Michigan Condo Rental Bans Are Allowed by Two-Thirds Amendment

Michigan's leasing rules for community associations live in the Condominium Act, 1978 PA 59. That matters at the threshold, because Michigan has never enacted a general homeowners-association statute. A platted subdivision association gets its leasing authority from its recorded declaration and general contract law, and MCL 559.212 does not apply to it. A condominium association, including a site condominium where owners hold detached homes, is squarely inside the section.

Timing splits the analysis. MCL 559.212(1) provides that before the transitional control date, during the development and sales period, a co-owner's right to rent any number of units is controlled by the condominium documents as recorded by the developer and cannot be changed without developer approval. Once control passes to the co-owners, the association may amend the condominium documents as to rental of units or terms of occupancy. The legislature said plainly that leasing restrictions may be adopted after the fact; it did not preserve an owner's right to keep renting.

The vote required comes from MCL 559.190(2), not from section 212. The master deed, bylaws and condominium subdivision plan may be amended, even where the amendment materially alters or changes co-owner or mortgagee rights, with the consent of not less than two-thirds of the votes of the co-owners and mortgagees. A mortgagee gets one vote per mortgage held. That two-thirds threshold is a ceiling as well as a floor: the statute says it may not be increased by the terms of the condominium documents, and a provision requiring a greater proportion is void and superseded. Mortgagees need not attend, but their approval must be solicited by written ballot, and any mortgagee ballot not returned within 90 days of mailing counts as approval. Under MCL 559.190(8), a two-thirds affirmative vote means two-thirds of all co-owners entitled to vote as of the record date, so abstentions count against the amendment. Co-owners must be notified of a proposed amendment not less than 10 days before it is recorded, and under MCL 559.190(6) the cost of an amendment adopted by a prescribed majority is an expense of administration rather than a charge on the proponent.

The grandfathering in MCL 559.212(1) is thinner than owners usually expect. It shields the rights of lessors or lessees under a written lease otherwise in compliance with the section and executed before the effective date of the amendment, plus units owned or leased by the developer. Three consequences follow. An owner renting on a handshake or a month-to-month understanding with no written lease has nothing to shield. An owner who never made the disclosure the section requires does not hold a lease in compliance with it. And the protection expires with the lease term, so a rental ban adopted mid-lease reaches the unit as soon as the tenancy ends. Michigan gives no permanent grandfathered status to the owner or to the unit.

Section 212 also imposes a disclosure routine that applies whether or not the association restricts leasing. Under MCL 559.212(2) a co-owner intending to rent must disclose that in writing to the association at least 10 days before presenting a lease or otherwise agreeing to grant possession, and at the same time supply a copy of the exact lease for the association's review for compliance with the condominium documents. The co-owner must later provide a copy of the executed lease. If no lease is used, the co-owner supplies the names and addresses of the lessees or occupants, the rental amount and due dates, and the term of the proposed arrangement. MCL 559.212(3) requires tenants and other non-co-owner occupants to comply with the condominium documents and requires every lease and rental agreement to say so.

Michigan is silent on the terms that dominate leasing fights elsewhere. There is no statutory cap on the percentage of units an association may keep from being leased, no statutory minimum or maximum lease term, no statutory hardship exemption, no waiting period after purchase, and no cap on a leasing or tenant-registration fee. Those all come from the condominium documents, subject only to the amendment mechanics in MCL 559.190.

MCL 559.212(4) sets a two-step enforcement route against a non-complying tenant. The association must first notify the co-owner by certified mail of the alleged violation by the tenant, and the co-owner then has 15 days after receiving that notice to investigate and correct the breach or to advise the association that no violation occurred. If after 15 days the association believes the breach is not cured or may be repeated, it may bring, on its own behalf or derivatively through the co-owners where the association is still under developer control, an action for eviction against the tenant or non-co-owner occupant and simultaneously an action for money damages against both the co-owner and the tenant for breach of the condominium documents. The statute allows that relief to proceed by summary proceeding, and it makes both the tenant and the co-owner liable for damage to the general common elements caused in connection with the unit or the project.

A landlord co-owner who falls behind on assessments faces a separate consequence under MCL 559.212(5). The association may give the tenant written notice of the arrearage, and the tenant must then deduct the arrearage and future assessments as they fall due from the rent and pay them to the association. The statute says that deduction is not a breach of the lease by the tenant. If the tenant refuses to remit, the association may issue a statutory notice to quit for non-payment of rent and enforce it by summary proceeding, or proceed with the eviction and damages action described above.