Michigan HOA Budget Approval
Section 1: Overview — How HOA budgets are approved in Michigan
Michigan approaches HOA budgets differently from most states, and the difference starts with how the state sorts its communities. Michigan governs condominiums under the Condominium Act of 1978 (1978 PA 59, MCL 559.101 et seq.), and that statute reaches further than many owners expect. It covers site condominiums, the detached single-family developments that make up a large share of the state's neighborhoods. For these communities, the recorded condominium bylaws — not a separate statutory ratification step — control how the association adopts its budget.1 The board of directors of the association of co-owners adopts the budget under those bylaws, and the Act does not impose the negative-option ratification that Uniform Common Interest Ownership Act states use.2 A site condominium is a development made up of single-family detached homes, a structure that places many communities resembling conventional subdivisions under the Condominium Act and its recorded master deed and bylaws.3 A reserve-fund requirement for major repairs and replacement of common elements applies to condominium associations, and it sits in the Michigan Administrative Code condominium rules — current law that boards should verify against the operative rule text.4 Michigan has never adopted the Uniform Common Interest Ownership Act; it runs on a bespoke 1978 statute instead.1 The table and sequence below lay out the operative mechanics, the site-condominium structure, the reserve requirement, and the budget-adjacent obligations that shape the budget cycle.
Section 2: The budget approval mechanism
2A. Quick-Reference Budget Mechanics Table
This table reflects the Michigan Condominium Act and the recorded condominium bylaws for condominiums, including site condominiums. Non-condominium planned communities are addressed in the prose below.
| Parameter | Value |
|---|---|
| Governing statute section(s) | Michigan Condominium Act, MCL 559.101 et seq.; bylaws provisions at MCL 559.153 to 559.154; assessment of common expenses at MCL 559.169; reserve fund at MCL 559.205; reserve rule at Mich Admin Code R 559.5111 |
| Community types covered | Residential, site, business, mobile home, conversion, and time-share condominium projects, including site condominiums of detached single-family homes3 |
| Body that adopts the proposed budget | Not specified by statute; governed by recorded condominium bylaws5 |
| Approval model | Bylaws-driven: the board adopts the budget under the recorded condominium bylaws; the Act prescribes no negative-option ratification by co-owners5 |
| Budget summary distribution deadline | Not specified by statute; governed by recorded condominium bylaws5 |
| Ratification meeting notice window | Not specified by statute; governed by recorded condominium bylaws5 |
| Owner rejection threshold | Not specified by statute; governed by recorded condominium bylaws5 |
| Quorum required to ratify | Not specified by statute; governed by recorded condominium bylaws5 |
| Effect of owner rejection | Not specified by statute; governed by recorded condominium bylaws5 |
| Statutory cap on assessment increase absent owner vote | None; the Act imposes no percentage cap, and any limit comes from the master deed or bylaws6 |
| Special assessment approval threshold | Not specified by statute; governed by recorded condominium bylaws7 |
| Reserve study mandate (and frequency) | No reserve study is required under current law; House Bill 5784 of 2026 would add one8 |
| Reserve funding mandate | Yes; a reserve fund for major repairs and replacement of common elements, at a minimum equal to 10% of the association's current annual budget on a noncumulative basis (Mich Admin Code R 559.511 and MCL 559.205)4 |
| Audit or financial review tied to budget cycle | Independent CPA audit or review required annually for associations with annual revenues greater than $20,000, subject to annual majority opt-out (MCL 559.157); annual financial statement to each co-owner (MCL 559.154)9 |
| Provisions variable by the bylaws or declaration | Budget adoption procedure, assessment-increase limits, special-assessment approval, meeting and notice rules, and voting allocation are set by the recorded master deed and condominium bylaws (MCL 559.153 to 559.156)5 |
2B. The budget process and the site-condominium structure
A site condominium is a development of single-family detached homes. The Condominium Act itself never defines the term, but the Department of Licensing and Regulatory Affairs uses it to describe a condominium of detached houses, and these developments must comply with the Act.3 The consequence matters. Many developments that look like platted subdivisions — each home on its own lot-like parcel — are legally condominium projects, and each home sits on a condominium unit rather than a platted lot. For those communities, the Condominium Act and the recorded master deed and bylaws supply the budget framework, not a separate planned-community statute.3 The shared property in a site condominium usually consists of private roads, retention ponds, and entryway land held as common elements.3
The Act provides that recorded bylaws, filed as part of the master deed, govern the administration of a condominium project (MCL 559.153).5 Those bylaws must name the people who administer the project and must require them to keep detailed books and records of what the association spends and receives (MCL 559.154).5 The Act does not say who adopts the annual budget, what notice that adoption requires, or whether co-owners may ratify or reject it. It leaves those steps to the recorded bylaws, which typically hand budget adoption to the board of directors.5 The verified model, then, is bylaws-driven board adoption — not the negative-option ratification used under the Uniform Common Interest Ownership Act.
Adopting the budget is not the same as levying the assessment. The board adopts a budget that projects the year's expenses under the bylaws; the association then levies the assessment under MCL 559.169, which allocates common expenses among the units in proportion to their percentages of value, or as the master deed otherwise provides.10 A co-owner cannot escape that obligation by declining to use the common elements or by abandoning the unit (MCL 559.169(4)).10
Non-condominium planned communities — true platted-subdivision homeowners associations — fall outside the Condominium Act entirely. Their recorded declarations of covenants, conditions, and restrictions govern them, along with the Michigan Nonprofit Corporation Act (MCL 450.2101 et seq.) when they incorporate, and the common law. Michigan has enacted no separate, comprehensive planned-community statute for these associations, so the recorded CC&Rs supply their budget and assessment authority.11
2C. The reserve-fund requirement and variation
The reserve-fund requirement lives in the Michigan Administrative Code condominium rules, promulgated under the Act. MCL 559.205 directs the association of co-owners to maintain a reserve fund for major repairs and replacement of common elements, and it authorizes the administrator to set minimum standards by rule.12 The operative minimum appears in Mich Admin Code R 559.511(1), which provides that the association "shall maintain a reserve fund which, at a minimum, shall be equal to 10% of the association's current annual budget on a noncumulative basis."4 The association may use those funds only for major repairs and replacement of common elements (R 559.511(2)). The rule also requires the bylaws to acknowledge that the minimum may fall short for a particular project, and that the association should analyze whether it needs to set aside more.4 Treat this minimum as current law and verify it against the operative rule text each cycle.
The Act makes a handful of budget-adjacent provisions mandatory while it leaves the budget mechanics to the bylaws. The mandatory items include the reserve fund (MCL 559.205 and R 559.511), the recordkeeping and annual-financial-statement obligations (MCL 559.154), and the audit-or-review obligation for larger associations (MCL 559.157).9 The budget adoption process, assessment-increase limits, and special-assessment approval stay with the recorded bylaws. For associations incorporated as nonprofit corporations, the Michigan Nonprofit Corporation Act supplies corporate formalities such as director duties and annual reporting, but it sets no budget-approval threshold.11 The 10% floor and the project's actual capital needs both constrain the budget, which is why they belong in this overview.
Section 3: Budget-adjacent obligations
Reserves in the budget
The administrative-code reserve-fund requirement (Mich Admin Code R 559.511, under MCL 559.205) applies to condominium associations and requires a fund equal to at least 10% of the current annual budget on a noncumulative basis, usable only for major repairs and replacement of common elements.4 The budget consequence is direct: the board must fund the reserve as a line item when it sets the annual assessment. This obligation is mandatory for condominiums, and the bylaws cannot waive it below the rule's floor.
Special assessments
The Condominium Act addresses how the association allocates expenses, but it sets no general co-owner-approval threshold for special assessments. MCL 559.169(1) and (2) require that the association specially assess the expenses of a limited common element against the unit or units it serves.10 The Act does not define "additional assessment" or "special assessment," so the master deed and bylaws decide when the board may levy them and whether co-owner approval is required.7 This is variable by the bylaws.
Assessment increase limits
The Condominium Act imposes no statutory percentage cap on assessment increases. Absent a limit in the master deed or bylaws, the association sets the assessment amount.6 Any cap is therefore variable and document-specific, and Michigan does not follow a California Davis-Stirling-style statutory cap.
Financial review, audit, and disclosure tied to the budget cycle
MCL 559.157 requires an association of co-owners with annual revenues greater than $20,000 to have a certified public accountant independently audit or review its books, records, and financial statements each year, under the applicable AICPA standards; the Legislature added that requirement in 2013 PA 134, effective in 2014.9 The co-owners may opt out of it annually by an affirmative vote of a majority of members (MCL 559.157(3)). The Act also requires the association to make its books, records, contracts, and financial statements available for examination by co-owners and their mortgagees (MCL 559.157(1)), and it requires the bylaws to provide for distribution of an annual financial statement to each owner (MCL 559.154).5 These provisions are mandatory, subject to the audit opt-out.
Section 4: Recent legislative and judicial activity
A. Recent bills
Michigan is not rewriting its condominium budget law wholesale. The one proposal worth watching is narrow and practical: a bill that would make associations study their reserves and plan how to fund them.
HB 5784 · 2026 Regular Session
House Bill 5784 of 2026 would amend the Act's reserve provision (MCL 559.205) to make an association of co-owners conduct a reserve study, establish a reserve funding plan, update both periodically, and send co-owners annual written notice of the reserve fund balance.8 Representative John Fitzgerald introduced the bill on April 14, 2026, with co-sponsors Jason Hoskins and Stephen Wooden; the House read it a first time and referred it to the Committee on Regulatory Reform.8 The bill picks up where House Bill 5019 of 2023 left off — that earlier measure proposed substantially the same requirements but did not pass after the 2024 session.13
| Property managers | A reserve study and funding plan are not required yet, but you should prepare clients for a likely future mandate and budget for a professional study. |
| HOA board members | Track the bill and consider commissioning a reserve study now, because the 10% floor often understates real capital needs. |
| Community association attorneys | Monitor committee action and advise on bylaw and budget language that anticipates a study-and-funding-plan requirement. |
| Homeowners | If the bill becomes law, you would gain annual disclosure of reserve balances and funding plans before assessment decisions. |
B. Recent appellate rulings
Michigan's appellate courts have not rebuilt condominium budget law from the bench. One recent decision is worth noting for a simple reason: it tells owners they cannot withhold an assessment because they suspect the board mishandled earlier money.
Main Street Lofts Condominium Association v Parodi
The Michigan Court of Appeals affirmed a condominium association's foreclosure and money judgment against a co-owner who refused to pay a duly levied assessment, arguing that the association had mismanaged earlier assessments. After three earlier repair assessments on the 22-unit Royal Oak condominium, the owner declined a January 2020 assessment and claimed the association could not account for the funds it had already collected. The court held that "because defendant failed to demonstrate a genuine issue of material fact regarding his belief that the assessment was not justified, plaintiff was entitled to judgment on its claims for foreclosure and money damages."14 The court also affirmed an attorney-fee award of $6,937.50, noting that the association sought fees and costs "under both MCL 559.206 and its condominium bylaws," and that MCL 559.206(b) lets a successful association recover the costs of the proceeding and reasonable attorney fees.14 The decision applies the Act's assessment, records, and enforcement provisions (MCL 559.157 and MCL 559.206) in the budget-and-assessment setting.
| Property managers | Keep clean, contemporaneous assessment ledgers, because accurate accounting defeats mismanagement defenses to collection. |
| HOA board members | A co-owner cannot withhold assessments over budget-mismanagement suspicions; the board may levy and enforce while disputes proceed. |
| Community association attorneys | Speculative mismanagement claims, unsupported by documentary evidence, will not defeat summary disposition on a foreclosure claim. |
| Homeowners | Pay validly levied assessments and pursue budget grievances through governance and the courts, not by nonpayment. |
C. Active legislative debates
The reserve study and reserve funding plan bill, House Bill 5784 of 2026, is the principal active proposal; it would add a study-and-funding-plan obligation to the Act's reserve provision. No statutory percentage cap on assessment increases, and no change to the bylaws-driven budget-adoption model, is under active consideration.8
Section 5: National positioning and related coverage
Michigan stands apart from the Uniform Common Interest Ownership Act family. It governs condominiums under a bespoke 1978 Condominium Act, leans heavily on site condominiums for its detached-home developments, runs a bylaws-driven budget process with no statutory member ratification, and parks its reserve-fund requirement in an administrative rule rather than in the statute. It does not use the negative-option budget ratification of UCIOA states, and it does not impose a California Davis-Stirling-style cap on assessment increases. For a multi-state operator entering Michigan, the practical lesson is plain: many communities that look like conventional HOAs are in fact condominiums under the Condominium Act, and the recorded condominium bylaws — not a planned-community statute — control budget adoption and assessment.
Federal frameworks — including the Fair Housing Act, the Americans with Disabilities Act, the Fair Debt Collection Practices Act, the Servicemembers Civil Relief Act, and the FCC's OTARD rule — apply to Michigan associations regardless of the state budget framework.
- Michigan Legislature, Condominium Act, 1978 PA 59, MCL 559.101 et seq. ↩
- Michigan Legislature, MCL 559.154 (mandatory bylaws provisions; administration of project) ↩
- Michigan Department of Licensing and Regulatory Affairs, The Condominium Buyer's Handbook (site condominium definition; developments must comply with the Act) ↩
- Mich. Admin. Code R. 559.511, Reserve fund for major repairs and replacement of common elements (10% noncumulative minimum; permissible uses; bylaws statement) ↩
- Michigan Legislature, MCL 559.153 to 559.154 (administration governed by recorded bylaws; mandatory bylaws provisions; annual financial statement to each owner) ↩
- Michigan Department of Licensing and Regulatory Affairs, The Condominium Buyer's Handbook ("If there are no restrictions in the bylaws that place limits on increasing the monthly fee, the association has the right to determine the amount.") ↩
- Michigan Legislature, MCL 559.169 (assessment of common expenses; special assessment of limited common element expenses; allocation by percentage of value) ↩
- Michigan Legislature, House Bill 5784 of 2026 (reserve study and reserve funding plan; amends MCL 559.205) ↩
- Michigan Legislature, MCL 559.157 (examination of records; annual CPA audit or review for associations with revenues greater than $20,000; annual opt-out; added by 2013 PA 134) ↩
- Michigan Legislature, MCL 559.169 (contribution of co-owner; no exemption by nonuse or abandonment) ↩
- Michigan Legislature, Nonprofit Corporation Act, 1982 PA 162, MCL 450.2101 et seq. ↩
- Michigan Legislature, MCL 559.205 (reserve fund maintained by association; administrator may set minimum standards by rule) ↩
- Michigan Legislature, House Bill 5019 of 2023 (predecessor reserve study bill; amends MCL 559.205) ↩
- Main Street Lofts Condominium Ass'n v Parodi, unpublished per curiam opinion of the Michigan Court of Appeals, issued Nov. 21, 2023 (Docket Nos. 362990, 362991, 363727) ↩