The Minnesota Common Interest Ownership Act, Minn. Stat. § 515B et seq. (“MCIOA”, pronounced “em-kai-wah”) was passed by the Minnesota legislature in 1994 in order to provide a more uniform administration of common interest communities. Subject to a few exceptions, MCIOA applies to all condominium communities in Minnesota, as well as all townhome communities formed on or after June 1, 1994. Townhome communities created prior to June 1, 1994 are not subject to MCIOA unless they amend their declarations to opt in.
Amending declarations and other governing documents such as Articles of Incorporation and Bylaws is one of the most common projects needed by common interest communities. Often, governing documents have not been updated or revised since a community was created, leaving them with provisions that are no longer applicable and language that is difficult to interpret and enforce.
When a townhome association decides to update its governing documents, one of the decisions it will need to make is whether to opt in to MCIOA. In our opinion, the benefits to opting in outweigh any perceived downsides that may exist, and the law provides a helpful framework that will allow it to continue to thrive well after the documents are updated.
The overarching benefit of opting in to MCIOA is that it provides clarity and consistency with the legal standards in Minnesota. For example, the statute provides clear definitions and provisions related to assessments, a clear delineation of maintenance and repair obligations, and an increased ability to implement reasonable rules and regulations. Additionally, associations that opt in to MCIOA may use the “super lien” provision, which requires first mortgagees that foreclose on a unit to pay certain assessments. It also provides the ability to assess homeowners for repairs and improvements that affect only their units, and clearly outlines the authority for collecting assessments, including clear lien and foreclosure rights.
Additionally, once an association opts in, it becomes bound by and subject to that statute moving forward, including any changes that the legislature chooses to make. This benefits communities by providing answers to issues that hadn’t been previously considered or were not properly addressed by the governing documents. It also provides mortgage lenders and other interested parties with a known standard of governance, which can be helpful for prospective buyers looking to obtain loans and other financing.
Of course, there are also perceived disadvantages to opting in to MCIOA. A common concern is the idea of additional government involvement with the property, or more restrictions on the community. However, most often some or all of the rights and responsibilities contained in MCIOA are already present in the association’s original documents, albeit in perhaps an outdated version. Opting in simply provides statutory support for those rights, while also benefitting from any additional rights or responsibilities moving forward.
Another concern may be the requirement that the Board provide adequate reserve funds, insurance, and financial accounting. However, these requirements are extremely important to ensure that the association properly represents and acts on behalf of the owners. Also, again, most declarations already contain similar obligations, and opting in to MCIOA simply aligns those requirements with the legal standard in Minnesota.
In the end, we recommend opting in to MCIOA because it is the clearest, safest way to ensure that the operation, regulation, and maintenance of the association remains constant over time. It keeps the association current and compliant with standard practices in Minnesota, which allows owners and prospective buyers with a full understanding of the rights and restrictions at the property.
The attorneys at Smith Jadin Johnson, PLLC have extensive experience drafting, amending, and interpreting governing documents on behalf of associations. If you or your association would like a free consultation about how we can help, please contact our office today.
– Karly Kauf, Attorney @ Smith Jadin Johnson, PLLC