Minnesota Common Interest Ownership Act Changes and Updates

On behalf of Smith Jadin Johnson, PLLC posted on Friday, April 20, 2018.

During the last legislative session, the Minnesota legislature made two significant changes to the Minnesota Common Interest Ownership Act, Minn. Stat. § 515B (“MCIOA”) that will affect all common interest communities subject to that law. These changes, which have been signed into law by Governor Dayton, affect community associations’ maintenance responsibilities and rights to bring construction defect lawsuits. This blog post summarizes these changes.

ARE THESE CHANGES APPLICABLE TO YOUR ASSOCIATION?

MCIOA applies to all condominium associations, even those created under the old Minnesota Condominium Act, Minn. Stat. § 515, and the Uniform Condominium Act, Minn. Stat. § 515A. So if you live in or manage a condominium association, these changes will apply to you.

Additionally, MCIOA applies to nearly all common interest communities created after June 1, 1994, regardless of type. So if you live in or manage a townhome or condominium association created after June 1, 1994, these changes probably apply to you.

If you are unsure whether MCIOA and the recent changes to it apply to your association, please contact us and we can help you answer that question.

WHAT ARE THE NEW REQUIREMENTS?

There have been two significant changes to MCIOA. First, community associations subject to MCIOA must prepare and adopt a “written preventative maintenance plan” for their common elements. Second, community associations subject to MCIOA must obtain homeowner approval before filing a construction defect lawsuit.

1.  The New Preventative Maintenance Plan Requirement.

MCIOA now requires associations to adopt and distribute to their members a formal preventative maintenance plan for their common elements by January 1, 2019.

The new amendments to MCIOA specify that an association’s preventative maintenance plan must meet the following criteria:

  1. The preventative maintenance plan must be in writing;
  2. The preventative maintenance plan must be formally adopted by the association’s board of directors (i.e., approved at a formal board meeting by a majority of the board members);
  3. The preventative maintenance plan must include a schedule of when each item of maintenance will be performed;
  4. The preventative maintenance plan must include a budget to cover the costs associated with the maintenance; and
  5. The preventative maintenance plan must be distributed to the homeowners after it is adopted.

The purpose of this preventative maintenance plan is to ensure that associations regularly and proactively perform necessary maintenance to maintain their properties. A proper maintenance plan can prevent costly and expensive problems down the road. Regular routine maintenance maximizes the life of a property’s common elements, and increases the time between expensive capital improvement projects. Further, associations that take steps to keep their common elements in a state of good repair are likely to see their property values increase.

Having thorough records of the condition and maintenance of the common elements also allows associations to more accurately budget, which reduces the likelihood of an unexpected special assessment or loan to fund a large repair project.

Associations should determine if they are subject to this new requirement and if so, what it needs to include in its preventative maintenance plan. There is no “one size fits all” preventative maintenance plan, as every association has different common elements and maintenance needs.

Smith Jadin Johnson, PLLC can help associations review their governing documents to determine if the new law applies to them and, in conjunction with their boards of directors and property managers, prepare an appropriate preventative maintenance plan.

2. The New Construction Defect Litigation Requirement.

The second significant change to MCIOA deals with the ability of associations to sue for construction defects. Note that these changes apply only to associations created on or after August 1, 2017.

The MCIOA changes require covered associations (i.e., those created after August 1, 2017) to participate in a mediation with any potentially liable “development party” before it can bring a construction defect lawsuit. A “development party” includes the developer, contractor, subcontractor, architect and engineer involved in the design and construction of the property.

Additionally, the MCIOA changes require covered associations (i.e., those created after August 1, 2017) to: (1) give written notice to their homeowners before filing a construction defect lawsuit; and (2) have the proposed construction defect lawsuit approved by a majority of the association’s voting power before it can sue a “development party” for construction defects. Homeowner approval can be given at a properly noticed member meeting, via written ballot, or via electronic ballot.

Associations subject to the new MCIOA changes that fail to follow these steps risk having their construction defect lawsuits dismissed. Smith Jadin Johnson, PLLC can help associations navigate these new requirements so they can bring construction defect claims.

We hope this provides you with helpful information regarding the recent changes to MCIOA. Please feel free to contact us if you have additional questions, or if you would like assistance in complying with these new requirements.