Condominium developments in Michigan often include significant infrastructure improvements, including private roads, utilities, and drainage systems. Because these improvements are essential to the use and value of the project, the Michigan Condominium Act requires developers to provide financial security to ensure completion of those improvements. In Hills of Lone Pine Ass’n v Texel Land Co, Inc, 226 Mich App 120; 572 NW2d 256 (1997), the Michigan Court of Appeals considered whether a condominium developer was required to provide sufficient security to complete subdivision roads under MCL 559.184(4)(c) and what remedies were available when that obligation was not satisfied. As discussed below, this decision provides important guidance regarding a developer’s statutory obligations and the protections afforded to condominium associations and co-owners when infrastructure remains incomplete.
Facts
The dispute arose in a residential development where the developer recorded a master deed creating a condominium project that included roads and other improvements as part of the common elements. The developer undertook responsibility for constructing those improvements but failed to complete certain roadway work within the project.
The condominium association brought suit, alleging that the developer had not complied with its obligations under the Michigan Condominium Act, including the requirement under MCL 559.184(4)(c) to provide adequate security to ensure completion of the “must be built” roads. The association sought enforcement of the developer’s statutory duties and relief related to the unfinished roads.
The trial court addressed whether the statutory security requirement applied to the developer’s obligations for the roads in this case. The trial court found that the developer failed to complete construction of the “must be built” roads, and the condominium association was awarded a default judgment against the developer. The condominium association appealed the trial court’s decision denying its motion for summary disposition against the developer’s escrow agent after the condominium association was unable to collect from the developer.
MCL 559.184 Requires Security for the Completion of “Must be Built” Improvements and Structures
On appeal, the Michigan Court of Appeals analyzed MCL 559.184(4)(c), which requires a developer to provide sufficient security, such as an irrevocable letter of credit, a lending commitment, or an indemnification agreement, to ensure the completion of improvements that the developer is obligated to construct as part of the condominium project.
The Court recognized that roads designated as “must be built” fall squarely within the scope of the statute when the developer has undertaken responsibility for their construction. The purpose of the statutory requirement is to protect co-owners and associations from the risk that essential infrastructure will remain incomplete if a developer fails to perform.
The Court made clear that when a developer promises to construct roads as part of the condominium project, compliance with MCL 559.184 is mandatory. The obligation is not satisfied by informal assurances or by the developer’s general financial capacity. Rather, the statute contemplates tangible financial security sufficient to complete the improvements if the developer defaults.
Failure to Provide Required Security Exposes Developers to Liability
The Court of Appeals’ analysis underscores that developers who do not comply with the security requirements of MCL 559.184 may face litigation and court-ordered remedies. Condominium and homeowners associations are entitled to enforce the statutory protections designed to ensure that “must be built” structures or improvements, such as roads, are properly completed.
Importantly, the statutory requirement protects condominium associations and their co-owners. Without adequate security in place, co-owners could be forced to fund road completion through special assessments or suffer diminished property values due to incomplete infrastructure.
Key Takeaways for Condominium Associations and Developers
The Court of Appeals’ decision in Hills of Lone Pine Ass’n v Texel Land Co, Inc highlights several important considerations:
- Improvements and Structures Designated as “Must be Built” Require Sufficient Security. If your condominium documents designate roads and other common elements as “must be built” and the developer is responsible for constructing them, MCL 559.184(4)(c) requires appropriate financial security to ensure their completion.
- Statutory Obligations Cannot Be Avoided. Developers cannot sidestep this security requirement. The Michigan Condominium Act imposes mandatory protections.
- Associations Should Verify Compliance Early. Condominium associations should review their condominium documents and confirm whether the required bonds, letters of credit, or other security instruments have been properly posted. Acting promptly can prevent financial exposure if a developer fails to complete the infrastructure.
Need Guidance on Condominium Development or Infrastructure Obligations?
If your condominium or homeowners association is dealing with incomplete roads or other unfinished common elements, or if you are a developer seeking to ensure compliance with the Michigan Condominium Act, experienced legal counsel can help you navigate MCL 559.184 and avoid costly disputes. Our experienced condominium and homeowners association lawyers can help ensure proper planning and compliance at the outset of a project, protecting both developers and co-owners and ensuring that essential infrastructure is completed as promised.
