Michigan Condo Records Access, Audits and Board Transition Rules

Michigan regulates condominium governance through 1978 PA 59 and leaves most of the detail to the recorded bylaws. MCL 559.153 makes the bylaws part of the master deed or as the master deed provides, bars an amendment that would eliminate the mandatory provisions required by section 54, and makes any amendment inoperative until it is recorded. Because Michigan has no general homeowners-association statute, none of this reaches a platted subdivision association, whose governance comes from its own declaration.

The records right is one sentence. MCL 559.157(1) provides that the books, records, contracts, and financial statements concerning the administration and operation of the condominium project shall be available for examination by any of the co-owners and their mortgagees at convenient times. What the sentence does not contain is as important as what it does. There is no deadline to produce, no maximum copying charge, no requirement that the association mail or email anything, no list of records the board may withhold, and no fine or damages award for stonewalling. "At convenient times" is the whole standard, and a co-owner denied access enforces it by petitioning a court of competent jurisdiction under MCL 559.154(9), or through binding arbitration where the parties have elected it.

The financial-reporting duties are more concrete. MCL 559.157(2) requires an association of co-owners with annual revenues greater than $20,000.00 to have its books, records and financial statements independently audited or reviewed each year by a certified public accountant as defined in section 720 of the occupational code, 1980 PA 299, MCL 339.720, and the same subsection requires that audit or review to be performed in accordance with the statements on auditing standards or the statements on standards for accounting and review services of the American Institute of Certified Public Accountants. MCL 559.157(3) lets the association opt out of that on an annual basis by an affirmative vote of a majority of its members, taken by any means the bylaws permit, so the audit is a default rather than a floor. Those two subsections were added by 2013 PA 134, effective January 14, 2014. Independently, MCL 559.154(5) requires the bylaws to provide that the association prepare and distribute a financial statement to each owner at least once each year, with the contents defined by the association itself, and MCL 559.154(1) requires the bylaws to make the persons administering the project keep books and records with a detailed account of the expenditures and receipts affecting the project and specifying its operating expenses.

MCL 559.154 also fixes several other bylaw contents. Subsection (3) requires specific provisions directing the courses of action on partial or complete destruction of the buildings. Subsection (6) requires an indemnification clause for the board of directors that gives co-owners 10 days' notice before any payment under it and that excludes indemnification for willful and wanton misconduct and for gross negligence. Subsection (7) permits the bylaws to allocate votes either in proportion to each unit's percentage of value or equally per unit. For projects established on or after the 2002 amendment, subsections (8) through (11) require an arbitration clause covering disputes over interpretation or application of the condominium documents and disputes among co-owners, binding on the parties' election and written consent and on written notice to the association, under the commercial arbitration rules of the American Arbitration Association. Absent that election either a co-owner or the association may go to court, and once arbitration is elected the courts are closed to that dispute.

Board composition during the developer period is the one area the Act times precisely. MCL 559.152(1) requires an advisory committee of nondeveloper co-owners at the earlier of 120 days after title to one-third of the units that may be created has passed to nondeveloper co-owners or one year after the first conveyance to a nondeveloper co-owner, and dissolves it when nondeveloper co-owners elect a majority of the board. MCL 559.152(2) then steps the board over: within 120 days of 25% of the units being conveyed, at least one director and not less than 25% of the board; within 120 days of 50%, not less than 33-1/3%; and within 120 days of 75% but before 90% are conveyed, the nondeveloper co-owners elect all directors, subject to the developer's right to designate at least one director while it owns and offers for sale at least 10% of the units. If 75% has not been conveyed within 54 months of the first sale, MCL 559.152(3) gives nondeveloper co-owners board seats in proportion to the units they hold. Fractional entitlements of 0.5 or more round up under subsection (4).

The last statutory notice period sits in MCL 559.190(5): co-owners must be notified of a proposed amendment to the condominium documents not less than 10 days before the amendment is recorded. Beyond that, meeting frequency, agenda posting, proxy rules, quorum and whether members may attend board meetings are all matters for the recorded bylaws.

The Condominium Act attaches no fine, no state enforcement and no statutory damages to a records refusal or a missed audit. 157(1). 154(10) bars either party from taking that dispute to court afterward. 157(2) is enforced practically rather than punitively: a board that skips it without a recorded majority opt-out vote under subsection (3) is acting outside the statute, which is evidence in any later action over the board's handling of association funds. The Department of Licensing and Regulatory Affairs reviews condominium documents when a project is registered but does not adjudicate governance complaints between co-owners and boards.