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In past articles, we have talked about the issues a prospective buyer should consider when purchasing a home or lot in a Common Interest Community (CIC) in Minnesota — which I’ll refer to generally as an ‘Association’. In today’s article, we discuss the overall framework for the operation and governance of an Association. Our law firm has expertise on laws governing Associations in Minnesota and assists many area developers, Association boards, and Association owner/residents.
There are two primary aspects of governance for Associations in Minnesota. First, the Declaration of Covenants is the legal document that is recorded at the County where the Association is located. It puts future owners on notice of the rights and obligations of the Association and individual property owners. The Declaration is integral to ownership of a parcel of property within an Association and part of the parcel’s title of record.
By purchasing a parcel of property within an Association, a new owner takes title subject to and agrees to be bound by the Declaration, and the Declaration sets out in detail what it means to be an owner in that particular Association. A Declaration may address everything from snowplowing, lawn maintenance, use of a harbor slip, to the style and color of house that may be constructed. The Declaration empowers a Board of Directors to govern the Association for the good of all owners and for the preservation of the Association’s assets pursuant to its terms, and the Declaration imposes the responsibility on the owners to abide by the Declaration and pay their share of assessments.
The other primary aspect of governance for an Association is the entity which is formed at the same time the CIC development is established and the Declaration is recorded. This is typically a non-profit corporation. All owners within an Association automatically become members of the non-profit corporation, and they elect the individual owners to serve on the Board of Directors.
To form the entity, Articles of Incorporation are filed with the Minnesota Secretary of State and Bylaws are adopted. In some cases, the Bylaws are recorded along with the Declaration. Annual renewals of the Association entity must be completed to keep it active. The Articles of Incorporation and the Bylaws establish the framework for governance of the Association, setting out the number of directors to serve on the Board, time and location of the annual meeting of members and the Board, voting procedures, and other procedural matters, including the election of officers.
It’s the responsibility of the Board of Directors to adopt an annual budget, levy and collect assessments, adopt rules for the community, establish committees, and address other community issues. The President, Treasurer, and Secretary, appointed or elected by the Board, take care of the day-to-day operations of the Association and carry out the decisions of the Board. At the early stages of an Association, the developer typically makes up the Board and runs the Association, but as parcels are sold, it’s up to the owner members to take on this role.
In Minnesota, there are Associations that are ‘Cooperative’ CICs. These ‘Coops’ have a different ownership structure compared to other CICs, but they function in a similar manner to other Associations and governed by a Board with the authority to adopt a budget, levy assessments, and establish rules.
To be an owner within an Association means you are part of a community in many respects – sharing space with others to enjoy and sharing the responsibility that comes with it. We hope this article helps explain the underlying framework for Association membership and governance in Minnesota. Please contact us or your own attorney, if you have specific questions about your Association.
Any requests for topic suggestions may be sent to rene@breenandperson.com. Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know. Our purpose is to educate and we hope that you can take something new away from this column each time you read it.