82% of new Minnesota homes are in an HOA. A new state bill aims to protect residents.
A bill setting mandatory rules for homeowners associations in Minnesota passed the state Senate this week, part of a two-year legislative effort driven by resident complaints about HOA disputes.
The legislation establishes a list of requirements aimed at improving transparency and reducing conflicts within HOAs. Minnesota estimates that 25% of its residents live in an HOA, and 82% of new homes are built within one.
One area the bill addresses is financial accountability — specifically, how HOAs manage reserve funds and special assessments. Dana Ohman, an attorney who handles HOA disputes, spoke with CBS News Minnesota about some of the most common questions homeowners have.
A reserve fund is money set aside for large, anticipated expenses. Experts say it should equal roughly 25% of an HOA's annual operating budget.
"That's because one of the main jobs of the HOA is to maintain the property," Ohman said, when asked whether a solid reserve fund matters.
Those funds typically cover costs like painting and siding repair, pool renovations, and elevator upgrades — expenses that are expected but significant. Special assessments are a separate matter. Unlike reserve funds, they are used for unplanned costs.
"Special assessments are meant to be for projects that come up, capital improvement projects that come up that are unbudgeted. So it's usually something that is a surprise," Ohman said.
HOA members are responsible for covering special assessments when they arise.
Ohman also addressed a question many homeowners have about what happens if they refuse to pay. An HOA cannot remove a resident for nonpayment, she said, but the consequences can still be severe.
"But they can foreclose on you if you are behind in assessments and fines, even if your mortgage is current," Ohman said.