SF 1521

as introduced - 87th Legislature (2011 - 2012) Posted on 01/25/2012 09:03am

A bill for an act
relating to economic development; allowing a stay of mortgage foreclosure
proceedings under certain conditions; landlord and tenant; providing rights to
tenants of foreclosed property; amending Minnesota Statutes 2010, section
504B.151, subdivisions 1, 2, by adding subdivisions; proposing coding for new
law in Minnesota Statutes, chapter 582.

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

Section 1.

Minnesota Statutes 2010, section 504B.151, subdivision 1, is amended to
read:

Subdivision 1.

Limitation on lease and notice to tenant.

(a) Once a landlord has
received notice of a contract for deed cancellation under section 559.21 or notice of a
mortgage foreclosure sale under chapter 580 or 582, or summons and complaint under
chapter 581, the landlord may only enter into (i) a periodic residential lease agreement
with a term of not more than two months or the time remaining in the contract cancellation
period or the mortgagor's redemption period, whichever is less or (ii) a fixed term
residential tenancy not extending beyond the cancellation period or the landlord's period
of redemption until:

(1) the contract for deed has been reinstated or paid in full;

(2) the mortgage default has been cured and the mortgage reinstated;

(3) the mortgage has been satisfied;

(4) the property has been redeemed from a foreclosure sale; or

(5) a receiver has been appointed.

(b) Before entering into a lease under this section and accepting any rent or security
deposit from a tenant, the landlord must notify the prospective tenant in writing that the
landlord has received notice of a contract for deed cancellation or notice of a mortgage
foreclosure sale as appropriate, and the date on which the contract cancellation period or
the mortgagor's redemption period ends. The landlord must also inform the prospective
tenant of the tenant's right to continued utility services if the landlord defaults on utility
payments during the foreclosure process.

(c) This section does not apply to a manufactured home park as defined in section
327C.01, subdivision 5.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 2.

Minnesota Statutes 2010, section 504B.151, subdivision 2, is amended to read:

Subd. 2.

Exception allowing a longer term lease.

This section Subdivision 1
does not apply if:

(1) the holder or the mortgagee agrees not to terminate the tenant's lease other than
for lease violations for at least one year from the commencement of the tenancy; and

(2) the lease does not require the tenant to prepay rent for any month commencing
after the end of the cancellation or redemption period, so that the rent payment would be
due prior to the end of the cancellation or redemption period.

For the purposes of this section, a holder means a contract for deed vendor or a
holder of the sheriff's certificate of sale or any assignee of the contract for deed vendor or
of the holder of the sheriff's certificate of sale.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 3.

Minnesota Statutes 2010, section 504B.151, is amended by adding a
subdivision to read:

Subd. 5.

Rights of tenant of foreclosed property.

(a) When a new owner takes
ownership of a rental property as the result of a foreclosure:

(1) a tenant is deemed by operation of law to become the tenant of the new owner;
and

(2) all leases, verbal or written, and all terms and conditions of those agreements
shall be transferred to the new owner and recorded in a new lease between the new owner
and the tenant.

(b) A new owner shall:

(1) maintain as rental property, property that was used as rental property by the
previous landlord;

(2) offer renewal leases to tenants of the foreclosed property; and

(3) offer a fair market rent.

(c) The requirements of paragraphs (a) and (b) must not apply to:

(1) a single family rental property that the new owner intends to occupy as a primary
residence within 60 days of the purchase of the property; and

(2) any part of a multifamily rental property that the new owner intends to occupy
as a primary residence within 60 days of the purchase of the property. In any action to
recover possession of rental property in which a new owner claims to be exempt from
the requirements of this subdivision, the new owner bears the burden to demonstrate
such intent.

(d) For purposes of this section "new owner" means a holder of the sheriff's
certificate of sale or the assignee or vendee of such holder.

EFFECTIVE DATE.

This section is effective the day following final enactment.

Sec. 4.

Minnesota Statutes 2010, section 504B.151, is amended by adding a
subdivision to read:

Subd. 6.

Eviction.

Notwithstanding any other law to the contrary, the new owner
must not begin an eviction action against a tenant without cause. For purposes of this
subdivision, "cause" shall mean one or more of the following:

(1) the tenant has failed to pay a reasonable rent to the foreclosing owner, but only
if the foreclosing owner notified the tenant in writing of the reasonable rent amount, to
whom it was to be paid, and the due date;

(2) the tenant has violated an obligation or covenant of the tenancy or occupancy
other than the obligation to surrender possession upon proper notice and has failed to
cure the violation within a reasonable time after having received written notice from the
foreclosing owner;

(3) the tenant is permitting a nuisance to exist in, or is causing substantial damage
to, the unit, or is creating a substantial interference with the quiet enjoyment of other
occupants;

(4) the tenant is convicted of using or permitting the unit to be used for any illegal
purpose; or

(5) the tenant has refused the foreclosing owner reasonable access to the unit to make
necessary repairs or improvements required by law, inspect the premises as permitted
or required by agreement or by law, or show the rental housing unit to a prospective
purchaser or mortgagee.

EFFECTIVE DATE.

This section is effective the day following final enactment
until June 30, 2014.

Sec. 5.

Minnesota Statutes 2010, section 504B.151, is amended by adding a
subdivision to read:

Subd. 7.

Termination of tenancy.

A new owner must not terminate the tenancy of a
tenant of foreclosed property without cause as defined in subdivision 6.

EFFECTIVE DATE.

This section is effective the day following final enactment
until June 30, 2014.

Sec. 6.

Minnesota Statutes 2010, section 504B.151, is amended by adding a
subdivision to read:

Subd. 8.

Periodic leases.

A new owner must offer a fixed-term lease option to a
tenant with a periodic lease in place at the time the tenant becomes a tenant of the new
owner.

EFFECTIVE DATE.

This section is effective the day following final enactment
until June 30, 2014.

Sec. 7.

Minnesota Statutes 2010, section 504B.151, is amended by adding a
subdivision to read:

Subd. 9.

Applicability.

The provisions of subdivisions 5 to 8 apply to all tenants
regardless of when a tenant entered into a rental agreement with the property owner or at
what stage the foreclosure process was in when the rental agreement was entered.

EFFECTIVE DATE.

This section is effective the day following final enactment
until June 30, 2014.

Sec. 8.

[582.33] FORECLOSURE MORATORIUM.

Subdivision 1.

Emergency declared to exist.

The legislature declares that a public
economic emergency exists in the state due to the increase in foreclosure rates. The
legislature declares that these conditions have created a housing emergency that justifies
legislation creating a moratorium on mortgage foreclosures.

Subd. 2.

Stay of foreclosure process.

In any proceeding to foreclose a mortgage
upon residential property, whether by judicial process under this chapter and chapter
581 or by advertisement under this chapter and chapter 580, foreclosed borrowers
residing in their homesteaded property shall be entitled to stay the foreclosure process
and remain in possession of the mortgaged premises by serving a notice of right to stay
upon the mortgage holder or the holder of a certificate of sheriff's sale if different from
the mortgage holder, the court having jurisdiction over a judicial action to foreclose the
mortgage, and the sheriff in the jurisdiction where the mortgaged premises are located.
The foreclosure process shall be stayed effective as of the date of service of the notice
of right to stay. The stay shall continue in effect for a period ending two years from
the effective date of this bill or on June 30, 2014, whichever is later, provided that the
conditions set forth in subdivision 3 are met.

Subd. 3.

Maintenance of stay.

In order to maintain a stay obtained under
subdivision 2:

(1) the holder of the stay must maintain homestead status of the property;

(2) after receipt of written notice from the foreclosing lender or holder of a certificate
of sheriff's sale of the name and address to which the monthly payments are to be made,
the amount of the payment, the date that the first monthly payment is due, and the dates
of each subsequent payment, the holder of the stay shall make reasonable, affordable
monthly payments to the foreclosing lender or holder or holder of a certificate of sheriff's
sale. The monthly payment shall be equal to the monthly payment when the stay became
effective or 41 percent of the borrower's documented and verified monthly gross income,
whichever is less; and

(3) the holder of the stay must refrain from conduct that would constitute just cause
for dissolution of the stay, as defined in subdivision 4.

Subd. 4.

Dissolution of stay.

Upon 30 days' written notice to the holder of the stay
and any other party previously designated in writing to the new owner by the holder of the
stay, the foreclosing lender or holder of a certificate of sheriff's sale shall be entitled to
apply to a court in the jurisdiction where the property is located for an order dissolving
the stay. An order dissolving the stay and granting possession of the property to the
holder of the certificate of sheriff's sale may be granted if the court finds that the public
interest is served by granting the order and upon a showing that the foreclosed borrower
in possession or tenant in possession of foreclosed property has failed to comply with
the requirements of subdivision 3 or that other just cause exists. For purposes of this
subdivision, "other just cause" means one or more of the following:

(1) the holder of the stay is permitting a nuisance to exist in, or is causing substantial
damage to, the unit, or is creating a substantial interference with the quiet enjoyment
of other occupants;

(2) the holder of the stay is convicted of using or permitting the unit to be used
for any illegal purpose; or

(3) the holder of the stay has refused the foreclosing owner reasonable access to
the unit for the purpose of making necessary repairs or improvements required by law,
to inspect the premises as permitted or required by agreement or by law, or to show the
premises to a prospective purchaser or mortgagee.

Subd. 5.

Application.

This section applies only to mortgages executed before
the effective date of this section.

EFFECTIVE DATE.

This section is effective the day following final enactment
until June 30, 2014.