Bill regulating HOAs, common interest communities passes House

A quarter of Minnesotans live in a homeowner association and 82% of new homes are in an HOA.

But state law hasn’t kept pace with the growing practice, which has led to the “wild west” in some instances and stories from Minnesotans about how their dream home turned into a nightmare, said Rep. Kristin Bahner (DFL-Maple Grove).

After two years of work by lawmakers and stakeholders, HF1268/SF1750* is a wide-ranging bill creating regulations for HOAs and common interest communities and it’s nearing the finish line. Bahner, the sponsor, said it “refines and reforms our 32-year-old statute to provide much-needed updates for those living in homeownership communities and common interest communities.”

The House passed the bill, as amended, on a 100-34 vote Thursday. It now heads to the Senate for concurrence.

Rep. Spencer Igo (R-Wabana Township) credited Bahner and Rep. Shane Mekeland (R-Clear Lake) with taking the lead on the bill.

“It really represents one of the best parts of the tie that we have in the House… that this really good bipartisan work was able to happen,” Igo said.

Lawmakers aren’t saying HOAs are bad, but it’s time for lawmakers to clean up the law so Minnesotans can have peace of mind that the rules and regulations are manageable, he said.

The bill focuses on transparency, best practices and strong consumer protections, Bahner said.

Among the provisions in the bill are regulations that would add transparency to board meetings and documents, prohibit conflicts of interest for board members and property managers, ban retaliation against unit owners, add requirements for maintenance contracts, limit fines imposed on unit owners, create a new process for terminating an HOA and limit a local government’s ability to require an HOA as a permit condition for new housing developments.

On a 69-65 vote, lawmakers amended the bill to add a prohibition of an association disclosing data in violation of the Safe at Home program. 

An amendment was defeated by an 86-47 vote to remove the prohibition on local government requiring the creation of an HOA as a permit condition for new development. Rep. Tim O'Driscoll (R-Sartell), the amendment sponsor, called the inclusion of the provision a “stumbling block” to his support of the overall bill.

Rep. Carlie Kotyza-Witthuhn (DFL-Eden Prairie) said she has repeatedly heard from her constituents about HOAs and the House’s discussion on the amendments Thursday shows there’s still more work to do on the issue.

“This package has been decades in the making,” she said.

Notable provisions

The bill covers a variety of functions of HOAs and common interest communities.

It would allow a common interest community to be terminated with the written agreement of two-thirds of unit owners if the community consists entirely of detached, single-family dwellings that don’t include any common elements and maintenance obligations.

An association would be banned from retaliating against a unit owner for asserting their rights under state law.

A local government would be banned from adding the condition of creating an HOA to an approval of a residential building permit or conditional use permit, residential subdivision development or residential planned unit development or any other permits related to residential development. But a local government would be able to require the maintenance of common elements.

An association would be required to give unit owners at least 21 days notice to review and comment before it votes to adopt, amend or revoke a rule or regulation, although it could adopt a temporary rule without notice in an emergency situation.

Fines would be capped at $100 for a single violation, unless the association members approve a greater amount. Fines could be more than $100 for subsequent violations of the same conduct or if the violation has serious and immediate impacts involving residents’ health or safety or property damage. A late payment fee on common expenses and special assessments would be capped at the greater of $20 or 5% of the amount owed.

A board would be required to make a good faith effort to resolve grievances with unit owners and if it can’t, it would need to refer the unit owner to the state’s HOA/common interest community ombudsperson.

If the association’s bylaws call for elections, the elections of board directors would occur regularly and a director’s term would be limited to three years as long as there isn’t a limit on the number of terms a director can serve.

Unit owners would be provided with meeting agendas, contracts or other documents on which the board plans to vote. They would also be given time to speak on agenda items at meetings and the board wouldn’t be able to impose a fine for doing so.

Board members wouldn’t be able to participate in deliberations or vote on a contract in which they or their family member has a financial interest. Board members and property managers wouldn’t be able to solicit or accept any money or other compensation from anyone as an inducement to vote in favor of or enter into a contract.

The board would be required to solicit a minimum of three written competitive bids before entering into a contract for property maintenance, construction, repair or reconstruction services estimated to cost at least $50,000.

An association wouldn’t be able to regulate the parking of a unit owner or guest, tenant or invitee of the owner within the public right of way maintained by a local government.

An association would be required to have a collection policy, provided to all unit owners, that includes three separate notifications to a unit owner before it’s referred to a collection agency.