This article addresses issues from the standpoint of a prospective buyer, and it’s the first in a series of articles on Common Interest Communities (CICs), homeowners’ associations, and other aspects of planned developments. Our law firm has expertise in the laws governing CICs in Minnesota and assists many area developers, associations, and CIC residents.
So, you’ve decided to buy a new house, and you’re working with your trusted Realtor® to find the perfect home for you and your family. There’s so much to consider. Homes come in all shapes and sizes, the lots can vary by dimension, location, topography, and some homes are part of an HOA or PUD or CIC or Coop. They may be subject to the MIOCA. What?
There exist many types of planned developments throughout our lakes area, and they offer a wide range of amenities and the benefits of living in an established community. One may feature single-family homes with shared lake access, common swimming beach, shared harbor, and dockage on one of our popular lakes in the area. Another development may have condominium units in a larger building with underground parking, a workout facility, and swimming pool.
Most all planned communities have some type of cost-sharing for common services such as lawncare, snow plowing, garbage, and the like. Owners of such residences often enjoy these amenities at a lower cost than if they purchased them on their own. From an economic standpoint, these common interest communities make a lot of sense and can be a great option for certain home buyers. From a legal standpoint, there are several issues to consider.
First, understand what type of community you are considering.
- Condo — Sometimes called a ‘box of air in the sky’, a condominium CIC is divided into units that are individually owned and structural, mechanical, and common elements that are shared and owned in common by all of the unit owners.
- Townhome — generally, in a townhome CIC, individual ownership includes the unit and the land underlying the unit. Townhomes often have shared walls with other units and in some cases include a portion of the land surrounding the unit structure.
- Single-family — single-family CICs may include vacant lots or existing homes. A buyer may purchase a vacant lot within a CIC and build a home, or a buyer may purchase an existing home within a CIC. In either case, the owner has individual ownership of the home and the lot, and the owner has an undivided or shared interest in the common elements.
- Planned communities — all three of these types of CICs may include variations on the ownership of the common elements. The owner may have an undivided interest in the common elements. In some cases, the association owns all the common elements, and owners have a right to use them.
- Coop — one of the least common types of CICs in Minnesota and one in which the owner owns a personal property interest in the cooperative corporation and the right to occupy a unit owned by the corporation along with the right to use common elements.
Second, understand the legal framework under which it operates. The Minnesota Common Interest Ownership Act (MCIOA) governs most common interest communities in Minnesota. Generally, it calls for a CIC Declaration to be recorded and the formation of a homeowner’s association (HOA). The homeowners’ association is the legal entity that oversees management of the CIC and the allocation and payment of expenses. The HOA has the legal authority to assess each owner her share of expenses, file a lien against the owner’s unit if not paid, and foreclosure rights under the statute.
Lastly, do some investigating. If a planned development is governed by the MCIOA, a seller must provide a prospective buyer with information about the CIC, including notice, a disclosure/resale disclosure certificate, copies of the CIC governing documents, the rules and regulations, and proposed budget. From a practical standpoint, it’s good to look into how the association operates. Does it hold regular meetings; communicate with its members; collect assessments; hold reserves. Gathering this information will help make an informed decision whether purchasing a home in a CIC is a good fit for you.
The foregoing article provides a general description of the Minnesota laws governing planned developments. It must be noted that this area of the law is fairly technical and the application of certain provisions of the MCIOA can vary depending on the facts, including whether the CIC has elected to be governed by it, when the CIC was formed, and other factors. Please contact one of our attorneys if you have questions about your particular situation.
Any requests for topic suggestions may be sent to firstname.lastname@example.org. 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.