Bill Text: MN HF536 | 2013-2014 | 88th Legislature | Engrossed
Bill Title: Residential property contracts for deed notice established, and remedies provided.
Sponsorship: Moderate Partisan Bill (Democrat 14-2)
Status: (Introduced - Dead) 2013-03-20 - Committee report, to pass as amended and re-refer to Rules and Legislative Administration [HF536 Detail]
Download: Minnesota-2013-HF536-Engrossed.html
1.2relating to real property; establishing notice for contracts for deed involving
1.3residential property; providing remedies;amending Minnesota Statutes 2012,
1.4sections 507.235, subdivision 2; 559.211, subdivision 2; proposing coding for
1.5new law in Minnesota Statutes, chapter 559; repealing Minnesota Statutes 2012,
1.6section 507.235, subdivision 4.
1.7BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.8 Section 1. Minnesota Statutes 2012, section 507.235, subdivision 2, is amended to read:
1.9 Subd. 2. Penalty for failure to file. (a) A vendee who fails to record a contract for
1.10deed, as required by subdivision 1, is subject to a civil penalty, payable under subdivision
1.115, equal to two percent of the principal amount of the contract debt, unless the vendee
1.12has not received a copy of the contract for deed in recordable form, as required under
1.13subdivision 1a. Payments of the penalty shall be deposited in the general fund of the
1.14county. The penalty may be enforced as a lien against the vendee's interest in the property.
1.15(b) A person receiving an assignment of a vendee's interest in a contract for deed
1.16who fails to record the assignment as required by subdivision 1 is subject to a civil penalty,
1.17payable under subdivision 5, equal to two percent of the original principal amount of the
1.18contract debt. Payments of the penalty must be deposited in the general fund of the county.
1.19The penalty may be enforced as a lien against the vendee's interest in the property.
1.20 Sec. 2. [559.201] DEFINITIONS.
1.21 Subdivision 1. Application. The definitions in this section apply to section 559.202.
1.22 Subd. 2. Business day. "Business day" means any day other than a Saturday,
1.23Sunday, or holiday as defined in section 645.44, subdivision 5.
2.1 Subd. 3. Family farm security loan. "Family farm security loan" has the meaning
2.2given in Minnesota Statutes 2008, section 41.52, subdivision 5.
2.3 Subd. 4. Multiple seller. "Multiple seller" means a person that has acted as the
2.4seller during the 12-month period that precedes either: (1) the date on which the purchaser
2.5executes a purchase agreement under section 559.202; or (2) if there is no purchase
2.6agreement, the date on which the purchaser executes a contract for deed under section
2.7559.202.
2.8 Subd. 5. Person. "Person" means a natural person, partnership, corporation, limited
2.9liability company, association, trust, or other legal entity, however organized.
2.10 Subd. 6. Purchase agreement. "Purchase agreement" means a purchase agreement
2.11for a contract for deed, an earnest money contract, or an executed option contemplating
2.12that, at closing, the seller and the purchaser will enter into a contract for deed.
2.13 Subd. 7. Purchaser. "Purchaser" means a natural person who enters into a contract
2.14for deed to purchase residential real property. Purchaser includes all purchasers who enter
2.15into the same contract for deed to purchase residential real property.
2.16 Subd. 8. Residential real property. "Residential real property" means real property
2.17improved or intended to be improved by a structure designed principally for the occupancy
2.18of one to four families, whether or not the owner occupies the real property. Residential
2.19real property does not include property subject to sections 583.20 to 583.32.
2.20 Sec. 3. [559.202] CONTRACTS FOR DEED INVOLVING RESIDENTIAL
2.21PROPERTY.
2.22 Subdivision 1. Notice required. (a) A multiple seller must deliver the notice
2.23specified under subdivision 3 to a prospective purchaser as provided under this subdivision.
2.24(b) If there is a purchase agreement, the notice required by subdivision 2 must be
2.25affixed to the front of the purchase agreement. A contract for deed for which notice is
2.26required under this subdivision may not be executed for five business days following
2.27the execution of the purchase agreement and delivery of the notice and instructions for
2.28cancellation.
2.29(c) If there is no purchase agreement, a multiple seller must deliver the notice in a
2.30document separate from any other document or writing to a prospective purchaser no less
2.31than five business days before the prospective purchaser executes the contract for deed.
2.32(d) The notice must be:
2.33(1) written in at least 12-point type; and
2.34(2) signed and dated by the purchaser.
3.1(e) If a dispute arises concerning whether or when the notice required by this
3.2subdivision was provided to the purchaser, there is a rebuttable presumption that the notice
3.3was not provided unless the original executed contract for deed contains the following
3.4statement: "By initialing here ....... purchaser acknowledges receipt at least five business
3.5days before signing this contract for deed of the disclosure statement entitled "Important
3.6Information About Contracts for Deed" required by Minnesota Statutes, section 559.202,
3.7subdivision 3."
3.8 Subd. 2. Exception. This section does not apply if the purchaser is represented
3.9throughout the transaction by either:
3.10(1) a person licensed to practice law in this state; or
3.11(2) a person licensed as a real estate broker or salesperson under chapter 82,
3.12provided that the representation does not create a dual agency, as that term is defined
3.13in section 82.55, subdivision 6.
3.14 Subd. 3. Content of the notice. The notice must contain the following verbatim
3.15language:
3.17Know What You Are Getting Into
3.18(1) A contract for deed is a complex legal agreement. You are NOT a tenant. The
3.19foreclosure laws don't apply.
3.20(2) You should know ALL of your obligations and rights before you sign a purchase
3.21agreement or contract for deed.
3.22(3) You (seller must circle one):
3.27(4) After some time, you may need to make a large lump sum payment (called a "balloon
3.28payment"). Know when it is due and how much it will be. You'll probably need to get a
3.29new mortgage from a bank at that time.
3.30(5) If you miss just a single payment or can't make the balloon payment, the seller can
3.31cancel your contract. You will likely lose all the money you have already paid. You will
3.32likely lose your ability to purchase the home. The seller can begin an eviction action
3.33against you in just a few months.
3.34Key Things to Do Before You Sign
4.1(1) Get advice from a lawyer or the Minnesota Home Ownership Center at
4.21-866-462-6466. To find a lawyer through the Minnesota State Bar Association, go to
4.3www.mnfindalawyer.com.
4.4(2) Get an independent, professional appraisal of the property to learn what it is worth.
4.5(3) Get an independent, professional inspection of the property.
4.6(4) Buy title insurance or ask a real estate lawyer for a "title opinion."
4.7(5) Check with the city or county to find out if there are inspection reports or unpaid
4.8utility bills.
4.9(6) Check with a title company or the county where the property is located to find out if
4.10there is a mortgage or other lien on the property and if the property taxes have been paid.
4.11If You Are Entering into a Purchase Agreement
4.12(1) If you haven't already signed the contract for deed, you can cancel the purchase
4.13agreement (and get all your money back) if you do so within five business days after
4.14getting this notice.
4.15(2) To cancel the purchase agreement, you must follow the provisions of Minnesota
4.16Statutes, section 559.217, subdivision 4. Ask a lawyer for help."
4.17 Subd. 4. Right to cancel purchase agreement. (a) A prospective purchaser may
4.18cancel a purchase agreement within five business days after actually receiving the notice
4.19required under subdivision 1 if a multiple seller fails to timely deliver the notice, provided
4.20that the contract for deed has not been executed by all parties.
4.21(b) A prospective purchaser may cancel the purchase agreement in accordance with
4.22the provisions of section 559.217, subdivision 4.
4.23(c) In the event of cancellation, the multiple seller may not impose a penalty and must
4.24promptly refund all payments made by the prospective purchaser prior to cancellation.
4.25 Subd. 5. Remedies for failure to timely deliver notices. (a) Notwithstanding
4.26any contrary provision in the purchase agreement or contract for deed, a purchaser has
4.27a private right of action against a multiple seller who fails to timely deliver the notice
4.28required under subdivision 1. The multiple seller is liable to the purchaser for:
4.29(1) the greater of actual damages or statutory damages of $2,500; and
4.30(2) reasonable attorney fees and court costs.
4.31(b) At the purchaser's option an amount not to exceed $2,500 may be applied
4.32to offset outstanding contract installment payments past due or next due under the
4.33contract for deed. The right to offset expires upon cancellation of the contract for deed in
5.1accordance with applicable law. Recording of the documents specified in section 559.213
5.2constitutes prima facie evidence that any right to offset under this subdivision has expired.
5.3(c) A multiple seller who knowingly fails to timely deliver the notice required
5.4under subdivision 1 is liable to the purchaser for triple the actual or statutory damages
5.5available under paragraph (a), whichever is greater, provided that the purchaser must elect
5.6the remedy provided under either paragraph (b) or this paragraph and may not recover
5.7damages under both paragraphs.
5.8(d) The rights and remedies provided in this subdivision are cumulative to, and not
5.9a limitation of, any other rights and remedies provided under law. Any action brought
5.10pursuant to this subdivision must be commenced within four years from the date of the
5.11alleged violation.
5.12 Subd. 6. Duty of multiple seller to account. Upon reasonable request by the
5.13purchaser and no more than once every 12-month period, a multiple seller must provide an
5.14accounting of all payments made pursuant to the contract for deed, the amount of interest
5.15paid, and the amount remaining to satisfy the principal balance under the contract.
5.16 Subd. 7. No waiver. The provisions of this section may not be waived.
5.17EFFECTIVE DATE.This section is effective August 1, 2013, and applies to
5.18transactions in which the contract for deed and the purchase agreement for the contract
5.19for deed, if any, were both executed on or after that date.
5.20 Sec. 4. Minnesota Statutes 2012, section 559.211, subdivision 2, is amended to read:
5.21 Subd. 2. Remedies additional. The remedies provided in this section are in
5.22addition to and do not limit other rights or remedies available to purchasers or vendors of
5.23real estate. Subject to the provisions of sections 559.213 and 559.217, subdivision 7, this
5.24section shall not be construed to bar a court from determining the validity, effectiveness,
5.25or consequences of proceeding under section 559.21 or 559.217, or granting other relief in
5.26connection therewith, by reason of the failure of a purchaser to seek or obtain relief under
5.27this section prior to the purported effective date of the termination of the contract.
5.28 Sec. 5. REPEALER.
5.29Minnesota Statutes 2012, section 507.235, subdivision 4, is repealed.
5.30EFFECTIVE DATE.This section is effective the day following final enactment.
1.3residential property; providing remedies;amending Minnesota Statutes 2012,
1.4sections 507.235, subdivision 2; 559.211, subdivision 2; proposing coding for
1.5new law in Minnesota Statutes, chapter 559; repealing Minnesota Statutes 2012,
1.6section 507.235, subdivision 4.
1.7BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.8 Section 1. Minnesota Statutes 2012, section 507.235, subdivision 2, is amended to read:
1.9 Subd. 2. Penalty for failure to file. (a) A vendee who fails to record a contract for
1.10deed, as required by subdivision 1, is subject to a civil penalty, payable under subdivision
1.115, equal to two percent of the principal amount of the contract debt, unless the vendee
1.12has not received a copy of the contract for deed in recordable form, as required under
1.13subdivision 1a. Payments of the penalty shall be deposited in the general fund of the
1.14county. The penalty may be enforced as a lien against the vendee's interest in the property.
1.15(b) A person receiving an assignment of a vendee's interest in a contract for deed
1.16who fails to record the assignment as required by subdivision 1 is subject to a civil penalty,
1.17payable under subdivision 5, equal to two percent of the original principal amount of the
1.18contract debt. Payments of the penalty must be deposited in the general fund of the county.
1.19The penalty may be enforced as a lien against the vendee's interest in the property.
1.20 Sec. 2. [559.201] DEFINITIONS.
1.21 Subdivision 1. Application. The definitions in this section apply to section 559.202.
1.22 Subd. 2. Business day. "Business day" means any day other than a Saturday,
1.23Sunday, or holiday as defined in section 645.44, subdivision 5.
2.1 Subd. 3. Family farm security loan. "Family farm security loan" has the meaning
2.2given in Minnesota Statutes 2008, section 41.52, subdivision 5.
2.3 Subd. 4. Multiple seller. "Multiple seller" means a person that has acted as the
2.4seller during the 12-month period that precedes either: (1) the date on which the purchaser
2.5executes a purchase agreement under section 559.202; or (2) if there is no purchase
2.6agreement, the date on which the purchaser executes a contract for deed under section
2.7559.202.
2.8 Subd. 5. Person. "Person" means a natural person, partnership, corporation, limited
2.9liability company, association, trust, or other legal entity, however organized.
2.10 Subd. 6. Purchase agreement. "Purchase agreement" means a purchase agreement
2.11for a contract for deed, an earnest money contract, or an executed option contemplating
2.12that, at closing, the seller and the purchaser will enter into a contract for deed.
2.13 Subd. 7. Purchaser. "Purchaser" means a natural person who enters into a contract
2.14for deed to purchase residential real property. Purchaser includes all purchasers who enter
2.15into the same contract for deed to purchase residential real property.
2.16 Subd. 8. Residential real property. "Residential real property" means real property
2.17improved or intended to be improved by a structure designed principally for the occupancy
2.18of one to four families, whether or not the owner occupies the real property. Residential
2.19real property does not include property subject to sections 583.20 to 583.32.
2.20 Sec. 3. [559.202] CONTRACTS FOR DEED INVOLVING RESIDENTIAL
2.21PROPERTY.
2.22 Subdivision 1. Notice required. (a) A multiple seller must deliver the notice
2.23specified under subdivision 3 to a prospective purchaser as provided under this subdivision.
2.24(b) If there is a purchase agreement, the notice required by subdivision 2 must be
2.25affixed to the front of the purchase agreement. A contract for deed for which notice is
2.26required under this subdivision may not be executed for five business days following
2.27the execution of the purchase agreement and delivery of the notice and instructions for
2.28cancellation.
2.29(c) If there is no purchase agreement, a multiple seller must deliver the notice in a
2.30document separate from any other document or writing to a prospective purchaser no less
2.31than five business days before the prospective purchaser executes the contract for deed.
2.32(d) The notice must be:
2.33(1) written in at least 12-point type; and
2.34(2) signed and dated by the purchaser.
3.1(e) If a dispute arises concerning whether or when the notice required by this
3.2subdivision was provided to the purchaser, there is a rebuttable presumption that the notice
3.3was not provided unless the original executed contract for deed contains the following
3.4statement: "By initialing here ....... purchaser acknowledges receipt at least five business
3.5days before signing this contract for deed of the disclosure statement entitled "Important
3.6Information About Contracts for Deed" required by Minnesota Statutes, section 559.202,
3.7subdivision 3."
3.8 Subd. 2. Exception. This section does not apply if the purchaser is represented
3.9throughout the transaction by either:
3.10(1) a person licensed to practice law in this state; or
3.11(2) a person licensed as a real estate broker or salesperson under chapter 82,
3.12provided that the representation does not create a dual agency, as that term is defined
3.13in section 82.55, subdivision 6.
3.14 Subd. 3. Content of the notice. The notice must contain the following verbatim
3.15language:
3.17Know What You Are Getting Into
3.18(1) A contract for deed is a complex legal agreement. You are NOT a tenant. The
3.19foreclosure laws don't apply.
3.20(2) You should know ALL of your obligations and rights before you sign a purchase
3.21agreement or contract for deed.
3.22(3) You (seller must circle one):
| 3.23 |
(a) |
DO |
DO NOT |
have to pay homeowner's insurance. |
| 3.24 |
(b) |
DO |
DO NOT |
have to pay property taxes. |
| 3.25 3.26 |
(c) |
DO |
DO NOT |
have to make and pay for some or all of the repairs or maintenance. |
3.28payment"). Know when it is due and how much it will be. You'll probably need to get a
3.29new mortgage from a bank at that time.
3.30(5) If you miss just a single payment or can't make the balloon payment, the seller can
3.31cancel your contract. You will likely lose all the money you have already paid. You will
3.32likely lose your ability to purchase the home. The seller can begin an eviction action
3.33against you in just a few months.
3.34Key Things to Do Before You Sign
4.1(1) Get advice from a lawyer or the Minnesota Home Ownership Center at
4.21-866-462-6466. To find a lawyer through the Minnesota State Bar Association, go to
4.3www.mnfindalawyer.com.
4.4(2) Get an independent, professional appraisal of the property to learn what it is worth.
4.5(3) Get an independent, professional inspection of the property.
4.6(4) Buy title insurance or ask a real estate lawyer for a "title opinion."
4.7(5) Check with the city or county to find out if there are inspection reports or unpaid
4.8utility bills.
4.9(6) Check with a title company or the county where the property is located to find out if
4.10there is a mortgage or other lien on the property and if the property taxes have been paid.
4.11If You Are Entering into a Purchase Agreement
4.12(1) If you haven't already signed the contract for deed, you can cancel the purchase
4.13agreement (and get all your money back) if you do so within five business days after
4.14getting this notice.
4.15(2) To cancel the purchase agreement, you must follow the provisions of Minnesota
4.16Statutes, section 559.217, subdivision 4. Ask a lawyer for help."
4.17 Subd. 4. Right to cancel purchase agreement. (a) A prospective purchaser may
4.18cancel a purchase agreement within five business days after actually receiving the notice
4.19required under subdivision 1 if a multiple seller fails to timely deliver the notice, provided
4.20that the contract for deed has not been executed by all parties.
4.21(b) A prospective purchaser may cancel the purchase agreement in accordance with
4.22the provisions of section 559.217, subdivision 4.
4.23(c) In the event of cancellation, the multiple seller may not impose a penalty and must
4.24promptly refund all payments made by the prospective purchaser prior to cancellation.
4.25 Subd. 5. Remedies for failure to timely deliver notices. (a) Notwithstanding
4.26any contrary provision in the purchase agreement or contract for deed, a purchaser has
4.27a private right of action against a multiple seller who fails to timely deliver the notice
4.28required under subdivision 1. The multiple seller is liable to the purchaser for:
4.29(1) the greater of actual damages or statutory damages of $2,500; and
4.30(2) reasonable attorney fees and court costs.
4.31(b) At the purchaser's option an amount not to exceed $2,500 may be applied
4.32to offset outstanding contract installment payments past due or next due under the
4.33contract for deed. The right to offset expires upon cancellation of the contract for deed in
5.1accordance with applicable law. Recording of the documents specified in section 559.213
5.2constitutes prima facie evidence that any right to offset under this subdivision has expired.
5.3(c) A multiple seller who knowingly fails to timely deliver the notice required
5.4under subdivision 1 is liable to the purchaser for triple the actual or statutory damages
5.5available under paragraph (a), whichever is greater, provided that the purchaser must elect
5.6the remedy provided under either paragraph (b) or this paragraph and may not recover
5.7damages under both paragraphs.
5.8(d) The rights and remedies provided in this subdivision are cumulative to, and not
5.9a limitation of, any other rights and remedies provided under law. Any action brought
5.10pursuant to this subdivision must be commenced within four years from the date of the
5.11alleged violation.
5.12 Subd. 6. Duty of multiple seller to account. Upon reasonable request by the
5.13purchaser and no more than once every 12-month period, a multiple seller must provide an
5.14accounting of all payments made pursuant to the contract for deed, the amount of interest
5.15paid, and the amount remaining to satisfy the principal balance under the contract.
5.16 Subd. 7. No waiver. The provisions of this section may not be waived.
5.17EFFECTIVE DATE.This section is effective August 1, 2013, and applies to
5.18transactions in which the contract for deed and the purchase agreement for the contract
5.19for deed, if any, were both executed on or after that date.
5.20 Sec. 4. Minnesota Statutes 2012, section 559.211, subdivision 2, is amended to read:
5.21 Subd. 2. Remedies additional. The remedies provided in this section are in
5.22addition to and do not limit other rights or remedies available to purchasers or vendors of
5.23real estate. Subject to the provisions of sections 559.213 and 559.217, subdivision 7, this
5.24section shall not be construed to bar a court from determining the validity, effectiveness,
5.25or consequences of proceeding under section 559.21 or 559.217, or granting other relief in
5.26connection therewith, by reason of the failure of a purchaser to seek or obtain relief under
5.27this section prior to the purported effective date of the termination of the contract.
5.28 Sec. 5. REPEALER.
5.29Minnesota Statutes 2012, section 507.235, subdivision 4, is repealed.
5.30EFFECTIVE DATE.This section is effective the day following final enactment.
