2005 Minnesota Statutes

     326.975 Contractor's recovery fund. 

    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 82.43 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 purpose of this fund is: 

    (i) to compensate any aggrieved owner or lessee of 
 residential property located within this state 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 

    (ii) to reimburse the Department of Commerce for all legal 
 and administrative expenses, including staffing costs, incurred 
 in administering the fund; 

    (3) nothing may obligate the fund for more than $50,000 per 
 claimant, nor more than $75,000 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 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.  

    Subd. 1a.    Limitation.  Nothing may obligate the fund 
 for claims brought by: 

    (1) insurers or sureties under subrogation or similar 
 theories; or 

    (2) owners of residential property where the contracting 
 activity complained of was the result of a contract entered into 
 with a prior owner, unless the claim is brought and judgment 
 rendered for breach of the statutory warranty set forth in 
 chapter 327A. 

    Subd. 1b.    Condominiums or townhouses.  For purposes 
 of this section, the owner or lessee of a condominium or 
 townhouse is considered an owner or lessee of residential 
 property regardless of the number of residential units per 
 building. 

    Subd. 2.    Accelerated claims payment.  Recovery fund 
 claims that do not exceed the jurisdiction limits for 
 conciliation court matters as specified in section 491A.01 shall 
 be paid on an accelerated basis if all of the following 
 requirements have been satisfied: 

    (a) When any aggrieved person obtains a judgment in any 
 court of competent jurisdiction, regardless of whether the 
 judgment has been discharged by a bankruptcy court against a 
 residential building contractor or residential remodeler on 
 grounds specified in subdivision 1, paragraph (a), clause (2), 
 the aggrieved person may file a verified application with the 
 commissioner for payment out of the fund of the amount of actual 
 and direct out-of-pocket loss in the transaction, but excluding 
 any attorney fees, interest on the loss and on any judgment 
 obtained as a result of the loss, up to the conciliation court 
 jurisdiction limits, of the amount unpaid upon the judgment.  
 For purposes of this section, persons who are joint tenants or 
 tenants in common are deemed to be a single claimant. 

    (b) The commissioner has sent the licensee a copy of the 
 verified application by first-class mail to the licensee's 
 address as it appears in the records of the Department of 
 Commerce with a notice that the claim will be paid 15 days from 
 the date of the notice unless the licensee notifies the 
 commissioner prior to that date of the commencement of an appeal 
 of the judgment, if the time for appeal has not expired, and 
 that payment of the claim will result in automatic suspension of 
 the licensee's license. 

    (c) If the licensee does not notify the commissioner of the 
 commencement of an appeal, the commissioner shall pay the claim 
 at the end of the 15-day period. 

    (d) If an appeal is commenced, the payment of the claim is 
 stayed until the conclusion of the appeal. 

    (e) The commissioner may pay claims which total no more 
 than $15,000 against the licensee under this accelerated 
 process.  The commissioner may prorate the amount of claims paid 
 under this subdivision if claims in excess of $15,000 against 
 the licensee are submitted.  Any unpaid portions of such claims 
 shall be satisfied in the manner set forth in subdivision 1. 

    Subd. 3.    Appropriation.  Money in the contractor's 
 recovery fund is appropriated to the commissioner for the 
 purposes of this section. 

    HIST: 1993 c 245 s 36; 1994 c 404 s 1; 1994 c 465 art 2 s 17; 
 1995 c 169 s 6; 2000 c 483 s 50; 2001 c 208 s 23; 2002 c 387 s 
 15,16; 2004 c 203 art 2 s 61; 1Sp2005 c 1 art 4 s 94