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A Better Partnership
November 30, 2015

COA: Property owners association cannot use bylaws to impose new and expanded restrictions on a development without unanimous consent

In Conlin v. Upton, No. 322458, the Michigan Court of Appeals held that a property owners association cannot regulate properties through bylaws, unless the authority is derived from the original covenants and restrictions placed on the land.  Additionally, the association cannot authorize the imposition of new or expanded restrictions with less than unanimous consent.
 
In 1998 and 1999, Philip Colin purchased and developed Dixboro Farms, which is over 90 acres of land.  Conlin and his co-developers established a set of restrictions and protective covenants for the development and recorded them in 2001.  Conlin placed a restriction in the covenants that required a prospective purchaser to obtain his permission, as the developer, before building on any parcel.  The covenants also included a provision for the formation of a property owners association, which Conlin incorporated in 2007.  The covenants stated that Conlin would appoint the board of directors for the association after the development of 50% of the lots, and members had the right to elect the board after sale of 90% of the lots.  
 
In 2007, Conlin approved two new homes for construction and many of the members felt the new homes were not in harmony with the quality of the existing homes.  The homeowners met in January 2011 and drafted a letter to Conlin stating that the homeowners: 1. wanted to elect their own board for the association; 2. acted to appoint an architectural control committee to cooperate and assist in maintaining architectural harmony in the subdivision; and 3. intended to develop bylaws for the association.  Conlin acknowledged that he signed the letter and acquiesced to the homeowners decision to elect their own board, notwithstanding his continued right to appoint the board.
 
The association established and recorded bylaws in December 2011.  That same month, Conlin submitted a proposed plan of development for a lot to the association, stating that he invited the association’s comments and suggestions on the plan.   The association responded with preliminary feedback and requested that Conlin’s client submit $2,000 for a comprehensive review, as required by the bylaws.  In August 2011, the developers sued the members of the association, alleging the association’s bylaws contained invalid restrictions on the development of the lots and arguing that the bylaws burdened the properties with new or expanded restrictions that were not permitted by the original covenants.  Conlin also maintained that he did not assign the association his right to approve proposed plans for the development.
 
At trial, the parties submitted a special verdict form for the jury, asking the jury to answer whether the bylaws constituted restrictive covenants that ran with the land and whether the bylaws impaired the developers’ rights by violating the 2001 covenants and restrictions.  The jury answered “No” to both questions, and therefore, did not have to determine whether Conlin assigned his rights to the association.  The trial court entered a judgment of no cause of action against the developers and ordered them to pay more than $58,000 in attorney fees to the association.  The developers appealed.
 
The Court of Appeals concluded that the bylaws established rules governing the use and development of the land and clearly imposed limits on the members’ ability to develop and use their lots.  Furthermore, the court reasoned that the association did not have the authority to alter existing covenants or impose new burdens on existing lots without unanimous consent.
 
The Court of Appeals reversed the jury verdict, vacated the judgment, and remanded for further proceedings, specifically for the trial court to enter a partial judgment in favor of the developers declaring the 2001 covenants and restrictions did not give the association the authority to burden the lots with additional restrictions or add new restrictions without unanimous approval.  Additionally, the trial court’s order should declare that the association’s bylaws is invalid and does not impose an additional burden on the lots.  Moreover, the Court of Appeals held that, if necessary, the trial court should hold a new trial to resolve whether Conlin assigned his rights to the association.  Lastly, the Court of Appeals ordered that none of the parties may tax their costs because the appeal involved issues of importance to the general public.

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