In Vista Property Group, LLC v Schulte, an unpublished Michigan Court of Appeals opinion, the existing board of directors of Northwood Hills Condominium Association decided to change management companies. It terminated the existing management company and signed a contract with Vista. However, before the new contract went into effect a special meeting of the association was held, the board recalled, and a new board elected. The new board repudiated the Vista Contract and retained the prior management company to continue as property manager. Vista sued for breach of contract. The association defended by claiming that Vista first breached the contract by failing to provide a copy to the association; under the “first substantial breach” doctrine, the failure to provide a copy excused the association from paying Vista. The matter went to a jury, which returned a verdict of no cause of action. Vista appealed.
The appeals court found that nothing in the Vista contract required Vista to provide a copy of the contract beyond the initial copy provided to the (recalled) president of the association and thus the claim of first substantial breach failed as a matter of law. The court remanded the case for the trial court for entry of a judgment in favor of Vista and for a determination of its damages.
The author is frequently asked whether a board of directors can reverse a decision made or cancel a contract entered into by a former board of a community association. The answer is yes, but doing so can have adverse consequences. In this case, deciding to keep the present management company and repudiate the contract with the new management company signed by a prior board cost the association quite a bit of money.