Why a municipal escrow rule matters to a condominium association

Because in a condominium the building is a common element, and the master policy claim is the association's claim. When a Michigan condominium building burns, the association is the party negotiating the settlement, funding the reconstruction, and now potentially waiting on twice as much money as it would have in 2023.

Twenty-four thousand dollars is not a large number against a total-loss building claim. It is a very large number against the association's cash position in the first weeks after a fire, when it is paying for emergency board-up, debris removal, temporary utilities and an adjuster — while still collecting assessments from owners whose homes no longer exist.

The 15-day window is the operational point

The municipality has fifteen days from notice to demand escrow. That is short, and it runs while the association is dealing with everything else.

Three things a board can do in the first week after a significant loss:

1. Ask the carrier, in writing, whether MCL 500.2227 notice has gone to the municipal treasurer, and on what date. The clock is the association's problem even though the notice is the insurer's obligation.
2. Contact the municipal treasurer directly. A municipality that knows the association has a funded reconstruction plan and a contractor has less reason to escrow than one hearing nothing. The statute gives the municipality discretion, and discretion responds to information.
3. Model the cash flow with the money held. If the reconstruction plan only works with the full settlement in hand, the plan needs a bridge — reserves, a line of credit, or a special assessment — and the time to establish that is before the fifteen days run, not after.

What gets the money released

Repairs. The escrow exists to ensure the damaged structure is repaired or demolished, and it is released against progress. An association moving promptly on reconstruction faces a timing problem; an association that stalls faces a permanent one.

That is worth saying plainly to owners, because the pressure after a large loss is frequently to delay — to argue about the insurance, to argue about whether to rebuild, to argue about who is responsible. Michigan's escrow rule quietly penalises all of that, and it now penalises it twice as much.

The related change in what the master policy will actually pay

Since 1 July 2026, Fannie Mae and Freddie Mac allow master policies to insure roofs at actual cash value rather than replacement cost, and have retired the inflation-guard requirement. An association settling a fire loss may therefore be collecting less than it once would have on the roof component, while a municipality holds a larger share of what is collected.

Neither change is dramatic alone. Together they narrow the gap between an insured loss and a special assessment.

What to watch next

The annual CPI adjustment each 1 July. The cap is no longer a fixed figure, and a board working from a 2024 briefing note will be quoting the wrong number by 2027.