3 Essential Rules & Regulations for Michigan HOAs and Condo Associations

The governing documents of a homeowners association identify the rights and restrictions that apply to the members of that association. Governing documents include the master deed and bylaws of a condominium association, and the declaration or deed restrictions. However, these governing documents typically only identify what a member is required to do or prohibited from doing, as well as the authority of the condominium association or homeowners association to address any violations of the governing documents. Most community association governing documents lack an explanation of how the association should address these violations in real life. Enter the collection policy, bylaw enforcement policy, and fair housing policy.  These policies are designed to serve as a “how-to” manual for condo associations and HOAs, addressing how the association will respond to collection matters, bylaw and other governing document violations, and fair housing disputes. Below is an overview of the three HOA Rules and regulations every Michigan community association should know about, the purpose of each policy, along with the topics that make the policies practical and valuable for condominium associations, homeowner associations, and board members.

 

HOA Collection Policy

One of the primary HOA rules and regulations boards must implement is a collection policy. To pay for the maintenance, repair, and replacement of common elements or common areas, as well as any other expenses involved with managing the community, condominium associations and homeowners associations rely on their members to pay the assessments or dues levied against them. When an owner fails to pay, the governing documents should provide the remedies available to the condo association or HOA for collecting delinquent assessments or dues.  But because collection activities are subject to Michigan and federal law, the remedies in the governing documents may be difficult to understand. An effective HOA collection policy will address four main topics:

1. Relevant Dates and Timeframes

Before assessments or dues can become delinquent, a due date for payment must be established. The first aspect of a viable HOA collection policy is to identify the due date for payments and whether assessments are due in a lump sum or on a monthly, quarterly, or other specified frequency.

2. The Community Association’s Collection Efforts and When to Refer to an Attorney

Most community associations will attempt to resolve disputes with owners before involving an attorney.  However, there comes a point when an association needs to enlist the assistance of its attorney to intervene.  The HOA collection policy should clearly identify what that point is: either when the delinquency reaches a specified amount or a specified age. Once the delinquency reaches the identified amount or age, the community association will refer the matter to its attorney. Having a clear point at which the community association will involve its attorney should avoid claims of selective enforcement or favoritism.

3. The Remedies Available to the Association.

The remedies that a community association may pursue for delinquent assessments will depend on what is authorized by the governing documents. The following are some common remedies that may be included in HOA collection policies.

A condominium association can record a lien against a unit under MCL 559.208(1), which is often incorporated into the condominium bylaws. Whether a homeowners association may record a lien will depend on the provisions of its governing documents. Before recording a lien, however, it is common for the association’s attorney to send a letter demanding payment with a deadline for payment.  Then, if payment is not made, the attorney will record a lien against the property.

Additionally, the association may accelerate any remaining installments of the assessment, which will be immediately due, and include any interest, fines, late fees, costs, and attorney’s fees incurred in the collection efforts in the amount of the delinquency.

Condominium associations have a unique remedy under the Michigan Condominium Act, MCL 559.212(5), that allows the association to give notice to a tenant of a delinquent co-owner’s unit that the tenant must send any rent payments directly to the condominium association instead of the co-owner.  If an owner fails or refuses to pay the amount of the lien, plus any other interest, late fees, and/or attorney’s fees as authorized by the governing documents, then the association may pursue an action to foreclose on the lien.

4. The Restrictions that a Delinquent Owner Will Face

In addition to the collection efforts, the governing documents may identify additional restrictions that a delinquent owner will face.  Common restrictions include limiting the right to vote on association matters, using any of the common elements or common areas (except as necessary to access one’s unit or lot), running for or serving on the board of directors, and not receiving utilities or other services supplied by the association.

 

Bylaw Enforcement Policy

Condominium associations and homeowners associations are responsible for enforcing the provisions of the governing documents. Enforcing the provisions of the governing documents should be done uniformly and consistently.  It can be a natural tendency, though, for a board of directors to overlook violations that are perceived as minor or technical, and instead focus on those that are large or obvious.  However, an owner’s breach of the bylaws or declaration “no matter how minor and no matter how de minimis the damages, can be the subject of enforcement.”  Terrien v Zwit, 467 Mich 56, 65; 648 NW2d 602 (2002). One of the best ways to address this is through a condo or HOA’s rules and regulations. Specifically, a bylaw enforcement policy is meant to outline the process by which owners can report complaints of violations to the association and to specify how the association will address such violations with the responsible owner. With that purpose in mind, below are three areas that a bylaw enforcement policy should address.

1.  Identify the Available Remedies

The governing documents will identify the remedies available to the association for addressing an owner’s violation and encourage compliance.  Condominium associations and homeowners associations have the authority to enforce the governing document’s restrictions through a lawsuit. Any lesser enforcement actions, however, need to be explicitly identified in the governing documents. Identifying these actions, such as fines, arbitration, mediation, or otherwise, can inform the board of its authority and the owners of the potential consequences of noncompliance. Additionally, the policy may identify whether the association can assess any pre-litigation attorney’s fees incurred due to an owner’s violation against the offending owner.

2. Explain the Complaint Procedure and Provide a Template Complaint Form.

While the board of directors is tasked with enforcing the governing documents, the directors are volunteers who often do not have the time or ability to search the condominium or subdivision for violations.  Instead, the board may rely on complaints submitted by owners to learn of violations.  Having a clear procedure for owners to document violations, including the date, time, location, and description of the violations, can help the board effectively address the complaint.

3. Outline the Violation Procedure.

After the board becomes aware of a violation that falls within the association’s jurisdiction, it must address the issue.  The violation procedure should specify that a written notice will be sent to the offending owner, detailing the violation, the compliance deadline, and, if permitted by the governing documents, any potential fines, as well as an opportunity for a hearing.  However, the violation procedure should also allow the board to act appropriately based on the circumstances at hand if a situation arises that threatens the safety, appearance, or operation of the community.

 

Fair Housing Policy

The Fair Housing Act is a federal law that generally prohibits housing providers, including condominium associations and homeowners associations, from discriminating against their members based on race, color, religion, sex (both gender identity and sexual orientation), disability, familial status, or national origin.  Fair Housing Act violations typically occur when a condo association’s or HOA’s rules and regulations discriminate against an owner who is a member of one of the protected classes mentioned above.  While associations should be aware of this, the primary purpose of a fair housing policy is to report, investigate, and address discriminatory behavior between owners.

1.  Encourage Reporting

An HOA or condominium association can only address behavior that it is aware of. A fair housing policy should encourage owners and third parties involved with the association to report any discriminatory or harassing behavior promptly. To encourage individuals who are the subject of discrimination or harassment, the policy should allow them to report the behavior in writing or verbally.

2. Outline the Investigation Process

The fair housing policy should outline the process that the association will take to investigate any report of discrimination or harassment. The investigation process should include a commitment to an impartial and timely investigation by the board or management company, as appropriate, which allows the complaining owner, the accused, and any witnesses to share their stories. The board or property manager will then consider the information and evidence and provide a written conclusion.

3.  Identify the Corrective Action

As with traditional violations of the governing documents, not every instance of discrimination or harassment will warrant the same corrective action.  For example, an owner who apologizes, expresses regret, and commits to doing better in the future may receive a lesser corrective action than an owner who believes they did nothing wrong and refuses to accept responsibility for their actions.  Accordingly, a Fair Housing Act HOA policy should permit the HOA or condo association to take appropriate and proportionate corrective action, based on the severity of the conduct and the outcome of the investigation.

 

Conclusion

Adopting a collection policy, bylaw enforcement policy, and fair housing policy is essential for fostering a well-functioning community association. These policies not only provide clear guidelines for managing the collection of delinquent assessments and enforcing the provisions of the governing documents, but also promote a consistent approach that the board and owners alike can rely on. By implementing these three essential HOA rules and regulations, associations can foster a harmonious living environment, ensuring that all residents understand their rights and responsibilities, as well as the association’s actions in taking corrective measures.

If your community association needs assistance drafting HOA rules and regulations, the attorneys at Hirzel Law can provide experienced counsel. Contact us to discuss your concerns and schedule a consult to put clear, enforceable policies in place.