In this series of articles, we are analyzing the various changes that the affected associations will need to make to their policies, procedures, and, potentially, their governing documents by January 1, 2027, to comply with the new requirements of the Minnesota Common Interest Ownership Act (“MCIOA”) adopted in SF 1750. This article will focus on rules and regulations.
Whereas previously, Rules and Regulations were generally considered to be separate from the defined Governing Documents, under 1750, Governing Documents will now include Rules and Regulations as well as the Declaration, Bylaws, and Articles of Incorporation. Additionally, the new legislation makes changes to 515B.3-102(a)(1) regarding the association’s authority to adopt and amend rules and regulations. This power of the association is now limited by the following language: “Rules and regulations adopted must be reasonable. An association must give unit owners no less than 21 days’ notice before the association votes to adopt, amend, or revoke a rule or regulation to review and comment on the proposed change. An association may adopt a temporary rule without notice in exigent circumstances, provided the board acts as soon as practicable to give the requisite notice to unit owners before adopting the rule permanently. Nothing in this chapter prevents the unit owners from asking the board to adopt, amend, or revoke a rule or regulation.”
Much of this new language was completely unnecessary and added nothing to the existing statutory requirements, given that MCIOA is already full of language requiring associations to act reasonably and in good faith. However, the notice requirement is new. As with a number of other provisions in SF 1750, this section contains ambiguous language that is likely to result in litigation over different interpretations. The bill does not spell out what type of notice is required or how it is to be sent to the unit owners, so this may depend on what the governing documents say about how other notices are to be sent. It is also unclear whether the notice must include a copy of the proposed rule change or if it is sufficient to simply inform the owners that the board intends to vote on rule changes. The last part of that sentence contemplates that owners would have an opportunity to review and comment on the proposed change before the board votes on it[1], so a reasonable interpretation is that the association must provide a copy of the proposed or changed rule or rules that the board will be voting on. This requirement aligns with another change to 515B.3-102(g) that will require boards to provide owners with a copy of the agenda and any other contracts or documents that the board plans to vote on at a board meeting[2].
The next part of the new statutory language states that an association may adopt a temporary rule without providing the required notice in exigent circumstances, provided that the board acts as soon as practicable to send out the notice prior to adopting the rule permanently. Again, there are no guidelines as to what is deemed temporary or how long a temporary rule can be in place before it must be adopted permanently. Technically speaking, all rules are temporary since they can always be amended or revoked by the board at any point. But since we have no guidance from the legislature as to what is meant here, we can anticipate that this could be yet another point of contention and dispute.
Similarly, there can be a difference of opinion as to what constitutes an exigent circumstance that would justify the adoption of a rule without the required 21-day notice. We have worked with associations that have had to quickly adopt rules restricting or prohibiting grills and that sort of thing to ensure that they are able to secure an insurance policy before the current one lapses. This would likely fall under the category of exigent circumstances, such that the board could adopt the necessary “temporary” rules without waiting out the 21-day notice period. However, requiring the board to go through the motion to send notice and approve the rule a second time as a “permanent rule” seems a bit unnecessary, especially if the board had no choice about adopting the emergency rule. This provision will create additional unnecessary work for associations, but will now be required for any association governed under MCIOA prior to amending or adopting new or changed rules.
As with anything, the intent of this new statutory provision, regardless of how poorly it is worded, is to ensure that boards are being transparent when adopting and amending rules and that owners have advance notice of the board’s intent to change any existing rules. If boards strive to follow the spirit of the law rather than look for loopholes where it is open to interpretation, they will likely see fewer disputes and can avoid being the test case to determine what the new language means.
If you have any questions about the legislation, compliance with the new statutory requirements, amending governing documents, or any other matter affecting your association, please feel free to contact the author.
Click here to read part one of this series.
Click here to read part two of this series.
[1] The way this sentence is worded, it is unclear as to whether it is the owners or the board that is supposed to be allowed to comment, but a reasonable interpretation is that the owners must be allowed to comment.
[2] This latter section will be addressed further in a future article in this series.
