The regular session of the 93rd Legislature of Minnesota was a busy one! The legislature passed laws adopting paid sick leave and family/medical leave, declaring certain noncompete agreements unenforceable, and establishing paid breakfast and lunch for all Minnesota’s K-12 students. Oh, and of course the big one: enacting laws that decriminalize adult use and sale of cannabis.
Tucked into a “kitchen sink” bill were some significant changes to Minnesota Statutes Chapter 515B, commonly known as the Minnesota Common Interest Ownership Act (“MCIOA”) focused on collection of attorneys’ fees and costs in collection matters, and specific disclosures that must be made in violation notices. We’ll take a look at these changes over the course of several posts.
Assessment of Attorneys’ Fees and Costs When Fines or Assessments are Disputed
Section 515B.3-102 of MCIOA lays out the powers of the Board of Directors for associations governed by MCIOA. Until the most recent legislative session, Section 515B.3-102(a)(11) gave the Board the power to “impose interest and late charges for late payment of assessments and, after notice and an opportunity to be heard before the board or a committee appointed by it, levy reasonable fines for violations of the declaration, bylaws, and rules and regulations of the association[.]”
However, that section was modified so that the Board will now have the power to “impose interest and late charges for late payment of assessments and, after notice and an opportunity to be heard before the board or a committee appointed by it, levy reasonable fines for violations of the declaration, bylaws, and rules and regulations of the association, provided that attorney fees and costs must not be charged or collected from a unit owner who disputes a fine or assessment and, if after the homeowner requests a hearing and a hearing is held by the board or a committee of the board, the board does not adopt a resolution levying the fine or upholding the assessment against the unit owner or owner’s unit[.]”
How does the change affect how associations do business?
Section 515B.3-115(e) and Section 515B.3-1151(e)[1] state that, unless otherwise required by the declaration, “reasonable attorney fees and costs incurred by the association in connection with (i) the collection of assessments, and (ii) the enforcement of this chapter, the articles, bylaws, declaration, or rules and regulations, against a unit owner, may be assessed against the unit owner’s unit[.]” Based on that language, associations routinely “charged back” the attorneys’ fees and costs incurred by the association when a homeowner contested a fine or assessment, regardless of the final outcome of the dispute. The new language makes it clear that the association cannot assess such fees or costs to an owner unless and until final disposition of the case where the fine or assessment is upheld.
Example:
Following a snowstorm, the association sends a violation notice to Jerry for failure to move his vehicle to allow his driveway to be plowed. As is currently required under MCIOA, the violation notice advises Jerry of his right to request a hearing on the matter before the fine is imposed, and provides instructions as to how to request a hearing and the time period to make such a request.
Scenario 1: Jerry does not contest the fine or request a hearing. The fine is assessed upon expiration of the time in which to request a hearing.
Scenario 2: Jerry, who has caused problems in the past, contests the fine and requests a hearing. Because of Jerry’s history, the association’s attorney attends the hearing. At the hearing, Jerry explains that he was undergoing emergency when the snowstorm happened, and was in the hospital for a week afterwards, so was unable to move his vehicle. Ultimately, the Board decides not to impose a fine under the circumstances. The attorneys’ fees incurred by the association related to the dispute and hearing are then not assessable to the homeowner.
Scenario 3: Given Jerry’s cantankerous nature, he contests the fine and demands a hearing. In advance of the hearing, he makes numerous demands of the association related to the violation, and the association decides to get its attorney involved. The attorney also attends the hearing. At the hearing, Jerry says only that the violation is bogus, and the fine is just a “shakedown.” He vows not to pay it. Following the hearing, the board decides to uphold the fine, passes a resolution upholding and levying the fine, and notifies Jerry accordingly. Since the fine was upheld, the association is permitted to assess not only the fine but also the attorneys’ fees and costs incurred related to the matter.
Note that the new language specifically states that the board must adopt a resolution upholding and levying the fine. (I would also encourage the board to include approval of the levying of attorneys’ fees and costs incurred by the association related to the violation or disputed assessment.) That resolution can be reflected in minutes or adopted via written consent resolution. Arguably, the absence of such a resolution could prevent the association from collecting the attorneys’ fees and costs.
When does this change take effect?
The change to Section 515B.3-102 takes effect January 1, 2024, for fines and assessments levied on or after that date. While that date seems far away (it seems like the snow just melted, for goodness’ sake!), associations should take that time to consult with counsel and management (as applicable) to ensure that the association is well-prepared when the changes take effect.
Up Next: Collecting attorneys’ fees and costs in collection matters
If you have questions about the changes to MCIOA and how they impact your association, please contact attorney Nancy Polomis at 952-746-2105 or [email protected].
[1] Section 515B.3-115 applies to common interest communities created before August 1, 2010. Section 515B.3-1151 applies to common interest communities created on or after August 1, 2010. The relevant language is the same in both versions of the statute.
