One of the most common questions that Boards of Directors of Michigan condominium associations ask when considering a document amendment project is: how much is this going to cost? The answer, as with most legal questions, is that it depends. The cost of a document amendment project is driven by a number of factors, including the scope of the amendments being sought, the complexity of the existing documents, the level of community engagement required to build support for the amendments, and whether a mortgagee vote is required.
This article provides an overview of the three primary amendment approaches used by Hirzel Law attorneys to assist Michigan condominium associations in pursuing an amendment project, the typical cost associated with each, and a description of the document amendment process so that a Board of Directors can make an informed decision before embarking on an amendment project.
Why Amend Your Michigan Condominium Governing Documents?
As a preliminary matter, it is worth briefly addressing why a condominium association might consider amending its Master Deed and Bylaws in the first place. Michigan condominium associations are governed by the Michigan Condominium Act, MCL 559.101, et seq., and by the governing documents of their respective associations, which typically consist of a Master Deed, Condominium Bylaws, and Articles of Incorporation. These documents are often drafted at the time a Condominium Project is created, decades earlier, and many communities operate under documents prepared by the original developer with the developer’s interests in mind that have never been updated.
Several developments have occurred since many condominium documents were originally drafted that may make an amendment appropriate. For example, significant amendments were made to both the Michigan Condominium Act and the Michigan Nonprofit Corporation Act in 2001, 2002, 2008, 2015, and 2018. Communities whose documents predate these amendments may be missing important provisions, including those relating to remote meeting participation, electronic voting, limitations on director and officer liability, and the inspection of association records. Further, the recently adopted Homeowners Energy Policy Act of 2024, MCL 559.301, et seq., directly affects how Michigan homeowner associations regulate and administer owner requests for solar panels and energy-saving improvements. In addition, many older documents do not address issues now common in condominium communities, such as short-term rentals, whole-home generators, and the storage of e-bikes and other lithium-ion battery-powered devices. Outdated, conflicting, or ambiguous documents increase the risk of disputes and litigation, and a well-drafted set of governing documents is one of the most valuable investments a condominium association can make.
The Three Amendment Approaches
When a condominium association decides to pursue a document amendment project, we here at Hirzel Law generally pursue one of three approaches, each of which carries a different cost and scope.
Approach A: Amended and Restated Documents
The most comprehensive approach is a complete rewrite of the Master Deed and Bylaws, commonly referred to as an “amended and restated” set of governing documents. This approach involves drafting entirely new governing documents that incorporate all necessary legal updates, address current issues, and eliminate outdated or problematic provisions. We request that any association pursuing an “amended and restated” set of documents complete a questionnaire in order to assist in the drafting process.
An initial draft of a completely amended and restated Master Deed and Bylaws typically starts at around $3,500. However, the total cost of the project is driven by a number of factors that will vary from community to community, including the number of revisions requested by the Board, the number of meetings at which legal counsel is asked to participate, whether counsel is asked to prepare the meeting and voting package, and whether a mortgagee search is required. After the initial draft, these additional tasks can add another $2,000 to $6,000 to the total. A complete amended and restated project typically averages around $7,500 to $10,000 in total. If the Board also wants to amend the articles of incorporation, that usually runs an additional $500.
This type of amendment requires 2/3 co-owner approval and, depending on what is being amended, likely 2/3 mortgagee approval as well. The cost to pursue a mortgagee vote will vary depending on the sufficiency of the association’s records, but a mortgagee vote typically costs between $15.00 and $30.00 per unit.
A complete rewrite is most appropriate when the existing documents are significantly outdated, contain conflicting or ambiguous provisions, or are so difficult to understand that a targeted repair approach would leave too many problems unaddressed. While this tends to be the most expensive option, it is also the most thorough and typically produces the most comprehensive benefit for the community.
Approach B: Condominium Report Card
For communities that are not sure whether a complete rewrite is necessary, a “Condominium Report Card” can be a cost-effective way to assess the state of the governing documents before committing to a more extensive project. For a current flat fee of $2,000, legal counsel will conduct a comprehensive review of the existing governing documents and provide the Board with a detailed checklist of provisions that may be outdated, legally insufficient, or in need of updating. The Report Card identifies both legally necessary updates and practical improvements. The potential benefit to this approach is that it may reveal that a complete rewrite is not necessary and that targeted spot amendments would suffice. Boards that are uncertain about the scope of necessary amendments could be well-served by starting with the Report Card before committing to a more expensive project.
Approach C: Spot Amendments
A “spot amendment” is a targeted amendment that addresses one or more specific issues identified by the Board, without undertaking a complete rewrite of the governing documents. Spot amendments are appropriate when the existing documents are generally sound and the Board has a discrete set of issues it wishes to address — for example, adding a short-term rental restriction, clarifying maintenance and repair responsibilities, or updating enforcement provisions to permit fines and the recovery of attorneys’ fees.
Spot amendments typically start at $1,000 for a single amendment, with the cost varying based on the complexity of the issues being addressed. While spot amendments can be the least expensive option and can be effective for addressing specific issues, they should be approached with care. Amending one or two provisions in an otherwise outdated document without conducting a comprehensive review can sometimes lead to a patchwork of provisions that are inconsistent with the rest of the document. And if a large number of “spot amendments” are pursued, the cost of the spot amendment project can start to approximate the cost of an amended and restated project.
The Michigan Condominium Document Amendment Process
Regardless of which approach is selected, the document amendment process for a Michigan condominium association typically follows the same general framework.
Questionnaire.
The process begins with a questionnaire that legal counsel provides to the Board. The questionnaire allows the Board to consider the proposed changes, identify community issues, and provide initial input before the first draft is prepared. Completing the questionnaire thoroughly reduces the number of revisions required later in the process, making the overall project more efficient and cost-effective.
Revisions and Drafts.
Based on the Board’s responses to the questionnaire, legal counsel prepares an initial draft of the proposed amendments. The Board then reviews the draft and provides feedback, and the parties collaborate to revise the documents until they are in final form. Once the documents are finalized, a copy is sent to all Co-owners along with an explanatory letter summarizing the major changes.
Informational Meeting.
Before the voting process begins, an informational meeting can be held with all Co-owners to review the proposed amendments, answer questions, and provide an opportunity for additional input. This meeting can be conducted in person or remotely. Community engagement is critical to a successful amendment project: co-owners are more likely to vote in favor of amendments they understand and that they have had an opportunity to discuss. Boards that underestimate the importance of the informational meeting often struggle to obtain the required votes.
Voting Process.
The voting process typically involves a 45 to 60-day window during which Co-owners return ballots to approve or reject the proposed amendments. In many cases, the voting must be conducted at an annual or special meeting of the association. Under MCL 559.190(2), the Bylaws of a Michigan condominium may be amended “with the consent of not less than 2/3 of the votes of the Co-owners.” As part of the voting package, a mortgagee information sheet is typically provided to help gather the information needed for any required mortgagee vote.
Mortgagee Vote.
A mortgagee vote may be required depending on the nature of the amendments being proposed. The key provisions that typically trigger a mortgagee vote are changes to maintenance responsibilities, changes to insurance, and changes to rental restrictions. If a mortgagee vote is required, there is an additional mandatory 90-day waiting period. Unlike a co-owner vote, which requires an affirmative response, a mortgagee’s failure to timely respond constitutes a “yes” vote.
Recording.
Once the required votes are obtained, the Master Deed and Bylaws amendments are recorded at the county register of deeds and become effective upon recording.
Articles of Incorporation.
If the articles of incorporation are also being amended, the process is somewhat different: no mortgagee vote is required, and if the vote passes based on the vote threshold contained in the articles of incorporation, the new articles are filed with the State of Michigan.
Factors That Affect Cost To Amend Michigan Condominium Documents
The cost estimates described above assume a relatively straightforward process. Several factors can increase the overall cost of an amendment project:
Community Size. The size and complexity of the community matters. A condominium with 200 units and multiple common element amenities will typically require a more complex set of governing documents — and more revisions — than a smaller community with straightforward ownership arrangements.
Community Engagement. The level of engagement required can also affect cost. Communities that require multiple informational meetings, a multi-stage voting process, or extensive communication with Co-owners will typically incur higher fees than communities with an engaged and informed membership that is ready to vote.
Mortgagee Vote. A mortgagee vote adds time and cost. If a mortgagee vote is required, legal counsel will typically conduct a mortgagee search to identify all relevant lenders and will prepare and distribute the required mortgagee notice. The additional 90-day waiting period also extends the overall timeline for the project.
Revisions. Finally, the number and scope of revisions requested by the Board has a direct impact on cost. The best way to minimize revision costs is to complete the questionnaire thoroughly at the outset of the project and to consolidate the Board’s feedback at each revision stage.
Conclusion
Amending the Master Deed and Bylaws of a Michigan condominium association is a significant undertaking, but it is one that can provide substantial long-term benefits to the community. Well-drafted governing documents reduce the risk of disputes, provide clear guidance to Boards and Co-owners alike, and position the association to address the modern issues that today’s communities face. A condominium association that is considering a document amendment project should contact legal counsel to discuss which approach is right for its community and to obtain an estimate of the anticipated cost.
