SF 1660

as introduced - 79th Legislature (1995 - 1996) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to uniform laws; enacting uniform land 
  1.3             security interest act to regulate real estate security 
  1.4             in excess of $500,000; proposing coding for new law as 
  1.5             Minnesota Statutes, chapter 506. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7                                PART 1
  1.8                  GENERAL PROVISIONS AND DEFINITIONS 
  1.9      Section 1.  [506.101] [SHORT TITLE.] 
  1.10     This chapter may be cited as the Uniform Land Security 
  1.11  Interest Act. 
  1.12     Sec. 2.  [506.102] [PURPOSES; RULES OF CONSTRUCTION; 
  1.13  SCOPE.] 
  1.14     (a) This chapter shall be liberally construed and applied 
  1.15  to promote its underlying purposes and policies, which are: 
  1.16     (1) to simplify, clarify, and modernize the law governing 
  1.17  secured transactions in real estate; 
  1.18     (2) to promote the interstate flow of funds for secured 
  1.19  real estate transactions; and 
  1.20     (3) to make uniform the law with respect to the subject of 
  1.21  this chapter among states enacting it. 
  1.22     (b) Subject to the provisions on excluded transactions in 
  1.23  section 506.110, this chapter applies to any transaction, 
  1.24  regardless of its form, intended to create a security interest 
  1.25  in real estate.  This chapter governs security interests created 
  2.1   by contract or conveyance, including a mortgage, deed of trust, 
  2.2   trust deed, security deed, contract for deed, land sales 
  2.3   contract, lease intended as security, assignment of leases or 
  2.4   rents intended as security, and any other consensual lien or 
  2.5   contract for retention of title intended as security for an 
  2.6   obligation. 
  2.7      (c) If a security agreement covers both real estate and 
  2.8   personal property, this chapter applies to the security interest 
  2.9   in real estate and the secured party may also proceed against 
  2.10  the personal property in accordance with the secured party's 
  2.11  rights and remedies under this chapter. 
  2.12     (d) If a security interest covers only fixtures subject to 
  2.13  sections 336.9-101 to 336.9-508, the creation, obligation, and 
  2.14  foreclosure of the security interest in the fixtures is governed 
  2.15  by sections 336.9-101 to 336.9-508. 
  2.16     Sec. 3.  [506.103] [VARIATION BY AGREEMENT.] 
  2.17     (a) The parties to a transaction may vary by agreement the 
  2.18  effect of any provision of this chapter except as provided in 
  2.19  subsection (b) and section 506.501(d), or unless a section of 
  2.20  this chapter contains the words "notwithstanding agreement to 
  2.21  the contrary." 
  2.22     (b) The obligation of good faith prescribed by this chapter 
  2.23  may not be disclaimed by agreement, but the parties by agreement 
  2.24  may determine standards by which the performance of that 
  2.25  obligation is to be measured if those standards are not 
  2.26  manifestly unreasonable. 
  2.27     Sec. 4.  [506.104] [SUPPLEMENTARY GENERAL PRINCIPLES OF LAW 
  2.28  APPLICABLE.] 
  2.29     The principles of law and equity, including the law 
  2.30  relative to capacity to contract, principal and agent, 
  2.31  marshalling of assets, subrogation, estoppel, fraud, 
  2.32  misrepresentation, duress, coercion, mistake, bankruptcy, or 
  2.33  other validating or invalidating cause, supplement this chapter 
  2.34  unless displaced by particular provisions of it. 
  2.35     Sec. 5.  [506.105] [CONSTRUCTION AGAINST IMPLIED REPEAL.] 
  2.36     This chapter is intended as a unified coverage of its 
  3.1   subject matter.  No part of it may be construed to be impliedly 
  3.2   repealed by subsequent legislation if that construction can 
  3.3   reasonably be avoided. 
  3.4      Sec. 6.  [506.106] [REMEDIES TO BE LIBERALLY ADMINISTERED.] 
  3.5      (a) The remedies provided by this chapter must be liberally 
  3.6   administered to the end that the aggrieved party is put in as 
  3.7   good a position as though the other party had fully performed.  
  3.8   However, consequential, special, or penal damages may not be 
  3.9   awarded except as specifically provided in this chapter or by 
  3.10  other rule of law. 
  3.11     (b) Any right or obligation declared by this chapter is 
  3.12  enforceable by judicial proceeding unless the provision 
  3.13  declaring it provides otherwise. 
  3.14     Sec. 7.  [506.107] [SEVERABILITY CLAUSE.] 
  3.15     If any provision of this chapter or of its application to 
  3.16  any person or circumstance is held invalid, the invalidity does 
  3.17  not affect other provisions or applications of this chapter 
  3.18  which can be given effect without the invalid provision or 
  3.19  application, and to this end the provisions of this chapter are 
  3.20  severable. 
  3.21     Sec. 8.  [506.108] [OBLIGATION OF GOOD FAITH.] 
  3.22     Every contract or duty governed by this chapter imposes an 
  3.23  obligation of good faith in its performance or enforcement. 
  3.24     Sec. 9.  [506.109] [WAIVER OR RENUNCIATION OF CLAIM OR 
  3.25  RIGHT AFTER BREACH.] 
  3.26     (a) Subject to subsection (b), a claim or right arising out 
  3.27  of an alleged breach of a security agreement may be discharged 
  3.28  in whole or in part with or without consideration by a written 
  3.29  waiver or renunciation signed and delivered by the aggrieved 
  3.30  party. 
  3.31     (b) A waiver or renunciation, whether or not for 
  3.32  consideration, of a claim or right arising out of an alleged 
  3.33  breach, by which a party agrees to forego rights given the party 
  3.34  by this chapter or otherwise, is invalid if the court finds as a 
  3.35  matter of law that the waiver or renunciation is unconscionable 
  3.36  or that is was secured in an unconscionable manner.  The 
  4.1   competence of the aggrieved party, any material 
  4.2   misrepresentation, failure to disclose, or overreaching by the 
  4.3   other party, and the value of any consideration for the waiver 
  4.4   or renunciation, are relevant to the issue of unconscionability. 
  4.5      Sec. 10.  [506.110] [EXCLUDED TRANSACTIONS.] 
  4.6      Except for section 506.302 on priority of future advances, 
  4.7   this chapter does not apply to: 
  4.8      (a) a landlord's lien unless the parties agree in writing 
  4.9   that this chapter applies; 
  4.10     (b) a vendor's or vendee's lien unless the lien is 
  4.11  specifically created by a writing; 
  4.12     (c) a nonconsensual lien, such as a mechanic's lien, 
  4.13  judgment lien, or tax lien; 
  4.14     (d) an agreement not to convey or encumber; 
  4.15     (e) a lien to secure an obligation owed to an association 
  4.16  in a common interest community, or under covenants or 
  4.17  restrictions running with the land, but the remedies provided in 
  4.18  sections 506.501 to 506.514 apply; 
  4.19     (f) a security interest in an interest in a common interest 
  4.20  community if under other law of this state that interest is 
  4.21  personal property; 
  4.22     (g) a security interest provided by a security agreement 
  4.23  executed before the effective date of this chapter; 
  4.24     (h) security for an obligation in an original principal 
  4.25  amount less than $500,000; 
  4.26     (i) security in property that is primarily or substantially 
  4.27  in agricultural use.  "Agricultural use," for purposes of this 
  4.28  subsection, means use of land for the production of livestock, 
  4.29  dairy animals, dairy products, poultry and poultry products, 
  4.30  fur-bearing animals, horticultural and nursery stock, fruit of 
  4.31  all kinds, vegetables, forage, grains, bees, apiary products, 
  4.32  aquaculture, or hydroponics.  Wetlands, pasture, and woodlands 
  4.33  accompanying land in agricultural use are also in agricultural 
  4.34  use.  This agricultural use exclusion does not apply to 
  4.35  transactions in which the secured party disburses loan proceeds 
  4.36  primarily for land acquisition and for development of the 
  5.1   property for nonagricultural uses; or 
  5.2      (j) security in residential real estate as defined in 
  5.3   section 506.111, subdivision 23.  A recital in a security 
  5.4   agreement that the real estate in which a security interest is 
  5.5   created is not residential real estate establishes a presumption 
  5.6   that the real estate is not residential real estate under this 
  5.7   chapter. 
  5.8      Sec. 11.  [506.111] [GENERAL DEFINITIONS.] 
  5.9      As used in this chapter, subject to additional definitions 
  5.10  contained in this chapter which apply to specific parts, or 
  5.11  sections thereof, or unless the context otherwise requires: 
  5.12     (1) "Aggrieved party" means a party entitled to a remedy. 
  5.13     (2) "Agreement" means the bargain of the parties as found 
  5.14  in their language and by implication from other circumstances. 
  5.15  Whether an agreement has legal consequences is determined by the 
  5.16  provisions of this chapter, if applicable; otherwise by the law 
  5.17  of contracts. 
  5.18     (3) "Collateral" means the real estate subject to a 
  5.19  security interest. 
  5.20     (4) "Common interest community" means real estate described 
  5.21  in an instrument with respect to which a person by reason of 
  5.22  ownership of a part thereof is obligated to pay for real estate 
  5.23  taxes, insurance premiums, maintenance, or improvement of 
  5.24  another part thereof.  The term includes real estate held in a 
  5.25  condominium or cooperative. 
  5.26     (5) "Contract" means the total of legal rights and 
  5.27  obligations resulting from the parties' agreement as affected by 
  5.28  this chapter and other applicable rules of law. 
  5.29     (6) "Conveyance" means a transfer of real estate other than 
  5.30  by will or operation of law. 
  5.31     (7) "Creditor" includes an unsecured creditor, a secured 
  5.32  creditor, and a representative of creditors. 
  5.33     (8) "Debtor" means a person who owes payment or other 
  5.34  performance of an obligation secured, but if the debtor and the 
  5.35  owner of real estate are not the same person, the term means the 
  5.36  owner of real estate in any provision of this chapter dealing 
  6.1   with collateral, and the obligor in any provision dealing with 
  6.2   an obligation.  The term includes both where context requires. 
  6.3      (9) "Deed" means a writing, other than a lease or a 
  6.4   security agreement, which by its terms conveys real estate. 
  6.5      (10) "Fault" means wrongful act, omission, or breach. 
  6.6      (11) "Future advances" means funds advanced to a debtor, or 
  6.7   other obligations incurred on behalf of a debtor, by a secured 
  6.8   party after the debtor executes a security agreement. 
  6.9      (12) "Future advances made to protect collateral" means 
  6.10  future advances made or incurred (i) for the reasonable 
  6.11  protection of the security interest in the collateral, such as 
  6.12  payment of real property taxes, hazard insurance premiums, or 
  6.13  maintenance charges imposed under a common interest community 
  6.14  declaration or other restrictive covenant; or (ii) under a 
  6.15  security agreement created to enable completion of a 
  6.16  contemplated improvement, that contains a legend on the first 
  6.17  page clearly stating it is a "Construction Security Agreement" 
  6.18  and secures an obligation which the debtor incurred for the 
  6.19  purpose of making an improvement of the real estate in which the 
  6.20  security interest is given. 
  6.21     (13) "Judicial proceeding" means an action at law, suit in 
  6.22  equity, or any other proceeding in which rights are judicially 
  6.23  determined. 
  6.24     (14) "Law" includes statutes, case law, administrative 
  6.25  rules or regulations, and legislative enactments of local 
  6.26  governments. 
  6.27     (15) "Organization" means a corporation, business trust, 
  6.28  estate, trust, partnership, association, joint venture, 
  6.29  government, governmental subdivision or agency, or any other 
  6.30  legal or commercial entity. 
  6.31     (16) "Party," as distinguished from "third party," means a 
  6.32  person who engages in a transaction or makes an agreement under 
  6.33  this chapter. 
  6.34     (17) "Person" includes an individual or an organization. 
  6.35     (18) A security agreement is a "purchase money security 
  6.36  agreement" to the extent that it is: 
  7.1      (i) taken or retained by the seller of the collateral to 
  7.2   secure all or part of its price; or 
  7.3      (ii) taken by a person other than the seller of the 
  7.4   collateral who, by making an advance or incurring an obligation, 
  7.5   gives value to enable the debtor to acquire the collateral. 
  7.6      (19) An advance is made "pursuant to commitment" if the 
  7.7   obligor has bound itself to make it, whether or not a default or 
  7.8   other event not within its control has relieved or may relieve 
  7.9   it from its obligation. 
  7.10     (20) "Real estate" means any estate or interest in, over, 
  7.11  or under land, including minerals, structures, fixtures, and 
  7.12  other things that by custom, usage, or law pass with a 
  7.13  conveyance of land though not described or mentioned in the 
  7.14  contract of sale or instrument of conveyance; and, if 
  7.15  appropriate to the context, the land in which the interest is 
  7.16  claimed.  "Real estate" includes rents, the interest of a 
  7.17  landlord or tenant, and interests in a common interest community 
  7.18  unless under other law of this state that interest is personal 
  7.19  property. 
  7.20     (21) "To record" means to present to the recording officer 
  7.21  for the place in which the land is situated a document the 
  7.22  recording office accepts and either enters in a daily log or 
  7.23  notes thereon an identifying number, regardless of whether under 
  7.24  applicable law the recording officer is directed to file the 
  7.25  document or otherwise maintain a record of it.  "Recorded" and 
  7.26  "recording" have corresponding meanings. 
  7.27     (22) "Representative" means a person empowered to act for 
  7.28  another, and includes an agent, a government official, an 
  7.29  officer of a corporation or association, a trustee, and a 
  7.30  personal representative of a decedent. 
  7.31     (23) "Residential real estate" means: 
  7.32     (i) one to four separate living units used for primary, 
  7.33  seasonal, or vacation residential purposes; 
  7.34     (ii) a unit in a common interest community in residential 
  7.35  use under chapter 515B; or 
  7.36     (iii) a structure owned by a cooperative apartment 
  8.1   corporation organized under chapter 308A or 317A in which more 
  8.2   than 80 percent of the floor area is in residential use. 
  8.3      "Residential real estate" does not include manufactured 
  8.4   homes under section 327.31, subdivision 6, or hotels or motels 
  8.5   in which units are commonly hired for periods less than 30 days. 
  8.6      (24) "Secured creditor" means a lender, seller, or other 
  8.7   person in whose favor there is a security interest.  If the 
  8.8   holder of an obligation issued under an indenture of trust or 
  8.9   the like is represented by a trustee or other person, the 
  8.10  representative is the secured creditor. 
  8.11     (25) "Security agreement" means a writing that creates or 
  8.12  provides for a security interest in real estate. 
  8.13     (26) "Security interest" means an interest in real estate 
  8.14  which secures payment or performance of an obligation.  If a 
  8.15  lease is intended as security to the lessor, the lessor's 
  8.16  interest is a security interest.  If a seller's retention of 
  8.17  legal title to real estate after the buyer enters into 
  8.18  possession is intended as security, the seller's interest is a 
  8.19  security interest.  Whether a transaction is intended as 
  8.20  security is to be determined by the facts of each case.  
  8.21  However, 
  8.22     (i) the inclusion in a lease of an option to purchase at a 
  8.23  price not unreasonable under the circumstances at the time of 
  8.24  contracting does not of itself indicate the lease is intended 
  8.25  for security, and 
  8.26     (ii) retention of the title to real estate by a seller 
  8.27  under a contract right to retain title for not more than one 
  8.28  year after the buyer enters into possession of the real estate 
  8.29  is not a retention for security. 
  8.30     (27) "Signed" means executed by signature.  Signature 
  8.31  includes any symbol executed or adopted by a party with present 
  8.32  intention to authenticate a writing. 
  8.33     (28) A person gives "value" for rights if the person 
  8.34  acquires the rights: 
  8.35     (i) pursuant to commitment to extend credit or for the 
  8.36  extension of credit; 
  9.1      (ii) a security for, or in total or partial satisfaction 
  9.2   of, a preexisting claim; 
  9.3      (iii) pursuant to a preexisting contract; or 
  9.4      (iv) generally, in return for any consideration sufficient 
  9.5   to support a simple contract. 
  9.6      (29) "Written" or "writing" includes printing, typewriting, 
  9.7   or any other communication intentionally expressed in tangible 
  9.8   form. 
  9.9      Sec. 12.  [506.112] [NOTICE; KNOWLEDGE; GIVING NOTICE; 
  9.10  RECEIPT OF NOTICE.] 
  9.11     (a) A person has "notice" of a fact if: 
  9.12     (1) the person has actual knowledge of it; 
  9.13     (2) the person has received a notice or notification of it; 
  9.14  or 
  9.15     (3) from all the facts and circumstances known to the 
  9.16  person at the time in question the person has reason to know it 
  9.17  exists. 
  9.18     (b) Except as provided in subsection (e), a person has 
  9.19  "knowledge" or "learns" of a fact or "knows" or "discovers" a 
  9.20  fact only when the person has actual knowledge of it. 
  9.21     (c) A person "notifies" or "gives" or "sends" notice or 
  9.22  notification to another, whether or not the other person 
  9.23  actually comes to know of it, by taking steps reasonably 
  9.24  required to inform the other in ordinary course, but where this 
  9.25  chapter specifies particular steps to be taken to notify, or 
  9.26  give or send notice or notification, those steps must be taken. 
  9.27     (d) A person "receives" a notice or notification at the 
  9.28  time it: 
  9.29     (1) comes to the person's attention; or 
  9.30     (2) is delivered at the place of business through which the 
  9.31  person conducted the transaction with respect to which the 
  9.32  notice or notification is given or at any other place held out 
  9.33  by the person as the place for receipt of the communication. 
  9.34     (e) Notice, knowledge of a notice, or notification received 
  9.35  by a person is effective for a particular transaction at the 
  9.36  earlier of the time it comes to the attention of the individual 
 10.1   conducting the transaction or the time it would have come to the 
 10.2   individual's attention had the person maintained reasonable 
 10.3   routines for communicating significant information to the 
 10.4   individual conducting the transaction and there had been 
 10.5   reasonable compliance with the routines.  An individual acting 
 10.6   for the person is not required to communicate information unless 
 10.7   the communication is part of the individual's regular duties or 
 10.8   the individual has reason to know of the transaction and that 
 10.9   the transaction would be materially affected by the information. 
 10.10     Sec. 13.  [506.115] [PRESUMPTION.] 
 10.11     "Presumption" or "presumed" means that a party against whom 
 10.12  a presumption is directed has the burden of proving that the 
 10.13  nonexistence of the presumed fact is more probable than its 
 10.14  existence. 
 10.15                               PART 2
 10.16                   VALIDITY OF SECURITY AGREEMENT 
 10.17                    AND RIGHTS OF PARTIES THERETO
 10.18     Sec. 14.  [506.201] [GENERAL VALIDITY OF SECURITY 
 10.19  AGREEMENT.] 
 10.20     Except as provided in this chapter and in other statutes 
 10.21  governing recording and priority of interests in real estate, a 
 10.22  security agreement is effective according to its terms between 
 10.23  the parties, against purchasers of the collateral, and against 
 10.24  creditors. 
 10.25     Sec. 15.  [506.202] [TITLE TO COLLATERAL IMMATERIAL.] 
 10.26     Each provision of this chapter with regard to rights, 
 10.27  obligations, and remedies applies whether title to the 
 10.28  collateral is in the debtor, the secured creditor, or a third 
 10.29  party. 
 10.30     Sec. 16.  [506.203] [ENFORCEABILITY OF SECURITY INTEREST; 
 10.31  FORMAL REQUISITES.] 
 10.32     (a) A security interest attaches to real estate when the 
 10.33  following have occurred, unless an explicit agreement postpones 
 10.34  attachment: 
 10.35     (1) the debtor has signed a security agreement containing a 
 10.36  description of the collateral; 
 11.1      (2) value has been given; and 
 11.2      (3) the debtor has an interest in the collateral. 
 11.3      (b) A security interest is not enforceable against the 
 11.4   debtor with respect to the real estate until it attaches. 
 11.5      (c) As to all future advances, value is deemed to have been 
 11.6   given at the time value was first given. 
 11.7      Sec. 17.  [506.204] [USE OR DISPOSITION OF COLLATERAL 
 11.8   WITHOUT AN ACCOUNTING.] 
 11.9      A security interest is not invalid, impaired, or fraudulent 
 11.10  against creditors by reason of the right of the debtor to use, 
 11.11  commingle, or dispose of all or part of the collateral or to 
 11.12  use, commingle, or dispose of proceeds from disposition of the 
 11.13  collateral or by reason of the failure of the secured creditor 
 11.14  to require the debtor to account for proceeds or replace the 
 11.15  collateral. 
 11.16     Sec. 18.  [506.205] [AFTER-ACQUIRED PROPERTY.] 
 11.17     A security agreement may provide that any obligation 
 11.18  covered by the security agreement is to be secured by 
 11.19  after-acquired real estate. 
 11.20     Sec. 19.  [506.206] [DEFENSE AGAINST ASSIGNEE OF 
 11.21  OBLIGATION.] 
 11.22     (a) As used in this section, "obligor" means a debtor or 
 11.23  tenant.  Unless an obligor has made an enforceable agreement not 
 11.24  to assert defenses arising out of a loan or rental agreement as 
 11.25  provided in subsection (d), the rights of an assignee of a 
 11.26  security agreement are subject to: 
 11.27     (1) all the terms of the contract between the obligor and 
 11.28  the assignor and any defense arising therefrom; and 
 11.29     (2) any other defense or claim of the obligor against the 
 11.30  assignor accruing before the obligor receives notice of the 
 11.31  assignment. 
 11.32     (b) If the assignee empowers the assignor to act as 
 11.33  servicing agent for a security agreement after it is assigned, 
 11.34  any modification of or substitution for the contract assigned 
 11.35  made in good faith and in the ordinary course of the assignor's 
 11.36  business by the obligor and assignor is effective against the 
 12.1   assignee, although the obligor has received notice of the 
 12.2   assignment, unless the obligor has otherwise agreed or, before 
 12.3   the modification or substitution, the obligor has received 
 12.4   notice from the assignee that modification or substitution may 
 12.5   not be made without the assignee's consent.  However, the 
 12.6   assignee acquires the rights of the assignor under the modified 
 12.7   or substituted contract without further act of transfer.  The 
 12.8   assignment may provide that any modification or substitution is 
 12.9   a breach by the assignor.  If the obligor has received notice 
 12.10  from the assignee that modification or substitution may not be 
 12.11  made without the assignee's consent, the assignee may not 
 12.12  unreasonably withhold consent to a modification or substitution 
 12.13  approved by the assignor as servicing agent.  A notice to pay to 
 12.14  an assignee is not, of itself, a notice that the assignor has no 
 12.15  power to make a modification or substitution of the agreement or 
 12.16  that modification must have the consent of the assignee.  
 12.17     (c) The obligation of the obligor in the assigned agreement 
 12.18  is discharged by performance to the assignor until the obligor 
 12.19  receives notification of the assignment.  If requested by the 
 12.20  obligor, the assignee within ten days after the request is 
 12.21  received shall furnish reasonable proof that an assignment has 
 12.22  been made.  The obligor need not perform to the assignee until 
 12.23  requested proof is furnished.  The obligor need not perform to 
 12.24  the assignor until the time for furnishing proof of the 
 12.25  assignment has expired.  
 12.26     (d) If a debtor who has given a security interest in real 
 12.27  estate agrees not to assert against an assignee defenses the 
 12.28  debtor may have against the assignor, the agreement is 
 12.29  enforceable by an assignee who takes the assignment for value, 
 12.30  in good faith, and without notice of a defense, to the same 
 12.31  extent as though the assignee were a holder in due course of a 
 12.32  negotiable instrument under sections 336.3-101 to 336.3-805, the 
 12.33  article on commercial paper (article 3) of the Uniform 
 12.34  Commercial Code.  A debtor makes such an agreement if as a part 
 12.35  of one transaction the debtor signs both a negotiable instrument 
 12.36  and a security agreement. 
 13.1      Sec. 20.  [506.207] [POWER OF DEBTOR TO LEASE.] 
 13.2      (a) Except as provided in this section or unless the 
 13.3   secured creditor has agreed otherwise, a tenant under a lease 
 13.4   executed by the debtor after a security interest in the real 
 13.5   estate is perfected or under a lease that has been subordinated 
 13.6   thereto by written agreement of the tenant has no greater right 
 13.7   to remain in possession under the lease term than has the debtor.
 13.8      (b) Notwithstanding agreement to the contrary in the 
 13.9   security agreement and except as provided in subsections (c) and 
 13.10  (d), a lease of residential real estate made in ordinary course 
 13.11  by a debtor in possession of collateral is effective against the 
 13.12  secured creditor for not more than two years after the date of 
 13.13  the lease if the lease: 
 13.14     (1) reserves a reasonable rent in the circumstances 
 13.15  existing at the time of leasing; 
 13.16     (2) contains a promise by the tenant for payment of rent in 
 13.17  periodic installments payable not more than three months in 
 13.18  advance; 
 13.19     (3) provides for reentry or termination of the lease within 
 13.20  not more than two months after default by the tenant; 
 13.21     (4) provides that the tenant is entitled to take possession 
 13.22  not more than six months after the date of the lease or, in case 
 13.23  of a building under construction, not later than completion of 
 13.24  the unit subject to lease. 
 13.25     (c) Subsection (b) does not apply to leases made by or on 
 13.26  behalf of a debtor as to whom a voluntary or involuntary 
 13.27  petition pursuant to the bankruptcy code has been filed or a 
 13.28  receivership proceeding instituted. 
 13.29     (d) A clause in a lease protected under subsection (b) 
 13.30  granting the tenant a right of renewal for another term or an 
 13.31  option to purchase is invalid against the holder of a security 
 13.32  interest otherwise entitled to priority over the leasehold 
 13.33  interest under subsection (a). 
 13.34     (e) The debtor and secured creditor, by agreement in 
 13.35  writing, whether or not contained in the security agreement, may 
 13.36  confer further leasing powers on the debtor, and on exercise of 
 14.1   the power conferred, the lease takes priority in accordance with 
 14.2   the authorization. 
 14.3      Sec. 21.  [506.208] [ALIENABILITY OF DEBTOR'S INTEREST; 
 14.4   RIGHT TO ACCELERATE ON TRANSFER.] 
 14.5      Notwithstanding any agreement to the contrary, a debtor's 
 14.6   right in collateral may be voluntarily or involuntarily 
 14.7   transferred.  If not contrary to section 47.20, subdivision 6, 
 14.8   6a, or 6c, the security agreement may provide that a sale 
 14.9   without consent of the secured creditor is a ground for 
 14.10  acceleration of the debt.  The security agreement may also 
 14.11  provide that the granting of a security interest by a debtor is 
 14.12  a ground for acceleration of that debt. 
 14.13     Sec. 22.  [506.209] [REQUEST FOR STATEMENT OF ACCOUNT.] 
 14.14     (a) A debtor may request from the secured creditor a 
 14.15  statement of account between them as of a specified date.  The 
 14.16  secured creditor shall comply with a written request within two 
 14.17  weeks after receipt by sending a written statement of account 
 14.18  that includes the principal amount due and accrued interest, 
 14.19  other sums due, the interest rate in effect, including per diem 
 14.20  for the current interest period, and indicates the status of any 
 14.21  escrow account being held by the secured creditor in connection 
 14.22  with the loan.  A secured creditor who without reasonable excuse 
 14.23  fails to comply with a written request is liable for any damage 
 14.24  thereby caused to the debtor.  A successor in interest is not 
 14.25  subject to this section until the successor receives a written 
 14.26  request. 
 14.27     (b) Subject to subsection (c), a debtor is entitled to 
 14.28  request a statement once every six months without charge.  The 
 14.29  secured creditor may impose a reasonable charge for each 
 14.30  additional statement furnished. 
 14.31     (c) If a secured creditor without request provides annually 
 14.32  or more frequently a statement containing the information 
 14.33  specified in subsection (a), the secured creditor may impose a 
 14.34  reasonable charge for any statement requested as of a date 
 14.35  within 21 days before or after the date of a periodic statement. 
 14.36     (d) A statement provided pursuant to this section and 
 15.1   relied upon by a purchaser or any other interested party in good 
 15.2   faith to the party's detriment is binding upon the secured 
 15.3   creditor with respect to that party. 
 15.4      Sec. 23.  [506.210] [SECURITY INTEREST IN CERTAIN RIGHTS 
 15.5   AND CLAIMS.] 
 15.6      (a) A security interest attaches without explicit agreement 
 15.7   to: 
 15.8      (1) any right the debtor has against a seller for breach of 
 15.9   the contract to convey or of the warranties in the conveyance; 
 15.10     (2) any claim of the debtor for payment for any portion of 
 15.11  the collateral taken in an eminent domain proceeding; 
 15.12     (3) any insurance payable to the debtor because of loss of 
 15.13  or damage to the collateral; and 
 15.14     (4) any claim of the debtor against third parties for loss 
 15.15  of or damage to the collateral. 
 15.16     (b) An obligation described in subsection (a) is discharged 
 15.17  by performance to the debtor until the obligor receives 
 15.18  notification that the secured creditor has a security interest 
 15.19  entitling the secured creditor to receive the performance and 
 15.20  that performance is to be made to the secured creditor.  If 
 15.21  requested by the obligor, the secured creditor, within ten days 
 15.22  after the request is received, shall furnish reasonable proof of 
 15.23  the secured creditor's right to the performance.  The obligor 
 15.24  need not perform to the secured creditor until the requested 
 15.25  proof is furnished.  The obligor need not perform to the debtor 
 15.26  until the ten-day period has expired or the proof has been 
 15.27  received, whichever occurs first. 
 15.28     Sec. 24.  [506.211] [SECURED PARTY'S EQUITY IN COLLATERAL.] 
 15.29     Notwithstanding a rule denominated "fettering," "clogging 
 15.30  the equity of redemption," or "claiming a collateral advantage" 
 15.31  or a rule of similar import: 
 15.32     (1) a secured party, without adversely affecting its 
 15.33  security interest, may acquire from a debtor any direct or 
 15.34  indirect present or future ownership interest in the collateral, 
 15.35  including rights to any income, proceeds, or increase in value 
 15.36  derived from the collateral; and 
 16.1      (2) an option granted by a debtor to a secured party to 
 16.2   acquire an interest in the collateral takes priority as of the 
 16.3   date of its recording and is effective according to its terms if 
 16.4   the right to exercise the option is not dependent upon the 
 16.5   occurrence of a default under the security agreement. 
 16.6                                PART 3
 16.7                    PRIORITIES AND FUTURE ADVANCES 
 16.8      Sec. 25.  [506.301] [PRIORITY BETWEEN CONFLICTING SECURITY 
 16.9   INTERESTS IN SAME COLLATERAL.] 
 16.10     (a) So long as conflicting security interests remain 
 16.11  unrecorded, the first to attach has priority. 
 16.12     (b) Except as provided in section 506.302, the priority of 
 16.13  a recorded security interest is determined according to the law 
 16.14  governing recording and priority. 
 16.15     Sec. 26.  [506.302] [FUTURE ADVANCES.] 
 16.16     (a) An obligation secured by a security agreement may 
 16.17  include future advances, whether or not future advances are made 
 16.18  pursuant to commitment.  However, except for future advances 
 16.19  made to protect collateral, the maximum amount of future 
 16.20  advances secured at any time may not exceed the maximum amount 
 16.21  stated in the agreement, together with interest accrued but 
 16.22  unpaid on those advances. 
 16.23     (b) A future advance made to protect collateral is secured 
 16.24  by a security agreement even though the agreement does not 
 16.25  provide for future advances, or the advances cause the total 
 16.26  obligation to exceed the maximum amount stated in the security 
 16.27  agreement. 
 16.28     (c) A future advance made under a recorded security 
 16.29  agreement takes priority as of the date of the recording: 
 16.30     (1) if made pursuant to a commitment entered into before 
 16.31  the secured creditor had knowledge of an intervening interest, 
 16.32  to the extent of the outstanding future advances that do not 
 16.33  exceed the maximum amount stated in the record; 
 16.34     (2) if not made pursuant to a commitment entered into 
 16.35  before the secured creditor had knowledge of an intervening 
 16.36  interest, to the extent of future advances that are outstanding 
 17.1   when the secured creditor obtained knowledge of the intervening 
 17.2   interest and do not exceed the maximum amount stated in the 
 17.3   record. 
 17.4      (d) A future advance made to protect collateral takes 
 17.5   priority as of the date a security agreement is recorded, even 
 17.6   though the secured creditor has knowledge of an intervening 
 17.7   interest at the time the future advance is made. 
 17.8                                PART 5
 17.9                               DEFAULT 
 17.10     Sec. 27.  [506.501] [RIGHTS AND REMEDIES.] 
 17.11     (a) If a debtor is in default under a security agreement, 
 17.12  the secured creditor has the rights and remedies provided in 
 17.13  sections 506.501 to 506.514 and, except as limited by subsection 
 17.14  (d), those provided in the security agreement, including the 
 17.15  right to reduce the personal obligation of the secured 
 17.16  creditor's claim to judgment. 
 17.17     (b) If a secured creditor reduces its claim to judgment 
 17.18  before foreclosing under sections 506.501 to 506.514, the 
 17.19  judgment lien takes its normal priority as a judgment lien on 
 17.20  the real estate, unless the judgment specifies that the 
 17.21  obligation was secured by real estate under a recorded security 
 17.22  agreement identified in the judgment.  If the judgment states 
 17.23  that the obligation was secured by real estate under a recorded 
 17.24  security agreement identified therein and an appropriate 
 17.25  notation to that effect is made on each docket entry of the 
 17.26  judgment, the lien of the judgment relates back to and takes the 
 17.27  priority of the security interest in the real estate.  
 17.28     (c) A secured creditor who has foreclosed under sections 
 17.29  506.501 to 506.514 may not bring a judicial proceeding to 
 17.30  recover the debt except as provided in sections 506.501 to 
 17.31  506.514. 
 17.32     (d) Rights granted to the debtor and obligations imposed on 
 17.33  the secured creditor under sections 506.501 to 506.514 may not 
 17.34  be waived or modified as between creditor and debtor, except as 
 17.35  specifically permitted.  However, the parties by agreement may 
 17.36  determine the standards by which the fulfillment of those rights 
 18.1   and obligations is to be measured if the standards are not 
 18.2   manifestly unreasonable.  
 18.3      (e) If the security agreement covers both real estate and 
 18.4   personal property, the secured creditor may proceed under 
 18.5   sections 506.501 to 506.514 as to both the real estate and 
 18.6   personal property. 
 18.7      (f) In sections 506.501 to 506.514, "foreclosure" and 
 18.8   "right to foreclosure" mean foreclosure by a sale conducted by 
 18.9   the secured creditor or third party under section 506.509 or 
 18.10  foreclosure by judicial sale under section 506.510. 
 18.11     (g) In sections 506.501 to 506.514, "default" cannot occur 
 18.12  until after the expiration of any applicable grace period or 
 18.13  notice to comply, or both, to which the debtor is entitled. 
 18.14     Sec. 28.  [506.502] [ACCELERATION.] 
 18.15     To exercise a right to accelerate against a debtor, a 
 18.16  creditor must give written notice after the debtor's failure to 
 18.17  perform that if the failure is not cured before a date stated, 
 18.18  which may not be earlier than 15 days after the date the notice 
 18.19  is given, or in any event earlier than the expiration of the 
 18.20  grace period in the security agreement, the entire debt will be 
 18.21  due.  This provision may be waived or modified by a debtor. 
 18.22     Sec. 29.  [506.503] [CREDITOR'S RIGHT TO POSSESSION.] 
 18.23     (a) If the security agreement provides that the secured 
 18.24  creditor may take possession without judicial proceeding, the 
 18.25  secured creditor, on debtor's default, may take possession if 
 18.26  the secured creditor can do so without breaching the peace. 
 18.27     (b) A secured creditor, on the debtor's default, may take 
 18.28  possession of the real estate by judicial proceeding. 
 18.29     (c) In a judicial proceeding to remove the debtor from 
 18.30  possession before termination of the debtor's interest, the 
 18.31  debtor may assert claims and defenses against the secured 
 18.32  creditor, including a claim that there has been no default. 
 18.33     (d) If more than one secured creditor is entitled to take 
 18.34  possession, the secured creditor whose security interest has 
 18.35  priority also has priority of right to take possession. 
 18.36     (e) Any possession of the secured creditor under this 
 19.1   section is subject to the terms of any lease executed by the 
 19.2   debtor before the creditor takes possession, even though the 
 19.3   lessee's right under the lease terminates on termination of 
 19.4   debtor's interest in the property, unless the court finds that 
 19.5   termination of possession of a lessee whose interest is 
 19.6   subordinate to that of the creditor is necessary to protect the 
 19.7   real estate against deterioration or destruction.  
 19.8      (f) The right to possession under a default ceases upon 
 19.9   cure or redemption of that default under section 506.513. 
 19.10     Sec. 30.  [506.504] [RIGHT TO APPOINTMENT OF A RECEIVER.] 
 19.11     Nothing in this chapter affects the power of a court to 
 19.12  appoint a receiver before or after default.  
 19.13     Sec. 31.  [506.505] [RENTS; RIGHTS AND DUTIES OF CREDITOR 
 19.14  IN POSSESSION.] 
 19.15     (a) After a debtor's default, a secured creditor in 
 19.16  possession of the real estate and any creditor who has an 
 19.17  assignment of rents, even though not in possession, may notify a 
 19.18  lessee to make payment of the rents to that creditor and, 
 19.19  subject to the priority among creditors specified in this 
 19.20  subsection, is entitled to the rents accruing after the receipt 
 19.21  of the notice, except to the extent that the rents have been 
 19.22  paid in good faith either to the debtor or to a secured creditor 
 19.23  entitled thereto under a previous notice.  If more than one 
 19.24  secured creditor entitled to rents has notified the lessee to 
 19.25  make payment, the secured creditor in possession has priority 
 19.26  or, if no creditor is in possession, the secured creditor having 
 19.27  priority of security interest has priority as to rents.  If 
 19.28  requested in writing by the lessee, the secured creditor, within 
 19.29  ten days after the request is received, shall furnish reasonable 
 19.30  proof as to the secured creditor's right to rents.  The lessee 
 19.31  need not perform to the secured creditor until the proof is 
 19.32  furnished.  The lessee need not perform to the debtor or any 
 19.33  secured creditor who had previously given notice until the time 
 19.34  for furnishing the proof has expired.  In any case provided for 
 19.35  in this subsection, the lessee is discharged by performance in 
 19.36  good faith to the secured creditor. 
 20.1      (b) A creditor in possession may execute leases (other than 
 20.2   oil, gas, or other mineral leases) extending beyond the time of 
 20.3   the creditor's possession which have the same priority as if 
 20.4   made by the owner of the real estate.  The terms of the lease, 
 20.5   including its duration, must be reasonable and customary for the 
 20.6   type of use involved. 
 20.7      (c) A creditor in possession shall manage the property as 
 20.8   would a prudent person, taking into account the effect of that 
 20.9   person's management on the interest of the debtor.  If the 
 20.10  creditor by contract delegates the managerial functions to a 
 20.11  person in the business of managing real estate of the kind 
 20.12  involved who is financially responsible, not related to the 
 20.13  creditor, and prudently selected, the creditor satisfies the 
 20.14  creditor's obligation to act prudently, and is not responsible 
 20.15  to the debtor or other persons for the omissions and commissions 
 20.16  of the management agent. 
 20.17     (d) In managing the real estate, the creditor or the 
 20.18  creditor's delegate: 
 20.19     (1) shall carry casualty and liability insurance reasonably 
 20.20  available and reasonable as to amount and risks covered; 
 20.21     (2) shall maintain the property in at least as good 
 20.22  condition as existed at the time the creditor took possession, 
 20.23  excepting reasonable wear and tear and damage by any casualty 
 20.24  not required to be insured against under clause (1); 
 20.25     (3) may make other repairs and improvements necessary to 
 20.26  comply with building, housing, and other similar codes or with 
 20.27  existing contractual obligations of the debtor; and 
 20.28     (4) shall apply receipts to payment of ordinary operating 
 20.29  expenses including royalties, rents, and other expenses of 
 20.30  management. 
 20.31     (e) A creditor in possession may abandon or vacate the 
 20.32  property after first giving notice to the persons specified in 
 20.33  section 506.507(e) and in the manner specified in section 
 20.34  506.508, stating the date on which abandonment is intended, 
 20.35  which shall not be less than four weeks after the notice is 
 20.36  given. 
 21.1      (f) A creditor in possession may deduct from any money 
 21.2   received in managing the real estate all costs and expenses 
 21.3   incurred by the creditor or the creditor's delegate, including 
 21.4   the costs of hazard and liability insurance premiums against the 
 21.5   creditor's or the agent's acts or omissions.  The creditor also 
 21.6   may deduct from the receipts any commission or management fee 
 21.7   reasonably paid for managing property of the type involved. 
 21.8      (g) As between the creditor in possession and the debtor, 
 21.9   the risk of accidental loss or damage and the risk of liability 
 21.10  to third parties arising during the course of management is on 
 21.11  the debtor if the creditor: 
 21.12     (1) has procured insurance as required by subsection 
 21.13  (d)(1), to the extent of any deficiency in the insurance 
 21.14  coverage, or 
 21.15     (2) has not procured insurance as required by subsection 
 21.16  (d)(1), to the extent that insurance coverage as required 
 21.17  thereby would not have covered the risk. 
 21.18     (h) The creditor shall apply money received by the creditor 
 21.19  after deducting the ordinary expenses of management and 
 21.20  operation, in the following order: 
 21.21     (1) to payment of claims having priority over the interests 
 21.22  the creditor represents under the laws of the United States and 
 21.23  of this state; 
 21.24     (2) to payment of interest and principal of the security 
 21.25  interest under which the creditor is acting; and 
 21.26     (3) to payment of any residue to the persons who but for 
 21.27  the creditor's taking possession would have been entitled to the 
 21.28  money. 
 21.29     Sec. 32.  [506.506] [INDEX OF NOTICES AND TIMES RELATING TO 
 21.30  FORECLOSURE.] 
 21.31     (a) Before foreclosure, a notice of default, which may 
 21.32  include a notice of intention to foreclose as described in 
 21.33  section 506.508, and a notice of meeting of interested persons 
 21.34  complying with section 506.508(c), must be given.  The content 
 21.35  of the notice is specified by section 506.508(b), the method of 
 21.36  sending by section 506.508(a), and the persons to whom it must 
 22.1   be sent by section 506.507(e).  The notice of intention to 
 22.2   foreclose may be sent at any time after default. 
 22.3      (b) Before foreclosure under a power of sale, notice of the 
 22.4   intended sale must be given.  The content of the notice of sale, 
 22.5   the persons to whom it must be given, and the method of sending 
 22.6   is specified in section 506.509(a).  Sale may not occur until 
 22.7   after the time specified in section 506.509(a).  The notice of 
 22.8   default and the notice of the intended sale may be included in 
 22.9   the notice of intention to foreclose or may be by separate 
 22.10  writings and may be given simultaneously with the notice of 
 22.11  intention to foreclose or at a later date. 
 22.12     (c) A judicial proceeding may be commenced at any time 
 22.13  after the notice of intention to foreclose has been given, in 
 22.14  compliance with section 506.507(b). 
 22.15     (d) The effect of failure to comply with the notice and 
 22.16  time provisions relating to foreclosure is specified by sections 
 22.17  506.512(a) and 506.514. 
 22.18     Sec. 33.  [506.507] [METHODS OF FORECLOSURE AND NOTICE.] 
 22.19     (a) After a debtor's default, the secured creditor and 
 22.20  debtor may agree on an acquisition of the debtor's interest in 
 22.21  the real estate in lieu of foreclosure. 
 22.22     (b) Absent agreement, but after giving the debtor notice of 
 22.23  an intention to foreclose under section 506.508, the secured 
 22.24  creditor may terminate the debtor's interest in the real estate 
 22.25  by a judicial sale, complying with section 506.510. 
 22.26     (c) If the security agreement or other agreement between 
 22.27  the debtor and secured creditor authorizes it, the creditor, 
 22.28  after debtor's default and after giving the debtor notice of 
 22.29  intention to foreclose under section 506.508, may terminate the 
 22.30  debtor's interest by exercising a power of sale under section 
 22.31  506.509. 
 22.32     (d) If the secured creditor gives the notice required for 
 22.33  exercising a power of sale, in compliance with section 506.509, 
 22.34  or commencing a judicial proceeding under section 506.510, as 
 22.35  part of the creditor's notice of intention to foreclose under 
 22.36  section 506.508, the minimum time required by subsection (b) or 
 23.1   section 506.508 commences when the notice of intention to 
 23.2   foreclose is given. 
 23.3      (e) A notice of intention to foreclose required by this 
 23.4   section must be sent to the person specified by the debtor in 
 23.5   the security agreement or, if none is specified, to the debtor 
 23.6   or any one of two or more debtors; to any person obligated on 
 23.7   the debt whom the creditor may wish to hold liable for any 
 23.8   deficiency; to any person in possession of the real estate from 
 23.9   whom the creditor has received a written demand to receive a 
 23.10  notice of intention to foreclose; and to any person who has 
 23.11  recorded a request for notice of default.  Failure to comply 
 23.12  fully with this subsection does not invalidate the notice as to 
 23.13  persons to whom it is given. 
 23.14     Sec. 34.  [506.508] [NOTICE OF INTENTION TO FORECLOSE.] 
 23.15     (a) Notice of intention to foreclose in a writing complying 
 23.16  with subsection (b) must be sent to the person entitled thereto 
 23.17  both by registered or certified mail and by ordinary first class 
 23.18  mail.  The notice must be sent to a debtor at the debtor's 
 23.19  address specified in the security agreement as the place to 
 23.20  which notices are to be sent.  If the creditor knows of a 
 23.21  different address of the debtor at which notices are more likely 
 23.22  to come to the debtor's attention, the notice also must be sent 
 23.23  to that address.  The notice must be sent to a person other than 
 23.24  a debtor at any address at which the secured party in good faith 
 23.25  believes the notice is likely to come to the person's attention. 
 23.26     (b) The writing must state, in a manner calculated to make 
 23.27  the debtor aware of the situation: 
 23.28     (1) the particular security interest to be foreclosed; 
 23.29     (2) the nature of the default claimed; 
 23.30     (3) that the secured creditor has accelerated maturity of 
 23.31  the debt, if that is the case; 
 23.32     (4) any right the debtor has to cure the default, the 
 23.33  amount to be paid or other action necessary to cure, and the 
 23.34  time within which the cure must take place; 
 23.35     (5) the methods by which the debtor's ownership of the real 
 23.36  estate may be terminated; 
 24.1      (6) any right the debtor has to transfer the real estate to 
 24.2   another person subject to the security interest or to refinance 
 24.3   the obligation and of the transferee's right, if any, to succeed 
 24.4   to the rights of the debtor in curing the default; 
 24.5      (7) the circumstances under which the debtor's right to 
 24.6   possession will be terminated and that on termination the debtor 
 24.7   may be evicted by judicial process; 
 24.8      (8) the right of the debtor to any surplus from a sale and, 
 24.9   if the debtor is or may be liable for any deficiency, a 
 24.10  statement of the circumstances under which the deficiency will 
 24.11  be asserted; 
 24.12     (9) that no deficiency may or will be claimed, if that is 
 24.13  the case; 
 24.14     (10) if the secured creditor intends to include in the 
 24.15  notice of intention to foreclose a notice of sale under a power 
 24.16  of sale under section 506.509(a), or of intention to institute 
 24.17  judicial proceedings under section 506.507(b), or to terminate 
 24.18  under section 559.21, the creditor shall so state and comply 
 24.19  with section 506.509(a), 506.509(b), or 559.21, as the case may 
 24.20  be; and 
 24.21     (11) the right of the debtor under section 506.514 to apply 
 24.22  for a court order controlling the foreclosure. 
 24.23     (c) If a notice of default that included a notice of 
 24.24  meeting of interested persons was not already given, the notice 
 24.25  of intention to foreclose must also include notice of the time 
 24.26  and place of a meeting for all interested persons, to be held 
 24.27  within 21 to 28 days after the date the notice of meeting is 
 24.28  given.  The secured creditor must also give notice of the 
 24.29  meeting to all senior creditors of record.  Each person who 
 24.30  attends the meeting must disclose the source, amount, and 
 24.31  priority of that person's claim against the real estate. 
 24.32     (d) Unless previously notified of the date of sale, all 
 24.33  persons to be given notice under section 506.509(a) whose 
 24.34  interests are of record six weeks prior to the date of sale must 
 24.35  be given notice of the intended sale at least three weeks prior 
 24.36  to the date of sale. 
 25.1      Sec. 35.  [506.509] [CREDITOR'S POWER OF SALE AFTER 
 25.2   DEFAULT.] 
 25.3      (a) If the secured creditor is authorized to foreclose by 
 25.4   power of sale under section 506.507(c), the secured creditor, 
 25.5   after the debtor's default and upon compliance with this 
 25.6   section, may sell any or all of the real estate that is subject 
 25.7   to the security interest in its then condition or after any 
 25.8   reasonable rehabilitation or preparation for sale.  Sale may be 
 25.9   at a public sale or by private negotiation, by one or more 
 25.10  contracts, as a unit or in parcels, at any time and place, and 
 25.11  on any terms including sale on credit, but every aspect of the 
 25.12  sale, including the method, advertising, time, place, and terms, 
 25.13  must be reasonable.  The creditor shall give to the persons 
 25.14  entitled to notice under section 506.507(e) reasonable written 
 25.15  notice of the time and place of any public sale or if a private 
 25.16  sale is intended, reasonable notice of intention to enter into a 
 25.17  contract to sell and of the time after which a private 
 25.18  disposition may be made.  The same notice must also be sent to 
 25.19  any other person who has a recorded interest in the real estate 
 25.20  which would be cut off by the sale, but only if the interest was 
 25.21  on record at least three weeks before the date the notice is 
 25.22  given of the date of any public sale or the date after which a 
 25.23  private sale may be made.  As to persons entitled to notice 
 25.24  under section 506.507(e), the notice must be sent to the address 
 25.25  specified in section 506.508(a).  As to others entitled to 
 25.26  notice, the notice may be sent to any address reasonable in the 
 25.27  circumstances.  Sale may not be held until 60 days after the 
 25.28  sending of the notice of default, nor until five weeks after 
 25.29  sending the notice of intention to foreclose.  The creditor may 
 25.30  buy at any public sale and, if the sale is conducted by a 
 25.31  fiduciary or other person not related to the creditor, at a 
 25.32  private sale. 
 25.33     (b) On acceptance of a bid at a public sale, the bidder, 
 25.34  other than the foreclosing creditor, shall deposit at least ten 
 25.35  percent of the bid price in cash or bank obligation.  If the 
 25.36  successful bidder fails to make the deposit on acceptance, or to 
 26.1   complete the transaction within five weeks after acceptance, the 
 26.2   secured creditor may specifically enforce the contract or resell 
 26.3   the real estate under subsection (a).  If the contract is not 
 26.4   specifically enforced, the bidder's deposit may be retained or 
 26.5   recovered as liquidated damages.  Any sums retained or recovered 
 26.6   by the creditor must be applied in the same manner as the 
 26.7   proceeds of a completed sale. 
 26.8      Sec. 36.  [506.510] [FORECLOSURE BY JUDICIAL PROCEEDING.] 
 26.9      (a) A security interest may be foreclosed in a judicial 
 26.10  proceeding directing a judicial sale of the real estate that is 
 26.11  subject to the security interest. 
 26.12     (b) The secured creditor's initial pleading must state 
 26.13  facts showing that the notice of default and the notice of 
 26.14  intention to foreclose under sections 506.507(b) and 506.508 
 26.15  were properly given. 
 26.16     (c) Process must be served upon all persons entitled to 
 26.17  notice under section 506.507(e) and any other person having a 
 26.18  recorded interest in the real estate which would be cut off by 
 26.19  the judicial sale, or who has recorded a request for notice of 
 26.20  default.  If the court finds that the debtor is in default and 
 26.21  that the creditor has properly given notice of intention to 
 26.22  foreclose, it shall enter judgment for the amount due with costs 
 26.23  and order the sale of the real estate.  The judgment also must 
 26.24  specify the official, secured creditor, debtor, or other person 
 26.25  authorized or directed to conduct the sale.  Unless the judgment 
 26.26  specifies that the sale is to be conducted in accordance with 
 26.27  the law relating to the sale of real estate on execution, the 
 26.28  sale is to be conducted under section 506.509. 
 26.29     (d) A person conducting the sale must seek potential buyers 
 26.30  and bidders through means of communication reasonable for the 
 26.31  type of real estate involved, even though there has been or will 
 26.32  be notice by publication for the purposes of service of process 
 26.33  or informing persons having a claim to the property. 
 26.34     (e) The judgment must direct the person conducting the sale 
 26.35  to make a report to the court.  Upon confirmation by the court 
 26.36  of the report of sale, the clerk shall enter satisfaction of the 
 27.1   judgment to the extent of the sale price less expenses and 
 27.2   costs.  Unless the judgment states there is to be no deficiency 
 27.3   judgment, the clerk shall enter the balance on the judgment 
 27.4   docket to become a lien effective as of the date docketed and be 
 27.5   enforced in the manner of any other judgment for the payment of 
 27.6   money. 
 27.7      (f) If the sale is confirmed, the person conducting it 
 27.8   shall execute an instrument of conveyance under section 506.512. 
 27.9      (g) If possession of the property is wrongfully withheld 
 27.10  after confirmation of the sale and delivery of the instrument of 
 27.11  conveyance, the court may compel delivery of possession to the 
 27.12  person entitled thereto by order directing the appropriate 
 27.13  official to effect delivery of possession. 
 27.14     (h) This section does not affect any existing procedure for 
 27.15  strict foreclosure. 
 27.16     Sec. 37.  [506.511] [APPLICATION OF PROCEEDS OF SALE, 
 27.17  SURPLUS, AND DEFICIENCY.] 
 27.18     (a) The proceeds resulting from a sale of real estate under 
 27.19  sections 506.501 to 506.514 must be applied in the following 
 27.20  order: 
 27.21     (1) the reasonable expenses of sale; 
 27.22     (2) the reasonable expenses of securing possession before 
 27.23  sale, and holding, maintaining, and preparing the real estate 
 27.24  for sale, including payment of taxes and other governmental 
 27.25  charges, premiums on hazard and liability insurance, management 
 27.26  fees, and, to the extent provided for in the agreement and not 
 27.27  prohibited by law, reasonable attorney's fees and other legal 
 27.28  expenses incurred by the creditor; 
 27.29     (3) satisfaction of the indebtedness secured; 
 27.30     (4) satisfaction in the order of priority of any 
 27.31  subordinate security interest of record; and 
 27.32     (5) remittance of any excess to the debtor. 
 27.33     (b) Unless otherwise agreed, a person who owes payment of 
 27.34  an obligation secured is liable for any deficiency.  For 
 27.35  purposes of calculating the amount of any deficiency, a transfer 
 27.36  of the real estate to a person who is liable to the creditor 
 28.1   under a guaranty, endorsement, repurchase agreement, or the 
 28.2   like, is not a sale. 
 28.3      Sec. 38.  [506.512] [EFFECT OF DISPOSITION.] 
 28.4      (a) If real estate is sold by a creditor under a power of 
 28.5   sale under section 506.509, or at a judicial sale under section 
 28.6   506.510, a purchaser for value in good faith acquires the 
 28.7   debtor's and creditor's rights in the real estate, free of the 
 28.8   security interest under which the sale occurred and any 
 28.9   subordinate interest, even though the creditor or person 
 28.10  conducting the sale fails to comply with the requirements of 
 28.11  sections 506.501 to 506.514 on default or of any judicial sale 
 28.12  proceeding. 
 28.13     (b) The person conducting a sale under a power of sale 
 28.14  under section 506.509, or conducting a judicial sale under 
 28.15  section 506.510, shall execute a deed to the purchaser 
 28.16  sufficient to convey title, which identifies the security 
 28.17  interest and the parties to the security agreement, indicates 
 28.18  where it is recorded, and recites that the deed is executed by 
 28.19  the person conducting the sale after a default and sale under 
 28.20  sections 506.501 to 506.514 and that person's authority to make 
 28.21  the sale.  Signature and title or authority of the person 
 28.22  signing the deed as grantor and a recital of the fact of default 
 28.23  and the giving of notices required by this chapter is sufficient 
 28.24  proof of the facts recited and of the signer's authority to 
 28.25  sign.  Further proof of the signer's authority is not required 
 28.26  even though the signer is also named as grantee in the deed. 
 28.27     (c) A regularly conducted, noncollusive transfer under a 
 28.28  power of sale under section 506.509, or by a judicial sale under 
 28.29  section 506.510, to a transferee who takes for value and in good 
 28.30  faith is not a fraudulent transfer even though the value given 
 28.31  is less than the value of the debtor's interest in the real 
 28.32  estate. 
 28.33     Sec. 39.  [506.513] [DEBTOR'S RIGHT TO CURE DEFAULT AND 
 28.34  REDEEM.] 
 28.35     (a) At any time before the earlier of the sale or a 
 28.36  contract of sale under a power of sale under section 506.509, or 
 29.1   before the time specified in a decree of judicial foreclosure, 
 29.2   the debtor or the holder of any subordinate security interest 
 29.3   may cure the debtor's default and prevent sale or other 
 29.4   disposition by tendering the performance due under the security 
 29.5   agreement, including any amounts due because of exercise of a 
 29.6   right to accelerate, plus the reasonable expenses of proceeding 
 29.7   to foreclosure incurred to the time of tender, including 
 29.8   reasonable attorney's fees of the creditor. 
 29.9      (b) After default, a debtor entitled to cure or redeem 
 29.10  under this section may release that right in writing or assign 
 29.11  that right subject to section 506.208. 
 29.12     (c) If a debtor is entitled to cure or redeem under this 
 29.13  section, the debtor or the holder of any subordinate security 
 29.14  interest, subject to the terms entitling the debtor or the 
 29.15  holder of any subordinate security interest to cure or redeem, 
 29.16  may require the secured creditor, upon full payment of the 
 29.17  obligation, to assign the debt and the security interest without 
 29.18  recourse or warranty to any person designated by the payer and 
 29.19  the secured creditor is obligated to do so.  The rights under 
 29.20  this subsection may be enforced by the holder of any subordinate 
 29.21  security interest even though it is an intermediate security 
 29.22  interest.  A tender of redemption by any holder of a security 
 29.23  interest prevails over a tender of redemption by the debtor.  As 
 29.24  between or among holders of security interests, the tender of 
 29.25  redemption by the holder entitled to priority prevails over the 
 29.26  tender of redemption by the holder of a subordinate interest.  
 29.27  Nothing in this section requires giving an assignment where the 
 29.28  secured creditor owns a subordinate security interest that is 
 29.29  not to be assigned. 
 29.30     Sec. 40.  [506.514] [CREDITOR'S LIABILITY FOR FAILURE TO 
 29.31  COMPLY WITH SECTIONS 506.501 TO 506.514.] 
 29.32     (a) A sale or disposition of proceeds may be ordered or 
 29.33  restrained on terms and conditions determined by the court if it 
 29.34  is established by the debtor or any other person entitled to 
 29.35  notice under section 506.509(a) that:  
 29.36     (1) the obligation is invalid; 
 30.1      (2) the debtor is not in default; 
 30.2      (3) the creditor or other person exercising a power of sale 
 30.3   under section 506.509 is not complying or is not likely to 
 30.4   comply with sections 506.501 to 506.514; or 
 30.5      (4) the proceeds of any sale are not being applied or are 
 30.6   not likely to be applied as required by section 506.511. 
 30.7      (b) If disposition of the real estate has occurred, the 
 30.8   debtor or any person entitled to notice under section 506.509(a) 
 30.9   may recover from the creditor any loss caused by a failure to 
 30.10  comply with sections 506.501 to 506.514. 
 30.11                               PART 6 
 30.12                   EFFECTIVE DATE AND TRANSITION 
 30.13     Sec. 41.  [506.601] [EFFECTIVE DATE.] 
 30.14     This act is effective August 1, 1996, and applies to 
 30.15  transactions entered into and events occurring on or after that 
 30.16  date. 
 30.17     Sec. 42.  [506.602] [PROVISIONS FOR TRANSITION.] 
 30.18     Transactions validly entered into before the effective date 
 30.19  specified in section 506.601, and the rights, duties, and 
 30.20  interests flowing from them remain valid thereafter and may be 
 30.21  terminated, completed, consummated, or permitted by any statute 
 30.22  or other law amended or superseded by this act as if this act 
 30.23  had not been enacted.