Homeowners Associations in Perspective

Earlier this year, former Minnesota Governor Arne Carlson made the news over a flap in his Florida condominium association.  Apparently, Governor Carlson ran for the Emerald Pointe Condominium Association’s Board of Directors in a rather contentious manner.  Things apparently became so nasty that the Association petitioned the State of Florida to assign an election overseer to conduct the vote tabulation at a cost to the Association of $800.00.

Closer to home, my own homeowners association is in the midst of a fourth (yes, fourth) vote over an amendment to our Declaration to allow residents to park their own cars in their own driveways.   Why all the votes?  Because an amendment to our Declaration requires the approval of 67% of all eligible voters and, despite having the numbers on the most recent vote, some residents took issue with Board members calling residents whilst ballots were being counted to get them to come in and vote.  The complaining residents’ argument was that Minnesota election laws were not followed in terms of what time polls were to have closed and whether ballots were secured after voting had ceased.  One resident went so far as to accuse the Board members (this author included) of “election fraud.”

Homeowners associations in Minnesota – particularly those consisting of single-family homes like my association – are tricky creatures under the law.  In some respects, these associations are nothing more than non-profit corporations.  Homeowners associations are formed when non-profit articles of incorporation are filed with the Minnesota Secretary of State, and the rights and responsibilities of members, directors and officers are set out in the Minnesota Nonprofit Corporation Act.

Homeowners associations also are governed by certain contractual arrangements.  When a housing development is planned as an association-controlled neighborhood, the developer prepares and records with the County Recorder a document called a “Declaration”, also known as “Covenants, Conditions & Restrictions” or CC&Rs for short.  The Declaration typically sets out provisions as to assessment of dues to residents for maintaining common areas, guidelines for architectural review of home plans, improvements such as decks, fences and even landscaping, as well as penalties for violations of these provisions.  A well written Declaration will also provide a mechanism for the Association’s Board to promulgate rules and regulations consistent with its provisions.  For condominium and townhome associations, the Minnesota Common Interest Ownership Act (“MCIOA”) also applies.

In the case of matters requiring a vote by the members of a homeowners association, the Minnesota Nonprofit Corporation Act and your average Declaration (and even MCIOA) say very little about the step-by-step process to be followed in conducting such a vote.  Most associations also enact Bylaws that provide some additional clarification as to voting procedures, but I have never seen a set of association governing documents in Minnesota that apply the election laws which are in force for elections for President, Governor and the like (although Minnesota law does override association restrictions on the display of political signs  in certain instances out of First Amendment concerns).

Voting issues in homeowners associations are symptomatic of a larger issue:  what role do these organizations have?  More importantly, what powers does an association board have?  Is it akin to a city council or county board, or is it something much less? 

A 1998 California case , Fountain Valley Chateau Blanc Homeowners Association v. Department of Veterans Affairs, shows how a homeowners association can blur the lines between a municipality and a private association of homeowners.  In that case, the Board attempted to use a provision in its CC&Rs that required owners to “maintain the interiors of their residential units and garages, including the interior wall, ceilings, floors and permanent fixtures and appurtenances in a clean, sanitary and attractive condition” to force an elderly veteran suffering from Hodgkin’s Disease to clean up what they deemed to be a “garbage house.”  The Court, in rebuking the association, stated that “it is virtually impossible to say the association acted reasonably.” 

What the association in the Fountain Valley Chateau Blanc Homeowners Association case was trying to do was to exercise powers in the nature of those which a city uses to clean up a problem property.  It is not surprising, then, that the Court prevented the association from so doing.  In the words of one commentator on the case, “the private homeowners association is not the government, and there is no reason to treat it as such.”

As to the question of what law governs voting procedures in a Minnesota homeowners association, in the absence of provisions in the Declaration, and aside from the minimal requirements of the Minnesota Nonprofit Corporation Act, there is no governing law.  Association Board thats wish to create procedures similar to voting for statewide officeholders, municipal offices such as city council, county commissioner or school board, and school district referenda, are certainly free to do so, but they must create such rules using their discretionary rulemaking authority (and they must, of course, follow any procedures in their governing documents as to the enactment of such rules).

I have often said that homeowners associations are one step above grade school government.  So why, do you ask, would I spend such a significant amount of time being involved with my own association and being falsely accused of violating election laws when the association does not possess the power of a municipality and there are no such election laws in existence to govern it?  Because I want to make sure that my fellow Board members and fellow residents understand this and never lose sight of this fact.

NOTE:  much thanks are in order to my wife, Jennifer, for bringing to my attention the information on Governor Carlson’s ill-fated association board run as well as the California case.  She has once again proved my July 27,2009 blog post correct.