For more information contact: Matt Swenson 651-297-8406

HOUSE BRIEFS

FORECLOSURE CRISIS RESPONSE: RENTER WORKING GROUP FINAL REPORT

Executive Summary

Minnesota, like the rest of the country, is facing a mortgage foreclosure crisis of proportions not seen since the Depression. Although last session the Minnesota Legislature passed what is widely regarded as the strongest anti-predatory lending law in the nation, there is universal recognition that more needs to be done to provide relief to homeowners and tenants.
In the summer of 2007, Representative Joe Mullery convened a wide-ranging group of affected stakeholders. Out of that meeting, five working groups were created, led by a bi-partisan group of legislators from both the Minnesota Senate and the Minnesota House of Representatives, to develop legislative proposals for the 2008 session. One of those groups was the Renter Working Group, which was charged with addressing issues arising from foreclosures that adversely affect tenants.
Led by Representatives Jim Davnie and Paul Kohls and Senators Warren Limmer and Ann Rest, the Renter Working Group was comprised of metropolitan cities and counties, public housing authorities, tenant advocates, landlord advocates, private attorneys, the banking and mortgage industries, affordable housing preservation and development advocates, and the utility industry.
The group offers a set of policy proposals, in the form of draft 2008 legislation that:
· Extends to tenants who lease during the redemption period the right to a foreclosure notice;

· Prescribes the form and content of the foreclosure notice;
· Improves the ability of tenants to maintain or restore utility service;
· Provides an opportunity for tenants to expunge an undeserved eviction from their record;

· Removes a monetary barrier to maintaining habitability during foreclosure; and

· Helps ease the financial burden on tenants forced to relocate due to a foreclosure.
Introduction

The 2007 Minnesota Legislature enacted what is considered to be the strongest anti-predatory lending law in the country. Though justifiably proud of their achievement, legislators understood that the enactment of that law was the first step in a series of actions necessary to address the exploding mortgage foreclosure crisis.
During the past six months, a group of dedicated individuals undertook a bipartisan and cross-sector collaborative effort to develop responses to the crisis. Five Working Groups, each addressing a different aspect of the foreclosure crisis, were formed. Actively participating in one or more of the groups were State Representatives and State Senators, the Minnesota Attorney General’s office, State agency personnel, county and local government staff, nonprofit sector representatives, members of the financial community, landlord representatives, members of the academic community, and consumer advocates.
The groups were charged with developing proposals designed collectively to provide comprehensive relief to the victims of the crisis and to prevent further devastation to families, further deterioration of neighborhoods, and further erosion of property values and community and economic stability. The five working groups were:
· Foreclosure Data Committee – charged with examining ways to make foreclosure data more complete and accessible, and to develop a statewide data information system to provide a central repository for mortgage and foreclosure information;

· Foreclosure Prevention Working Group – charged with looking at ways to increase resources for foreclosure prevention counseling efforts;

· Renter Working Group – charged with increasing rights of tenants who are forced to vacate as a result of a foreclosure of an owner or investor’s property;

· Remedies Working Group – charged with enhancing tools for borrowers to save their homes from foreclosure and to enhance protections against predatory lending; and

· Vacancy Working Group – charged with helping municipalities address the myriad problems associated with the raft of vacancies and abandonments brought on by the avalanche of foreclosures.

This report presents the activities and recommendations of the Renter Working Group.


Background

The United States is in the midst of a foreclosure crisis. The New York Times reports that “[m]ore than one million properties are expected to enter foreclosure this year." The crisis has been called “a national nightmare.” Approximately 14% of the more than 7.2 million subprime loans are in default. The number of defaults is predicted to grow substantially in 2008.
Minnesota is suffering the ravages of the crisis, which include financial ruin, displacement of families, increased homelessness, lower property values, increased crime and vandalism, and devastated communities. In the Twin Cities Metropolitan Area, there were over 11,000 sheriff’s sales in 2006. More than 20,000 sheriff’s sales are projected for 2007, representing an 83% increase over the previous year.
In Greater Minnesota, foreclosures increased 48% between 2005 and 2006. They were projected to increase 84% between 2006 and 2007. In all, between 2005 and 2007, an estimated 15,000 Greater Minnesota families will have lost their homes.
The crisis shows no signs of abating any time soon. While foreclosure rates are difficult to predict, one indicator of future foreclosure activity is the number of interest rate resets. A Federal Reserve Board of Minneapolis estimate indicates that 40% of adjustable rate subprime loans and 10% of near-prime loans (also known at “Alt A loans”) in Minnesota will reset to a higher interest rate by October 2008, with an additional 22% of subprime and 60% of near-prime resetting sometime thereafter.
Renters are not immune from the devastating impacts of the crisis. They are victims of what one report called “the trickle-down effects from Minnesota’s wave of foreclosures.” The New York Times referred to this group as “a large but little noticed class of casualties.” An estimated 2,500 renter households are expected to be displaced in Hennepin County alone in 2007.

The Renter Working Group Activity

The working group met six times between October 2, 2007 and January 18, 2008. The group divided itself into subgroups addressing the following issues:
· Notice
· Maintenance of Foreclosed Rental Properties (including utilities)
· Rental Records
· Emergency Assistance
· Lenders as Landlords

Seven consensus legislative proposals emerged from three of the five subgroups. Other proposals were discussed but, since no consensus could be reached, were found to be in need of further development.
All the proposals are discussed below. In addition, a review of the activities of the two groups for which no proposals were forthcoming is found following the sections discussing the consensus recommendations and the proposals requiring further development.

2008 Consensus Legislative Recommendations
The following proposals received unanimous endorsement from the group members:

Notice

Lack of Notice

The Issue: Persons who lease during the redemption period are not entitled to notice from the lender to vacate, whereas renters who lease prior to the redemption period are entitled to receive one months’ notice to vacate. Those entitled to notice are given two options: (1) stay one month beyond the end of the redemption period; or (2) vacate prior to the end of the redemption period and be held harmless for breaching the lease if the landlord redeems.

The Proposal: Amend Minn. Stat. § 504B.285 (Eviction Actions section) to: (1) require that tenants who lease during the redemption period receive notice, and (2) extend the notice period to two months.


Content of Notice

The Issue: The initial notice from the lender to the occupants of an impending foreclosure and sheriff's sale does not clearly and fully inform tenants of their rights when they are victims of a foreclosure.

The Proposal: Amend Minn. Stat., chapter 580 (Mortgages; Foreclosure by Advertisement section) to prescribe the language of a Foreclosure Advise Notice to Tenants that provides guidance concerning the foreclosure process and where to seek advice and assistance.


Notice to Prospective Tenants

The Issue: Currently, landlords are not required to inform prospective tenants contemplating leasing during the redemption period that the property is in foreclosure. Additionally, there are no provisions allowing or encouraging lenders to allow tenants to remain in units beyond the end of the redemption period.

The Proposal: Amend Minn. Stat. § 504B.151 (Restriction on Residential Lease Terms for Buildings in Financial Distress section) to: (1) require notice by a landlord to a prospective tenant contemplating leasing during the redemption period that the property is in foreclosure, and (2) allow landlords to lease beyond the redemption period without disclosure if the lender agrees to honor the lease.

Discussion: A fully rented dwelling provides the best opportunity for a landlord to refinance and redeem property in foreclosure. At the same time, a prospective renter should have full knowledge of the status of the property to make an informed decision whether to lease. However, if the lender pledges to honor the lease, the landlord should be able to rent without encumbrance.



Maintenance of Foreclosed Rental Properties

Impediment to Obtaining Repairs in Foreclosures

The Issue: The filing fee to initiate a Tenant Remedies Action (TRA), Emergency Tenant Remedies Action (ETRA), or Rent Escrow action presents a barrier to obtaining repairs when a rental property is in foreclosure.

The Proposal: Amend Minn. Stat. § 357.021 (District Court Administrator; Fees section) to eliminate the filing fee if one of these actions is filed during the redemption period.


Impediment to Maintaining Utility Service

The Issue: Current law governing the rights of tenants where a landlord fails to pay the utility bill provides limited options for tenants to continue or restore utility service. The foreclosure crisis has exacerbated the problem tenants face regarding the loss of utility service due to nonpayment of landlords.

The Proposal: Amend Minn. Stat. § 504B.215 (Loss of Utility Services section) to: (1) clarify that if tenants pay charges for the usage for only the most recent billing cycle, the utility must restore or maintain service for one more billing period, and (2) provide a new option in buildings with less than five units for a tenant to place the account in the tenant’s name and become a new customer, paying prospective bills. Other tenants may contribute and deduct utility payments from rent. The landlord can be restored as the customer of record upon payment of, or an agreement to pay, all arrears and late charges.
Rental Records

Undeserved Evictions on Rental Records

The Issue: As a matter of course, many lenders file evictions following the provision of the required notice to tenants to vacate. Evictions are filed even if the tenant has vacated prior to the expiration of the redemption period or never received notice to vacate. Thus, tenants who did not hold over or never received proper notice have increasingly been saddled with undeserved evictions on rental records. It is widely acknowledged that having an eviction on a rental record makes it significantly more difficult to find new housing.

The Proposal: Amend Minn. Stat. § 484.014 (Expungement of Eviction Information in Housing Records section) to provide for mandatory expungement where a tenant is a victim of foreclosure and either vacated prior to end of the redemption period and the commencement of the eviction action, or did not receive the required statutory notice to quit.


Other

Financial Burden on Tenants Forced to Vacate and Relocate

The Issue: Per Minn. Stat. § 504B.178, under normal circumstances, a tenant withholding last month’s rent is liable to a landlord for a penalty, in addition to the usual consequences of failing to pay rent. However, there are certain statutory exceptions excusing a tenant who withholds last month’s rent from the penalty. Tenants forced to prematurely relocate due to a foreclosure are often without the financial means necessary to cover new expenses, such as a new security deposit and first month’s rent. Any security deposit is likely unrecoverable from the foreclosed landlord/mortgagor, and the tenant often is precluded from obtaining assistance from the county because s/he has already obtained rental assistance.


The Proposal: Amend Minn. Stat. § 504B.178 (Limit on Withholding of Last Month’s Rent section) to exempt tenants in foreclosure from the statute's penalty for withholding the last month’s rent.


Proposals Requiring Further Development

A number of other proposals surfaced that generated differences of opinion among group members. These proposals did not achieve consensus, and, to the extent there is interest among parties, warrant further development. The following discusses these proposals.

Maintenance and Utilities

Lien for Unpaid Utility Bills

The Issue: Municipal water companies and other municipal utilities are entitled to a "first in line" lien for unpaid water bills. The availability of such liens creates an incentive to maintain service. Private utility companies cannot assess for unpaid bills. Therefore, their options for collection are limited, and disconnection is the strongest tool they possess.
For a variety of reasons, tenants are not always able to use the “pay and deduct” option provided under Minn. Stat. § 504B.215. These tenants are left with little choice. Caught between the landlord’s nonpayment and the utility’s legitimate need and desire to collect for nonpayment and prevent the accumulation of even more arrears, tenants may find themselves without utility service or options.
The Proposal: The proposal would allow utilities, in return for agreeing to maintain utility service to residential tenants in circumstances where landlords fail to pay, to take a lien position following any tax lien for landlord-owed bills. (If the utility lien were placed in a subordinate position, then it is unlikely that there would be funds left to pay off the unpaid bills after the lender’s lien is satisfied.) The proposal remains a work in progress.



Discussion: The advantages of the proposal are that it creates strong incentives for utilities to maintain service to tenants, while creating a mechanism for recovery of unpaid bills. The results would provide benefits to all other ratepayers, as well as the utility and its shareholders.

The disadvantages of the proposal are that it places lenders in a less advantageous lien position, and would likely affect lender negotiations with landlords seeking mortgages for residential, investor properties.


Consolidating Tenant Remedies Actions in Residential Complexes

The Issue: The Tenant Remedies Act allows a tenant in a distressed property to file an action seeking a judicial ruling or the appointment of an administrator to oversee properties where there are maintenance issues. Currently, if the property is one large building (e.g., a 50-unit high-rise), a single action is all that is required. However, if the property is divided into a complex of several smaller buildings (e.g., five 10-unit buildings), a separate action for each building is necessary.
The Proposal: The proposal creates a new definition in Chapter 504B of “residential complex,” which enables Tenant Remedies actions to be brought not just for a "residential building," but also for a "residential complex."
Discussion: The advantages of this proposal are that it fosters judicial efficiency, enables tenants in a residential complex to more easily resolve maintenance deficiencies, and avoids utility shutoffs where rents from one building are insufficient to pay off a complex-wide utility bill in arrears, a problem tenant advocates report as rising as a result of the surge in foreclosures.

The disadvantages of this proposal are that the defect a tenant seeks to remedy may not be present in all the buildings in the complex and tenants in other buildings in a complex may choose not to take an action.






Condominium and Townhouse Associations and Foreclosures

Foreclosures for Failure to Pay Association Dues

The Issue: Homeowner associations are foreclosing their liens on units owned by homeowners who are delinquent in paying homeowner association dues (technically called "assessments"), even if the homeowner is current on the mortgage.

Discussion: Advocates for homeowners want a remedy to address a perceived unfairness that a homeowner can lose the home if the homeowner is current on the mortgage but behind on association dues.

Advocates for condominium and townhouse associations believe it is imperative that they retain the important (and, perhaps in some cases, the only) tool to cause the dues to be brought current and provide necessary maintenance, upkeep, or repairs for the whole residential community.


Activities of Other Subgroups

Emergency Assistance Subgroup
Tenants forced to relocate due to a foreclosure may be in desperate need of emergency assistance but are often unable to obtain it. The Emergency Assistance Subgroup tackled this issue.
Tenants in foreclosed properties often need rental assistance (e.g., security deposit and first month’s rent) to obtain new housing after being forced to relocate through no fault of their own due to a foreclosure. Such tenants are unlikely to secure the return of their security deposit from landlords in foreclosure, but often find themselves closed off from emergency assistance either because counties restrict how frequently in a given period a person may apply for rental or other assistance or do not offer rental assistance under any circumstances. This subgroup discussed a proposal that would prohibit denial by a county of emergency assistance to a renter seeking help if the renter were a victim of a foreclosure, despite the fact that the request may come prior to the expiration of the imposed waiting period.
County representatives on the group noted that emergency assistance has, for several years now, been a block grant program over which counties have complete discretion. Concern was expressed about placing statutory restrictions county implementation of the block grant. Consequently, the subgroup was unable to develop a consensus proposal to address this issue.
Lenders as Landlords
This subgroup discussed the possibility of having lenders act in the capacity of landlords, allowing renters to stay beyond the redemption period in return for obtaining key exemptions from some of the requirements of Chapter 504B. However, lenders expressed concerns about taking on the role of landlord in foreclosed properties. Concerns included: the specter of tort liability; the day-to-day maintenance obligations lenders would need to assume; and how a lender as landlord would be received by regulators. No proposals were forthcoming from this subgroup.

Conclusion

The Renter Working Group was one of five established by legislators to address the problems associated with the mortgage foreclosure crisis. The group examined issues stemming from the crisis that adversely affect tenants in foreclosed properties. The group coalesced around seven proposals to provide relief for tenants caught in a foreclosure of the landlord’s property and urges their adoption by the 2008 Legislature.

Members of the Renter Working Group

Legislative Leads
The Honorable Jim Davnie State Representative
The Honorable Paul Kohls State Representative
The Honorable Warren Limmer State Senator
The Honorable Ann Rest State Senator

Group Coordinator
Ron Elwood Legal Services Advocacy Project

Lead Attorney
Lawrence McDonough Legal Services Society of Minneapolis

Members
Jill Alverson Hennepin County
Bonnie Balach City of Minneapolis
Denise Beigbeder Ramsey County
Tim Bendel Minnesota Mortgage Association
Paul Birnberg HOME Line
Bob Boyd Minneapolis Public Housing Authority
Joe Collins St. Paul Department of Planning and Economic Development
Doug Clark St. Cloud Area Legal Services
Kevin Dunlevy Beisel & Dunlevy and Chair of Minnesota State Bar Association Real Property Section
Genevieve Gaboriault Mid-Minnesota Legal Assistance
Amber Hawkins Legal Aid Society of Minneapolis
Al Hester St. Paul Public Housing Authority
Jack Horner Minnesota Multi-Housing Association
Mara Humphrey Minnesota Credit Union Network
Steve Johnson Minnesota Bankers Association
Gerry Kaluzny Southern Minnesota Regional Legal Services
Fred Krietzman Felhaber, Larson, Fenlon and Vogt
Todd B. Liljenquist Minnesota Multi-Housing Association
Pat Martyn Minnesota Mortgage Association
Grania McKiernan Xcel Energy
Brandon Nessen Minnesota ACORN
Zachary Olson Southern Minnesota Regional Legal Services
Janeen Rosas Hennepin County
David Skilbred Independent Community Bankers of Minnesota
James Wilkinson Housing Discrimination Law Project
Pamela Zagaria Family Housing Fund

Proposal to Require Notice to Tenants Who Lease During Redemption Period

Section 1. Minnesota Statutes, 2007, section 504B.285, subdivision 1, is amended to read:
Subdivision 1. Grounds. The person entitled to the premises may recover possession by eviction when:
(1) any person holds over real property:
(i) after a sale of the property on an execution or judgment; or
(ii) on foreclosure of a mortgage and after the expiration of the time for redemption on foreclosure of a mortgage, or (iii) after termination of contract to convey the property,; provided that if the person holding the real property after the expiration of the time for redemption or termination was is a tenant during the redemption or termination period, the person entered into the lease of any duration after the date of the notice of mortgage foreclosure or contact for deed cancellation and prior to the expiration of the time for redemption or termination, and the person has received:
(A) at least one two month’s written notice to vacate no sooner than one month after the expiration of the time for redemption or termination, provided that the tenant pays the rent and abides by all terms of the lease; or
(B) at least one two month’s written notice to vacate no later than the date of the expiration of the time for redemption or termination, which notice shall also state that the sender will hold the tenant harmless for breaching the lease by vacating the premises if the mortgage is redeemed or the contract is reinstated;
(2) any person holds over real property after termination of the time for which it is demised or leases to that person or to the persons under whom that person holds possession, contrary to the conditions or covenants of the lease or agreement under which that person holds, or after any rent becomes due according to the terms of such lease or agreement; or
(3) any tenant at will holds over after the termination of the tenancy by notice to quit.

APPENDIX C


Proposal to Prescribe Foreclosure Advise Notice to Tenants

Section 1. Minnesota Statutes, 2007, section 580.03, is amended to read:
580.03. NOTICE OF SALE; SERVICE ON OCCUPANT. Six weeks' published notice shall be given that such mortgage will be foreclosed by sale of the mortgaged premises or some part thereof, and at least four weeks before the appointed time of sale a copy of such notice shall be served in like manner as a summons in a civil action in the district court upon the person in possession of the mortgaged premises, if the same are actually occupied. If there be a building on such premises used by a church or religious corporation, for its usual meetings, service upon any officer or trustee of such corporation shall be a sufficient service upon it. The notices required by section sections 580.041 and 580.042 must be served simultaneously with the notice of foreclosure required by this section.
Sec. 2. Minnesota Statutes, 2007, section 580.041, is amended to read:

580.041. FORECLOSURE ADVICE NOTICE TO OWNERS.
Subdivision 1. [Renumbered subd. 1b]
Subd. 1a. Applicability. This section applies to foreclosure of mortgages under this chapter on property consisting of one to four family dwelling units, one of which the owner occupies as the owner's principal place of residency on the date of service of the notice of sale on the owner.
Subd. 1b. Form and delivery of notice. The notice required by this section must be in 14-point boldface type and must be printed on colored paper that is other than the color of the notice of foreclosure and that does not obscure or overshadow the content of the notice. The title of the notice must be in 20-point boldface type. The notice must be on its own page. The notice required by this section must be delivered with the notice of foreclosure required by sections 580.03 and 580.04. The notice required by this section also must be delivered with each subsequent written communication regarding the foreclosure mailed to the mortgagor by the foreclosing party up to the day of redemption. A foreclosing mortgagee will be deemed to have complied with this section if it sends the notice required by this section at least once every 60 days during the period of the foreclosure process. The notice required by this section must not be published.
Subd. 2. Content of notice. The notice required by this section must appear substantially as follows:
"Help For Homeowners in Foreclosure
Minnesota law requires that we send you this notice about the foreclosure process. Please read it carefully.
Mortgage foreclosure is a complex process. Some people may approach you about "saving" your home. You should be careful about any such promises.
The state encourages you to become informed about your options in foreclosure before entering into any agreements with anyone in connection with the foreclosure of your home.
There are government agencies and nonprofit organizations that you may contact for helpful information about the foreclosure process. For the name and telephone number of an organization near you please call the Minnesota Housing Finance Agency (MHFA) at (insert telephone number). The state does not guarantee the advice of these agencies.
Do not delay dealing with the foreclosure because your options may become more limited as time passes."
Subd. 3. Affidavit. Any person may establish compliance with or inapplicability of this section by recording, with the county recorder or registrar of titles, an affidavit by a person having knowledge of the facts, stating that the notice required by this section has been delivered in compliance with this section or that this section is not applicable because the property described in the notice of foreclosure did not consist of one to four family dwelling units, one of which was occupied by the owner as the owner's principal place of residency. The affidavit and a certified copy of a recorded affidavit shall be prima facie evidence of the facts stated in the affidavit. The affidavit may be recorded regarding any foreclosure sale, including foreclosure sales which occurred prior to August 1, 2005, and may be recorded separately or as part of the record of a foreclosure.
Subd. 4. Validation of foreclosure sales. No mortgage foreclosure sale under this chapter shall be invalid because of failure to comply with this section unless an action to invalidate the sale is commenced and a notice of lis pendens is filed with the county recorder or registrar of titles within one year after the last day of the redemption period of the mortgagor, the mortgagor's personal representatives, or assigns. This subdivision shall not affect any action or proceeding pending on August 1, 2005, or which is commenced before February 1, 2006, in any court of this state, provided a notice of lis pendens of the action is filed with the county recorder or registrar of titles before February 1, 2006.
Sec. 3. Minnesota Statutes, 2007, chapter 580, is amended by adding a section to read:
580.042. FORECLOSURE ADVICE NOTICE TO TENANT.
Subdivision 1. Applicability. This section applies to foreclosure of mortgages under this chapter.
Subd. 2. Form of delivery of notice. The notice required by this section must be in 14-point boldface type and must be printed on colored paper that is other than the color of the notice of foreclosure and of the notice to be given under section 580.041, subd. 1b, and that does not obscure or overshadow the content of the notice. The title of the notice must be in 20-point boldface type. The notice must be on its own page.
Subd. 3. Content of notice. The notice required by this section must appear substantially as follows.
Foreclosure: Advice to Tenants
You are renting in a property that is in foreclosure. Minnesota law requires that we send you this notice about the foreclosure process. Please read it carefully.
A mortgage foreclosure notice does not change the terms of your lease. You and your landlord must continue to follow the terms of your lease, including the rights and responsibilities of you and your landlord. You must keep paying rent unless you have a legal reason to withhold it. Your landlord must keep the property repaired. Utilities must be paid under the terms of your lease or under state law.
Moving out of the property early might be a violation of your lease. The date of the sheriff s foreclosure sale is in the attached foreclosure notice. In most cases you do not need to move from the property before the sheriff s foreclosure sale. Read your lease to see if it says anything about foreclosure and about the rights you may have if the property is in foreclosure. If you have a month-to-month lease, the foreclosure notice does not change the rules for ending your lease. You and your landlord must still give legal notice to end your lease.

In most cases, your landlord has six months after the date of the sheriff s foreclosure sale to pay off the mortgage. This is called the redemption period. Read the attached foreclosure notice to determine the length of the redemption period. You cannot be asked to move during the redemption period except for lease violations or if your lease expires during the redemption period. If your landlord stops the foreclosure, you may not have to move from the property. If your landlord does not stop the foreclosure, there will be a new owner of the property at the end of the redemption period.
The new owner may have the legal right to ask you to move even if your lease is not over. But, the new owner must still give to you a written notice stating that the new owner wants you to move.
Do not wait to get information about foreclosure. Mortgage foreclosure is a complicated process. It is important you learn about your rights as a renter when there is a mortgage foreclosure. You may have fewer options if you wait too long. There are government agencies and nonprofit organizations that you may contact for helpful information about the foreclosure process. For the name and telephone number of an organization near you, please call the legal aid office or bar association office in your county. You also can find information on tenant rights at HOME Line at (866) 866-3546 and Law Help Minnesota at http://www.LawHelpMN.org. The state of Minnesota does not guarantee the advice of these agencies and organizations.
Subd. 4. Affidavit. Any person may establish compliance with or inapplicability of this section by recording, with the county recorder or registrar of titles, an affidavit by a person having knowledge of the facts, stating that the notice required by this section has been delivered in compliance with this section. The affidavit and a certified copy of a recorded affidavit shall be prima facie evidence of the facts stated in the affidavit. The affidavit may be recorded regarding any foreclosure sale, including foreclosure sales which occurred prior to August 1, 2008, and may be recorded separately or as part of the record of a foreclosure.
Subd. 5. Validation of foreclosure sales; remedy for violation. (a) No mortgage foreclosure sale under this chapter shall be invalid because of failure to comply with this section.
(b) The remedy for a violation for failure to serve upon the occupant the notice required by this section pursuant to section 580.03 shall be limited to actual damages caused by such violation, not to exceed $ XXX, and shall be available only to the tenant of the mortgaged premises who occupied the mortgaged premises at the time the notice prescribed by this section was required to be given. Any legal action brought to enforce the provisions of this section must be commenced by the last day of the redemption period of the mortgagor.

APPENDIX D


Proposal to Require Notice to Prospective Tenants that Property is in Foreclosure


Section 1. Minnesota Statutes, 2007, section 504B.151, is amended to read:
504B.151 RESTRICTION ON RESIDENTIAL LEASE TERMS FOR BUILDINGS IN FINANCIAL DISTRESS; REQUIRED NOTICE OF PENDING FORECLOSURE.
Subdivision 1. Limitation on lease and notice to tenant. (a) Once a landlord has received notice of a contract for deed cancellation under section 559.21 or notice of a mortgage foreclosure sale under chapter 580 or 582, the landlord may only enter into (i) a periodic residential lease agreement with a term of not more than two months or the time remaining in the contract cancellation period or the mortgagor’s redemption period, whichever is less, or (ii) a fixed term residential tenancy not extending beyond the cancellation period or the landlord's period of redemption until:
(1) the contract for deed has been reinstated or paid in full;
(2) the mortgage default has been cured and the mortgage reinstated;
(3) the mortgage has been satisfied;
(4) the property has been redeemed from a foreclosure sale; or
(5) a receiver has been appointed.
(b) Before entering into a lease under this section and accepting any rent or security deposit from a tenant, the landlord must notify the prospective tenant in writing that the landlord has received notice of a contract for deed cancellation or notice of a mortgage foreclosure sale as appropriate, and the date on which the contract cancellation period or the mortgagor’s redemption period ends.
(c) This section does not apply to a manufactured home park as defined in section
327C.01, subdivision 5.
Subd. 2. Exception allowing a longer term lease. This section does not apply if:
(1) the holder or the mortgagee agrees not to terminate the tenant's lease other than for lease violations for at least one year from the commencement of the tenancy; and
(2) the lease does not require the tenant to prepay rent for any month commencing after the end of the cancellation or redemption period, so that the rent payment would be due prior to the end of the cancellation or redemption period.
For the purposes of this section, a holder means a contract for deed vendor or a holder of the sheriff s certificate of sale or any assignee of the contract for deed vendor or of the holder of the sheriff s certificate of sale.
Subd. 3. Attornment. (a) A tenant who enters into a lease under subdivision 2 is:
(1) deemed by operation of law to attorn to the holder immediately upon the holder succeeding to the interest of the landlord under the lease; and
(2) bound to the holder under all the provisions of the lease for either the balance of the lease term or for one year after the start of the tenancy, whichever occurs first.
(b) A tenant who attorns under this subdivision is not obligated to pay rent to the holder until the holder provides and the tenant receives written notice that the holder has succeeded to the interest of the landlord. A letter from the holder to the tenant to that effect is prima facie evidence that the holder has succeeded to the interest of the landlord.
Subd. 4. Holder not bound by certain acts. A holder succeeding to an interest in a lease lawfully entered into under subdivision 2 is not: (i) liable for any act or omission of any prior landlord, (ii) subject to any offset or defense which the tenant had against any prior landlord, or (iii) bound by any modification of the lease entered into under subdivision 2, unless the modification is made with the holder's consent.


APPENDIX E


Proposal to Eliminate Filing Fee for Tenant Remedies Actions,
Emergency Tenant Remedies Actions, and Rent Escrow Actions

Section 1. Minnesota Statutes, 2007, section 357.021, subdivision 1a, is amended to read:
Subd. 1a. Transmittal of fees to commissioner of finance. (a) Every person, including the state of Minnesota and all bodies politic and corporate, who shall transact any business in the district court, shall pay to the court administrator of said court the sundry fees prescribed in subdivision 2. Except as provided in paragraph (d), the court administrator shall transmit the fees monthly to the commissioner of finance for deposit in the state treasury and credit to the general fund. $30 of each fee collected in a dissolution action under subdivision 2, clause (1), must be deposited by the commissioner of finance in the special revenue fund and is appropriated to the commissioner of employment and economic development for the displaced homemaker program under section 116L.96.
(b) In a county which has a screener-collector position, fees paid by a county pursuant to this subdivision shall be transmitted monthly to the county treasurer, who shall apply the fees first to reimburse the county for the amount of the salary paid for the screener-collector position. The balance of the fees collected shall then be forwarded to the commissioner of finance for deposit in the state treasury and credited to the general fund. In a county in a judicial district under section 480.181, subdivision 1, paragraph (b), which has a screener-collector position, the fees paid by a county shall be transmitted monthly to the commissioner of finance for deposit in the state treasury and credited to the general fund. A screener-collector position for purposes of this paragraph is an employee whose function is to increase the collection of fines and to review the incomes of potential clients of the public defender, in order to verify eligibility for that service.
(c) No fee is required under this section from the public authority or the party the public authority represents in an action for:
(1) child support enforcement or modification, medical assistance enforcement, or establishment of parentage in the district court, or in a proceeding under section 484.702;
(2) civil commitment under chapter 253B;
(3) the appointment of a public conservator or public guardian or any other action under
chapters 252A and 525;
(4) wrongfully obtaining public assistance under section 256.98 or 256D.07, or recovery of overpayments of public assistance;
(5) court relief under chapters 260, 260A, 260B, and 260C;
(6) forfeiture of property under sections 169A.63 and 609.531 to 609.5317;
(7) recovery of amounts issued by political subdivisions or public institutions under sections 246.52, 252.27, 256.045, 256.25, 256.87, 256B.042, 256B.14, 256B.15, 256B.37, 260B.331, and 260C.331, or other sections referring to other forms of public assistance;
(8) restitution under section 611A.04; or(9) actions seeking monetary relief in favor of the state pursuant to section 16D.14, subdivision 5 .
(d) No fee is required under this section from any party in an action initiated under sections 504B.381 to 504B.471 if the case is initiated during the redemption period. For the purposes of this section, redemption is period is the period described in section 580.23, subdivisions 1 and 2, and section 581.10.
(d) (e) $20 from each fee collected for child support modifications under subdivision 2, clause (13), must be transmitted to the county treasurer for deposit in the county general fund and $35 from each fee shall be credited to the state general fund. The fees must be used by the county to pay for child support enforcement efforts by county attorneys.


APPENDIX F


Proposal to Provide Additional Options for Tenants
to Continue or Restore Utility Service Where a Landlord Fails to Pay the Utility Bill

Section 1. Minnesota Statutes 2006, section 504B.215 , subdivision 3, is amended to read:
Subd. 3. Procedure Right of Tenants to Pay Utility Bills. (a) When a municipality, utility company, or other company supplying home heating oil, propane, natural gas, electricity, or water to a building has issued a final notice or has posted the building proposing to disconnect or discontinue the service to the building because a landlord who has contracted for the service has failed to pay for it or because a landlord is required by law or contract to pay for the service and fails to do so, a tenant or group of tenants may pay to have the service continued or reconnected as provided under this section. Before paying for the service, the tenant or group of tenants shall give oral or written notice to the landlord of the tenant's intention to pay after 48 hours, or a shorter period that is reasonable under the circumstances, if the landlord has not already paid for the service. In the case of oral notification, written notice shall be mailed or delivered to the landlord within 24 hours after oral notice is given.
(b) In the case of natural gas, electricity, or water, if the landlord has not yet paid the bill by the time of the tenant's intended payment, or if the service remains discontinued,:
(1) the tenant or tenants may pay the outstanding bill current charges for the most recent billing period, if and the utility company or municipality will must restore the service for at least one billing period. ; or
(2) in a residential building with less than five units, and notwithstanding subdivision 2 of this section or local law, one of the tenants may notify the utility company or municipality that the tenant agrees to become the bill payer responsible and customer of record, and the utility company or municipality must place the account disconnected or subject to disconnection in the tenant's name and provide service prospectively, provided the tenant satisfies all requirements for establishing service. The right to become the bill payer responsible and the customer of record under this paragraph may be exercised only once in any twelve-month period.
Exercise of the right granted in paragraph (b)(1) of this subdivision does not preclude exercise of the right granted in paragraph (b)(2).
In a single-metered residential building, other residential tenants in the building may contribute payments to the utility company or municipality on the landlord's account under paragraph (b)(1) or on the account of the tenant who is the customer of record under paragraph (b)(2).
For the purposes of this subdivision, "current charges" shall not include any arrears incurred by the landlord.
A landlord who satisfies all requirements for reestablishing service, including paying, or entering into an agreement acceptable to the utility company or municipality to pay, all arrears and all other lawful charges incurred by the landlord on the account that was placed in the tenant's name, may reestablish service in the landlord's name.
(c) In the case of home heating oil or propane, if the landlord has not yet paid the bill by the time of the tenant's intended payment, or if the service remains discontinued, the tenant or tenants may order and pay for one month's supply of the proper grade and quality of oil or propane.
(d) After submitting receipts for documentation to the landlord of the tenant's payment to the landlord utility company or municipality, a tenant may deduct the amount of the tenant's payment to the utility company or municipality from the rental payment next paid to the landlord. Any amount paid to the municipality, utility company, or other company by a tenant under this subdivision is considered payment of rent to the landlord for purposes of section 504B.291.

APPENDIX G


Proposal to Provide for Expungement of Eviction
Where Tenant in Foreclosure Voluntarily Vacates

Section 1. Minnesota Statutes, 2007, section 484.014, is amended by adding a subdivision to read:
Subd. 3. Mandatory expungement. The court shall order expungement of an eviction case commenced solely on the grounds provided in Section 504B.285, sub.1 (1) if the court finds that: (a) the defendant occupied real property which was subject to contract for deed cancellation or mortgage foreclosure; and (b) either (i) the time for contract cancellation or foreclosure redemption has expired and the defendant vacated the property prior to commencement of the eviction action; or (ii) the defendant was a tenant during the contract cancellation or foreclosure redemption period and did not receive a notice under Section 504B.285, subd. 1(1) to vacate on a date prior to commencement of the eviction case.


APPENDIX H


Proposal to Excuse Tenants from a Penalty and Interest
Where the Tenant is Forced to Vacate Due to Foreclosure

Section 1. Minnesota Statutes, 2007, section 504B.178, subdivision 8, is amended to read:
Subd. 8. Withholding rent. No tenant may withhold payment of all or any portion of rent for the last payment period of a residential rental agreement, except an oral or written month to month residential rental agreement concerning which neither the tenant nor landlord has served a notice to quit, or for the last month of a contract for deed cancellation period under section 559.21 or a mortgage foreclosure redemption period under chapter 580 or 582, on the grounds that the deposit should serve as payment for the rent. Withholding all or any portion of rent for the last payment period of the residential rental agreement creates a rebuttable presumption that the tenant withheld the last payment on the grounds that the deposit should serve as payment for the rent. Any tenant who remains in violation of this subdivision after written demand and notice of this subdivision shall be liable to the landlord for the following: (1) a penalty in an amount equal to the portion of the deposit which the landlord is entitled to withhold under subdivision 3 other than to remedy the tenant's default in the payment of rent; and (2) interest on the whole deposit as provided in subdivision 2, in addition to the amount of rent withheld by the tenant in violation of this subdivision.

APPENDIX I

Proposal to Allow Utilities Priority Lien Position for Unpaid Bills


Section 1. Minnesota Statutes, 2007, chapter 504B, is amended by adding a section to read:
504B.218. LIENS FOR UNPAID UTILITY BILLS.
Subdivision 1. Definitions. For the purposes of this section, “residential building” and “residential complex” shall have the meanings given them in section 504B.001.
Subd. 2. Right to attach. Whenever a utility company, or other company supplies home heating oil, propane, natural gas, electricity, or water to a residential building or residential complex and the landlord is responsible for the bill, the utility company or other company shall have a perpetual lien thereon for the charges for the supply from the time such supply shall be made.
Subd. 3. Lien subordinate to liens for taxes and assessments. The lien created under subdivision 2 shall be subordinate to any lien for real estate taxes or governmental assessments or for any lien for other taxes, but shall be superior to all other claims or liens.
Subd. 4. Limits to enforcement of lien. The lien created under subdivision 2 may not be enforced unless:
(1) A bill has been sent for the home heating oil, propane, natural gas, electricity, or water, and the charges for the home heating oil, propane, natural gas, electricity, or water have not been paid within sixty days after the bill has been sent.
(2) A statement of the claim for the unpaid bills is recorded with the county recorder or registrar of the county in which the residential building or residential complex is situated.
(3) A copy of the statement of the claim is served personally in accordance with the provisions for personal service of a summons in district court or by certified mail on the owner of the property or the owner’s authorized agent. The owner of the property or the owner’s authorized agent may file a dispute of the lien within twenty days of the filing of the statement of claim. Such dispute shall state the specific basis for the dispute. Failure to make such a filing within twenty days shall constitute acceptance by the owner of the amount of the lien.
Subd. 6. Residential service must continue if lien recorded. If a statement of a claim for unpaid bills is filed for record in accordance with subdivision 4(2), then the utility company or other company shall not discontinue service or supply to a residential building or residential complex based upon non-payment of the amount stated in the statement of claim, if the utility company or other company knows or has reason to know that the residential building or residential complex is then occupied by a tenant.
Subd. 7. Computation of interest on lien. Interest shall accrue on the amount of the lien at the rate stated on the original terms of sale. For public utilities, this shall be the rate for late payments as established in the utility’s tariff approved by the public utilities commission.

APPENDIX J

Proposal to Add Definition of “Residential Complex” to Landlord-Tenant Law


Section 1. Minnesota Statutes, 2007, section 504B.001, is amended by adding a subdivision to read:
504B.001 DEFINITIONS.
Subdivision 1. Applicability. For the purposes of this chapter, the terms defined in this section have the meanings given them.
Subd. 2. Controlled substance. "Controlled substance" means a drug, substance, or immediate precursor in Schedules I through V of section 152.02. The term does not include distilled spirits, wine, malt beverages, intoxicating liquors, or tobacco.
Subd. 3. Distress for rent. "Distress for rent" means the act of a landlord seizing personal property of the tenant or other person to enforce payment of rent.
Subd. 4. Evict or eviction. "Evict" or "eviction" means a summary court proceeding to remove a tenant or occupant from or otherwise recover possession of real property by the process of law set out in this chapter.
Subd. 5. Housing-related neighborhood organization. "Housing-related neighborhood organization" means a nonprofit corporation incorporated under chapter 317A that:
(1) designates in its articles of incorporation or bylaws a specific geographic community to which its activities are limited; and
(2) is formed for the purposes of promoting community safety, crime prevention, and housing quality in a nondiscriminatory manner.
For purposes of this chapter, an action taken by a neighborhood organization with the written permission of a residential tenant means, with respect to a building with multiple dwelling units, an action taken by the neighborhood organization with the written permission of the residential tenants of a majority of the occupied units.
Subd. 6. Inspector. "Inspector" means the person charged by the governing body of the political subdivision in which a residential building is situated, with the responsibility of enforcing provisions of local law, the breach of which could constitute a violation as defined in subdivision 14, clause (1). If there is no such person, "inspector" means the county agent of a board of health as authorized under section 145A.04 or the chair of the board of county commissioners, and in the case of a manufactured home park, the state Department of Health or its designee.
Subd. 7. Landlord. "Landlord" means an owner of real property, a contract for deed vendee, receiver executor, trustee, lessee, agent, or other person directly or indirectly in control of rental property.
Subd. 8. Lease. "Lease" means an oral or written agreement creating a tenancy in real property.
Subd. 9. License. "License" means a personal privilege to do a particular act or series of acts on real property without possessing any estate or interest in real property. It may be created in writing or orally.
Subd. 10. Person. "Person" means a natural person, corporation, limited liability company, partnership, joint enterprise, or unincorporated association.
Subd. 11. Residential building. "Residential building" means:
(1) a building used in whole or in part as a dwelling, including single-family homes, multiple-family units such as apartments, and structures containing both dwelling units and units used for nondwelling purposes, and includes a manufactured home park; or
(2) an unoccupied building which was previously used in whole or in part as a dwelling and
which constitutes a nuisance under section 561.01.
Subd. 11a. Residential complex. Residential complex means a group of two or more
residential buildings that are contiguous, under common ownership, and managed by a single
natural person or by the same rental office.
Subd. 12. Residential tenant. "Residential tenant" means a person who is occupying a dwelling in a residential building under a lease or contract, whether oral or written, that requires the payment of money or exchange of services, all other regular occupants of that dwelling unit, or a resident of a manufactured home park.
Subd. 13. Tenancy at will. "Tenancy at will" means a tenancy in which the tenant holds possession by permission of the landlord but without a fixed ending date.
Subd. 14. Violation. "Violation" means:
(1) a violation of any state, county or city health, safety, housing, building, fire prevention, or housing maintenance code applicable to the building;
(2) a violation of any of the covenants set forth in section 504B.161, subdivision 1, clause (1) or (2), or in section 504B.171, subdivision 1; or
(3) a violation of an oral or written agreement, lease, or contract for the rental of a dwelling in a building.
Subd. 15. Writ of recovery of premises and order to vacate. "Writ of recovery of premises and order to vacate" means the writ set out in section 504B.361.
Sec. 2. Minnesota Statutes, 2007, section 504B.381, subdivision 2, is amended is read:
Subd. 2. Venue. The venue of the action authorized by this section is the county where the residential building or residential complex alleged to contain the emergency condition is located.
Sec. 3. Minnesota Statutes, 2007, section 504B.385, subdivision 1, is amended to read:
Subdivision 1. Escrow of rent. (a) If a violation exists in a residential building or residential complex, a residential tenant may deposit the amount of rent due to the landlord with the court administrator using the procedures described in paragraphs (b) to (d).
Sec. 4. Minnesota Statutes, 2007, section 504B.395, subdivision 1, is amended to read:
Subdivision 1. Who may bring action. An action may be brought in district court by:
(1) a residential tenant of a residential building or residential complex in which a violation, as defined in section 504B.001, subdivision 14, is alleged to exist;
(2) any housing-related neighborhood organization with the written permission of a residential tenant of a residential building or residential complex in which a violation, as defined in section 504B.001, subdivision 14 , clause (1) or (2), is alleged to exist;
(3) a housing-related neighborhood organization that has within its geographical area an unoccupied residential building or residential complex in which a violation, as defined in section 504B.001, subdivision 14 , clause (1) or (2), is alleged to exist; or
(4) a state, county, or local department or authority, charged with the enforcement of codes relating to health, housing, or building maintenance.
Sec. 5. Minnesota Statutes, 2007, section 504B.395, subdivision 4, is amended to read:
Subd. 4. Landlord must be informed. A landlord must be informed in writing of an alleged violation at least 14 days before an action is brought by:
(1) a residential tenant of a residential building or residential complex in which a violation as defined in section 504B.001, subdivision 14, clause (2) or (3), is alleged to exist; or
(2) a housing-related neighborhood organization, with the written permission of a residential tenant of a residential building or residential complex in which a violation, as defined in section 504B.001, subdivision 14 , clause (2), is alleged to exist. The notice requirement may be waived if the court finds that the landlord cannot be located despite diligent efforts.
Sec. 6. Minnesota Statutes, 2007, section 504B.395, subdivision 6, is amended to read:
Subd. 6. Contents of complaint. (a) The complaint must be verified and must:
(1) allege material facts showing that a violation or violations exist in the residential building or residential complex;
(2) state the relief sought; and
(3) list the rent due each month from each dwelling unit within the residential building or residential complex, if known.
(b) If the violation is a violation as defined in section 504B.001, subdivision 14, clause (1), the complaint must be accompanied by:
(1) a copy of the official report of inspection by a department of health, housing, or building, certified by the custodian of records of that department stating:
(i) when and by whom the residential building or residential complex concerned was inspected;
(ii) what code violations were recorded; and
(iii) that notice of the code violations has been given to the landlord; or
(2) a statement that a request for inspection was made to the appropriate state, county, or municipal department, that demand was made on the landlord to correct the alleged code violation, and that a reasonable period of time has elapsed since the demand or request was made.
Sec. 7. Minnesota Statutes, 2007, section 504B.401, subdivision 2, is amended to read:
Subd. 2. Service. The summons and complaint must be served upon the landlord or the landlord's agent not less than seven nor more than 14 days before the hearing. Service shall be by personal service upon the defendant pursuant to the Minnesota Rules of Civil Procedure. If personal service cannot be made with due diligence, service may be made by affixing a copy of the summons and complaint prominently to the residential building or buildings involved, and mailing at the same time a copy of the summons and complaint by certified mail to the last known address of the landlord.
Sec. 8. Minnesota Statutes, 2007, section 504B.415, is amended to read:
504B.415. DEFENSES.
It is a sufficient defense to a complaint under section 504B.385 or 504B.395 that:
(1) the violation or violations alleged in the complaint do not exist or that the violation or violations have been removed or remedied;
(2) the violations have been caused by the willful, malicious, negligent, or irresponsible conduct of a complaining residential tenant or anyone under the tenant's direction or control; or
(3) a residential tenant of the residential building or residential complex has unreasonably refused entry to the landlord or the landlord's agent to a portion of the property for the purpose of correcting the violation, and that the effort to correct was made in good faith.
Sec. 9. Minnesota Statutes, 2007, section 504B.425, is amended to read:
504B.425. JUDGMENT.
(a) If the court finds that the complaint in section 504B.395 has been proved, it may, in its discretion, take any of the actions described in paragraphs (b) to (g), either alone or in combination.
(b) The court may order the landlord to remedy the violation or violations found by the court to exist if the court is satisfied that corrective action will be undertaken promptly.
(c) The court may order the residential tenant to remedy the violation or violations found by the court to exist and deduct the cost from the rent subject to the terms as the court determines to be just.
(d) The court may appoint an administrator with powers described in section 504B.445, and:
(1) direct that rents due:
(i) on and from the day of entry of judgment, in the case of petitioning residential tenants or housing-related neighborhood organizations; and
(ii) on and from the day of service of the judgment on all other residential and commercial tenants of the residential building or residential complex, if any, shall be deposited with the administrator appointed by the court; and
(2) direct that the administrator use the rents collected to remedy the violations found to exist by the court by paying the debt service, taxes, and insurance, and providing the services necessary to the ordinary operation and maintenance of the residential building or residential complex which the landlord is obligated to provide but fails or refuses to provide.
(e) The court may find the extent to which any uncorrected violations impair the residential tenants' use and enjoyment of the property contracted for and order the rent abated accordingly. If the court enters judgment under this paragraph, the parties shall be informed and the court shall determine the amount by which the rent is to be abated.
(f) After termination of administration, the court may continue the jurisdiction of the court over the residential building or residential complex for a period of one year and order the landlord to maintain the residential building or residential complex in compliance with all applicable state, county, and city health, safety, housing, building, fire prevention, and housing maintenance codes.
(g) The court may grant any other relief it deems just and proper, including a judgment against the landlord for reasonable attorney fees, not to exceed $500, in the case of a prevailing residential tenant or neighborhood organization. The $500 limitation does not apply to awards made under section 549.211 or other specific statutory authority.
Sec. 10. Minnesota Statutes, 2007, section 504B.431, is amended to read:
504B.431. SERVICE OF JUDGMENT.
A copy of the judgment must be personally served on every residential and commercial tenant of the residential building or residential complex in compliance whose obligations will be affected by the judgment. If, with due diligence, personal service cannot be made, service may be made by posting a notice of the judgment on the entrance door of the residential tenant's dwelling or commercial tenant's unit and by mailing a copy of the judgment to the residential tenant or commercial tenant by certified mail.
Sec. 11. Minnesota Statutes, 2007, section 504B.445, subdivision 6, is amended to read:
Subd. 6. Residential building or residential complex repairs and services. The administrator must first contract and pay for residential building or residential complex repairs and services necessary to keep the residential building or residential complex habitable before other expenses may be paid. If sufficient funds are not available for paying other expenses, such as tax and mortgage payments, after paying for necessary repairs and services, the landlord is responsible for the other expenses.