HF 1254

as introduced - 87th Legislature (2011 - 2012) Posted on 02/15/2012 04:15pm

A bill for an act
relating to real property; expanding and defining certain residential property
rights; modifying certain association vote and lien provisions of the Minnesota
Common Interest Ownership Act; amending Minnesota Statutes 2010, sections
500.215; 515B.2-119; 515B.2-123; 515B.2-124; 515B.3-113; 515B.3-116;
proposing coding for new law in Minnesota Statutes, chapter 500.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2010, section 500.215, is amended to read:

500.215 LIMITS ON CERTAIN RESIDENTIAL PROPERTY RIGHTS
PROHIBITED; FLAG DISPLAY new text begin ; CERTAIN IMPROVEMENTS new text end .

Subdivision 1.

General rule.

(a) Any provision of any deed restriction, subdivision
regulation, restrictive covenant, local ordinance, contract, rental agreement or regulation,
or homeowners association document that limits the right of an owner or tenant of
residential property to display new text begin a noncommercial sign within the meaning of section
211B.045, new text end the flag of the United States and the flag of the State of Minnesota is void
and unenforceable.

(b) "Homeowners association document" includes the declaration, articles of
incorporation, bylaws, and rules and regulations of:

(1) a common interest community, as defined in section 515B.1-103(C)(10),
regardless of whether the common interest community is subject to chapter 515B; and

(2) a residential community that is not a common interest community, as defined in
section 515B.1-103(C)(10).

Subd. 2.

Exceptions.

(a) This section does not prohibit limitations narrowly tailored
to protect health or safety.

(b) This section does not prohibit limitations that restrict:

(1) the size of the new text begin sign or new text end flag to be displayed to a size customarily used on
residential property;

(2) the installation and display of the new text begin sign or new text end flag to a portion of the residential
property to which the person who displays the new text begin sign or new text end flag has exclusive use new text begin , but the
limitation may not restrict the use of a flagpole affixed to a portion of real property to
which the person who displays the flag has exclusive use new text end ; or

(3) illuminating the new text begin sign or new text end flag.

(c) This section does not prohibit a requirement that the new text begin sign or new text end flag be displayed in a
legal manner under Minnesota law, that the new text begin sign or new text end flag be in good condition and not altered
or defaced, or that the new text begin sign or new text end flag not be affixed in a permanent manner to that portion of
property to be maintained by others or in a way that causes more than inconsequential
damage to others' property. A person who causes damage is liable for the repair costs.

new text begin Subd. 2a. new text end

new text begin Certain improvements. new text end

new text begin (a) Any provision of any deed restriction,
subdivision regulation, restrictive covenant, local ordinance, contract, rental agreement
or regulation, or homeowners association document that limits the right of an owner or
tenant of residential property to make alternative energy or landscaping improvements to a
portion of the residential property to which the person who makes the improvements has
exclusive use, is void and unenforceable.
new text end

new text begin (b) "Homeowners association document" has the meaning given in subdivision 1.
"Landscaping" means the planting of trees, shrubs, bushes, and other vegetation, including
home gardens. "Alternative energy" means a project to install and construct equipment to
utilize solar, wind, geothermal, biomass, or other alternative energy sources in heating,
cooling, or providing electricity for the residential real property.
new text end

new text begin (c) Any improvement in paragraph (a) must meet all applicable state and local
building, fire, safety, and energy codes. No improvement in paragraph (a) may be affixed
in a permanent manner to that portion of property to be maintained by others or in a way
that causes more than inconsequential damage to others' property. A person who causes
damage is liable for the costs.
new text end

Subd. 3.

Applicability.

This section applies to all limitations described in
subdivision 1 and not excepted in subdivision 2, regardless of whether adopted before, on,
or after August 1, 2005.

Subd. 4.

Recovery of attorney fees.

If an owner or tenant of residential property
is denied the right provided by this section, the owner or tenant is entitled to recover,
from the party who denied the right, reasonable attorney fees and expenses if the owner
or tenant prevails in enforcing the right. If a new text begin sign or new text end flag is installed or displayed new text begin , or
improvement made, new text end in violation of enforceable restrictions or limitations, the party
enforcing the restrictions or limitations is entitled to recover, from the party displaying
the new text begin sign or new text end flag, new text begin or making the improvement, new text end reasonable attorney fees and expenses if the
enforcing party prevails in enforcing the restrictions or limitations.

Sec. 2.

new text begin [500.216] LIMITS ON ACCESS TO PRIVATE PROPERTY.
new text end

new text begin No agent or employee of a person hired by a common interest community or other
residential community association to provide maintenance or management services to the
association may enter onto a portion of residential property to which an owner or tenant
has exclusive use, without the prior, express permission of the owner or tenant. Any
provision of a homeowner's association document that purports to give permission to
persons other than the owner or tenant, to inspect or examine residential property of an
owner or tenant, without the prior, express permission of the owner or tenant, is void and
unenforceable. For purposes of this section, a "homeowner's association document" has
the meaning given in section 500.215, subdivision 1, paragraph (b).
new text end

Sec. 3.

Minnesota Statutes 2010, section 515B.2-119, is amended to read:

515B.2-119 TERMINATION OF COMMON INTEREST COMMUNITY.

(a) Except as otherwise provided in this chapter, a common interest community may
be terminated only by agreement of unit owners of units to which at least deleted text begin 80 percent deleted text end new text begin a
simple majority new text end of the votes in the association are allocated, and deleted text begin 80 percent deleted text end new text begin a simple
majority new text end of the first mortgagees of units (each mortgagee having one vote per unit
financed), or any larger percentage the declaration specifies. The declaration may specify
a smaller percentage only if all of the units are restricted to nonresidential use.

(b) An agreement to terminate shall be evidenced by a written agreement, executed
in the same manner as a deed by the number of unit owners and first mortgagees of units
required by subsection (a). The agreement shall specify a date after which the agreement
shall be void unless recorded before that date. The agreement shall also specify a date by
which the termination of the common interest community and the winding up of its affairs
must be accomplished. A certificate of termination executed by the association evidencing
the termination shall be recorded on or before the termination date, or the agreement to
terminate shall be revoked. The agreement to terminate, or a memorandum thereof, and
the certificate of termination shall be recorded in every county in which a portion of the
common interest community is situated and is effective only upon recording.

(c) In the case of a condominium or planned community containing only units
having upper and lower boundaries, a termination agreement may provide that all of the
common elements and units of the common interest community must be sold following
termination. If, pursuant to the agreement, any real estate in the common interest
community is to be sold following termination, the termination agreement shall set forth
the minimum terms of sale acceptable to the association.

(d) In the case of a condominium or planned community containing any units not
having upper and lower boundaries, a termination agreement may provide for sale of the
common elements, but it may not require that the units be sold following termination,
unless the original declaration provided otherwise or all unit owners whose units are to be
sold consent to the sale.

(e) The association, on behalf of the unit owners, shall have authority to contract
for the sale of real estate in a common interest community pursuant to this section,
subject to the required approval. The agreement to terminate shall be deemed to grant
to the association a power of attorney coupled with an interest to effect the conveyance
of the real estate on behalf of the holders of all interests in the units, including without
limitation the power to execute all instruments of conveyance and related instruments.
Until the sale has been completed, all instruments in connection with the sale have been
executed and the sale proceeds distributed, the association shall continue in existence
with all powers it had before termination.

(1) The instrument conveying or creating the interest in the common interest
community shall include as exhibits (i) an affidavit of the secretary of the association
certifying that the approval required by this section has been obtained and (ii) a schedule
of the names of all unit owners in the common interest community as of the date of the
approval.

(2) Proceeds of the sale shall be distributed to unit owners and secured parties as
their interests may appear, in accordance with subsections (h), (i), (j), and (k).

(3) Unless otherwise specified in the agreement of termination, until the association
has conveyed title to the real estate, each unit owner and the unit owner's successors in
interest have an exclusive right to occupancy of the portion of the real estate that formerly
constituted the unit. During the period of that occupancy, each unit owner and the unit
owner's successors in interest remain liable for all assessments and other obligations
imposed on unit owners by this chapter, the declaration or the bylaws.

(f) The legal description of the real estate constituting the common interest
community shall, upon the date of recording of the certificate of termination referred to
in subsection (b), be as follows:

(1) In a planned community utilizing a CIC plat complying with section
515B.2-110(d)(1) and (2), the lot and block description contained in the CIC plat, and any
amendments thereto, subject to any subsequent conveyance or taking of a fee interest in
any part of the property.

(2) In a condominium or cooperative, or a planned community utilizing a CIC
plat complying with section 515B.2-110(c), the underlying legal description of the real
estate as set forth in the declaration creating the common interest community, and any
amendments thereto, subject to any subsequent conveyance or taking of a fee interest in
any part of the property.

(3) The legal description referred to in this subsection shall apply upon the recording
of the certificate of termination. The recording officer for each county in which the
common interest community is located shall index the property located in that county
in its records under the legal description required by this subsection from and after the
date of recording of the certificate of termination. In the case of registered property, the
registrar of titles shall cancel the existing certificates of title with respect to the property
and issue one or more certificates of title for the property utilizing the legal description
required by this subsection.

(g) In a condominium or planned community, if the agreement to terminate
provides that the real estate constituting the common interest community is not to be sold
following termination, title to the common elements and, in a common interest community
containing only units having upper and lower boundaries described in the declaration, title
to all the real estate in the common interest community, vests in the unit owners upon
termination as tenants in common in proportion to their respective interest as provided
in subsection (k), and liens on the units shift accordingly. While the tenancy in common
exists, each unit owner and the unit owner's successors in interest have an exclusive right
to occupancy of the portion of the real estate that formerly constituted the unit.

(h) The proceeds of any sale of real estate pursuant to subsection (e), together with
the assets of the association, shall be held by the association as trustee for unit owners,
secured parties and other holders of liens on the units as their interests may appear. Before
distributing any proceeds, the association shall have authority to deduct from the proceeds
of sale due with respect to the unit (i) unpaid assessments levied by the association with
respect to the unit, (ii) unpaid real estate taxes or special assessments due with respect
to the unit, and (iii) the share of expenses of sale and winding up of the association's
affairs with respect to the unit.

(i) Following termination of a condominium or planned community, creditors of
the association holding liens on the units perfected before termination may enforce those
liens in the same manner as any lienholder, in order of priority based upon their times of
perfection. All other creditors of the association are to be treated as if they had perfected
liens on the units immediately before termination.

(j) In a cooperative, the declaration may provide that all creditors of the association
have priority over any interests of unit owners and creditors of unit owners. In that event,
following termination, creditors of the association holding liens on the cooperative which
were perfected before termination may enforce their liens in the same manner as any
lienholder, in order of priority based upon their times of perfection. All other creditors
of the association shall be treated as if they had perfected a lien against the cooperative
immediately before termination. Unless the declaration provides that all creditors of
the association have that priority:

(1) the lien of each creditor of the association which was perfected against the
association before termination becomes, upon termination, a lien against each unit owner's
interest in the unit as of the date the lien was perfected;

(2) any other creditor of the association is to be treated upon termination as if
the creditor had perfected a lien against each unit owner's interest immediately before
termination;

(3) the amount of the lien of an association's creditor described in paragraphs (1) and
(2) against each of the unit owners' interest shall be proportionate to the ratio which each
unit's common expense liability bears to the common expense liability of all of the units;

(4) the lien of each creditor of each unit owner which was perfected before
termination continues as a lien against that unit owner's interest in the unit as of the date
the lien was perfected; and

(5) the assets of the association shall be distributed to all unit owners and all
lienholders as their interests may appear in the order described in this section. Creditors of
the association are not entitled to payment from any unit owner in excess of the amount of
the creditor's lien against that unit owner's interest.

(k) The respective interest of unit owners referred to in subsections (e), (f), (g),
(h) and (i) are as follows:

(1) Except as provided in paragraph (2), the respective interests of unit owners are
the fair market values of their units, allocated interests, and any limited common elements
immediately before the termination, as determined by one or more independent appraisers
selected by the association. The decision of the independent appraisers must be distributed
to the unit owners and becomes final unless disapproved within 30 days after distribution
by unit owners of units to which 25 percent of the votes in the association are allocated.
The proportion of any unit's interest to that of all units is determined by dividing the fair
market value of that unit by the total fair market values of all the units.

(2) If any unit or any limited common element is destroyed to the extent that an
appraisal of the fair market value thereof before destruction cannot be made, the interests
of all unit owners shall be measured by: (i) in a condominium, their allocations of common
element interests immediately before the termination, (ii) in a cooperative, their respective
ownership interests immediately before the termination, and (iii) in a planned community,
their respective allocations of common expenses immediately before the termination.

(l) In a condominium or planned community, except as provided in subsection (m),
foreclosure or enforcement of a lien or encumbrance against the entire common interest
community does not terminate, of itself, the common interest community, and foreclosure
or enforcement of a lien or encumbrance against a portion of the common interest
community does not withdraw that portion from the common interest community.

(m) In a condominium or planned community, if a lien or encumbrance against a
portion of the real estate comprising the common interest community has priority over
the declaration and the lien or encumbrance has not been partially released, the parties
foreclosing the lien or encumbrance, upon foreclosure, may record an instrument excluding
the real estate subject to that lien or encumbrance from the common interest community.

(n) Following the termination of a common interest community in accordance with
this section, the association shall be dissolved in accordance with law.

Sec. 4.

Minnesota Statutes 2010, section 515B.2-123, is amended to read:

515B.2-123 CHANGE OF FORM OF COMMON INTEREST COMMUNITY.

(a) The legal form of a condominium, planned community or cooperative subject
to this chapter may be changed to a condominium or planned community, subject to any
requirements contained in the declaration or bylaws of the common interest community,
and the following requirements:

(1) Subject to paragraphs (2) and (3), the change of form shall be approved in writing
by the unit owners of units to which at least deleted text begin 80 percent deleted text end new text begin a simple majority new text end of the votes in the
association are allocated, and deleted text begin 80 percent deleted text end new text begin a simple majority new text end of the first mortgagees of record
of the units (each mortgagee having one vote per unit financed). The declaration or bylaws
may specify a smaller percentage only if all of the units are restricted to nonresidential
use. A declaration and bylaws complying with this chapter shall be approved, subject to
the foregoing approval standards, with respect to the new common interest community.

(2) If the period of declarant control has not expired, the change of form shall also
be approved in writing by the declarant.

(3) If the existing common interest community is a cooperative, the change of form
shall also be approved in writing by (i) each holder of a blanket mortgage of record and
(ii) deleted text begin 80 percent deleted text end new text begin a simple majority new text end of the secured parties holding interests in share loans
encumbering the cooperative units or memberships (each secured party having one vote
per share loan owned).

(b) Upon approval as provided in subsection (a), the association in the existing
common interest community shall have authority to execute the declaration of the new
common interest community on behalf of the unit owners of, and all other persons
holding an interest in, the units or other property which is a part of the existing common
interest community, and to do all other acts necessary to create the new common interest
community.

(c) Upon approval as provided in subsection (a), the association in the existing
common interest community shall have a power of attorney coupled with an interest to
effect the conveyance of the units or any other real estate owned by the unit owners or
the association, which is a part of the existing common interest community, on behalf of
the unit owners and all other holders of interests in the common interest community,
including without limitation the power to execute all instruments of conveyance and
related instruments.

(d) In a change of legal form under this section, the offer, conveyance or exchange
of a unit in the new common interest community to or with the person owning the unit in
the existing common interest community shall not be subject to article 4 of this chapter.

(e) A change of legal form under this section shall not affect any preexisting
obligations or liabilities of a declarant under any statute, or under the disclosure statement,
declaration or bylaws of the existing common interest community. The declarant of the
existing common interest community shall continue to have the rights and obligations of
a declarant with respect to the offer and sale of units owned by it or its affiliates in the
new common interest community.

Sec. 5.

Minnesota Statutes 2010, section 515B.2-124, is amended to read:

515B.2-124 SEVERANCE OF COMMON INTEREST COMMUNITY.

(a) Unless the declaration provides otherwise, a part of a common interest
community containing one or more units, with or without common elements, may be
severed from the common interest community, subject to the requirements of this section.
Subject to any additional requirements contained in the declaration, the severance shall be
approved in a written severance agreement complying with this section, executed by:

(1) unit owners entitled to cast at least deleted text begin 67 percent deleted text end new text begin a simple majority new text end of the votes in
the association, which approval shall include the approval of unit owners entitled to cast a
majority of the votes allocated to units in the remaining common interest community and
the approval of unit owners entitled to cast a majority of the votes allocated to units in
the part of the common interest community being severed;

(2) declarant until the earlier of five years after the recording of the declaration or
the time at which declarant no longer owns an unsold unit; and

(3) in the case of a cooperative, all holders of mortgages or contracts for deed on the
entire real estate constituting the cooperative.

(b) The declaration may specify a smaller percentage for unit owner approval only if
all of the units are restricted to nonresidential use.

(c) The severance agreement shall specify a severance date by which the severance
of the common interest community shall be accomplished, after which the severance
agreement is void. The severance agreement shall be deemed to grant to the association a
power of attorney coupled with an interest to effect the severance of the common interest
community on behalf of the unit owners and the holders of all other interests in the units,
including without limitations the power to execute the amendment to the declaration, any
instruments of conveyance, and all related instruments.

(d) The severance agreement shall:

(1) Approve an amendment to the declaration complying with this chapter, in
substantially the same form to be recorded, and an amendment to the CIC plat if
required. The declaration amendment shall, at a minimum, (i) legally describe the real
estate constituting the remaining common interest community and the real estate being
severed, (ii) restate the number of units in the remaining common interest community, (iii)
reallocate the interests of the unit owners in the remaining common interest community
among the remaining units in accordance with the allocation formula set forth in the
declaration, and (iv) recite any easements to which the severed portion of the common
interest community remains subject.

(2) Approve an amendment to the articles of incorporation and bylaws of the
remaining common interest community, if necessary.

(3) Authorize the association to execute and record the amended declaration, articles
of incorporation or bylaws on behalf of the unit owners and all other persons holding an
interest in the remaining common interest community, and to take other actions necessary
to accomplish the severance of the common interest community.

(4) Allocate the assets and liabilities of the association between the association and
(i) a new association formed pursuant to subsection (g), or (ii) the owners of the units being
severed, subject to a lien against their interest in the severed real estate or their share in the
assets of the association in favor of any person that held a security interest in their unit.

(5) If the units that are being severed from the common interest community will not
be included in a new common interest community that is (i) formed simultaneously with
the severance of the common interest community, and (ii) includes all of the units and
substantially all of the common elements being severed, then the agreement shall contain
the written consent of holders of first mortgages on all units that are being severed, and
shall describe in detail the proposed disposition of all real estate to be severed and all
assets of the association allocated to the severed units, and the distribution of the proceeds
of the disposition, if any, consistent with subsection (i).

(e) The severance agreement or a memorandum of it shall be recorded in every
county in which a part of the common interest community is located. The recording of the
severance agreement or memorandum of it shall, from the date of recording, constitute
notice to all persons subsequently acquiring an interest in the common interest community
that the common interest community is being severed, and that those persons acquire their
interests subject to the terms and conditions contained in the severance agreement and
the amendment to the declaration.

(f) The amendment to the declaration of the remaining common interest community
shall be recorded on or before the severance date or the severance agreement and the
amendment to the declaration are void as of the day after the severance date. The recording
of the amendment to the declaration shall complete the severance of the common interest
community and release the severed part of the common interest community from the
declaration without further action by any person.

(g) If the unit owners whose units are being severed from the common interest
community intend to form a new common interest community, then said unit owners shall,
by at least deleted text begin 80 percent deleted text end new text begin a simple majority new text end of the votes allocated by the existing declaration
to said units, approve a new declaration, articles of incorporation and bylaws to govern the
new common interest community no later than 60 days before the effective date of the
severance. The new declaration shall be recorded simultaneously with the amendment to
the existing declaration. No later than 30 days after the date of the severance agreement,
the articles of incorporation creating the association intended to govern the new common
interest community shall be filed with the secretary of state and promptly thereafter the
unit owners whose units are being severed shall elect a board of directors to act on behalf
of the new association. The board of directors of the new association shall cooperate with
the board of directors of the existing association to complete the severance. The existing
association shall retain all authority to act on behalf of the common interest community
until the amendment to the existing declaration and the new declaration are recorded.

(h) The legal descriptions of the real estate constituting (i) the remaining common
interest community, and (ii) the severed portion of the common interest community shall,
at the time of recording of the amendment to the declaration referred to in subsection
(e), be as follows:

(1) In a planned community using a CIC plat that complies with section 515B.2-110,
subsection (d), the lot and block descriptions contained in the CIC plat, and any
amendments to it, with respect to (i) the remaining common interest community, and (ii)
the severed portion of the common interest community.

(2) In a condominium, or cooperative or planned community using a CIC plat that
complies with section 515B.2-110, subsection (c), (i) the CIC plat description relating
to the remaining common interest community, and (ii) the part of the underlying legal
description of the real estate in the declaration creating the common interest community,
and any amendments to it, relating to the severed part of the common interest community.

(3) The recording officer for each county in which the common interest community
is located shall index the property located in that county in its records under the legal
descriptions required by this subsection as of the date of recording of the amendment to the
declaration. In the case of registered property, the registrar of titles shall cancel the existing
certificates of title for the severed part of the common interest community and issue
certificates of title for the property using the legal descriptions required by this subsection.

(i) In a condominium or planned community, if the severed part of the common
interest community is not to be reconstituted as a new common interest community
following severance, title to all the real estate in the severed part of the common interest
community vests in the unit owners of the units being severed, upon severance, as
provided in the severance agreement.

(j) No common interest community shall be severed in such a manner as to
materially impair access, utility services, communication services, or other essential
services with respect to either the remaining common interest community or the severed
part of the common interest community.

Sec. 6.

Minnesota Statutes 2010, section 515B.3-113, is amended to read:

515B.3-113 INSURANCE.

(a) Commencing not later than the time of the first conveyance of a unit to a unit
owner other than a declarant, the association shall maintain, to the extent reasonably
available:

(1) subject to subsection (b), property insurance (i) on the common elements and,
in a planned community, also on property that must become common elements, (ii)
for broad form covered causes of loss, and (iii) in a total amount of not less than the
full insurable replacement cost of the insured property, less deductibles, at the time the
insurance is purchased and at each renewal date, exclusive of items normally excluded
from property policies; and

(2) commercial general liability insurance against claims and liabilities arising
in connection with the ownership, existence, use or management of the property in an
amount, if any, specified by the common interest community instruments or otherwise
deemed sufficient in the judgment of the board, insuring the board, the association, the
management agent, and their respective employees, agents and all persons acting as
agents. The declarant shall be included as an additional insured in its capacity as a unit
owner or board member. The unit owners shall be included as additional insureds but
only for claims and liabilities arising in connection with the ownership, existence, use or
management of the common elements. The insurance shall cover claims of one or more
insured parties against other insured parties.

(b) In the case of a common interest community that contains units, or structures
within units, sharing or having contiguous walls, siding or roofs, the insurance maintained
under subsection (a)(1) shall include those units, or structures within those units, and
the common elements. The insurance need not cover the following items within the
units: (i) ceiling or wall finishing materials, (ii) finished flooring, (iii) cabinetry, (iv)
finished millwork, (v) electrical, heating, ventilating, and air conditioning equipment,
and plumbing fixtures serving a single unit, (vi) built-in appliances, or (vii) other
improvements and betterments, regardless of when installed. If any improvements and
betterments are covered, any increased cost may be assessed by the association against the
units affected. The association may, in the case of a claim for damage to a unit or units, (i)
pay the deductible amount as a common expense, (ii) assess the deductible amount against
one or more of the units affected in any reasonable manner, or (iii) require the unit owners
of one or more of the units affected to pay the deductible amount directly.

(c) If the insurance described in subsections (a) and (b) is not reasonably available,
the association shall promptly cause notice of that fact to be hand delivered or sent prepaid
by United States mail to all unit owners. The declaration may require the association to
carry any other insurance, and the association in any event may carry any other insurance
it considers appropriate to protect the association, the unit owners or officers, directors or
agents of the association.

(d) Insurance policies carried pursuant to subsections (a) and (b) shall provide that:

(1) each unit owner and secured party is an insured person under the policy with
respect to liability arising out of the unit owner's interest in the common elements or
membership in the association;

(2) the insurer waives its right to subrogation under the policy against any unit
owner of the condominium or members of the unit owner's household and against the
association and members of the board of directors;

(3) no act or omission by any unit owner or secured party, unless acting within the
scope of authority on behalf of the association, shall void the policy or be a condition to
recovery under the policy; and

(4) if at the time of a loss under the policy there is other insurance in the name of a
unit owner covering the same property covered by the policy, the association's policy is
primary insurance.

(e) Any loss covered by the property policy under subsection (a)(1) shall be adjusted
by and with the association. The insurance proceeds for that loss shall be payable to the
association, or to an insurance trustee designated by the association for that purpose. The
insurance trustee or the association shall hold any insurance proceeds in trust for unit
owners and secured parties as their interests may appear. The proceeds shall be disbursed
first for the repair or restoration of the damaged common elements and units. If there is a
surplus of proceeds after the common elements and units have been completely repaired
or restored or the common interest community is terminated, the board of directors may
retain the surplus for use by the association or distribute the surplus among the owners on
an equitable basis as determined by the board.

(f) Unit owners may obtain insurance for personal benefit in addition to insurance
carried by the association.

(g) An insurer that has issued an insurance policy under this section shall issue
certificates or memoranda of insurance, upon request, to any unit owner or secured
party. The insurance may not be canceled until 60 days after notice of the proposed
cancellation has been mailed to the association, each unit owner and each secured party
for an obligation to whom certificates of insurance have been issued.

(h) Any portion of the common interest community which is damaged or destroyed
as the result of a loss covered by the association's insurance shall be promptly repaired or
replaced by the association unless (i) the common interest community is terminated and
the association votes not to repair or replace all or part thereof, (ii) repair or replacement
would be illegal under any state or local health or safety statute or ordinance, or (iii) deleted text begin 80
percent deleted text end new text begin a simple majority new text end of the unit owners, including every unit owner and holder of a
first mortgage on a unit or assigned limited common element which will not be rebuilt,
vote not to rebuild. Subject to subsection (b), the cost of repair or replacement of the
common elements in excess of insurance proceeds and reserves shall be paid as a common
expense, and the cost of repair of a unit in excess of insurance proceeds shall be paid by
the respective unit owner.

(i) If less than the entire common interest community is repaired or replaced, (i) the
insurance proceeds attributable to the damaged common elements shall be used to restore
the damaged area to a condition compatible with the remainder of the common interest
community, (ii) the insurance proceeds attributable to units and limited common elements
which are not rebuilt shall be distributed to the owners of those units, including units to
which the limited common elements were assigned, and the secured parties of those units,
as their interests may appear, and (iii) the remainder of the proceeds shall be distributed to
all the unit owners and secured parties as their interests may appear in proportion to their
common element interest in the case of a condominium or in proportion to their common
expense liability in the case of a planned community or cooperative.

(j) If the unit owners and holders of first mortgages vote not to rebuild a unit, that
unit's entire common element interest, votes in the association, and common expense
liability are automatically reallocated upon the vote as if the unit had been condemned
under section 515B.1-107. The association shall have the power to, and shall, promptly
prepare, execute and record an amendment to the declaration reflecting the reallocations.
Notwithstanding the provisions of this subsection, if the common interest community is
terminated, insurance proceeds not used for repair or replacement shall be distributed in
the same manner as sales proceeds pursuant to section 515B.2-119(e).

(k) The provisions of this section may be varied or waived in the case of a common
interest community in which all units are restricted to nonresidential use.

Sec. 7.

Minnesota Statutes 2010, section 515B.3-116, is amended to read:

515B.3-116 LIEN FOR ASSESSMENTS.

(a) The association has a lien on a unit for any assessment levied against that unit
from the time the assessment becomes due. If an assessment is payable in installments,
the full amount of the assessment is a lien from the time the first installment thereof
becomes due. Unless the declaration otherwise provides, fees, charges, late charges, deleted text begin fines deleted text end
and interest charges pursuant to section 515B.3-102(a)(10), (11) and (12) are liens, and
are enforceable as assessments, under this section new text begin , except that fines for violations of the
declaration, bylaws, and rules and regulations of the association, may not become the
basis of a lien, and are not enforceable as assessments under this section new text end . Recording of
the declaration constitutes record notice and perfection of any assessment lien under this
section, and no further recording of any notice of or claim for the lien is required.

(b) Subject to subsection (c), a lien under this section is prior to all other liens and
encumbrances on a unit except (i) liens and encumbrances recorded before the declaration
and, in a cooperative, liens and encumbrances which the association creates, assumes, or
takes subject to, (ii) any first mortgage encumbering the fee simple interest in the unit, or,
in a cooperative, any first security interest encumbering only the unit owner's interest in
the unit, (iii) liens for real estate taxes and other governmental assessments or charges
against the unit, and (iv) a master association lien under section 515B.2-121(h). This
subsection shall not affect the priority of mechanic's liens.

(c) If a first mortgage on a unit is foreclosed, the first mortgage was recorded after
June 1, 1994, and no owner or person who acquires the owner's interest in the unit redeems
pursuant to chapter 580, 581, or 582, the holder of the sheriff's certificate of sale from the
foreclosure of the first mortgage or any person who acquires title to the unit by redemption
as a junior creditor shall take title to the unit subject to a lien in favor of the association
for unpaid assessments for common expenses levied pursuant to section 515B.3-115(a),
(e)(1) to (3), (f), and (i) which became due, without acceleration, during the six months
immediately preceding the end of the owner's period of redemption. The common
expenses shall be based upon the association's then current annual budget, notwithstanding
the use of an alternate common expense plan under section 515B.3-115(a)(2). If a first
security interest encumbering a unit owner's interest in a cooperative unit which is
personal property is foreclosed, the secured party or the purchaser at the sale shall take
title to the unit subject to unpaid assessments for common expenses levied pursuant to
section 515B.3-115(a), (e)(1) to (3), (f), and (i) which became due, without acceleration,
during the six months immediately preceding the first day following either the disposition
date pursuant to section 336.9-610 or the date on which the obligation of the unit owner is
discharged pursuant to section 336.9-622.

(d) Proceedings to enforce an assessment lien shall be instituted within three years
after the last installment of the assessment becomes payable, or shall be barred.

(e) The unit owner of a unit at the time an assessment is due shall be personally
liable to the association for payment of the assessment levied against the unit. If there are
multiple owners of the unit, they shall be jointly and severally liable.

(f) This section does not prohibit actions to recover sums for which subsection (a)
creates a lien nor prohibit an association from taking a deed in lieu of foreclosure.

(g) The association shall furnish to a unit owner or the owner's authorized agent
upon written request of the unit owner or the authorized agent a statement setting forth
the amount of unpaid assessments currently levied against the owner's unit. If the unit
owner's interest is real estate, the statement shall be in recordable form. The statement
shall be furnished within ten business days after receipt of the request and is binding
on the association and every unit owner.

(h) The association's lien may be foreclosed as provided in this subsection.

(1) In a condominium or planned community, the association's lien may be
foreclosed in a like manner as a mortgage containing a power of sale pursuant to chapter
580, or by action pursuant to chapter 581. The association shall have a power of sale to
foreclose the lien pursuant to chapter 580.

(2) In a cooperative whose unit owners' interests are real estate, the association's
lien shall be foreclosed in a like manner as a mortgage on real estate as provided in
paragraph (1).

(3) In a cooperative whose unit owners' interests in the units are personal property,
the association's lien shall be foreclosed in a like manner as a security interest under
article 9 of chapter 336. In any disposition pursuant to section 336.9-610 or retention
pursuant to sections 336.9-620 to 336.9-622, the rights of the parties shall be the same as
those provided by law, except (i) notice of sale, disposition, or retention shall be served on
the unit owner 90 days prior to sale, disposition, or retention, (ii) the association shall be
entitled to its reasonable costs and attorney fees not exceeding the amount provided by
section 582.01, subdivision 1a, (iii) the amount of the association's lien shall be deemed to
be adequate consideration for the unit subject to disposition or retention, notwithstanding
the value of the unit, and (iv) the notice of sale, disposition, or retention shall contain the
following statement in capital letters with the name of the association or secured party
filled in:

"THIS IS TO INFORM YOU THAT BY THIS NOTICE (fill in name of association
or secured party) HAS BEGUN PROCEEDINGS UNDER MINNESOTA STATUTES,
CHAPTER 515B, TO FORECLOSE ON YOUR INTEREST IN YOUR UNIT FOR THE
REASON SPECIFIED IN THIS NOTICE. YOUR INTEREST IN YOUR UNIT WILL
TERMINATE 90 DAYS AFTER SERVICE OF THIS NOTICE ON YOU UNLESS
BEFORE THEN:

(a) THE PERSON AUTHORIZED BY (fill in the name of association or secured
party) AND DESCRIBED IN THIS NOTICE TO RECEIVE PAYMENTS RECEIVES
FROM YOU:

(1) THE AMOUNT THIS NOTICE SAYS YOU OWE; PLUS

(2) THE COSTS INCURRED TO SERVE THIS NOTICE ON YOU; PLUS

(3) $500 TO APPLY TO ATTORNEYS FEES ACTUALLY EXPENDED OR
INCURRED; PLUS

(4) ANY ADDITIONAL AMOUNTS FOR YOUR UNIT BECOMING DUE TO
(fill in name of association or secured party) AFTER THE DATE OF THIS NOTICE; OR

(b) YOU SECURE FROM A DISTRICT COURT AN ORDER THAT THE
FORECLOSURE OF YOUR RIGHTS TO YOUR UNIT BE SUSPENDED UNTIL
YOUR CLAIMS OR DEFENSES ARE FINALLY DISPOSED OF BY TRIAL,
HEARING, OR SETTLEMENT. YOUR ACTION MUST SPECIFICALLY STATE
THOSE FACTS AND GROUNDS THAT DEMONSTRATE YOUR CLAIMS OR
DEFENSES.

IF YOU DO NOT DO ONE OR THE OTHER OF THE ABOVE THINGS WITHIN
THE TIME PERIOD SPECIFIED IN THIS NOTICE, YOUR OWNERSHIP RIGHTS
IN YOUR UNIT WILL TERMINATE AT THE END OF THE PERIOD, YOU WILL
LOSE ALL THE MONEY YOU HAVE PAID FOR YOUR UNIT, YOU WILL LOSE
YOUR RIGHT TO POSSESSION OF YOUR UNIT, YOU MAY LOSE YOUR RIGHT
TO ASSERT ANY CLAIMS OR DEFENSES THAT YOU MIGHT HAVE, AND YOU
WILL BE EVICTED. IF YOU HAVE ANY QUESTIONS ABOUT THIS NOTICE,
CONTACT AN ATTORNEY IMMEDIATELY."

(4) In any foreclosure pursuant to chapter 580, 581, or 582, the rights of the parties
shall be the same as those provided by law, except (i) the period of redemption for unit
owners shall be six months from the date of sale or a lesser period authorized by law, (ii)
in a foreclosure by advertisement under chapter 580, the foreclosing party shall be entitled
to costs and disbursements of foreclosure and attorneys fees authorized by the declaration
or bylaws, notwithstanding the provisions of section 582.01, subdivisions 1 and 1a, (iii) in
a foreclosure by action under chapter 581, the foreclosing party shall be entitled to costs
and disbursements of foreclosure and attorneys fees as the court shall determine, and (iv)
the amount of the association's lien shall be deemed to be adequate consideration for the
unit subject to foreclosure, notwithstanding the value of the unit.

(i) If a holder of a sheriff's certificate of sale, prior to the expiration of the period of
redemption, pays any past due or current assessments, or any other charges lienable as
assessments, with respect to the unit described in the sheriff's certificate, then the amount
paid shall be a part of the sum required to be paid to redeem under section 582.03.

(j) In a cooperative, if the unit owner fails to redeem before the expiration of the
redemption period in a foreclosure of the association's assessment lien, the association
may bring an action for eviction against the unit owner and any persons in possession of
the unit, and in that case section 504B.291 shall not apply.

(k) An association may assign its lien rights in the same manner as any other secured
party.