Tag Archives: MCIOA

Matt Drewes Quoted in Two Recent Articles at HOALeader.com: Handling rogue board members; and Proper treatment of meeting minutes.

20 Dec

Matt Drewes recently contributed quotes for the following articles published at www.hoaleader.com, a national web-based publication focused on homeowners association and condominium board members and association management professionals:

  • What’s Your Duty When Fellow HOA Board Members Violate Governing Documents?; published November 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.
  • More HOA Meeting Minute Madness: When Can Minutes Be Changed?”; published November 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.

Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law, and insurance coverage. He has been included in several years of the annual list of Minnesota’s Rising Stars, and has been quoted in the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, HOALeader.com, and elsewhere on issues involving construction litigation, community associations and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.



16 Feb

            While MCIOA provides for a perfected and secured lien without the necessity of filing a physical lien statement with the county recorder or registrar of titles, and even provides for the six-month “super lien” following foreclosure of a first mortgage, the statute also provides for priority of a first mortgage over the Association’s lien. So, if a property is sold without a Resale Disclosure Certificate being requested, and a new first mortgage is recorded against the property, the new mortgage will have priority over the Association’s lien whether said lien was for amounts due for several years or, just the MCIOA-super lien amounts.

            Our office is seeing a significant increase in re-sales without Resale Disclosure Certificates being requested from the Association. Several months later a new owner is startled to find out there is an unpaid lien against the property. However, if a new first mortgage has been recorded, and, the first mortgage equals or exceeds the value of the property, the value of that Association lien is significantly diminished, if not worthless as a collection tool.

            To avoid this result, file a physical lien statement with the appropriate county index. I have yet to meet a lender who funds a loan without requiring the release of a filed lien statement against the property (not extinguished through mortgage foreclosure). 

            Thomsen & Nybeck can assist you in this regard and strongly advises spending the money to secure an Association in light of the growing trend to re-sell property without obtaining or providing a Resale Disclosure Certificate, especially re-sales by foreclosing mortgage and/or HUD. 

          Entry byGretchen Schellhas.  Gretchen is a shareholder at Thomsen & Nybeck, P.A. and Chief Executive Officer of the firm.  She practices primarily in the areas of real estate, collections, community association law and family law.

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.

Understanding Community Association Budgets

24 Mar

Budget decisions for new community associations can be a minefield. Developers, owners, and board members often don’t realize all the financial considerations they’re supposed to take into account when making early budget decisions. An association should never start out “in the hole,” and there are measures that are required that can protect against an inability to perform necessary projects down the road. This article is to give those dealing with budget issues a brief overview of how to approach the budgeting process.

An association obtains funds through its assessments. The developer of the association (also known as the declarant) has control of the board of directors of a new association (or condominium conversion) until it turns over control to the unit owners. This gives the developer the power to set the amount of the monthly assessments during the period of declarant control. Assessments are comprised of two primary components: (1) The common expense assessments are for funds necessary to maintain and manage of the community; and (2) The reserve funds are those funds required for the replacement of anything the association is obligated to replace (this is found in the association’s governing documents, specifically the declaration – roofing and siding are frequent examples).

The Minnesota Common Interest Ownership Act, or “MCIOA,” found in Minnesota Statutes Chapter 515B, permits a developer to reserve the right to pay a 25% alternative assessment for each unit it owns that is not “substantially complete.” “Substantial completion” means the date on which a “certificate of occupancy” is issued, which is issued by the city in which the home is located following an inspection. A developer may therefore pass the first assessment early so homeowners start to pay a portion of the operating expenses, but delay “substantial completion” on unsold units to take advantage of the alternative assessment. Developers also may take advantage of potentially ambiguous language in MCIOA stating that assessment obligations do not begin until a unit is “created.”

It may sound unfair that a developer would pay only 25% of monthly assessments, but it’s not entirely that simple. Prior to the passage of the initial assessment the developer is required to pay all of the association’s operating expenses. Also, if there are any unpaid costs at the time control is transferred to the members, the developer must pay them within 60 days. The developer’s alternative assessment right is also limited to the common expense portion of the assessments. The developer has to pay 100% of the reserve assessment on the units it owns. Again, however, these assessments are not due until the unit itself or any building within the unit is “substantially complete,” which may lead a developer to delay the “substantial completion” of unsold units to avoid triggering this assessment.

All of this may tempt a developer to set assessments too low in order to minimize its own assessment contribution or to generate buyer interest. Nevertheless, the association’s budget is required by law to include an adequate reserve assessment to allow for the replacement of the required components of the development. The members of a board of directors who are appointed by a developer also owe a fiduciary duty to get this right. The developer and the board it appoints would therefore face liability if they leave the association with insufficient operating or reserve funds on hand. A developer would be wise to set a realistic budget or it and the board members it appointed will risk liability to the Association.

Similarly, it would be wise for individual owners elected as board members to review that budget right away, and each year thereafter. Consider whether a reserve study is necessary to ensure the reserves are adequate. A new association board should also make sure it has all the proper documentation for the construction, finances and operation of the association from the developer. These documents are often not turned over to the detriment of the unit owners going forward.

Assessment issues should be addressed proactively by all parties involved. Failing to discover a problem early can lead to significant financial consequences for all involved that will only worsen if not discovered. Accordingly, resolution of these problems is more likely if they are caught sooner, rather than later. Hopefully this article helps you to reach that goal.


This blog entry is written by Matt Drewes. Matt is a shareholder at Thomsen & Nybeck, P.A. and head of the firm’s Association Representation Group. He practices primarily in the areas of real estate litigation, townhome and condominium law, construction litigation, debtor/creditor law, insurance litigation and employment law.  For more information on townhome and condominium law, please visit: http://www.tn-law.com/CM/Real-Estate/Townhome-Condominium-Law.asp.

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