Ask the Attorney by
This column is comprised of questions that have been posed to me by homeowners, property managers and related professionals regarding legal issues that they have encountered with respect to their associations. Discussion of these questions, as well as prior questions, can be found on the CAI-MN LinkedIn page: www. linkedin.com/groups?gid=1769135 My association is not governed by the Minnesota Common Interest Owners Act. Do we still need to provide a resale disclosure when we sell our unit? Every time a unit is sold1 by an owner other than the declarant (the original seller of the unit), certain actions must be taken by the seller and the association. Whether or not your association is governed by MCIOA, the provisions of Minn. Stat. §515B.4107 must be complied with. This statute requires that three items be provided to a potential purchaser of a unit. First, copies of the declaration, articles of incorporation, bylaws and any rules and regulations, along with all updates to these documents must be provided. Second, if the association is part of a master association, the same set of master documents must also be provided. Finally, a resale disclosure certificate must be completed and provided to the potential purchaser. The resale disclosure certificate must substantially follow the form provided in Minn. Stat. §515B.4-107(3)(b). It is important to note that the form underwent big changes in 2010 and many people are still using the older form. The resale disclosure certificate is intended to provide potential purchasers with a clear understanding of the maintenance 1. Except in the cases of 1) a gratuitous transfer; 2) a transfer pursuant to a court order; 3) a transfer to a government or governmental agency; 4) a transfer to a secured party by foreclosure or deed in lieu of foreclosure; 5) an option to purchase a unit, until exercised; or 6) a transfer by inheritance. See Minn. Stat. §515B.4-107.
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Minnesota Communit y Living
obligations of the association, the financial health of the association and what large issues the association may be facing in the short term. The certificate must include the following information (note — this list is not exhaustive, but highlights most of the areas): Assessments and other charges: • the amount of current annual assessment installments • any ongoing or outstanding special assessments • all unpaid assessments (including fines and other charges) • if the association has approved a plan for levying certain common expenses against fewer than all of the units • details on all late fees, user fees, etc., that may be charged by the association • describe any un-assessed “extraordinary expenditures” that have been approved Maintenance, reserves and insurance: • describe what components the association is obligated to replace • how much money is in the reserves • provide copies of the most recent balance sheet, income/expense statement and current budget • details of the insurance coverage provided by the association Status of the unit: • if the unit has been altered in any manner inconsistent with the declaration • it the association is aware that the unit is not in compliance with a governmental statute, ordinance, code or regulation The resale disclosure certificate must be completed by a representative of the association. For managed associations this is usually the property manager, and for self-managed associations the president or treasurer often complete the certificate. The association must respond to a request for a resale disclosure certificate within 10 days of receiving a request, and is allowed to charge a reasonable fee for drafting the certificate and providing the necessary documents.
Nigel H. Mendez, Esq., Carlson & Associates, Ltd.
The accuracy of the resale disclosure certificate is very important. A purchaser of a unit is not liable for any unpaid assessments, including special assessments, that are not disclosed on the certificate. In addition, the purchaser is “not liable for the amount by which the annual or special assessments exceed the amount of annual or special assessments stated in the certificate for assessments payable in the year in which the certificate was given.” For example, if the current assessment installments are $150 a month, but the certificate states $130 a month, the association is only able to collect the lower amount from the purchaser for the remainder of the year. Finally, the resale disclosure certificate must be dated no more than 90 days prior to the date of the purchase agreement or conveyance of the property (whichever is earlier). Our board currently meets monthly, but as we are not facing any pressing matters in our association we want to change to quarterly. Can we do that? Probably. The answer will be found in your association’s bylaws. Many bylaws state that the board must meet on a prescribed schedule, often monthly or quarterly. If a specific frequency is stated, then it must be followed. However, other bylaws simply state that the board must meet at a time and place determined by the board. In this instance, a quarterly meeting, provided that a majority of the board members support that change, would be acceptable. The Minnesota Nonprofit Corporation Act requires boards to meet at least once during the year. If your association bylaws require monthly meetings, you could amend the bylaws to have a less frequent meeting requirement. To have a question answered in a future article, please email it to me at nmendez@carlsonassoc.com with the subject line “Ask the Attorney.” While I can’t promise that all questions will be answered, I will do my best to include questions that have a broad appeal. Questions will also be answered by other attorneys practicing in this area of law. The answers are intended to give the reader a good understanding of the issue raised by the question but are not a substitute for acquiring an opinion from your legal counsel.