Michigan Home Owners Associations
A home owners association (“HOA”) is an organization of co-owners, either mandatory or optional, in a particular subdivision, condominium or planned unit development, formed for the purpose of providing a common basis for preserving, maintaining, repairing, and enhancing the common areas.
Michigan statutory law - Condominium Act 59 of 1978, MCL 559.101 et seq.AN ACT relative to condominiums and condominium projects; to prescribe powers and duties of the
administrator; to provide certain protections for certain tenants, senior citizens, and persons with disabilities relating to conversion condominium projects; to provide for escrow arrangements; to provide an exemption from certain property tax increases; to impose duties on certain state departments; to prescribe remedies and penalties; and to repeal acts and parts of acts.
History: 1978, Act 59, Eff. July 1, 1978; Amended 1980, Act 283, Imd. Eff. Oct. 10, 1980; Amended 1982, Act 538, Imd. Eff. Jan. 17, 1983; Amended. 1998, Act 36, Imd. Eff. Mar. 18, 1998.
Entity CreationMandatory vs. Optional * initial origin will be in the CCR*s found within the recorded real estate documentation contained in the Master Deed of the development (which may thereafter be amended pursuant to restrictions), and thereafter as related to each unit of co-owners title work. MCL 559.108; 559.191 There is a need to determine if the word or synonym for *mandatory* is referenced therein to conjoin each unit/lot/condominium or PUD to one another for a mutual benefit.
Governance and OversightNon-profit status * corporation or limited liability company * the initial governance is typically delivered through the developer, which planned and designed the large view of co-owned units, received state and local approvals, recorded original documentation. The governance typically depends upon ownership quantity, values, preferred status, and pro-rations. Transition from governance by the developer to an HOA board of directors based upon ownership, sales and pro-rations is ideally smooth, but oftentimes less so. Leverage and strength based upon ownership, values, exterior resources and dedication to mutual causes and interests have large effect.
Board of Directors ObligationsUpon creation of an HOA pursuant to Michigan non-profit corporation law, with taxation exemption (state and federal), governance by an HOA can commence based upon the CCR*s, by-laws, and rules and regulations duly adopted by the developer and/or co-owners (*governance documents*). Governance thereafter is similar to any corporate entity created under law, whether for-profit or non-profit. Typically, the first board of directors will be appointed by and with the assistance of the developer, who retains a certain amount of votes, based upon the co-owned units still titled in the developer*s name. Powers and authority of the board of directors are defined within the governance documents, which are amendable by authority of state statute or as provided in the governance documents themselves. MCL 559.190 When seeking participants at this level, set aside social alliances and favoritism in place of persons with leadership and professional skills and individuals seeking to work for the common benefit of all co-owners.
Administration and ManagementIs there a paid, professional management company? How attentive is the designee to the HOA daily operations? If no paid management, who among the board of directors oversees the daily operations? Compensation or no compensation? Voting procedures by co-owners, by mortgagees on individual units, and by the members of the board of directors, are discussed in detail within the Michigan Condominium Act. MCL 559.109a,
Common Area Responsibilities and ObligationsThe major benefit of an HOA is to put the burden and responsibility of management, oversight, maintenance, repair and *house keeping* of common areas upon a designee appointed by memorialized process set forth in the CCR*s, by-laws and rules and regulations. This might be the development entrance signs, or the roads and lanes for ingress and egress to units, or medians within those roads, or park maintenance, or lawn cutting on common areas, storm water runoff basins, or more intensive care of pool and community house facilities. No one co-owner has neither a right nor obligation to tend to any of those examples. Older developments that have no HOA often visibly suffer with regard to care, maintenance and repair or replacement of such examples because the obligation that originally rested with the developer has been passed on to no one in particular.
Enforcement AbilitiesBased upon the authority imposed by the Michigan Condominium Act of 1978, the Master Deed for a real estate development may set forth and be recorded by exhibits, CCR*s, and by-laws for the project a detailed rights and obligations related to each unit or lot within the development with regard to common elements and prorate allocation to the same, both from the standpoint of usage entitlement but also with regard to the obligations to maintain the same. MCL 559.108; 559.173 The by-laws contain mandatory provisions as enumerated in MCL 559.154; 559.165 Moreover, they may also contain broad permissible provisions which don*t in any way conflict other rights or laws, such as limitations upon leasing, occupancy and selling, disability accommodations, rights to insure individual units, as examples. MCL 559.156
Financial obligations and assessments are imposed upon each unit to the degree associated with the maintenance, repair, renovation, restoration, or replacement of the eommon element based upon the percentages of value or other provisions as contained in the Master Deed for appointment of expenses of administration. MCL 559.169 Non-use or waiver of use by a co-owner shall not exempt obligatory contribution by such co-owner. MCL 559.169(4).
Benefits to OwnersThe obvious benefit is the knowledge that common areas will be well maintained by a designee as needed. As a result, visual image will be more pleasing, which affects value per each unit within the HOA, when considering sale, lease or rental values. Other, less monetary benefits, include social desirability, bonding among co-owners, and the general welfare and co-existence within the development.
Questions About Owning Before Buyinga. Learn the HOA Rules * typically current CCR*s are discoverable on line, through the HOA website and/or the public real estate recordings within the Register of Deeds county records. Such are subject to change, based upon the mechanisms and formulae set forth in the CCR*s and by-laws of the HOA. Attendance at a board or membership meeting can be a good source of information. If such attendance is too restrictive and not transparent to outsiders* attendance, weigh the same when considering a purchase.
b. Are HOA requirements properly enforced with administrative oversight?
c. Assess environmental practices, with limitations of garden sizes, compost piling, use of fertilizers, pesticides, and sprinkler systems.
d. Consider your temperament and customizing home owner desires to comport with HOA rules, oversight and enforcement. Observe social interactions among co-owners and be aware of negative activities that affect welfare and peaceful enjoyment.
e. (1) Is there an annual HOA budget? How was it set? Is there management expertise?
(2) What are the fees? How are fees set? How do they increase? History dues pattern for the last 10 years?
(3) Does the developer still own lots? If so, is the developer a prorata contributor to the revenue of the HOA?
(4) Does the HOA maintain a reserve fund for *rainy day* events? With any purchase transaction, will a co-owner apportioned reserve account (similar to an escrow for taxes) be transferred from seller to buyer. What do monthly fees cover?
(5) A record of any history of special assessments? Are roads and lanes publically dedicated to the municipality or the responsibility of the HOA?
(5) Additional fees for recreational facilities? Pools, tennis courts, club house and park usage are typically in addition to assessments. Ask whether guests and a maximum number of welcomed non-co-owners can participate.
(6) Annual audits conducted by a CPA? Copy of minutes from last BOD meeting? Typically, monthly or in other specified interims. Last membership meeting? Typically annually.
(7) Is the HOA managed by volunteers or a professional management company * learn the definition of authority, autonomy, oversight, restrictive abilities without additional authority, compensation?
f. Prior meeting minutes * board of directors and membership * any current or past conflicts, process for resolution of conflicts, any litigation past or present, discuss with current and past board members, understanding that a volunteer, part-time office is treated differently than a paid employment position.
g. Watch for under-management where the administration is not adequately covered? Common area maintenance, cleanliness, trash removal, ground crews, pool maintenance, supervisory oversight of all services (part-time or full time).
h. Catastrophic insurance with the HOA as insured * needed for general common areas, such as community pools, club houses, parks, hallways, stairwells, parking lots to insure against floods, tornadoes, fires, and the like.
i. Effect/impact of fees upon co-owner personal finances * impact upon home values with HOA typically higher as weig
ConclusionJust like any formally created organization, there are well run, compliant entities and, to the other extreme, there are those that exist, with unmanaged, unenforced powers and duties because of inadequate governance documents or simply inexperienced leaders, such as members of the board of directors or management, who are entrusted to apply those document provisions to the administration of the entity.