Plaintiff/appellee, Elizabeth Trace Condominium Association (the “Association"), is responsible for administering and operating a 46-unit condominium project in White Lake Township, Michigan that was established on May 25, 2004. When the condominium project was created, only units 42 through 46 were labeled as “must be built" in the Condominium Documents, with units 1 through 41 being labeled as “need not be built." The Condominium's first developer-built units 1 through 14 and 42 through 46, but units 15 to 41 (the “Unbuilt Units") were never built and to this day have never been built.
On December 18, 2009, the Unbuilt Units were conveyed from the Condominium's first developer to its mortgagor via a deed in lieu of foreclosure, and on October 2, 2012, the mortgagor conveyed the Unbuilt Units to defendant/appellant, American Global Enterprises, Inc. (“AEG").
In 2016, MCL 559.167 was amended to read as it currently does today, stating, in pertinent part, the following:
(3) Notwithstanding section 33, for 10 years after the recording of the master deed, the developer . . . may withdraw from the project any undeveloped land or convert the undeveloped condominium units located thereon to “must be built" without the prior consent of any co-owners . . .
On December 14, 2018, the Association filed a lawsuit against AEG, claiming that ownership of the Unbuilt Units had reverted to general common elements by operation of law under the prior version of MCL 559.167 because the Unbuilt Units had not been developed, constructed, or withdrawn from the Condominium by the end of 2014. The Michigan trial court agreed, holding that the Unbuilt Units had ceased to exist and that those Unbuilt Units had become general common elements within the Condominium.
AEG appealed the trial court's decision to the Michigan Court of Appeals, arguing that the Unbuilt Units had not reverted to general common elements by operation of law and, therefore, could still be constructed on the following grounds: (1) it was not a developer under the Michigan Condominium Act and, therefore, MCL 559.167(3) did not apply to it, (2) the application of the prior version of MCL 559.167(3) in this case would render an absurd result in which a non-developer could lose its land because of a prior developer's failure to take certain action, (3) construction of the surrounding common elements had taken place, and, therefore, MCL 559.167(3) did not apply, and (4) the application of the prior version of MCL 559.167(3) in this case would result in an unconstitutional taking without due process of law under the Fifth Amendment to the United States Constitution.
In a published opinion, the Michigan Court of Appeals rejected all of AEG's arguments and upheld the trial court's decision, primarily because of another published opinion out of the Michigan Court of Appeals, Cove Creek Condominium Association v Vistal Land & Home Development, LLC, 330 Mich App 679 (2019), which held that the 2016 version of MCL 559.167(3) did not apply retroactively and a condominium developer could lose all their rights to construct unbuilt units as a result of the expiration of the statutory time period in the prior version of MCL 559.167(3). Cove Creek also expressly rejected the argument that the loss of property rights by operation of law under the prior version of MCL 559.167(3) resulted in an unconstitutional taking without due process of law, consistent with other Michigan Supreme Court precedents holding that the Michigan legislature could condition the retention of property rights on the performance of certain actions indicating an intention to retain that property interest.
Amicus Brief
Michigan Supreme Court Order Denying Application Leave to Appeal - March 2023
Court: Supreme Court of Michigan
Topic: Developer Control
Brief Author: Kevin M. Hirzel, Esq., CCAL, and Kayleigh B. Long, Esq., Hirzel Law, LLC
Filed: December 2, 2022
CAI Amicus Review Panel: Mr. Robert Diamond, Esq., CCAL, Co-Chair of Amicus Committee
Mr. Stephen Marcus, Esq., CCAL, Co-Chair of Amicus Committee
Mr. Thomas Moriarty, Esq., CCAL (MA)
Ms. Mary Howell, Esq., CCAL (CA)
Ms. Lydia Linsmeier, Esq. (AZ)