Slides from the third evening of our four-week course offered October 4 through October 25, 2016 for Michigan community association board members, managers and owners. If you missed this one, we will be offering courses again in the spring and fall of each year.

1. The Meisner Law Group, P.C.
www.meisner-law.com
248-644-4433
© 2016 The Meisner Law Group, P.C.
Introduction to Successful
Community Association Operation
October 18, 2016
Presented by: Robert M. Meisner, Esq.
Attorney and Counselor
M. Katherine Michael, Paralegal

2. The Legal and Fiduciary Duties of
Directors and Officers
I. Directors and Officers Differentiated
The Meisner Law Group, P.C. 2

3. The Legal and Fiduciary Duties of
Directors and Officers
II. General Responsibilities of the Board of Directors
of Community Associations
A. Enabling documents; bylaws and articles of
incorporation
B. Functions of Board of Directors
The Meisner Law Group, P.C. 3

4. The Legal and Fiduciary Duties of
Directors and Officers
II. General Responsibilities of the Board of Directors
of Community Associations, cont.
C. Ensure that the responsibilities of the
Directors are properly and thoroughly
discharged
1. Management and administration
2. Collection of assessments and expenditures of
funds
a. Delinquent Assessment Collection Policy
b. Budgeting and Reserve funding
The Meisner Law Group, P.C. 4

5. The Legal and Fiduciary Duties of
Directors and Officers
II. General Responsibilities of the Board of Directors
of Community Associations, cont.
C. Ensure that the responsibilities of the
Directors are properly and thoroughly
discharged, cont.
3. Collection of insurance and allocation of
proceeds thereof.
a. Common Elements insured
b. Directors and officers liability insurance
c. H-06 on Condominium Units
d. Crime/theft policy – FHA requirements
4. Rebuild improvements after casualty.
The Meisner Law Group, P.C. 5

6. The Legal and Fiduciary Duties of
Directors and Officers
II. General Responsibilities of the Board of Directors of
Community Associations, cont.
C. Ensure that the responsibilities of the Directors are
properly and thoroughly discharged, cont.
5. Contract for and employ persons, firms, corporations or
other agents to assist in the management, operation,
maintenance and administration of the Condominium
Project.
a. Written Contract
b. Experience
c. Warranties and guarantees
6. Caution: Approval or disapproval of proposed purchasers or
lessees of any unit in the manner specified in the
Condominium Documents.
7. Acquiring, maintaining, improving, conveying, assigning,
mortgaging or leasing any real or personal property
(including easements, rights of way and licenses) on behalf
of the Association.
The Meisner Law Group, P.C. 6

7. The Legal and Fiduciary Duties of
Directors and Officers
II. General Responsibilities of the Board of Directors of
Community Associations, cont.
C. Ensure that the responsibilities of the Directors
are properly and thoroughly discharged, cont.
8. Borrowing of money and issuing of evidences of
indebtedness.
a. Typically need co-owner approval for secured loan
9. Make rules and regulations concerning the use of
the Condominium.
a. Reasonableness test
b. Deliver copy to all co-owners; record.
The Meisner Law Group, P.C. 7

8. The Legal and Fiduciary Duties of
Directors and Officers
II. General Responsibilities of the Board of Directors of
Community Associations, cont.
C. Ensure that the responsibilities of the Directors
are properly and thoroughly discharged, cont.
10. New Fair Housing Harassment Rule passed by HUD:
10.14.2016
a. Community associations may be liable under the
Fair Housing Act for the discriminatory actions of
residents who harass or create a hostile
environment for other residents who fall within
the protected class: i.e. race, color, religion, sex,
national origin, disability, and familial status.
b. Failure to act could expose the association to
liability under the new HUD rule.
c. Establish policies
The Meisner Law Group, P.C. 8

9. The Legal and Fiduciary Duties of
Directors and Officers
III. Liability of Directors for Failure to Meet
Responsibilities
A. Duty of care
B. Caution re delegation of authority
The Meisner Law Group, P.C. 9

10. The Legal and Fiduciary Duties of
Directors and Officers
III. Liability of Directors for Failure to Meet
Responsibilities, cont.
C. Areas of Potential conflict of interest and general
recommendations
1. Managing Agent conflicts
2. Association attorney conflicts
3. Contractor conflicts
4. Familiarize yourself with the laws
5. Implement employee policies and training and
supervising
The Meisner Law Group, P.C. 10

11. The Legal and Fiduciary Duties of
Directors and Officers
III. Liability of Directors for Failure to Meet
Responsibilities, cont.
D. Misappropriation or misuse of funds
E. Inefficient or negligent administration
F. Failure to enforce Condominium Documents
G. Failure to properly maintain site
H. Failure to actively pursue claims
The Meisner Law Group, P.C. 11

12. Preventive Measures for Directors and
Officers in the Face of Potential Liability
I. Ways to Avoid Risks and Liabilities of Directors
A. Indemnification of officers and directors, directors
and officer’s liability insurance, and limitation of
personal liability for directors and officers through
amendments to Bylaws and Articles of
Incorporation
B. Retain adequate personnel and professional
assistance
C. Attend Board meetings
D. Exercise general supervision over association
activities
The Meisner Law Group, P.C. 12

13. Preventive Measures for Directors and
Officers in the Face of Potential Liability
I. Ways to Avoid Risks and Liabilities of Directors,
cont.
E. Exercise sound business judgment
F. Establish adequate committees and internal
structures and policies
G. Avoid self-dealing and self-serving policies
H. Avoid conflicts of interest
The Meisner Law Group, P.C. 13

14. Preventive Measures for Directors and
Officers in the Face of Potential Liability
I. Ways to Avoid Risks and Liabilities of Directors,
cont.
I. Communicate with members
J. Sound and adequate financial condition
K. Progress reports
L. Properly maintain Condominium property
The Meisner Law Group, P.C. 14

15. Preventive Measures for Directors and
Officers in the Face of Potential Liability
I. Ways to Avoid Risks and Liabilities of Directors,
cont.
M. Invite participation by members
N. Amend documents
O. Ensure adequate security
The Meisner Law Group, P.C. 15

16. Preventive Measures for Directors and
Officers in the Face of Potential Liability
II. Security and Safety
Can the Association or Board of Directors be held
liable for security problems?
 The Board should take reasonable measures to
protect against foreseeable criminal activity
 Keep common elements in good working order
 Consult your condo attorney to help balance
options
The Meisner Law Group, P.C. 16

17. How to Take Advantage of Changes in the Laws
Through Amendments to the Condominium Documents
I. Overview of Condominium Documents
A. Condominium Project vs. the Condominium Association
B. The Condominium Documents:
1. Master Deed
2. Condominium Bylaws
3. Condominium Subdivision Plan
4. Corporate Bylaws (combined set)
5. Articles of Incorporation
6. Rules and Regulations
The Meisner Law Group, P.C. 17

18. How to Take Advantage of Changes in the Laws
Through Amendments to the Condominium Documents
II. Changes in the laws to consider in determining the
compliance of your documents based on when they
are dated
 1978 Michigan Condominium Act passed
 1988 Federal Fair Housing Amendments Act adopted
 1996 Telecommunications Act and FCC Rules
promulgated
 2001 Sweeping changes to the MI Condo Act
 2008 Changes to the MI Nonprofit Corporation Act
The Meisner Law Group, P.C. 18

19. How to Take Advantage of Changes in the Laws
Through Amendments to the Condominium Documents
II. Changes in the laws to consider in determining the
compliance of your documents based on when they
are dated, cont.
 2008 Housing and Economic Recovery Act
 2009 Federal Housing Administration passes
condominium certification requirements
 2014 Condo Act Audit changes
 2015 Sweeping Changes to the MI Nonprofit
Corporation Act
An up-to-date set of Condominium/Subdivision Documents
enhancing the smooth administration and operation of a
Condominium/Subdivision Association limits the necessity of
a court’s interpretation.
The Meisner Law Group, P.C. 19

20. How to Take Advantage of Changes in the Laws
Through Amendments to the Condominium Documents
III. Bylaws (Condominium and Corporate)
A. Combined set
B. Problem areas
1. Indemnification of Directors and Officers
2. Director and Officer liability insurance
3. Assessment Provision – add all new state of the art
remedies
a. Reserve fund at 10% minimum.
b. FHA requires the delinquencies not exceed 15% over
60 days.
c. Delinquent Assessment Collection Policy – See Meisner
Law Group Schedule of Flat Fees (distributed last
week).
The Meisner Law Group, P.C. 20

21. How to Take Advantage of Changes in the Laws
Through Amendments to the Condominium Documents
III. Bylaws (Condominium and Corporate), cont.
B. Problem areas, cont.
4. Insurance Provision
5. Reconstruction and Repair
The Meisner Law Group, P.C. 21

22. How to Take Advantage of Changes in the Laws
Through Amendments to the Condominium Documents
III. Bylaws (Condominium and Corporate), cont.
B. Problem areas, cont.
6. Restriction problem areas
a. Permitted uses
b. Leasing – can limit the number of overall rentals
c. Alterations/Modifications
i. Schedule of Flat Fees - modification agreement
ii. Special rights for persons with disabilities
d. Pets
e. Vehicles
f. Rules and Regulations
g. Right of access
h. Assess costs of enforcing documents
i. Right of first refusal problems
The Meisner Law Group, P.C. 22

23. How to Take Advantage of Changes in the Laws
Through Amendments to the Condominium Documents
III. Bylaws (Condominium and Corporate), cont.
B. Problem areas, cont.
7. Corporate provisions problem areas
a. Quorum
b. Absentee balloting and proxies
c. Electronic Voting, Electronic Notification and Remote
participation in association and board meetings
d. Stagger terms
e. Fidelity Bond and D&O insurance
8. Amendment requirements
The Meisner Law Group, P.C. 23

24. How to Take Advantage of Changes in the Laws
Through Amendments to the Condominium Documents
III. Articles of Incorporation
A. Purposes of the Corporation
B. Action without a meeting
C. Electronic Voting
D. Problems with provision to limit personal liability
of directors and officers
The Meisner Law Group, P.C. 24

25. How to Take Advantage of Changes in the Laws
Through Amendments to the Condominium Documents
IV. Master Deed
A. Reallocate repair responsibility
B. Problem areas
The Meisner Law Group, P.C. 25

26. How to Take Advantage of Changes in the Laws
Through Amendments to the Condominium Documents
V. Multi-Step Amendment Process
A. Draft Amendments for Board approval
B. Co-owners to vote – 66-2/3%; attorney attend meeting
to explain, answer questions and assist with voting
C. Mortgagees may need to vote – 66 2/3%
D. Record Master Deed and Bylaw Amendments with
Register of Deeds, and file Articles of Incorporation with
State of Michigan.
E. Put together new condominium document booklet.
F. Update rules and adopt procedures and policies – see
Meisner Law Group Schedule of Flat Fees.
G. Get FHA certification, re-certify every 2 years.
The Meisner Law Group, P.C. 26

27. FHA and VA Requirements For Condominiums
2009 Changes in FHA Requirements, amended
several times:
A. Certification Periods:
1. FHA project-wide certification for condominium
projects expires every 2 years.
2. VA approval for condominium projects does NOT
expire.
The Meisner Law Group, P.C. 27

28. FHA and VA Requirements For Condominiums
B. Overview of Specific FHA Approval Requirements
1. Condominium Document Requirements. The
Condominium Documents must be in compliance
with FHA requirements, and other Federal, State
and local laws and requirements governing
condominiums.
2. Investor Owner Limitation
3. Aggressive and Consistent Collection of
Delinquencies. No more than 15% of the overall
Units can be more than 60 days delinquent. Adopt
a delinquent assessment collection policy.
The Meisner Law Group, P.C. 28

29. FHA and VA Requirements For Condominiums
B. Overview of Specific FHA Approval Requirements,
cont.
4. Leasing Restrictions. FHA requires that no more
than 50% of the overall Units can be rented at one
time in a condominium project. Consider a cap in
the Bylaws.
5. Budget Adequacy Requirements. Minimum 10%
reserve line item in the budget, adequate provision
for insurance premiums and deductibles.
The Meisner Law Group, P.C. 29

30. FHA and VA Requirements For Condominiums
B. Overview of Specific FHA Approval Requirements,
cont.
6. Insurance Requirements. A minimum $1,000,000
liability insurance policy, crime/fidelity bond
insurance in the amount of 3/12 of the annual
overall assessment, plus the amount of the reserve
account funds.
7. Other Factors. Pending litigation, special
assessments, etc.
See your experienced Condominium attorney to help get
your project ready for FHA certification. See Kay after class
if you would like to obtain a Flat Fee proposal from our firm.
The Meisner Law Group, P.C. 30

31. 31
The Meisner Law Group
30200 Telegraph Road, Ste. 467
Bingham Farms, MI 48025
248-644-4433 www.meisner-law.com
The Meisner Law Group, P.C.