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Key: (1) language to be deleted (2) new language

CHAPTER 343--H.F.No. 3386
An act
relating to real property; requiring performance guidelines for certain
residential contracts; modifying statutory warranties; requiring notice and
opportunity to repair; providing for dispute resolution procedures; requiring
a report;amending Minnesota Statutes 2008, sections 302A.781, subdivision
4; 322B.863, subdivision 4; 326B.809; 327A.01, subdivision 7, by adding
a subdivision; 327A.02, subdivision 4, by adding subdivisions; 327A.03;
Minnesota Statutes 2009 Supplement, section 327A.08; proposing coding for
new law in Minnesota Statutes, chapter 327A.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

    Section 1. Minnesota Statutes 2008, section 302A.781, subdivision 4, is amended to
read:
    Subd. 4. Statutory homeowner warranty claims preserved. The statutory
warranties provided under section 327A.02, and any contribution or indemnity claim
arising from the breach of those warranties, are not affected by a the dissolution under
this chapter of a vendor or home improvement contractor.

    Sec. 2. Minnesota Statutes 2008, section 322B.863, subdivision 4, is amended to read:
    Subd. 4. Statutory homeowner warranty claims preserved. The statutory
warranties provided under section 327A.02, and any contribution or indemnity claim
arising from the breach of those warranties, are not affected by a the dissolution under
this chapter of a vendor or home improvement contractor.

    Sec. 3. Minnesota Statutes 2008, section 326B.809, is amended to read:
326B.809 WRITTEN CONTRACT REQUIRED.
    (a) All agreements including proposals, estimates, bids, quotations, contracts,
purchase orders, and change orders between a licensee and a customer for the performance
of a licensee's services must be in writing and must contain the following:
    (1) a detailed summary of the services to be performed;
    (2) a description of the specific materials to be used or a list of standard features
to be included; and
    (3) the total contract price or a description of the basis on which the price will
be calculated.
    (b) Before entering into an agreement, the licensee shall provide a prospective
customer with written performance guidelines for the services to be performed.
Performance guidelines also must be included or incorporated by reference in the
agreement. All agreements shall be signed and dated by the licensee and customer.
    (c) The licensee shall provide to the customer, at no charge, a signed and dated
document at the time that the licensee and customer sign and date the document.
Documents include agreements, performance guidelines, and mechanic's lien waivers.

    Sec. 4. Minnesota Statutes 2008, section 327A.01, subdivision 7, is amended to read:
    Subd. 7. Vendor. "Vendor" means any person, firm, or corporation which that
constructs dwellings for the purpose of sale, including the construction of dwellings on
land owned by vendees. Vendor does not include a subcontractor or material supplier
involved in the construction of a dwelling.

    Sec. 5. Minnesota Statutes 2008, section 327A.01, is amended by adding a subdivision
to read:
    Subd. 12. Inspection. "Inspection" means a visual or invasive examination of the
alleged property damage.

    Sec. 6. Minnesota Statutes 2008, section 327A.02, subdivision 4, is amended to read:
    Subd. 4. Response from vendor or home improvement contractor to notice
of claim; right to inspect. (a) Following notice under section 327A.03, The vendee
or owner must allow an inspection and opportunity to for purposes of the preparation of
an offer to repair the known alleged loss or damage under subdivision 5. Upon request
of the vendee, a court may order the vendor to conduct the inspection. The inspection
must be performed and any offer to repair must be made in writing to the vendee by
the vendor or home improvement contractor within 30 days of the vendor's receipt of
the written notice required under section 327A.03, clause (a), alleging loss or damage
the notification under section 327A.03, clause (a). Any damage to property caused as a
result of an inspection must be promptly repaired by the inspecting party to restore the
property to its pre-inspected condition.
(b) The applicable statute of limitations and statute of repose for an action based on
breach of a warranty imposed by this section, or any other action in contract, tort, or other
law for any injury to real or personal property or bodily injury or wrongful death arising
out of the alleged loss or damage, is tolled from the date the written notice provided by the
vendee or owner is postmarked, or if not sent through the mail, received by the vendor
or home improvement contractor until the earliest latest of the following:
(1) the date the vendee rejects the vendor's offer to repair of completion of the home
warranty dispute resolution process under section 327A.051; or
(2) the date the vendor rejects the vendee's claim in writing;
(3) failure by the vendor to make an offer to repair within the 30-day period
described in this subdivision; or
(4) 180 days.
For purposes of this subdivision, "vendor" includes a home improvement contractor.
(b) (c) Upon completion of repairs as described in an offer to repair, the vendor must
provide the vendee with a list of the repairs made and a notice that the vendee may have
a right to pursue a warranty claim under this chapter. Provision of this statement is not
an admission of liability. Compliance with this subdivision does not affect any rights
of the vendee under this chapter.

    Sec. 7. Minnesota Statutes 2008, section 327A.02, is amended by adding a subdivision
to read:
    Subd. 5. Right to repair; agreement. (a) Within 15 days of completion of the
inspection required by subdivision 4, the vendor or home improvement contractor must
provide to the vendee or owner a written offer to repair. The offer to repair must include,
at a minimum:
(1) the scope of the proposed repair work; and
(2) the proposed date on which the repair work would begin and the estimated
date of completion.
(b) This subdivision does not prevent the vendee or owner from obtaining the
information in paragraph (a) from another contractor or from negotiating with the vendor
or home improvement contractor for a different scope of work.
(c) If the parties agree to a scope of work, the vendor or home improvement
contractor must perform the repair work in accordance with the offer to repair. If the
parties do not agree to a scope of work, the vendee or owner must submit the matter to the
homeowner warranty dispute resolution process under section 327A.051.
(d) Upon completion of repairs described in an offer to repair, the vendor or home
improvement contractor must provide the vendee or owner with a written notice that the
scope of the work agreed upon has been completed.

    Sec. 8. Minnesota Statutes 2008, section 327A.02, is amended by adding a subdivision
to read:
    Subd. 6. Failure to perform inspection or repair. If the vendor or home
improvement contractor fails to perform an inspection under subdivision 4 or fails to
make an offer to repair or perform agreed upon repairs under subdivision 5, the vendee or
owner may commence an action.

    Sec. 9. Minnesota Statutes 2008, section 327A.02, is amended by adding a subdivision
to read:
    Subd. 7. Processes required before commencement of action. Except as provided
in subdivision 6, a cause of action for which the statute of limitations or statute of repose
is tolled under subdivision 4, paragraph (b), must not be commenced in district court
until the earlier of:
(1) the completion of the home warranty dispute resolution process under section
327A.051; or
(2) 60 days after the written offer of repair is provided to the vendee or owner.

    Sec. 10. Minnesota Statutes 2008, section 327A.03, is amended to read:
327A.03 EXCLUSIONS.
The liability of the vendor or the home improvement contractor under sections
327A.01 to 327A.07 is limited to the specific items set forth in sections 327A.01 to
327A.07 and does not extend to the following:
(a) loss or damage not reported by the vendee or the owner to the vendor or the
home improvement contractor in writing within six months after the vendee or the owner
discovers or should have discovered the loss or damage; unless the vendee or owner
establishes that the vendor or home improvement contractor had actual notice of the
loss or damage;
(b) loss or damage caused by defects in design, installation, or materials which the
vendee or the owner supplied, installed, or directed to be installed;
(c) secondary loss or damage such as personal injury or property damage;
(d) loss or damage from normal wear and tear;
(e) loss or damage from normal shrinkage caused by drying of the dwelling or the
home improvement within tolerances of building standards;
(f) loss or damage from dampness and condensation due to insufficient ventilation
after occupancy;
(g) loss or damage from negligence, improper maintenance or alteration of the
dwelling or the home improvement by parties other than the vendor or the home
improvement contractor;
(h) loss or damage from changes in grading of the ground around the dwelling or the
home improvement by parties other than the vendor or the home improvement contractor;
(i) landscaping or insect loss or damage;
(j) loss or damage from failure to maintain the dwelling or the home improvement
in good repair;
(k) loss or damage which the vendee or the owner, whenever feasible, has not taken
timely action to minimize;
(l) loss or damage which occurs after the dwelling or the home improvement is
no longer used primarily as a residence;
(m) accidental loss or damage usually described as acts of God, including, but not
limited to: fire, explosion, smoke, water escape, windstorm, hail or lightning, falling trees,
aircraft and vehicles, flood, and earthquake, except when the loss or damage is caused by
failure to comply with building standards;
(n) loss or damage from soil movement which is compensated by legislation or
covered by insurance;
(o) loss or damage due to soil conditions where construction is done upon lands
owned by the vendee or the owner and obtained by the vendee or owner from a source
independent of the vendor or the home improvement contractor;
(p) in the case of home improvement work, loss or damage due to defects in the
existing structure and systems not caused by the home improvement.

    Sec. 11. [327A.051] HOME WARRANTY DISPUTE RESOLUTION.
    Subdivision 1. Panel of neutrals. (a) The commissioner of labor and industry shall
maintain a list of persons who consent to serve as qualified neutrals for purposes of this
section. The commissioner shall establish application requirements and qualifications for
qualified neutrals, taking into consideration the education, experience, and training of the
applicant, potential conflicts of interest, and that the purpose of the process is to assist
parties in determining an agreeable scope of repair or other resolution of their dispute.
(b) As a condition of being included on the panel of neutrals identified in this
section, the commissioner of labor and industry may charge each qualified neutral a fee of
$200 per year for the administration of the home warranty dispute resolution process.
    Subd. 2. Dispute resolution process. (a) The home warranty dispute resolution
process required by this section is commenced by written application to the commissioner.
A request must include the complete current address and full name of the contact person
for each participating party.
(b) Within ten days of receiving a written request, the commissioner shall provide
each party with a written list of three qualified neutrals randomly selected from the panel
of neutrals established under subdivision 1. The commissioner shall also provide complete
contact information for each qualified neutral.
(c) Within five business days after receipt of the list from the commissioner,
the parties shall mutually select one of the three qualified neutrals identified by the
commissioner to serve as the qualified neutral for their dispute. If the parties cannot
mutually agree on a neutral, the vendor or home improvement contractor shall strike one
of the neutrals from the list, the vendee or owner shall subsequently strike one of the
remaining neutrals from the list, and the remaining neutral shall serve as the qualified
neutral for the dispute resolution process. The parties shall notify the selected qualified
neutral and the commissioner of the selection.
    Subd. 3. Neutral evaluation; fee. (a) The qualified neutral selected by the parties
shall convene, and each party shall attend, an in-person conference of the parties. The
qualified neutral shall select the date for the conference after consulting the parties.
The conference must occur no later than 30 days after the neutral's selection, except by
mutual agreement of the parties. In addition, the neutral shall collect from each party an
administrative fee of $25 and shall submit those fees to the commissioner no later than ten
days after the completion of the conference.
(b) At least seven days before the conference, each party must provide the
qualified neutral and the other party with all information and documentation necessary to
understanding the dispute, or the alleged loss or damages.
(c) After reviewing the information and documentation provided by the parties and
after consulting with the parties at the conference, the neutral shall issue to the parties a
nonbinding, written determination, which must include, to the extent possible, findings
and recommendations on the scope and amount of repairs necessary, if any. The qualified
neutral shall mail the determination to each party within ten days after the conference.
(d) The parties shall share the expense of the qualified neutral's billed time equally,
unless otherwise agreed. The neutral's billed time for evaluation of documents, meeting
with the parties, and issuing a written determination must not exceed six hours, unless
agreed to in writing by both parties. The neutral must identify the neutral's hourly rate
to the parties.
    Subd. 4. Alternative process. If both parties agree, the parties may designate an
alternative dispute resolution process in lieu of participating in the home warranty dispute
resolution process established by this section. If the parties agree to an alternative dispute
resolution process, they shall provide written notice of the agreement and a description of
the selected process to the commissioner as soon as practicable, but no later than the date
the parties are required to select a neutral under subdivision 2.
    Subd. 5. Effect on future proceedings. (a) The written determination issued by the
qualified neutral and all communications relating to the home warranty dispute resolution
process, except those between any party and the commissioner, are deemed confidential
settlement communications pursuant to Rule 408 of the Minnesota Rules of Evidence.
(b) No party may use the written offer of repair provided by a vendor or home
improvement contractor, a counteroffer to repair, or a written determination issued by the
qualified neutral as evidence of liability in subsequent litigation between the parties. The
qualified neutral may not be called to testify regarding the dispute resolution proceedings.
(c) Any amount paid by a party for the services of a qualified neutral under this
section is deemed a taxable cost of the prevailing party in a subsequent litigation involving
the same subject matter.
    Subd. 6. Noncompliance with timelines; effect. Failure to strictly comply with the
timelines in this section shall not be grounds for dismissal of any claim brought under
section 327A.05, provided that the parties establish good faith effort in complying with
this section.

    Sec. 12. Minnesota Statutes 2009 Supplement, section 327A.08, is amended to read:
327A.08 LIMITATIONS.
Notwithstanding any other provision of sections 327A.01 to 327A.08:
(a) the terms of the home improvement warranties required by sections 327A.01 to
327A.08 commence upon completion of the home improvement and the term shall not
be required to be renewed or extended if the home improvement contractor performs
additional improvements required by warranty;
(b) the home improvement warranties required by sections 327A.01 to 327A.08
shall not include products or materials installed that are already covered by implied or
written warranty; and
(c) the warranties required by sections 327A.01 to 327A.08 must be set forth as
written warranty instruments and must be included as part of the construction contract
and. The warranties and the exclusions under section 327A.03, the right to inspect and
offer to repair under section 327A.02, subdivisions 4 and 5, and the home warranty dispute
resolution process under section 327A.051 must be conveyed in writing to the owner.
Failure to comply with this paragraph is a violation of section 326B.84.
(d) If the warranties required by sections 327A.01 to 327A.08 are not provided to
the owner in writing as required by paragraph (c), they are implied statutory warranties
that have the same effect as if the vendor or home improvement contractor had complied
with paragraph (c).
(e) The owner's right under this section to receive the written warranty required
under this section may not be waived or modified by contract or otherwise. Any agreement
that purports to waive or modify the right to the written warranty required under this
section is void.
(f) This section does not limit the ability of the vendor or home improvement
contractor and the owner to enter into the agreements permitted under section 327A.04,
subdivisions 2 and 3.

    Sec. 13. REPORT.
By February 1, 2014, the commissioner of labor and industry shall report to the
chairs and ranking minority members of the committees of the legislature with jurisdiction
over civil law matters on the number of dispute resolution cases established under
Minnesota Statutes, section 327A.051, and, to the extent possible, identify the number of
cases that used the home warranty dispute process and the number that used an alternative
dispute resolution process under subdivision 4 of that section.

    Sec. 14. EFFECTIVE DATE; APPLICATION.
Sections 1 and 2 and 4 to 11 are effective January 1, 2011, and apply to notices of
claims given and actions commenced on or after that date. Sections 3 and 12 are effective
January 1, 2011, and apply to contracts entered into on or after that date.
Sections 1 to 12 do not revive claims already barred or extend any applicable statute
of limitations or repose.
Presented to the governor May 11, 2010
Signed by the governor May 13, 2010, 10:20 a.m.

700 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155 ♦ Phone: (651) 296-2868 ♦ TTY: 1-800-627-3529 ♦ Fax: (651) 296-0569