Minnesota Court of Appeals Sides with Homeowners Associations Terminating Contracts

2 Feb

In a decision rendered January 30, 2012, the Minnesota Court of Appeals examined Minn. Stat. § 515.B.3-105(a)(iii) of the Minnesota Common Interest Ownership Act (MCIOA).  This statute allows certain contracts to be terminated by the association without penalty, including contracts to which a declarant (the developer) bound the association.  The intent of the statute is to avoid a situation where a unit owner-controlled association becomes subject to unfavorable contracts that were entered into during the time that the declarant controlled the association, but which the unit owners hadn’t agreed to as they weren’t yet in control of the association.  In the case that the court examined, an association was obligated on a service contract that the declarant (the developer) of the association had entered into prior to homeowner control.  The association asserted its right to cancel the service contract under the statute.  The company providing those services objected arguing that the association could not terminate the contract because the declarant wasn’t still a party at the time the association sought termination.  The Court of Appeals, however, sided with the association finding that it was sufficient that the declarant at one point had been a party to the contract during the period of declarant control and then had the association assume that obligation.  The name of the court case is Energy Center, LLC v. The Falls and Pinnacle Owners’ Association, number 27-CV-09-26427 (Minn.Ct. Ap. Jan. 30, 2012); the decision is an unpublished decision from the court.

This blog entry is written by Chris Renz, a shareholder at Thomsen Nybeck. Chris practices in the litigation area of the firm with primary focus on real estate litigation, employment litigation, townhome and condominium law, and criminal law, particularly as the prosecutor for the Metropolitan Airports Commission.

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