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.

Legislative Recap 2017

By Todd Liljenquist, Vice President of Government Relations

The Minnesota Legislature adjourned the 2017 Regular Session at midnight on May 22nd and immediately went into a Special Session. A Special Session was called because it was believed that the framework for a global budget deal had been reached between legislative leaders and Governor Dayton. But what was expected to last one day turned into a three-day Special Session when the final budget bills were sent to Governor Dayton on May 25th. 

Further complicating matters, Governor Dayton line-item vetoed funding for the state legislature. In his veto letter, the governor stated that he was disappointed in the budget passed by the legislature and that the legislature needed to agree to certain changes in the budget. Governor Dayton explained that he would have vetoed the Omnibus Tax Bill but the legislature connected funding for the Minnesota Department of Revenue to enactment of the Tax Bill. Legislative leaders have since filed suit against Governor Dayton, alleging that the line-item veto depriving funding for the legislature violates the separation of powers principle in the Minnesota Constitution. 

The primary job for the legislature this session was to pass a state budget. This task was completed (with the caveat of the complications listed above) as the ten budget bills signed by Governor Dayton make up the $46 billion two-year budget for the state. The legislature had the good fortune of crafting a state budget with a $1.65 billion budget surplus. In addition to the state budget, four other priority areas were also acted upon this year: (1) additional transportation funding was provided, (2) a tax bill was enacted after there had been no tax bill for the previous two sessions, (3) a nearly billion dollar bonding bill was enacted (with $65,000,000 in additional bonding funds for housing), and (4) short-term health insurance premium relief was provided for certain private market purchasers.

It was a successful legislative session for the Minnesota Multi Housing Association. One of the many elements of a successful government affairs program is having dedicated, supportive, and active member involvement in the process. We would like to thank Lisa Moe for providing steady leadership as chair of the Legislative Committee, and especially for her assistance on the proposal creating four geographic regions for the CRP. We would also like to thank Legislative Committee members for their willingness to assist when asked and for their thoughtful consideration of legislative proposals. 

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


New Laws

Civil filing fee reductions

Civil filing fees, including eviction actions, will be reduced beginning July 1, 2017 from $310 to $285, plus any authorized county fees. The $25 reduction represeents the first time filing fees have been reduced since they were increased by $70 in 2009 under a plan to prevent the courts from seeing significant budget cuts. Cuts to conciliation court filing fees were also considered but those reductions were not included in the final Omnibus Public Safety Policy and Finance Bill.

(Laws of 2017, Regular Session, Chapter 95, Article 4, Section 1)

Accessibility lawsuit clarification

Changes were made to the statute regarding alleged accessibility violations under the Minnesota Human Rights Act (MHRA). A small group of attorneys have targeted small businesses in recent years by alleging technical violations of the MHRA and the federal Americans with Disabilities Act (ADA). Although many of the claims prove to be meritless or minor violations, defendant businesses often settle the claims in order to avoid costly litigation costs but also end up paying attorneys’ fees in the process. Under the new law, before filing an MHRA lawsuit, a plaintiff represented by an attorney must provide a business or “place of public accommodation” at least 60 days to remedy the alleged accessibility violation. Areas generally considered “places of public accommodation” for the rental housing industry include the rental office, parking lot, and other areas on the property rented out to the general public.

(Laws of 2017, Regular Session, Chapter 80)

CIC Construction defect claim changes

Changes were made to construction defect liability and how such claims are asserted by common interest community (CIC) associations. Developers, builders, and municipalities were the main proponents of the law change and they claimed that the current lack of owner-occupied multi-family construction is due to the increased financial risk of construction defect claims when developing such properties.

The main components of the new law are as follows:

Associations must, before instituting litigation or arbitration involving construction defect claims, provide written notice to each unit owner and obtain approval of a majority of unit owners.

Associations must prepare and approve a written preventative maintenance plan, maintenance schedule, and maintenance budget for common elements (associations crated on or before August 1, 2017 have until January 1, 2019 to comply with this requirement). Disclosure statements must also include the maintenance plan and maintenance schedule.

Contractors and other development parties are not liable for loss or damage caused by the failure of the association or unit owner to comply with the maintenance plan or schedule.

Construction defect claims must proceed to mediation before a CIC association may file a lawsuit.

(Laws of 2017, Regular Session, Chapter 87)
  

Interim ordinance vote and hearing required

Cities that choose to enact an interim ordinance (moratorium) that regulates, restricts, or prohibits a “housing proposal” must provide notice to interested parties and the city council must hold a hearing and vote on the proposed interim ordinance. Written notice by the city must be provided at least three business days before the public hearing and the public hearing must be scheduled for the earlier of the next regularly scheduled city council meeting after the notice period or within ten days of the notice. “Housing proposal” is defined as “a written request for city approval of a project intended primarily to provide residential dwellings, either single family or multi-family, and involves the subdivision or development of land or the demolition, construction, reconstruction, alteration, repair, or occupancy of residential dwellings.” Under prior law, a majority vote of a city council could enact a development moratorium for up to one year without notice or a public hearing.

(Laws of 2017, Regular Session, Chapter 94, Article 11, Section 3)

Notice of proposed city ordinances required

Cities must now provide notice of proposed ordinances at least ten days before the city council meeting at which the proposed ordinance is scheduled for a final vote. If a city posts ordinances on its website then the notice must be posted on its website, otherwise the notice must be posted in the same location where other public notices are posted. If the city has an electronic notification system then the city must notify any person who has signed up for e-mail notification at least ten days before the city council meeting at which the proposed ordinance is scheduled for a final vote. Persons applying for a new business license or license renewal must be notified at that time of the notification procedure in order to participate in the electronic notification system.

(Laws of 2017, Regular Session, Chapter 77)

Workforce housing development program

An allocation of $2,000,000 from the Challenge Program of the Minnesota Housing Finance Agency (MHFA) is dedicated for a new workforce housing development program. Under the program, grants of deferred loans may be awarded to eligible project areas to be used for qualified expenditures. Eligible expenditures for market rate residential rental properties include acquisition of property, construction of improvements, and provisions of loans or subsidies, or other financing-related costs. Certain determinations must be made prior to project eligibility being granted, such as a five-percent vacancy rate for a two-year period in the project area, one or more businesses must state that the lack of available rental housing has impeded their ability to recruit and hire employees, and certification must be provided that the funds will be used for qualified expenditures. Funds from the program for any one project may not exceed 25 percent of the development project costs and the city must certify that the grant or deferred loan amounts shall be matched by a local unit of government, business, or nonprofit with $1 for every $2 provided in grant or deferred loan funds.

(Laws of 2017, Regular Session, Chapter 94, Article 11, Section 7)

Pest control application notice

Pest control applicators must post in each rental housing unit a list of precautions contained on the pesticide label, if any, after a pesticide application has occurred in the unit. This notice was already common industry practice but is now codified so that all pest control applicators must comply. This law was the result of three years of discussions between MHA, the pest control management industry, and the Minnesota Department of Agriculture. The original 2015 proposal required applicators to post complete copies of application reports in a conspicuous place on the premises accessible to all residents.

(Laws of 2017, Regular Session, Chapter 88, Article 2, Section 20)

Electronic notice of cancellation of CIC sales

The Minnesota Common Interest Ownership Act (MCIOA) was amended to allow a purchase agreement or a resale purchase agreement of a CIC unit to be cancelled if the purchaser gives notice to the seller or the seller’s agent by means of electronic communication. Under prior law, the cancellation notice needed to be delivered by hand or by mail. Purchase agreement cancellation by electronic communication will now be permitted if the seller or the seller’s agent has provided an electronic address at which the seller or the seller’s agent agrees to receive electronic communications. “Electronic communication” is defined as “any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient of the communication, and that may be directly reproduced in paper form by the recipient through an automated process.”

(Laws of 2017, Regular Session, Chapter 38)

Fire sprinkler rules for twinhomes

A new law removes a requirement in the state building code that newly-constructed twinhomes have automatic fire sprinkler systems installed. This change is intended to address the high costs for installing sprinklers in twinhomes which, according to proponents of the change, drives prospective twinhome owners to other states that do not have such a requirement. Bill advocates asserted that this contrast is more apparent in border cities, such as Moorhead, where permits for twinhome construction have seen a significant decline since the 2015 state building code rule was enacted. No state that borders Minnesota has similar sprinkler rules that this law overturned.

(Laws of 2017, Regular Session, Chapter 20)

Housing trust funds for local housing development

Specific legislation was enacted enabling local units of government to establish local housing trust funds. Money in the trust fund may only be used to pay for administrative expenses, make grants or loans, match other funds from federal, state or private resources for housing projects, or provide down payment assistance, rental assistance, and homebuyer counseling services. This legislation grandfathers in existing local housing trust funds but stipulates that newly-created local housing trust funds must comply with certain terms in their creation and administration, and be restricted in their funding sources.

(Laws of 2017, Regular Session, Chapter 94, Article 11, Section 8)

Property Taxes

After failing to enact a tax bill into law the previous two legislative sessions, the legislature passed and Governor Dayton signed a bill that provides $650 million in tax relief for the 2018-2019 biennium. The tax bill provides, among other things, income tax subtractions for social security benefits and contributions to 529 college savings plans, as well as increasing the threshold for the estate tax. Both local government aid and county program aid will see annual increases in the amounts of $15 million and $25.5 million, respectively. 

Changes were also made to the statewide property tax, which is a tax paid by commercial-industrial and seasonal-recreational (cabins) properties. The statewide property tax will be frozen at the 2018 level rather than be recalculated using an automatic annual inflator. In addition, the first $100,000 of a commercial-industrial property’s market value will be exempt from the state levy. These changes have no impact on the property taxes of property types which do not pay the tax, which includes apartments, but they do provide property tax relief to lower market-value business properties which are primarily located in greater Minnesota. These changes will impact the overall state budget because that money will no longer be added to the general fund.

The following two items related to the Certificate of Rent Paid (CRP) were included in the final Omnibus Tax Bill and are of great interest to our members.

Report on rent constituting property taxes
The Minnesota Department of Revenue (Revenue) must report to the legislature by March 1, 2018, on the percentage of rent constituting property taxes used in determining the renter property tax refund. The report must include estimates of rent constituting property tax for the following geographic regions: 

  • the city of Minneapolis,
  • the city of St. Paul,
  • the counties of Anoka, Dakota, Hennepin, excluding the city of Minneapolis, and ramsey, excluding the city of St. Paul, and
  • the remainder of the state.

An earlier version of the proposal, which was included in the House Tax Bill, would have changed the percentage rate from 17% statewide to creating different percentage rates for each of the four geographic regions detailed above. MHA expressed serious concerns with that proposal and it was ultimately removed in conference committee.

(Laws of 201, First Special Session, Chapter 1, Article 4, Section 30)

Owner or manager furnish CRP to Minnesota Department of Revenue

A Revenue proposal which had been included in the previous two tax bills became law this year. 
Revenue will now have the authority to require rental property owners to submit a copy of the CRP to the department, in addition to giving a copy to the resident, in the content, format, and manner prescribed by the commissioner. Due to MHA’s advocacy efforts, Revenue must “first consult with representatives of owners or managing agents to develop an implementation and administration plan that attempts to minimize financial burdens and costs of compliance.” The department has the ability to begin implementing this change for the next CRP cycle but will likely delay it until the following year in order to ensure implementation concerns are diminished.

(Laws of 2017, First Special Session, Chapter 1, Article 13, Section 13)

 

Proposals NOT Enacted into Law

1.      Uniform Labor Standards Act. Governor Dayton vetoed proposed legislation that would have explicitly prevented local governments from mandating local wage and benefits packages, including mandatory safe and sick time. With the veto of this legislation, paid safe and sick time ordinances passed in Minneapolis and St. Paul will go into effect on July 1, 2017.

2.      Mandatory lead hazard testing. For the third consecutive session, a bill requiring testing every five years of all residential rental units built before 1978 for the presence of lead hazards was introduced in both bodies but failed to receive a hearing. Under the proposal, test results need to be disclosed to current residents and prospective residents, and if a lead hazard is found in the dwelling, in the residential water, or in the soil, then interim controls or lead abatement measures need to be completed.

3.     “Ban the Box” for rental housing. Governor Dayton proposed in his Minnesota Department of Human Rights budget to extend the “Ban the Box” concept to the area of rental housing. Under the proposal, landlords would be prohibited from conducting a criminal background check until all other phases of the screening process have been completed, and then must consider criminal history in light of “examples of rehabilitation or other mitigating factors.” The proposal was not included in the final Omnibus Public Safety Policy and Finance Bill.

4.      Screening fee charges. A proposal prohibiting a landlord from charging more than the actual cost of screening a prospective resident was introduced but did not receive a hearing.

5.     Cooling tower registry. Proposed mandatory registration of cooling towers with the Minnesota Department of Health in an attempt to address the spread of certain waterborne diseases, such as Legionnaire’s disease, did not receive a hearing.

6.      Eviction expungement for “life event.” A proposal, which did not receive a hearing, would extend the criteria for discretionary expungement of evictions actions to a “life event,” such as the death of an immediate family member, major illness, or job loss, that directly impacted the ability of the resident to pay rent.

7.      Alternative notice period. A bill prohibiting enforcement of lease notice provisions that provide different notice periods for the tenant and the landlord did not receive a hearing.

8.      Rulemaking reforms. Numerous proposed changes to the administrative rulemaking process received significant legislative discussion but were not ultimately signed into law. Considered proposals included expanding legislative oversight, creating peer review advisory panels, mandatory determination of the impact of new rules on residential construction, and restrictions on enforcement of certain administrative policies and guidelines.


 

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