Minnesota Session Laws - 1995, Regular Session

                            CHAPTER 169-H.F.No. 536 
                  An act relating to commerce; residential building 
                  contractors; regulating licensees; providing a 
                  clarification; amending Minnesota Statutes 1994, 
                  sections 326.83, subdivision 5, and by adding a 
                  subdivision; 326.84, subdivision 3; 326.91, 
                  subdivision 1; 326.95, subdivision 2; and 326.975, 
                  subdivision 1. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1994, section 326.83, 
        subdivision 5, is amended to read: 
           Subd. 5.  [GROSS ANNUAL RECEIPTS.] "Gross annual receipts" 
        means the total amount derived from residential contracting or 
        remodeling activities, regardless of where the activities are 
        performed, and must not be reduced by cost of goods sold, 
        expenses, losses, or any other amount. 
           Sec. 2.  Minnesota Statutes 1994, section 326.83, is 
        amended by adding a subdivision to read: 
           Subd. 21.  [GARAGE.] "Garage" means a structure attached to 
        or in reasonable proximity to a dwelling, which is used or 
        intended to be used primarily for the protection or storage of 
        automobiles or other personal vehicles owned or driven by the 
        occupants of the dwelling. 
           Sec. 3.  Minnesota Statutes 1994, section 326.84, 
        subdivision 3, is amended to read: 
           Subd. 3.  [EXEMPTIONS.] The license requirement does not 
        apply to: 
           (1) an employee of a licensee performing work for the 
        licensee; 
           (2) a material person, manufacturer, or retailer furnishing 
        finished products, materials, or articles of merchandise who 
        does not install or attach the items; 
           (3) an owner or owners of residential real estate who build 
        or improve residential real estate and who do the work 
        themselves or jointly with the owner's own bona fide employees 
        or agents.  This exemption does not apply to a person who 
        engages in a pattern of building or improving real estate for 
        purposes of resale.  Such a pattern is presumed to exist if the 
        person sells more than one property so built or 
        improved constructs or improves more than one property within 
        any 12-month period; 
           (4) an architect or engineer engaging in professional 
        practice as defined in this chapter; 
           (5) a person whose total gross annual receipts from 
        projects regulated under this section do not exceed $15,000; 
           (6) a mechanical contractor; 
           (7) a plumber, electrician, or other person whose 
        profession is otherwise subject to statewide licensing, when 
        engaged in the activity which is the subject of licensure; 
           (8) specialty contractors who provide only one special 
        skill as defined in section 326.83; 
           (9) a school district, or a technical college governed 
        under chapter 136C; and 
           (10) manufactured housing installers; and 
           (11) Habitat for Humanity and Builders Outreach Foundation, 
        and their individual volunteers when engaged in activities on 
        their behalf. 
           To qualify for the exemption in clause (5), a person must 
        obtain a certificate of exemption from licensing from the 
        commissioner.  
           A certificate of exemption will be issued upon the 
        applicant's filing with the commissioner, an affidavit stating 
        that the applicant does not expect to exceed $15,000 in gross 
        annual receipts derived from contracting activities during the 
        calendar year for which the exemption is requested. 
           To renew the exemption in clause (5), the applicant must 
        file an affidavit stating that the applicant did not exceed 
        $15,000 in gross annual receipts during the past calendar year, 
        and the applicant does not expect to exceed $15,000 in gross 
        annual receipts during the calendar year for which the exemption 
        is requested. 
           If a person, operating under the exemption in clause (5), 
        exceeds $15,000 in gross receipts during any calendar year, the 
        person must immediately surrender the exemption certificate and 
        apply for the appropriate license.  The person must remain 
        licensed until such time as the person's gross annual receipts 
        during a calendar year fall below $15,000.  The person may then 
        apply for this exemption for the next calendar year. 
           Sec. 4.  Minnesota Statutes 1994, section 326.91, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [CAUSE.] The commissioner may by order 
        deny, suspend, or revoke any license or may censure a licensee, 
        and may impose a civil penalty as provided for in section 
        45.027, subdivision 6, if the commissioner finds that the order 
        is in the public interest, and that the applicant, licensee, or 
        affiliate of an applicant or licensee, or other agent, owner, 
        partner, director, governor, shareholder, member, officer, 
        qualifying person, or managing employee of the applicant or 
        licensee or any person occupying a similar status or performing 
        similar functions:  
           (1) has filed an application for a license which is 
        incomplete in any material respect or contains any statement 
        which, in light of the circumstances under which it is made, is 
        false or misleading with respect to any material fact; 
           (2) has engaged in a fraudulent, deceptive, or dishonest 
        practice; 
           (3) is permanently or temporarily enjoined by any court of 
        competent jurisdiction from engaging in or continuing any 
        conduct or practice involving any aspect of the business; 
           (4) has failed to reasonably supervise employees, agents, 
        subcontractors, or salespersons, or has performed negligently or 
        in breach of contract, so as to cause injury or harm to the 
        public; 
           (5) has violated or failed to comply with any provision of 
        sections 326.83 to 326.98 or any rule or order under sections 
        326.83 to 326.98; 
           (6) has been shown to be incompetent, untrustworthy, or 
        financially irresponsible; 
           (7) has been convicted of a violation of the state building 
        code; 
           (8) has failed to use the proceeds of any payment made to 
        the licensee for the construction of, or any improvement to, 
        residential real estate, as defined in section 326.83, 
        subdivision 17, for the payment of labor, skill, material, and 
        machinery contributed to the construction or improvement, 
        knowing that the cost of any labor performed, or skill, 
        material, or machinery furnished for the improvement remains 
        unpaid; 
           (9) has not furnished to the person making payment either a 
        valid lien waiver as to any unpaid labor performed, or skill, 
        material, or machinery furnished for an improvement, or a 
        payment bond in the basic amount of the contract price for the 
        improvement conditioned for the prompt payment to any person or 
        persons entitled to payment; 
           (10) has engaged in conduct which was the basis for a 
        contractor's recovery fund payment pursuant to section 326.975, 
        which payment has not been reimbursed; 
           (11) has engaged in bad faith, unreasonable delays, or 
        frivolous claims in defense of a civil lawsuit arising out of 
        their activities as a licensee under this chapter; or 
           (12) has had a judgment entered against them for failure to 
        make payments to employees or subcontractors, and all appeals of 
        the judgment have been exhausted or the period for appeal has 
        expired; 
           (13) if unlicensed, has obtained a building permit by the 
        fraudulent use of a fictitious license number or the license 
        number of another, or, if licensed, has knowingly allowed an 
        unlicensed person to use the licensee's license number for the 
        purpose of fraudulently obtaining a building permit; or 
           (14) has made use of forged mechanics' lien waivers under 
        chapter 514. 
           Sec. 5.  Minnesota Statutes 1994, section 326.95, 
        subdivision 2, is amended to read: 
           Subd. 2.  [ADVERTISING.] The license number of a licensee 
        must appear in any display advertising by that licensee 
        including but not limited to signs, vehicles, business cards, 
        published display ads, flyers, and brochures. 
           Sec. 6.  Minnesota Statutes 1994, section 326.975, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [GENERALLY.] (a) In addition to any other 
        fees, each applicant for a license under sections 326.83 to 
        326.98 shall pay a fee to the contractor's recovery fund.  The 
        contractor's recovery fund is created in the state treasury and 
        must be administered by the commissioner in the manner and 
        subject to all the requirements and limitations provided by 
        section 82.34 with the following exceptions: 
           (1) each licensee who renews a license shall pay in 
        addition to the appropriate renewal fee an additional fee which 
        shall be credited to the contractor's recovery fund.  The amount 
        of the fee shall be based on the licensee's gross annual 
        receipts for the licensee's most recent fiscal year preceding 
        the renewal, on the following scale: 
                  Fee           Gross Receipts
                  $100          under $1,000,000
                  $150          $1,000,000 to $5,000,000
                  $200          over $5,000,000
        Any person who receives a new license shall pay a fee based on 
        the same scale; 
           (2) the sole purpose of this fund is to compensate any 
        aggrieved owner or lessee of residential property who obtains a 
        final judgment in any court of competent jurisdiction against a 
        licensee licensed under section 326.84, on grounds of 
        fraudulent, deceptive, or dishonest practices, conversion of 
        funds, or failure of performance arising directly out of any 
        transaction when the judgment debtor was licensed and performed 
        any of the activities enumerated under section 326.83, 
        subdivision 19, on the owner's residential property or on 
        residential property rented by the lessee, or on new residential 
        construction which was never occupied prior to purchase by the 
        owner, or which was occupied by the licensee for less than one 
        year prior to purchase by the owner, and which cause of action 
        arose on or after April 1, 1994; and 
           (3) nothing may obligate the fund for more than $50,000 per 
        claimant, nor more than $50,000 per licensee; and 
           (4) nothing may obligate the fund for claims based on a 
        cause of action that arose before the licensee paid the recovery 
        fund fee set in paragraph (a), clause (1), or as provided in 
        section 326.945, subdivision 3.  
           (b) Should the commissioner pay from the contractor's 
        recovery fund any amount in settlement of a claim or toward 
        satisfaction of a judgment against a licensee, the license shall 
        be automatically suspended upon the effective date of an order 
        by the court authorizing payment from the fund.  No licensee 
        shall be granted reinstatement until the licensee has repaid in 
        full, plus interest at the rate of 12 percent a year, twice the 
        amount paid from the fund on the licensee's account, and has 
        obtained a surety bond issued by an insurer authorized to 
        transact business in this state in the amount of at least 
        $40,000.  
           Sec. 7.  [INTENT TO CLARIFY.] 
           By making the amendment in section 6, the legislature is 
        clarifying the original intent of the contractor's recovery fund 
        law, Laws 1993, chapter 245, section 36, when it was enacted.  
        The contractor's recovery fund replaces an earlier bonding 
        requirement set forth in Minnesota Statutes, sections 326.84 and 
        326.945.  Approximately one-half of the residential building 
        contractor licensees paid into the contractor's recovery fund on 
        March 31, 1994.  The remaining one-half are, pursuant to 
        Minnesota Statutes, section 326.945, still subject to the 
        bonding requirement until March 31, 1995, with an option to pay 
        into the contractor's recovery fund earlier.  
           It was intended that the contractor's recovery fund be 
        available to pay claims against only those licensees who had 
        paid into the contractor's recovery fund, and not against those 
        still subject to the bonding requirement. 
           Sec. 8.  [EFFECTIVE DATE.] 
           Sections 1, 3, 4, and 7, are effective the day following 
        final enactment. 
           Section 6 is effective retroactive to April 1, 1994. 
           Presented to the governor May 15, 1995 
           Signed by the governor May 17, 1995, 1:54 p.m.