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Minnesota Legislature

Office of the Revisor of Statutes

SF 1783

as introduced - 89th Legislature (2015 - 2016) Posted on 03/17/2015 09:17am

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - as introduced

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A bill for an act
relating to commerce; regulating the real estate education, research and recovery
fund; amending Minnesota Statutes 2014, section 82.86, subdivisions 6, 7,
by adding subdivisions; repealing Minnesota Statutes 2014, section 82.86,
subdivisions 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 19.

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

Section 1.

Minnesota Statutes 2014, section 82.86, subdivision 6, is amended to read:


Subd. 6.

Authorized expenditures.

The commissioner may expend money as
appropriated for the following purposes:

deleted text begin (a)deleted text endnew text begin (1)new text end to promote the advancement of education and research in the field of real
estate for the benefit of those licensed under this chapter;

deleted text begin (b)deleted text endnew text begin (2)new text end to underwrite educational seminars and other forms of educational projects
for the benefit of real estate licensees;

deleted text begin (c) to establish a real estate chair or courses at Minnesota state institutions of higher
learning for the purpose of making such courses available to licensees and the general
public;
deleted text end

deleted text begin (d)deleted text end new text begin(3) new text endto contract for a particular educational or research project in the field of real
estate to further the purposes of this chapter;

deleted text begin (e) to pay any reasonable costs and disbursements, excluding attorney's fees,
incurred in defending actions against the real estate education, research and recovery fund
including the cost of mailing or publication of notice pursuant to subdivision 14
deleted text endnew text begin (4) to
reimburse the department for all legal and administrative expenses, disbursements, and
costs, including staffing costs, incurred in administering and defending the fund
new text end; and

deleted text begin (f)deleted text endnew text begin (5)new text end to provide information to the public on housing issues, including but not
limited to, environmental safety and housing affordability.

Sec. 2.

Minnesota Statutes 2014, section 82.86, subdivision 7, is amended to read:


Subd. 7.

Application for recovery.

deleted text beginWhen anydeleted text end new text begin(a) Before an new text endaggrieved person
deleted text beginobtainsdeleted text endnew text begin files an application under paragraph (b), the person must obtainnew text end a final judgmentnew text begin:
new text end

new text begin (1)new text end in any court of competent jurisdiction regardless of whether the judgment has
been discharged by a bankruptcy courtnew text begin;
new text end

new text begin (2)new text end against an individual licensed new text beginas a real estate broker, real estate salesperson, or
closing agent
new text endunder this chapterdeleted text begin,deleted text endnew text begin;
new text end

new text begin (3)new text end on grounds of fraudulent, deceptive, or dishonest practices, deleted text beginor conversion of trust
funds
deleted text end new text beginincluding those defined in section 82.81 or 325D.44, where 82.81, subdivision 12,
paragraph (b), may not apply; and
new text end

new text begin (4) new text endarising directly out of any transaction when the judgment debtor was licensednew text begin,new text end and

new text begin (i) new text endperformed acts for which a license is required under this chapter,

new text begin (ii) represented oneself as a registered or licensed real estate broker, real estate
salesperson, or closing agent in any real estate transaction,
new text end or

new text begin (iii) new text endperformed acts permitted by section 327B.04, subdivision 5deleted text begin,deleted text endnew text begin.
new text end

new text begin (b)new text end The aggrieved person may, upon the judgment becoming final, and upon
termination of all proceedings, including reviews and appeals, file a verified application deleted text beginin
the court in which the judgment was entered
deleted text endnew text begin with the commissioner of commercenew text end. deleted text beginThe
application shall state with specificity the grounds upon which the application seeks to
recover from the fund, and request an order directing payment out of the fund of the
amount of actual and direct out of pocket loss in the transaction, but excluding any
attorney's fees, interest on the loss and on any judgment obtained as a result of the loss, up
to the sum of $150,000 of the amount unpaid upon the judgment, provided that nothing in
this chapter shall be construed to obligate the fund for more than $150,000 per claimant,
per transaction, subject to the limitations set forth in subdivision 14, regardless of the
number of persons aggrieved or parcels of real estate involved in the transaction, provided
that regardless of the number of claims against a licensee, nothing in this chapter may
obligate the fund for more than $250,000 per licensee.
deleted text end

new text begin (c)new text end An aggrieved person who has a cause of action under section 80A.76 shall first
seek recovery as provided in section 80A.66new text begin, paragraph new text end(e), before the commissioner may
order payment from the recovery fund. deleted text beginFor purposes of this section, persons who are joint
tenants or tenants in common are deemed to be a single claimant. A copy of the verified
application shall be served upon the commissioner and upon the judgment debtor, and
a certificate or affidavit of service filed with the court. For the purpose of this section,
"aggrieved person" does not include a government agency, financial institution, or other
entity that purchases, guarantees, or insures a loan secured by real estate, and does not
include a licensee unless (1) the licensee is acting in the capacity of principal in the sale of
interests in real property owned by the licensee; or (2) the licensee is acting in the capacity
of principal in the purchase of interests in real property to be owned by the licensee.
Under no circumstances shall a licensee be entitled to payment under this section for
the loss of a commission or similar fee.
deleted text end

deleted text begin For the purposes of this section, recovery is limited to transactions where the property
involved is intended for the direct personal habitation or commercial use of the buyer.
deleted text end

deleted text begin Except for securities permitted to be sold by a licensee pursuant to section 82.81,
subdivision 7
, for any action commenced after July 1, 1993, recovery under this section is
not available where the buyer's participation is for investment purposes only, and is limited
to providing capital to fund the transaction.
deleted text end

Sec. 3.

Minnesota Statutes 2014, section 82.86, is amended by adding a subdivision to
read:


new text begin Subd. 8a. new text end

new text begin Payment limitations. new text end

new text begin (a) The claimant shall seek to recover from the fund
only the amount of actual and direct out-of-pocket loss in the transaction, but excluding
attorney fees, interest on the loss, and interest on judgment obtained as a result of the loss.
new text end

new text begin (b) The commissioner shall not pay compensation from the fund to a claimant in an
amount greater than $150,000 per licensee. The commissioner shall not pay compensation
from the fund to claimants in an amount that totals more than $250,000 per licensee.
Regardless of the number of persons aggrieved or parcels of real estate involved in the
transaction, and regardless of the number of claims against a licensee, nothing in this
chapter obligates the fund for more than $250,000 per licensee.
new text end

new text begin (c) For the purposes of this section, recovery is limited to transactions where the
property involved is intended for the direct personal habitation or commercial use of
the buyer.
new text end

new text begin (d) Recovery under this section is not available where the buyer's participation is
for investment purposes only and is limited to providing capital to fund the transaction.
Recovery under this section is available for securities permitted to be sold by a licensee
pursuant to section 82.81, subdivision 7.
new text end

Sec. 4.

Minnesota Statutes 2014, section 82.86, is amended by adding a subdivision to
read:


new text begin Subd. 9a. new text end

new text begin Verified application. new text end

new text begin To be eligible for compensation from the fund, a
claimant shall serve on the commissioner an application for compensation verified by
the claimant on a form approved by the commissioner. The application must include
the following:
new text end

new text begin (1) the name and address of the claimant;
new text end

new text begin (2) if the claimant is represented by an attorney, the name, business address, and
telephone number of the attorney;
new text end

new text begin (3) the amount of the final judgment, the amount paid in satisfaction of the final
judgment, if any, and the amount owing on the final judgment as of the date of the verified
application;
new text end

new text begin (4) documents evidencing the application amount and detailing the calculation
of the claimant's actual and direct out-of-pocket loss. The claimant's actual and direct
out-of-pocket loss do not include attorney fees, interest on the loss, and interest on the
final judgment. An amount paid in satisfaction of the final judgment must be applied to
the claimant's actual and direct out-of-pocket loss;
new text end

new text begin (5) a detailed narrative statement of the facts in explanation of the allegations of
the complaint upon which the underlying judgment is based, if the complaint is not part
of the court record;
new text end

new text begin (6) the name and last known address of the licensee;
new text end

new text begin (7) the following representations and information from the claimant:
new text end

new text begin (i) the claimant is not a spouse of the licensee nor a personal representative of the
spouse;
new text end

new text begin (ii) the claimant has complied with all the requirements of this section;
new text end

new text begin (iii) the claimant has made all reasonable searches and inquiries to ascertain whether
the judgment debtor is possessed of real or personal property or other assets, liable to be
sold or applied in satisfaction of the judgment;
new text end

new text begin (iv) after conducting the searches and inquiries in item (iii), the claimant has
discovered no personal or real property or other assets liable to be sold or applied to
satisfy the judgment, or has discovered property or other assets that are described in the
application owned by the judgment debtor and liable to be sold or applied to satisfy the
judgment, and has taken all necessary action and proceedings to do so, and that the amount
collected was insufficient to satisfy the judgment, stating the amount so collected and the
balance remaining due on the judgment after application of the amount collected;
new text end

new text begin (v) the claimant has diligently pursued remedies against all the judgment debtors
and all other persons liable to that person in the transaction for which the claimant seeks
recovery from the real estate education, research and recovery fund;
new text end

new text begin (vi) the claimant has obtained a judgment as set out in subdivision 7;
new text end

new text begin (vii) the application was served on the commissioner of commerce no later than
two years after the underlying judgment became final, including after the termination of
any review or appeal of the judgment; and
new text end

new text begin (viii) whether or not the underlying judgment and debt have been discharged in
bankruptcy;
new text end

new text begin (8) detailed instructions with respect to the documentary evidence to be appended
to the application, including but not limited to pleadings, court rulings, the products of
discovery in the underlying litigation, and documents evidencing the amount of actual and
direct out-of-pocket loss as set out in clause (4). Evidence is not limited to documents
filed with or otherwise submitted to the court; and
new text end

new text begin (9) copy of the clerk's notice of docketing the judgment.
new text end

Sec. 5.

Minnesota Statutes 2014, section 82.86, is amended by adding a subdivision to
read:


new text begin Subd. 10a. new text end

new text begin Commissioner's notice and review. new text end

new text begin (a) The commissioner shall send
the licensee a copy of the verified application by first class mail to the licensee's address as
it appears in the records of the department with a notice that the claim may be paid after
review of the verified application.
new text end

new text begin (b) If the licensee wishes to contest payment of an application by the commissioner,
the licensee shall mail or deliver a written response to the commissioner and to the
claimant within 30 days after mailing of the notice in paragraph (d).
new text end

new text begin (c) As outlined in paragraph (b), if the licensee fails to mail or deliver a timely
response:
new text end

new text begin (1) the licensee waives the right to present objections to payment; and
new text end

new text begin (2) the commissioner may pay the claim at the end of the 30-day notice period.
new text end

new text begin (d) The notice mailed to the licensee must include the following statement:
new text end

new text begin "NOTICE: Based upon a judgment entered against you in favor of [name of
claimant], application for payment from the Real Estate Education, Research and
Recovery Fund is being made to the Minnesota Department of Commerce.
new text end

new text begin If payment is made from the fund, all licenses and license rights you have under the
Real Estate Law will be automatically suspended on the date of payment and cannot be
reinstated until the fund has been reimbursed in full, plus interest at the rate of 12 percent
a year, twice the amount paid from the fund on the person's account, and has obtained a
surety bond issued by an insurer authorized to transact business in this state in the amount
of $40,000 pursuant to Minnesota Statutes, section 82.86, subdivision 15a.
new text end

new text begin If you wish to contest payment by the Commissioner of Commerce, you must file a
written response to the application addressed to the Department of Commerce, Real Estate
Education, Research and Recovery Fund at [address] within 30 days after mailing of this
notice. You must also mail or deliver a copy of that response to the claimant within 30
days after mailing of this notice. If you fail to do so, you will have waived your right
to present your objections to payment."
new text end

new text begin (e) The commissioner may within 90 days after receipt of the complete verified
application:
new text end

new text begin (1) enter into an agreement with the claimant that resolves the verified application
for compensation from the fund; or
new text end

new text begin (2) issue an order to the claimant approving, modifying, or denying the verified
application for compensation from the fund.
new text end

new text begin (f) For purposes of considering and investigating an application, the commissioner
has the investigation and discovery powers available to the commissioner under chapter 45.
new text end

new text begin (g) If the claimant objects to the order issued, the claimant has 30 days from the date
of the order to serve upon the commissioner a written request for an administrative hearing.
If the claimant does not serve upon the commissioner a timely written request for hearing,
the order issued under this subdivision becomes a final order of the commissioner that may
not be reviewed by any court or agency. The commissioner shall order compensation from
the fund only if the claimant has filed a verified application that complies with subdivisions
7 and 9a and if the commissioner determines based on review of the application that
compensation should be paid from the fund. The commissioner is not bound by any prior
settlement, compromise, or stipulation between the claimant and the licensee.
new text end

new text begin (h) If the decision of the commissioner is to make a payment to the claimant out
of the real estate education, research and recovery fund, the following notice must be
given to the licensee:
new text end

new text begin "The decision of the commissioner of the Minnesota Department of Commerce on
the application of [claimant] is to pay $....... from the Real Estate Education, Research
and Recovery Fund.
new text end

new text begin As stated in the Notice dated [date], and pursuant to Minnesota Statutes, section
82.86, subdivision 15a, your license and license rights under the Real Estate Law will be
suspended and cannot be reinstated until the fund has been reimbursed in full, plus interest
at the rate of 12 percent a year, twice the amount paid from the fund on the person's
account, and has obtained a surety bond issued by an insurer authorized to transact
business in this state in the amount of $40,000.
new text end

new text begin If you desire a judicial review of the suspension of your license(s) and license rights,
you must provide written notice to the commissioner within 30 days of mailing this notice."
new text end

Sec. 6.

Minnesota Statutes 2014, section 82.86, is amended by adding a subdivision to
read:


new text begin Subd. 11a. new text end

new text begin Accelerated claims payment. new text end

new text begin (a) The commissioner may pay claims
from the recovery portion of the fund that do not exceed the jurisdiction limits for
conciliation court matters as specified in section 491A.01 on an accelerated basis if all of the
requirements in subdivisions 7 and 9a have been satisfied. The purpose of this subdivision
is solely to provide an expedited payment process in lieu of subdivision 13a when the
commissioner or administrative law judge orders an amount to be paid that does not
exceed the jurisdiction limits for conciliation court. All other subdivisions are applicable.
A distribution made by the commissioner in accordance with this subdivision is deemed to
satisfy and extinguish the claims of a claimant receiving a distribution against the fund.
new text end

new text begin (b) If an appeal is begun, payment of the claim is stayed until conclusion of the appeal.
new text end

Sec. 7.

Minnesota Statutes 2014, section 82.86, is amended by adding a subdivision to
read:


new text begin Subd. 12a. new text end

new text begin Administrative hearing. new text end

new text begin If a claimant or licensee makes a timely
request for an administrative hearing under subdivision 10a, the commissioner shall
request an administrative law judge be assigned and a hearing conducted under the
contested case provisions of chapter 14 within 45 days after the commissioner received the
request for hearing, unless the parties agree to a later date. The commissioner must notify
the claimant or licensee of the time and place of the hearing at least 15 days before the
hearing. Upon petition of the commissioner, the administrative law judge shall continue
the hearing up to 60 days and, upon a showing of good cause, may continue the hearing
for such additional period as the administrative law judge deems appropriate.
new text end

new text begin Whenever an applicant's judgment is by default, stipulation, or consent, or
whenever the action against the licensee was defended by a trustee in bankruptcy, the
claimant shall have the burden of proving by substantial evidence the cause of action for
fraudulent, deceptive, or dishonest practices. Otherwise, the judgment creates a rebuttable
presumption of the fraudulent, deceptive, or dishonest practices. This presumption affects
the burden of producing evidence.
new text end

new text begin The judgment debtor may defend any action of the debtor's own behalf and shall
have recourse to all appropriate means of defense and review, including examination
of witnesses.
new text end

new text begin The commissioner may defend an action on behalf of the fund and may use all
appropriate means of defense and review, including examination of witnesses.
new text end

new text begin The judgment is prima facie evidence of the cause of action and for the purposes
of this section is not conclusive. The commissioner may move the court at any time to
dismiss the application when it appears there are no triable issues and the application
is without merit. The motion may be supported by affidavit of any person or persons
having knowledge of the facts, and may be made on the basis that the application, and the
judgment referred to in the application, does not form the basis for a meritorious recovery
claim within the purview of subdivision 7; provided, however, the commissioner shall
give written notice at least ten days before the motion.
new text end

new text begin The administrative law judge shall issue findings of fact, conclusions of law, and
order. If the administrative law judge finds that compensation should be paid to the
claimant, the administrative law judge shall order the commissioner to make payment from
the fund of the amount it finds to be payable pursuant to the provisions of and in accordance
with the limitations contained in this section. The order of the administrative law judge
constitutes the final decision of the agency in the contested case. The commissioner,
claimant, or licensee may seek judicial review of the administrative law judge's findings of
fact, conclusions of law, and order in accordance with sections 14.63 to 14.69.
new text end

Sec. 8.

Minnesota Statutes 2014, section 82.86, is amended by adding a subdivision to
read:


new text begin Subd. 13a. new text end

new text begin Satisfaction of claims. new text end

new text begin The commissioner shall pay compensation from
the fund to a claimant by July 15 of the year after a final order was issued pursuant to
subdivision 10a or 12a, subject to the payment limitations of this section.
new text end

new text begin At the end of each calendar year the commissioner shall calculate the amount of
compensation to be paid from the fund pursuant to final orders issued under subdivisions
10a and 12a. If the calculated amount exceeds the amount available for payment, the
commissioner shall allocate the remaining amount available among the claimants in the
ratio that the amount agreed to or ordered to be paid to each claimant bears to the amount
calculated. The commissioner shall mail notice of the allocation to all claimants not
less than 45 days following the end of the calendar year. A claimant who objects to the
plan of allocation shall notify the commissioner within 20 days of the mailing of the
notice to make a request for administrative hearing. The commissioner shall request an
administrative law judge be assigned and a hearing conducted under the contested case
provisions of chapter 14 within 45 days after the commissioner received the request for
hearing, unless the parties agree to a later date. The commissioner must notify the claimant
or licensee of the time and place of the hearing at least 15 days before the hearing. Upon
petition of the commissioner, the administrative law judge shall continue the hearing up to
60 days and upon a showing of good cause may continue the hearing for an additional
period the administrative law judge considers appropriate.
new text end

new text begin Compensation paid by the commissioner in accordance with this subdivision
satisfies and extinguishes any right to compensation from the fund based upon the verified
application of the claimant.
new text end

Sec. 9.

Minnesota Statutes 2014, section 82.86, is amended by adding a subdivision to
read:


new text begin Subd. 14a. new text end

new text begin Right of subrogation. new text end

new text begin The commissioner shall not pay compensation
from the fund to a claimant unless and until the claimant executes an assignment to the
commissioner of all rights, title, and interest in the final judgment in the amount of the
compensation to be paid to the claimant pursuant to the final order. The commissioner
shall deposit in the fund any amount and interest recovered by the commissioner on the
judgment under this subdivision.
new text end

Sec. 10.

Minnesota Statutes 2014, section 82.86, is amended by adding a subdivision
to read:


new text begin Subd. 15a. new text end

new text begin License suspension. new text end

new text begin If the commissioner pays from the recovery portion
of the fund any amount in settlement of a claim or toward satisfaction of a judgment
against a licensee, the license is automatically suspended upon the effective date of a final
order authorizing payment from the recovery portion of the fund. A broker, salesperson,
or closing agent shall not be granted reinstatement until the person has repaid in full,
plus interest at the rate of 12 percent a year, twice the amount paid from the fund on
the person's account, and has obtained a surety bond issued by an insurer authorized to
transact business in this state in the amount of $40,000. The bond must be filed with the
commissioner, with the state of Minnesota as obligee, conditioned for the prompt payment
to any aggrieved person entitled thereto, of any amounts received by the real estate broker,
salesperson, or closing agent or to protect an aggrieved person from loss resulting from
fraudulent, deceptive, or dishonest practices. The bond must remain operative for as long
as that real estate broker, salesperson, or closing agent is licensed. Payment must not be
made from the fund based upon claims against a broker, salesperson, or closing agent who
is granted reinstatement pursuant to this subdivision. A discharge in bankruptcy does not
relieve a person from the penalties and disabilities provided in this section.
new text end

Sec. 12.

Minnesota Statutes 2014, section 82.86, is amended by adding a subdivision
to read:


new text begin Subd. 17a. new text end

new text begin Criminal penalty. new text end

new text begin It is unlawful for a person or the agent of a person to
knowingly file with the commissioner any notice, statement, or other document required
under this section which is false or untrue or contains a material misstatement of fact.
Conduct in violation of this subdivision constitutes a gross misdemeanor.
new text end

Sec. 13.

Minnesota Statutes 2014, section 82.86, is amended by adding a subdivision
to read:


new text begin Subd. 20. new text end

new text begin Additional applicable terms. new text end

new text begin (a) For purposes of this section:
new text end

new text begin (1) "claimant" refers to the applicant for recovery from the recovery portion of the
real estate education, research and recovery fund;
new text end

new text begin (2) "licensee" is synonymous with the judgment debtor that is or was licensed under
this chapter as a real estate broker, real estate salesperson, or closing agent;
new text end

new text begin (3) persons who are joint tenants or tenants in common are considered to be a single
claimant; and
new text end

new text begin (4) "aggrieved person" does not include a government agency; financial institution;
insurance company; other entity that purchases, guarantees, or insures a loan secured by
real estate; or insurers or sureties under subrogation or similar theories, and does not
include a licensee unless (i) the licensee is acting in the capacity of principal in the sale
of interests in real property owned by the licensee; or (ii) the licensee is acting in the
capacity or principal in the purchase of interests in real property to be owned by the
licensee. Under no circumstances is a licensee entitled to payment under this section for
the loss of a commission or similar fee.
new text end

Sec. 11.

Minnesota Statutes 2014, section 82.86, is amended by adding a subdivision to
read:


new text begin Subd. 16a. new text end

new text begin Appropriation. new text end

new text begin Any sums received by the commissioner pursuant to
any provisions of this section must be deposited in the state treasury, and credited to the
real estate education, research and recovery fund. All money in the fund is appropriated
annually to the commissioner for the purposes of this section.
new text end

Sec. 14. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2014, section 82.86, subdivisions 8, 9, 10, 11, 12, 13, 14, 15, 16,
17, and 19,
new text end new text begin are repealed.
new text end