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2011 Community Association Legislative Update

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A number of bills were introduced in the Minnesota legislature in the 2011 session that impact community associations. Those that were enacted into law (effective August 1, 2011) include some technical amendments to the Minnesota Common Interest Ownership Act ("MCIOA") to clarify some of the amendments that were made in 2010 and a provision specifically authorizing associations to charge for copies and, in certain cases, for time spent compiling documents in response to a records review request by a homeowner.

In addition to the above, several other bills were introduced that have not been passed into law. The first relates specifically to management companies and affiliated businesses in relation to certain practices regarding construction projects that may be contracted for on behalf of an association. The second bill proposed a revision to the sale and resale disclosure requirements permitting a buyer to consent in writing to having the 10-day right of rescission run from the date of delivery of the disclosure and governing documents to the buyer's real estate agent (as opposed to delivery to the actual buyer). Both of these bills were introduced but not scheduled for a vote in either house.

The third and perhaps most controversial bill (SF926 and HF1254) would have had far-reaching effects that would seriously restrict homeowners associations from being able to regulate their own affairs. The initial bill as proposed by Senator Gerlach and Representative Bills applied not only to associations but also to rental properties and contained provisions that would have prevented associations from being able to maintain their properties by restricting access by the association to units and limited common areas and permitting homeowners to make any landscaping improvements and install any type of alternative energy sources that they want, as well put up any non-commercial signs and/or flagpoles in any portion of the property over which they have exclusive control. The bill also proposed to change the minimum voting requirements under MCIOA for terminating, severing or converting to another form of association from a super majority of 80% approval of the members to a simple majority of 51% (this was later changed to 60% for all but single family home associations). After several revisions, all reference to rental properties was removed, and the provisions regarding access to properties, landscaping, alternative energy and voting requirements were removed completely. The bill was thus pared down to three basic provisions going into the committee hearings.

The first provision would expand the 2005 law permitting homeowners in associations to fly the Minnesota or American flags to also include the installation of flag poles anywhere on the property that the owner has exclusive use (including decks, patios, balconies, garage stalls, etc.). There was no exception included in the bill for allowing associations to regulate the size, number, placement or installation of the flagpole(s) or for requiring that a flag actually be attached to a flagpole, so it could potentially result in flagpoles of any size being placed anywhere and everywhere without any restrictions whatsoever. The proposed bill further provides for an award of attorney's fees to an owner in a court action if an association tries to regulate or restrict them in any way from installing flagpoles within their units or limited common areas.

The second provision also impacts the ability of associations to regulate the appearance of the property by preventing them from prohibiting owners from putting up non-commercial signs in any portion of the property of which the owner has exclusive use. As originally proposed, this section did not define the non-commercial signs, meaning that homeowners would be permitted to place just about any kind of sign they wanted on the property. After this was pointed during the hearing before the Senate Commerce Committee, the author agreed to change the language to limit its application to campaign signs during the specified campaign period. However, the attempt to legislatively dictate that associations have to allow certain kind of signage on their properties still conflicts with the rights of an association and its members to contractually agree not to permit signs on their private property. This section of the bill also contains an attorney's fee provision.

The final provision of the bill that is the most controversial and strongly opposed by various groups would eliminate the ability of associations to assess or lien a unit for fines for violations of the governing documents. Under this provision, fines could still be collected by pursuing a judgment in court but would no longer be part of the lien against the property. Senator Gerlach made a comment during the hearing before the Senate Judiciary Committee that he may have intended this provision to completely eliminate the Association's ability to lien the property at all for unpaid assessments, but as written it would only apply to the lien for fines.

The Senate version of the bill (SF926) passed through both the Senate Commerce and Judiciary Committees and was recommended to be put to the Senate floor for a vote. However, thanks to the efforts of all those who testified and/or wrote to their legislators in opposition to the bill, the House version of the bill (HF1254) was tabled by the House Civil Law Committee and thus did not reach a vote by either house in 2011. However, there is a good chance that the bill will be reintroduced in the 2012 legislative session.