1.1 	A bill for an act
1.2 	relating to real property; regulating causes of action
1.3 	arising out of construction defects in residential
1.4 	housing; providing for notice and opportunity to
1.5 	repair; proposing coding for new law as Minnesota
1.6 	Statutes, chapter 337A.
1.7 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8 	Section 1. [337A.01] DEFINITIONS.
1.9 		Subdivision 1.Scope. For the purposes of this chapter,
1.10 	the following terms have the meanings given.
1.11 		Subd. 2.Action. An "action" or "cause of action" means
1.12 	any civil lawsuit, judicial action, or arbitration asserting a
1.13 	claim in excess of $7,500, including an action under section
1.14 	327A.05, in whole or in part, for damages or other relief in
1.15 	connection with a dwelling, or any failure to construct a
1.16 	dwelling in accordance with any applicable code, law, statute,
1.17 	ordinance, or regulation, caused by an alleged construction
1.18 	defect.
1.19 		Subd. 3.Association. An "association" has the meaning
1.20 	given in section 515.02, subdivision 5; 515A.1-103, clause (3);
1.21 	or 515B.1-103, clause (4).
1.22 		Subd. 4.Business day. A "business day" means Monday
1.23 	through Friday, excluding any holidays as defined in section
1.24 	645.44.
1.25 		Subd. 5.Claimant. A "claimant" means any person who
1.26 	asserts a claim relating to a construction defect.
2.1 		Subd. 6.Construction defect. A "construction defect" or
2.2 	"defect" has the meaning assigned by an express, written
2.3 	warranty provided by a contractor, or if no express warranty
2.4 	provides a definition, means a matter concerning the design,
2.5 	construction, or repair of a dwelling, of an alteration of or
2.6 	repair or addition to an existing dwelling, or of an
2.7 	appurtenance to a dwelling, on which a person has a complaint
2.8 	against a contractor.  A defect includes any physical damage to
2.9 	the dwelling or any appurtenance, or the real property on which
2.10 	the dwelling or appurtenance is affixed, caused by a
2.11 	construction defect.  A "major construction defect" has the
2.12 	meaning given in section 327A.01, subdivision 5.
2.13 		Subd. 7.Contractor. A "contractor" means any person,
2.14 	firm, partnership, corporation, or other organization that is
2.15 	engaged in the business of design, development, construction,
2.16 	alteration, addition to, or repair of, a new or existing
2.17 	dwelling, or of an appurtenance to a new or existing dwelling.
2.18 	A contractor includes an:
2.19 	(1) owner, officer, director, shareholder, partner, or
2.20 	employee of the contractor;
2.21 	(2) subcontractors, suppliers, and other agents of the
2.22 	contractor; and 
2.23 	(3) a risk retention group, if any, registered by law, that
2.24 	insures any part of a contractor's liability for the cost to
2.25 	repair a construction defect.
2.26 		Subd. 8.Dwelling. A "dwelling" means a single-family
2.27 	house, duplex, or multifamily unit designed for residential use
2.28 	in which title to each individual unit is transferred to the
2.29 	owner and shall include common areas and improvements that are
2.30 	owned or maintained by an association or members of the
2.31 	association.  A dwelling includes the systems, other components,
2.32 	improvements, other structures, or recreational facilities that
2.33 	are appurtenant to the single-family house, duplex, or
2.34 	multifamily unit at the time of its initial sale, but not
2.35 	necessarily a part of the single-family house, duplex, or
2.36 	multifamily unit.

3.1 	Sec. 2. [337A.02] NOTICE AND OPPORTUNITY TO REPAIR.
3.2 		Subdivision 1.Notice. Not later than 90 business days
3.3 	before filing a cause of action, the claimant must provide
3.4 	written notice to the contractor.  The written notice must be
3.5 	served by certified mail or personal service and must describe
3.6 	in sufficient detail the defect that the claimant is claiming
3.7 	has occurred.
3.8 		Subd. 2.Response. Within 30 business days of receipt of
3.9 	the notice in subdivision 1, the contractor must provide a
3.10 	written response to the claimant.  The response must be served
3.11 	by certified mail or personal service and must:
3.12 	(1) offer to settle the claim by a monetary payment, the
3.13 	making of repairs, or a combination of both; or 
3.14 	(2) propose to inspect the dwelling that is the subject of
3.15 	the claim.
3.16 		Subd. 3.Inspection; response; supplemental offer. (a)
3.17 	If a proposal for inspection is made under subdivision 2, the
3.18 	claimant, within 30 business days of receiving the response,
3.19 	must provide the contractor with timely access to the dwelling
3.20 	in order to inspect and document the claimed defect, and perform
3.21 	any testing reasonably necessary to evaluate the nature, extent,
3.22 	and cause of the claimed defect, and nature and extent of any
3.23 	repairs or replacements that may be required to remedy the
3.24 	claimed defect.
3.25 	(b) Within 14 business days of completing the inspection
3.26 	and testing, the contractor must provide a written response to
3.27 	the claimant.  The response must be served by certified mail or
3.28 	personal service and must:
3.29 	(1) offer to settle the claim by a monetary payment, making
3.30 	repairs, or a combination of both; or 
3.31 	(2) state that the contractor will not proceed further to
3.32 	remedy the claimed defect.
3.33 	(c) Within 15 business days of receiving a claimant's
3.34 	rejection of a settlement offer made under paragraph (b), the
3.35 	contractor may make a supplemental offer to settle the claim by
3.36 	a monetary payment, making repairs, or a combination of both.
4.1 		Subd. 4.Offer to make repairs. Any offer under
4.2 	subdivision 2 or 3 to remedy the claimed defect by making
4.3 	repairs shall include a detailed description of additional
4.4 	construction necessary to remedy the defect and an anticipated
4.5 	timetable for the completion of the construction.
4.6 		Subd. 5.Acceptance of settlement offer. (a) If the
4.7 	claimant accepts a settlement offer made in subdivision 2 or 3,
4.8 	including a supplemental offer, the claimant must provide
4.9 	written notice of the acceptance.  The acceptance must be served
4.10 	by certified mail or personal service within 30 business days of
4.11 	receipt of the offer.  The claimant may not file an action
4.12 	without responding to the settlement offer within 30 business
4.13 	days of receipt of the offer.
4.14 	(b) If the claimant accepts an offer to repair, the
4.15 	claimant must provide the contractor with timely access to the
4.16 	dwelling to complete the construction by the timetable agreed
4.17 	upon in the settlement offer.
4.18 	(c) If a claimant accepts, and a contractor performs in
4.19 	accordance with, a settlement offer made under this section:
4.20 	(1) the claimant is thereafter barred from bringing an
4.21 	action involving the defect.  If a subsequent defect is alleged,
4.22 	the claimant must provide notice to the contractor as provided
4.23 	by subdivision 1; and 
4.24 	(2) the contractor is deemed to have been legally obligated
4.25 	to make the repairs or monetary payment as if the claimant had
4.26 	recovered a judgment against the contractor in the amount of the
4.27 	cost of repairs or monetary payment, or a combination of both.
4.28 		Subd. 6.Rejection of claim; failure to respond; failure
4.29 	to provide notice. The claimant may, without further notice,
4.30 	file a cause of action if the contractor:
4.31 	(1) rejects the claim and will neither remedy the defect or
4.32 	settle the claim as provided in subdivision 2 or 3;
4.33 	(2) fails to serve a response to the claimant as required
4.34 	by subdivision 2 or 3; or 
4.35 	(3) fails to provide the notice required by section 337A.03.
4.36 		Subd. 7.Rejection of settlement offer. (a) If the
5.1 	claimant rejects a settlement offer made in subdivision 2 or 3,
5.2 	including a supplemental offer, the claimant must provide
5.3 	written notice of the rejection prior to commencing an action.
5.4 	The rejection must be served by certified mail or personal
5.5 	service within 30 business days of receipt of the offer and must
5.6 	specify the reasons known to the claimant for the rejection.  If
5.7 	the claimant believes the settlement offer omitted reference to
5.8 	any portion of the claim, or was unreasonable in its terms, the
5.9 	claimant must set forth those items of the claim the claimant
5.10 	believes were omitted or why the settlement offer was
5.11 	unreasonable.
5.12 	(b) In an action subsequently brought, if the court or
5.13 	arbitrator determines that the contractor has made a good faith
5.14 	and reasonable offer of settlement of the claim under
5.15 	subdivision 2 or 3, and that the claimant has rejected the
5.16 	offer, the claimant may not recover an amount in excess of the
5.17 	written settlement offer.
5.18 		Subd. 8.Failure to comply. If a claimant accepts a
5.19 	settlement offer pursuant to this section, and the contractor
5.20 	fails to make the monetary payment or remedy the defect within
5.21 	the agreed timetable, the claimant may, without further notice,
5.22 	file a cause of action.  The claimant may also file the
5.23 	settlement offer and acceptance which will create a rebuttable
5.24 	presumption that a binding and valid settlement agreement has
5.25 	been created and should be enforced by the court or arbitrator.
5.26 		Subd. 9.Additional defects. A defect that is discovered
5.27 	after the claimant has provided the original claim notice under
5.28 	subdivision 1 may not be alleged in an action until the claimant
5.29 	has provided the required notice and the contractor has been
5.30 	given opportunity to respond, as provided by this section.

5.31 	Sec. 3. [337A.03] CONTRACT FOR SALE.
5.32 	A contractor must include, in every contract for the sale
5.33 	of a dwelling to be completed and in every contract for the sale
5.34 	of home improvement work, the notice required by this section.
5.35 	The notice must be in at least 10-point bold type, if printed,
5.36 	or in capital letters, if typewritten, and must state as follows:
6.1 	"Minnesota law contains important procedures and
6.2 	requirements you must follow before you may file a lawsuit for
6.3 	defective construction against the contractor who constructed,
6.4 	or performed construction on, your home.  Failure to follow
6.5 	these procedures and requirements may affect your ability to
6.6 	file a lawsuit.  You must serve a written notice on the
6.7 	contractor of any construction conditions you believe to be
6.8 	defective 90 business days before you file your lawsuit.  A
6.9 	contractor has the opportunity to make an offer to repair or pay
6.10 	for the defects.  You are not obligated to accept an offer made
6.11 	by a contractor." 

6.12 	Sec. 4. [337A.04] DISMISSAL; RELATION TO OTHER LAWS.
6.13 	(a) Except as provided in paragraph (b) or (c), if a
6.14 	claimant has not complied with section 337A.02 before filing a
6.15 	cause of action, the court or arbitrator with whom the action
6.16 	has been filed shall dismiss the cause of action without
6.17 	prejudice.  The action may not be refiled until the claimant has
6.18 	complied with section 337A.02.
6.19 	(b) An action that includes a cause of action for damages
6.20 	due to personal injury or death is not subject to dismissal
6.21 	under section 337A.02.
6.22 	(c) A claimant may file an action if delay would preclude
6.23 	the action from being brought by section 541.051.  However, the
6.24 	court or arbitrator shall stay the proceedings pending
6.25 	compliance with this section.  This subdivision shall not be
6.26 	construed to revive or extend any applicable statute of
6.27 	limitation or repose periods set forth in section 541.051.  This
6.28 	section does not negate a claimant's duty to report loss or
6.29 	damage as required by section 327A.03, clause (a).
6.30 	(d) Nothing in this chapter creates a cause of action on
6.31 	behalf of a claimant or contractor.  Nothing in this chapter
6.32 	limits a contractor's right to seek contribution, indemnity, or
6.33 	recovery against a subcontractor, material supplier, or design
6.34 	professional for any claim made against a contractor.
6.35 	(e) Nothing in this chapter diminishes or enlarges the
6.36 	rights or responsibilities of a claimant or of an insurer,
7.1 	pursuant to contract or by law under any insurance contract.  If
7.2 	a contractor requests that its insurer indemnify the contractor
7.3 	against a claim made in accordance with this chapter, the
7.4 	insurer shall complete its investigation and inform the insured
7.5 	contractor of acceptance or denial of the claim within 30
7.6 	business days after receipt of notification of claim, as
7.7 	required by section 72A.201, subdivision 4.  If an insurer fails
7.8 	to accept or deny a claim within 30 business days after receipt
7.9 	of notification of the claim, the insurer waives its rights to
7.10 	claim that the insured contractor's subsequent efforts to
7.11 	resolve the claim violated the insurance contract's conditions
7.12 	or prejudiced the insurer in any way.

7.13 	Sec. 5. [337A.05] LIMITATION.
7.14 	In any action relating to a dwelling involving a
7.15 	construction defect, a contractor is not liable for:
7.16 	(1) loss or damage described in section 327A.03;
7.17 	(2) damages caused by the contractor's reliance on the
7.18 	written directive of a local or state building official;
7.19 	(3) damages involving a construction defect known by or
7.20 	disclosed to the claimant before the claimant's purchase of the
7.21 	dwelling, or that could have been discovered by the claimant
7.22 	through the exercise of reasonable diligence before the
7.23 	claimant's purchase of the dwelling; or 
7.24 	(4) refusal by the claimant or predecessor claimant to
7.25 	permit the contractor to perform warranty service work.

7.26 	Sec. 6. [337A.06] ACTIONS OF HOMEOWNER ASSOCIATIONS.
7.27 		Subdivision 1.Prohibition. (a) No person shall provide
7.28 	or offer to provide anything of value, directly or indirectly,
7.29 	to a property manager, member, or officer of an association, to
7.30 	encourage or discourage the association to file an action for
7.31 	damages arising from a construction defect.
7.32 	(b) No property manager, member, or officer of an
7.33 	association shall accept anything of value, directly or
7.34 	indirectly, in exchange for encouraging or discouraging the
7.35 	association from filing an action for damages arising from a
7.36 	construction defect.
8.1 	(c) Violation of this subdivision is a misdemeanor.
8.2 		Subd. 2.Action. No association may bring an action for
8.3 	damages arising from a construction defect against a contractor
8.4 	unless:
8.5 	(1) the action involves the common elements or limited
8.6 	common elements of the common interest ownership community;
8.7 	(2) the association obtains the written approval of each
8.8 	unit's owner whose interest in the common elements or limited
8.9 	common elements is the subject of the action;
8.10 	(3) a vote of the units' owners to which at least a
8.11 	majority of the votes of the members of the association are
8.12 	allocated;
8.13 	(4) the full board of directors of the association and the
8.14 	contractor have met and conferred in a good faith attempt to
8.15 	resolve the association's claim, or the contractor has declined
8.16 	or ignored the requests to meet with the board of directors of
8.17 	the association; and 
8.18 	(5) the association has complied with this chapter.
8.19 		Subd. 3.Vote. (a) At least three business days in
8.20 	advance of voting to bring an action against a contractor, the
8.21 	attorney representing the association shall provide each unit's
8.22 	owner a written statement that includes, in reasonable detail:
8.23 	(1) the defect and the nature and extent of damages or
8.24 	injuries to the common elements or limited common elements
8.25 	resulting from the defect, if known;
8.26 	(2) the cause and location of the defect, if known;
8.27 	(3) an estimate of the cost of the action, including
8.28 	reasonable attorney's fees, costs, and fees, including expert
8.29 	and testing fees; and 
8.30 	(4) all disclosures that the unit owner is required to make
8.31 	upon sale of the unit.
8.32 	(b) At least 21 calendar days in advance of voting to bring
8.33 	an action against a contractor, the association must provide
8.34 	written notice of each unit owner of the meeting at which the
8.35 	vote will be considered.
8.36 		Subd. 4.Testing. An association or an attorney for an
9.1 	association shall not employ a person to perform testing to
9.2 	determine damage or injury to a unit, common element, or limited
9.3 	common element, unless:
9.4 	(1) the person is licensed under chapter 326;
9.5 	(2) the association has obtained the prior written approval
9.6 	of each unit's owner whose interest in the common elements or
9.7 	limited common elements is the subject of the action;
9.8 	(3) the person performing the tests is required to repair
9.9 	all damage resulting from the test in accordance with state and
9.10 	local law and has provided a written schedule for repairs; and 
9.11 	(4) prior notice and opportunity to observe the test is
9.12 	given to the contractor against whom an action may be brought as
9.13 	a result of the tests.
9.14 		Subd. 5.Exception. The board of directors of an
9.15 	association may, without giving notice, employ a contractor to
9.16 	make immediate and necessary repairs to a unit or common element
9.17 	within the common interest ownership community in order to
9.18 	protect the health, safety, and welfare of the unit owners.

9.19 	Sec. 7. EFFECTIVE DATE.
 9.20 	This act is effective the day following final enactment and
9.21 	applies to all actions commenced on or after that date.