LEGISLATIVE RECAP 2008

by Todd Liljenquist, Esq., Director of Legislative Affairs

Minnesota Multi Housing Association

The global agreement between the Governor and House and Senate leadership brought the 2008 session of the Minnesota State Legislature to a peaceful resolution. The Minnesota Multi Housing Association lobbyists worked on and monitored many pieces of legislation this session.  What follows is a discussion of the new laws which will have the greatest impact on the readers of this publication.

POOL AND SPA SAFETY

An important piece of legislation affecting those who own or manage properties with swimming pools and/or spas passed this session.  For a complete description of the new pool and spa safety requirements, go to the “Featured Links” section on the front page of the MHA website (www.mmha.com).

FORECLOSURE CRISIS RESPONSE LEGISLATION

Out of response to the foreclosure situation, a working group was created during the interim to look at ways the state could address the crisis, and MHA lobbyists served on a subgroup charged with addressing issues concerning residents of rental property involved in the foreclosure process. Many proposals were presented by resident advocates but only the following items received consensus and passed the legislature and were signed into law.

1.                  When a property is scheduled for a sheriff’s foreclosure sale, occupants of the property currently receive a notice of the foreclosure sale from the lender. This notice is difficult for the average person to understand and rental housing residents who receive such notice are often under the mistaken belief that they must immediately vacate the premises after the foreclosure sale. A plain-language notice which provides a clearer description of the foreclosure process and the status of the rental relationship will now be provided by the lender and accompany the current notice. (Laws of 2008, Chapter 341, Article 5, Section 11)

2.                  Prospective residents must now be informed of a pending foreclosure or contract for deed cancellation prior to the property manager entering into a lease or accepting rent or security deposit. This requirement will provide residents more accurate information regarding the possibility of continuing to reside at the property following completion of their original lease. An exception to the disclosure is provided if the lender agrees not to terminate the lease other than for lease violations for at least one year from the commencement of the tenancy. (Laws of 2008, Chapter 177, Section 1)

3.                  When a property manager of a building with less than five units, after receiving a final notice from a municipality or utility company and notice of intention to pay from a resident, has failed to pay for utility service, the resident may agree to become the customer of record and bill payer responsible for the utility. Current charges are paid by the resident and may be deducted from the resident’s rental amount upon submission of documentation by the resident to the property manager. A property manager may be restored as customer of record by paying all outstanding charges or entering into an agreement with the utility to do so. (Laws of 2008, Chapter 313)

4.                  Expungement of eviction records will now be allowed in the limited situation where the property has been foreclosed upon or a contract for deed has been cancelled and the resident either did not receive the notice to vacate that is required in these cases or had vacated the property prior to commencement of the eviction action. (Laws of 2008, Chapter 174)

5.                  Currently, residents may be penalized for withholding payment of the last month’s rent. Because residents may not receive their security deposit back when the property has been foreclosed, the penalty for withholding the last month’s rent for a foreclosed property has now been removed. This law does not authorize withholding rent but just removes the additional penalty for doing so. (Laws of 2008, Chapter 177, Section 2)

PROPERTY TAXES

Many new property tax laws were enacted in 2008. Two with particular relevance to rental housing are described here.

Class 4d Amendments

Class 4d property is qualifying low-income rental housing. It has a property tax class rate of .75 percent on the qualifying units and qualifying portion of land, compared to the 1.25 percent class rate for regular apartments, class 4a. Under previous law, in order to qualify as 4d, at least 75 percent of the units must receive financial assistance under certain federal government or state of Minnesota housing assistance programs.

This law was amended in two ways: 1) The 75 percent threshold of qualifying units was changed to 20 percent; and 2) units can qualify that receive financial assistance through a local unit of government’s program in addition to federal and state programs.

Effective for property taxes payable in 2009 and thereafter. (Chapter 154, Laws of 2008, Article 2, Section 10)

Brooklyn Center-4d-Crime Free Multi Housing Pilot Project

A pilot project applicable only in Brooklyn Center, and only if the City approves it, provides that owners or managers of a rental property in tax class 4d for which the number of police calls to the property over the preceding three-year period exceeded the City’s average number of calls for multiunit rental properties for the period by at least 25 percent, adjusted for the number of rental units, may be required to complete the three phases of the City’s crime-free multihousing program or the property could lose its 4d classification. Calls for police or emergency assistance in response to domestic abuse or medical assistance are not counted toward the number of calls. Various procedural requirements the City must comply with, notices to owners and managers, and time periods for compliance with this section are provided. Ultimately, if a property that is required to do so, fails to complete the crime-free multihousing program, the property may lose its class 4d status until it complies.

Effective when, and if, Brooklyn Center approves this section. The law expires after taxes payable in 2017. If the City adopts this pilot project, it must report on the effectiveness of the program to the legislative tax committees by January 1, 2017. (Chapter 366, Laws of 2008, Article 6, Section 48)

Another significant property tax issue that was opposed by MHA was pushed again this year, but fortunately did not become law.  The “Street Improvement Fee” bill, was a version of legislation that has been introduced several times previously. It would authorize cities to create street improvement districts of any size or shape and tax the properties in the districts for street, bridge, sidewalk, sewer and transit right-of-way acquisition, construction, reconstruction and upgrades, and maintenance. The city could impose ongoing charges of any amount (called “street improvement fees”) on the real property in the district without any limitation on the size of the fee, or how it would be apportioned among the various classes of property. MHA’s concern was that it would allow a city to create, in effect, a whole new property taxation system that could easily be very unfair to rental housing.

RESTRICTING ACCESS TO INFORMATION

A number of bills were introduced this year which would affect the use of and access to information relevant to members of the rental housing industry. Although none of these proposals passed during the 2008 Session, similar issues will likely be confronted in future legislative sessions.

1.                  Automatic expungement of eviction records and certain criminal justice data, such as arrest records.

2.                  Prohibit use of arrest records for employment purposes: A bill would have prohibited the use of arrest records when making private employment decisions. We worked with the author and an exception was provided for hiring decisions where a criminal background investigation is required or permitted by law, which would include the Koskinen background check requirement for our industry. The bill was ultimately not included in the final version of the Data Practices Omnibus bill.

3.                  Reclassify certain criminal justice data: A proposal would have reclassified Bureau of Criminal Apprehension data so that offenses which are not felony violent crimes would be considered private data in less time than the current fifteen-year period.

4.                  Certificate of Good Conduct: This bill would have allowed an individual convicted or adjudicated delinquent for a crime to petition the court for a certificate of good conduct. The effect of the certificate would be to create a presumption of rehabilitation and allow an employer to act in such a manner. So, if an employer hired someone with such a certificate, the employer would not be civilly or criminally liable for relying on the certificate when making that employment decision.

 Todd Liljenquist, Esq.

Minnesota Multi Housing Association

952-548-2204

Todd.Lijenquist@mmha.com

2007 Legislative Update

by Todd Liljenquist, Esq., Director of Government Relations

Minnesota Multi Housing Association

During the 2007 Regular Session at the state capitol, we were actively involved in many bills. Only a handful directly affect common interest communities.  What follows is a discussion of the new laws that have the greatest effect on CIC members, with the last two laws pertaining only to rental property.

Criminal Gang Activity as Public Nuisance

Criminal gang activity has been a growing problem in a number of Minnesota communities.  A new law was passed this session that will provide additional tools for law enforcement in addressing criminal gang activity.  The legislation basically supplements the current public nuisance law by classifying criminal gangs engaging in criminal gang activity and the habitual use of a place for gang activity as public nuisances. 

In addition to gang members, property owners or persons responsible for maintaining the property may be made defendants in a suit to abate the nuisance.  Upon commencement of a suit against a property owner, proof of frequent gang activity occurring at the property provides a presumption that the property owner knowingly permitted the activity. 

Adequate procedural requirements for property owners would ameliorate many concerns with the provisions mentioned above.  As introduced, however, neither notice nor an opportunity to abate the nuisance was required prior to a city or county attorney filing an action against the property owner. 

We worked closely with the Senate author, Senator Mee Moua (D-St. Paul), who proved extremely helpful in drafting language sufficiently protective of property owners’ rights.  Among several changes to the original bill, the Senate version required notice to be given to the property owner and an opportunity to abate the nuisance prior to beginning a legal action against the owner.  Also, the presumption that the property owner knowingly permitted the gang activity may be overcome by showing “reasonable efforts” were made to prevent the occurrence of gang activity on the property.  Language similar to the Senate version passed both the House and Senate and was signed by the Governor on May 25th. (Laws of 2007, Chapter 150)

Window Safety Screens

The past few years have seen a number of tragic instances where Minnesota children have fallen from windows.  A bill was introduced this year that would have required “window safety screens” to be installed on all new construction and all remodels or reconstruction that receive financing from the Minnesota Housing Finance Agency (MHFA).  The standards in the bill required screens to prevent a small child from passing through when a force of 30 foot pounds is applied to the screen.  In addition, screens would need to be capable of being opened from the inside by a person having no special training or knowledge. 

A number of groups, including window and screen manufacturers and builders, expressed concerns with the bill that were largely twofold.  First, it was unclear whether window and screen manufacturers had been consulted in reaching the 30 foot pounds of force standard.  This concern raised questions of whether currently manufactured window screens satisfy the criteria set forth in the bill.  Furthermore, it was unclear what level of testing was done to develop the standard.  Second, the application of the 30 foot pounds of force would be difficult to gauge.  For example, no statement is made in the bill regarding the size of force area which must withstand the 30 foot pounds.  Rather than proceed with the standards set forth in the bill, the interested groups suggested that rules for window fall prevention be developed and placed in the building code.

The bill was amended to a form which addressed the interested group’s concerns by: (1) requiring the Commissioner of Labor and Industry to adopt rules for window fall prevention devices as part of the state Building Code and (2) requiring the Commissioner of Health to create an educational component to provide awareness of the need to take precautions to prevent children from falling through open windows.  These two provisions were signed into law by the Governor on May 25th as part of the Health and Human Services Omnibus bill.

(Laws of 2007, Chapter 147, Article 16)

Right of Victims of Domestic Abuse to Terminate Lease

A law was passed this session that will allow domestic abuse victims to lawfully terminate their lease if the tenant meets certain criteria.  MHA worked closely with the proponents of the bill and the bill’s authors to include language that would adequately protect the landlord’s financial burden in such situations.  MHA also sought to craft language that would limit application of the legislation to those scenarios where the tenant needs to terminate the tenancy to be free from imminent harm. 

Some of the important elements of the new law are discussed below.

1.        Written notice.  Written notice must be provided to the landlord in advance of termination of the tenancy.  Failure to provide such written notice means that the tenant will not be protected by this law.  The individual using this law must make three statements in the notice:

a)                   The tenant is imminently fearful of domestic abuse from a person named in a no contract order or order for protection.

b)                   In order to avoid imminent domestic abuse, the tenant needs to terminate the tenancy.

c)                   The specific date the tenancy will terminate.

2.        Court order.  An order for protection or no contact order naming the individual from whom the tenant fears imminent domestic abuse must be provided to the landlord.  Both of these documents represent court orders where a burden of proof has been satisfied showing the individual named in the order is sufficiently dangerous to the safety of the tenant seeking to use this law.

3.        Clear termination date.  The date stated by the tenant as the termination date in the advance written notice is the date the tenancy automatically terminates.  No further action needs to be taken by either party to effectuate the termination.  This provides greater clarity than the current situation where it may be unclear whether a tenant has actually abandoned the property.

4.        Financial liabilities.  A tenant using this law remains responsible for the full month’s rent in which the tenancy terminates plus an additional amount equal to one month’s rent.  The amount equal to one month’s rent must be paid on or before the termination of the tenancy.  Failure to timely provide the amount equal to one month’s rent prohibits the tenant from using this law.  In addition, liability remains for other amounts owed by the tenant, including delinquent and unpaid rent. 

5.        Multiple tenants.  When one tenant uses this law but multiple tenants are bound by the lease, there is no difference in security deposit disbursement or lease treatment for the remaining tenants. 

The Governor signed the bill into law on May 7th as part of the Public Safety Omnibus bill.  Following is the language of the new law.  Take note that the effective date of the legislation is July 1st.  This is different from the normal effective date of August 1st for most policy legislation.

 [504B.206] RIGHT OF VICTIMS OF DOMESTIC ABUSE TO
TERMINATE LEASE.
    Subdivision 1. Right to terminate; procedure. (a) A tenant to a residential lease who is a victim of domestic abuse and fears imminent domestic abuse against the tenant or the tenant's minor children if the tenant or the tenant's minor children remain in the leased premises may terminate a lease agreement without penalty or liability as provided in this section. The tenant must provide advance written notice to the landlord stating that:
    (1) the tenant fears imminent domestic abuse from a person named in an order for protection or no contact order;
    (2) the tenant needs to terminate the tenancy; and
    (3) the specific date the tenancy will terminate.
    (b) The written notice must be delivered before the termination of the tenancy by mail, fax, or in person, and be accompanied by the order for protection or no contact order.
    (c) For purposes of this section, an order for protection means an order issued under chapter 518B. A no contact order means a no contact order currently in effect, issued under section 518B.01, subdivision 22, or chapter 609.
    Subd. 2. Treatment of information. A landlord must not disclose information provided to the landlord by a tenant documenting domestic abuse under subdivision 1. The information must not be entered into any shared database or provided to any person or entity but may be used when required as evidence in an eviction proceeding, action for unpaid rent or damages arising out of the tenancy, claims under section 504B.178, with the consent of the tenant, or as otherwise required by law.
    Subd. 3. Liability for rent; termination of tenancy. (a) A tenant terminating a lease under subdivision 1 is responsible for the rent payment for the full month in which the tenancy terminates and an additional amount equal to one month's rent. The tenant is relieved of any other contractual obligation for payment of rent or any other charges for the remaining term of the lease, except as provided in this section.
    (b) This section does not affect a tenant's liability for delinquent, unpaid rent or other amounts owed to the landlord before the lease was terminated by the tenant under this section.
    (c) The tenancy terminates, including the right of possession of the premises, on the termination date stated in the notice under subdivision 1. The amount equal to one month's rent must be paid on or before the termination of the tenancy for the tenant to be relieved of the contractual obligations for the remaining term of the lease as provided in this section.
    (d) For purposes of this section, the provisions of section 504B.178 are triggered as follows:
    (1) if the only tenant is the tenant who is the victim of domestic abuse and the tenant's minor children, if any, upon the first day of the month following the later of:
    (i) the date the tenant vacates the premises; or
    (ii) the termination of the tenancy indicated in the written notice under subdivision 1; or
    (2) if there are additional tenants bound by the lease, upon the expiration of the lease.
    Subd. 4. Multiple tenants. Notwithstanding the release of a tenant from a lease agreement under this section, if there are any remaining tenants the tenancy continues for those remaining tenants.
    Subd. 5. Waiver prohibited. A residential tenant may not waive, and a landlord may not require the residential tenant to waive, the tenant's rights under this section.
    Subd. 6. Definition. For purposes of this section, "domestic abuse" has the meaning given in section 518B.01, subdivision 2.
EFFECTIVE DATE.This section is effective July 1, 2007.

(Laws of 2007, Chapter 54, Article 4)

Lead Hazard Amendments

Two provisions of a bill relating to reducing lead hazards would have had an impact on rental property had they passed.  One provision required landlords to have lead dust wipes performed by a certified third-party in all rental housing built prior to 1978 and then give the results to all potential tenants.  Estimates show that these lead dust wipes would cost landlords in the range of $150-300 per test.  The other provision would have lowered the state mandatory intervention level for children from 15 to 5 micrograms of lead per deciliter of blood.  Neither of these provisions survived and only a study of lowering the action level to 10 micrograms of lead per deciliter of blood remained in the final version.