Minnesota Homeowner Rights Threatened by HF 3520 and SF 3224

by Alex Nelson, Esq.,, (952) 314-7237

We need your help! Contact your Minnesota State legislators this week to share concerns with SF 3224 and HF 3520- Minnesota Common Interest Ownership Act construction defect bills.

Last week, HF 3520 (Rep. Dennis Smith, R-Maple Grove) and SF 3224 (Sen. Kari Dziedzic, DFL-Minneapolis) were introduced in the House and Senate. These bills weaken consumer protection elements awarded to you by the Minnesota Common Interest Ownership Act ("MCIOA"). If passed your most valuable investment - your home - will be at great risk. The legislation seeks to essentially wipe out any consumer recourse for latent construction defects. We need you to contact your state legislators and ask they oppose HF 3520 and SF 3224. 

Proponents argue that consumer warranties that have been in place for the last 35 years should now be removed to encourage developers to build condominiums. This conclusion is built upon several assumptions whose legitimacy has not been scrutinized and evaluated. Economists point to the real impediments to condominium and townhome building over the last few years, such as the crushing student debt preventing first-time home purchase, the recent mortgage crisis, tightened residential lending, and the wiped-out home equity of millions of Americans. However, it is apparent that as the economy improves, these impediments fall away and building resumes. Indeed, as banks loosen lending requirements, our members have noted several multifamily communities now in construction in the greater metropolitan area.

These bills will:

1. Make it harder for an association to file suit. The bills require a special meeting and written consent of 2/3 of the ALL homeowners in a homeowners association before its Board of Directors is permitted to institute a construction defect claim on the association’s behalf. Proper quorum at a homeowner meeting for purposes of electing Directors is challenging in-and-of itself. In a community where Directors have been duly elected pursuant to MCIOA and the Minnesota Non-Profit Corporation Act, no good reason exists to inhibit the power or authority of those Directors to manage the affairs of a common interest community.

2. Lead to an increase in your assessments. The bills require associations to perform annual reserve studies. Associations should be encouraged to perform reserve studies, but should not be mandated, especially at this frequency. This new requirement will be unduly burdensome and prohibitively expensive for almost all homeowners associations in Minnesota, save only the very largest and most financially able associations. Reserves studies are often prepared by licensed professional engineers, and can cost thousands, or tens-of-thousands of dollars to research and prepare for any given community.  

3. Make it more expense to file suit. The bills remove an association’s ability to recover its attorney fees from a declarant-homebuilder when it prevails on a construction defect or other type of claim. Construction defect claims are difficult for homeowners associations to prosecute and succeed on for many reasons, including but not limited to short statutes of limitation, builder and developer insolvency, and liability insurance coverage problems. The attorney fees and engineering fees that are required often make construction defect claims a financial impossibility for associations. Of those associations that successfully prosecute defect claims, many end up having to “value engineer” needed repairs, or not make them at all because they’re not made financially whole after paying their attorney fees and other costs of litigation. 

Please contact your legislators and the House Civil Law and Senate Judiciary Committees, and ask that they oppose HF 3520 and SF 3224.

You can determine your State Senator and Represenatative by clicking here: Contact your legislators

Talk to your neighbors, friends, and anyone you know that owns a home within a community association in our state and direct them to contact these legislators.

Protect your home, protect your investment, and oppose these bills. The House Civil Law Committee takes up HF 3520 this coming Thursday, March 31, 2016 at 8:15AM, so the timeframe for defeating these bill is very short!