Experience

New Real Estate Legislation

By Charles Bans

The last session of the Minnesota Legislature passed a number of real estate related laws. Some of the most interesting are the following:

1. A "lender" as defined in Minnesote Statutes § 47.206, who causes unreasonable delay in processing a loan application beyond the expiration date of an interest rate or discount point agreement is liable to the borrower for a penalty in an amount not to exceed the borrower's actual out-of-pocket damages, including the present value of the increased interest costs over the normal life of the loan or specific performance of the agreement. The law applies to any agreement entered into after July 1, 2004. The law includes specific acts of the lender which evidences unreasonable delay. In addition, a lender is liable to the borrower for $500 for each unreasonable delay in processing a loan application which causes an interest rate or discount point agreement to expire before closing. It appears by virtue of the reference to Minn. Stat. Section 47.206 that the legislature intends the statute to be generally applicable to home mortgage loan applications of $200,000 or less.
2. Minnesota Statutes § 559.21 has been amended to provide an alternative in terminating residential earnest money contracts, residential purchase agreements and residential exercised options (collectively "Purchase Agreements"). Minn. Stat. § 559.21 now provides that the Purchase Agreements may be terminated on thirty (30) days notice (the "Old Law") or may now be canceled under new Section 559.217 which provides for a fifteen (15) day cancellation period. Section 559.217 provides for cancellation (i) if a default occurs or an unfulfilled condition exists after the date specified for fulfillment in the terms of a purchase agreement which does not by its terms cancel the purchase agreement or (ii) if such default occurs or an unfulfilled condition exists after the date specified for fulfillment in the terms of a purchase agreement, which by the terms of the purchase agreement cancels the purchase agreement (the so-called declaratory confirmation cancellation provision). If, however, a party seeks to cancel through the fifteen (15) day cancellation provisions and the other party commences a proceeding to obtain a court order to suspend the cancellation, the court is entitled to award attorneys' fees and filing fees and costs of service to the prevailing party in an amount not to exceed $3,000.
3. Minnesota Statutes § 580.24 dealing with redemptions by creditors in mortgage foreclosure proceedings has been amended to provide that notices of intent to redeem must not only be filed with the county recorder and/or registrar of titles where the foreclosed mortgage is recorded but also must be filed with the sheriff's office who is obligated to maintain for public inspection all such notices for a period of six (6) months following the end of the mortgagor's redemption period. The foreclosure law has always required as a prerequisite for a redeeming lien creditor to exercise its rights of redemption, that such redeeming creditor first file a "notice of intent" to redeem prior to the expiration of the mortgagor's redemption period. This amendment is intended to make the redemption process "usable" since at the present time in many foreclosure actions it is impossible to tell whether a notice of intent to redeem has been timely filed with the recorder's office or the registrar of titles office. This is because those offices are behind in posting their records to reflect recorded documents by as much as eight (8) weeks. Many creditors file their notices of intent to redeem within the last few days prior to the end of the mortgagor's original redemption period thus making it impossible to know which creditor or a subsequent creditor must redeem from. The statute now makes it possible for subsequent creditors to redeem in an orderly and timely manner. However, the statute is not effective until January 1, 2005.
4. Minnesota Statutes § 462.353 and 462.358 dealing with municipal fees have also been amended. Fees charged by a municipality to defray costs incurred by the municipality must be fair, reasonable and proportionate and must now have a nexus to the actual cost of the service for which the fee is imposed. Upon request, a municipality must now explain the basis of its fees. If a dispute arises over a specific fee, the person aggrieved by the fee may appeal provided that the appeal must be brought within sixty (60) days after approval of the application under this section and a deposit of the fee into escrow. A municipality must not condition the approval of any proposed subdivision or development on an agreement to waive the right to challenge the validity of the fee. With respect to park dedications and the like for new proposed subdivisions there must be an essential nexus between the fees or dedication imposed and the municipal purpose sought to be achieved by the fee or dedication. The fee or dedication must be a rough proportionality to the need created by the proposed subdivision or development. Again, a municipality must not condition the approval of the proposed subdivision or development on an agreement to waive the right to challenge the validity of the fee. The statute is effective August 1, 2004 and applies to ordinances relating to fees which are adopted or amended on or after August 1, 2004.

For a more detailed discussion of the above statutes or any other new or current statute, please contact any member of our real estate department.

Charles Bans is a partner in the real estate area, where he handles the purchasing, financing, selling and leasing of commercial properties for developers and investors, as well as commercial real estate loans for both lenders and borrowers. He is certified as a Real Property Law Specialist by the Minnesota State Bar Association.