Can A Michigan Condominium Association Collect Attorney Fees for Bylaw Violations?
In Michigan, the responsibility for attorney fees and costs in litigation typically lies with the parties involved. Following the ‘American rule,’ attorney fees are not recoverable unless expressly allowed by statute, court rule, common-law exception, or contract. Dessart v. Burak, 470 Mich. 37, 42, 678 N.W.2d 615 (2004); Grace v. Grace, 253 Mich.App. 357, 370–371, 655 N.W.2d 595 (2002),” Reed v Reed, 265 Mich App 131, 164; 693 NW2d 825 (2005).
Condominium associations usually fall within two of the noted exceptions: contract and statute. When co-owners purchase a unit, they enter into a contractual agreement with the association, obliging them to adhere to the master deed, bylaws, and rules and regulations of the condominium project. MCL 559.165 provides “[e]ach unit co-owner, tenant, or noncoowner occupant shall comply with the master deed, bylaws, and rules and regulations of the condominium project and this act.”
The Michigan Court of Appeals has stated “where the parties have contracted to create duties that differ or expand beyond those established by general principles of law, and the terms of the contract are not otherwise unenforceable, the parties must abide by the contractual duties contracted,” Grand Trunk Western R R, Inc. v Auto Warehousing, 262 Mich App 345, 351 (2004).
Many association bylaws include provisions enabling the recovery of attorney fees in enforcement disputes. Section 106 of the Condominium Act further codifies this right, allowing associations to recover costs and reasonable attorney fees in proceedings arising from a co-owner’s alleged default, as long as the condominium documents expressly provide for it.
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
Legal precedent, such as Homestead Shores Ass’n v Entwistle, rejects applying the American Rule to condominium associations, emphasizing the mandatory recovery of reasonable attorney fees under MCL 559.206(b). The term ‘reasonable’ in this context doesn’t hinge on sympathy but involves a careful evaluation of specific factors.
What Is Reasonable?
The question then becomes “what is reasonable?” When taken out of context, the term “reasonable” may be weaponized as a backdoor method of denying recovery of fees and costs. It is not out of the realm of possibility that a court could simply state that attorney fees and costs, as applied to a defendant, are not reasonable. In this context, reasonableness does not rely on sympathy or being empathic of the losing party.
In determining the reasonableness of attorney fees, “trial courts have been required to consider the totality of special circumstances applicable to the case at hand” Pirgu v United Svcs Automobile Ass’n, 499 Mich 269; 884 NW2d 257 (2016) involved the denial of Personal Injury Protection (PIP) benefits and addresses the application of the Smith framework (Smith v Khouri, 481 Mich 519 (2008), citing Smolen v Dahlmann Apartments, Ltd, 186 Mich App 292 (1990)) to the no-fault insurance act. While the trial court focused on the Smith framework, the Court of Appeals disagreed. The Supreme Court, instead of granting leave to appeal, reversed the decision and provided new guidance on attorney fee calculations.
The Court, after reviewing fee determinations in previous cases, identified the need for a simplified approach. It consolidated factors from Wood and MRPC 1.5(a) into a single list for trial courts to consider when determining attorney fees.
- the experience, reputation, and ability of the lawyer or lawyers performing the services,
- the difficulty of the case, i.e., the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly,
- the amount in question and the results obtained,
- the expenses incurred,
- the nature and length of the professional relationship with the client,
- the likelihood, if apparent to the client, that acceptance of the particular employment will preclude other employment by the lawyer,
- the time limitations imposed by the client or by the circumstances, and
- whether the fee is fixed or contingent.
Conclusion
Pirgu v United Svcs Automobile Ass’n, 499 Mich 269; 884 NW2d 257 (2016) marks a significant step toward achieving greater objectivity in attorney fee calculations. Importantly, the directive for trial judges to discuss and justify their views on each factor, including any additional ones, enhances transparency and accountability in the fee determination process. This not only encourages trial judges to make more reasonable fee awards initially but also sets the stage for more successful appeals should judges deviate from the established criteria. The emphasis on openness and justification within the decision-making process contributes to a fairer and more accountable legal system in the realm of attorney fee assessments.
Matthew D. Levine is an associate attorney and joined Hirzel Law in 2023. Mr. Levine graduated from James Madison College at Michigan State University in 1996 with a degree in International Relations. He obtained his Juris Doctorate at Wayne State University Law School in 2000, where he was a member of the International Moot Court Team. Upon graduation, Mr. Levine served as a law clerk for judges in the Oakland County Circuit Court, assisting the court with legal research and writing, trial preparation, and jury coordination. Since leaving the court, Mr. Levine has focused his practice on real property and consumer finance law with an emphasis on property rights, mortgage loans, regulatory compliance, eviction, and municipal ordinances. Mr. Levine can be reached at (248) 478-1800 or mlevine@hirzellaw.com.
