In Phyle v Schepp Investments, Inc., an unpublished Michigan Court of Appeals opinion, a member of a condominium association sued the successor developer, which also owned certain adjacent recreational facilities co-owners had the right to use, claiming that the co-owner was improperly charged a flat usage fee rather than the actual costs and expenses. The trial court agreed and the developer appealed.
While there are several discovery issues in the case as well, the principles applicable to condominiums are:
1. A developer must properly disclose the financial obligations of co-owners to support the operation of the recreational facilities in the disclosure statement mandated by the MI Condominium Act.
2. The recreational facility owner may not charge a flat fee for the facilities, but must charge the actual expenses.
3. The recreational facility owner must keep separate books and records regarding the facilities and make them available for inspection by co-owners.
4. A developer who fails to do so may be found liable for the violations.