It's Time to Reform HOAs

Have you ever felt frustrated by issues with your Homeowners' Association (HOA)? Or, if you’re on the board of your HOA, have you had difficulties navigating the complexities of the role? If the answer is yes to either question, you’re not alone. It’s incredibly common to hear of challenges and dysfunctional practices from both HOA homeowners and board members, especially in recent years. HOAs can provide many benefits to communities, but it’s clear the landscape isn’t perfect, and the need for reform has grown. Now, the state legislature is considering ways to improve this environment, and we’re all for it. Let’s discuss why this is needed and why we believe these reforms will help.

As of 2024, Minnesota was 15th in a ranking of U.S. States for the number of homeowners’ associations we have, with over a quarter of our population residing within one. Despite having more than 8,000 HOAs throughout the state, nearly half of which are in the Twin Cities, our state lacks regulations for how they function and oversight to keep track of them. Complaints from homeowners vary, but there are a few that have become increasingly common and especially concerning. Many homeowners encounter challenges when trying to interact with their board – some encounter barriers when trying to become board members, while others can’t find clear information on when their board meets or what they discuss. Some are even fined for asking questions or requesting board documents.

Additionally, HOAs can pursue foreclosure for minor infractions without proper means to resolve disputes. We often find situations that could’ve been remedied with more communication and clarity, but instead have quickly snowballed due to HOA fees. Jenny Sanford, our Homeowner Engagement Manager, helps homeowners navigate their HOAs and recently encountered a situation just like this. A homeowner is facing foreclosure for a few thousand dollars in delinquent HOA fees.

“The HOA management company changed a year ago, and the homeowner, who does not read well, did not understand that a new automatic payment was not set up for dues,” Jenny explained. Now, in addition to the delinquency consisting of late fees and past dues, the homeowner will be responsible for an additional $1,500 in attorney fees while facing foreclosure. While we know there needs to be means to address violations, we don’t think they should jeopardize someone’s ability to stay in their home.

Jenny (center), with Habitat homeowner Edgar (left) and Site Supervisor Katie (right), at a Volunteer and Learn event for Habitat homeowners to volunteer on a Habitat build and learn about home maintenance.

Things aren’t a walk in the park for HOA boards either. In recent years, it’s become more challenging to get property insurance, and the insurance available has often come with higher costs and reduced coverage. In many HOA communities, rates have increased drastically, despite one of the goals of an HOA being to save costs by pooling funds together. Issues like these can drive costs up for residents and threaten the long-term financial viability of HOAs when funds meant for repairs, emergencies, and day-to-day maintenance are increasingly going toward insurance costs.

According to Jenny, “The most challenging and common issues that our homeowners face living in an HOA revolve around assessments for insurance claims. When the HOA has submitted an insurance claim, there is typically a significant deductible to cover the loss. Often, homeowners do not have coverage through their individual HO6 (condo insurance) policy to cover their portion of this deductible. When that happens, they are assessed for their portion. There are not a lot of options that exist for someone who cannot pay for this assessment.”

Many HOA board members and residents are left unsure of where to turn in these scenarios and lack proper training, resources, and standards to navigate the complex legal and financial avenues within this environment.

So what’s being proposed to fix this, and how did these proposals come about? During last year’s legislative session, advocacy efforts resulted in the creation of a working group to study these issues and provide recommendations for reforms. After a lot of discussion, consideration, and input from stakeholders, the group came up with more than 150 ideas, many of which are now being condensed into a few bills. These have been well-researched and aim to be consistent with standards in other states across the country.

Attendees of Habitat on the Hill - MN 2024 advocated for the creation of a working group to come up with HOA reform recommendations.

Some of the proposed HOA reforms include:

• Standards around conflicts of interest for property management companies and HOA boards.

• Caps and reasonable standards for fines and late fees assessed by HOAs, as well as preventing HOAs from foreclosing on homes over unpaid fees of less than a certain amount.

• Disclosure of attorney fees with an estimated cost before charging in response to a question and elimination of fees paid by residents for attorneys to answer questions about board governing documents.

• Creating a position for an ombudsperson that would help resolve disputes between HOAs and residents.

We believe these reforms are reasonable and much needed, and we’re confident in the benefits they can provide. As the housing landscape evolves, it’s time our laws and policies change to best meet the needs of Minnesotans. We have been advocating for these bills through meeting with legislators, attending hearings and sharing testimonies, and collaborating with other housing organizations. We are beyond excited to see the amount of enthusiastic, bipartisan support for this issue, but there’s still more to be done before the session ends. As an individual, you can help elevate our message by contacting your lawmakers in support of these reforms.

Click below to send a quick, predrafted letter to your representatives. You can send it as is or use it to share your personal stories regarding HOAs.        

Want more ways to be involved? You can also join us on May 13 to talk to your lawmakers in person about HOA reform and our other legislative priorities at Habitat on the Hill. Click here to learn more, or register below!

Finally, to stay up to date and take action virtually, you can also sign up for action alerts from our Government Affairs team.