Minnesota HOA Foreclosures
If you default on HOA dues and assessments in Minnesota, the homeowners association can foreclosure on your condo, townhome, or house located in a common interest development.
If you live in a single-family home, condominium, or townhome that is part of a common interest community in Minnesota, you are most likely responsible for paying dues and assessments to the homeowners’ association (HOA). If you fall behind in payments, in most cases the HOA can get a lien on your property that could lead to a foreclosure.
Read on to learn about the particular requirements for HOA foreclosures in Minnesota.
Minnesota HOA Lien Laws
The Minnesota Common Interest Ownership Act (MCIOA) (Minn. Stat. §§ 515B.1-101 through 515B.4-118) is the main set of laws pertaining to HOAs in Minnesota. It governs common interest developments, including condominiums and planned communities, created after June 1, 1994.
While Minnesota also has two other sets of laws that pertain to condominiums (the Condominium Act and the Uniform Condominium Act), the provisions of the MCIOA discussed in this article apply to all condominiums, including those created before the effective date.
How HOA Liens Work
Almost all HOAs have the power to place a lien on the property if the homeowner becomes delinquent in paying the monthly dues and/or any special assessments (collectively referred to as “assessments”). Once a homeowner becomes delinquent on the assessments, a lien will usually automatically attach to that homeowner's property.
In Minnesota, 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 becomes a lien from the time the first installment became due (Minn. Stat. § 515B.3-116(a)).
The recording of the HOA documents that create the common interest community (such as a Declaration of Covenants, Conditions, and Restrictions) constitutes record notice and perfection of the lien. No further recording of the claim of lien for assessments is required (Minn. Stat. § 515B.3-116(a)). (In some states, the association must record the lien.)
Charges the HOA May Include in the Lien
Minnesota law sets out the types of charges that the HOA may include in the assessments lien (Minn. Stat. §515B.3-115(e)(4) and (5), § 515B.3-116(a), § 515B.3-102(a)(11)). Unless the declaration provides otherwise, the association can include charges for:
- Assessments. The HOA can include amounts for unpaid assessments in the lien.
- Late charges. Charges for the late payment of assessments may be included in the assessments lien as well.
- Fines. The association may include fines for violations of the declaration, bylaws, and/or rules and regulations of the association.
- Interest. The HOA may also include interest for the late payment of assessments.
- Attorney’s fees and costs. The HOA may assess reasonable attorney’s fees and costs incurred by the association in connection with the collection of assessments and the enforcement of the articles, bylaws, declaration, or rules and regulations.
- Other charges. The association may also impose certain other charges, such as charges for the preparation and recordation of amendments to the declaration or statements of unpaid assessments.
Also, in a foreclosure, the HOA is entitled to recover foreclosure attorney’s fees and costs if authorized by the declaration or bylaws (in a nonjudicial foreclosure) or as determined by the court (in a judicial foreclosure) (Minn. Stat. § 515B.3-116(h)(4)).
HOA Lien Priority in Minnesota
An HOA’s lien is prior to all other liens, except for:
- liens and encumbrances recorded before the declaration
- liens for real estate taxes (and other governmental assessments)
- a master association lien (if the common interest community is part of a master association), and
- a first mortgage (Minn. Stat. § 515B.3-116(b)). (This means that if the HOA is the successful purchaser at the foreclosure sale and there is no redemption, the HOA will take the property subject to the first mortgage. Learn more about lien priority and what happens to a first mortgage in an HOA foreclosure in Nolo’s article What happens to my mortgages if the HOA forecloses on its lien?)
Requesting a Statement of Assessments Due
If you make a written request to the HOA, the association must provide you with a statement of the assessments that are due within ten business days after receiving the request (Minn. Stat. § 515B.3-116(g)).
HOA Foreclosures in Minnesota
If you default on the assessments, the HOA can foreclose. A common misconception is that the association cannot foreclose if you are current with your mortgage payments. However, the association’s right to foreclose has nothing to do with whether you are current on your mortgage payments. (Learn more about HOA liens and foreclosure.)
In Minnesota, an HOA may foreclose its lien either:
- judicially (by filing a lawsuit with the court), or
- nonjudicially (which means the lender does not have to go through state court to foreclose) (Minn. Stat. § 515B.3-116(h)(1)).
The redemption period is generally six months from the date of sale, though it may be a lesser period if authorized by law (Minn. Stat. § 515B.3-116(h)(4)). (Learn more about the right of redemption after an HOA foreclosure.)
Statute of Limitations
In order for the HOA's lien to remain valid, the association must initiate an action to enforce the lien within three years after the last installment of the assessment becomes due (Minn. Stat. § 515B.3-116(d)). This is called the statute of limitations.
What to Do if You Are Facing Foreclosure by an HOA
If you are facing an HOA foreclosure, you should consult with an attorney licensed in Minnesota to discuss all legal options available in your particular circumstances. (See our HOA Foreclosure topic page for articles on HOAs, possible options to catch up if you are delinquent in payments, how bankruptcy can help discharge dues, HOA super liens, and more.)