New Laws for Minnesota Landlords

The residential landlord-tenant relationship in Minnesota is heavily regulated, and oftentimes in favor of tenants.  Still, this most recent legislative session resulted in an unusually large number of changes to Minnesota’s landlord-tenant statutes, many of which have important implications for landlords of all sizes.

Here is a quick summary of the new laws for Minnesota landlords:

1.     Cash Payments by Tenants Require Receipts (new § 504B.118):  

    When a tenant pays cash to a landlord for rent or any other purpose:

    • If the tenant pays in person, the landlord must immediately provide a written receipt.  
    • If the tenant does not pay in person, the landlord must provide the receipt within three business days.

2. Attorney’s Fees Provisions in Residential Leases Operate Reciprocally (new § 504B.172):

    If the lease allows the landlord to recover attorney’s fees in any action and through any means (e.g. additional rent), the tenant
    is also entitled to attorney’s fees, and to the same extent, in any action that would allow the landlord to do so.
    (Effective for leases entered into on or after August 1, 2011, and for leases renewed on or after August 1, 2012)

3. Applicant Screening Fees Must be Properly Handled, Used, and Returned (§ 504B.173 amended):

    Landlord requirements
  
    A landlord must give an applicant a receipt for a screening fee.  At the applicant’s request, the receipt may be incorporated into 
    the application form itself.

    A screening fee can be used to perform a personal reference check, to obtain a consumer credit report, or to obtain a tenant 
    screening report.  The landlord must return any amount of the screening fee that is not used for those purposes.

    Prior to accepting a screening fee, a landlord must provide written notice to an applicant of:
    • The name, address, and telephone number of the screening service (unless the landlord does not use such a service); and
    • The criteria on which the decision to rent will be based.
    • If the application is rejected, the landlord must notify the applicant within 14 days and identify the criteria the applicant failed to 
       meet.
    • If the applicant is rejected for any other reason than the criteria disclosed, the landlord must return the screening fee.

    Before doing anything at all with a screening fee (i.e. use, cash, or deposit), the landlord must first ensure that all prior
     applicants have either: 
    • Been screened and rejected, or 
    • Been offered the unit and declined to enter into a lease.

    If a prior applicant does enter into a lease, the landlord must return all subsequent applicants’ screening fees.

    Applicant Liability

    If an applicant provides materially false information on the application or omits material information that is requested, he is liable:
    • To the landlord for damages, and
    • For a civil penalty of up to $500, court filing costs, and attorney’s fees.

4. Late Fees For Rent Must Be Agreed Upon in Writing (new § 504B.177):

    No fees for late rent without an agreement in writing to that effect.
    • The agreement must specify when the fee will be imposed.
    • The fee cannot be more that 8% of the overdue rent payment.
    • The fee is not to be considered interest or liquidated damages.

    This provision does not affect federal rules on late fees for federally-subsidized tenancies.

    (Note:  this provision becomes effective January 1, 2011 for leases entered into or renewed on or after that date)

5. Punitive Damages Against Landlords Increased (amends §§ 504B.178 and 504B.271):

    The punitive damages cap for the bad faith retention by a landlord of a deposit, the interest thereon, or any portion thereof has
     been increased from $200 per deposit to $500 per deposit.  Punitive damages against a landlord for failure to return a
     tenant’s property upon proper request have been increased from $300 to twice the actual damages or $1,000, whichever is
     greater.

6. Abandoned Property May Be Sold/Disposed of Sooner (amends § 504B.271):

Someone at the Legislature must be reading this blog, as I ranked the abandoned property statutes in Minnesota’s landlord-tenant statutes to be among the silliest real estate laws.  This amendment changes the time frame in which a landlord may sell or dispose of abandoned property from 60 days to 28 days.  The amended statute also allows notice to be given to the tenant by first-class mail (whereas only certified mail was previously specified).

7. Relief for Tenants in Foreclosed Properties Following Expiration of the Redemption Period (amends § 504B.285):

    The Legislature also felt the need to codify in state law the provisions of the Protecting Tenants at Foreclosure Act of 2009 .  

    The Minnesota statute provides as follows:

    When a tenant holds over after the expiration of the redemption period following foreclosure of a property and:
    • The tenant held a lease of any duration,
    • The lease began after the date the mortgage was executed, and
    • The lease began before expiration of the redemption period,

    Then the tenant must be given at least 90 days’ written notice to vacate, and the notice:
    • Can be given no sooner than the date the redemption period expires, and
    • Can be effective no sooner than 90 days after the date the redemption period expires,

    Provided, the tenant pays the rent and abides by all terms of the lease.

    (Applies to eviction actions commenced on or before December 31, 2012)

    When the tenant has a bona fide lease extending more than 90 days past the expiration of the redemption period:
    • The tenant must be allowed to occupy the premises until the end of the lease’s remaining term, and
    • The tenant must be given at least 90 days’ written notice to vacate, effective no sooner than the date the lease expires.

    Except, when the successor in interest (or an immediate subsequent bona fide purchaser) will occupy the property as a primary
     residence:

    • The tenant must be given at least 90 days’ written notice to vacate:
    • Notice may be given no sooner than the expiration of the redemption period, and
    • Notice may be effective no sooner than 90 days after the redemption period.
    • Provided, the tenant pays the rent and abides by all terms of the lease.

     (Applies to eviction actions commenced on or before December 31, 2012; not that these provisions do not apply to Section 8
     housing)

    A “bona fide lease” means: 
    (1) the mortgagor or the child, spouse, or parent of the mortgagor is not the tenant;
    (2) the lease or tenancy was the result of an arm’s-length transaction; and
    (3) the lease or tenancy requires the receipt of rent that is not substantially less than 
    fair market rent for the property or the unit’s rent is reduced or subsidized by a federal, state, or local subsidy.

8. Relief for Tenants Following Termination of a Contract for Deed (Amends § 504B.285):

    When a tenant holds over after the termination of a contract for deed and the tenant:
    • Held a lease of any duration during the termination period,
    • The lease began after the date the contract for deed was executed, and
    • The lease began before the expiration of the time for termination,

    Then the tenant must be given at least 2 months’ written notice to:
    • Vacate no sooner than 1 month after the expiration of the time for termination, provided the tenant pays rent and abides by all
     terms of the lease, or
    • Vacate no later than the end of the termination period, with the tenant being held harmless for breaching the lease by vacating if
     the contract for deed is reinstated.

     (Applies to eviction actions commenced on or before December 31, 2012)

    The above rules—for persons holding over after the foreclosure redemption period or contract for deed termination period—last 
    until January 1, 2013.  All such eviction actions commenced on or after January 1, 2013, are governed by the rule as it existed prior
    to amendment.

9. Rebuttable Presumption of Rent Paid by Money Order (amends § 504B.291):

    There is a rebuttable presumption that rent has been paid if the tenant produces:
    • Copies of one of more money orders, or
    • One or more original receipt stubs from the purchase of a money order.

    Provided, the documents:
    • Total the amount of the rent,
    • Include dates that approximately correspond with the date rent was due, and
    • With copies of money orders, are made out to the landlord.

    The presumption is rebutted if the landlord produces a business record showing that the tenant has not paid rent (although
     the landlord can introduce other evidence to rebut the presumption).

With one exception (the shortening of the period in which the landlord is responsible for storing the tenant’s abandoned property), these new laws are heavily skewed in favor of tenants’ rights.  Landlords of all sizes should take heed of these changes so as to avoid claims made by their tenants.

 

Posted in Blog, Landlord-Tenant, Minnesota law, Real Estate Law