SF 308

1st Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

A bill for an act
relating to housing; creating a blighted housing rehabilitation program; providing
for transfer of possession or ownership of nuisance properties to nonprofit
housing organizations; proposing coding for new law in Minnesota Statutes,
chapter 463.

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

Section 1.

new text begin [463.270] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin As used in sections 463.270 to 463.277, the terms defined in
this section have the meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin Last known address. new text end

new text begin "Last known address" includes the address where
the property is located or the address as listed in the tax records.
new text end

new text begin Subd. 3. new text end

new text begin Low- or moderate-income housing. new text end

new text begin "Low- or moderate-income housing"
means housing for persons and families whose income does not exceed 80 percent of the
greater of state median income or area or county median income as determined by the
federal Department of Housing and Urban Development.
new text end

new text begin Subd. 4. new text end

new text begin Nonprofit housing organization. new text end

new text begin "Nonprofit housing organization" or
"organization" means a nonprofit corporation organized under chapter 317A or similar law
of another state that has as one of its purposes the improvement of housing. Nonprofit
housing organization includes a church, or convention or association of churches, or
an organization operated primarily for religious purposes that is operated, supervised,
controlled, or principally supported by a church or convention or association of churches
described in United States Code, title 26, section 501(c)(3), of the federal Internal Revenue
Code and exempt from income tax under section 501(a).
new text end

new text begin Subd. 5. new text end

new text begin Nuisance. new text end

new text begin "Nuisance" means any property that because of its physical
condition or use is a public nuisance, or any property that constitutes a blight on the
surrounding area, or any property that is not fit for human habitation under the applicable
fire, building, and housing codes. Nuisance also means any property on which any illegal
activity involving controlled substances as defined in section 152.01, subdivision 4, or
marijuana takes place or any property on which any illegal activity by a criminal gang,
as defined in section 609.229, subdivision 1, takes place.
new text end

new text begin Subd. 6. new text end

new text begin Parties in interest. new text end

new text begin "Parties in interest" means any owner or owners of
record, judgment creditor, tax purchaser, or other party having any legal or equitable
title or interest in the property.
new text end

new text begin Subd. 7. new text end

new text begin Property. new text end

new text begin "Property" means any residential real estate that has been
continuously unoccupied by persons legally in possession for the preceding 365 days.
new text end

new text begin Subd. 8. new text end

new text begin Rehabilitation. new text end

new text begin "Rehabilitation" means the process of improving the
property including, but not limited to, bringing property into compliance with applicable
fire, housing, and building codes.
new text end

Sec. 2.

new text begin [463.271] PETITION FOR TEMPORARY POSSESSION.
new text end

new text begin Subdivision 1. new text end

new text begin General requirements. new text end

new text begin (a) A nonprofit housing organization may
bring a petition for temporary possession of property if:
new text end

new text begin (1) the property has been continuously unoccupied by persons legally in possession
for the preceding year;
new text end

new text begin (2) the property is a nuisance;
new text end

new text begin (3) the organization intends to rehabilitate the property and use the property as
housing for low- and moderate-income persons and families; and
new text end

new text begin (4) the organization has sent notice to the parties in interest of the property, by
certified or registered mail, mailed to the parties' last known address and posted on the
property at least 30 but not more than 60 days before the date the petition is brought, of
the organization's intent to bring a petition for possession under section 463.272.
new text end

new text begin (b) A proceeding under this section may be commenced as a civil action in
district court in the county in which the property is located. The petition must allege
the conditions specified in paragraph (a). All parties in interest of the property must be
named as respondents in the petition. Before a hearing on the petition, the petitioner shall
record a notice of the pendency of the petition with the county recorder or the registrar
of titles in the case of registered property and shall publish at least one notice of the
petition in a qualified newspaper.
new text end

new text begin (c) The appointment of the organization as the temporary possessor is not a taking of
the property, but is a remedy to abate the nuisance.
new text end

new text begin Subd. 2. new text end

new text begin Hearing. new text end

new text begin (a) At the hearing on the petition, the organization shall submit
to the court a plan for the rehabilitation of the property and present evidence that the
organization has adequate resources to rehabilitate and manage the property. For the
purpose of developing a plan, representatives of the organization may be permitted entry
onto the property by the court at times and on terms as the court deems appropriate.
new text end

new text begin (b) Upon request, the court shall grant a respondent 120 days to bring the property
into compliance with applicable fire, housing, and building codes, provided that the
respondent submits a plan to the court that is reasonably sufficient for these purposes. The
court may, for good cause shown, extend the compliance period. If the property is brought
into compliance within the compliance period, the court shall dismiss the petition. If the
respondent fails to bring the property into compliance within the compliance period, the
court shall consider the petition.
new text end

Sec. 3.

new text begin [463.272] REHABILITATION ORDER.
new text end

new text begin If the court approves the petition, the court shall enter an order approving the
rehabilitation plan and granting temporary possession of the property to the organization.
The organization may, subject to court approval, enter into leases or other agreements
in relation to the property. The organization shall bring the property into compliance
with applicable fire, housing, and building codes, and obtain all necessary permits. The
organization shall complete the code compliance work no later than six months from taking
temporary possession. The court may, for good cause, extend the compliance period.
new text end

Sec. 4.

new text begin [463.2725] ORGANIZATION POWERS AND LIABILITY.
new text end

new text begin Subdivision 1. new text end

new text begin Powers. new text end

new text begin The organization shall have the following powers:
new text end

new text begin (1) to collect rents from residential tenants, evict residential tenants for nonpayment
of rent or other cause, enter into leases for vacant dwelling units, and exercise other
powers necessary and appropriate to carry out the purposes of this section;
new text end

new text begin (2) to contract for the reasonable cost of materials, labor, and services including
utility services provided by a third party necessary for the rehabilitation of the property to
maintain safe and habitable conditions over the useful life of the property, and disburse
money for these purposes from funds available for the purpose;
new text end

new text begin (3) to provide services to the residential tenants that a landlord is obligated to
provide and pay for them from funds available for the purpose;
new text end

new text begin (4) to petition the court, after notice to the parties, for an order allowing the
organization to encumber the property to secure funds to the extent necessary to cover the
costs described in clause (2), including reasonable fees for the organization's services, and
to pay for the costs from funds derived from the encumbrance. The encumbrance shall
become a first lien as provided in section 463.277; and
new text end

new text begin (5) to petition the court, after notice to the parties, for an order allowing the
organization to receive funds made available for this purpose by the federal or state
governing body or the municipality to the extent necessary to cover the costs described in
clause (2) and pay for them from funds derived from this source.
new text end

new text begin The municipality shall recover disbursements under clause (5) by special assessment
on the real estate affected, bearing interest at the rate determined by the municipality, but
not to exceed the rate established for finance charges for open-end credit sales under
section 334.16, subdivision 1, paragraph (b). The assessment, interest, and any penalties
shall be collected as are special assessments made for other purposes under state statute or
municipal charter.
new text end

new text begin Subd. 2. new text end

new text begin Liability. new text end

new text begin The organization may not be held personally liable in the
performance of duties under this section, except for misfeasance, malfeasance, or
nonfeasance of office.
new text end

Sec. 5.

new text begin [463.273] ANNUAL REPORT.
new text end

new text begin The organization shall file an annual report with the court in relation to the
rehabilitation and use of the property. The court shall require reports and status updates to
be filed as it deems appropriate under the circumstances but no less frequently than once
per year. The report shall include statements of all expenditures made by the organization
including, but not limited to, payments for the rehabilitation, operation, and maintenance
of and repairs to the property, and for real estate taxes, and payments to mortgagees and
lienholders during the preceding year, and shall include statements of all income and
receipts from the property for the preceding year.
new text end

Sec. 6.

new text begin [463.274] RIGHTS OF OWNER.
new text end

new text begin An owner is entitled to regain possession of the property by petitioning to the court
for restoration of possession and, upon due notice to the organization, for a hearing on the
petition. At the hearing, the court shall determine proper compensation to the organization
for its expenditures, including management fees, based on the organization's reports to
the court. The court, in determining the proper compensation to the organization, may
consider income or receipts received from the property, and the increase in the market
value of the property resulting from the rehabilitation by the organization. In no event
shall the amount paid be less than the amount spent by the organization plus management
fees and interest. After the owner pays the compensation to the organization as determined
by the court, the owner shall resume possession of the property, subject to all existing
rental agreements, whether written or verbal, entered into by the organization.
new text end

Sec. 7.

new text begin [463.275] PROPERTY REDEMPTION.
new text end

new text begin If the property is sold for unpaid taxes, an organization with temporary possession
may redeem the property in the same manner as the owner is permitted, and amounts paid
to redeem the property shall be included as expenditures in the organization's report to
the court.
new text end

Sec. 8.

new text begin [463.276] PETITION FOR TRANSFER OF OWNERSHIP.
new text end

new text begin If an owner takes no action to regain possession of the property in the six months
following entry of an order granting temporary possession of the property to the
organization, the organization may file a petition for an order transferring ownership of the
property to the organization. Upon due notice to the named respondents, an order may
be entered transferring ownership to the organization. The order must specify that the
property be used for low- and moderate-income housing for at least a ten-year period after
the order is entered, if the organization is renting the property. The organization may sell
the property to low- or moderate-income home buyers. The ten-year restrictive covenant
does not transfer to the low- or moderate-income buyer. The title shall be incontestable to
the purchaser. The organization must record the deed at the county.
new text end

Sec. 9.

new text begin [463.277] PRIORITY OF LIENS.
new text end

new text begin All expenses related to rehabilitation and administration incurred by the organization
with temporary possession of the property, and any notes issued for rehabilitation, are a
first lien on the property.
new text end