Recent Posts — 2007

Year 2007
Posted: 2009 Apr 03. Click History for a list of changes and updates.

__See Recent Posts Explanation for an explanation of the content. Click Continue for the listing of recent posts with brief summaries.

Don Nordeen
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Click Continue for Post Continuation plus Comments. Or Click Show All for Above plus Post Continuation and Comments.

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Competitive Fees for all Services and Benefits

2007 June 14
Last update: 2009 Jun 27. Click History for a list of changes and updates.

__The continuation of this post is work in progress on this subject. It is posted in its incomplete form to provide the internet links to user fee schedules used by other property owners associations. Otherwise it only provides a few notes from my internet research.

Don Nordeen
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Continue reading Competitive Fees for all Services and Benefits.

• Key Words:_ Community Association, Governance, Michaywé, MOA Operations (General/Total), Recreational Facilities, User Fees; Governing Documents; amenities; fee schedule; golf; members' rights; meeting rooms; recreational facilities; tennis; storage; swimming; user fees

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Board Action to Assess a Late Fee of $25 for Nonpayment of Dues

2007 June 12
Last update: 2009 Apr 02 which is the initial post. Click History for a list of changes and updates.

__ The continuation of this post is an email on the above subject. References to prior correspondence are included. The Fair Debt Collection Practices Act may apply to collection of delinquent dues and assessments.

__ Some of the internet links in the post are to a password-protected weblog. If you are a MOA member, please refer to the Welcome and Home Page for information on how to access that weblog.

Don Nordeen
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Please be advised that the writer is not an attorney, and this is not legal advice. The information is based on research on information available in the public domain.
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Continue reading Board Action to Assess a Late Fee of $25 for Nonpayment of Dues.

• Key Words:__ Financial Information, General; Governing Documents, 2005-6 Amendment Initiative; Governing Documents, General; MOA Board of Directors; MOA Governance; MOA Members & Members' Rights; late fees; delinquent dues; assessment

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Audit Considerations for 2006

2007 May 07
Last edit: 2010 Feb 16. Click History for a list of changes and updates.

__ The continuation of this post is an email to the board summarizing the accounting and audit concerns regarding MOA's financial accounting and reports. Fourteen subject areas are covered, which is an indication of the magnitude of the opportunities for improvement. My goal is to help make the accounting and accounting practices so well founded that even over a beer after a round of golf the members comment that they have no quarrels with the accounting. With solid credibility in the accounting, the members can better spend their efforts on helping to make the necessary improvements.

__ Please post your comments.

Don Nordeen
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Continue reading Audit Considerations for 2006.

• Key Words:_ Financial Information, 2006 General; Financial Information, 2005 General; Financial Information, General; MOA Accounting Practices; MOA Board of Directors; MOA Operations, General/Total

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A Discussion of "User Fees" or "Charges" for Michaywé

2007 May 18 Posted 2009 May 04 but indexed to the original date. Click History for a list of changes and updates. __The continuation of this post is a summary of my proposal concerning the subject of User Fees which was submitted to the board of directors in 2007. This concept has been discussed by MOA homeowners at Open Forums in Board meetings. Many voiced support. However, no formal discussion or proposals have been made by the board to give all members, both homeowners and lot owners, the opportunity to better understand and comment on the concept. __The fees suggested were included after studying fees charged by other Home Owners Associations and other entities like the Sportsplex. Many other owners associations use this concept. Continue on to read the particulars. __Also, an unfinished discussion of user fees, Competitive Fees for all Services and Benefits, is available to provide the internet links to the user fee schedules used by other associations. Kate Nordeen ========== Click Continue for Post Continuation plus Comments.

• History:_
• 2009 May 04 — Posted 2009 May 04 but indexed to the original date.
• Links:_ A Discussion of "User Fees" or "Charges" for Michaywé at [http://swagmanmwpoa.blogspot.com/2007/05/discussion-of-user-fees-or-charges-for.html]
• Key Words:_ Governing Documents, Members' Rights, Michaywé, MOA Operations (General/Total), Recreational Facilities,

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A Discussion of "User Fees" or "Charges" for Michaywé (continued) A DISCUSSION OF "USER FEES" OR "CHARGES" FOR MICHAYWE' __This pamphlet [Sample Michaywé User Fee Schedule.pdf at [http://swagman.typepad.com/files/Mw%27UserFeeSchdl4AR.pdf]] is meant as a starter for conversation and debate on the subject of User Fees or Charges for Michaywe' amenities. The amounts listed are for illustration only and were chosen based on fees and chargers other developments use. __In researching a number of Property Owner's Associations which have amenities, I found that most of them have user fees as part of their financial picture. Basically, the dues - so much per lot or unit- pay for the convenience and maintenance of the amenities, with operational costs a combination of subsidies, public use and user fees. __Our Deed Restrictions say:

"As a member of the Association each Owner shall be entitled to the use and enjoyment of the Michaywe' Common Properties which are an integral part of the Restricted Property, and (each Owner) shall be obligated for related financial support for Michaywe' Common Properties."

I believe this allows us to implement user fees as part of our financial support. __Just as golfers pay for using the golf course, I believe owners should pay for swimming, tennis and use of facilities. For absent owners, support for User Fees seems only fair. For lot owners with homes, well kept amenities are important in sustaining the real-estate value of their property as well as for their enjoyment and sense of community. When a person builds a home in a development with amenities, it is incumbent upon the owner to support them. __To make User Fees or Charges convenient, I am suggesting the use of the electronic access card. For other facility uses, arrangements would be made through the MOA office as is done now. Golf would be handled as it is now. There are a number of companies in Michigan who sell cards and equipment needed. Further research on these would be needed. __Please take time to look at the pamphlet and then begin a discussion to consider making User Fees or Charges part of our financial package. __Formulated and Submitted by Kate Nordeen, May 16, 2007

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Recommended Bylaws Provision re Operating Plan and Budget

2007 April 03 Last edit: 2009 Mar 23. Click History for a list of changes and updates. __The continuation of this post is an email to the MOA board of directors recommending an amendment to the bylaws concerning the balanced budget requirements. This amendment merely makes more specific what is to be included in the balanced budget calculation, and would require a monthly projection for balance (unbalance). The M-W online dictionary definition of budget is

4 a : a statement of the financial position of an administration for a definite period of time based on estimates of expenditures during the period and proposals for financing them b : a plan for the coordination of resources and expenditures c : the amount of money that is available for, required for, or assigned to a particular purpose

This definition includes all sources of financing and all expenditures. Unfortunately, the boards over the past six years have only considered revenues and expenses (income & expense items) only, which has underestimated the finances required, and helps to explain MOA's deteriorating financial condition. __This is also a policy issue for building trust with members. An interpretation that avoids disclosing the true budget conditions to members does not build trust with members. __(added 2009 Mar 23) A prior email to the board discusses the concept of Annual Approval of Operating Plan and Budget at [http://swagman.typepad.com/michaywe_poa/2006/10/annual_approval.html] Don Nordeen ========== Click Continue for Post Continuation plus Comments.

• History:xx
• 2009 Mar 23 — Added link to prior discussion of the concept.
• 2007 Jan 10 — Initial Post, but indexed to the date of the email, 2007 Apr 03.
• Links:xxRecommended Bylaws Provision re Operating Plan and Budget at [http://swagmanmwpoa.blogspot.com/2007/04/recommended-bylaws-provision-re.html]
• Key Words:x Financial Information, General; Governing Documents, 2005-7 Amendment Initiative; Governing Documents, General; MOA Board of Directors; MOA Governance; MOA Members & Members' Rights; MOA Operations, General/Total; planning; plan; budget; balanced budget

Click Continue for Post Continuation plus Comments. Or Click Show All for Above plus Post Continuation and Comments.

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Recommended Bylaws Provision re Operating Plan and Budget (continued) __ _From: Don Nordeen ____Date: 2007 April 3 18:59:47 EST ____ _To: Floyd Burchard, Bill Martella, Tad Latuszek, Bob Olszewski, _________Vicky Rigney, Carolyn Study, Kirk Yodzevicis ____ _Cc: Bill Nowacki, Robert Felt, Don Nordeen, Bob Allaben, Bob&Jackie _________Kish, Jack Barry, Mike Buckley, Phil Curtiss, Bill Fish, Gary Hyatt, _________Dick Nelson, Kate Nordeen, Diane Shockey, Pam Tavernier, _________Jim PagelsO, Dick&Joyce Thams, Christine Zarichney __Subject: Recommended Bylaws Provision re Operating Plan and Budget Date: 2007 April 03 ___ _From: Don Nordeen_____ _To: Floyd Burchard, Tad Latuszek, Bill Martella, Bob Olszewski, __________Vicky Rigney, Carolyn Study, Kirk Yodzevicis _____ _cc: Bob Allaben, Jack Barry, Mike Buckley, Phil Curtiss, Bill Fish, __________Gary Hyatt, Bob Kish, Don Nordeen, Dick Nelson, __________Bill & Penny Nowacki. Kate Nordeen, Jim Pagels, Vicki Rigney, __________Diane Shockey, Pam Tavernier, Dick Thams ______cc: Christine Zarichney (for MOA file) __Subject: Recommended Bylaws Provision re Operating Plan and Budget Re: Recommended Bylaws Provision re Operating Plan and Budget __This responds to the discussion concerning Operating Plan and Budget at the Special Board Meeting on Mar 29. I had the writing assignment on this provision. At the Mar 14 bylaws cmte meeting, there were a number of decisions on content, but not full agreement on the language. My email (Appendix) on the revised language was sent to the bylaws cmte on Mar 15. A lot was done at the last moment in putting the bylaws package together, so a few glitches are not unexpected. __The discussion at the Mar 29 board meeting was a very good one. Since the members control the money by having to approve both the dues cap and any special assessment, and since the members are unlikely to ever assign any part of that to the board, a way must be found to connect the members with the operating plan and budget. The operating plan, budget, dues cap and special assessment all go together. Even though the decisions are made by the members, the board has a major role in the process. Trust is essential. ************************************************************************ __With regard to trust, consider a few aspects of how the board views the members as evidenced by the actions taken on Mar 29. The qualitative scoreboard is:

Favorable to the Board — Many Favorable to the Staff — Many Favorable to Members — Zero (so far) Unfavorable to Members — Many

__And this only counts the direct actions. Many, perhaps all, of the actions that are favorable to the board and staff are unfavorable to the members. Why?

• Aren't the directors elected to represent the members?
• Why are the board and staff more important than the members?
• Did any current director state in the election biography and reasons for seeking election that they intended to vote against the members?
• Does the board have the obligation to protect the rights of the members?

__Consider the action on the $25.00 late fee as an example. I heard comments that the members have a fiduciary duty for timely payment of dues. No, members have an obligation to pay. Fiduciary is a duty to others. The fees and penalties for non–payment are defined in the DMCCR, which the board has the obligation to enforce. Does the DMCCR give the board the authority to assign a blanked $25.00 late fee? Does any board member know the extent of the investigation by a prior board in developing the policy? The language in the DMCCR is clear that a $25.00 late fee assigned as a fine requires the four steps (hearing, etc.) with each individual member prior to assessment. If the board is trying to build trust with the members and protect the members rights, shouldn't the benefit of the doubt go to the members? That is also the standard used by the courts — ambiguities construed against the party seeking enforcement. How the board treats the "least of our brethren" sends a powerful message. On the other hand, protecting the rights of the "least of our brethren" would send an even more powerful message that the board is there to help and to serve the members. __The issue of information is also critical. The board and the staff have the information. The members don't. Isn't providing full and accurate information to members so they can make informed votes part of the board's obligation? I heard discussion about phone books and about members having the obligation to dig out the information. Just where would the members get the information? Could they write to MOA and get questions answered within the 30 days between notice and voting? Who would answer the questions? Would a board meeting be required to approved the answers? Is there any other source of information? Full and accurate information is the requirement, done once and done right. And there is the ridiculous hold harmless clause regarding full and accurate information. The board has the resources to get it right. Incidentally, the "full and accurate" phrase has been in the job description for the treasurer since 1971, as in "full and accurate" books and records. __Providing full and accurate information is only one aspect of the voting process. A careful review will show that the voting process in the bylaws committee report is stacked against the members and does not treat members uniformly. These and other provisions must protect the members' rights if they are to be meaningfully involved in the process if trust is to be established between the members and the board. My views. ************************************************************************ __Enough philosophy. But in reviewing the recommended amendment below which is for the members' benefit, consider the members and also the workability. Below is the recommended bylaw provision on operating plan and budget with explanations line by line. The text from the Appendix (email to Bylaws Cmte re Balanced Budget amendment) is shown in blue. #PrpsdAmndmnt

Section 7.xx. Operating Plan and Budget — The board shall develop an operating plan and budget for the following fiscal year and include both with the mailing of the annual dues billing on or before 60 days prior to the beginning of the fiscal year. Members may provide comments and recommendations to the board prior to the beginning of the fiscal year. The board shall consider members’ comments and provide a final operating plan and budget to the members by first-class mail no later than 30 days into the fiscal year.

__Explanation — Since the operating plan and budget interact with each other, they need to go together. Mailing with the dues billing further ties the operating plan, budget and dues together. Note that the word preliminary is not used. Most of the year's revenues and expenses are known by the end of September so the estimates can be reliable. A special board meeting would be required in early January to consider the members' comments and to refine the operating plan and budget as final. It should be then published to the members with the fourth quarter business review mailed in January.

__The Board shall not approve an annual budget in which the total unrestricted operating revenues are less than the total operating expenditures.

__Explanation — This is the balanced budget requirement expressed in simple terms. All members should be able to understand the principle involved. The complexity is in the definitions of what is included. "Unrestricted" excludes the restricted funds (reserves, etc.) from the statement, but the transfers to the restricted funds may be part of the expenditures. "Operating" is a key word as well which excludes extraordinary items, such as a profit or cash from the sale of an asset. The next paragraph provides the definitions.

Budgets shall be based on operating trends adjusted for changes reflected in the operating plan, usual and customary business analyses and methods used to develop operating plans and budgets, and shall be conservative (may need a better word). Any budgets with projected increased revenues require a business analysis based on no increase in revenues, which shall also be provided to the members with the dues billing.

__Explanation — This is a definition for "be realistic". Part of being realistic is not using optimistic projections of revenue for balancing the budget. Hence the requirement in the last sentence. I hope the meaning is clear: no budgets that are only an exercise in arithmetic.

__For the purposes of this provision, total operating expenditures means the sum of (a) total unrestricted operating expenses, (b) required principal payments on long-term notes and obligations, (c) capital investments in new and/or expanded facilities, (d) the net of required reserve funding minus depreciation, and (e) required transfers to any other restricted accounts or funds.

__Explanation — I have inserted letters in the text above to aid the explanation. Since members may not understand these details, they are in a separate paragraph. Perhaps the bylaws should be written with a "lettered" list. Probably better, the CPA should specifically review these definitions.

1. (a) "Unrestricted" means not including revenues earmarked for restricted funds.
2. (b) I have added the word "required" in the text. The budget has to be balanced based on the required payments. Discretionary payments such as might occur from the sale of an asset would be excluded from both the revenue and expense sides.
3. (c) These are the discretionary investments (example is the $100,000 in most of the prior year budgets).
4. (d) This should be better worded as "the greater of depreciation and the reserve requirement from a professionally-conducted reserve study". Since both depreciation and reserve calculations are based on useful lives of the assets and since project-by-project repair etc is more expensive than if done as part of a larger project, the professional study should yield a higher number than depreciation. The use of depreciation establishes a minimum allocation to the reserve fund which would be reflected in more meaningful financial statements.
5. (e) Restricted accounts can also be established by the board or could be established by members' resolution. For example, a fund should be established by the board for the repair of the pool so that the operating expenses related to the repair and the payments from the insurance companies would not distort the operating expenses. The language has been crafted to avoid any implied resolution of the questions about the CI/DR Dues.

As a way of validating the language, the above could be applied to the results for 2002 through 2005. __Monthly projections of year-end results are required with the above requirements applied. A budget or monthly year-end projection not meeting the stated requirements requires approval by a majority vote of the members voting in person or by proxy at a special members’ meeting called within 5 days for this purpose. The notice of the meeting shall provide full and accurate information on the annual operating plan and budget and applicable year-end projections.

____Explanation — The basis for determining status should always be the projected year-end results. When conditions change that affect projected revenues and/or expenses for remaining months, those adjustments should be immediately made in projecting year-end results. The year-end results made each month should be approved by motion of the board. As part of the determination of unfavorable projected year-end results, the board should have debated alternatives for keeping the budget balanced. That is the information needed for the notice. If the result by approved motion is unbalance, the only time required to the mailing the notice is the time to prepare and reproduce the notice for mailing. It is a short time. Delays are costly. No deferring or waiting until next month.

__Click Return to go to the beginning of this post. Don Nordeen (989) 939-8240 =====Appendix — Bylaws Provision as Submitted to Bylaws Cmte===== #BylawsBalBdgt Date: 2007 March 15 __To: Bob Allaben, Mike Buckley, Bill Fish Gary Hyatt, Dick Nelson, _____Don Nordeen,Kate Nordeen, Jim Pagels, Pam Tavernier __cc: Christine Zarichney (for MOA file) Re: Balanced Budget Provision Article VII. Board of Directors __Balanced Budget Provision ____Current Provision — The Board shall not approve an annual budget in which the projected expenses are in excess of the projected income (revenue) unless approved by a majority vote of the members voting in person or by proxy at a Members’ Meeting. The notice of the meeting shall provide complete and balanced information on the annual budget. ____Proposed Provision as a New Section — ____Section 7.xx. Operating Plan and Budget — The board shall develop an operating plan and budget for the following fiscal year and include both with the mailing of the annual dues billing on or before 60 days prior to the beginning of the fiscal year. Members may provide comments and recommendations to the board prior to the beginning of the fiscal year. The board shall consider members’ comments and provide a final operating plan and budget to the members by first-class mail no later than 30 days into the fiscal year. ____The Board shall not approve an annual budget in which the total unrestricted operating revenues are less than the total operating expenditures. Budgets shall be based on operating trends adjusted for changes reflected in the operating plan, usual and customary business analyses and methods used to develop operating plans and budgets, and shall be conservative (may need a better word). Any budgets with projected increased revenues require a business analysis based on no increase in revenues, which shall also be provided to the members with the dues billing. ____For the purposes of this provision, total operating expenditures means the sum of total unrestricted operating expenses, principal payments on long-term notes and obligations, capital investments in new and/or expanded facilities, the net of required reserve funding minus depreciation, and required transfers to any other restricted accounts or funds. ____Monthly projections of year-end results are required with the above requirements applied. A budget or monthly year-end projection not meeting the stated requirements requires approval by a majority vote of the members voting in person or by proxy at a special members’ meeting called within 5 days for this purpose. The notice of the meeting shall provide full and accurate information on the annual operating plan and budget and applicable year-end projections. ______Rationale — The proposed provision corrects the deficiencies in the current provision by reflecting all of the operating revenues and expenses. By including the operating plan and budget with the dues billing, members can relate what they are paying to what will be provided. The dates reflect timely action by the board. The 30-day requirement reflects approval of the year-end results for inclusion in the fourth quarter business review. The second paragraph defines requirements to avoid unrealistic budgets, which requires Plan B (no revenue increase) if Plan A is based on a revenue increase. The third paragraph provides the accounting detail to ensure that expenditures do not exceed revenues. The last paragraph requires monthly evaluations by the board for which unbalanced budgets or projections require prompt approval by the members. The CPA should review the third paragraph to ensure that the accounting details are properly stated. ______Further Explanation — The operating plan and budget are logically bound together as hand in glove. The parts members may have difficulty understanding are the accounting details in the third paragraph. A qualitative understanding is provided by the first, second and fourth paragraphs. Barron's accounting dictionary defines expenditure as "Payment of cash or property, or the incurrence of a liability to obtain an asset or service." That is what is intended to be described. The CPA should also verify the default for reserve funding equal to the depreciation. Don Nordeen Tel: (989) 939-8240

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$25.00 Late Fee Likely Inconsistent with Master Declaration

2007 February 23 Last edit: 2007 Mar 14. Click History for a list of changes and updates. __The continuation of this post is an updated email to the bylaws committee providing an analysis of whether or not a $25.00 late fee for delinquent dues is authorized in the Master Declaration. Answer is likely not. The matter was discussed at the 2007 Feb 21 bylaws committee meeting approved by those in attendance. Bob Allaben and I voted no. That last updated email replaced the earlier one. __This is an example of one of the things that is very wrong at MOA, namely, adherence to the governing documents is not taken seriously. Members may not like that other members do not timely pay the annual dues. But that dislike does not provide the authorization to assess an late fee of $25 per quarter that is invalid under the governing documents. __Some of the internet links in the post are to a password-protected weblog. If you are a MOA member, please refer to the Welcome & Home Page for information on how to access that weblog. Don Nordeen ==========

------------------------------------------------------------------------------------------------------ Please be advised that the writer is not an attorney, and this is not legal advice. The information is based on research on information available in the public domain. ------------------------------------------------------------------------------------------------------

Click Continue for Post Continuation plus Comments.

• History:_
• 2007 Mar 14 — Added recollection of prior action of the bylaws cmte, added more discussion and analysis.
• 2007 Feb 27 — Expanded the scope of the analysis to answer more questions.
• 2009 Apr 03 — Initial Post, but indexed to the date of the document which is 2007 Feb 23
• Links:_ $25.00 Late Fee Likely Inconsistent with Master Declaration at [http://swagmanmwpoa.blogspot.com/2007/02/2500-late-fee-likely-inconsistent-with.html]
• Key Words:_ Governing Documents; 2005-7 Amendment Initiative; Governing Documents, General; MOA Board of Directors; MOA Governance; MOA Members & Members' Rights; late fees; delinquent dues; assessment

Click Continue for Post Continuation plus Comments. Or Click Show All for Above plus Post Continuation and Comments.

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$25.00 Late Fee Likely Inconsistent with Master Declaration (continued) ____From: Don Nordeen ____Date: 2007 March 14 10:45:25 EST ______To: MOA Bylaws Committee ______Cc: Christine Zarichney __Subject: $25.00 Late Fee Likely Inconsistent with Master Declaration Date: 2007 February 23 (Revised 2007 Feb 27, 2007 Mar 14) ____From: Don Nordeen ______To: Bylaws Committee: Bob Allaben, Jack Barry, Mike Buckley, Phil Curtiss, _________Bob Felt, Bill Fish, Joe Houston, Gary Hyatt, Bob Kish, Dick Nelson, _________Don Nordeen, Kate Nordeen, Bill & Penny Nowacki, Jim Pagels, _________Vicki Rigney, Diane Shockey, Pam Tavernier, Dick Thams ______cc: Non-official Michaywe weblog (access information below signature block) _________at [http://swagman.typepad.com/michaywe_poa/2007/02/2500_late_fee_l.html] ______cc: Christine Zarichney (for MOA file) __Subject: $25.00 Late Fee Likely Inconsistent with Master Declaration Re: $25.00 Late Fee Likely Inconsistent with Master Declaration __(added 2007 Feb 27) Revision with this update adds an additional provision of the Declaration of Master Covenants, Conditions and Restrictions (DMCCR) which even more clearly defines allowable late fees as limited to actual costs of the additional administrative expense. __(added 2007 Mar 14) My recollection is that, after considerable discussion, the bylaws cmte decided to reference the applicable provisions in the DMCCR and not include the $25.00 late fee proposal. As the bylaws committee has done elsewhere, it is inappropriate to redefine what is already defined in the DMCCR, which is the superior document. The recommended provision in the bylaws then becomes (added language in italics and blue):

Section 5.04 - Failure to Pay Dues or Assessments. Failure to timely pay dues and assessments may result in additional charges, as defined in Article V of the Master Deed Restrictions, including charges for interest, late fees, fines and collection costs. A certificate in writing issued by the Treasurer of the Association shall be given on demand to any member liable for said charges and assessments setting forth the status thereof. Notes and Explanation

1. Since the due dates and all the charges are defined in the DMCCR which is the superior document, no additional charges can be defined in the bylaws.
2. As the committee has decided on other issues, the requirements should not be restated in the bylaws which might create conflicting language.
3. Since the various requirements are dispersed through Article V of the DMCCR, it is best to reference Article V to avoid missing a required reference.
4. The board's policy to charge a late fee of $25.00 per quarter is likely inconsistent with the DMCCR. The board's obligation is to be obedient to the governing documents. Action is required by the board.

__I previously distributed this research by email to those who attended the Feb 21 bylaws committee meeting. I believe it should receive broader communication to provide the opportunity for more members to comment. The bylaws committee should exist to serve the members. MOA Members' inputs are important. Please click "Reply All" and send your comments to those on this distribution list. __Conclusion — (revised 2007 Mar 14) A provision for assessment of a $25.00 late fee is likely inconsistent with the DMCCR and should not be included as a proposed amendment to the bylaws. Rather, the bylaws should refer to Article V for required due dates and the allowable late fees. __ One of the considerations discussed by the board several times in updating the bylaws was the need to bring the bylaws into consistency with the Declaration of Master Covenants, Conditions and Restrictions (DMCCR). Unfortunately, such is not stated in any board motion. However, it seems to be part of the charter for the bylaws cmte. __ (revised 2007 Mar 14) This consideration should apply to any new provision in the bylaws as well. I have stated on several occasions that the DMCCR do not authorize a $25.00 late fee for delinquent dues — rather authorize a fee to cover costs. This is directly stated in Article V, Section 5(b) and 5(e) of the DMCCR:

__Excerpt from (c) "The Association may also assess fines for late payment or nonpayment of Association Dues, assessments and other charges in accordance with the provisions of Article VII hereof, and/or through duly promulgated rules and regulations, establish late fees for late payment of Association Dues, assessments and other charges, to compensate the Association for the administrative expense associated with handling delinquent accounts."

__The assessment of any fine must meet the requirements for fines as defined in Article VII. Separate board action would appear to be required for each fine assessed. The procedures required are clearly defined in Article VII. Any action to assess a fine that does not conform to Article VII is invalid. __The excerpt of (c) is

"The Association may ... establish late fees for late payment of Association Dues, assessments and other charges, to compensate the Association for the administrative expense associated with handling delinquent accounts."

__(added 2007 Feb 27) The DMCCR repeat much of the above in Article V, Section 5(e) which states in its entirety:

"(e) Expenses of Collection. All expenses incurred in collecting unpaid assessments, including interests, fines, costs, actual attorneys' fees (not limited to statutory fees) and other costs paid by the Association for taxes, other liens and other such expenses paid to protect its lien, shall be chargeable to the Owner in default and shall be secured by the lien on his Property Unit. Such collection fees shall also include, but are not limited to, the costs for additional billings and invoices, special correspondence, preparing and recording liens and releases, collection agencies, and court costs. The Association shall prepare a schedule of costs for routine transactions for such billing of costs. Non-routine costs shall be billed at the actual cost to the Association plus the appropriate transaction and administrative costs."

This is a very specific provision and as such should take precedence over a general or more general provision. It makes very specific that the Association shall prepare a schedule of costs for the allowable late fees. __Redrafting of the DMCCR is needed to define the additional charges in one section rather than two. The last two sentences of (e) are clear as to what charges are authorized. __The Michigan court of appeals cases has established clear standards for interpretation of restrictive covenants:

“Restrictive covenants are to be read as a whole to give effect to the ascertainable intent of the drafter, and strictly construed against grantors and the parties seeking to enforce the covenants. All doubts are to be resolved in favor of the free use of property. Courts should not infer restrictions that are not expressly provided for in the controlling documents."

The excerpt of the remaining part described above is clear about what is allowed, namely fees for administrative expenses. __ When this issue was discussed previously in the bylaws cmte, the action was to refer to Article V, Section 5(b). That clearly makes the bylaws consistent with the DMCCR. __ The current assessment of $25.00 appears to be in violation of the DMCCR, which only allows a late fee "for the administrative expense associated with handling delinquent accounts." The requires a cost analysis to determine the costs for the fee for administrative expense. Don Nordeen (989) 939-8240

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