OCTOBER 2022 – MICHIGAN CAI LEGISLATIVE ACTION COMMITTEE UPDATE

As fall in Michigan turns to winter, and then back to summer for a couple days, and then back to winter, the Michigan Chapter of the Community Association Institute’s Legislative Action Committee (“LAC”) is seeing a definite uptick in legislative activity, especially as we near the end of the 2021-2022 legislative session.   As legislators gear up for elections and the expiration of their terms, we expect a significant amount of activity during the upcoming “lame duck” session.

Some key topics involving community associations include the following:

• Amendments to the Marketable Record Title Act:  In 2021 the LAC expected the Real Property Law Section (RPLS) of the Michigan Bar to propose amendments to the Marketable Record Title Act (MRTA) to resolve certain issues and problems which were created by the 2018 amendments to the Act.  This did not occur, and it does not appear as though RPLS has any intention of moving forward with any MRTA amendments.

Instead, on September 8, 2022, Representative Hauck introduced HB 6370.HB 6370 was drafted initially to amend the MRTA so as to protect utility easements and conservation easements from the problems created by the 2018 amendments to the Act and also potentially protect restrictive covenants in deed restrictions.Unfortunately, the language of the HB 6370 was then modified to clarify that it does not benefit community associations.HB 6370 then passed the house, as modified, on September 28, 2022, but has not yet passed the Senate.The LAC has requested that Representative Hauck or HB 6370’s equivalent sponsor in the Senate add language to HB 6370 to protect community associations from the adverse effects of the 2018 amendments to the MRTA by clarifying that their recorded documents are not affected by the MRTA.These efforts appear to face strong opposition from the title insurance lobby which opposes the LAC’s efforts.

The MRTA amendments continue to be a high priority for the LAC.    Even as this legislative session comes to a close, the LAC is still working to introduce and support legislation that will protect community associations and their recorded governing documents (e.g., Master Deeds, Bylaws, and Declarations) from being eliminated as a result of the 2018 amendments to the Act. 

• Amendments to Sections 106 and 108 of the Condominium Act – Fines and Liens: In 2021 the LAC drafted proposed amendments to Section 108 of the Condominium Act to resolve issues resulting from the 2021 case Channel View East Condo Ass’n, Inc v Ferguson, No 351888 (Mich Ct App Feb 25, 2021) (unpublished).  The amendments are intended to clarify that notwithstanding the conclusion of the Court of Appeals in Channel View East, properly imposed unpaid fines are secured by a condominium lien regardless of whether unpaid assessments are also owed. 

The LAC’s proposed amendments would also clarify that the “notice and hearing” requirement of Section 106 of the Act governing the imposition of fines against co-owners for violations.Under the LAC’s proposed amendments, the association’s notice and hearing obligations under Section 106 would be satisfied as long as the association has offered the co-owner the opportunity for a hearing (regardless of whether the co-owner actually requests or attends a hearing with the board).This change is intended to help provide clarity to association boards as to their statutory duty to provide notice to co-owners and conduct hearings on violations before imposing a fine.

The LAC has been working with legislators to get these amendments introduced and expects to see the legislation introduced in early 2023.

• Reserve Studies and Reserve Funding: In response to the Surfside Condominium collapse which occurred in Florida last year, several states have introduced legislation to address perceived deficiencies in the law regarding the obligations of a condominium association to conduct reserve studies and to set aside adequate reserve funds for major building and repairs.  Legislation has also been introduced at the federal level to try to help ensure that condominium associations are adequately funded and have access to the funds needed to maintain and repair their buildings.  The LAC and its Reserve Study subcommittee are reviewing the legislation that has been adopted in other jurisdictions as part of an effort to update the Michigan Condominium Act on this issue.  The LAC expects to complete its review and seek legislators to help sponsor potential legislation in early 2023.  The LAC’s goal on this issue is to make sure that condominium associations have the tools necessary to properly assess the condition of their infrastructure and to fund all requisite repairs.

• H.B. 7532, the Securing Access to Financing for External Repairs in Condominium Act of 2022 (‘SAFER”), and H.B. 8304, the Rapid Financing for Condominium Building Repairs Act of 2022 (“RAPID”):  On October 20, LAC Co-Chairperson Greg Fioritto and several other members of the LAC had the opportunity to meet via Zoom with the legislative staff of U.S. Senators Gary Peters and Debbie Stabenow during CAI’s Virtual Advocacy Summit.  During this meeting, the LAC discussed two bills, currently pending with the House Committee on Financial Services, that could significantly help both condominium associations and individual co-owners to finance much-needed, large scale infrastructure repairs.  The SAFER bill would allow condominium co-owners to finance a building repair special assessment (what we usually call an “Additional Assessment” here in Michigan) over 20 years through a second mortgage insured by the Federal Housing Administration ("FHA"), or through a new FHA-insured 30-year mortgage.  This would allow co-owners to finance additional assessments over a longer period of time and reduce the financial strain such assessments often create for Co-owners. The RAPID bill would authorize FHA insurance for loans made by private lenders to condominium associations.  Lenders will be able to offer condominium associations 30-year, fixed interest rate loans without balloon notes or prepayment penalties.  This would lower association borrowing costs and reduce the need for additional assessments by spreading the expense of common element repairs over 30 years. The LAC will continue its efforts to support these two important pieces of federal legislation and will work to keep the lines of communication open with our representatives in Congress.

Community associations represent the interests of an ever-increasing membership in the State of Michigan and throughout the U.S.  The CAI LAC is continually looking for ways to make our voices heard in the legislature and is committed to educating legislators about the needs of our communities. 

But we can’t do it without your help. 

The CAI LAC greatly needs your support to make our state’s laws better for all of our Michigan community associations, their members and families.  Contributing to the CAI LAC with a monetary donation is one way that you can directly support these efforts to help make our laws better. 

If you are interested in supporting legislative change for community associations, please consider making a financial contribution to the LAC at www.cai-michigan.org/advocacy.html.  Contributions from both individuals and community associations are welcome.

Gregory J. Fioritto and Matthew Heron

Co-Chairs of the Michigan CAI LAC