SF 2665

1st Engrossment - 89th Legislature (2015 - 2016) Posted on 05/03/2016 02:21pm

A bill for an act
relating to real estate appraisers; regulating appraiser fees, investigation
costs, and appraisal management companies; amending Minnesota Statutes
2014, sections 45.027, subdivision 1; 82C.02, subdivisions 3, 4, by adding
subdivisions; proposing coding for new law in Minnesota Statutes, chapter 82C.

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

Section 1.

Minnesota Statutes 2014, section 45.027, subdivision 1, is amended to read:

Subdivision 1.

General powers.

In connection with the duties and responsibilities
entrusted to the commissioner, and Laws 1993, chapter 361, section 2, the commissioner
of commerce may:

(1) make public or private investigations within or without this state as the
commissioner considers necessary to determine whether any person has violated or is
about to violate any law, rule, or order related to the duties and responsibilities entrusted
to the commissioner;

(2) require or permit any person to file a statement in writing, under oath or otherwise
as the commissioner determines, as to all the facts and circumstances concerning the
matter being investigated;

(3) hold hearings, upon reasonable notice, in respect to any matter arising out of the
duties and responsibilities entrusted to the commissioner;

(4) conduct investigations and hold hearings for the purpose of compiling
information related to the duties and responsibilities entrusted to the commissioner;

(5) examine the books, accounts, records, and files of every licensee, and of every
person who is engaged in any activity regulated; the commissioner or a designated
representative shall have free access during normal business hours to the offices and
places of business of the person, and to all books, accounts, papers, records, files, safes,
and vaults maintained in the place of business;

(6) publish information which is contained in any order issued by the commissioner;

(7) require any person subject to duties and responsibilities entrusted to the
commissioner, to report all sales or transactions that are regulated. The reports must
be made within ten days after the commissioner has ordered the report. The report is
accessible only to the respondent and other governmental agencies unless otherwise
ordered by a court of competent jurisdiction; and

(8) assess a natural person or entity subject to the jurisdiction of the commissioner
the necessary expenses of the investigation performed by the department when an
investigation is made by order of the commissioner. The cost of the investigation shall
be determined by the commissioner and is based on the salary cost of investigators or
assistants and at an average rate per day or fraction thereof so as to provide for the total
cost of the investigation. All money collected must be deposited into the general fund. A
natural person or entity licensed under chapter 60K or, 82, or 82B shall not be charged
costs of an investigation if the investigation results in no finding of a violation. This clause
does not apply to a natural person or entity already subject to the assessment provisions
of sections 60A.03 and 60A.031.

EFFECTIVE DATE; APPLICATION.

This section is effective the day following
final enactment and applies to investigations commenced or concluded on or after that date.

Sec. 2.

Minnesota Statutes 2014, section 82C.02, subdivision 3, is amended to read:

Subd. 3.

Appraisal assignment.

"Appraisal assignment" means an engagement for
which an appraiser is employed or retained to act, as a disinterested third party in giving
an unbiased analysis, opinion, or conclusion relating to the nature, quality, value, or utility
of named interests in, or aspects of, identified real estate.

Sec. 3.

Minnesota Statutes 2014, section 82C.02, is amended by adding a subdivision
to read:

Subd. 3a.

National Registry.

"National Registry" means the registry of
state-registered appraisal management companies and federally regulated appraisal
management companies maintained by the Appraisal Subcommittee.

Sec. 4.

Minnesota Statutes 2014, section 82C.02, subdivision 4, is amended to read:

Subd. 4.

Appraisal management company.

"Appraisal management company"
means a corporation, partnership, sole proprietorship, subsidiary, unit, or other business
entity that directly or indirectly performs the following appraisal management services:

(1) within a given 12-month period, as defined in section 82C.025, administers
a network or networks of independent contractors and/or employee appraisers more
than 15 Minnesota state-licensed or state-certified real estate appraisers or 25 or more
state-licensed or state-certified real estate appraisers in two or more states, who are
independent contractors to the appraisal management company, as described in section
82C.025 to perform residential real estate appraisal assignments for clients;

(2) receives requests for residential real estate appraisal services from clients and, for
a fee paid by the client, enters into an agreement with one or more independent contractor
appraisers to perform the real estate appraisal services contained in the request; or

(3) serves as a third-party broker of appraisal management services between clients
and appraisers.

An "appraisal management company" does not include a department or division of an
entity that provides appraisal management services only to that entity.

Sec. 5.

Minnesota Statutes 2014, section 82C.02, is amended by adding a subdivision
to read:

Subd. 8a.

Appraisal Subcommittee.

"Appraisal Subcommittee" means the
Appraisal Subcommittee of the Federal Financial Institutions Examination Council.

Sec. 6.

Minnesota Statutes 2014, section 82C.02, is amended by adding a subdivision
to read:

Subd. 12a.

Federally regulated appraisal management company.

"Federally
regulated appraisal management company" means an appraisal management company
that is owned and controlled by an insured depository institution, as defined in United
States Code, title 12, section 1813, and regulated by the Office of the Comptroller of
the Currency, the Board of Governors of the Federal Reserve System, or the Federal
Deposit Insurance Corporation.

Sec. 7.

[82C.025] APPRAISER PANEL; ANNUAL SIZE CALCULATION.

(a) For purposes of determining whether, within a 12-month period, an appraisal
management company oversees an appraiser panel of more than 15 Minnesota
state-licensed or state-certified real property appraisers employed as independent
contractors or 25 or more state-certified or state-licensed appraisers employed as
independent contractors in two or more states, the provisions in paragraphs (b) through
(e) shall apply.

(b) An appraiser is deemed part of the appraisal management company's appraiser
panel as of the earliest date on which the appraisal management company:

(1) accepts the appraiser for the appraisal management company's consideration for
future appraisal assignments; or

(2) engages the appraiser to perform one or more appraisals on behalf of a client.

(c) An appraiser who is deemed part of the appraisal management company's
appraiser panel pursuant to paragraph (b) of this section is deemed to remain on the panel
until the date on which the appraisal management company:

(1) sends written notice to the appraiser removing the appraiser from the appraiser
panel, with an explanation of its action; or

(2) receives written notice from the appraiser asking to be removed from the
appraiser panel or notice of the death or incapacity of the appraiser.

(d) If an appraiser is removed from an appraisal management company's appraiser
panel pursuant to paragraph (c) of this section, but the appraisal management company
subsequently accepts the appraiser for consideration for future assignments or engages the
appraiser at any time during the 12 months after the appraisal management company's
removal, the removal will be deemed not to have occurred, and the appraiser will be
deemed to have been part of the appraisal management company's appraiser panel without
interruption.

(e) The period for purposes of counting appraisers on an appraisal management
company's appraiser panel is the 12-month period established with which the appraisal
management company is required to register.

Sec. 8.

[82C.17] REASONABLE AND CUSTOMARY FEES.

Subdivision 1.

Fees.

An appraisal management company shall compensate
appraisers with fees that are reasonable and customary for appraisal services performed in
the market area of the property being appraised.

Subd. 2.

Evidence.

(a) An appraisal management company can evidence that the
fees paid to an appraiser were reasonable and customary through:

(1) objective third-party information, including, but not limited to, government
agency fee schedules or academic studies. An academic study used must exclude appraisal
assignments ordered by an appraisal management company. The commissioner may
establish a fee scheduled for use by an appraisal management company; or

(2) reviewing each of the following factors and making adjustments to recent fees
paid for appraisal services performed in the market area:

(i) the type of property appraised;

(ii) the scope of the appraisal work;

(iii) the time in which the appraisal service must be performed;

(iv) appraiser qualifications;

(v) appraiser experience and professional record; and

(vi) appraiser work quality.

(b) The fees paid for a complex appraisal assignment shall reflect the increased
time, difficulty, and scope of work required.

(c) An appraisal management company shall maintain written documentation
describing and substantiating all methods and information used to determine the customary
and reasonable fees required by this section.

Subd. 3.

Reporting.

(a) An appraisal management company shall separately state to
the client the following:

(1) the fees paid to an appraiser for appraisal services; and

(2) the fees charged by the appraisal management company for services associated
with the management of the appraisal process, including procurement of the appraiser's
services.

(b) An appraisal management company shall not prohibit an appraiser who is part
of an appraiser panel from recording the fee that the appraiser was paid by the appraisal
management company for the appraisal within the appraisal report that is submitted by the
appraiser to the appraisal management company.

(c) An appraisal management company shall not include fees for appraisal
management services performed by the company in the amount the company reports as
charges for the appraisal by the appraiser.

Subd. 4.

Timely payment.

Except in the case of breach of contract or an appraisal
that contains one or more documented errors of law, regulation, appraisal standards,
or reasonable requirements of the appraisal management company that have not been
corrected by an appraiser, an appraisal management company shall pay an independent
contractor appraiser for the completion of an appraisal or appraisal review:

(1) within 30 days of the appraiser providing the appraisal report to the appraisal
management company or within 30 days of the date the appraisal report is transmitted to
the client by an appraisal management company, whichever is sooner; or

(2) in accordance with a payment schedule agreed to in writing by the appraiser
and the appraisal management company.

Sec. 9. EFFECTIVE DATE.

Sections 2 to 8 are effective August 1, 2016, and apply to appraisal assignments
commenced on or after that date.