Michigan MCL 559.154: Mandatory Condo Bylaws and Arbitration

Quick Answer

MCL 559.154 lists what every Michigan condominium's bylaws must contain: who administers the project, books and records, a destruction course of action, an annual financial statement to each owner, a board indemnification clause, and an arbitration provision. Subsections (8) through (11) make arbitration binding only if the parties elect it and consent in writing, and they apply only to projects established on or after the effective date of the amendatory act that added subsection (11).

This is a section about bylaw content. It is not a standalone owner-rights section, so what a given condo actually must do comes from its own recorded bylaws.

At a Glance

What the Law Says

The section tells the drafter what the bylaws "shall" contain. Subsection by subsection:

• (1) Provisions for designating persons to administer the project. The bylaws must require those persons to "keep books and records with a detailed account of the expenditures and receipts" and specify the operating expenses.
• (2) The person administering the project is assessed as the person in possession for tangible personal property owned or possessed in common. Personal property taxes on it are expenses of administration.
• (3) "Specific provisions directing the courses of action to be taken in the event of partial or complete destruction" of the buildings.
• (4) Expenditures of administration include costs of satisfying liability arising from the common elements or administration, and receipts include insurance proceeds securing the co-owners against those liabilities or losses.
• (5) The association "shall prepare and distribute to each owner at least once each year a financial statement, the contents of which shall be defined by the association of co-owners."
• (6) An indemnification clause for the board. It "shall require that 10 days' notice, before payment under the clause, be given to the co-owners" and "shall exclude indemnification for willful and wanton misconduct and for gross negligence."
• (7) The bylaws "may" allocate votes in proportion to percentage of value, or an equal number of votes per unit.

Arbitration and court access

Subsection (8) requires a bylaw provision that disputes, claims and grievances about interpreting or applying the condominium documents, or among co-owners, be submitted to arbitration with a final and binding decision, "upon the election and written consent of the parties" and "upon written notice to the association." The American Arbitration Association commercial rules apply.

Subsection (9): without that election and written consent, a co-owner or the association may still petition a court. Subsection (10): once parties elect arbitration, they cannot petition the courts on that dispute. Subsection (11) limits (8) through (10) to projects established on or after the effective date of the amendatory act that added subsection (11). The section's text does not give that date, so check your project's establishment date with counsel.

What This Means in Practice

For boards

Use the section as a bylaw audit list. Older documents may lack an arbitration clause or may use different wording. The indemnification rules are the most operational: the 10-day notice to co-owners comes before any payment under the clause, and willful and wanton misconduct and gross negligence are excluded. See board member liability for the related risk discussion.

The annual financial statement is the only annual distribution duty in this section. Its contents are left to the association, so the statute does not prescribe a format, an audit or a reserve disclosure. Audit and records rules are in a different section; see books, records and audit.

For owners

Arbitration is not automatic even where the bylaws contain the clause. It requires both the parties' election and written consent, and written notice to the association. Once elected, court access for that dispute is closed. Think before you consent, and consider legal advice.

Open questions (our reading)

• The text does not say what happens when bylaws omit a required item. Whether the statute fills the gap or a court would read it in is a question for counsel.
• The text does not state a minimum for the annual financial statement or require that owners receive a budget.
• Whether a dispute is within the arbitration clause ("interpretation of the application of the condominium document") can itself be contested.

Timeline

Related Michigan Law

• Books, records and annual audit (MCL 559.157)
• Reserve fund requirement (MCL 559.205)
• Co-owner enforcement suits (MCL 559.207 and 559.215)
• Director duties and volunteer liability
• Michigan Condominium Act overview

Board Checklist

• Compare your recorded bylaws against each mandatory item in subsections (1) through (6).
• Confirm the board indemnification clause has the 10-day notice and the two exclusions.
• Calendar the annual financial statement distribution and keep proof it went to every owner.
• Confirm the project's establishment date before relying on the arbitration provisions.
• If arbitration is proposed in a dispute, require written consent from all parties and written notice to the association.
• Do not describe arbitration as mandatory unless the parties have elected it in writing.
• Have counsel review any bylaw amendment to fix gaps.

Frequently Asked Questions

Must Michigan condo bylaws require arbitration?

Bylaws must contain an arbitration provision, but it is binding only on the election and written consent of the parties and written notice to the association, and only for projects established after the amendatory act that added subsection (11).

Can a co-owner still sue if the bylaws have an arbitration clause?

Yes, unless the parties have elected and consented in writing. Subsection (9) preserves the right to petition a court otherwise.

What does the indemnification clause have to say?

It must require 10 days' notice to co-owners before payment and exclude willful and wanton misconduct and gross negligence.

Do owners get an annual financial statement?

The bylaws must provide that the association prepares and distributes one at least once each year, with contents defined by the association.

Which arbitration rules apply?

The statute says the American Arbitration Association's commercial arbitration rules apply.

Does this section set reserve requirements?

No. Reserve funds are covered in MCL 559.205, which has a separate page.

Where This Comes From

This page is based on the text of MCL 559.154 as published by the Michigan Legislature, current through PA 114 of 2026 when read on November 13, 2026, including its history note. Official page: legislature.mi.gov, MCL 559.154.

How APM Helps

Association Property Managers manages condominium and HOA communities across Michigan from our East Lansing office, with flat, published pricing. See our Michigan service area, browse every Michigan state-law guide, or request a free proposal. Laws and documents differ by community, and we review your master deed and bylaws when we build your proposal.

Legal disclaimer: This article is general information, not legal advice. Laws change and associations differ. Confirm the current statute text and how it applies to your governing documents with a licensed Michigan attorney before acting.