The Minnesota Multi Housing Association (MHA)
is a state-wide nonprofit trade organization. With nearly 2,100 members representing more than 250,000 housing units throughout Minnesota, MHA is the voice of the state's multi housing industry.
2013 Legislative Recap
By Todd Liljenquist, Director of Goverment Relations

The 2013 session of the State Legislature, which ended at the stroke of midnight on May 20, was a successful one for the Minnesota Multi Housing Association. We were able to come to agreement with tenant advocates on a limited landlord-tenant bill and we successfully opposed a number of bills that we believe would be detrimental to rental housing owners and managers and the residents they serve, such as a bill that would require management to provide a resident with written notice and an opportunity to cure or vacate the rental unit seven days prior to filing the eviction action for non-payment of rent.

In the tax area, we found ourselves involved with proposals not only impacting property taxes but also those expanding the sales tax to services not currently subject to the sales tax. A proposed extension of the sales tax to property management services was included in Governor Dayton’s initial sales tax expansion proposal but when the governor’s bill language was released it contained an exception for “real estate services” which would have exempted out property management services. The governor ultimately announced that he would not pursue a significant expansion of the sales tax this session.

Our legislative success is due in very large part to the active support and involvement of association members and to the reasonable positions on issues adopted by our Legislative Committee and Board of Directors. Contacting legislators, testifying at legislative hearings, and serving on the Association’s Legislative Committee are vital. For example, the excellent testimony provided and input given from association members to legislators on the seven-day notice bill was integral to ensuring the bill did not pass this session. In particular, we want to express our gratitude to Legislative Committee chairman Mark Jossart and Political Action Committee chairman Steve Schachtman for their excellent work and dedication.

Detailed explanation of new laws that specifically affect rental housing, as well as a brief discussion of defeated legislation and the ongoing issues they represent follow. 

NEW LAWS

Landlord-Tenant Law Changes

Legal Aid brought forward several landlord-tenant proposals this session. MHA was able to narrow the scope of the proposals to the items discussed below. The types of issues which were part of the original proposals but were not part of our negotiations include requiring 24-hour notice prior to entry into resident’s dwelling unit; increasing the civil penalty from $100 to $500 for violating resident’s right to privacy; requiring courts to hear expungement motions at the time of the eviction hearing; and modifying and expanding existing law with regard to evictions, eviction expungements, resident screening, lease terminations, and damage deposit remedies as they relate to victims of domestic violence.

MHA agreed on a bill containing the following provisions.

  1. A civil penalty of $500 was added for management’s failure to inform prospective residents of a pending foreclosure or contract for deed cancellation prior to entering into a lease or accepting rent or security deposit. Existing law provides an exception to the disclosure requirement 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.
  2. Temporary federal law affecting rights of renters in foreclosed properties was made permanent. The law provides that renters in foreclosed properties must be provided at least 90 days notice to vacate after the end of the redemption period rather than the 2 months required under prior state law. The federal law is set to expire at the end of 2014 but the greater notice standard was made permanent in Minnesota.
  3. A party to an eviction action will have 15 days to appeal the judgment rather than the previously allowed 10 days.
  4. The triggering mechanism for scheduling a hearing in rent escrow actions was clarified in situations where the resident files the required notice but no rent is currently due to management.

(Laws of 2013, Chapter 100)

Limiting Reliance on Criminal History for Employment Purposes (“Ban the Box”)

Under a new law that previously applied only to public employers, private employers may not inquire into or consider or require disclosure of the criminal record or criminal history of an applicant for employment until the applicant has been selected for an interview. If no interview is scheduled, the employer may not inquire before a conditional offer of employment has been made. Most significant for the rental housing industry is an exception provided in the law for employers who have a statutory duty to conduct a criminal history background check or otherwise take into consideration a potential employee’s criminal history during the hiring process. The Kari Koskinen law requires a “manager” in rental housing, defined as someone who “would have the means, within the scope of the individual’s duties, to enter tenants’ dwelling units” to pass a criminal background check. 

From a practical standpoint, no change to the employment application is necessary for prospective employees who will undergo a Koskinen background check since the new law provides an exception for employers with a statutory duty to conduct a criminal history background check. However, employment applications for positions that will not undergo a Koskinen background check should have all questions related to the applicant’s criminal history or criminal record removed. As noted above, for positions not undergoing a Koskinen background check, discussion concerning the applicant’s criminal record or criminal history may occur at the interview, or if there is not an interview, after a conditional offer of employment has been made to the applicant.

No private right of action exists under the state statute. Remedies for a violation of this statute are limited to penalties assessed by the Commissioner of Human Rights. First violations during the first year of the statute taking effect will result in a warning with a fine of up to $500 if not remedied within 30 days. Penalties after the first year of the statute taking effect are based on the size of the employer with a maximum penalty for employers with more than twenty employees of $500 per violation not to exceed $2,000 in a calendar month.

(Laws of 2013, Chapter 61) Effective January 1, 2014.

Court Technology Fee

Civil filing fees, including eviction actions, will be increased by $2 beginning July 1, 2013. The additional $2 fee will be used to fund court technology items, such as computer systems, equipment and devices, interactive video conferencing, and online services, and will sunset on June 30, 2018.

The House passed another proposal which was not enacted into law which would have significantly increased court filing fees for conciliation court. Under the graduated filing fee structure, depending on the amount in controversy, the filing fee would have increased from $65 to a range of $110 to $150.

(Laws of 2013, Chapter 86, Article 3, Section 6) Effective July 1, 2013, and applies to filings made on or after that date.

Elevator Inspection Fee Restructure

The Minnesota Department of Labor and Industry elevator inspection fee structure was altered. Inspection fees following elevator construction and repair will remain at 1.5% of the total cost of the permitted work for labor and materials but the $1,000 cap on the fee has been removed. For purposes of the inspection fee, labor and material costs for each elevator are calculated separately.  MHA successfully achieved a delay in the effective date of this change to January 1, 2014.

(Laws of 2013, Chapter 85, Article 2, Sections 23-24) Effective January 1, 2014.

Contracts for Deed Changes

Specified notice must be provided to certain contract for deed purchasers who will have five business days to review and an opportunity to cancel the purchase agreement. The new law contains several exceptions including applying only to “multiple sellers,” defined as those who sell four or more contracts for deed during a twelve-month period, applying only to residential real property consisting of one to four family dwelling units, one of which the purchaser intends to occupy as the purchaser’s principal place of residence, and not applying to transactions where the purchaser is represented by an attorney or licensed real estate broker or salesperson, provided that the representation does not create a dual agency.

(Laws of 2013, Chapter 85, Article 6, Sections 6-9) Effective August 1, 2013, and applies to transactions in which the contract for deed and the purchase agreement for the contract for deed, if any, were both executed on or after that date.

Minnesota Radon Awareness Act

Certain information related to radon must be provided to prospective buyers of single-family residences, including those in common interest communities. The seller must disclose in writing, prior to the buyer signing an agreement to sell or transfer the property, the following: (1) whether a radon test has occurred on the real property, (2) the most current records pertaining to radon concentrations, (3) a description of any radon concentrations, mitigation, or remediation, (4) information regarding any radon mitigation system installed in the dwelling, and (5) a required radon warning statement. In addition, the seller must provide to the buyer a copy of the Minnesota Department of Health publication entitled “Radon in Real Estate Transactions.”

Another proposal which did not become law would have required, prior to entering into a purchase agreement, sellers of single-family residences to test for radon and disclose the results in writing to prospective buyers.

(Laws of 2013, Chapter 43, Section 4) Effective January 1, 2014, and applies to agreements to sell or transfer residential real property executed on or after that date.

Amendments to Cost-Effective Energy Improvements Program

Under a program originally passed into law in 2010, cities or their housing and redevelopment authority have the ability to provide financing to owners of qualifying real property, including single-family and multifamily residential dwellings, to pay for cost-effective energy improvements. Among other changes, an inconsistency in state statute regarding the length of payback was removed this session thus making the program more effective and useable. Loan terms for the program may extend up to 20 years and local governments using this financing tool must secure repayment with a lien on the property and collect repayments using the special assessment collection process.

(Laws of 2013, Chapter 85, Article 8, Sections 1-6) Effective the day following final enactment.

Employment Law Changes

Technical changes were made to the prompt payment of wages requirements including that an employee’s demand for payment must be in writing but need not state the precise amount due. Changes were also made to an employee’s use of personal sick leave benefits so that, in addition to the employee’s child, employees may use personal sick leave benefits provided by the employer for absences due to an illness of or injury to employees adult child, spouse, sibling, parent, grandparent, or stepparent on the same terms upon which the employee is able to use sick leave benefits for the employee’s own illness or injury.

(Laws of 2013, Chapter 27) Effective the day following final enactment.

(Laws of 2013, Chapter 87) Effective August 1, 2013, and applies to sick leave used on or after that date.

Fair Market Value for Purposes of Dedication Fees

“Fair market value” for purposes of dedication fees will now be determined “based on tax valuation or other relevant data.” In the event of an objection of the valuation by the applicant then the valuation must be negotiated between the municipality and the applicant.

(Laws of 2013, Chapter 85, Article 5, Section 41)

PROPERTY TAXES

In an effort to achieve property tax relief, a new local government aid (LGA) formula was created and LGA funding was increased by $80 million, county and city purchases of goods and services were made exempt from the sales tax, and various changes were made to the property tax refund program, including the renter program, which broadened the number of renters who qualify for the refund and increased the maximum refund across all income ranges. It is believed by many that the combination of increasing LGA funding and exempting local government purchases from the sales tax will result in lower property taxes for most property types.

A large coalition ranging from business organizations to non-profits to religious organizations successfully opposed a “Street Improvement Fee” proposal. The proposal, which has been introduced several times previously, would have authorized cities to create street improvement districts of any size or shape and tax the properties in the district for street, bridge, sidewalk, sewer and transit infrastructure construction, reconstruction and upgrades, and maintenance. The city could impose ongoing charges of any amount 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 new property taxation system that could be very unfair to rental housing. The proposal was included in the House Tax Bill but was not included in the Tax Conference Committee Report.

Class 4d Rate Change

Rental housing which qualifies for 4d property tax classification received a class rate reduction to .25 percent for amounts over $100,000 in value per housing unit. Class 4d is a favorable property tax rate applicable to properties with rent and income restrictions under certain government assistance programs. The current class rate of .75 percent remains in place for the first $100,000 in value per housing unit. In subsequent years, the $100,000 valuation per housing unit will be indexed based on the statewide average growth rate for apartment property values.

(Laws of 2013, Chapter 143, Article 4, Sections 18 and 45.) Effective beginning with assessment year 2014.

Housing Improvement Areas

The law allowing local governments to establish housing improvement areas without special authorization was extended by 15 years to June 30, 2028. A housing improvement area is a defined area in a city in which housing improvements for common interest communities, such as roofing, siding, and roadways, may be financed by the city.

(Laws of 2013, Chapter 143, Article 4, Section 31) Effective the day following final enactment.

Filing Requirements for Tax Court Appeals Clarified

A new law clarified that, when filed by mail delivery, an appeal to the Tax Court of a decision by the Commissioner of Revenue related to taxes, fees, or other assessments, is timely filed if the official postmark stamped on the envelope by the U.S. Postal Service is within the time allowed for an appeal, even if the envelope is physically delivered on a date that is not within the time allowed for the appeal. Private postage meters do not qualify for timely filing under this change.

(Laws of 2013, Chapter 36, Section 1) Effective for filings delivered by the United States Postal Service with a postmark date after August 1, 2013.

Historic Structure Rehabilitation Credit Amendments

Technical changes were made to the historic structure rehabilitation credit, such as increasing the fee structure and extending availability of the credit through fiscal year 2022.

(Laws of 2013, Chapter 143, Article 6, Sections 16-20 and 32) Effective the day following final enactment.

Assessor Standards

Various new standards for assessors were enacted into law including providing additional sanction authority to the state board of assessors, granting the commissioner of revenue the authority to conduct investigations of assessor malfeasance, and requiring assessors to meet additional licensing standards.

(Laws of 2013, Chapter 143, Article 4, Sections 8-11 and 16) Effective beginning July 1, 2013.

PROPOSALS NOT ENACTED INTO LAW

The following proposals were not enacted into law this session but represent issues which impact the rental housing industry and may be confronted in future legislative sessions.

  1. Seven-Day Notice. A bill which would have required management to provide a resident with written notice and an opportunity to cure or vacate the rental unit seven days prior to filing the eviction action for non-payment of rent did not become law. The bill passed to the House floor but did not receive a hearing in the Senate.
  2. Termination of Lease upon Death of Unmarried Resident Living Alone. A proposal to allow the heirs of a deceased, unmarried resident under the age of 26 who was living alone to cancel the lease and vacate the rental unit without having to provide a two months notice passed out of one House committee but received no further action.
  3. Minimum Wage. Changes to the minimum wage passed both bodies but the conference committee could not agree on a compromise. The House proposal would have raised the minimum wage to $9.50/hour for large employers and $8.50/hour for small employers while the Senate proposal would have raised it to $7.75/hour for large employers.
  4. Preventing Solar Energy System Restrictions. A provision preventing any private entity, including homeowners associations, from denying an owner of a single-family home or townhome permission to install, maintain, or use a solar energy system was removed from an energy bill during a Senate committee hearing.
  5. Prohibiting Associations from Foreclosing on Liens for Assessments. A bill, similar to one discussed in previous legislative sessions, removing the ability of common interest communities to enforce liens as assessments against owners who violate the association declaration, bylaws, rules, or regulations was introduced in the Senate but did not receive a hearing.
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