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Impact Of 2017 MCIOA Modifications On Existing Common Interest Communities

by Alex Nelson ArticlesMinnesotaHomeowner AssociationsNewsQuestions Answered

By now you’re probably aware that there have been changes made to the Minnesota Common Interest Ownership Act (MCIOA) governing the operation of common interest communities (CICs).[1]  The most significant impact will be on communities formed on or after August 1, 2017, but existing communities are affected as well.  This article is the first of a three-part series and focuses on the MCIOA revisions affecting existing communities, those created before August 1, 2017.[2]

I.          Upkeep and the Preventive Maintenance Plan

CICs have always been responsible for maintenance, repair and replacement of common elements.[3]  This obligation will now also explicitly extend to damage resulting from lack of maintenance[4] (though this was already the implied practice).

By or before January 1, 2019, existing CICs will need to develop a written “preventive maintenance plan.”[5]  This is different from your long-term capital budget planning and any reserve studies that have or may be performed.  The new statutory section has three main components:

The board must prepare and approve a maintenance plan, maintenance schedule, and maintenance budget for the common elements;

The plan must be implemented by the deadline, and thereafter may be amended, modified or replaced “from time to time” as deemed necessary by the board; and

All unit owners must be provided with a copy of the plan, the schedule, and any amendments/modifications/replacements thereto.  Communication to the owners can be via paper copy, electronic copy, or electronic access through a web portal or something similar.[6]

 

What exactly needs to be addressed within the maintenance plan is left to the determination of the board, sort of.  The specific contents are not defined by this section of the statute but are filled in by other statutory provisions when read together with each community’s governing documents.

Note that the maintenance plan requirements apply only to common elements, not to any separate unit owner’s property.  On the other hand, limited common elements are still common elements and will need to be accounted for in the maintenance plan and budget.  Figuring out what your limited common elements are and what to do with them in terms of maintenance, repair and replacement can be one of the more vexing issues that board members and managers must address.  The 2017 MCIOA revisions will require you to squarely take up the question of what limited common elements you have in your community, as well as how you will plan and budget for their upkeep and replacement.

II.        Limited Common Elements

All common elements including all of the limited common elements of a community must be accounted for in the required preventive maintenance plan.  Limited common elements are designated for the exclusive use of the owners of the unit or units to which the limited common elements are allocated by the terms of the declaration.[7]  Portions of the structures in the community that are shared by multiple unit owners are specifically defined by statute as limited common elements.[8]  These may include exterior elements like roofs, siding, and shared driveways as well as chutes, flues, ducts, wires, pipes, conduits, bearing walls, etc. that serve one or more but fewer than all units and are located wholly or partially outside the unit boundaries.[9]  The declaration may alter the statutory defaults, so review of both the applicable statutes and the governing documents is necessary for each association.

Windows are always a source of debate and sometimes confusion as to who is responsible for upkeep.  For the record, windows are defined by statute as limited common elements unless the declaration says otherwise.[10]  By default, windows are limited common elements and must be included in the maintenance plan.  If your declaration is silent as to windows, it may be wise to review the historical treatment of windows, doors, etc. in your community to ensure that the association is in compliance with the MCIOA and governing documents.  If not, the maintenance plan deadline presents an opportunity to bring that treatment into compliance or to formally amend the governing documents to reflect the association’s “traditional” approach.

Careful review of the structures in the community must be undertaken to assess the elements of the buildings that may fall within the maintenance plan requirements.  Each association board will need to decide whether budgeting for property elements such as siding, roofs, driveways, pipes, windows, etc. is required for their community.  Outside guidance may be useful for this review in order to keep the board’s decisions firmly within the scope of the business judgment rule (and thus insulated from legal challenge later).

III.       Things That Did Not Change for Existing Communities

While existing communities must devise and implement new the maintenance plan requirements, they are exempt from the other changes made to the MCIOA.  All of the other the new provisions are applicable only to CICs created on or after August 1, 2017.[11]  For existing communities that means, among other things,

failure to document compliance with the maintenance plan requirements does not create a statutory defense in favor of contractors under the new § 515B.4-113(h);

the new pre-suit notice requirements of § 515B.3-102(d)(1) do not apply;

the new mandatory pre-suit majority voting requirements of § 515B.3-102(d)(2) do not apply; and

the mandatory pre-suit mediation and tolling provisions of § 515B.4-116 do not apply.

 

Another thing that did not change are the replacement reserve requirements of §§ 515B.3-114 or 1141 for residential communities.  The preventive maintenance budget should be accounted for under the annual operating budget, rather than being drawn from replacement reserves.  Annual budgeting will be more complicated where the maintenance schedule contemplates expenses on anything other than a yearly basis.

IV.       Summary

            For existing communities, the impacts of the 2017 MCIOA revisions are limited but significant.  Associations will need to develop a written maintenance plan, schedule and budget consistent with the MCIOA and governing documents.  The statute leaves plenty of flexibility for associations of different sizes and needs to develop a plan that is appropriate for the characteristics of their communities.  Large, diverse associations may benefit from the assistance of outside vendors to help identify and assess each of the common and limited common elements and to determine the appropriate preventive maintenance schedule and budget.

Homeowner-controlled boards in associations formed on or after August 1, 2017, will inherit preventive maintenance planning and budgeting from the declarant.  In the next article, we will address the impact of the new MCIOA provisions on those newly-formed CICs.

 

[1] Associations created before June 1, 1994, and which have not opted in to the MCIOA, are not affected.  See generally Minn. Stat. § 515B.1-102 for more detail on the applicability of the MCIOA.

[2] A common interest community is created upon the recording of the declaration.  See Minn. Stat. § 515B.2-101(a).

[3] Minn. Stat. § 515B.3-107(a).  Unit owners are likewise responsible for their units.  Id.

[4] Id.

[5] Minn. Stat. § 515B.3-107(b).

[6] Minn. Stat. § 515B.3-107(b).

[7] Minn. Stat. § 515B.2-109(a).

[8] See Minn. Stat. § 515B.2-109(c) and (d).

[9] See Minn. Stat. § 515B.2-109(c).

[10] See Minn. Stat. § 515B.2-109(d).

[11] Laws of Minnesota 2017, Ch. 87 (HF No. 1538), sec. 7.