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Subject: Short term rental problem
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CatF
(Michigan)

Posts:24


12/02/2018 12:13 PM  
Hello! I am new to the forum and hoping for some input.
We live in a lakeside community in Michigan with full and part time owners. About the time we purchased our home for year-round residency, another couple bought a home (under an LLC) and promptly added bedrooms and facilities in order to rent it through AirBnB. Part of the problem is that the previous owners were renting (under board approval) because they were having trouble selling. The new guy rents year-round and apparently this is their business. They rarely spend any time at the house at all, except when we have an HOA board meeting because he has gotten himself on the board!
The bylaws clearly (at least to me!) say that any rental under 30 days is prohibited. So once some residents started squawking about this guy renting, the board consulted a local (small town) attorney that stated that the bylaws support short term rentals. Several other homeowners, us included, contacted an unbiased, out of the community, real estate attorney who told us (and documented research) that rentals are explicitly prohibited. Four years ago the entire HOA VOTED to prohibit short term rentals as well.
Well...of course, the guy is still renting. The board doesn't want to spend money or upset this guy to get him to stop. However, they want to "amend" the bylaws to show that it's prohibited got future buyers. BUT he will still get to advertise on AirBnb and continue with his business. His attorney sent a threatening letter to the board saying if we try and stop him, he will sue for the board to purchase his house.
We don't have an attorney on the board at this time and we have suggested going with the one that we used who supports this. But board members and neighbors are torn, wanting to keep friendships etc. and want to stay with the local attorney who apparently can't read bylaws!
WHAT DO WE DO NOW?? We are at a loss. Help!
KerryL1
(California)

Posts:5950


12/02/2018 12:40 PM  
It's best to hire an HOA attorney vs. a real estate attorney.

What do your CC&Rs say?? That's where verbiage about rentals usually is found. Do the CC&Rs (covenants; restrictions; declaration) give the board the power to make rules about rentals?

It's not typical to have s wording about rentals in bylaws, so that part of your post is confusing, Cat.
CatF
(Michigan)

Posts:24


12/02/2018 1:06 PM  
Sorry, I meant the CC&R's within the bylaws.

This is the wording:
Section 5. Restrictions on Leasing. No member shall lease less than an entire unit in the Condominium and no tenant of a residential unit shall be permitted to occupy a residential unit, except under written lease, the initial term of which is at least thirty days, unless specifically approved in writing by the Board of Directors.
In addition, any owner who wishes to lease his property has to provide a copy of the lease to the Board for approval 30 days before it is presented to the party who will be leasing his property.
Which he hasn't done.
And the board refuses to enforce any of the CC&R's. They don't want to spend the money.

We live in a very small town which does not have HOA attorneys, so we went with a real estate attorney.
LetA
(Nevada)

Posts:550


12/02/2018 1:21 PM  
What do your town, county ordnances say about short term rentals? Many communities are starting to clamp down on STR's
CatF
(Michigan)

Posts:24


12/02/2018 1:23 PM  
The county just had a huge lawsuit in a community for this very thing, during which they ruled that the resident was wrong for renting. Our township says nothing except that he has to be inspected and approved to rent, which again he hasn't done. And they again do nothing about it.
Very frustrating.
SueW6
(Michigan)

Posts:354


12/02/2018 2:07 PM  
Looks like 30 days plus is OK for a lease, yet for shorter days stay, is he using the loophole “Unless specifically in writing to the board” verbiage.

That’s probably why his lawyer wants a permission letter.

Your board need to get a backbone. If your members don’t follow their own CCR’s, you are in danger of becoming a motel.
SamE2
(New Jersey)

Posts:26


12/02/2018 3:50 PM  
Does you Board have Directors and Officers insurance? If they do and the enforce they rules the insurance should cover any suits by the homeowner. If I was a Board member I would do my job and deal with the suit if they guy decides to sell. Make sure he does not have permission from the Board.
CatF
(Michigan)

Posts:24


12/02/2018 4:49 PM  
No, he doesn't have a permission letter, never asked for one. His attorney just looked at the document and determined that STRs were ok, like the board's attorney did.
From the verbage it looks like they aren't allowed.
No, they don't have insurance and no, they don't have a backbone.
The thing is, he is on the board and most of the other board members are basically afraid of him. They'll talk behind his back but nobody will stand up to him except two of us new members.
He won't recuse when it comes to rental votes. I say he shouldn't even be on the board, but they say that way they can keep him in check.
Help me out. What do we do? Thanks for all your help and advice! I am very new to this.
CatF
(Michigan)

Posts:24


12/02/2018 4:50 PM  
No, he doesn't have permission. This is a site condo HOA of expensive homes and the CC&Rs are not being enforced at all. WWYD?
KerryL1
(California)

Posts:5950


12/02/2018 5:42 PM  
How many are on the board? Why are some of the other directors afraid of him?

Now that I know your'er on the board, Cat, why don't you place his specific unit on an executive session agenda and ask the board to start fining him? To discuss this matter, he must recuse himself an leave the room if the rest of you ask him to.

What you've cited say he cannot rent for less than 30 days. And in what document is the vote of 4 years ago saying no short-term rentals?? Get your language straight--CC&Rs are superior to bylaws and aren't "within" them that I know of.

Wait, does your HOA have a schedule of fines for various violations?

I n my HOA the fine for rentals of under 30 days is $1,000 first offense. Others in my urban high rise 'hood are $5,000.
CatF
(Michigan)

Posts:24


12/02/2018 6:18 PM  
Sorry, like I said...new to all of this. We have a document that says bylaws and within that are the CCRs from what I see.
There are seven on the board. He had his attorney send the board a threatening letter saying if he's not allowed to rent, that he will sue for the board to purchase his home.
The HOA vote was in the minutes from a meeting 4 years ago.
No, there are no fines at all for violations. They have not enforced any violations ever, at all.
They don't want to spend the money. And they don't want to confront this guy.
So yes, not sure why we have bylaws at all. Or a board. I'm not sure what our next move should be. I don't believe he should be on the board at all and I think they should start enforcing the bylaws. I know that the other board members have stated that he should be grandfathered in if we start enforcing. Of course, they also believe we should amend the bylaws to explicitly state what I believe is already obvious.
UGH.
GeorgeS21
(Florida)

Posts:796


12/02/2018 7:11 PM  
Cat - time for backbone.

You have the tools on the Boa d - use them.

Don’t give an inch.

It the boa d won’t do their jobs b, start a recall effort.
LetA
(Nevada)

Posts:550


12/02/2018 8:39 PM  
Posted By CatF on 12/02/2018 1:23 PM
The county just had a huge lawsuit in a community for this very thing, during which they ruled that the resident was wrong for renting. Our township says nothing except that he has to be inspected and approved to rent, which again he hasn't done. And they again do nothing about it.
Very frustrating.




Then you need to file a complaint with housing code enforcement.
MelissaP1
(Alabama)

Posts:7762


12/02/2018 10:49 PM  
Okay so they sue... Why live in fear of it? That is your first mistake. Anyone threatens to sue our HOA, I tell them waiting on the paperwork. Thanks! A threat of a lawsuit doesn't mean anything. It's a way to manipulate the situation. That ain't going to happen.

Now as an incorporated HOA, you will need to hire a lawyer to represent you in court. (Do NOT get a Real Estate lawyer). This lawyer this person has is just doing what his client tells him to do. Doesn't necessarily make it accurate or true. Be careful of hiring ANY lawyer that response is "I will do whatever you tell me to do".

Your HOA also has the option to "counter-sue". Which does NOT take a lawyer to file. It's a response to the lawsuit by the other party. It is cheaper to counter-sue. Your HOA can sue for it's legal costs it's incurring for this situation. Also if there are other issues the member is violating.


So I would not bow down or panic because you got a letter from a lawyer. Even Santa Clause gets letters from lawyers. It's just a "power play" that you all just need to respond "Bring it on" and wait. Plus I would also go to the city/county to find out if there are restrictions of AirNB's. Some towns require a license or other paperwork to be filed. So it's not just the HOA issue. There may be ordinance in place or you all could go to town to make one.


There are options. Just not a need to panic. Research your options and the rules in your area. Get a lawyer when/if a lawsuit does appear.

Former HOA President
CatF
(Michigan)

Posts:24


12/03/2018 5:58 AM  
Thanks for the advice. I will look for an HOA attorney in our area. My question is, if the fines are not written into the CCRs, how do we stop this guy? Does the board have to take him to court? They have never enforced the restrictions and I guess it's a matter of stopping the rock from rolling downhill.
Do we get him off the board?
Just a bit lost as to where to start. Or is is this all up to the attorney?
Thanks.
AugustinD


Posts:1208


12/03/2018 7:21 AM  
Posted By CatF on 12/02/2018 4:49 PM
[The violator] is on the board and most of the other board members are basically afraid of him. They'll talk behind his back but nobody will stand up to him except two of us new members.


At this point, all members unhappy about this should write a letter of demand to the board. Google for examples. Such letters should be short and sweet. Quote the covenant the board member is violating. Quote any section of the CC&Rs that says the Board has to enforce the covenants or a member may enforce the covenants via a court of law. If your HOA's CC&Rs say it is organized under the Michigan Nonprofit Corporation Act, quote from the following:


http://www.legislature.mi.gov/(S(etvynzunos4nkwc5jgkeqpmd))/mileg.aspx?page=getObject&objectName=mcl-450-2489


Notice that Part (1)(e) of this section of the Nonprofit Corporation Act is likely where the board and violator's attorney is getting the argument that the HOA might be ordered to purchase the violator's home. But I think this is a stretch.

Close your letter with a sentence that says something like: If the HOA refuses to enforce this covenant, then we will be left with no other choice than to take the HOA to court.

You should send a demand letter to the violator as well, again quoting the CC&Rs and telling him that if he does not cease and desist, you will be left with no other choice but to take him to court, pursuant to the Michigan Nonprofit Corporation Act, section 450.2489.

Repeat the letter of demand once a month for three months. Meanwhile, start either shopping for a HOA attorney, or finding a free legal clinic. Call your County Circuit Court and ask if there is a free legal clinic offered by the court.

Here is some 2017 Michigan commentary and case law that appears to offer support to your claim:

https://www.kreisenderle.com/homeowners-associations-restrictions-against-airbnb-and-short-term-rentals/

https://micondolaw.com/2017/09/21/2852/

RoyalP
(South Carolina)

Posts:203


12/03/2018 7:27 AM  
perhaps

juuuuust perhaps


the 'bylaw' restriction was an attempt to circumvent the actual CCRs

said CCRs having NO restriction against rentals


perhaps

juuuuust perhaps BOTH attorneys are actually correct !?
AugustinD


Posts:1208


12/03/2018 7:44 AM  
The CC&R quoted indicated this is a condominium. If so, then the Michigan Condominium Act applies. See http://www.legislature.mi.gov/documents/mcl/pdf/mcl-act-59-of-1978.pdf , and especially Section 559.207:
~~~
559.207 Action to enforce terms and provisions of condominium documents; action for
injunctive relief or damages.
Sec. 107. A co-owner may maintain an action against the association of co-owners and its officers and directors to compel these persons to enforce the terms and provisions of the condominium documents. In such a proceeding, the association of co-owners or the co-owner, if successful, shall recover the costs of the proceeding and reasonable attorney fees, as determined by the court, to the extent that the condominium documents expressly so provide. A co-owner may maintain an action against any other co-owner for injunctive relief or for damages or any combination thereof for noncompliance with the terms and provisions of the condominium documents or this act.
History: 1978, Act 59, Eff. July 1, 1978;Am. 2000, Act 379, Imd. Eff. Jan. 2, 2001
~~~

CatF, make sure you mention the Michigan Condominium Act Section 559.207 in your letter of demand, pointing out that the HOA might have to pay your attorney's fees. Make sure any attorney you interview knows it is possible he or she might be awarded attorney's fees.
JohnC46
(South Carolina)

Posts:7865


12/03/2018 8:50 AM  
Cat

The letter to the BOD has them peeing in their panties. They either man up and take legal action or keep running scared.
RoyalP
(South Carolina)

Posts:203


12/03/2018 10:22 AM  
..... the previous owners were renting (under board approval) because .....


matters not 'because', permission was granted, setting a precedent

CatF
(Michigan)

Posts:24


12/03/2018 1:37 PM  
Right! So now what? He never got board approval...
RichardP13
(California)

Posts:3130


12/03/2018 1:58 PM  
CatF

You are fight a battle the HOA will NEVER win. Your best bet is to get the city to ban rentals less than 30 days and then your member would have to abide by local rules. This is how one of my HOA's fought and won.
CatF
(Michigan)

Posts:24


12/03/2018 1:59 PM  
Why do you think it's a no-win?
RoyalP
(South Carolina)

Posts:203


12/03/2018 3:16 PM  
Posted By CatF on 12/03/2018 1:37 PM
Right! So now what? He never got board approval...




'He' will claim: I purchased a 'unit'/'home' in an HOA which the BOD had, in writing, permitted renting out. Now, after the fact, I am being told, w/o SPECIFIC documentation, that I am violation of some 'covenant' of which I was never made aware.


CatF
(Michigan)

Posts:24


12/03/2018 3:31 PM  
Hmm....so considering that he does not have written approval for his unit (the previous owner was only allowed on a limited basis), the actual CCRs don't matter? Why do we even have them if they're not enforced/enforceable? They also state you cannot store your boat in your driveway and he is telling others to ignore that as well!
MelissaP1
(Alabama)

Posts:7762


12/03/2018 3:39 PM  
Remember there is no lawsuit yet. Just a letter of a threat of one. I wouldn't worry till a lawsuit was brought. Once that happens, I would then counter-sue for enforcing the restriction.

Now the HOA should have a "fining schedule" in place. It may be the HOA has the right to fine in their CC&R's. They just don't have it defined for how much and for how long. That is what the "Fining Schedule" does. All owners/members should then be aware of it and agreed.


I would consult a lawyer about developing a fining schedule before this guy has a chance to file a lawsuit. That way your HOA can then start instituting a fining system to enforce the rule they are violating. Plus that is the amount the HOA may be able to counter-sue for.


Your HOA still has a chance here to enforce the restriction. You all just have to figure out how to do it. Is it by Fines? Is it by a city ordinance? The burden of proof is on the person bringing the suit. The HOA has proof in their documentation that they are in violation do they not?

Don't run scared. Run to the rules.

Former HOA President
RichardP13
(California)

Posts:3130


12/03/2018 3:52 PM  
Posted By CatF on 12/03/2018 1:59 PM
Why do you think it's a no-win?



Based on experience.
CatF
(Michigan)

Posts:24


12/03/2018 3:54 PM  
Exactly. He has numerous excuses... "the realtor told me I could!..."I didn't get the bylaws etc. until the day we closed!"..."Can't we all be good neighbors?" UGH.

Another problem is that he has been doing it now for two years and people have complained, spoken to lawyers etc. but nobody has done anything. Yes, the BOD is afraid of being sued.
And finally, those on the board aren't SURE that the CCRs actually prohibit STRs because two attorneys (including his) have told them they aren't prohibited. Only the attorney that several of us hired looked at ALL of it and determined that they are.
KerryL1
(California)

Posts:5950


12/03/2018 5:29 PM  
I DO think Richard's being unhelpful b/c owe always have some choices before they must resort to having the courts enforce their governing documents.

Since you're on the Board, you must convince them to act. You also must be active in setting up a schedule of fines to enforce your convents and rules. Meantime, follow Augustine's advice. Yes it doe take work, but this is about th future of your community!

Your Board if your HOA is incorporated is protected by some version of the Business Judgement rule, Cat. It states that they're OK (can't be sued) IF they use due diligence in making decisions. corporate boards might make mistakes.

One of those steps is to seek advice from experts. Are their 2 opinions on this topic in writing??? What do these opinions say? How do they differ form the attorney you et. al hired?
RoyalP
(South Carolina)

Posts:203


12/03/2018 6:31 PM  
..... And finally, those on the board aren't SURE that the CCRs actually prohibit STRs because two attorneys (including his) have told them they aren't prohibited. Only the attorney that several of us hired looked at ALL of it and determined that they are. .....


Therein lies the issue.

The Covenants and Restrictions (key word being Restrictions) would govern/ban STRs.

NOT, repeat NOT, the bylaws which govern the actual operation of the incorporated XYZ HOA, Inc.

Read, reread, and read again the actual Covenant to see what, if anything, it restricts re: rentals.

If they are actually restricted send the violator a 'demand letter' / notice of violation certified mail return receipt requested giving a 10 day time frame to 'cease and desist'. QUOTE THE COVENANT, not a bylaw.

then

Be prepared to take appropriate legal action (seek an injunction) to force compliance.

but

IMO: if the 'restriction' is in the bylaws as opposed to actually in the Covenants said restriction is probably invalid and non-enforceable - as per the TWO attorneys consulted
CatF
(Michigan)

Posts:24


12/03/2018 7:01 PM  
The difference between the three attorneys' opinions are because this:

Section 5. Additional Restrictions on Leasing. No member shall lease less than an entire unit in the Condominium and no tenant of a residential unit shall be permitted to occupy a residential unit, except under written lease, **the initial term of which is at least thirty days**, unless specifically approved in writing by the Board of Directors. The Board may, except to the extent prohibited by law, require a security deposit from any proposed tenant of a residential unit as a condition to the approval of any lease.

is on a whole different page than this:

Section 2. Notices of Desire and Intent.
(a) A member who desires to rent or lease his Condominium unit for any term shall provide notice of such desire to the Board of Directors at least ten (10) days before presenting a lease form to a potential tenant.

And according to our attorney, the other two just didn't read far enough.
And yes, they are restrictions within the bylaws. There are no covenants in the documents.
It was all drawn up by an attorney.
Is there a problem with that?
RoyalP
(South Carolina)

Posts:203


12/03/2018 7:09 PM  
YES, IMO, a big problem.

It is the "Covenants and Restrictions" that 'bind' a property owner.

Bylaws merely dictate how the Covenants and Restrictions are 'managed' by the corporate operations.

Bylaws may NOT add restrictions to the Covenants unless the Covenants themselves authorize same.


see: http://www.hoatalk.com/Forum/tabid/55/forumid/1/tpage/1/view/topic/postid/256523/Default.aspx#256523



Y'all really really really need an attorney well versed in BOTH contract AND HOA law.


BEST OF LUCK

and

CAVEAT EMPTOR
RoyalP
(South Carolina)

Posts:203


12/03/2018 7:33 PM  
(an 'easier' link)

COVENANTS
RichardP13
(California)

Posts:3130


12/03/2018 7:35 PM  
Posted By KerryL1 on 12/03/2018 5:29 PM
I DO think Richard's being unhelpful b/c owe always have some choices before they must resort to having the courts enforce their governing documents.

Since you're on the Board, you must convince them to act. You also must be active in setting up a schedule of fines to enforce your convents and rules. Meantime, follow Augustine's advice. Yes it doe take work, but this is about th future of your community!

Your Board if your HOA is incorporated is protected by some version of the Business Judgement rule, Cat. It states that they're OK (can't be sued) IF they use due diligence in making decisions. corporate boards might make mistakes.

One of those steps is to seek advice from experts. Are their 2 opinions on this topic in writing??? What do these opinions say? How do they differ form the attorney you et. al hired?



EXACTLY, how am I am being unhelpful?????? Where did I even mention the courts????

FYI..I manage a condo complex in Rosemead, CA. Up until August of this year, we could not prohibit owners from renting their units for less than 30 days. Their CCRs were old and ineffective. We worked with their city council and rentals less than 30 days were prohibited as of August 31st of this year. Now if there is a violation, it goes straight to the city to enforce!

Kerry, what have you done lately???
RoyalP
(South Carolina)

Posts:203


12/03/2018 7:41 PM  
..... Their CCRs were old and ineffective. We worked with their city council and rentals less than 30 days were prohibited as of August 31st of this year. Now if there is a violation, it goes straight to the city to enforce! .....



EXCELLENT

no longer the HOA's problem

also, one can notify the IRS of the STRs




@Richard: even a stopped clock is correct twice a day

(assuming a 12 hr clock)
RoyalP
(South Carolina)

Posts:203


12/03/2018 7:43 PM  
Posted By LetA on 12/02/2018 1:21 PM
What do your town, county ordnances say about short term rentals? Many communities are starting to clamp down on STR's



MelissaP1
(Alabama)

Posts:7762


12/03/2018 7:53 PM  
#1 a realtor can't tell a buyer anything about the HOA. Just that there is one if they know. Many states but not all may require the HOA's documents to be handed over at/by closing by the seller. Otherwise, it's considered the buyer's responsibility to be informed. Meaning No ONE else is responsible for educating/providing HOA CC&R/Articles of Incorporation. Those documents are considered PUBLIC documents. Available at the Records department of your county. By-laws or ACC documents are the INTERNAL documents of the HOA. Which the HOA provides. Although by-laws are often filed (not required) with the CC&R's.

So your person's excuses are just that. EXCUSES. Do you play into those? The HOA holds the power here. If the documents say there is an approval process prior to renting, then they are clearly in violation for not doing so. It is then the HOA's responsibility to enforce that by creating a Fining Schedule or another form of punishment. Maybe take away access to amenities like the pool. Which can extend to their renter. No one wants to rent if they can't use the pool. So it doesn't have to be fines.

I would say if they decide to sue, then counter sue them for the legal expenses the HOA is incurring. Also you all can sue to enforce the rule as well. Which may be fines or restricted access.

Still don't understand how this person thinks that they can sue the HOA for paying for their house? Really where is the logic in that? The HOA doesn't own the property nor did they sell it to them. They just responsible for enforcing the restrictions on that property. The HOA isn't responsible for someone's profit margin. Plus there is also a restriction most likely regarding home business restrictions as well...

Former HOA President
AugustinD


Posts:1208


12/03/2018 8:41 PM  
Posted By RoyalP on 12/03/2018 7:09 PM
YES, IMO, a big problem. It is the "Covenants and Restrictions" that 'bind' a property owner. Bylaws merely dictate how the Covenants and Restrictions are 'managed' by the corporate operations. Bylaws may NOT add restrictions to the Covenants unless the Covenants themselves authorize same.


Maybe the above is so in general but it appears to be otherwise in Michigan. From the Michigan Condominium Act:

559.156 Bylaws; permissible provisions
Sec. 56. The bylaws may contain provisions:
(b) For restrictions on the sale, lease, license to use, or occupancy of condominium units.

See http://www.legislature.mi.gov/documents/mcl/pdf/mcl-act-59-of-1978.pdf


AugustinD


Posts:1208


12/03/2018 8:48 PM  
Posted By CatF on 12/03/2018 7:01 PM
And according to our attorney, the other two just didn't read far enough. And yes, they are restrictions within the bylaws. There are no covenants in the documents. It was all drawn up by an attorney. Is there a problem with that?


This is not the first time in the last couple of years that I have heard of attorneys making boneheaded mistakes that laypeople call them out on.

Of course, the violator's attorney will fiercely advocate for his/her client, which includes prevarication. It's the attorney's job, and it's just the way it is. The worn-out lawyers' joke that goes, "When can you tell if an attorney is lying? When she or he opens her or his mouth." has enormous truth to it. It's their job to sell falsehoods.

The section of your Bylaws restricting renting is consistent with the Michigan Condominium Act. I see no problem.
RoyalP
(South Carolina)

Posts:203


12/04/2018 5:38 AM  
Posted By AugustinD on 12/03/2018 8:41 PM
Posted By RoyalP on 12/03/2018 7:09 PM
YES, IMO, a big problem. It is the "Covenants and Restrictions" that 'bind' a property owner. Bylaws merely dictate how the Covenants and Restrictions are 'managed' by the corporate operations. Bylaws may NOT add restrictions to the Covenants unless the Covenants themselves authorize same.


Maybe the above is so in general but it appears to be otherwise in Michigan. From the Michigan Condominium Act:

559.156 Bylaws; permissible provisions
Sec. 56. The bylaws may contain provisions:
(b) For restrictions on the sale, lease, license to use, or occupancy of condominium units.

See http://www.legislature.mi.gov/documents/mcl/pdf/mcl-act-59-of-1978.pdf







"Live long, and learn!"


CatF
(Michigan)

Posts:24


12/04/2018 5:56 AM  
This is in the restrictions regarding leases as well. Perhaps this is where he thinks he can ask for the BOD to purchase his house, if they don't approve his renting.

"If disapproved, the Association shall offer to purchase or lease, or provide another purchaser or tenant acceptable to it, on terms not less favorable to the seller or landlord than those originally proposed, and the seller or landlord shall be bound to consummate the transaction with such approved purchaser or permit the approved tenant to enter into possession within thirty (30) days thereafter."

Again, thanks for all your advice guys! Seven people, volunteering to be on the board, and NONE of them really understands their responsibilities or understands the document set in front of them.
We have actually had the conversation in meetings where one member says, "Well, I don't want to really take a side on this issue."

SIDE?? How about the side of the actual restrictions?? Or your property value??
I am so fed up I am ready to buy some livestock for my backyard just to prove I can do it and nobody will stop me!
RoyalP
(South Carolina)

Posts:203


12/04/2018 5:59 AM  
? Are we sure the following is applicable to the OP's situation ?

CONDOMINIUM ACT
Act 59 of 1978

AN ACT relative to condominiums and condominium projects; to prescribe powers and duties of the
administrator; to provide certain protections for certain tenants, senior citizens, and persons with disabilities relating to conversion condominium projects; to provide for escrow arrangements; to provide an exemption from certain property tax increases; to impose duties on certain state departments; to prescribe remedies and penalties; and to repeal acts and parts of acts.559.146 Restrictions and covenants.

Sec. 46. The developer or a co-owner may impose reasonable restrictions or covenants running with the
land upon a condominium unit in the condominium project, in addition to the reasonable restrictions and
covenants as may be contained in the condominium documents, so long as such restrictions and covenants are
not otherwise prohibited by law and as long as they are consistent with the condominium documents. The
restrictions and covenants may include provisions governing the joint or common ownership of condominium
units in the condominium project and the basis upon which the usage of the condominium unit or
condominium units may be shared from time to time by the joint or common owners thereof.

559.153 Bylaws governing administration of condominium project; amendments; recording.
Sec. 53. The administration of a condominium project shall be governed by bylaws recorded as part of the
master deed, or as provided in the master deed. An amendment to the bylaws of any condominium project
shall not eliminate the mandatory provisions required by section 54. An amendment shall be inoperative until
recorded.

559.156 Bylaws; permissible provisions.
Sec. 56. The bylaws may contain provisions:
(a) As are deemed appropriate for the administration of the condominium project not inconsistent with this
act or any other applicable laws.
(b) For restrictions on the sale, lease, license to use, or occupancy of condominium units.
(c) For insuring the co-owners against risks affecting the condominium project, without prejudice to the
right of each co-owner to insure his condominium unit or condominium units on his own account and for his
own benefit.



RoyalP
(South Carolina)

Posts:203


12/04/2018 6:01 AM  
Posted By RoyalP on 12/04/2018 5:59 AM
? Are we sure the following is applicable to the OP's situation ?

CONDOMINIUM ACT
Act 59 of 1978

AN ACT relative to condominiums and condominium projects; to prescribe powers and duties of the
administrator; to provide certain protections for certain tenants, senior citizens, and persons with disabilities relating to conversion condominium projects; to provide for escrow arrangements; to provide an exemption from certain property tax increases; to impose duties on certain state departments; to prescribe remedies and penalties; and to repeal acts and parts of acts.559.146 Restrictions and covenants.

Sec. 46. The developer or a co-owner may impose reasonable restrictions or covenants running with the
land upon a condominium unit in the condominium project, in addition to the reasonable restrictions and
covenants as may be contained in the condominium documents, so long as such restrictions and covenants are
not otherwise prohibited by law and as long as they are consistent with the condominium documents. The
restrictions and covenants may include provisions governing the joint or common ownership of condominium
units in the condominium project and the basis upon which the usage of the condominium unit or
condominium units may be shared from time to time by the joint or common owners thereof.

559.153 Bylaws governing administration of condominium project; amendments; recording.
Sec. 53. The administration of a condominium project shall be governed by bylaws recorded as part of the
master deed, or as provided in the master deed. An amendment to the bylaws of any condominium project
shall not eliminate the mandatory provisions required by section 54. An amendment shall be inoperative until
recorded.

559.156 Bylaws; permissible provisions.
Sec. 56. The bylaws may contain provisions:
(a) As are deemed appropriate for the administration of the condominium project not inconsistent with this
act or any other applicable laws.
(b) For restrictions on the sale, lease, license to use, or occupancy of condominium units.
(c) For insuring the co-owners against risks affecting the condominium project, without prejudice to the
right of each co-owner to insure his condominium unit or condominium units on his own account and for his
own benefit.







sorry for the preceding formatting error
AugustinD


Posts:1208


12/04/2018 6:52 AM  
Posted By CatF on 12/04/2018 5:56 AM
This is in the restrictions regarding leases as well. Perhaps this is where he thinks he can ask for the BOD to purchase his house, if they don't approve his renting.

"If disapproved, the Association shall offer to purchase or lease, or provide another purchaser or tenant acceptable to it, on terms not less favorable to the seller or landlord than those originally proposed, and the seller or landlord shall be bound to consummate the transaction with such approved purchaser or permit the approved tenant to enter into possession within thirty (30) days thereafter."

Again, thanks for all your advice guys! Seven people, volunteering to be on the board, and NONE of them really understands their responsibilities or understands the document set in front of them.
We have actually had the conversation in meetings where one member says, "Well, I don't want to really take a side on this issue."

SIDE?? How about the side of the actual restrictions?? Or your property value??
I am so fed up I am ready to buy some livestock for my backyard just to prove I can do it and nobody will stop me!


What you quoted here indicates the Board; the HOA attorney; and the landlord-member's attorney in fact got it right. CatF, with this new revelation, I think you and your fellow disapproving members are stuck with either airbnb and other very short-term rentals, or the HOA is going to have to get into the buying, selling and possibly leasing of condo units business, which has all manner of tax implications. If I were on the Board, I would do as the OP's board did, though quoting everything relevant so people understood.

I think the most the OP can hope for is amending the relevant Bylaws. Even an amendment may be subject to challenge in court, since being able to rent one's condo unit for short-term is a pretty important use of one's property.
RoyalP
(South Carolina)

Posts:203


12/04/2018 7:36 AM  
To repeat:

..... “The law looks with disfavor upon covenants restricting the free use of property. As a consequence, the law declares that nothing can be read into a restrictive covenant enlarging its meaning beyond what its language plainly and unmistakably imports. .....

COVENANTS
RoyalP
(South Carolina)

Posts:203


12/04/2018 7:38 AM  
Posted By AugustinD on 12/04/2018 6:52 AM
Posted By CatF on 12/04/2018 5:56 AM
This is in the restrictions regarding leases as well. Perhaps this is where he thinks he can ask for the BOD to purchase his house, if they don't approve his renting.

"If disapproved, the Association shall offer to purchase or lease, or provide another purchaser or tenant acceptable to it, on terms not less favorable to the seller or landlord than those originally proposed, and the seller or landlord shall be bound to consummate the transaction with such approved purchaser or permit the approved tenant to enter into possession within thirty (30) days thereafter."

Again, thanks for all your advice guys! Seven people, volunteering to be on the board, and NONE of them really understands their responsibilities or understands the document set in front of them.
We have actually had the conversation in meetings where one member says, "Well, I don't want to really take a side on this issue."

SIDE?? How about the side of the actual restrictions?? Or your property value??
I am so fed up I am ready to buy some livestock for my backyard just to prove I can do it and nobody will stop me!


What you quoted here indicates the Board; the HOA attorney; and the landlord-member's attorney in fact got it right. CatF, with this new revelation, I think you and your fellow disapproving members are stuck with either airbnb and other very short-term rentals, or the HOA is going to have to get into the buying, selling and possibly leasing of condo units business, which has all manner of tax implications. If I were on the Board, I would do as the OP's board did, though quoting everything relevant so people understood.

I think the most the OP can hope for is amending the relevant Bylaws. Even an amendment may be subject to challenge in court, since being able to rent one's condo unit for short-term is a pretty important use of one's property.



CatF
(Michigan)

Posts:24


12/04/2018 10:14 AM  
Did you see the other two sections I quoted before this?
It talks about how it's okay to lease your home, then the next section states that you can't lease for under thirty days.
This last thing I quoted deals with how the board should buy out his house if they don't approve.
I guess I'm confused as to what you think they got right.
AugustinD


Posts:1208


12/04/2018 10:21 AM  
Hi CatF, yes, I saw the other two sections. To recap, your condominium has the following in its Bylaws:
~~~
Section 5. Restrictions on Leasing. No member shall lease less than an entire unit in the Condominium and no tenant of a residential unit shall be permitted to occupy a residential unit, except under written lease, the initial term of which is at least thirty days, unless specifically approved in writing by the Board of Directors. In addition, any owner who wishes to lease his property has to provide a copy of the lease to the Board for approval 30 days before it is presented to the party who will be leasing his property.

"Section 5. Additional Restrictions on Leasing. No member shall lease less than an entire unit in the Condominium and no tenant of a residential unit shall be permitted to occupy a residential unit, except under written lease, **the initial term of which is at least thirty days**, unless specifically approved in writing by the Board of Directors. The Board may, except to the extent prohibited by law, require a security deposit from any proposed tenant of a residential unit as a condition to the approval of any lease."

"If disapproved, the Association shall offer to purchase or lease, or provide another purchaser or tenant acceptable to it, on terms not less favorable to the seller or landlord than those originally proposed, and the seller or landlord shall be bound to consummate the transaction with such approved purchaser or permit the approved tenant to enter into possession within thirty (30) days thereafter."
~~~

By my reading, the Board has a right to disapprove, say, a one-night rental, but when it disapproves this, it must ("shall") offer to purchase or lease the unit et cetera. What are you seeing that I am not?
CatF
(Michigan)

Posts:24


12/04/2018 11:01 AM  
I was under the impression, as was our attorney, that leases over thirty days are allowed. The owner applies to the board for the lease and if not approved, then the board has to purchase or lease it.
No?
AugustinD


Posts:1208


12/04/2018 11:32 AM  
CatF, I think I see what you mean now. I think you are correct that this was the intent of the Bylaws in question. But if push comes to shove, I think the problem would be that the Bylaw is a bit ambiguous. E.g. Suppose Member John Jerk comes to the Board seeking approval of a lease for one night. The Board disapproves the application, but solely because the lease is for only one night. The Board explains that the Bylaw is actually saying, "Leases for less than 30 days shall not be allowed. Leases over 30 days must be approved by the Board... " Member John Jerk, with his lawyer in tow, responds that, unfortunately, the Bylaw does not say this. Member John Jerk says that the Bylaws say any disapproval of any lease (even a one day lease) requires the HOA to buy or lease his unit.

Ambiguities are interpreted in favor of free enjoyment of property. I think this Bylaw is just ambiguous enough for a court to say that Member John Jerk wins.

What about this vote you say (in your first post) that condominium members had to prohibit short term rentals? Can you elaborate on this?
AugustinD


Posts:1208


12/04/2018 11:45 AM  
Also, even if there was a formal amendment of the Bylaws via a member vote, and so Member John Jerk was clearly in violation, and the Condo took him to court, I think Member John Jerk could cite section 450.2489 of the nonprofit corporation act to ask the Court to force the HOA to buy or lease his home:
~~~~~~~~~~~~~~~~~~~
"... a member of a corporation that is organized on a membership basis may bring an action in the circuit court of the county in which the principal place of business or registered office of the corporation is located to establish that the acts of the directors, shareholders, members, or others in control of the corporation are illegal, fraudulent, or willfully unfair and oppressive to the corporation or to the director, member, or shareholder. If the director, member, or shareholder establishes grounds for relief, the circuit court may make an order or grant relief as it considers appropriate including, but not limited to, an order that provides for any of the following:
...
(e) The purchase at fair value of the shares of a shareholder or the membership of a member, either by the corporation or by the officers, directors, or other shareholders or members responsible for the wrongful acts."

-- From http://www.legislature.mi.gov/(S(2w3qjucac1gnyzzbm34o0y2c))/mileg.aspx?page=getObject&objectName=mcl-450-2489
~~~~~~~~~~~~~~~~~~~

Whoever wrote your condo's Bylaws appears to have been aware of this part of Michigan's Nonprofit Corporation Act (a statute). I admit I have not seen anything so harsh in other HOA's bylaws or other states' nonprofit corporation acts. But there it is, not once but twice (first in the statute; and again in your Condo's bylaws.)
CatF
(Michigan)

Posts:24


12/04/2018 11:57 AM  
Thanks for the info.
So what would your next move be? Seeing as our BOD meeting is this Saturday...
RoyalP
(South Carolina)

Posts:203


12/04/2018 12:53 PM  
plan B:


an airB&B is a business


are y'all allowed to run a business from y'all's units ?

have all taxes been paid on said business ?

incl. IRS ?

are their any LOCAL requirements to operate a 'hotel' ?


contact your local 'authority having zoning jurisdiction'


BEST OF LUCK
CatF
(Michigan)

Posts:24


12/04/2018 1:13 PM  
That is what the county judge said in the other lawsuit: NO commercial use allowed. And by definition, commercial is when you make money off of your home.
Not sure about the taxes, although I'd love to find out! This guy rents to over 15 people at a time and has probably made $50k this year on rentals alone.
RoyalP
(South Carolina)

Posts:203


12/04/2018 2:36 PM  
Notify the IRS and wait for your 10% 'finders fee'.

10% of their taxes payable.

AugustinD


Posts:1208


12/04/2018 2:39 PM  
Posted By CatF on 12/04/2018 11:57 AM
Thanks for the info.
So what would your next move be? Seeing as our BOD meeting is this Saturday...


It's an opinion more than anything, though I think I am pretty well read on how the courts see these things and went through a long, frivolous suit a member filed against a HOA and its directors, past and present (including myself). It was ultimately dismissed, but we all learned a lot.

I would be checking to see that the Condo's Bylaws, Articles of Incorporation and any CC&Rs do in fact say somewhere that the condo is subject to the Michigan Nonprofit Corporation Act. If enough members were disgusted with the situation, I'd maybe start a movement to amend the Bylaws, because I would not want airbnb's at my condo, either.

If I were you and had the money, I would ask the attorney you consulted about (1) ambiguities in covenants; and (2) the parts of the Nonprofit Corporation Act about a HOA potentially being ordered to buy or lease a violator's condo.

Some posters here point out that, at the trial court level, it's a toss of the coin as to who will win. But if I were an attorney, I'd try to be an ethical one, and I would tell you and all the Members who felt as you did that I could not take your case, and waste your money, since the chances of prevailing were poor, and I felt the law was on Member John Jerk's side, unfortunately. It is the price of poorly written docs.

What kills me is that clause in the Michigan Nonprofit Corporation Act makes it riskier-than-usual for a HOA to enforce any Bylaw or covenant without risking being ordered to buy or lease the violator's condo or home. I wonder if a judge has actually ever ordered this. And if so, was it a weighing of equities involving very poorly written bylaws or covenants?

One other thing: Director-Member John Jerk should abstain from votes on any of this, as far as I am concerned. It's a conflict of interest to do otherwise. I doubt this helps other than validating any frustration and disgust you may be feeling. I know I would be frustrated and disgusted. My HOA has about 50% renters (with year long leases), and they tend to be slobs.

GenoS
(Florida)

Posts:2518


12/04/2018 3:11 PM  
This is a big issue in Florida where local communities want to restrict short-term rentals but the state legislature, under the influence of lobbyists, is moving toward a state-wide pre-emption of local laws that restrict short-term rentals. Florida's tourist industry likes short-term rentals; Michigan is probably very different in this regard.

Regarding AirBnB and VRBO, there was where...

"On appeal, the appellate court focused on the plain language of the restrictive covenant and explained that the pertinent issue was the actual use, as opposed to the duration of the rental. In keeping in line with other Florida decisions, the court reasoned that a rental does not transform a home’s use from residential to either business or commercial."

A prohibition against commercial or business use in a home does NOT equate to renting out the property. In Florida, an association's CC&Rs have to explicitly provide for "no short-term rentals" in addition to a general probibitions against "no business or commercial use".
GenoS
(Florida)

Posts:2518


12/04/2018 3:14 PM  
Correct link here.
CatF
(Michigan)

Posts:24


12/04/2018 4:16 PM  
Here is a wrap up of the recent court case in our county. The judge ruled that short-term vacation rentals by the Defendants constituted commercial activity.

https://micondolaw.com/2016/06/09/allegan-county-trial-court-rules-that-short-term-vacation-rentals-violate-deed-restrictions/

As to the other issue. I don't see how, if the restrictions explicitly say 30 days or more for leases, how he could sue the board for anything. It's his fault he didn't follow the restrictions and has had two years to make all kinds of money.

BTW, how does one check with the IRS on this sort of thing??
CatF
(Michigan)

Posts:24


12/04/2018 4:26 PM  
And yes, it does mention it being a nonprofit with the state of Michigan.
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