HF 4040

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to real estate; clarifying and supplementing prohibitions on certain
disclosure requirements in the sale of residential real estate; providing
requirements for home inspectors; amending Minnesota Statutes 2006, sections
82.41, subdivision 13; 513.55; 513.57, subdivision 2; Minnesota Statutes 2007
Supplement, section 82.22, subdivision 8; proposing coding for new law as
Minnesota Statutes, chapter 82C.

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

Section 1.

Minnesota Statutes 2007 Supplement, section 82.22, subdivision 8, is
amended to read:

Subd. 8.

Material facts.

(a) Licensees shall disclose to any prospective purchaser
all material facts of which the licensees are aware, which could adversely and significantly
affect an ordinary purchaser's use or enjoyment of the property, or any intended use of the
property of which the licensees are aware.

(b) It is not a material fact relating to real property offered for sale the fact or
suspicion that the property:

(1) is or was occupied by an owner or occupant who is or was suspected
to be infected with human immunodeficiency virus or diagnosed with acquired
immunodeficiency syndrome;

(2) was the site of a suicide, accidental death, natural death, or perceived paranormal
activity; or

(3) is located in a neighborhood containing any adult family home, community-based
residential facility, or nursing home.

(c) A licensee or employee of the licensee has no duty to disclose information
regarding an offender who is required to register under section 243.166, or about whom
notification is made under that section, if the broker or salesperson, in a timely manner,
provides a written notice that information about the predatory offender registry and
persons registered with the registry may be obtained by contacting local law enforcement
where the property is located or the Department of Corrections.

(d) A licensee or employee of the licensee has no duty to disclose information
regarding airport zoning regulations if the broker or salesperson, in a timely manner,
provides a written notice that a copy of the airport zoning regulations as adopted can be
reviewed or obtained at the office of the county recorder where the zoned area is located.

(e) A licensee is not required to disclose, except as otherwise provided in paragraph
(f), information relating to the physical condition of the property or any other information
relating to the real estate transaction, if a written report that discloses the information has
been prepared by a qualified third party and provided to the person. For the purposes of
this paragraph, "qualified third party" means a federal, state, or local governmental agency,
or any person whom the broker, salesperson, or a party to the real estate transaction
reasonably believes has the expertise necessary to meet the industry standards of practice
for the type of inspection or investigation that has been conducted by the third party
in order to prepare the written report and who is acceptable to the person to whom the
disclosure is being made.

(f) A licensee shall disclose to the parties to a real estate transaction any facts known
by the broker or salesperson that contradict any information included in a written report, if
a copy of the report is provided to the licensee, described in paragraph (e).

(g) The limitation on disclosures set forth in paragraphs (b) and (c) shall modify any
common law duties with respect to disclosure of material facts.

new text begin (h) A licensee or employee of a licensee shall disclose in writing to a purchaser at the
closing any homeowner's insurance claims, liability claims, or other claims with respect to
damage or loss to the property, known to the licensee or employee of the licensee, made
by the seller or any other person within the 12 months prior to the closing and the status
of any such claims, including whether the damage or loss related to the claims has been
repaired, replaced, or otherwise remedied.
new text end

new text begin (i) A purchaser who incurs loss as a result of a purposeful violation of this
subdivision has a cause of action against the licensee or employee of the licensee for
damages; equitable relief as determined by the court; reasonable attorney fees; costs and
disbursements; and a civil penalty determined by the court in an amount not to exceed 50
percent of the damages.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2008, and applies to
purchases resulting from purchase agreements entered into on or after that date.
new text end

Sec. 2.

Minnesota Statutes 2006, section 82.41, subdivision 13, is amended to read:

Subd. 13.

Fraudulent, deceptive, and dishonest practices.

(a) Prohibitions. For
the purposes of section 82.35, subdivision 1, clause (b), the following acts and practices
constitute fraudulent, deceptive, or dishonest practices:

(1) act on behalf of more than one party to a transaction without the knowledge
and consent of all parties;

(2) act in the dual capacity of licensee and undisclosed principal in any transaction;

(3) receive funds while acting as principal which funds would constitute trust funds
if received by a licensee acting as an agent, unless the funds are placed in a trust account.
Funds need not be placed in a trust account if a written agreement signed by all parties to
the transaction specifies a different disposition of the funds, in accordance with section
82.35, subdivision 1;

(4) violate any state or federal law concerning discrimination intended to protect the
rights of purchasers or renters of real estate;

(5) make a material misstatement in an application for a license or in any information
furnished to the commissioner;

(6) procure or attempt to procure a real estate license for himself or herself or any
person by fraud, misrepresentation, or deceit;

(7) represent membership in any real estate-related organization in which the
licensee is not a member;

(8) advertise in any manner that is misleading or inaccurate with respect to
properties, terms, values, policies, or services conducted by the licensee;

(9) make any material misrepresentation or permit or allow another to make any
material misrepresentation;

(10) make any false or misleading statements, or permit or allow another to make
any false or misleading statements, of a character likely to influence, persuade, or induce
the consummation of a transaction contemplated by this chapter;

(11) fail within a reasonable time to account for or remit any money coming into the
licensee's possession which belongs to another;

(12) commingle with his or her own money or property trust funds or any other
money or property of another held by the licensee;

(13) demand from a seller a commission to compensation which the licensee is not
entitled, knowing that he or she is not entitled to the commission compensation;

(14) pay or give money or goods of value to an unlicensed person for any assistance
or information relating to the procurement by a licensee of a listing of a property or of a
prospective buyer of a property (this item does not apply to money or goods paid or given
to the parties to the transaction);

(15) fail to maintain a trust account at all times, as provided by law;

(16) engage, with respect to the offer, sale, or rental of real estate, in an
anticompetitive activity;

(17) represent on advertisements, cards, signs, circulars, letterheads, or in any other
manner, that he or she is engaged in the business of financial planning unless he or
she provides a disclosure document to the client. The document must be signed by the
client and a copy must be left with the client. The disclosure document must contain
the following:

(i) the basis of fees, commissions, or other compensation received by him or her
in connection with rendering of financial planning services or financial counseling or
advice in the following language:

"My compensation may be based on the following:

(a) ... commissions generated from the products I sell you;

(b) ... fees; or

(c) ... a combination of (a) and (b). [Comments]";

(ii) the name and address of any company or firm that supplies the financial services
or products offered or sold by him or her in the following language:

"I am authorized to offer or sell products and/or services issued by or through the
following firm(s):

[List]

The products will be traded, distributed, or placed through the clearing/trading
firm(s) of:

[List]";

(iii) the license(s) held by the person under this chapter or chapter 60A or 80A in
the following language:

"I am licensed in Minnesota as a(n):

(a) ... insurance agent;

(b) ... securities agent or broker/dealer;

(c) ... real estate broker or salesperson;

(d) ... investment adviser"; and

(iv) the specific identity of any financial products or services, by category, for
example mutual funds, stocks, or limited partnerships, the person is authorized to offer
or sell in the following language:

"The license(s) entitles me to offer and sell the following products and/or services:

(a) ... securities, specifically the following: [List];

(b) ... real property;

(c) ... insurance; and

(d) ... other: [List] deleted text begin . deleted text end " new text begin ;
new text end

new text begin (18) advise the seller to settle an insurance or liability claim for past damage to the
property prior to or after the closing without applying the amount received to repairing the
damage that generated the claim;
new text end

new text begin (19) advise any other person to violate, or assist any other person in violating, any
other provision of this paragraph.
new text end

(b) Determining violation. A licensee shall be deemed to have violated this section
if the licensee has been found to have violated sections 325D.49 to 325D.66, by a final
decision or order of a court of competent jurisdiction.

(c) Commissioner's authority. Nothing in this section limits the authority of the
commissioner to take actions against a licensee for fraudulent, deceptive, or dishonest
practices not specifically described in this section.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2008.
new text end

Sec. 3.

new text begin [82C.01] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Applicability. new text end

new text begin For purposes of this chapter, the terms defined in this
section have the meanings given.
new text end

new text begin Subd. 2. new text end

new text begin Home inspector. new text end

new text begin "Home inspector" or "inspector" means a person who,
for compensation, inspects a residential dwelling for the purpose of providing expert
advice to a prospective purchaser of the residential dwelling regarding the condition of the
structural, mechanical, electrical, and other functional aspects of the dwelling. The term
does not include a person who performs inspections as an employee of, or under contract
with, the state or one of its political subdivisions.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2008, and applies to
inspections performed on or after that date.
new text end

Sec. 4.

new text begin [82C.02] HOME INSPECTORS; REQUIREMENTS.
new text end

new text begin Subdivision 1. new text end

new text begin Written contract. new text end

new text begin A home inspector shall not inspect a residential
dwelling unless the home inspector has entered into a written contract with the customer
for that purpose. The contract must specify the services to be provided and the amount to
be charged for them. The contract must require that the inspector provide to the customer
a detailed written report of the inspection, signed and dated by the inspector.
new text end

new text begin Subd. 2. new text end

new text begin Bonding. new text end

new text begin Prior to entering into a contract to perform an inspection,
the home inspector must have in force a corporate surety bond, for the benefit of the
inspector's customers, from a company authorized to issue the bond in this state, in the
amount of at least $100,000, conditioned upon the home inspector performing home
inspections in a manner consistent with generally accepted standards for home inspections
in the community in which the inspection is performed. The name and address of the
bonding company must be included in the written contract required under subdivision 1.
new text end

new text begin Subd. 3. new text end

new text begin Limit on liability prohibited. new text end

new text begin A written contract required under this
section must not include a limit on the home inspector's liability for damages incurred by
the customer as a result of the inspector's failure to perform the inspection in a manner
consistent with generally accepted standards for home inspections in the community in
which the inspection is performed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2008, and applies to
inspections performed on or after that date.
new text end

Sec. 5.

Minnesota Statutes 2006, section 513.55, is amended to read:

513.55 GENERAL DISCLOSURE REQUIREMENTS.

Subdivision 1.

Contents.

(a) Before signing an agreement to sell or transfer
residential real property, the seller shall make a written disclosure to the prospective
buyer. The disclosure must include all material facts of which the seller is aware that
could adversely and significantly affect:

(1) an ordinary buyer's use and enjoyment of the property; or

(2) any intended use of the property of which the seller is aware.

(b) The disclosure must be made in good faith and based upon the best of the seller's
knowledge at the time of the disclosure.

new text begin (c) The disclosure required under paragraph (a) must include any past or present
water damage or water intrusion of which the seller is aware, regardless of whether the
seller considers it to be material or likely to affect the ordinary buyer's use, enjoyment,
or intended use of the property.
new text end

Subd. 2.

Disclosure to licensee.

A seller may provide the written disclosure
required under sections 513.52 to 513.60 to a real estate licensee representing or assisting
the prospective buyer. The written disclosure provided to the real estate licensee
representing or assisting the prospective buyer is considered to have been provided to
the prospective buyer. If the written disclosure is provided to the real estate licensee
representing or assisting the prospective buyer, the real estate licensee shall provide
a copy to the prospective buyer.

new text begin Subd. 3. new text end

new text begin Disclosure of insurance and liability claims. new text end

new text begin In addition to the other
disclosures required under sections 513.52 to 513.60, a seller shall disclose in writing at
the closing any homeowner's insurance claims, liability claims, or other claims made by
the seller or known to the seller within the 12 months prior to the closing with respect to
damage to the property and the status of any such claims, including whether the damage or
loss related to the claims has been repaired, replaced, or otherwise remedied.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2008, and applies to
purchases resulting from purchase agreements entered into on or after that date.
new text end

Sec. 6.

Minnesota Statutes 2006, section 513.57, subdivision 2, is amended to read:

Subd. 2.

Liability.

A seller who fails to make a disclosure as required by sections
513.52 to 513.60 and was aware of material facts pertaining to the real property is liable
to the prospective buyer. A person injured by a violation of this section may bring a
civil action and recover damages deleted text begin and receive other deleted text end new text begin ; new text end equitable relief as determined by the
court new text begin ; reasonable attorney fees; costs and disbursements; and a civil penalty determined
by the court in an amount not to exceed 50 percent of the damages new text end . An action under this
subdivision must be commenced within two years after the date on which the prospective
buyer closed the purchase or transfer of the real property.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2008, and applies to
purchases resulting from purchase agreements entered into on or after that date.
new text end