1.1                          A bill for an act 
  1.2             relating to builders; contractor's recovery fund; 
  1.3             adding subcontractors to those who can access the 
  1.4             recovery fund; modifying the contribution schedule; 
  1.5             amending Minnesota Statutes 1996, section 326.975. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  Minnesota Statutes 1996, section 326.975, is 
  1.8   amended to read: 
  1.9      326.975 [CONTRACTOR'S RECOVERY FUND.] 
  1.10     Subdivision 1.  [GENERALLY.] (a) In addition to any other 
  1.11  fees, each applicant for a license under sections 326.83 to 
  1.12  326.98 shall pay a fee to the contractor's recovery fund.  The 
  1.13  contractor's recovery fund is created in the state treasury and 
  1.14  must be administered by the commissioner in the manner and 
  1.15  subject to all the requirements and limitations provided by 
  1.16  section 82.34 with the following exceptions: 
  1.17     (1) each licensee who renews a license shall pay in 
  1.18  addition to the appropriate renewal fee an additional fee which 
  1.19  shall be credited to the contractor's recovery fund.  The amount 
  1.20  of the fee shall be based on the licensee's gross annual 
  1.21  receipts for the licensee's most recent fiscal year preceding 
  1.22  the renewal, on the following scale: 
  1.23            Fee           Gross Receipts
  1.24            $100          under $1,000,000
  1.25            $150          $1,000,000 to $5,000,000
  2.1             $200          over $5,000,000
  2.2   Any person who receives a new license shall pay a fee based on 
  2.3   the same scale; 
  2.4      (2) the recovery fund fee described in clause (1) shall be 
  2.5   reduced according to the funds claims experience with that 
  2.6   contractor as follows: 
  2.7      no claims for two years              10 percent reduction 
  2.8      no claims for three years            20 percent reduction 
  2.9      no claims for four years             30 percent reduction 
  2.10     no claims for five years             40 percent reduction 
  2.11     no claims for six years or more      50 percent reduction; 
  2.12     (3) the sole purpose of this fund is to compensate any 
  2.13  aggrieved owner or lessee of residential property, or any 
  2.14  aggrieved subcontractor or material supplier who furnishes 
  2.15  materials or labor to a licensee during construction of a 
  2.16  residential unit, who obtains a final judgment in any court of 
  2.17  competent jurisdiction against a licensee licensed under section 
  2.18  326.84, on grounds of fraudulent, deceptive, or dishonest 
  2.19  practices, conversion of funds, or failure of performance 
  2.20  arising directly out of any transaction when the judgment debtor 
  2.21  was licensed and performed any of the activities enumerated 
  2.22  under section 326.83, subdivision 19, on the owner's residential 
  2.23  property or on residential property rented by the lessee, or on 
  2.24  new residential construction which was never occupied prior to 
  2.25  purchase by the owner, or which was occupied by the licensee for 
  2.26  less than one year prior to purchase by the owner, and which 
  2.27  cause of action for an owner or a lessee arose on or after April 
  2.28  1, 1994, or for a subcontractor or material supplier arose on or 
  2.29  after the effective date of this section; 
  2.30     (3) (4) nothing may obligate the fund for more than $50,000 
  2.31  per claimant, nor more than $50,000 per licensee; and 
  2.32     (4) (5) nothing may obligate the fund for claims based on a 
  2.33  cause of action that arose before the licensee paid the recovery 
  2.34  fund fee set in clause (1), or as provided in section 326.945, 
  2.35  subdivision 3.  
  2.36     (b) Should the commissioner pay from the contractor's 
  3.1   recovery fund any amount in settlement of a claim or toward 
  3.2   satisfaction of a judgment against a licensee, the license shall 
  3.3   be automatically suspended upon the effective date of an order 
  3.4   by the court authorizing payment from the fund.  No licensee 
  3.5   shall be granted reinstatement until the licensee has repaid in 
  3.6   full, plus interest at the rate of 12 percent a year, twice the 
  3.7   amount paid from the fund on the licensee's account, and has 
  3.8   obtained a surety bond issued by an insurer authorized to 
  3.9   transact business in this state in the amount of at least 
  3.10  $40,000.  
  3.11     Subd. 2.  [ACCELERATED CLAIMS PAYMENT.] Recovery fund 
  3.12  claims that do not exceed the jurisdiction limits for 
  3.13  conciliation court matters as specified in section 491A.01 shall 
  3.14  be paid on an accelerated basis if all of the following 
  3.15  requirements have been satisfied: 
  3.16     (a) When any aggrieved person obtains a judgment in any 
  3.17  court of competent jurisdiction, regardless of whether the 
  3.18  judgment has been discharged by a bankruptcy court against a 
  3.19  residential building contractor or residential remodeler on 
  3.20  grounds specified in subdivision 1, paragraph (a), 
  3.21  clause (2) (3), the aggrieved person may file a verified 
  3.22  application with the commissioner for payment out of the fund of 
  3.23  the amount of actual and direct out-of-pocket loss in the 
  3.24  transaction, but excluding any attorney fees, interest on the 
  3.25  loss and on any judgment obtained as a result of the loss, up to 
  3.26  the conciliation court jurisdiction limits, of the amount unpaid 
  3.27  upon the judgment.  For purposes of this section, persons who 
  3.28  are joint tenants or tenants in common are deemed to be a single 
  3.29  claimant. 
  3.30     (b) The commissioner has sent the licensee a copy of the 
  3.31  verified application by first-class mail to the licensee's 
  3.32  address as it appears in the records of the department of 
  3.33  commerce with a notice that the claim will be paid 15 days from 
  3.34  the date of the notice unless the licensee notifies the 
  3.35  commissioner prior to that date of the commencement of an appeal 
  3.36  of the judgment, if the time for appeal has not expired, and 
  4.1   that payment of the claim will result in automatic suspension of 
  4.2   the licensee's license. 
  4.3      (c) If the licensee does not notify the commissioner of the 
  4.4   commencement of an appeal, the commissioner shall pay the claim 
  4.5   at the end of the 15-day period. 
  4.6      (d) If an appeal is commenced, the payment of the claim is 
  4.7   stayed until the conclusion of the appeal. 
  4.8      (e) The commissioner may pay claims which total no more 
  4.9   than $15,000 against the licensee under this accelerated 
  4.10  process.  The commissioner may prorate the amount of claims paid 
  4.11  under this subdivision if claims in excess of $15,000 against 
  4.12  the licensee are submitted.  Any unpaid portions of such claims 
  4.13  shall be satisfied in the manner set forth in subdivision 1. 
  4.14     Subd. 3.  [APPROPRIATION.] Money in the contractor's 
  4.15  recovery fund is appropriated to the commissioner for the 
  4.16  purposes of this section. 
  4.17     Sec. 2.  [EFFECTIVE DATE.] 
  4.18     Section 1 is effective on the day following final enactment.