On December 1, 2016, the Grand Traverse County Circuit Court ruled that units could not be added to a condominium after the expiration of the six (6) year time frame contained in MCL 559.132 in Irish v Scheppe Investments, Inc., et. al., Grand Traverse County Circuit Case No. 2016-031750-CH. As was discussed in Was your Condominium Properly Expanded under the Michigan Condominium Act, MCL 559.132(c) provides a six (6) year time cap on an expansion to a condominium that adds units. MCL 559.132 provides in pertinent part:
If the condominium project is an expandable condominium project, the master deed shall contain the following:
(a) The explicit reservation of an election on the part of the developer or its successors to expand the condominium project.
(b) A statement of any restrictions on the election in subdivision (a), including, without limitation, a statement as to whether the consent of any co-owners is required, and if so, a statement as to the method whereby the consent is ascertained; or a statement that the limitations do not exist.
(c) A time limit based on size and nature of the project, of not more than 6 years after the initial recording of the master deed upon which the election to expand the condominium project expires. (emphasis added).
In the above case, the Traverse Bay RV Park Condominium, a recreational RV condominium located in Acme Township, Michigan and was established on August 31, 2001 by the recording of its Master Deed and Condominium Bylaws. On August 12, 2005, the Developer, Traverse Bay RV Park, Inc., recorded a First Amendment to Master Deed (the “First Amendment”). Article X of the First Amendment purported to reserve to the Developer a subsequent right to enlarge the Condominium from 217 units to 350 units up to six (6) years after the recording of the First Amendment, inter alia. On June 7, 2007, Traverse Bay RV Park, Inc. assigned its rights as the Developer of the Condominium to Defendant, Scheppe Investments, Inc. (“Scheppe”). On July 2, 2009, Scheppe recorded a Second Amendment to Master Deed (the “Second Amendment”). On August 2, 2010, Scheppe recorded a Third Amendment to Master Deed (the “Third Amendment”). The Third Amendment did not purport to affect the size of the Condominium or the expandability of the Condominium.
On September 3, 2010, Defendants Scheppe and the Traverse Bay RV Park Condominium Association recorded a First Amendment and Restatement to Third Amendment to Master Deed (the “Restatement”). The Restatement attempted to reserve the right to expand the Condominium from 217 units to 350 units at any time, and without any limitation or reference to the six (6) year period set forth in Article X of the First Amendment. On September 28, 2015, Scheppe and the Traverse Bay RV Park Condominium Association recorded a Statement of Clarification to the First Amendment and Restatement to the Third Amendment to the Master Deed (the “Clarification”). The Clarification purported to reflect the intention of the Restatement to “renew” the six (6) year period to expand the Condominium as set forth in Article X of the First Amendment. On January 12, 2016, Scheppe recorded a Fourth Amendment to Master Deed (the “Fourth Amendment”) that purported to “renew” the six (6) year period in the First Amendment for an additional and six (6) years.
In granting summary disposition, the Court held that the Developer and Condominium Association’s attempts to reserve the right to expand the condominium outside of the six (6) year time period were illegal, unenforceable and void ab initio and that MCL 559.190 did not allow for the the six (6) year time period to be extended. A copy of the court’s order can be found here. Accordingly, while some condominium associations and developers attempt to expand condominiums outside of the six (6) year time period contained in MCL 559.132, the safer course of action is to create a separate condominium in the expandable condominium if the land is going to be developed.
Kevin Hirzel is the Managing Member of Hirzel Law, PLC and concentrates his practice on commercial litigation, community association law, condominium law, Fair Housing Act compliance, homeowners association and real estate law. Mr. Hirzel is a fellow in the College of Community Association Lawyers, a prestigious designation given to less than 175 attorneys in the country. He has been a Michigan Super Lawyer’s Rising Star in Real Estate Law from 2013-2018, an award given to only 2.5% of the attorneys in Michigan each year. Mr. Hirzel was named an Up & Coming Lawyer by Michigan Lawyer’s Weekly in 2015, an award given to only 30 attorneys in Michigan each year. He represents community associations, condominium associations, cooperatives, homeowners associations, property owners and property managers throughout Michigan. He may be reached at (248) 478-1800 or kevin@hirzellaw.com.