Dangers of Waiving a Home Inspection in Minnesota

Home Buyer Beware: Waiving the Right to a Home Inspection can be a Costly Mistake

Competitive bidding in a seller's market is nothing new. The combination of low interest rates, low inventory, and a sharp rise in sales price for single-family homes has created an unprecedented advantage for sellers in the current Twin Cities housing market. However, buyers waiving the right to a home inspection before closing is uncharted territory.

Is waiving a home inspection a good idea, and what's covered with Minnesota home inspection laws?

In short, no. Waiving a home inspection is not a good idea. While there may be immediate gain as you get to purchase the house you desire, the decision to waive a home inspection may lead to severe problems months or years later.

Electing not to have a home inspection or waiving the right to the inspection typically means that the buyer's only information regarding the property's structural condition is the seller's disclosures.

Disclosures mandated by Minnesota law require sellers to disclose information regarding the condition of the house and garage, including foundation issues, alterations/remodeling, and water intrusion. However, the seller only needs to disclose material facts that could adversely or significantly affect the buyer's use and enjoyment of the property. Minnesota law explicitly protects the seller from liability for any error, inaccuracy, or omissions that were not within the personal knowledge of the seller.

In many instances, a seller may not be aware of foundation damage or a structural defect; this is precisely why a buyer should always elect for an inspection contingency in the purchase agreement and retain a licensed inspector. Issues raised in a home inspection provide the buyer with bargaining power to negotiate the purchase price or cancel the purchase agreement if costly repairs are recommended.

Waiving a home inspection leaves a buyer with little or no recourse against the sellers. Even if the owner failed to disclose known defects, a buyer would typically need to prove the owner's conduct rose to the level of fraudulent misrepresentation. Arbitration or litigation is expensive and time-consuming. More importantly, an arbitration claim must be filed within two years after the sale's closing date, and structural defects may not come to light within those two years.

Using Good Strategy

Purchasing a new home can be stressful and sometimes exhausting, given the current market. Buyers may believe waiving a home inspection makes their offer more attractive to the seller, but it's not necessarily a good strategy. The buyer may win the battle, meaning they get their desired home, but they can still lose the war because of the structural problems they've inherited. Waiving a home inspection could result in years of costly repairs with no recourse against the seller.

The Eviction Moratorium Phaseout

By signing the 2021 Omnibus Housing Finance Bill, Governor Tim Walz voided all previous eviction moratorium rules outlined in the Executive Orders and began the next return phase to pre-pandemic eviction laws. Aptly titled “Eviction Moratorium Phaseout,” the new law relating to residential tenants provides a process of gradually removing restrictions on filing eviction actions, providing a notice to vacate, or terminating a lease.

New Rules: Notice of Intent to File an Eviction

Minnesota Executive Order 20-79 required a 7-day notice of intent to file an eviction prior to filing all eviction actions. The phaseout requires a 15-day notice of intent to file an eviction only for eviction actions based on nonpayment of rent.

For all nonpayment eviction actions, a written notice provided to tenants at least 15 days prior to filing an eviction is required until October 12, 2021. This notice must contain information including: “(1) the state eviction moratorium has ended and the tenant may soon be subject to an eviction action; (2) the total amount of rent past due; and (3) a tenant should visit Rent Help MN or call 211 to see if they are eligible for financial assistance.”

The phaseout does not reference the method by which the notice is to be served on the tenant. To avoid further delay or defenses, our advice is to send the notice by first-class mail and post it on the property to ensure the resident receives the notice.

Eviction actions based on seriously endangering the safety of others, significant damage to property, or violations of Minn. Stat. § 504B.171 (unlawful activity).

Currently, eviction actions can be filed for seriously endangering the safety of others, significant damage to property, and violations of Minnesota Statutes § 504B.171 which includes tenant covenants related to unlawful activity, including controlled substances, prostitution, unlawful use or possession of a firearm, and stolen property. Under the phaseout law, there is no longer a requirement to provide a notice of intent to evict prior to filing these evictions.

Eviction actions based on tenant’s refusal to apply for specified rent assistance.

Once the 15-day notice is sent via first-class mail and posted, you may now also proceed with an eviction action for nonpayment of rent if the tenant is eligible for rental assistance through a COVID-19 emergency rental assistance program but refuses to apply for the specified rent assistance.

Eviction actions based on material violations of the lease.

On or after June 30, 2021, you can provide notices of lease termination or nonrenewal of lease to tenants that have materially violated the lease other than nonpayment of rent. On or after July 14, 2021, you can proceed with eviction actions for material violations of the lease other than nonpayment of rent. You are not required to provide the 15-day notice of intent to file an eviction prior to filing these evictions.

Eviction actions based on nonpayment of rent and tenant is not eligible for rental assistance.

On or after August 13, 2021, leases can be terminated for tenants who are not eligible for COVID-19 rental assistance and are past due on rent. On or after September 12, 2021, you can proceed with eviction actions against tenants with outstanding rent balances who are ineligible for rental assistance. You are required to provide the 15-day notice of intent to file an eviction prior to filing these evictions.

Expiration of Moratorium and Phaseout Procedures

On or after October 12, 2021, all eviction actions will be allowed, other than matters involving nonpayment for tenants eligible for applicable rental assistance with a pending application.

For additional information regarding the phaseout legislation or specific questions related to your properties, contact Bernick Lifson.

Disclaimer: The information provided is based only on current Minnesota law. Conflicts may arise with existing federal rules and statutes.

Ejectment Actions in Minnesota During the Ban on Evictions

Prior to the COVID-19 pandemic and related peacetime emergency in Minnesota, landlords had the right to evict renters from their properties under a wide variety of circumstances. That changed in 2020 when the "moratorium" or ban on evictions was put in place to help combat the fallout from the COVID-19 virus and related financial turmoil in the Minnesota community. With eviction actions now off the table, some property owners are looking into an older and lesser-known legal action to recover possession of real property that remains unaffected by the current eviction moratorium in Minnesota.

Since March 2020, Minnesota Governor Tim Walz has barred landlords from evicting renters from their real property with few exceptions. On July 14, 2020, he issued Emergency Executive Order 20-79, which modified the suspension of evictions and writs of recovery during the COVID-19 peacetime emergency in Minnesota. The Executive Order states, in relevant in part, that:

The ability of property owners, mortgage holders, or other persons entitled to recover residential premises from filing an eviction action on the grounds that a residential tenant remains in the property after a notice of termination of the lease, after a notice of nonrenewal of a lease, after a material violation of a lease, after the termination of the redemption period for a residential foreclosure, or after nonpayment of rent, is suspended.

Pursuant to this Executive Order, the ability of property owners or other persons entitled to recover residential premises from filing an "eviction action" against a "residential tenant" has been suspended by Governor Walz. This Executive Order remains the most current description of the state of the eviction moratorium in Minnesota since Governor Walz first declared the peacetime emergency in late March 2020.

Importantly, Governor Walz's recent restrictions on evictions during the peacetime emergency present no barrier to bringing ejectment actions, where appropriate. As such, it is more important than ever to understand the difference between these two very similar possessory legal actions.

Minnesota law provides that evictions are only appropriate in specific situations—usually to terminate a tenancy or when a person "holds over" or remains at a property after the property has been sold or foreclosed. See Minn. Stat. § 504B.285, subd. 1(a). Similarly, in suspending eviction actions in Minnesota, the Executive Order applies only to actions against "residential tenant[s]." For purposes of an eviction action, "'residential tenant' means a person who is occupying a dwelling in a residential building under a lease or contract, whether oral or written, that requires the payment of money or exchange of services . . .." Minn. Stat. § 504B.001, subd. 12.

Ejectment is a more general but less common, possessory action and may be maintained by any person entitled to exclusive possession of real property against a person currently in possession of the same. The Minnesota Supreme Court has squarely held that the legal owner of the property has the right to possess it unless a contract (such as a lease or other rental agreement) has deprived them of it. To maintain an action in ejectment, the property owner must establish that another party has possession of the property and is withholding possession from the property owner without justification.

Simply put, an ejectment action is much more general in scope than an eviction action and not appropriate where a contract (such as a lease agreement) is in place to give another party the right to possess the property. Thus, where a property owner seeks to recover possession of their real property from another party who is not an authorized tenant with a lease agreement, the Executive Order presents no barrier to the property owner bringing an ejectment action.

At Bernick Lifson's, we are well-versed in eviction actions, ejectment actions, and Governor Walz's recent restrictions on evictions and terminating tenancies in Minnesota. If you have questions about recovering possession of your real property during these unusual times, don't hesitate to get in touch with us to discuss your rights and the remedies that might be available to you.

Foreclosure Redemption Period in Light of New Bill

In response to the Covid-19 pandemic, the Minnesota legislature passed a bill, HF4556/SF 4462, in April 2020 signed by Governor Tim Walz the following day. The bill extends numerous deadlines that would otherwise apply, but for the pandemic, such as the next language found in Article I, Section 16:

“The running of deadlines imposed by statutes governing proceedings in the district and appellate courts, including any statutes of limitations or other time periods prescribed by statute, is suspended during the peacetime emergency declared on March 13, 2020, in governor’s Executive Order 20-01 and any extensions authorized under Minnesota Statutes, section 12.31, subdivision 2, and for 60 days after the end of the peacetime emergency declaration.”

The peacetime emergency has been extended through November 12, 2020, by Executive Order 20-92. However, there was confusion over what deadlines the bill covered and whether or not the bill extended the time when a homeowner could redeem property after a mortgage foreclosure.

Our firm represented a lender who foreclosed a mortgage, and after the homeowner’s six-month redemption period expired, the homeowner argued the redemption period was extended based on the bill.

Whether or not the redemption period was extended pursuant to HF4556/SF4462, it was litigated in Ramsey County district court. The court held that the bill did not extend the deadline to redeem from mortgage foreclosure and that the statutory six-month period still applies.

The court found that the bill is inapplicable to foreclosure by advertisement as that is a non-judicial proceeding. The bill only relates to those matters in district or appellate court.

Suppose you are looking for advice on the rights of a lender to a property where the mortgage is in default given the Covid-19 pandemic. In that case, Bernick Lifson has the practical experience to advise you on the law, as well as what various courts have ruled on the issue.

Find more information about the Executive Orders issued by Governor Walz since the declaration of the peacetime emergency.

Timeline for rental properties: Getting back to “Normal”

When Governor Tim Walz issued Executive Order 20-14 on March 23, 2020, placing a moratorium on specific actions by owners and managers of residential rental properties, it was much clearer what conduct was allowed and prohibited during the peacetime emergency. Since that time, Minnesota Executive Orders, the Federal CARES Act, Minnesota Court Orders, and Minnesota legislation have made it more challenging to determine what options owners and managers have related to managing their properties during the COVID-19 pandemic. To understand this, you need to know what orders and legislation affect your properties, how these orders and legislation affect your properties, and the timeline for when you can expect your management responsibilities to more closely resemble what they were before this pandemic.

Executive Orders

Executive Order 20-14 placed a moratorium on owners and managers of residential rental properties sending notices to vacate and terminating a lease or filing an eviction under most circumstances. In addition, officers will not execute a writ unless it has been designated a priority writ by the court. At this time, based on Executive Order 20-53 dated May 13, 2020, the peacetime emergency and the moratorium are set to expire June 12, 2020. It is uncertain at this time whether the moratorium will be extended upon its expiration. There are still options when dealing with serious misconduct from residents or providing options for tenants struggling during the COVID-19 pandemic until the moratorium expires.

When a tenant commits certain offenses on the premises or seriously endangers the safety of other residents, an eviction can still be filed on an expedited basis. These hearings will take place between five to seven days from when the court issues the summons. An order from the court for the tenant to vacate the premises should include issuing a priority writ.

While owners and managers cannot terminate leases during a peacetime emergency, they can provide options for residents who have fallen on hard times, including agreements to terminate leases without early termination fees and/or forgiving some or all of an outstanding balance. If approaching tenants with options such as the ones stated above, it is essential to clarify that you are not providing notice to vacate or attempting to terminate their lease. Making this point clear will help avoid confusion on behalf of residents and ask whether your actions violated the moratorium under Executive Order 20-14.

The CARES Act

The CARES Act further delays many of the items discussed above when your rental property meets specific qualifications. This includes properties that participate in a covered housing program (Section 8, Vouchers, Section 42, etc.), rural housing voucher programs, or a federally backed mortgage loan. If your property falls under any of these categories, you must abide by the terms of the CARES Act.

The conditions of the CARES Act include a moratorium on filing evictions and charging late fees for nonpayment of rent for 120 days from March 27, 2020. Additionally, you may not issue a notice to vacate until the moratorium concludes or require a tenant to vacate until 30 days after providing the tenant with the notice to vacate. The moratorium is set to end on July 24, 2020.

Minnesota Court Orders

Many court proceedings, including housing court matters, were initially suspended by Minnesota Chief Justice Gildea’s order on March 13, 2020, and have just recently resumed as of May 18, 2020. Since restarting hearings, counties have been converting a significant amount of hearings to virtual appearances or appearances by phone. Housing Court has continued to hear expedited evictions throughout the pandemic and resumed hearing rent escrow, commercial eviction, and expungement matters as of May 18, 2020.

Once the peacetime emergency ends, the courts will start by hearing residential evictions filed just prior to the issuance of Executive Order 20-14, and then the evictions filed afterward. All Minnesota courts have 60 days from the end of the peacetime emergency to catch up on timelines for backlogged cases. With procedures being put in place to promote social distancing by smaller calendars and virtual hearings, this likely means a lengthy delay for many cases from the ordinary timelines for scheduling evictions.

Minnesota Legislation

The Minnesota legislative session concluded recently without any laws relating to evictions, late fees, termination, or non-renewal of rental agreements and assistance for tenants. However, both the House and Senate have considered all these issues at times since the start of the pandemic, and will likely consider some, if not all, during a special session. One residential rental housing factor that will almost certainly be passed is assistance for tenants towards rent, utilities, and other expenses. This will likely involve assistance payments directly to owners or managers of rental properties to aid residents struggling to pay past due balances.  

One bill that passed the House included a postponement on most lease terminations and non-renewals during the peacetime emergency, which is already a requirement of Executive Order 20-14. This bill also prohibited charging late fees for late payment of rent for 90 days following an emergency declaration. It required a 30 day written notice before filing an eviction following the conclusion of the emergency. It remains to be seen what the final law will look like as it relates to rental properties.

Contact Bernick Lifson today for additional information on the above legislation and orders and specific questions related to your properties.

Expanded Retaliation Defense: A new hurdle to evicting tenants

In recent judicial news, there has been a significant change to landlord-tenant law in Minnesota. Last month the Minnesota Supreme Court in Central Housing Associates, LP v. Olson, issued a ruling creating brand new common law for tenants to utilize in defense of eviction actions.

In this case, the tenant complained to the landlord about maintenance issues, and after he claimed, a maintenance staff member harassed his daughter. Sometime later, the landlord gave the tenant notice that the tenant’s one-year lease would be terminated two months early. The tenant objected to the eviction, claiming the eviction was due to the tenant’s earlier complaints.

Minnesota landlord-tenant law provides tenants with a “retaliation defense.” Minnesota Statutes Section 504B.441 states:

A residential tenant may not be evicted, nor may the residential tenant’s obligations under a lease be increased or the services decreased, if the eviction or increase of obligations or decrease of services is intended as a penalty for the residential tenant’s or housing-related neighborhood organization’s complaint of a violation. The burden of proving otherwise is on the landlord if the eviction or increase of obligations or decrease of services occurs within 90 days after filing the complaint unless the Court finds that the complaint was not made in good faith. After 90 days, the burden of proof is on the residential tenant.

However, as interpreted by the Minnesota Supreme Court in this case, the statutory defense is only available to tenants that make a formal complaint of misconduct against the landlord, such as filing a lawsuit or making a complaint to a housing inspector.

The Court was dissatisfied with the limitations of the statutory retaliation defense and created a new law to fill in the gaps it felt the Legislature unintentionally formed. The new law created by the Court established a common-law retaliation defense for tenants to utilize when they have made complaints to the landlord and not a more formal complaint.

What does this mean for landlords moving forward? It means the potential for an increase in cost and difficulty in evicting tenants. When considering eviction, landlords must now be prepared to defend against any complaints made regarding real or perceived misconduct, regardless of whether those complaints impacted the landlord’s decision to evict the tenant. In short, landlords must now be ready to expend more time, money, and effort to evict tenants.

The pitfalls associated with Letters of Intent

Outlining the basic terms of a real estate transaction in a letter of intent can help prevent future disagreements between parties — it can also lead to them. When this type of document is incomplete, self-contradicting, or up for interpretation, problems often arise. The most significant is confusion as to whether the letter is binding or non-binding. While one party may see the document as a simple guideline designed to build momentum towards a final deal, the other party may believe the terms in a letter of intent are set in stone.

Most of our clients would like to create a letter of intent that is non-binding and unenforceable, as their circumstances could change before the deal is finalized. It is critical to create a letter of intent that explicitly states this fact in cases like these. Any language that refers to the letter as an “agreement” should be omitted from a letter of intent since a court may interpret this language as a binding agreement. While Minnesota law states that any agreement to enter negotiations in the future is unenforceable, it’s better to be safe than sorry when drafting a letter of intent.

Want to learn more? Attorney At Law Magazine has published an in-depth article explaining the precautions to take when drafting a letter of intent. Please read it here to get information that could prevent legal problems down the line.