New Law Expands Protections for Municipalities in Premises Liability Lawsuits

Michigan Governor Rick Snyder recently signed into law an amendment to the Governmental Liability for Negligence Act. MCL 691.1402a. This statute describes the extent of municipal duties and liability in claims relating to sidewalk maintenance.

Municipalities are required to maintain sidewalks in reasonable repair and are not liable for the failure to maintain sidewalks unless a plaintiff proves the municipality knew, or should have known, of the defective sidewalk more than 30 days before the occurrence. A municipality is presumed to have maintained the sidewalk in reasonable repair. This presumption is rebutted only upon a showing that the proximate cause of injury was (1) a vertical discontinuity of 2 inches or more or (2) a dangerous condition in the sidewalk itself other than a vertical discontinuity.

Prior to its amendment, municipalities were limited as to the defenses they could assert. The amended statute permits municipalities to assert any defenses available under the common law with respect to premises liability claims. The amended statute specifically mentions the open and obvious defense, which protects landowners from liability if an average user of ordinary intelligence would have been able to discover the condition upon casual inspection. Landowners are under no duty to warn about open and obvious conditions.

The amendment may place plaintiffs in a precarious position. If the plaintiff presents evidence of a vertical discontinuity greater than 2 inches in order to rebut the presumption that the sidewalk was in reasonable repair, the plaintiff is also presenting evidence that may support a finding that the vertical discontinuity was open and obvious. See eg Eaton v Frontier Communications, unpublished opinion of the Court of Appeals dated Feb. 9, 2016 (Docket No. 324499) (vertical discontinuity of 2.5-3 inches was open and obvious).

Attorneys in our municipal law practice group are able to assist should you have any questions regarding this recent amendment or any municipal law issue.

Matt Cross is an attorney in our Traverse City office where he focuses his practice on business law, insurance defense, law enforcement defense and litigation, and municipal law. He may be reached at (231) 922-1888 or mcross@cmda-law.com.

Michigan Court Rules in Favor of Condominium Association in Interpreting Newly-Amended MCL 559.167 (SB 610)

Kevin Hirzel_8x10@300Kevin Hirzel recently scored an important victory for a Michigan condominium associations.  The Oakland County Circuit Court held that the  MCL 559.167, as amended by 2016 PA 233, does not recreate “need not be built” units that were eliminated under the prior version of MCL 559.167.  The ruling will have an impact on any condominium projects that contain unconstructed “need not be built” units and also meet one of the following two (2) requirements:

 1.Construction of the condominium was commenced prior to September 21, 2006; or

2. An amendment to the master deed that expanded the condominium, contracted the condominium or exercised a right of convertibility was recorded prior to September 21, 2010.

As the court held in Cove Creek, if a condominium meets these requirements, a developer or successor developer automatically lost the right to construct the “need not be built” units and the land on which the units were located will remain as common elements owned by the co-owners. If a condominium does not meet the above requirements, it will be subject to the new “reversion” requirements contained in the 2016 amendment to MCL 559.167, and the “need not be built” units will remain in the condominium until the “reversion” requirements are satisfied.

History of MCL 559.167

As previously discussed in Senate Bill 610 Passes: Is the amendment to MCL 559.167 of the Michigan Condominium Act constitutional?, MCL 559.167 was enacted in 2001 in order to provide an end date for the development of condominiums. MCL 559.167(3) required that a developer, its successors or assigns either complete any units identified as “need not be built” on the condominium subdivision plan within ten (10) years of the date of commencement of construction or within six (6) years of exercising a right of conversion, expansion or contraction.  If the developer, its successors or assigns did not complete the “need not be built” units with the statutory time periods, the right to construct the units would automatically terminate and the undeveloped land would remain as common elements if it was not withdrawn from the condominium.

In contrast, the 2016 amendments to MCL 559.167, which became effective on September 21, 2016, created a new “reversion” process to eliminate “need not be built” units after the expiration of the six (6) year or ten (10) year statutory time periods. Newly created MCL 559.167(4) now requires 2/3 of the co-owners that are in good standing to vote to approve a “reversion” of “need not be built” units to common elements by adopting a declaration that will be recorded in the register of deeds after the expiration of the statutory time periods. If 2/3 co-owner approval is obtained, the condominium association must then send the declaration to a developer or successor developer at its last known address.  The developer or successor developer may withdraw the land on which the units were to be located or amend the master deed to make the units “must be built” within the sixty (60) day time period.   If the developer or successor developer fails to withdraw the land or amend the master deed within sixty (60) days, the condominium association may record the declaration, which becomes effective upon recording and the right to construct the “need not be built” units will be eliminated.

Cove Creek Condominium Association v Vistal Land & Home Development, L.L.C., et al.

One of the most important questions surrounding the 2016 amendment to MCL 559.167 was whether 2016 PA 233 would be applied retroactively or only prospectively. Specifically, newly created MCL 559.167(5) states, “A reversion under subsection (4), whether occurring before or after the date of the 2016 amendatory act that added this subsection, is not effective unless the election, notice, and recording requirements of subsection (4) have been met.” In Cove Creek Condominium Association v Vistal Land & Home Development, L.L.C., et al., Oakland County Circuit Court Case No. 16-155706-CH (Order Granting Summary Disposition, Dated February 10, 2017) the court held that MCL 559.167, as amended by 2016 PA 233, did not retroactively recreate “need not be built” units that had previously been eliminated from the Cove Creek Condominium (the “Condominium”). The court held that the co-owners’ vested ownership interest in the common elements that was acquired under MCL 559.167, as amended by 2002 PA 283, remained intact.

Facts

The Condominium was established by the recording of the Master Deed in the Oakland County Register of Deeds on April 21, 1989. Lifestyle Homes, a co-partnership, was the developer of the Condominium, which was originally to be composed of 31 units.  On May 11, 1989 Lifestyle Homes recorded the First Amended to the Master Deed indicating that Cove Creek Limited Partnership (“Cove Creek, LP”) was now the developer. On May 17, 1989, Lifestyle executed a deed transferring all of its interest in the Condominium to Cove Creek, LP.  Units 1-14 have never been constructed and were identified as “need not be built” on the condominium subdivision plan.  Units 15-31 were constructed and sold to non-developer co-owners.  Construction of the condominium commenced prior to October 27, 1989, as this was the date that the first constructed unit was conveyed to a non-developer co-owner.

On September 15, 2004, Cove Creek, LP executed a deed attempting to convey units 1-14 to Vistal Cothery, LLC. On November 6, 2006, Vistal Cothery, LLC attempted to deed units 1-14 to Vistal Land & Home Development, LLC (“VLHD, LLC”).  On October 31, 2016, VLDH, LLC attempted to deed units 1-14 to the America and Maria Cervi Living Trust (the “Trust”).  On November 3, 2016, the Trust advised the Cove Creek Condominium Association that it had withdrawn “need not be built” units 1-14 from the Condominium pursuant to MCL 559.167, as amended by 2016 PA 233.

Interpretation of the Plain Language of MCL 559.167

The defendants argued that MCL 559.167, as amended by 2016 PA 233, repealed and replaced all prior versions of MCL 559.167 on September 21, 2016.  The Court held that defendants’ argument failed for several reasons.  First, the court held that MCL 559.167, as amended by 2002 PA 283, eliminated any rights to construct units 1-14.  The court held that the time period to construct or withdraw units 1-14 ended no later than October 27, 1999.  The court held that even if the ten (10) year period did not begin to run until 2002, when 2002 PA 283 was enacted, that the time period to construct units 1-14 expired no later 2012.  Accordingly, the court held that the enactment of 2016 PA 233 did not change the fact that the right to construct units 1-14 ceased to exist no later than 2012.

The court also held that the plain language of MCL 559.167, as amended by 2016 PA 233, evidenced the legislature’s intent that 2016 PA 233 is not retroactive.  The court recognized that the term “reversion” was not contained in any prior version of MCL 559.167, and that a “reversion”, i.e. the 2/3 co-owner vote and recording of a declaration, could not have occurred prior to September 21, 2016, the date that 2016 PA 233 became effective.  Rather, the court acknowledged that the co-owners acquired vested rights under MCL 559.167(3), as amended by 2002 PA 283, no later than 2012.  Given that the co-owners acquired their rights under 2002 PA 283, newly created MCL 559.167(5) was inapplicable as it only applied to “A reversion under subsection (4)”.

The court also held that even if a “reversion” could have occurred prior to September 21, 2016, the plain language of MCL 559.167(5) indicates that it would not undo a completed “reversion”.  The court held that defendants’ interpretation attempted to substitute the word “occurred”, which is a past participle, for the word “occurring”, which is a present participle, in MCL 559.167(5).  The court held that the use of the word “occurring”, a present participle, meant that 2016 PA 233 only applied to condominiums in which the statutory time periods were running, but had not yet been completed.  However, if the 6 or 10 year statutory time periods had already expired, any “reversion” would have already occurred, i.e. been completed, and 2016 PA 233 would not apply.

Constitutionality of retroactive application of MCL 559.167, as amended by 2016 PA 233

The court also ruled that defendants’ interpretation of MCL 559.167, as amended by 2016 PA 233, would render MCL 559.167 unconstitutional and that Michigan courts have an obligation to interpret a statute to be constitutional if possible.  Specifically, the court relied on Gorte v Dept of Transp, 202 Mich App 161, 164; 507 NW2d 797, 799 (1993). In Gorte, the plaintiff filed a complaint for adverse possession against the state on March 3, 1988 claiming that he held title to land via adverse possession from the state. Id. at 164.  MCL 600.5821 was amended to preclude adverse possession claims against the state and became effective on March 1, 1988, prior to the filing of the lawsuit. Id.  The trial court held that since 1966, plaintiff and his predecessors had adversely possessed the disputed acreage and that the amendment to MCL 600.5821 did not bar plaintiff’s adverse possession claim because he had a vested property right before March 1, 1988. Id.  In affirming the trial court, the Court of Appeals held:

…a statute may not be applied retroactively if it abrogates or impairs vested rights. In re Certified Questions, 416 Mich. 558, 572, 331 N.W.2d 456 (1982)…where a period of limitation has expired, the rights afforded by that statute are vested and the action in question is barred. Russo, supra, 439 Mich. at 594–595, 487 N.W.2d 698. Thus, § 5821, as amended, cannot be applied to plaintiffs if it would abrogate or impair a vested right.

Defendant argues that, in amending § 5821, the Legislature intended to void not only causes of action accruing after the effective date of the statute, but also causes of action for adverse possession against the state that could have been asserted before March 1, 1988, but were not….We are constrained, however, to follow the rules of statutory construction that dictate that a statute of limitations may not be applied retroactively to take away vested rights. We therefore interpret § 5821, as amended, to preclude the running of the period of limitation against the state for purposes of adverse possession after the effective date of the statute. We further interpret § 5821 as inapplicable where applying the statute would abrogate or impair vested rights.

Because the statute cannot be applied if it would abrogate or impair a vested right, it is necessary to determine when a claim of title to property by adverse possession vests. Generally, the expiration of a period of limitation vests the rights of the claimant. Russo, supra….Defendant argues the contrary view, that plaintiffs’ possession of the property merely gave plaintiffs the ability, before the amendment of § 5821, to raise the expiration of the period of limitation as a defense to defendant’s assertion of title. Contrary to defendant’s arguments, however, Michigan courts have followed the general rule that the expiration of the period of limitation terminates the title of those who slept on their rights and vests title in the party claiming adverse possession….Thus, assuming all other elements have been established, one gains title by adverse possession when the period of limitation expires, not when an action regarding the title to the property is brought.

Id. at 167-169 (emphasis added).

The court held that similar to the adverse possession statute, Gorte makes clear that the vested rights of the co-owners cannot be constitutionally abrogated under MCL 559.167, as amended by 2016 PA 233.

MCL 559.167, as amended by 2002 PA 283, eliminates “need not be built” units by operation of law

Finally, the court rejected the defendants’ argument that some form of recording or a replat is required to eliminate the right to construct units under MCL 557.167, as amended by 2002 PA 283. The court relied on the plain language of the statute as well as the statute of frauds, MCL 566.106.  Specifically, the court held that the right to construct “need not be built” units is eliminated by operation of law and that a property interest created by operation of law is not subject to the statute of frauds.  As such, the court granted summary disposition in favor of the Cove Creek Condominium Association and held that the “need not be built” units ceased to exist and that the defendants could not withdraw the undeveloped land from the condominium in 2016.

Conclusion

            While Cove Creek Condominium Association v Vistal Land & Home Development, L.L.C., et al., Oakland County Circuit Court Case No. 16-155706-CH (Order Granting Summary Disposition, Dated February 10, 2017) is only a circuit court opinion, it certainly provides a significant amount of guidance in interpreting MCL 559.167.  Until there is a published court of appeals opinion that interprets MCL 559.167, attorneys, co-owners, condominium associations, developers, successor developers and title companies should be aware of the following takeaways from the Cove Creek case:

  1. MCL 559.167, as amended by 2002 PA 283, applies to ALL condominiums that existed at the time the statute was enacted, not just condominiums that were created on or after the effective date of 2002 PA 283.
  2. “Need not be built” condominium units are automatically eliminated by operation of law under MCL 559.167, as amended by 2002 PA 283, and a replat or recording of any additional documents is not necessary.
  3. Vested rights in the common elements acquired by the co-owners under MCL 559.167, as amended by 2002 PA 283, cannot constitutionally be eliminated by 2016 PA 233.
  4. The co-owner voting “reversion” process, and the additional 60 day time period for a developer to withdraw “need not be built” units that was created by 2016 PA 233 only applies to condominiums in which the six (6) or ten (10) year statutory periods had not expired prior to September 21, 2016 or to condominiums created after September 21, 2016.

Kevin Hirzel is a Partner in our Livonia and Clinton Township offices and leads the Community Association Practice Group. He frequently represents Builders, Community Associations, Condominium Associations, Cooperatives, Co-Owners, Developers, Homeowner Associations, Investors, Property Owners and Property Managers throughout the State of Michigan. Mr. Hirzel can be contacted at (734) 261-2400 or khirzel@cmda-law.com. Please view The Michigan Community Association Law Blog at http://micondolaw.com for additional resources on Michigan Community Association Law.

Why Every Condominium and Homeowners Association Should Trademark its Name and Logo

brandan-hallaq-profile-photoOver the past decade, the popularity of living in a common interest community, particularly condominium and homeowners associations, has risen significantly. According to recent statistics provided by Community Associations Institute, there are over 340,000 community associations, over 26 million housing units, and over 68 million residents living in these associations in the United States. As these numbers continue to grow, the range of differences between associations grows larger. With so many new associations forming each year, and so many residents choosing to live in these types of developments, every condominium and homeowners association should consider trademarking its name and logo.

WHAT IS A TRADEMARK?
A trademark includes names, slogans, and/or symbols that identify and distinguish goods and/or services. A trademark grants the exclusive right to use the name or logo to the owner of the mark. Owning a trademark is important because it puts the world on notice that a particular name or logo is owned and being used to identify a specific product or service. Owning a trademark also allows the owner to file a lawsuit in federal court to seek recourse against anyone who has unlawfully used the trademark. Upon being granted a trademark by the United States Patent and Trademark Office, the owner has the exclusive right to use the trademark throughout the entire country. Additionally, as the owner of the trademark, you can use the ® symbol which indicates to others that the name or logo is a registered trademark. If one has not yet applied for registration but nonetheless wishes to put the world on notice of its claim and use of a name or logo, the ™ symbol may be used, although it does not confer the exclusive right to use the name or logo.

DIFFERENCES BETWEEN APPLYING FOR A TRADEMARK AND INCORPORATING UNDER STATE LAW
Incorporation under state law provides some protections for business entities wishing to utilize a specific name or logo. Most condominium and homeowners associations are formed as nonprofit corporations in Michigan. In order to form the corporation, the association must file Articles of Incorporation with the State and select a unique name. The State will not permit any business entity to form using a name that is already in use by another entity. Accordingly, if an association is formed in one state with a particular name, no other entity may be formed using that same name in the same state. However, nothing prevents another entity from using the same name, or similar names, in a different state. Additionally, individuals might use the name without registering as a business entity with the state.

WHY APPLY FOR A TRADEMARK?
Many people are surprised to learn that the cost of obtaining a trademark is extremely reasonable in light of all the benefits it confers. The cost of submitting an application for a trademark ranges between $225 and $400. The process can require a legal analysis but many times will not be extremely time consuming which means the cost of hiring an attorney should not be prohibitive. If a particular association is affiliated with or administers the affairs for multiple developments, a specific brand name and logo will be very important. Trademarks are particularly important in this situation to protect associations that have expended resources in creating and maintaining a positive reputation in the community from having competitors steal their names and/or logos in order to profit or trick the public into believing that the two entities are related.

Condominium projects now include (1) site condominiums with detached buildings, (2) a number of identical or similarly constructed smaller buildings, each housing 2 or more Units, (3) large high rise buildings with potentially hundreds or thousands of Units, (4) strictly residential developments, (5) strictly commercial developments, (6) mixed-use developments, (7) condominiums dedicated to mobile homes and other recreational vehicles, and (8) condominiums created specifically for boat docks. Whether your association is small or large, in order to prevent others from using the association name, obtaining a trademark is the best way to protect your rights.

For smaller associations that only manage one development, a trademark is still an important tool for the association to protect itself against hostile or uncooperative members. As far too many associations and board members are familiar, it is not uncommon for an angry member of the association to go rogue and create a website or social media accounts in the association’s name. The member might do this for a number of reasons but often times it is done merely to cause trouble and to provide a platform to bad-mouth the association and its board members. Pursuant to the Lanham Act, 15 U.S.C. § 1125, obtaining a trademark in the association’s name prohibits any other person or entity from creating a domain name that infringes upon said trademark. In these situations, having a trademark of the association’s name provides the association with significantly greater resources to take swift action to prevent this behavior.

For example, in Board of Directors of Sapphire Bay Condominiums West v Simpson, 328 F Supp 2d 571 (D.V.I. 2004), affirmed by 129 F App’x 711 (3d Cir 2005), a condominium association sued an unhappy co-owner and obtained a preliminary injunction preventing the co-owner from operating a website under the name of the association. In that case, the co-owner registered the domain name “sapphirebaycondos.com” and used that name to operate a website where he made negative statements about the association and its board of directors. However, because the association did not have a registered trademark, the association’s options for recovery against the co-owner were more limited.

The Association eventually lost at trial and was unable to obtain a permanent injunction or monetary damages against the co-owner. Board of Directors of Sapphire Bay Condominiums West v Simpson, No. CV 04-62, 2014 WL 4067175 (D.V.I. 2014), affirmed by, 641 F App’x 113 (3d Cir 2015). The association may have been successful if it had a registered trademark as opposed to simply relying on common law protections. Even if the association in the Sapphire Bay case had prevailed at trial, it may not have been able to prevent someone in another state from using that domain name. Furthermore, because there was no registered trademark, nothing prevents another entity from attempting to obtain a trademark in the association’s name.

As mentioned, having a registered trademark provides the ultimate protection. Registration of a trademark provides constructive notice to all others throughout the country that the trademark is in use as well as the name of the owner. Having a registered mark also provides the opportunity to recover monetary damages for infringement including attorney’s fees and treble damages in certain cases. Additionally, using a registered trademark for five continuous years can grant the owner of the mark “incontestable” status meaning the exclusive right to use of the trademark is conclusively established.

CONCLUSION
Whether your association only operates in one state and only manages a single small development, or whether your association is managing a large number of properties throughout the country, obtaining a trademark of the association’s name and logo will undoubtedly be a valuable asset. Associations can use the trademark to protect their brand and reputation from being confused with competitors and can protect property values from nefarious, difficult co-owners. Additionally, associations can use the trademark to prevent others from hijacking the association’s name online. Because of the affordability of obtaining a trademark, it is something every association should at least consider and discuss with legal counsel.

Brandan Hallaq is an attorney in our Livonia office where he focuses his practice in the areas of business and real estate law. He may be reached at (734) 261-2400 or bhallaq@cmda-law.com.

Acho Appears on Radio Shows to Discuss NLRB Ruling Against NCAA

Jim Acho 2016Jim Acho, a partner in our Livonia office, appeared on several radio shows today after a crucial ruling against the NCAA was handed down by the National Labor Relations Board (NLRB) over the weekend. Of local interest, Jim was a guest on WJR’s popular Frank Beckmann Show, a show on which Jim has appeared more than a dozen times the past 15 years.

To listen to Jim’s interview, click here.

Hirzel Appointed to CAI National Government & Public Affairs Committee

Kevin Hirzel_8x10@300The Community Associations Institute (CAI) Board of Trustees recently appointed Kevin Hirzel to the national Government & Public Affairs Committee for a two year term from January 1, 2017 through December 31, 2018.  He is tasked with providing oversight, support and counsel to advocacy efforts, including developing and updating CAI’s public policy positions, establishing position statements on policy issues and drafting model legislation on key legislative and regulatory issues impacting CAI members.

CAI is an international membership organization with more than 34,000 members in partnership with 60 chapters around the globe. CAI provides information, education and resources to the homeowner volunteers who govern communities and the professionals who support them.

Congratulations to Mr. Hirzel on this well-deserved honor.

Kevin Hirzel is a partner in our Livonia and Clinton Township offices and leads the Community Association Practice Group. He frequently represents Builders, Community Associations, Condominium Associations, Cooperatives, Co-Owners, Developers, Homeowner Associations, Investors, Property Owners and Property Managers throughout the State of Michigan. He may be reached at (734) 261-2400 or khirzel@cmda-law.com.

Please view The Michigan Community Association Law Blog at http://micondolaw.com for additional resources on Michigan Community Association Law.