Legislative Changes Affecting HOAs
The 2023 legislative session in Minnesota was active, with several significant bills that will impact community associations in the state. Below is an abbreviating listing of those topics. As the laws are further defined and incorporated into daily living in HOAs, we will continue diving deeper into these topics in future newsletters and publications. Marijuana/Cannabis A controversial topic, to be sure, that has been swirling around Minnesota for the past few years became a new law – Minn. Stat. #342. As a part of the comprehensive language passed, specific points related to associations and multi-resident/unit dwellings. We have to look at it in two ways. One issue is smoking, and the second is growing. Associations will have to navigate both problems. What it Says – generally, smoking or vaping in multi-resident/unit housing is unlawful and a nuisance under the statute. Growing is allowed with some limitations (maximum of eight plants). When it comes to growing, it does get a little more complicated. The new law allows people to grow up to eight cannabis plants, with no more than four being mature; flowering plants may be grown at a single residence. Must be the primary residence of a person 21 or older. If outside, it must be (1) enclosed; (2) locked; and (3) not visible to the public. The current law does not reference multi-family/unit developments (HOAs). Whom it Affects – all HOAs What it Means – Vaporizing or smoking cannabis flowers, cannabis products, artificially derived cannabinoids, or hemp-derived consumer products is prohibited in multi-family housing buildings, including balconies and patios. By existing state statute, boards also can govern common areas, including prohibiting smoking or vaping of cannabis products if they so choose. When it comes to growing, the association still controls common areas and can prohibit growing in limited common and common areas. However, they cannot regulate or disallow growing inside of the unit/home. The association’s Declarations would have to be amended to specifically disallow it. That said, the association does have the ability to manage and respond to nuisance issues. Both state statutes and Declarations typically say something to the effect of: Quiet Enjoyment; Interference Prohibited. All Owners and Occupants and their guests shall have a right to peaceful enjoyment in their respective Units. They shall use the Property in such a manner as will not cause a nuisance nor unduly restrict, interfere with, or impede the use of the Property by other Owners and Occupants and their guests. Should the growing of cannabis create issues, such as smell, and other owners complain, the association does have the right to ask an owner to cease the activity that made said nuisance. This issue could become challenging for an association to navigate, and it should seek legal counsel. When it Goes into Effect – July 1, 2023 Summary: our friends at the Smith, Jadin, and Johnson law firm recently spoke to Sharper Manager at length on this issue. An overview of their recommendations is as follows: Send an update to Owners regarding the marijuana bill explaining that as multifamily housing, smoking and vaping are prohibited. Take any complaints seriously and send violations consistent with Rule enforcement procedures. Keep a good paper trail. For complaints lodged, Board will need to know (1) when the alleged violation occurred and (2) who was the violator. If an Owner complains that they “smell” smoke, they can’t send a violation to every Owner. However, a general “reminder” email blast may help paper the file in case of a nuisance lawsuit. If a lawsuit for nuisance arises – 1. If procedures are followed (sent violation), tell Owner you have enforced and that they must drop the case or else the HOA will defend itself and assess fees • 2. If procedures are not followed, settle Solar Panels Like satellite dishes 20 years ago, associations must navigate homeowners wishing to install solar panels on rooflines. This has been a discussion amongst legislative bodies for the past few years. This year it finally got traction, and Minn. Stat. # 500.216 was passed. The bottom line, the new law limits some associations from prohibiting solar panels on rooflines. What it Says – “Notwithstanding any … homeowners association document, … a private entity must not prohibit or refuse to permit the owner of a single-family dwelling to install, maintain, or use a roof-mounted solar energy system.” Whom it Affects – Single family HOAs and any HOAs where the Owner is responsible for maintaining and insuring the dwelling (roofs, siding). Note that this bill does NOT apply to HOAs with shared roofs (such as a standard townhome). What it Means – Single-family HOAs may want to create a policy that could set parameters, requirements, and approval processes around solar panels. Examples include: Require only licensed contractors; prohibit materials extending beyond rooflines; require Owners to indemnify the HOA for any damages; require Owners remove the system if necessary to repair or replace something the HOA maintains. When it Goes into Effect – August 1, 2023 Violations & Rule Enforcement To create more uniformity in how rule violations are notified, fines assessed, and appeals processed, the Minnesota Common Interest Ownership Act (MCIOA) was amended to develop further standards. What it Says – any fine associated with a rule violation has to meet seven specific criteria, or it could be challenged in court. Homeowners are also entitled to a more consistent process for an appeal and hearing of said fine. Whom It Affects – all associations currently under MCIOA, which is any association built after June 1, 1994, and any condominium association regardless of when it was established. What it Means – Any fine and specific assessments must be accompanied by a dated, written notice to the Owner, including seven pieces of information. (1) states the amount and reason for the fine or assessment (2) for fines levied under section 515B.3-102(a)(11) [VIOLATION OF GOVERNING DOCUMENTS], specifies (i) the violation for which a fine is being levied and the date of the levy; and (ii) the specific section of the declaration, bylaws, rules, or regulations allegedly violated; (3) for assessments levied under section 515B.3-115(g) or
Board Tip: Tabling vs. Postponing Agenda Items
While each HOA may conduct business differently, a standard procedure for board meetings is essential to optimize efficiency and productivity, commonly known as Parliamentary Procedure. Some boards use Robert’s Rules of Order to create the meeting format, agendas, motions, and floor discussion, while others create their own procedures. But, even with a solid structure to a meeting, certain topics will have heavier debate than others. Whether members don’t have enough information on the topic, or it’s too sensitive, the board will either “table” or “postpone” that item. Postpone If the board decides that the item is taking up too much time, or the members’ time would better be spent on something else, they can decide to postpone the matter. With this structure, the board intends to take the matter back up at a later time, whether in the same meeting or a future one. These items can be postponed to a definite time. The motion to postpone can be debated by members. There are, however, indefinite postponements, where the board has no particular intention of taking the matter back up. If an item is postponed indefinitely, the matter cannot be brought up in the same meeting. Table Following Robert’s Rules of Order, a motion to lay an item “on the table” takes precedence over all other motions at the time that it is made. This motion cannot be debated and needs a majority and a second to carry the motion. However, with laying an item on the table, that matter doesn’t automatically come up in the next meeting. There has to be a motion to take that topic off the table. And, the motion to take the matter off the table can only be done during certain classes of business, such as “unfinished business” or “general orders.” This motion also needs a second and a majority. As your Minnesota neighbors, Sharper Management works to keep your HOA board of directors informed to ensure efficient leadership.
Dues Increases – No Resident Wants; But Every Association Needs It
For most Associations, it is budget season. Your Community Manager has worked hard to develop a proposed 2018 operating budget that will keep your association fiscally healthy by projecting and planning for expense trends (such as utilities), plugging in contract figures (such as lawn/snow), budgeting for operating projects you’ve directed to be completed (perhaps gutter cleaning or painting), allocating a dollar amount to contribute to your Reserve Fund (your “savings”), etc. As you may know, your operating budget is what sets the “dues” amount that people will pay each month. Technically, it’s the “assessment” amount, but no one likes to use that word. It’s always difficult when the realization kicks in that you need to raise your dues to meet your expenses. No one likes to be responsible for making people pay more money. Nevertheless, it is your fiduciary duty as a Board to keep the Association fiscally healthy. There is one pitfall that a number of Associations can fall into during the budget approval process. Boards get hesitant to raise dues and they look for reasons to keep stagnant on the revenue/dues need. Perhaps it’s a down economy; maybe a number of your residents are on a “fixed income;” or sometimes it’s seeing the Association is trending positive with their budget vs actuals and have a “surplus.” Here’s the advice that no one wants to hear – and certainly few have the gumption to say: You should raise your dues every year. Costs don’t go down. Inflation is real. The pitfall many Associations fall into is a reluctance to approve small dues increase, then needing a larger one to catch up the next year. It is far more prudent and healthy to do smaller increases every year than it is put yourselves (and the residents) on a roller coast ride of no increase, no increase, 12% increase, no increase, 8% increase. In the long run, you’ll find your Association stays fiscally strong, and you’ll be surprised at how well, and quickly, the community will be conditioned to annual inflationary increases.
Sharper Management HOA Wins CAI MN Association of the Year
Sharper Management is pleased to announce one of their managed HOAs, the Territory Homeowners Association, has won CAI MN’s Association of the Year Award. Honored on September 14 at the annual Vision Awards, Territory is under the supervision of Sharper’s Community Manger Jeremy Larson. The Association of the Year Award recognizes the outstanding team effort of an association board of directors and homeowners whose members clearly understand their roles and fiduciary responsibilities putting the association’s interest ahead of and above all personal agendas. A board comprised of effective volunteer leaders who are fair, responsible and reasonable in their decisions. A lovely single-family home development, Territory HOA is still in development but recently transitioned from Declarant to Homeowner Control. It is because of the smooth process and expert planning during this transition that this Association was so deserving of Homeowner Association of the Year. A key factor contributing to the success of Territory HOA is the diverse expertise their Board members bring to the table. Their skills were put to the test when tasked with developing a detailed Architectural Review process. This is a very important process for all HOAs, but particularly important for this one since parts of the community are still in development. A reliable and efficient approval process is essential in maintaining the continuity of the community. Another strength of this Board of Directors is their fiduciary diligence. Territory has expansive common areas throughout the development that include a variety of amenities. This Association has found a perfect balance of revenue and managing expenses. Their healthy cash flow is in part due to their diligence in staying on top of Collections. Maintaining the value of their property through a healthy cash flow, maintenance of common areas, and oversight of the community architecture keeps the continuity and the value of the property high. This Board accomplished all of this in a short timeframe and it is working wonderfully. “All of us at Sharper Management are happy to see the Territory Association honored in this way. It is truly a testament to innovative thinking, dedication, and great leadership. Congratulations to Territory and to our manager Jeremy Larson for a job very well done,” states Sharper Management’s Associate Director of Community Management, Josh Reams. About CAI-MN Founded in 1973 as a multidisciplinary, nonprofit alliance serving all stakeholders in community associations, CAI is the only national organization dedicated to fostering vibrant, responsive, competent community associations. CAI is regarded as the national expert in educational programs and publications about community association governance, operations, and management. CAI’s members look to us for information about new products, educational opportunities, technologies, and better ways to run their communities. Founded in 2010, Sharper Management is a locally-owned, mid-sized property management company offering a full suite of premiere services to homeowner’s associations of all sizes. Sharper Management currently provides services to the Minneapolis-St. Paul, MN seven-county metro area. For more information on Sharper Management services and employment opportunities, call 952-224-4777 or send an email to info@sharpermanagement.com.
Board Tip: “Tabling” an Agenda Item
The spectrum of how thoroughly a Board of Directors follows parliamentary procedure and applies Robert’s Rules of Order at their meeting varies greatly. Most associations are pretty informal and use the typical “motion, second, discussion, majority vote” on decision making matters. That might be the extent of it. Some are quite lax and don’t even officially call a meeting to order. Alternatively, a few take it to the extreme and want to emulate England’s House of Commons. There are many, many layers of structure and subtleties to Robert’s Rules of Order. After all, it’s a 669-page book! The reality is most Boards really only need to apply about 5% of what the book has to offer. One of the important components, however, is tabling motions. It is important to know the difference between “tabling” and “postponing” resolutions or motions a Board may be facing. “Let’s table that item” can casually be heard and agreed on at meetings, but there is a significance and protocol that should be followed to be operating “correctly.” If an item is placed on the Agenda under New Business, it should be acted on. If the Board is not ready to do so, they have a couple of options. 1. Table. If the Board is not ready to vote – be it a lack of information, a sensitive topic people need more time to process or deliberate, or other urgent matters came up – a member may make a motion to “table” the item. The motion needs a second. It is NOT debatable/open to discussion. And then it needs a majority to carry the motion. The important point to remember; however, is that it must be re-addressed at the NEXT official meeting. 2. Postpone. If the Board is not ready to vote and if there is uncertainty on when it will be ready, then a motion should be made to “postpone until ______ (fill in the blank).” Herein lies the major difference between tabling and postponing; postponing can be defined, but tabling is at the next meeting. Postponing requires motion, second, it CAN be debated/discussed, and a majority vote to carry. Regardless of how strictly your Board follows Robert’s Rules, the distinction between tabling and postponing is an important one. Think of it this way, if a homeowner sees an Agenda listing a specific New Business item up for resolution, your Minutes should accurately reflect the result, or deferred result (tables or postponed) so they can be assured you’re acting within procedure. It is also a great reminder for how to manage your “Old Business” vs “New Business” to ensure you are moving things along and bringing matters to conclusion.
Board Tips: Make Your Meeting Matter
In previous issues we’ve discussed the importance of a strong meeting facilitator; we’ve suggested agenda formats to create better meeting efficiency; and recently we wrote on the principle that meetings should be regulated to making decisions. There’s no denying that we live in a culture of meetings. In this issue’s Board Tips, we offer one thought for you to consider regarding meeting frequency, and one tip for you to try to make your meetings more meaningful. Meeting Frequency – how often are you meeting as an association Board? This will certainly vary. Your Governing Documents may dictate a number of meetings to be held within a calendar year. The size and complexity of your community may require more or less meeting regularity. And situational issues or projects may dictate the volume necessity for a “meeting of the minds.” Consider the notion, however, that the more often you meet, the less productive you may be. Fewer meetings create more focus when you do meet – and therefore motivation to have tangible outcomes and measurable initiatives as a result. Consider evaluating your meeting productivity. If you find that decisions are often times delayed or tabled, if your meetings are more social than business, and certainly if you have a limited number of items on your docket, consider having fewer meetings. See how it goes. The results might surprise you! Action List – to ensure that the meeting was, in fact, constructive with measurable outcomes, it is helpful to have a summary at the end of the meeting to identify and assign action items. Make a list! These can even be incorporated into the Meeting Minutes if it reflects a new business decision or resolution of the Board. Towards the end of a meeting, it is natural for people to just want to get home. Verbally summarizing and capturing, in writing, all action items is imperative. Make your meetings matter by ensuring they are productive and with measurable results!