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S.F. No. 1521,  as introduced - 87th Legislative Session (2011-2012)   Posted on Jan 23, 2012

1.1A bill for an act
1.2relating to economic development; allowing a stay of mortgage foreclosure
1.3proceedings under certain conditions; landlord and tenant; providing rights to
1.4tenants of foreclosed property;amending Minnesota Statutes 2010, section
1.5504B.151, subdivisions 1, 2, by adding subdivisions; proposing coding for new
1.6law in Minnesota Statutes, chapter 582.
1.7BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8    Section 1. Minnesota Statutes 2010, section 504B.151, subdivision 1, is amended to
1.9read:
1.10    Subdivision 1. Limitation on lease and notice to tenant. (a) Once a landlord has
1.11received notice of a contract for deed cancellation under section 559.21 or notice of a
1.12mortgage foreclosure sale under chapter 580 or 582, or summons and complaint under
1.13chapter 581, the landlord may only enter into (i) a periodic residential lease agreement
1.14with a term of not more than two months or the time remaining in the contract cancellation
1.15period or the mortgagor's redemption period, whichever is less or (ii) a fixed term
1.16residential tenancy not extending beyond the cancellation period or the landlord's period
1.17of redemption until:
1.18(1) the contract for deed has been reinstated or paid in full;
1.19(2) the mortgage default has been cured and the mortgage reinstated;
1.20(3) the mortgage has been satisfied;
1.21(4) the property has been redeemed from a foreclosure sale; or
1.22(5) a receiver has been appointed.
1.23(b) Before entering into a lease under this section and accepting any rent or security
1.24deposit from a tenant, the landlord must notify the prospective tenant in writing that the
1.25landlord has received notice of a contract for deed cancellation or notice of a mortgage
2.1foreclosure sale as appropriate, and the date on which the contract cancellation period or
2.2the mortgagor's redemption period ends. The landlord must also inform the prospective
2.3tenant of the tenant's right to continued utility services if the landlord defaults on utility
2.4payments during the foreclosure process.
2.5(c) This section does not apply to a manufactured home park as defined in section
2.6327C.01, subdivision 5 .
2.7EFFECTIVE DATE.This section is effective the day following final enactment.

2.8    Sec. 2. Minnesota Statutes 2010, section 504B.151, subdivision 2, is amended to read:
2.9    Subd. 2. Exception allowing a longer term lease. This section Subdivision 1
2.10does not apply if:
2.11(1) the holder or the mortgagee agrees not to terminate the tenant's lease other than
2.12for lease violations for at least one year from the commencement of the tenancy; and
2.13(2) the lease does not require the tenant to prepay rent for any month commencing
2.14after the end of the cancellation or redemption period, so that the rent payment would be
2.15due prior to the end of the cancellation or redemption period.
2.16For the purposes of this section, a holder means a contract for deed vendor or a
2.17holder of the sheriff's certificate of sale or any assignee of the contract for deed vendor or
2.18of the holder of the sheriff's certificate of sale.
2.19EFFECTIVE DATE.This section is effective the day following final enactment.

2.20    Sec. 3. Minnesota Statutes 2010, section 504B.151, is amended by adding a
2.21subdivision to read:
2.22    Subd. 5. Rights of tenant of foreclosed property. (a) When a new owner takes
2.23ownership of a rental property as the result of a foreclosure:
2.24(1) a tenant is deemed by operation of law to become the tenant of the new owner;
2.25and
2.26(2) all leases, verbal or written, and all terms and conditions of those agreements
2.27shall be transferred to the new owner and recorded in a new lease between the new owner
2.28and the tenant.
2.29(b) A new owner shall:
2.30(1) maintain as rental property, property that was used as rental property by the
2.31previous landlord;
2.32(2) offer renewal leases to tenants of the foreclosed property; and
2.33(3) offer a fair market rent.
3.1(c) The requirements of paragraphs (a) and (b) must not apply to:
3.2(1) a single family rental property that the new owner intends to occupy as a primary
3.3residence within 60 days of the purchase of the property; and
3.4(2) any part of a multifamily rental property that the new owner intends to occupy
3.5as a primary residence within 60 days of the purchase of the property. In any action to
3.6recover possession of rental property in which a new owner claims to be exempt from
3.7the requirements of this subdivision, the new owner bears the burden to demonstrate
3.8such intent.
3.9(d) For purposes of this section "new owner" means a holder of the sheriff's
3.10certificate of sale or the assignee or vendee of such holder.
3.11EFFECTIVE DATE.This section is effective the day following final enactment.

3.12    Sec. 4. Minnesota Statutes 2010, section 504B.151, is amended by adding a
3.13subdivision to read:
3.14    Subd. 6. Eviction. Notwithstanding any other law to the contrary, the new owner
3.15must not begin an eviction action against a tenant without cause. For purposes of this
3.16subdivision, "cause" shall mean one or more of the following:
3.17(1) the tenant has failed to pay a reasonable rent to the foreclosing owner, but only
3.18if the foreclosing owner notified the tenant in writing of the reasonable rent amount, to
3.19whom it was to be paid, and the due date;
3.20(2) the tenant has violated an obligation or covenant of the tenancy or occupancy
3.21other than the obligation to surrender possession upon proper notice and has failed to
3.22cure the violation within a reasonable time after having received written notice from the
3.23foreclosing owner;
3.24(3) the tenant is permitting a nuisance to exist in, or is causing substantial damage
3.25to, the unit, or is creating a substantial interference with the quiet enjoyment of other
3.26occupants;
3.27(4) the tenant is convicted of using or permitting the unit to be used for any illegal
3.28purpose; or
3.29(5) the tenant has refused the foreclosing owner reasonable access to the unit to make
3.30necessary repairs or improvements required by law, inspect the premises as permitted
3.31or required by agreement or by law, or show the rental housing unit to a prospective
3.32purchaser or mortgagee.
3.33EFFECTIVE DATE.This section is effective the day following final enactment
3.34until June 30, 2014.

4.1    Sec. 5. Minnesota Statutes 2010, section 504B.151, is amended by adding a
4.2subdivision to read:
4.3    Subd. 7. Termination of tenancy. A new owner must not terminate the tenancy of a
4.4tenant of foreclosed property without cause as defined in subdivision 6.
4.5EFFECTIVE DATE.This section is effective the day following final enactment
4.6until June 30, 2014.

4.7    Sec. 6. Minnesota Statutes 2010, section 504B.151, is amended by adding a
4.8subdivision to read:
4.9    Subd. 8. Periodic leases. A new owner must offer a fixed-term lease option to a
4.10tenant with a periodic lease in place at the time the tenant becomes a tenant of the new
4.11owner.
4.12EFFECTIVE DATE.This section is effective the day following final enactment
4.13until June 30, 2014.

4.14    Sec. 7. Minnesota Statutes 2010, section 504B.151, is amended by adding a
4.15subdivision to read:
4.16    Subd. 9. Applicability. The provisions of subdivisions 5 to 8 apply to all tenants
4.17regardless of when a tenant entered into a rental agreement with the property owner or at
4.18what stage the foreclosure process was in when the rental agreement was entered.
4.19EFFECTIVE DATE.This section is effective the day following final enactment
4.20until June 30, 2014.

4.21    Sec. 8. [582.33] FORECLOSURE MORATORIUM.
4.22    Subdivision 1. Emergency declared to exist. The legislature declares that a public
4.23economic emergency exists in the state due to the increase in foreclosure rates. The
4.24legislature declares that these conditions have created a housing emergency that justifies
4.25legislation creating a moratorium on mortgage foreclosures.
4.26    Subd. 2. Stay of foreclosure process. In any proceeding to foreclose a mortgage
4.27upon residential property, whether by judicial process under this chapter and chapter
4.28581 or by advertisement under this chapter and chapter 580, foreclosed borrowers
4.29residing in their homesteaded property shall be entitled to stay the foreclosure process
4.30and remain in possession of the mortgaged premises by serving a notice of right to stay
4.31upon the mortgage holder or the holder of a certificate of sheriff's sale if different from
4.32the mortgage holder, the court having jurisdiction over a judicial action to foreclose the
5.1mortgage, and the sheriff in the jurisdiction where the mortgaged premises are located.
5.2The foreclosure process shall be stayed effective as of the date of service of the notice
5.3of right to stay. The stay shall continue in effect for a period ending two years from
5.4the effective date of this bill or on June 30, 2014, whichever is later, provided that the
5.5conditions set forth in subdivision 3 are met.
5.6    Subd. 3. Maintenance of stay. In order to maintain a stay obtained under
5.7subdivision 2:
5.8(1) the holder of the stay must maintain homestead status of the property;
5.9(2) after receipt of written notice from the foreclosing lender or holder of a certificate
5.10of sheriff's sale of the name and address to which the monthly payments are to be made,
5.11the amount of the payment, the date that the first monthly payment is due, and the dates
5.12of each subsequent payment, the holder of the stay shall make reasonable, affordable
5.13monthly payments to the foreclosing lender or holder or holder of a certificate of sheriff's
5.14sale. The monthly payment shall be equal to the monthly payment when the stay became
5.15effective or 41 percent of the borrower's documented and verified monthly gross income,
5.16whichever is less; and
5.17(3) the holder of the stay must refrain from conduct that would constitute just cause
5.18for dissolution of the stay, as defined in subdivision 4.
5.19    Subd. 4. Dissolution of stay. Upon 30 days' written notice to the holder of the stay
5.20and any other party previously designated in writing to the new owner by the holder of the
5.21stay, the foreclosing lender or holder of a certificate of sheriff's sale shall be entitled to
5.22apply to a court in the jurisdiction where the property is located for an order dissolving
5.23the stay. An order dissolving the stay and granting possession of the property to the
5.24holder of the certificate of sheriff's sale may be granted if the court finds that the public
5.25interest is served by granting the order and upon a showing that the foreclosed borrower
5.26in possession or tenant in possession of foreclosed property has failed to comply with
5.27the requirements of subdivision 3 or that other just cause exists. For purposes of this
5.28subdivision, "other just cause" means one or more of the following:
5.29(1) the holder of the stay is permitting a nuisance to exist in, or is causing substantial
5.30damage to, the unit, or is creating a substantial interference with the quiet enjoyment
5.31of other occupants;
5.32(2) the holder of the stay is convicted of using or permitting the unit to be used
5.33for any illegal purpose; or
5.34(3) the holder of the stay has refused the foreclosing owner reasonable access to
5.35the unit for the purpose of making necessary repairs or improvements required by law,
6.1to inspect the premises as permitted or required by agreement or by law, or to show the
6.2premises to a prospective purchaser or mortgagee.
6.3    Subd. 5. Application. This section applies only to mortgages executed before
6.4the effective date of this section.
6.5EFFECTIVE DATE.This section is effective the day following final enactment
6.6until June 30, 2014.