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Radon disclosure effective January 1, 2014

3 Jan

Making Sense of the Radon Awareness Act

Buyers and sellers of residential real estate in Minnesota should be aware, if they are not already, of a law passed in the last legislative session that became effective January 1, 2014.  The new law requires sellers to disclose to buyers, in writing, any knowledge the seller has concerning radon concentrations in the dwelling.  It also requires very specific disclosure in the form of a statutory notice and accompanying publication, as detailed below.

Clearing the confusion.  While this law has only been in effect two days as of the time of this writing, it is clear that there is already some confusion and misinformation concerning what the law requires. Perhaps it is worth clarifying what the law does not require, first.  The law DOES NOT require a seller or buyer to perform a radon test before the property is sold.  The law DOES NOT require a seller to provide, or a buyer to obtain, a radon inspection.

  • What transactions are impacted? While the law became effective January 1, 2014, it applies very specifically to “[…]agreements to sell or transfer residential real property executed on or after that date.”  Minn. Stat. Sec. 144.496, subd. 6.
  • What does the Minnesota Radon Awareness Act require?  You can find the full text of the law here: https://www.revisor.mn.gov/statutes/?id=144.496. The new radon disclosure law is somewhat similar in approach to other Minnesota seller disclosure obligations, and also to federal lead-based paint disclosure.  The statutory language states:

Before signing an agreement to sell or transfer residential real property, the seller shall disclose in writing to the buyer any knowledge the seller has of radon concentrations in the dwelling.

(Minn. Stat. Sec. 144.496, subd. 3)

  • Additional requirements.  The disclosure must also include additional information, including whether radon tests have been performed on the property, recent records pertaining to radon concentration levels, a description of any remediation/mitigation efforts taken, etc.  Additionally, the law requires two very specific disclosure obligations be met: 1) the seller must provide a very specific radon disclosure statement containing language specified within the statute (Minn. Stat. Sec. 144.496, subd. 4); and 2) the seller must provide the buyer with a copy of the Minnesota Department of Health publication entitled “Radon in Real Estate Transactions”.  You can find that publication here: http://www.health.state.mn.us/divs/eh/indoorair/radon/rnrealestateweb.pdf
  • Certain transactions are excepted from the requirements.  The statute lists an array of transactions for which the Radon Awareness Act does not apply.  Minn. Stat. Sec. 144.496, subd. 3(d). To determine if your transaction may be excepted from the requirements, review the statute carefully and speak with your legal counsel to clarify any questions.

Some trade organizations, like the Minnesota Association of Realtors(R), and the Minnesota State Bar Association have created forms that incorporate the disclosure requirements.  If you are already utilizing an attorney or real estate agent in your transaction, hopefully they are assisting you with understanding and complying with this disclosure obligation.  If they aren’t, or you have not already engaged a real estate agent or attorney you should be sure to speak with a competent real estate attorney to ensure you obtain the advice and counsel you may need to help you fulfill this disclosure, and other applicable disclosure obligations.

For residential buyers, it is important that you understand that while a seller is obligated to disclose what they know, regarding radon, many sellers have no reason to know radon levels are normal or abnormal unless they have had an inspection done.  Buyers are free to negotiate a radon inspection into the terms of a purchase agreement.

If you are curious about the health concerns or rationale for why the legislature believed a radon disclosure to be necessary, radon facts and background information can be found at the Minnesota Department of Health website, here.  According to the Minnesota Department of Health,

High radon exist [sic] in every state in the US.  In Minnesota, 2 in 5 homes has radon levels that pose a significant health risk, and nearly 80% of counties are rated high radon zones.

Source: http://www.health.state.mn.us/divs/eh/indoorair/radon/index.html?utm_source=print&utm_medium=brochure&utm_campaign=general

Additional radon-related information can be found within the MDH website, here.

As real estate transactions become increasingly complex, it is prudent to engage professionals such as a real estate agent and attorney to help you navigate disclosure obligations and other responsibilities involved in buying or selling residential real estate.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  a

Matt Drewes Quoted in Recent Article at HOALeader.com: Does Your Architectural Committee Have the Right or Responsibility to Enforce Local Laws?

6 Jun

Matt Drewes recently contributed quotes for the following articles published at www.hoaleader.com, a national web-based publication focused on homeowners association and condominium board members and association management professionals:

  • Does Your HOA’s ARC Have to Enforce Local Laws? Discussion Forum Follow-up; published April, 2013 at HOALeader.com
    • Publisher: Plain-English Media, LLC (quoting Matthew A. Drewes); Read it now.

Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance. He has been included in the annual list of Minnesota’s Rising Stars for several years, and has been quoted in the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, and elsewhere on issues involving construction litigation, community associations and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Bank agrees to postpone foreclosure sale; forecloses anyway and obtains dismissal of lawsuit against it

28 Dec

The Minnesota Federal District Court recently dismissed the legal action that Etta Bracewell and her husband commenced against U.S. Bank for allegedly breaking its promise that it wouldn’t foreclose on them. Ms. Bracewell and her husband sued the Bank because it foreclosed on them on December 29, 2011, even though just days earlier they say the Bank had promised it would cancel the foreclosure sale.

The case was dismissed because of the Minnesota Credit Agreement Statute (“MCAS”). Minn. Stat. § 513.33. The MCAS insulates banks from lawsuits claiming they made promises or agreements relating to the grant, extension, or even holding off on the collection of loans unless the bank and the borrower have signed a credit agreement specifically stating the terms of the bank’s obligation and the value the bank is receiving in return.

The MCAS exists for a reason. Many people have sued banks claiming they were supposed to get a loan or that they had received an extension of time to pay the bank back, but the promise either was not made or someone within the bank without authority to make such a deal said they would try to get it approved. Sometimes, however, the results can appear unfair to the borrower. If the allegations by Ms. Bracewell and her husband are true, this may be one of those instances, as they alleged they might have taken other action to stop the foreclosure sale if they had known the Bank would not follow through with, or be bound by, its alleged promise.

The case, which is currently available only if you have a subscription to the Federal Courts electronic case filing system or if you subscribe to a legal research publishing service, is Bracewell v. U.S. Bank National Association. In its decision, the court explains the application of the MCAS as follows:

The Eighth Circuit has held that a creditor’s promise to postpone a foreclosure sale constitutes a “financial accommodation” for purposes of the MCAS. Brisbin v. Aurora Loan Servs., 679 F.3d 748, 753 (8th Cir. 2012). Therefore, Plaintiffs may only maintain an action on U.S. Bank’s alleged promise to cancel the sale if that promise “is in writing, expresses consideration, sets forth relevant terms and conditions, and is signed by” Bracewell and U.S. Bank.

Bracewell v. U.S. Bank (citing Minn. Stat. § 513.33, subd. 2). The Court went on to cite to several other recent cases where plaintiffs’ claims were barred by failure to verify their arrangements in signed agreements, including where the bank did not dispute that it made a promise to postpone the foreclosure sale. The Court found that, because Ms. Bracewell and her husband could not, and had not, asserted any of these requirements had been met, their claims are barred.

It may be that the MCAS was applied in the proper manner in this case, and that Ms. Bracewell and her husband did not receive the promise they say they did. But the case nevertheless represents a word to the wise; be sure to get that promise in writing, especially where the MCAS may apply.

Matt Drewes contributed this post. Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s eight-member Community Association Representation Group and the firm’s Creditors’ Remedies Group, and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law, and insurance. He has been included in several years’ annual lists of Minnesota’s Rising Stars, and has been quoted in the Minneapolis StarTribune, Minnesota Lawyer, Habitat Magazine, and on various websites including Yahoo!Finance.com, Bankrate.com, MSN.com, HOALeader.com, and elsewhere on issues involving construction litigation, community associations and real property issues. He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Ice Dams: Answers to Five Frequently Asked Questions

20 Dec

Ice dams are all too common during Minnesota winters. They may happen for a number of reasons, and there are debates about whether they should happen at all. When they occur, arguments frequently arise about how to take care of the problem. In common interest communities this also leads to disputes about who is responsible to perform the repair work and, more importantly, who should have to pay for it. Sadly, winter again is approaching, and for many, ice dams will follow. This article will review the causes of ice damming, the various parties who may have responsibility to pay for repairing the damage, and who might have the responsibility to correct the problem.

What Are Ice Dams?

Ice dams are characterized by a buildup of ice at the edge of a roof. They occur when snow accumulates on a roof and the surface of the roof is heated sufficiently to melt the snow, while the eaves (the portions of the roof more exposed to the elements) remain below freezing due to cooler outside temperatures. Icicles may form as a result of ice dams, but the presence of icicles does not necessarily signal the presence of ice dams. That said, it’s better to be safe than sorry, and if you’re in doubt you should react as though you have ice dams until you receive a credible confirmation that ice dams are not present.

What Causes Ice Dams and How Do They Cause Damage?

Sunny winter days, which are common in Minnesota, frequently contribute to ice dams. What many people don’t realize is that one or more other factors usually cause the ice dam. Some builders or their representatives will contribute to the confusion about the nature or cause of ice dams by attempting to excuse their presence. They may assure homeowners that ice dams are normal and unpreventable, or that the problem is caused by the homeowner’s or the association’s failure to maintain its roofs properly, or instead that the problem has arisen due to abnormal or extreme weather conditions that could not have been foreseen. In fact, ice dams should not occur and in most cases are preventable, though fault and financial responsibility may present some thorny issues.

The two most common causes for ice dams are found inside the structure. The first cause is “bypass air” from the dwelling that enters the attic, and the other is inadequate ventilation inside the attic space. In some ways the direction a building faces may contribute to the problem, as can certain architectural styles or features, but at least one of the two issues listed above are usually involved when an ice dam forms.

The term “bypass air” refers to warm air from the dwelling that finds its way into the attic and, during the winter, can start to warm the underside of the roof. This warm air may actually leak through light fixtures or other openings between the dwelling and the attic, or it can result from insufficient insulation in the attic, allowing ambient heat from the unit to rise into the attic. It is also possible that air ducts or other ventilation systems may leak or radiate heat into the attic. Service providers exist who can perform a “blower door” test that determines whether there is excessive air escaping from the living area into the attic space of a structure. Some even work through government-subsidized programs to make their services more affordable.

A ventilation issue arises when air flow in the attic itself is inadequate. Roofing systems are designed with vents near the peak and vents in the soffits. The soffit is the horizontal surface, usually made of painted metal, that you see when you look up at the underside of the eave of your roof. These vents exist to permit air to rise up through the soffit, flow along the underside of the roof deck, and escape out the vents near the roof peak. When this air flow occurs uninterrupted, the surface of the roof is more likely to say a relatively uniform temperature from top to bottom, limiting if not eliminating the temperature variations that can cause the upper areas of the roof to be warm while the lower areas of the roof remain cold (the cause of ice dams). If insulation blocks this ventilation because it is filled or packed against the underside of the roof, inconsistent roof temperatures characterized by warm upper roofs and cold lower roofs (the cause of ice dams) can result. Ironically, insulation intended to limit the amount of bypass air in the attic can cause ice dams by blocking needed ventilation.

Of course, water leaks need not occur just because there are ice dams. Proper roofing techniques can help protect against water damage even where ice dams might form. This primarily means proper installation of an “ice/water shield” a sufficient distance up the roof, and also protecting the bottom edge of the roof, where it meets the fascia. Ice/water shield can protect the roof edge, but some contractors will install a metal “drip edge” at this location to protect against voids between the roof deck and fascia where water can enter. Gaps or openings that allow water to enter when it backs up under the shingles should not exist at or near roof edges. Consider also that just because you haven’t seen water inside your home does not mean that water has not entered the structure. Water reaching the inside of a building violates building code and constitutes a major structural defect whether it enters the dwelling space or not.

How Should You Respond if You See Ice Dams?

If you see ice dams on your home or in your community, ensure the association’s board of directors and the property manager, if any, know about the ice dams and any resulting leaks. Provide the notice in writing as quickly as possible. The association and any affected unit owners should then cooperate for the purpose of making an inspection of the roof and attic —and the unit, if necessary— to investigate the cause of the ice dams and any damage arising from them.

If your community is less than 10 years old when you first notice the ice dams (or if the ice dams occur within 10 years of a renovation to the building) you should also provide written notice to the developer, builder or contractor, as applicable. Do this immediately. Failure to provide timely notice is just one of a number of pitfalls that await you if you hope to recover from those who might be responsible for any defects causing your ice dams. Keep in mind also that, to avoid an argument of spoliation (or destruction of evidence), you should be prepared to allow the builder or contractor to investigate the cause and effect of your ice dam problem. It would be wise to seek the assistance of an attorney familiar with these issues before potentially taking an action that compromises your ability to obtain a repair or recovery for your problem.

Whose Job Is it to Fix This?
Deciding who will be responsible to take steps to stop an ice damming problem becomes a challenging question. Conditions inside the structure usually cause the ice dams, but inside the structure does not necessarily mean inside an owner’s unit. The party responsible to perform the work may depend on the type of association involved (condominium or townhome). Moreover, both interior and exterior conditions may contribute to cause damage, and repairs may be necessary in both locations to prevent further problems.

A. Exterior.
The short term solution might be the easiest to identify. The association usually has the responsibility to maintain common elements and building exteriors. Frequently, this means the association should remove snow and ice from the roofs until a more permanent solution can be implemented. While it is a temporary solution to remove snow from the roof or to melt a channel in an ice dam, this should not be a permanent solution. Raking, shoveling, or even sweeping snow off of roofs, and especially efforts to chip ice away, are likely to damage the roof and should not be necessary if the roof system is performing properly. Moreover, depending upon the severity of the winter, clearing snow and ice from your roofs can quickly sap an association’s resources.

The association should examine the roof and fascia where an ice dam has formed to determine whether roofing materials were properly installed. If corrections are necessary to the shingles, underlayment, ice/water shield, or if a drip edge must be installed, the association should take steps to address these areas.

B. Interior.
A unit owner’s responsibility for making interior repairs or alterations to eliminate ice dams may depend on the type of community involved. In a condominium, unless the declaration states otherwise, the common elements include all portions of the association not contained within the unfinished interior surface of the owners’ units. This means the attics usually are part of the common elements. As such, the association will in most cases have the responsibility to maintain not only the roofs of a condominium, but also the attics. The association should, in such cases, evaluate and address any bypass air or ventilation issues.

In a townhome association, the attics usually are part of the unit. This means if a unit owner observes that he or she has ice dams, that owner may need to conduct his or her own investigation into any possible internal issues that are causing ice dams. If multiple owners have the same problems, however, it may be best to pursue the investigation and any alterations jointly, or with the association managing the process. This will maximize efficiency and perhaps lower the overall cost of the work. In addition, the association may have an interest in doing this work or ensuring that the alterations are consistent throughout all units because the building exterior will be affected if the ice dams return.

Who Gets the Bill?
Ice dams may generate several costs. First, there is the short-term need to remove the snow and ice that creates the ice dam itself, as well as the water that pools behind it. Longer term, the cause must be investigated. If leaks have occurred, the roof should be evaluated. Then there are the repairs that are necessary in light of this investigation. What follows are some thoughts about where to look for the money to pay for these things.

A. Insurance.
If an ice dam causes damage to the interior of a structure, this often will constitute an insured loss. Pursuant to most applicable policies, and certainly under Chapter 515B of Minnesota Statutes (also known as the Minnesota Common Interest Ownership Act, or MCIOA), the association’s insurance policy is to provide primary coverage for the loss. However, the association usually is entitled to allocate the deductible under its own policy against the owners whose units are involved in the claim or whose actions or inactions resulted in the loss. Ideally, owners will have HOA policies in place with loss assessment coverage, which will cover the association’s deductible if necessary. There may be reasons not to submit an insurance claim, however, such as avoiding an increase in insurance rates, or because the association intends to pursue the builder or contractor who is responsible for the conditions causing the ice dams.

B. Builder or Contractor.
If ice dams exist in a newer association, or if they began shortly after recent renovations or a re-roofing project, it is quite possible they’re a result of defective construction practices, and an express or implied warranty may cover the condition. As mentioned above, providing written notice to the builder and any applicable subcontractors is one step in preserving the right to obtain a recovery for the defect. However, there are several statutes of limitations that apply to claims for defective construction and breach of warranty. In addition, depending on the nature of your claims or the provisions of applicable purchase documents and governing documents, you may have to navigate potential restrictions or limitations on your ability to pursue a recovery. If you have any doubt whether you have a right to pursue a claim for recovery from your association’s builder or from your contractor, you should still pursue a full evaluation of the situation. Options may still exist even if you did not provide prompt written notice, or if the contractor has gone out of business or filed for bankruptcy, so you should never assume you have no chance at recovery. Of course, the earlier you pursue a complete evaluation, the better.

C. Common Expense: Shared vs. Allocated.
If insurance coverage is unavailable for performing necessary alterations or to correct deficiencies in the roof system, and recovery from the applicable builder is unavailable or unsuccessful, the association and the affected unit owner(s) must explore the proper solution. Associations may, and often do, choose to treat exterior work such as removing snow and ice, investigating the cause and fixing roofing issues, as a common expense borne equally by all owners. Note however, that if the association is governed by MCIOA, it is authorized by statute to allocate the cost of any work to fewer than all the units if only those units are benefitted by the work, as long as this is not prohibited by the declaration. Also, unless the association’s declaration requires otherwise, MCIOA associations that are performing work on limited common elements must allocate the cost of work on such areas to the unit(s) to which the limited common element is allocated. Note that, depending on your association’s declaration, limited common elements may include attics and/or roofs, meaning the cost of all necessary work might be allocated back to the benefited unit owner(s) if the association has reacted reasonably upon receiving notice of the problem.

This does not mean the association may pass along to owners the cost of obtaining an opinion regarding the association’s obligations, and the proper characterization of the area to be addressed (e.g., limited common element, common element, or a portion of a unit). This is not generally a cost directly attributable to maintenance, repair or replacement, and in most cases will not reasonably be considered a cost of enforcing the governing documents. There is no “one size fits all” approach, but this usually is a cost the association must bear as a common expense. Furthermore, if a party receives notice that snow on the roofs is turning into ice dams, that party risks liability for problems that it should have taken steps to avoid, but didn’t. For this reason, the association and its owners should cooperate as much as possible in diagnosing and eliminating the cause of ice dams, keeping in mind that both have something to lose if the problem is not promptly and permanently resolved.

Matt Drewes contributed this post, which is taken from an article appearing in the September/October issue of Minnesota Community Living magazine.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and the firm’s Creditors’ Remedies Group. and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance.  He has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Habitat Magazine, Minnesota Community Living Magazine, Yahoo!Finance.com, MSN.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

Can Minnesota real estate agents negotiate short sales?

21 Nov

Yes.  The short answer to the question of whether properly licensed real estate agents/brokers in the state of Minnesota can negotiate short sales is yes, presuming a few basic rules are followed.  One such rule (and among the most important) is that the agent/licensee has to be performing this role pursuant to the listing of the home for sale by that licensee’s company (rather than as a third-party negotiator).

This subject has been somewhat controversial lately, with various attorneys or companies opining on what the Minnesota Department of Commerce does or does not allow, and what licensing is required to serve the role of negotiating the release of a mortgage lien (and possible satisfaction or partial satisfaction of the underlying debt) in the event a homeowner is selling a home with insufficient property value to satisfy the outstanding debt, and cannot otherwise satisfy the debt with his/her own funds.

The Minnesota Association of Realtors® (“MNAR”) and this author have participated in discussions with representatives of the Minnesota Department of Commerce Enforcement division to try to ascertain whether a listing broker/agent (properly licensed under Minnesota Statute Chapter 82) may list a short sale property for sale and, pursuant to that listing agreement and the agent’s fiduciary and contractual relationship with the seller, work on the seller’s behalf to negotiate the release/satisfaction of liens attached to the property.

The Department of Commerce has indicated that such a scenario is permissible, so long as certain rules are followed, which are explained in more detail in a substantive memo published by the Minnesota Association of Realtors® at their website: http://www.mnrealtor.com/.  Or, find the memo directly via this link.  Separately, Chris Galler (CEO for the MNAR) has created a summary video that identifies the key issues and practice tips.  View the video here.

Real estate licensees in the state of Minnesota must be aware that having a real estate license does allow a certain degree of latitude in negotiating the release of a lien as part of the licensee’s efforts to assist the homeowner in selling the home the licensee has been engaged to sell, but such a license does not provide blanket authority to negotiate short sales on properties that the licensee or the licensee’s company does not have listed for sale.  The “third-party negotiator” role is one the Department of Commerce suggests requires a Chapter 58A (mortgage loan originator) license, as the negotiation of the release of lien or satisfaction of debt will be considered by the Commerce Department as a negotiation of the terms of the mortgage loan (as defined in Minn. Stat. Sec. 58A.02) .

Certain exemptions from such licensing requirements (such as for attorneys representing the property owner and engaging as the negotiator in the attorney’s role) exist, provided this is also done properly without improperly using a title company or other entity in the role of short sale negotiator on the premise that an attorney within such a company may serve as the negotiator.

These issues, and the nuances that may arise in any individual circumstance, are complicated, so this overview should not be considered as a definitive set of all the rules applicable.  Each scenario as to what licensing is proper is ultimately a case-by-case analysis.  Readers interested in this issue who want to assess their own specific scenarios should speak with an attorney.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.

Recent Minnesota Court of Appeals Case regarding Statutory Cancellation

20 Sep

On September 12, 2011, in Robert G. Dimke, et al. v. Naomi Farr, et al, the Minnesota Court of Appeals held that an “unfulfilled condition” of a purchase agreement (“PA”) is a threshold requirement that permits either a buyer or seller to invoke declaratory statutory cancellation of a PA for residential real property under Minn. Stat. § 559.217, subd. 4.  The Court held that absent an unfulfilled condition of the PA, a declaratory cancellation of a PA for residential real property is ineffective.

Here is brief recap on statutory cancellation under MN law:  If a buyer and seller of a residential PA cannot agree to mutual cancellation of a PA, either party may serve notice of cancellation of the PA per Minn. Stat. § 559.217, subd. 3 and 4.  In both scenarios (Cancellation with Right to Cure and Declaratory Cancellation) if the other party does not seek an injunction or if the other party does not “cure” ( in the event of a Cancellation with Right to Cure) within 15 days after service of notice, the PA is cancelled and the earnest money is refunded to the party who served the notice of cancellation.  However, if the other party also attempts a statutory cancellation (often referred to as a “cross-cancellation”) during the 15-day time period, the PA is cancelled and the return of earnest money becomes a litigation issue.

In Dimke v. Farr, the Farrs listed their property and entered into a binding PA with a party named Muir.  The Farr-Muir PA was to close on June 11, 2010, but failed to close.  Muir attempted to mutually cancel the PA, but the Farrs declined.  The Farrs re-listed the property subject to the cancellation of the Farr-Muir PA.  The Farr-Muir PA was never cancelled.  Shortly afterwards, the listing agent for the Farrs showed the property to another party, the Dimkes, and advised the Dimkes that the Farr-Muir PA would be cancelled when the Dimkes entered into a PA with the Farrs (despite having not yet initiated any efforts to cancel the Farr-Muir PA).  The Farrs and Dimkes entered into a second PA for the property which contained language requiring the Farrs “to use their best efforts to provide marketable title by the date of closing” and if the Farrs could not provide marketable title within 30 days after closing, either party has the right to cancel the Farr-Dimke PA.  After the execution of the Farr-Dimke PA, Muir came back and stated that he intended to close on the Farr-Muir PA.  The purchase price of the Farr-Muir PA was significantly higher than the Farr-Dimke PA.  The Farrs attempted to cancel the Farr-Dimke PA due to inability to provide marketable title to the Dimkes.  After the expiration of the 30-day period to provide marketable title, the Farrs served a notice of declaratory cancellation on the Dimkes per § 559.217, subd. 4.  The Dimkes did NOT seek injunctive relief as required by the statute but instead sued the Farrs for specific performance, damages, breach of contract and breach of the implied covenant of good faith and fair dealing.  Each party moved for summary judgment seeking to dismiss the respective claims against them.  The District Court granted summary judgment in favor of the Farrs on the ground that Farr-Dimke PA was void at the expiration of the 15-day period due to the Dimkes’ failure to seek injunctive relief.

The Dimkes appealed the District Court’s decision on the grounds that § 559.217, subd. 4, was inapplicable because the required “unfulfilled condition” did not exist to cancel the PA.  The Court, in analyzing the plain language of the statute, determined that an unfulfilled condition of the PA must exist before notice of cancellation may be served on the other party, and as a result, the District Court erred in granting summary judgment without first determining whether the cancellation notice was even effective.  The Court of Appeals noted that the Dimkes took “immediate action” in the case by initiating a lawsuit within 5 days after service of declaratory cancellation, even though the Dimkes did not seek injunctive relief as required by the statute.  The District Court’s decision was reversed and remanded to reinstate the Farr-Dimke PA and determine whether the declaratory cancellation was effective under § 559.217, subd. 4.

This recent decision raises important questions regarding the enforceability of declaratory cancellation per § 559.217, subd. 4.  Specifically, does this case mean that even if a party does not seek injunctive relief suspending an action for declaratory cancellation, that the PA may still be valid due to a different election of remedies?  How will this decision affect parties’ future ability to cancel residential PA’s per § 559.217, subd. 4?  Stay tuned for the District Court’s determination on remand…

This blog entry is written by Sarah Bennett, an associate attorney at Thomsen Nybeck.  Sarah practices in both the transactional and litigation area of the firm with a primary focus on real estate and business transactions, townhome and condominium law, real estate brokerage law and civil litigation.

Glimmers of Hope in the Twin Cities Real Estate Market

19 Sep

While the headlines of many local publications have continued to lament the downturn in the Minneapolisreal estate market including the number of foreclosures continuing to increase in June of 2011, there are some recent reports of good news.  This is not to say that the real estate market has recovered or that it will not be a long road out but, every ray of hope is welcome in these times.  On September 9, 2011, an article in the St. Paul Pioneer Press reported that the percent of mortgage loans that were delinquent was reduced from the same time last year and was under the national average.  A link to that article is here. In addition, data released recently from the National Association of REALTORS® shows that the number of listings on the market in the Twin Cities area has reduced by over 20%.  A link to the data is here.  As lawyers advising clients on all areas of real estate, we continue alongside our clients, to watch various indicators of the direction the real estate market is heading.  We welcome the two indicators detailed in this blog post.

This blog entry is written by Chris Renz, a shareholder at Thomsen Nybeck. Chris practices in the litigation area of the firm with primary focus on real estate litigation, employment litigation, townhome and condominium law, and criminal law, particularly as the prosecutor for the Metropolitan Airports Commission.

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