326B.89 CONTRACTOR RECOVERY FUND.
Subdivision 1. Definitions.
(a) For the purposes of this section, the following terms have
the meanings given them.
(b) "Gross annual receipts" means the total amount derived from residential contracting or
residential remodeling activities, regardless of where the activities are performed, and must not be
reduced by costs of goods sold, expenses, losses, or any other amount.
(c) "Licensee" means a person licensed as a residential contractor or residential remodeler.
(d) "Residential real estate" means a new or existing building constructed for habitation by
one to four families, and includes detached garages.
(e) "Fund" means the contractor recovery fund.
Subd. 2. Generally.
The contractor recovery fund is created in the state treasury and shall be
administered by the commissioner for the purposes described in this section. Any interest or profit
accruing from investment of money in the fund shall be credited to the contractor recovery fund.
Subd. 3. Fund fees.
In addition to any other fees, a person who applies for or renews a license
shall pay a fee to the fund. The person shall pay, in addition to the
appropriate application or renewal fee, the following additional fee that shall be deposited in the
fund. The amount of the fee shall be based on the person's gross annual receipts for the person's
most recent fiscal year preceding the application or renewal, on the following scale:
|Gross Annual Receipts
|$1,000,000 to $5,000,000
Subd. 4. Purpose of fund.
The purpose of this fund is to:
(1) compensate owners or lessees of residential real estate who meet the requirements of
(2) reimburse the department for all legal and administrative expenses, disbursements, and
costs, including staffing costs, incurred in administering and defending the fund;
(3) pay for educational or research projects in the field of residential contracting to further
the purposes of sections
(4) provide information to the public on residential contracting issues.
Subd. 5. Payment limitations.
Except as otherwise provided in this section, the
commissioner shall not pay compensation from the fund to an owner or a lessee in an amount
greater than $75,000. Except as otherwise provided in this section, the commissioner shall not pay
compensation from the fund to owners and lessees in an amount that totals more than $150,000
per licensee. The commissioner shall not pay compensation from the fund for a final judgment
based on a cause of action that arose before the commissioner's receipt of the licensee's fee
required by subdivision 3.
Subd. 6. Verified application.
To be eligible for compensation from the fund, an owner
or lessee shall serve on the commissioner a verified application for compensation on a form
approved by the commissioner. The application shall verify the following information:
(1) the specific grounds upon which the owner or lessee seeks to recover from the fund:
(2) that the owner or the lessee has obtained a final judgment in a court of competent
jurisdiction against a licensee licensed under section
(3) that the final judgment was obtained against the licensee on the grounds of fraudulent,
deceptive, or dishonest practices, conversion of funds, or failure of performance that arose
directly out of a transaction that occurred when the licensee was licensed and performing any of
the special skills enumerated under section
326B.802, subdivision 19
(4) the amount of the owner's or the lessee's actual and direct out-of-pocket loss on the
owner's residential real estate, on residential real estate leased by the lessee, or on new residential
real estate that has never been occupied or that was occupied by the licensee for less than one
year prior to purchase by the owner;
(5) that the residential real estate is located in Minnesota;
(6) that the owner or the lessee is not the spouse of the licensee or the personal representative
of the licensee;
(7) the amount of the final judgment, any amount paid in satisfaction of the final judgment,
and the amount owing on the final judgment as of the date of the verified application; and
(8) that the verified application is being served within two years after the judgment became
The owner's and the lessee's actual and direct out-of-pocket loss shall not include attorney
fees, interest on the loss, and interest on the final judgment obtained as a result of the loss. An
owner or lessee may serve a verified application regardless of whether the final judgment has
been discharged by a bankruptcy court. A judgment issued by a court is final if all proceedings
on the judgment have either been pursued and concluded or been forgone, including all reviews
and appeals. For purposes of this section, owners who are joint tenants or tenants in common
are deemed to be a single owner. For purposes of this section, owners and lessees eligible
for payment of compensation from the fund shall not include government agencies, political
subdivisions, financial institutions, and any other entity that purchases, guarantees, or insures a
loan secured by real estate.
Subd. 7. Commissioner review.
The commissioner shall within 120 days after receipt
of the verified application:
(1) enter into an agreement with an owner or a lessee that resolves the verified application
for compensation from the fund; or
(2) issue an order to the owner or the lessee accepting, modifying, or denying the verified
application for compensation from the fund.
Upon receipt of an order issued under clause (2), the owner or the lessee shall have 30 days
to serve upon the commissioner a written request for a hearing. If the owner or the lessee does
not serve upon the commissioner a timely written request for hearing, the order issued under
clause (2) shall become a final order of the commissioner that may not be reviewed by any court
or agency. The commissioner shall order compensation from the fund only if the owner or the
lessee has filed a verified application that complies with subdivision 6 and if the commissioner
determines based on review of the application that compensation should be paid from the fund.
The commissioner shall not be bound by any prior settlement, compromise, or stipulation between
the owner or the lessee and the licensee.
Subd. 8. Administrative hearing.
If an owner or a lessee timely serves a request for hearing
under subdivision 7, the commissioner shall request that an administrative law judge be assigned
and that a hearing be conducted under the contested case provisions of chapter 14 within 30
days after the service of the request for hearing upon the commissioner. Upon petition of the
commissioner, the administrative law judge shall continue the hearing up to 60 days and upon a
showing of good cause may continue the hearing for such additional period as the administrative
law judge deems appropriate. At the hearing the owner or the lessee shall have the burden of
proving by substantial evidence under subdivision 6, clauses (1) to (8). The administrative law
judge shall issue findings of fact, conclusions of law, and order. If the administrative law judge
finds that compensation should be paid to the owner or the lessee, the administrative law judge
shall order the commissioner to make payment from the fund of the amount it finds to be payable
pursuant to the provisions of and in accordance with the limitations contained in this section. The
order of the administrative law judge shall constitute the final decision of the agency in the
contested case. Judicial review of the administrative law judge's findings of fact, conclusions of
law, and order shall be in accordance with sections
Subd. 9. Satisfaction of applications for compensation.
The commissioner shall pay
compensation from the fund to an owner or a lessee pursuant to the terms of an agreement that has
been entered into under subdivision 7, clause (1), or pursuant to a final order that has been issued
under subdivision 7, clause (2), or subdivision 8 by December 1 of the fiscal year following the
fiscal year during which the agreement was entered into or during which the order became final,
subject to the limitations of this section. At the end of each fiscal year the commissioner shall
calculate the amount of compensation to be paid from the fund pursuant to agreements that have
been entered into under subdivision 7, clause (1), and final orders that have been issued under
subdivision 7, clause (2), or subdivision 8. If the calculated amount exceeds the amount available
for payment, then the commissioner shall allocate the amount available among the owners and the
lessees in the ratio that the amount agreed to or ordered to be paid to each owner or lessee bears to
the amount calculated. The commissioner shall mail notice of the allocation to all owners and
lessees not less than 45 days following the end of the fiscal year. Any compensation paid by the
commissioner in accordance with this subdivision shall be deemed to satisfy and extinguish any
right to compensation from the fund based upon the verified application of the owner or lessee.
Subd. 10. Right of subrogation.
If the commissioner pays compensation from the fund to an
owner or a lessee pursuant to an agreement under subdivision 7, clause (1), or a final order issued
under subdivision 7, clause (2), or subdivision 8, then the commissioner shall be subrogated to
all of the rights, title, and interest in the owner's or lessee's final judgment in the amount of
compensation paid from the fund and the owner or the lessee shall assign to the commissioner
all rights, title, and interest in the final judgment in the amount of compensation paid. The
commissioner shall deposit in the fund money recovered under this subdivision.
Subd. 11. Effect of section on commissioner's authority.
Nothing contained in this section
shall limit the authority of the commissioner to take disciplinary action against a licensee under
the provisions of this chapter. A licensee's repayment in full of obligations to the fund shall not
nullify or modify the effect of any other disciplinary proceeding brought under the provisions
of this chapter.
Subd. 12. Limitation.
Nothing may obligate the fund to compensate:
(1) insurers or sureties under subrogation or similar theories; or
(2) an owner of residential property for final judgments against a prior owner of the
residential property unless the claim is brought and judgment is rendered for breach of the
statutory warranty set forth in chapter 327A.
Subd. 13. Condominiums or townhouses.
For purposes of this section, the owner or the
lessee of a condominium or townhouse is considered an owner or a lessee of residential property
regardless of the number of residential units per building.
Subd. 14. Accelerated compensation.
(a) Payments made from the fund to compensate
owners and lessees that do not exceed the jurisdiction limits for conciliation court matters
as specified in section
may be paid on an accelerated basis if all of the following
requirements in paragraphs (b) and (c) have been satisfied.
(b) The owner or the lessee has served upon the commissioner a verified application for
compensation that complies with the requirements set out in subdivision 6 and the commissioner
determines based on review of the application that compensation should be paid from the fund.
The commissioner shall calculate the actual and direct out-of-pocket loss in the transaction, minus
attorney fees, interest on the loss and on the judgment obtained as a result of the loss, and any
satisfaction of the judgment, and make payment to the owner or the lessee up to the conciliation
court jurisdiction limits within 15 days after the owner or lessee serves the verified application.
(c) The commissioner may pay compensation to owners or lessees that totals not more than
$50,000 per licensee per fiscal year under this accelerated process. The commissioner may prorate
the amount of compensation paid to owners or lessees under this subdivision if applications
submitted by owners and lessees seek compensation in excess of $50,000 against a licensee. Any
unpaid portion of a verified application that has been prorated under this subdivision shall be
satisfied in the manner set forth in subdivision 9.
Subd. 15. Appropriation.
Money in the fund is appropriated to the commissioner for the
purposes of this section.
Subd. 16. Additional assessment.
If the balance in the fund is at any time less than the
commissioner determines is necessary to carry out the purposes of this section, every licensee,
when renewing a license, shall pay, in addition to the annual renewal fee and the fee set forth
in subdivision 3, an assessment not to exceed $100. The commissioner shall set the amount of
assessment based on a reasonable determination of the amount that is necessary to restore a
balance in the fund adequate to carry out the purposes of this section.
History: 2007 c 135 art 3 s 29; 2007 c 140 art 8 s 28