HF 536

as introduced - 88th Legislature (2013 - 2014) Posted on 02/18/2013 02:06pm

A bill for an act
relating to real property; creating a notice requirement for sellers in real estate
sales for contracts for deed; creating a civil action remedy for violations of the
notice requirements for contracts for deed; amending Minnesota Statutes 2012,
sections 82.55, subdivision 19; 507.235, subdivision 2; 559.211, subdivision 2;
proposing coding for new law in Minnesota Statutes, chapter 559; repealing
Minnesota Statutes 2012, section 507.235, subdivision 4.

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

Section 1.

Minnesota Statutes 2012, section 82.55, subdivision 19, is amended to read:

Subd. 19.

Real estate broker; broker.

"Real estate broker" or "broker" means
any person who:

(a) for another and for commission, fee, or other valuable consideration or with
the intention or expectation of receiving the same directly or indirectly lists, sells,
exchanges, buys or rents, manages, or offers or attempts to negotiate a sale, option,
exchange, purchase or rental of an interest or estate in real estate, or advertises or holds
out as engaged in these activities;

(b) for another and for commission, fee, or other valuable consideration or with
the intention or expectation of receiving the same directly or indirectly negotiates or
offers or attempts to negotiate a loan, secured or to be secured by a mortgage or other
encumbrance on real estate, which is not a residential mortgage loan as defined by section
58.02, subdivision 18;

(c) "real estate broker" or "broker" as set forth in clause (b) shall not apply to the
originating, making, processing, selling, or servicing of a loan in connection with the
ordinary business activities of a mortgagee, lender, or servicer approved or certified
by the secretary of Housing and Urban Development, or approved or certified by the
administrator of Veterans Affairs, or approved or certified by the administrator of the
Farmers Home Administration, or approved as a multifamily seller/servicer by the Federal
Home Loan Mortgage Corporation, or as a multifamily partner approved by the Federal
National Mortgage Association;

(d) for another and for commission, fee, or other valuable consideration or with the
intention or expectation of receiving the same directly or indirectly lists, sells, exchanges,
buys, rents, manages, offers or attempts to negotiate a sale, option, exchange, purchase or
rental of any business opportunity or business, or its good will, inventory, or fixtures, or
any interest therein;

(e) for another and for commission, fee, or other valuable consideration or with
the intention or expectation of receiving the same directly or indirectly offers, sells or
attempts to negotiate the sale of property that is subject to the registration requirements of
chapter 83, concerning subdivided land;

(f) for another and for commission, fee, or other valuable consideration or with
the intention or expectation of receiving the same, promotes the sale of real estate by
advertising it in a publication issued primarily for this purpose, if the person:

(1) negotiates on behalf of any party to a transaction;

(2) disseminates any information regarding the property to any party or potential
party to a transaction subsequent to the publication of the advertisement, except that
in response to an initial inquiry from a potential purchaser, the person may forward
additional written information regarding the property which has been prepared prior to the
publication by the seller or broker or a representative of either;

(3) counsels, advises, or offers suggestions to the seller or a representative of the
seller with regard to the marketing, offer, sale, or lease of the real estate, whether prior
to or subsequent to the publication of the advertisement;

(4) counsels, advises, or offers suggestions to a potential buyer or a representative of
the seller with regard to the purchase or rental of any advertised real estate; or

(5) engages in any other activity otherwise subject to licensure under this chapter;

(g) engages wholly or in part in the business of selling real estate to the extent that a
pattern of real estate sales is established, whether or not the real estate is owned by the
person. A person shall be presumed to be engaged in the business of selling real estate if
the person engages as principal in deleted text begin five deleted text end new text begin three new text end or more transactions during any 12-month
period, unless the person is represented by a licensed real estate broker or salesperson.

Sec. 2.

Minnesota Statutes 2012, section 507.235, subdivision 2, is amended to read:

Subd. 2.

Penalty for failure to file.

(a) A vendee who fails to record a contract for
deed, as required by subdivision 1, is subject to a civil penalty, payable under subdivision
5, equal to two percent of the principal amount of the contract debt new text begin , unless the vendee
has not received a copy of the contract for deed in recordable form, as required under
subdivision 1a new text end . Payments of the penalty shall be deposited in the general fund of the
county. The penalty may be enforced as a lien against the vendee's interest in the property.

(b) A person receiving an assignment of a vendee's interest in a contract for deed
who fails to record the assignment as required by subdivision 1 is subject to a civil penalty,
payable under subdivision 5, equal to two percent of the original principal amount of the
contract debt. Payments of the penalty must be deposited in the general fund of the county.
The penalty may be enforced as a lien against the vendee's interest in the property.

Sec. 3.

new text begin [559.201] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Application. new text end

new text begin The definitions in this section apply to section 559.202.
new text end

new text begin Subd. 2. new text end

new text begin Business day. new text end

new text begin "Business day" means any day other than a Saturday,
Sunday, or holiday as defined in section 645.44, subdivision 5.
new text end

new text begin Subd. 3. new text end

new text begin Family farm security loan. new text end

new text begin "Family farm security loan" has the meaning
given in Minnesota Statutes 2008, section 41.52, subdivision 5.
new text end

new text begin Subd. 4. new text end

new text begin Multiple seller. new text end

new text begin "Multiple seller" means a person that has acted as the
seller in two or more contracts for deed involving residential real property in Minnesota in
any calendar year. Multiple seller also includes a person who has acted in joint venture
or joint enterprise with one or more persons who have sold residential real estate on
a contract for deed.
new text end

new text begin Subd. 5. new text end

new text begin Person. new text end

new text begin "Person" means a natural person, partnership, corporation, limited
liability company, association, trust, or other legal entity, however organized.
new text end

new text begin Subd. 6. new text end

new text begin Purchase agreement. new text end

new text begin "Purchase agreement" means a purchase agreement
for a contract for deed, an earnest money contract, or an executed option contemplating
that, at closing, the seller and the purchaser will enter into a contract for deed.
new text end

new text begin Subd. 7. new text end

new text begin Purchaser. new text end

new text begin "Purchaser" means a natural person who enters into a contract
for deed to purchase residential real property. Purchaser includes all purchasers who enter
into the same contract for deed to purchase residential real property.
new text end

new text begin Subd. 8. new text end

new text begin Residential real property. new text end

new text begin "Residential real property" means real property
consisting of one to four family dwelling units, one of which the purchaser intends to
occupy as the purchaser's principal place of residence. Residential real property does
not include property subject to a family farm security loan or a transaction subject to
sections 583.20 to 583.32.
new text end

Sec. 4.

new text begin [559.202] CONTRACTS FOR DEED INVOLVING RESIDENTIAL
PROPERTY.
new text end

new text begin Subdivision 1. new text end

new text begin Notice. new text end

new text begin (a) In addition to the disclosures required under sections
513.52 to 513.60, a multiple seller must deliver a notice to a prospective purchaser:
new text end

new text begin (1) at least seven business days before the purchaser signs the purchase agreement; or
new text end

new text begin (2) if there is no purchase agreement, at least ten business days before the purchaser
signs the contract for deed.
new text end

new text begin (b) The notice must be:
new text end

new text begin (1) provided in a document separate from any other document or writing;
new text end

new text begin (2) written in both English and in any other language used to negotiate the
transaction; and
new text end

new text begin (3) signed and dated by the purchaser.
new text end

new text begin (c) The notice required under this subdivision must contain the title "Important
Information About Contracts for Deed" and the title must be in 14-point, bold type and
centered on the first page of the notice required under this subdivision. All other text must
be in 12-point type with a double space between each disclosure.
new text end

new text begin (d) If a dispute arises concerning whether or when the notice required by this
subdivision was provided to the purchaser, there is a rebuttable presumption that the notice
was not provided if the multiple seller cannot produce a copy of the notice signed and
dated by the purchaser.
new text end

new text begin (e) The notice must contain the following language:
new text end

new text begin "IMPORTANT INFORMATION ABOUT CONTRACTS FOR DEED
new text end

new text begin Key Things to Know Before You Sign
new text end

new text begin (1) A contract for deed is a complex legal agreement. You should know ALL of your
obligations and rights before you sign a purchase agreement or contract for deed.
new text end

new text begin (2) As a contract for deed purchaser you are NOT a tenant and the laws protecting tenants
do not apply. The seller usually does not maintain or repair the property.
new text end

new text begin (3) Your contract for deed places obligations on you that a tenant does not have, for
example, you (seller must circle one):
new text end

new text begin (i) new text end	new text begin DO new text end	new text begin DO NOT new text end	new text begin have to pay property taxes. new text end
new text begin (ii) new text end	new text begin DO new text end	new text begin DO NOT new text end	new text begin have to pay homeowner's insurance premiums. new text end
new text begin (iii) new text end	new text begin DO new text end	new text begin DO NOT new text end	new text begin have to make and pay for some or all of the repairs. new text end

new text begin (4) You will probably need to make a large lump sum payment (called a "balloon
payment"). You should know when you will have to make that payment and how much it
will be. You will probably need to get a new mortgage from a bank at that time.
new text end

new text begin (5) If you miss just a single payment or can't make the balloon payment, the seller can
cancel your contract and:
new text end

new text begin (i) you will likely lose all the money you have already paid;
new text end

new text begin (ii) you will likely lose your ability to purchase the home; and
new text end

new text begin (iii) the seller can likely evict you in 60 days.
new text end

new text begin Key Things to Do Before You Sign
new text end

new text begin Before you sign the purchase agreement or the contract for deed, you should:
new text end

new text begin (1) Get advice from a lawyer or the Minnesota Home Ownership Center at 1-866-462-6466.
new text end

new text begin (2) Get an independent, professional appraisal of the property to find out how much it
is worth.
new text end

new text begin (3) Get an independent, professional inspection of the property.
new text end

new text begin (4) Buy title insurance.
new text end

new text begin (5) Call the county where the property is located to find out if there is a mortgage lien
on the property and if the property taxes have been paid.
new text end

new text begin (6) Call the city where the property is located to find out if there are inspection reports on
file for the property, and if the city is aware of unpaid utility bills.
new text end

new text begin Your Right to Cancel the Purchase Agreement
new text end

new text begin (1) The seller must give you this notice seven business days or more before you sign a
purchase agreement (or ten business days or more before you sign the contract for deed if
there is no purchase agreement).
new text end

new text begin (2) You should take this time to consider the information in the notice and to ask for advice
from a lawyer or the Minnesota Home Ownership Center (their number is 1-866-462-6466).
new text end

new text begin (3) If you DO sign a purchase agreement, you can cancel it and get your money back if:
new text end

new text begin (i) you do not get this notice seven days or more before you sign the purchase agreement;
and
new text end

new text begin (ii) you haven't already signed the contract for deed.
new text end

new text begin (4) To cancel, you must give or mail a written notice of cancellation to the seller (or to
an agent who is assisting the seller), and you must do so:
new text end

new text begin (i) within seven business days after you get this paper; and
new text end

new text begin (ii) BEFORE you sign the contract for deed."
new text end

new text begin Subd. 2. new text end

new text begin Remedies for failure to timely deliver notices. new text end

new text begin (a) Notwithstanding any
contrary provision in the contract for deed, a purchaser has a private right of action against
a multiple seller who fails to timely deliver the notice required under subdivision 1. The
multiple seller is liable to the purchaser for an amount equal to three contract payments.
The amount due to the purchaser must be applied to offset outstanding contract installment
payments past due or next due under the contract for deed.
new text end

new text begin (b) No notice of cancellation of the contract for deed based on nonpayment and
served or published pursuant to section 559.21 is effective unless delinquencies remain
after the application of the offset.
new text end

new text begin (c) The right to offset expires upon cancellation of the contract for deed in accordance
with applicable law. Recordation of the documents specified in section 559.213 constitutes
prima facie evidence that any right to offset under this subdivision has expired.
new text end

new text begin (d) A purchaser required to commence or defend an action to enforce the remedies
provided under this subdivision is entitled to reasonable attorney fees and costs.
new text end

new text begin Subd. 3. new text end

new text begin Additional remedies for bad faith violations. new text end

new text begin (a) A multiple seller who
acts in bad faith in failing to timely deliver the notice required under subdivision 1 is
liable to the purchaser for:
new text end

new text begin (1) an amount equal to three times the amount of the penalty in subdivision 2,
paragraph (a);
new text end

new text begin (2) attorney fees; and
new text end

new text begin (3) court costs.
new text end

new text begin (b) The sanctions in paragraph (a) are in addition to what the purchaser is entitled to
in subdivision 2, paragraph (a).
new text end

new text begin (c) The rights and remedies provided in this subdivision are cumulative to, and not
a limitation of, any other rights and remedies provided by the law. Any action brought
pursuant to this subdivision must be commenced within four years from the date of the
alleged violation.
new text end

new text begin Subd. 4. new text end

new text begin Right to cancel purchase agreement. new text end

new text begin (a) A natural person may rescind
the purchase agreement within seven business days after actually receiving the notice
required under subdivision 2 if a multiple seller fails to timely deliver the notice, provided
that the person has not executed the contract for deed.
new text end

new text begin (b) Cancellation of the purchase agreement is effective upon delivery of a written
notice of cancellation to the multiple seller or the licensed agent assisting the multiple
seller. Delivery may be made by hand or by United States mail to the last known address
of the multiple seller or the multiple seller's agent.
new text end

new text begin (c) In the event of cancellation, the multiple seller may not impose a penalty and
must promptly refund all payments made by the person prior to cancellation.
new text end

new text begin Subd. 5. new text end

new text begin Duty of multiple seller to account. new text end

new text begin (a) In addition to any other legal
duties the multiple seller is obligated to perform, the multiple seller must, by January 30
of each year, provide on a form acceptable to the Internal Revenue Service for tax filing
a statement indicating the interest paid by the purchaser to the multiple seller under the
contract for the previous calendar year.
new text end

new text begin (b) Upon request by the purchaser, a multiple seller must provide an accounting of
all payments made pursuant to the contract for deed, the amount of interest paid, and the
amount remaining to satisfy the principal balance under the contract.
new text end

new text begin Subd. 6. new text end

new text begin Records. new text end

new text begin A multiple seller must retain copies of all signed notices required
under subdivision 2 for four years from the date the notice was signed and dated.
new text end

new text begin Subd. 7. new text end

new text begin No waiver. new text end

new text begin The provisions of this section may not be waived.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective August 1, 2013, and applies to
purchase agreements for contracts for deed and to contracts for deed that involve
residential real property and are entered into on or after that date.
new text end

Sec. 5.

Minnesota Statutes 2012, section 559.211, subdivision 2, is amended to read:

Subd. 2.

Remedies additional.

The remedies provided in this section are in
addition to and do not limit other rights or remedies available to purchasers or vendors of
real estate. new text begin Subject to the provisions of sections 559.213 and 559.217, subdivision 7, this
section shall not be construed to bar a court from determining the validity, effectiveness,
or consequences of proceeding under section 559.21 or 559.217, or granting other relief in
connection therewith, by reason of the failure of a purchaser to seek or obtain relief under
this section prior to the purported effective date of the termination of the contract.
new text end

Sec. 6. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2012, section 507.235, subdivision 4, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end