In that case, the board levied an assessment to raise funds to pay for legal fees for a lawsuit against the condominium developer. However, the board chose to disregard the bylaw provisions which required it to hold a meeting of the Association members and take a vote on whether to file the litigation and whether to approve a proposed litigation special assessment. The board decided to levy the assessment without the required vote. Members of the Association who objected to the failure to take a vote and who declined to pay the special assessment had liens recorded against their units. The Association then promptly filed actions to foreclose the liens.
While the trial court ruled in favor of the condominium association and upheld the assessment, the Court of Appeals reversed. The appellate court held that the board was not authorized to levy the assessment in its sole discretion, but instead was required to follow the processes contained in the bylaws. The court reasoned that the bylaws were in the nature of a binding contract between the association and its members. The appellate court rejected the condominium association's arguments that the bylaw requirements were too onerous or that they purportedly conflicted with the Michigan Nonprofit Corporation Act. The court also determined that, even if a particular procedural requirement of the bylaws was unreasonable, the trial court could have severed that provision and still give effect to the remaining provisions.
Additionally, the appellate court also reversed the trial court's award of attorneys fees to the Association. The Association incurred approximately $15,000 in legal fees in attempting to collect the $3,000 assessment. The Court of Appeals found that since the assessment was invalid, attorney fees and costs were not authorized.
This case underscores the importance of a board of directors knowing what provisions are in the condominium documents and obtaining sound advice and direction from its association counsel. Our law firm represented the co-owner in this case because we believed that the board should not have wholly disregarded the requirements in the bylaws.
Nottingham Village Condominium Association v. Pensom, Docket No. 319552