Legal Question in Real Estate Law in Minnesota

Merry Christmas!

This is a property legal question in which we are a common interest community of 86 townhomes with governing documents. Our documents state that properties are to be Owner occupied and "no renting" permitted.

Prior Owners have sold Units on Contract for Deed and the Board has had no jurisdiction over those sales.

Due to economy, decreased property values and foreclosures the value of our properties has gone from about $225k to $160k. We had a couple attend the last Baord meeting requesting the Board give them permission to sell by means of Lease to Own in which they would hire a property management firm to screen candidates and conduct credit and criminal background check. This couple has already made the move to start building in the spring and currently have their home on the market for the 4th year. They state they are stuck and do not want to leave behind another empty foreclosure further hurting the complex.

Our property manager say we would have to amend our docs for $5k and then get 67% vote of community. Other Board members say that is crazy as we have permitted CD sales and never amended. Some of the Board members agree to let this go through and some say no way as it is considered "renting"

Please help as the Board needs to know answers in order to close issue.

Is Lease to own "renting"? If so, how do we get around it with bylaws? What are the legal differences between CD and Lease to Own sales ? What steps does Board need to take to approve?

Thank you for your time and consideration !

Regards,

Kimberly

President of Association

Burnsville MN


Asked on 12/10/09, 4:05 pm

1 Answer from Attorneys
Joel Hilgendorf Hellmuth & Johnson, PLLC

Kimberly,

A lease with an option to purchase is renting, and a typcial leasing restriction within a community association's governing documents would prohibit a unit's use in this manner.

That being said, the specific leasing restriction for your association, any exceptions to that restriction, and the mechanism for amending the Declaration of Covenants are all unique to your Association.

The Association needs to consult with an experienced community association attorney to review its governing documents and provide a legal opinion in response to your inquiry.

Your property manager's quote of $5,000.00 to amend the Declaration would be appropriate if the entire Declaration was re-drafted. If the Association needs to amend its Declaration, it may only need to amend a single paragraph, which would not cost nearly that amount.

Feel free to contact me directly if the Association has further questions.

Joel Hilgendorf

Hellmuth & Johnson, PLLC

952-746-2167

[email protected]

www.hjlawfirm.com

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Answered on 12/15/09, 5:49 pm


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