In Highfield Beach at Lake Michigan v Sanderson, a published Michigan Court of Appeals opinion, the condominium bylaws originally allowed rentals of units for periods of 14 days or longer. Although an amendment was proposed in 2008 and adopted by the membership changing leasing restrictions, there was no evidence that it was ever approved by mortgagees, and it was never recorded. Sanderson purchased a unit in 2013, constructed a 5600 square foot home, and entered into a 15-year agreement, entitled “Lease Agreement," with CRA Management whereby CRA would lease the property to vacationers for minimum terms of 14 days. In 2016, an amendment was adopted limiting rental of units to minimum terms of four consecutive months. When Sanderson continued to lease his unit for periods of less than four months, the association filed suit to enforce the new restriction. Sanderson defended on the basis of MCL 559.212, which provides that an amendment changing leasing restrictions "shall not affect the rights of any lessors or lessees under a written lease otherwise in compliance with this section and executed before the effective date of the amendment.” Sanderson also counterclaimed against the association and filed a third party complaint against board members for breach of contract, negligence, and breach of fiduciary duty. The trial court granted summary disposition in favor of the association on its complaint, dismissed the counterclaim and third party complaint, and awarded the association costs and attorney fees. Sanderson appealed.
On appeal, the decisions were affirmed. Regarding the “Lease Agreement,” the court held that, despite its title, the contract was in actuality a management contract, because CRA had no right of possession. Thus, MCL 559.212 did not apply to “grandfather” the contract.
Regarding the claim for breach of negligence and fiduciary duty against the board members, because they were not board members at the time of the 2008 purported amendment, the court held that they could not be held liable for Sanderson’s claims regarding the actions (or inactions) concerning the 2008 amendment. The court also held that, because the 2008 amendment was never recorded, the association did not breach the provision of the condominium documents requiring it to keep amendments available for review by co-owners. This provision could not be construed to apply to amendments that were not approved or effective.
Curiously, while all three judges affirmed the grant of attorney fees to the association, the panel split on whether the statutory provision was sufficient or whether the association also needed to allege and prove a breach of the bylaw provision regarding attorney fees. One judge held that the amendment to MCL 559.206 in 2000 which added the provision “to the extent the condominium documents expressly so provide” turned a claim for attorney fees into a contractual claim; if the condominium documents do not contain a provision for recovery of attorney fees, the association is not entitled to them.