1.1                          A bill for an act 
  1.2             relating to commerce; increasing continuing education 
  1.3             requirements and contractor recovery fund fees for 
  1.4             building contractors; modifying statutory housing 
  1.5             warranties; extending the statute of limitations for 
  1.6             actions relating to improvements to real property; 
  1.7             amending Minnesota Statutes 1996, sections 16B.65, 
  1.8             subdivision 7; 326.87, subdivision 2; 326.975, 
  1.9             subdivisions 1, 2, and 3; 327A.01, subdivisions 2 and 
  1.10            5; 327A.02, subdivisions 1 and 3; 327A.03; and 
  1.11            541.051, subdivisions 1 and 4. 
  1.12  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.13     Section 1.  Minnesota Statutes 1996, section 16B.65, 
  1.14  subdivision 7, is amended to read: 
  1.15     Subd. 7.  [CONTINUING EDUCATION.] Subject to sections 
  1.16  16B.59 to 16B.75, the commissioner may by rule establish or 
  1.17  approve continuing education programs for municipal building 
  1.18  officials dealing with matters of building code administration, 
  1.19  inspection, and enforcement.  
  1.20     Effective January 1, 1985, each person certified as a 
  1.21  building official for the state must satisfactorily complete 
  1.22  applicable educational programs established or approved by the 
  1.23  commissioner every three calendar years to retain certification, 
  1.24  including at least three hours in programs relating to the state 
  1.25  energy code. 
  1.26     Each person certified as a building official must submit in 
  1.27  writing to the commissioner an application for renewal of 
  1.28  certification within 60 days of the last day of the third 
  2.1   calendar year following the last certificate issued.  Each 
  2.2   application for renewal must be accompanied by proof of 
  2.3   satisfactory completion of minimum continuing education 
  2.4   requirements and the certification renewal fee established by 
  2.5   the commissioner.  
  2.6      For persons certified prior to January 1, 1985, the first 
  2.7   three-year period commences January 1, 1985. 
  2.8      Sec. 2.  Minnesota Statutes 1996, section 326.87, 
  2.9   subdivision 2, is amended to read: 
  2.10     Subd. 2.  [HOURS.] A qualifying person of a licensee must 
  2.11  provide proof of completion of seven 15 hours of continuing 
  2.12  education per year.  At least three hours of continuing 
  2.13  education per year must relate to requirements of the state 
  2.14  energy code.  To the extent the commissioner considers it 
  2.15  appropriate, courses or parts of courses may be considered to 
  2.16  satisfy both continuing education requirements under this 
  2.17  section and continuing real estate education requirements. 
  2.18     Sec. 3.  Minnesota Statutes 1996, section 326.975, 
  2.19  subdivision 1, is amended to read: 
  2.20     Subdivision 1.  [GENERALLY.] (a) In addition to any other 
  2.21  fees, each applicant for a license under sections 326.83 to 
  2.22  326.98 shall pay a fee to the contractor's recovery fund.  The 
  2.23  contractor's recovery fund is created in the state treasury and 
  2.24  must be administered by the commissioner in the manner and 
  2.25  subject to all the requirements and limitations provided by 
  2.26  section 82.34 with the following exceptions: 
  2.27     (1) each licensee who renews a license shall pay in 
  2.28  addition to the appropriate renewal fee an additional fee which 
  2.29  shall be credited to the contractor's recovery fund.  The amount 
  2.30  of the fee shall be based on the licensee's gross annual 
  2.31  receipts for the licensee's most recent fiscal year preceding 
  2.32  the renewal, on the following scale: 
  2.33            Fee           Gross Receipts
  2.34            $100 $200          under $1,000,000
  2.35            $150 $300          $1,000,000 to $5,000,000
  2.36            $200 $500          over $5,000,000
  3.1   Any person who receives a new license shall pay a fee based on 
  3.2   the same scale; 
  3.3      (2) the sole purpose of this fund is to compensate any 
  3.4   aggrieved owner or lessee of residential property who obtains a 
  3.5   final judgment in any court of competent jurisdiction against a 
  3.6   licensee licensed under section 326.84, on grounds of 
  3.7   fraudulent, deceptive, or dishonest practices, conversion of 
  3.8   funds, or failure of performance or breach of warranty arising 
  3.9   directly out of any transaction when the judgment debtor was 
  3.10  licensed and performed any of the activities enumerated under 
  3.11  section 326.83, subdivision 19, on the owner's residential 
  3.12  property or on residential property rented by the lessee, or on 
  3.13  new residential construction which was never occupied prior to 
  3.14  purchase by the owner, or which was occupied by the licensee for 
  3.15  less than one year prior to purchase by the owner, and which 
  3.16  cause of action arose on or after April 1, 1994; 
  3.17     (3) nothing may obligate the fund for more 
  3.18  than $50,000 $100,000 per claimant, nor more 
  3.19  than $50,000 $200,000 per licensee; and 
  3.20     (4) nothing may obligate the fund for claims based on a 
  3.21  cause of action that arose before the licensee paid the recovery 
  3.22  fund fee set in clause (1), or as provided in section 326.945, 
  3.23  subdivision 3.  
  3.24     (b) Should the commissioner pay from the contractor's 
  3.25  recovery fund any amount in settlement of a claim or toward 
  3.26  satisfaction of a judgment against a licensee, the license shall 
  3.27  be automatically suspended upon the effective date of an order 
  3.28  by the court authorizing payment from the fund.  No licensee 
  3.29  shall be granted reinstatement until the licensee has repaid in 
  3.30  full, plus interest at the rate of 12 percent a year, twice the 
  3.31  amount paid from the fund on the licensee's account, and has 
  3.32  obtained a surety bond issued by an insurer authorized to 
  3.33  transact business in this state in the amount of at least 
  3.34  $40,000 $50,000.  
  3.35     Sec. 4.  Minnesota Statutes 1996, section 326.975, 
  3.36  subdivision 2, is amended to read: 
  4.1      Subd. 2.  [ACCELERATED CLAIMS PAYMENT.] Recovery fund 
  4.2   claims that do not exceed the jurisdiction limits for 
  4.3   conciliation court matters as specified in section 
  4.4   491A.01 $50,000 shall be paid on an accelerated basis if all of 
  4.5   the following requirements have been satisfied: 
  4.6      (a) When any aggrieved person obtains a judgment in any 
  4.7   court of competent jurisdiction, regardless of whether the 
  4.8   judgment has been discharged by a bankruptcy court against a 
  4.9   residential building contractor or residential remodeler on 
  4.10  grounds specified in subdivision 1, paragraph (a), clause (2), 
  4.11  the aggrieved person may file a verified application with the 
  4.12  commissioner for payment out of the fund of the amount of actual 
  4.13  and direct out-of-pocket loss in the transaction, but excluding 
  4.14  any attorney fees, interest on the loss and on any judgment 
  4.15  obtained as a result of the loss, up to the conciliation court 
  4.16  jurisdiction limits $50,000, of the amount unpaid upon the 
  4.17  judgment.  For purposes of this section, persons who are joint 
  4.18  tenants or tenants in common are deemed to be a single claimant. 
  4.19     (b) The commissioner has sent the licensee a copy of the 
  4.20  verified application by first-class mail to the licensee's 
  4.21  address as it appears in the records of the department of 
  4.22  commerce with a notice that the claim will be paid 15 days from 
  4.23  the date of the notice unless the licensee notifies the 
  4.24  commissioner prior to that date of the commencement of an appeal 
  4.25  of the judgment, if the time for appeal has not expired, and 
  4.26  that payment of the claim will result in automatic suspension of 
  4.27  the licensee's license. 
  4.28     (c) If the licensee does not notify the commissioner of the 
  4.29  commencement of an appeal, the commissioner shall pay the claim 
  4.30  at the end of the 15-day period. 
  4.31     (d) If an appeal is commenced, the payment of the claim is 
  4.32  stayed until the conclusion of the appeal. 
  4.33     (e) The commissioner may pay claims which total no more 
  4.34  than $15,000 $100,000 against the licensee under this 
  4.35  accelerated process.  The commissioner may prorate the amount of 
  4.36  claims paid under this subdivision if claims in excess 
  5.1   of $15,000 $100,000 against the licensee are submitted.  Any 
  5.2   unpaid portions of such claims shall be satisfied in the manner 
  5.3   set forth in subdivision 1. 
  5.4      Sec. 5.  Minnesota Statutes 1996, section 326.975, 
  5.5   subdivision 3, is amended to read: 
  5.6      Subd. 3.  [APPROPRIATION.] Money in the contractor's 
  5.7   recovery fund is appropriated to the commissioner for the 
  5.8   purposes of this section subdivisions 1 and 2 and, in addition, 
  5.9   to provide information to consumers on residential construction 
  5.10  issues. 
  5.11     Sec. 6.  Minnesota Statutes 1996, section 327A.01, 
  5.12  subdivision 2, is amended to read: 
  5.13     Subd. 2.  [BUILDING STANDARDS.] "Building standards" means 
  5.14  the structural, mechanical, electrical, and quality standards of 
  5.15  the home building industry for the geographic area in which the 
  5.16  dwelling is situated.  For those geographic areas where the 
  5.17  state building code adopted by the commissioner of 
  5.18  administration according to sections 16B.59 to 16B.75 is in 
  5.19  effect, "building standards" shall be no less rigorous than the 
  5.20  state building code. 
  5.21     Sec. 7.  Minnesota Statutes 1996, section 327A.01, 
  5.22  subdivision 5, is amended to read: 
  5.23     Subd. 5.  [MAJOR CONSTRUCTION DEFECT.] "Major construction 
  5.24  defect" means actual damage to the load-bearing portion of the 
  5.25  dwelling or the home improvement, including damage due to 
  5.26  subsidence, expansion or lateral movement of the soil, which 
  5.27  affects the load-bearing function and which 
  5.28  vitally substantially affects or is imminently likely to vitally 
  5.29  substantially affect use of the dwelling or the home improvement 
  5.30  for residential purposes.  "Major construction defect" does not 
  5.31  include damage due to movement of the soil caused by flood, 
  5.32  earthquake or other natural disaster. 
  5.33     Sec. 8.  Minnesota Statutes 1996, section 327A.02, 
  5.34  subdivision 1, is amended to read: 
  5.35     Subdivision 1.  [WARRANTIES BY VENDORS.] In every sale of a 
  5.36  completed dwelling, and in every contract for the sale of a 
  6.1   dwelling to be completed, the vendor shall warrant to the vendee 
  6.2   that: 
  6.3      (a) during the one-year two-year period from and after the 
  6.4   warranty date the dwelling shall be free from defects caused by 
  6.5   faulty workmanship and defective materials due to noncompliance 
  6.6   with building standards; 
  6.7      (b) during the two-year five-year period from and after the 
  6.8   warranty date, the dwelling shall be free from defects caused by 
  6.9   faulty installation of plumbing, electrical, heating, and 
  6.10  cooling systems; and 
  6.11     (c) during the ten-year period from and after the warranty 
  6.12  date, the dwelling shall be free from major construction defects.
  6.13     Sec. 9.  Minnesota Statutes 1996, section 327A.02, 
  6.14  subdivision 3, is amended to read: 
  6.15     Subd. 3.  [HOME IMPROVEMENT WARRANTIES.] (a) In a sale or 
  6.16  in a contract for the sale of home improvement work involving 
  6.17  major structural changes or additions to a residential building, 
  6.18  the home improvement contractor shall warrant to the owner that: 
  6.19     (1) during the one-year two-year period from and after the 
  6.20  warranty date the home improvement shall be free from defects 
  6.21  caused by faulty workmanship and defective materials due to 
  6.22  noncompliance with building standards; and 
  6.23     (2) during the ten-year period from and after the warranty 
  6.24  date the home improvement shall be free from major construction 
  6.25  defects.  
  6.26     (b) In a sale or in a contract for the sale of home 
  6.27  improvement work involving the installation of plumbing, 
  6.28  electrical, heating or cooling systems, the home improvement 
  6.29  contractor shall warrant to the owner that, during the two-year 
  6.30  five-year period from and after the warranty date, the home 
  6.31  improvement shall be free from defects caused by the faulty 
  6.32  installation of the system or systems.  
  6.33     (c) In a sale or in a contract for the sale of any home 
  6.34  improvement work not covered by paragraph (a) or (b), the home 
  6.35  improvement contractor shall warrant to the owner that, during 
  6.36  the one-year two-year period from and after the warranty date, 
  7.1   the home improvement shall be free from defects caused by faulty 
  7.2   workmanship or defective materials due to noncompliance with 
  7.3   building standards.  
  7.4      Sec. 10.  Minnesota Statutes 1996, section 327A.03, is 
  7.5   amended to read: 
  7.6      327A.03 [EXCLUSIONS.] 
  7.7      The liability of the vendor or the home improvement 
  7.8   contractor under sections 327A.01 to 327A.07 is limited to the 
  7.9   specific items set forth in sections 327A.01 to 327A.07 and does 
  7.10  not extend to the following: 
  7.11     (a) Loss or damage not reported by the vendee or the owner 
  7.12  to the vendor or the home improvement contractor in writing 
  7.13  within six months two years after the vendee or the owner 
  7.14  discovers or should have discovered the loss or damage; 
  7.15     (b) Loss or damage caused by defects in design, 
  7.16  installation, or materials which the vendee or the owner 
  7.17  supplied, installed, or directed to be installed; 
  7.18     (c) Secondary loss or damage such as personal injury or 
  7.19  property damage; 
  7.20     (d) Loss or damage from normal wear and tear; 
  7.21     (e) (d) Loss or damage from normal shrinkage caused by 
  7.22  drying of the dwelling or the home improvement within tolerances 
  7.23  of building standards; 
  7.24     (f) Loss or damage from dampness and condensation due to 
  7.25  insufficient ventilation after occupancy; 
  7.26     (g) (e) Loss or damage from negligence, improper 
  7.27  maintenance or alteration of the dwelling or the home 
  7.28  improvement by parties other than the vendor or the home 
  7.29  improvement contractor; 
  7.30     (h) (f) Loss or damage from changes in grading of the 
  7.31  ground around the dwelling or the home improvement by parties 
  7.32  other than the vendor or the home improvement contractor; 
  7.33     (i) (g) Landscaping or insect loss or damage; 
  7.34     (j) (h) Loss or damage from failure to maintain the 
  7.35  dwelling or the home improvement in good repair; 
  7.36     (k) (i) Loss or damage which the vendee or the owner, 
  8.1   whenever feasible, has not taken timely action to minimize; 
  8.2      (l) (j) Loss or damage which occurs after the dwelling or 
  8.3   the home improvement is no longer used primarily as a residence; 
  8.4      (m) (k) Accidental loss or damage usually described as acts 
  8.5   of God, including, but not limited to:  fire, explosion, smoke, 
  8.6   water escape, windstorm, hail or lightning, falling trees, 
  8.7   aircraft and vehicles, flood, and earthquake, except when the 
  8.8   loss or damage is caused by failure to comply with building 
  8.9   standards; 
  8.10     (n) (l) Loss or damage from soil movement which is 
  8.11  compensated by legislation or covered by insurance; 
  8.12     (o) (m) Loss or damage due to soil conditions where 
  8.13  construction is done upon lands owned by the vendee or the owner 
  8.14  and obtained by the vendee or owner from a source independent of 
  8.15  the vendor or the home improvement contractor; 
  8.16     (p) (n) In the case of home improvement work, loss or 
  8.17  damage due to defects in the existing structure and systems not 
  8.18  caused by the home improvement.  
  8.19     Sec. 11.  Minnesota Statutes 1996, section 541.051, 
  8.20  subdivision 1, is amended to read: 
  8.21     Subdivision 1.  (a) Except where fraud is involved, no 
  8.22  action by any person in contract, tort, or otherwise to recover 
  8.23  damages for any injury to property, real or personal, or for 
  8.24  bodily injury or wrongful death, arising out of the defective 
  8.25  and unsafe condition of an improvement to real property, nor any 
  8.26  action for contribution or indemnity for damages sustained on 
  8.27  account of the injury, shall be brought against any person 
  8.28  performing or furnishing the design, planning, supervision, 
  8.29  materials, or observation of construction or construction of the 
  8.30  improvement to real property or against the owner of the real 
  8.31  property more than two four years after discovery of the injury 
  8.32  or, in the case of an action for contribution or indemnity, 
  8.33  accrual of the cause of action, nor, in any event shall such a 
  8.34  cause of action accrue more than ten years after substantial 
  8.35  completion of the construction.  Date of substantial completion 
  8.36  shall be determined by the date when construction is 
  9.1   sufficiently completed so that the owner or the owner's 
  9.2   representative can occupy or use the improvement for the 
  9.3   intended purpose.  
  9.4      (b) For purposes of paragraph (a), a cause of action 
  9.5   accrues upon discovery of the injury or, in the case of an 
  9.6   action for contribution or indemnity, upon payment of a final 
  9.7   judgment, arbitration award, or settlement arising out of the 
  9.8   defective and unsafe condition. 
  9.9      (c) Nothing in this section shall apply to actions for 
  9.10  damages resulting from negligence in the maintenance, operation 
  9.11  or inspection of the real property improvement against the owner 
  9.12  or other person in possession. 
  9.13     (d) The limitations prescribed in this section do not apply 
  9.14  to the manufacturer or supplier of any equipment or machinery 
  9.15  installed upon real property. 
  9.16     Sec. 12.  Minnesota Statutes 1996, section 541.051, 
  9.17  subdivision 4, is amended to read: 
  9.18     Subd. 4.  This section shall not apply to actions based on 
  9.19  breach of the statutory warranties set forth in section 327A.02, 
  9.20  or to actions based on breach of an express written warranty, 
  9.21  provided such actions shall be brought within two four years of 
  9.22  the discovery of the breach. 
  9.23     Sec. 13.  [RESIDENTIAL VENTILATION.] 
  9.24     The commissioner of public service shall adopt rules as 
  9.25  part of the state energy code, effective no later than March 1, 
  9.26  1999, that require new residential buildings to contain 
  9.27  mechanical ventilation systems that will ensure adequate air 
  9.28  quality to all habitable rooms. 
  9.29     Sec. 14.  [DISCLOSURE, CATEGORY 1; CATEGORY 2.] 
  9.30     Prior to the effective date of the rules referenced in 
  9.31  section 13, a builder shall disclose in writing to a purchaser 
  9.32  before execution of a purchase contract whether the residential 
  9.33  building to be constructed is a category 1 or category 2 
  9.34  building, as defined in Minnesota Rules, part 7670.0470, subpart 
  9.35  6, item A.  The disclosure shall include an explanation of the 
  9.36  difference between the categories in respect of ventilation 
 10.1   systems and owner operation and maintenance of such systems. 
 10.2      Sec. 15.  [EFFECTIVE DATE.] 
 10.3      Sections 6 to 12 are effective for housing warranties which 
 10.4   take effect on or after January 1, 1999. 
 10.5      Section 14 is effective May 1, 1998.