a co-owner fail to resolve their delinquent balance, the condo association had the right to enforce collection of delinquent assessments through foreclosure by advertisement.
In 2009, Mary Frye stopped regularly paying her assessments to Golfpointe Village Condominium Association. On December 11, 2019, the association sent notice to Ms. Frye indicating that it was proceeding with foreclosing its lien if the account was not resolved by December 23, 2019. The notice provided the total outstanding debt to be paid including all interest, late charges, attorneys fees, and costs incurred to date. When Ms. Frye did not resolve her account, the association scheduled a foreclosure sale for February 28, 2020. On the date of the sale — February 28, 2020 — Ms. Frye initiated a lawsuit against the condo association claiming wrongful foreclosure in violation of MCL 600.3204 , breach of contract due to improper notice, and violation of the Michigan Consumer Protection Act (MCPA).
In response to the complaint, the condo association filed a motion for summary disposition on all of Ms. Frye’s claims, asserting that notice was not improper and that the foreclosure was lawful under MCL 559.208. In support, the association provided account statements which outlined the balance from 2009 through September 25, 2020.
Ms. Frye did not bring forth any evidence to support her claims and the trial court granted summary disposition in favor of the condo association on all claims. Ms. Frye appealed the ruling.
The Condominium Association Properly Foreclosed under MCL 559.208
Ms. Frye contended that there was a question of fact as to her default and whether the default implicated a valid foreclosure pursuant to MCL 600.3204. Under MCL 559.208 of the Michigan Condominium Act, an association can proceed with collecting unpaid assessments via foreclosure its lien for unpaid condo assessments. MCL 559.208(2) provides that “A foreclosure shall be in the same manner as a foreclosure under the laws relating to foreclosure of real estate mortgages by advertisement or judicial action except that to the extent the condominium documents provide, the association of co-owners is entitled to reasonable interest, expenses, and attorney fees for foreclosure by advertisement or judicial action.”
In determining whether the association properly initiated foreclosure, the appellate court reviewed MCL 600.3204(1), which governs the foreclosure of a mortgage. MCL 600.3204(1) provides that a mortgage can be foreclosed by advertisement if:
-
- A default in a condition of the mortgage has occurred, by which the power to sell became operative.
-
- An action or proceeding has not been instituted, at law, to recover the debt secured by the mortgage or any part of the mortgage or, if an action has been discontinued or an execution on a judgment rendered in the action or proceeding has been returned unsatisfied, in whole or in part.
-
- The mortgage containing the power of sale has been properly recorded.
-
- The party foreclosing the mortgage is either owner of the indebtedness of or an interest in the indebtedness secured by the mortgage or servicing agent of the mortgage.
The appellate court also reaffirmed the premise that “defects or irregularities in a foreclosure proceeding result in a foreclosure that is voidable, not void ab initio.” Kim v JP Morgan Chase Bank, NA, 493 Mich 98, 115; 825 NW2d 329 (2012). Under Kim, there are three essential elements of voiding a foreclosure that must be proven: “(1) fraud or irregularity in the foreclosure procedure, (2) prejudice to the mortgagor, and (3) a causal relationship between the alleged fraud and irregularity and the alleged prejudice, that the mortgagor would have in a better position to preserve the property interest absent the fraud or irregularity.” Diem v Sallie Mae Home Loans, Inc, 307 Mich App 204, 210-211; 859 NW2d 238 (2014).
In applying the above parameters, the appellate court found that Ms. Frye failed to provide any evidence that the condo associations accounting was inaccurate or that any payments of condo assessments made by Ms. Frye were not accounted for. The condo association account statements detailed assessment charges, payments received, and all associated charges from 2009 through September 25, 2020. Without evidence to the contrary, Ms. Frye failed to make a showing of an improper default for purposes of MCL 600.3204(1)(a) and the foreclosure of the condominium lien was deemed valid.
The Condominium Association Provided Proper Notice of Foreclosure
Ms. Frye argued that the condo association breached its contractual obligation under the condo bylaws by failing to provide notice of foreclosure ten days before the first publication of the foreclosure notice. The appellate court outlined that “A party asserting a breach of contract claim must establish by a preponderance of the evidence that (1) there was a contract (2) which the other party breached (3) thereby resulting in damages to the party claiming breach.” Bayberry Group, Inc v Crystal Beach Condo Ass’n, 334 Mich App 385, 393; 964 NW2d 846 (2020). Further, because condo bylaws are interpreted according to the rules governing contracts, the appellate court explained that any clear and unambiguous language in the condo bylaws would be enforced as written. Tuscany Grove Ass’n v Peraino, 311 Mich App 389, 393; 875 NW2d 234 (2015).
The specific condo bylaw provision at issue states:
(c) Notice of Action: Notwithstanding the foregoing, neither a judicial foreclosure action nor a suit at law for a money judgement shall be commenced, nor shall any notice of foreclosure by advertisement be published, until the expiration of 10 days after mailing, by first class mail, postage prepaid, addressed to the delinquent Co-owner(s) at his or her last known address, a written notice that 1 or more installments of the annual assessment levied against the pertinent Unit is or are delinquent and that the Association may invoke any of its remedies hereunder if default is not cured within ten (10) days after the date of mailing. . . .
Finding the provision clear and unambiguous, the appellate court indicated the notice language would be applied as written. Reviewing the evidence, there was no question that the condo association sent notice to Ms. Frye on December 11, 2019, indicating that the association was entitled to foreclosure of its lien due to unpaid assessments. The notice also provided the updated balance on the account including all costs and fees, the deadline for resolving the balance, and the notice indicated that costs and fees would continue to accrue. Further, the appellate court noted that the condo association did not submit the publication of foreclosure until over a month after the December 23, 2019, deadline. Ms. Frye failed to provide any supporting evidence of her claim and the appellate court held that no breach of contact occurred.
The Condominium Association Did Not Violate The Michigan Consumer Protection Act
The Michigan Consumer Protection Act (MCPA) declares unlawful, “[u]nfair, unconscionable, or deceptive methods, acts, or practices, in the conduct of trade or commerce.” MCL 445.903. Such unconscionable, unfair, and deceptive practices are outlined in MCL 445.903(1), and include causing misunderstanding and/or confusion as to the rights, obligations, and remedies of a party to a transaction, making a material misrepresentation of fact and/or failing to reveal material facts.
Ms. Frye argued that the condo association improperly declared default against her on the basis of inaccurate debt and misrepresentation of the debt owed, in violation of MCL 445.903(1). Ms. Frye asserted that she was confused over the amount of the debt and how it could have grown so large, believing she only owed outstanding assessments. However, the appellate court noted that Ms. Frye ignored the fact that the condo association was authorized to add late fees, attorney fees, interest, etc., onto the account balance going back to 2009 and provided her notice of the balance and the continued accrual of charges. Further, no evidence was presented to substantiate her argument of inaccurate accounting or misrepresentation. The appellate court noted that Ms. Frye may have been confused over her balance but that the condo association was not the cause of the confusion.
Conclusion
This case highlights the importance of condo associations having clearly drafted and refined condo bylaws that mirror the statutory scheme of the Michigan Condominium Act, so as to define a condo associations rights/remedies if it needs to proceed with foreclosure for delinquent condo assessments. As noted by the appellate court, clear and unambiguous language in condo bylaws are interpreted as written. Well drafted and clear condo bylaws are essential to combating claims by delinquent co-owner’s asserting wrongful foreclosure, breach of contract, and deceptive practices.
That said, simply having properly drafted governing documents will not protect a condo association if they are not followed. Condo associations should review their governing documents through each stage of collection, and ensure all procedures are properly followed in conjunction with the Michigan Condominium Act. Further, and as illustrated by this case, a condo association should ensure it keeps clear records and accurate accounting all of co-owner accounts. Without clear accounting and record keeping, an association can open itself up to claims of deceptive practices and wrongful foreclosure, as it would be unable to clearly identify delinquencies, payments, fees, etc. If you are a condo association exploring resolution of delinquent accounts, it is important to contact an experienced collection attorney to assist with the collection process and avoid collection pitfalls that could lead to claims of wrongful foreclosure.
