The association had levied a $3,000 special assessment against each unit in order to pay for legal fees to pursue litigation against the developer of the condominium project for construction defects. Although the condominium bylaws clearly required the condominium association to first obtain co-owner approval for the assessment, the board of directors chose to deliberately disregard this obligation and levied the assessment anyway. Co-owners who objected and did not pay the special assessment had liens recorded against their units and were then sued by the condominium association. In this case, the co-owner was initially unsuccessful in persuading the trial court that the special assessment was invalid. A judgment was entered against the co-owner. On appeal, the appellate court agreed with our argument that the condominium association violated the bylaws by failing to obtain the approval of the co-owners, rendering the assessment invalid. Accordingly, the Court of Appeals overturned the judgment, and directed that the trial court dismiss the condominium association’s case instead.
When the case went back down to the trial court, the association sought to amend the complaint and assert a different cause of action in an effort to try and save its case. The association also argued that the co-owners had subsequently voted to “ratify” the board of director’s action in filing the initial lawsuit against the developer. The court denied the requested amendment. We filed a motion for attorney fees, which requested that the court rule that the association did not have a factual basis for its claim. Specifically, the association had alleged that the unpaid assessment was for maintenance and repair, when it knew that the assessment at issue was actually levied to raise legal fees to fund developer litigation. The court granted our motion, and awarded our client nearly $8,000 in attorney fees and costs. The lien against our client’s unit was also discharged.
The association appealed. In its Opinion that was issued this week, the Michigan Court of Appeals declared that the award of attorney fees and costs to our client was proper. The court also stated that the association’s requested amendment was appropriately denied, and it additionally stated that the association’s purported “ratification” had no effect because there had not been any ratification of the levy of the special assessment. The association’s appeal was unsuccessful. Our client prevailed again.
The lesson is clear that a condominium association must be mindful of co-owners’ rights; a board of directors cannot simply choose to willfully ignore procedural requirements in the bylaws. Here, the association spent over $20,000 in legal fees to try to collect a $3,000 assessment that was improperly levied. Now, the association has also been ordered to pay the co-owner $8,000. This financial hit to the condominium association’s bank account and budget could have been avoided if the board of directors had merely abided by the bylaws.
Nottingham Village Condominium Association v. Pensom, Docket No. 333311