Minnesota Legislature
SF 411
1st Engrossment - 88th Legislature (2013 - 2014) Posted on 05/20/2013 10:05am
Current Version - 1st Engrossment
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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,
section 507.235, 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 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 debtnew text begin , unless the vendee
has not received a copy of the contract for deed in recordable form, as required under
subdivision 1anew 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. 2.
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[559.201] DEFINITIONS.
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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 a seller
in four or more contracts for deed involving residential real property during the 12-month
period that precedes:
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(1) the date on which the purchaser executes a purchase agreement under section
559.202; or
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(2) if there is no purchase agreement, the date on which the purchaser executes a
contract for deed under section 559.202.
new text end
new text begin
A contract for deed transaction that is exempt under section 559.202, subdivision 2, is a
contract for deed transaction for purposes of determining whether a seller is a multiple
seller.
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. 3.
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[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 the notice under subdivision 3 to a
prospective purchaser as provided under this subdivision.
new text end
new text begin
(b) If there is a purchase agreement, the notice must be affixed to the front of
the purchase agreement. A contract for deed for which notice is required under this
subdivision may not be executed for five business days following the execution of the
purchase agreement and delivery of the notice and instructions for cancellation.
new text end
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(c) If there is no purchase agreement, a multiple seller must deliver the notice in a
document separate from any other document or writing to a prospective purchaser no less
than five business days before the prospective purchaser executes the contract for deed.
new text end
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(d) The notice must be:
new text end
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(1) written in at least 12-point type; and
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(2) signed and dated by the purchaser.
new text end
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(e) 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 unless the original executed contract for deed contains the following
statement, initialed by the purchaser: "By initialing here ....... purchaser acknowledges
receipt at least five business days before signing this contract for deed of the disclosure
statement entitled "Important Information About Contracts for Deed" required by
Minnesota Statutes, section 559.202, subdivision 3."
new text end
new text begin Subd. 2. new text end
new text begin Exemption. new text end
new text begin
This section does not apply if the purchaser is represented
throughout the transaction by either:
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(1) a person licensed to practice law in this state; or
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(2) a person licensed as a real estate broker or salesperson under chapter 82,
provided that the representation does not create a dual agency, as that term is defined
in section 82.55, subdivision 6.
new text end
new text begin Subd. 3. new text end
new text begin Content of the notice. new text end
new text begin
The notice must contain the following verbatim
language:
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new text begin
"IMPORTANT INFORMATION ABOUT CONTRACTS FOR DEED
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new text begin
Know What You Are Getting Into
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new text begin
(1) A contract for deed is a complex legal agreement. You are NOT a tenant. Mortgage
foreclosure laws do not apply.
new text end
new text begin
(2) 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
(3) You (seller must circle one):
new text end
|
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(i) new text end |
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DO new text end |
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DO NOT new text end |
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have to pay homeowner's insurance. 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 |
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have to pay property taxes. new text end |
|
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(iii) new text end |
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DO new text end |
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DO NOT new text end |
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have to make and pay for some or all of the repairs or maintenance, as described in the contract for deed. new text end |
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(4) After some time, you may need to make a large lump sum payment (called a "balloon
payment"). Know when it is due and how much it will be. You will probably need to get a
new mortgage, another financial arrangement, or pay for the balance in cash 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. You will likely lose all the money you have already paid. You will
likely lose your ability to purchase the home. The seller can begin an eviction action
against you in just a few months.
new text end
new text begin
(6) Within four months of signing the contract for deed, you must "record" it in the office
of the county recorder or registrar of titles in the county in which the property is located.
If you do not, you could face a fine.
new text end
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Key Things Highly Recommended Before You Sign
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(1) Get advice from a lawyer or the Minnesota Home Ownership Center at
1-866-462-6466. To find a lawyer through the Minnesota State Bar Association, go to
www.mnfindalawyer.com.
new text end
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(2) Get an independent, professional appraisal of the property to find out how much it
is worth.
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(3) Get an independent, professional inspection of the property.
new text end
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(4) Buy title insurance or ask a real estate lawyer for a "title opinion."
new text end
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(5) Check with the city or county to find out if there are inspection reports or unpaid
utility bills.
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new text begin
(6) Check with a title company or the county where the property is located to find out if
there is a mortgage or other lien on the property, and if the property taxes have been paid.
new text end
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If You Are Entering into a Purchase Agreement
new text end
new text begin
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(1) If you have not already signed the contract for deed, you can cancel the purchase
agreement (and get all your money back) if you do so within five business days after
getting this notice.
new text end
new text begin
(2) To cancel the purchase agreement, you must follow the provisions of section 559.217,
subdivision 4. Ask a lawyer for help."
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 prospective purchaser may
cancel a purchase agreement within five business days after actually receiving the notice
required under subdivision 1 if a multiple seller fails to timely deliver the notice, provided
that the contract for deed has not been executed by all parties.
new text end
new text begin
(b) A prospective purchaser may cancel the purchase agreement in accordance with
the provisions of section 559.217, subdivision 4.
new text end
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(c) In the event of cancellation, the multiple seller may not impose a penalty and must
promptly refund all payments made by the prospective purchaser prior to cancellation.
new text end
new text begin Subd. 5. 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 purchase agreement or 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: (1) the
greater of actual damages or statutory damages of $2,500; and (2) reasonable attorney
fees and court costs.
new text end
new text begin
(b) A multiple seller who knowingly fails to timely deliver the notice required
under subdivision 1 is liable to the purchaser for triple the actual or statutory damages
available under paragraph (a), whichever is greater, provided that the purchaser must elect
the remedy provided under either paragraph (a) or this paragraph and may not recover
under both paragraphs.
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 under law. An action brought
under this subdivision must be commenced within four years from the date of the alleged
violation.
new text end
new text begin Subd. 6. new text end
new text begin Effect of violation. new text end
new text begin
A violation of this section has no effect on the validity
of the contract.
new text end
new text begin Subd. 7. new text end
new text begin Duty of multiple seller to account. new text end
new text begin
Upon reasonable request by the
purchaser, and no more than once per every 12-month period, 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. 8. 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
transactions in which the contract for deed and the purchase agreement for the contract for
deed, if any, were executed on or after that date.
new text end
Sec. 4. new text begin REPEALER.
new text end
new text begin
Minnesota Statutes 2012, section 507.235, subdivision 4,
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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