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Joseph G. Springer

Joseph G. Springer Construction Real Estate

jspringer@fredlaw.com
612.492.7168
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New Laws and Legislative Developments Impacting the Construction Industry

By: JOSEPH G. SPRINGER & JESSICA EDWARDS, SUMMER ASSOCIATE

August 13, 2009

New Laws Passed in 2009


In 2009, the Minnesota Legislature enacted three laws of particular interest to the construction industry. Each is discussed below.

Written Residential Warranties


Since 1977, Minnesota law has required vendors to warrant any newly constructed dwelling against faulty workmanship or defective materials, and since 1981, this requirement has extended to home improvements as well as new construction. Minn. Stat. § 327A.02. Before the new statute, contractors did not have to expressly include these warranties in contracts; they were implied by law.

Under a new law, the substance of the statutory warranties remains the same, but effective August 1, 2009, contractors must provide the warranties in writing and include them in their construction contracts. A homeowner’s right to receive this written warranty cannot be waived or modified by the contract’s terms. A contractor who does not provide this written warranty can be subject to penalties. Even if the contractor omits a written warranty, it will still be implied by law as it was previously. 2009 Minn. Laws Chapter 91 (amending Minn. Stat. § 327A.08).

Prompt Payment to Subcontractors and Suppliers


Since 1997, Minnesota law has required that general contractors and subcontractors pay their subcontractors and material suppliers within 10 days of receiving payment from the owner. Failure to do so results in interest penalties and the right to recover attorney fees and costs of collection. The law also requires prompt payment of progress payments unless the contract provides otherwise. The prompt payment law previously did not apply to improvements or construction of residential real estate, but the legislature did away with this residential exclusion this year. Effective August 1, 2009, contractors and subcontractors must promptly pay their suppliers and subcontractors for undisputed work within 10 days of receiving payment. This now applies to all building and construction projects, including residential construction and improvements. 2009 Minn. Laws Chapter 1056 (amending Minn. Stat. § 337.10).

Nonconforming Structures in Shoreland Areas


The legislature amended a law regulating nonconforming lots in shoreland districts. Effective May 22, 2009, the board of county commissioners or a municipality may now impose conditions on permits for rebuilding nonconforming structures. This law applies to structures that are set back less than 50 percent of the required distance from the water and that are destroyed or are damaged so substantially that the damage exceeds 50 percent of their estimated market value. In these situations, the county board or the municipality may require the setback to be increased when the structure is rebuilt “if practicable and reasonable conditions are placed upon a zoning or building permit to mitigate created impacts on the adjacent property or water body.” It is unclear from the law’s language whether it means that a setback increase may be required only if increasing the setback is “practicable” or whether it means the conditions that may be placed on zoning applications and building permits must be “practicable and reasonable.” 2009 Minn. Laws Chapter 149 (amending Minn. Stat. § 394.36).

Legislation to Watch For in the Future


There are several items that did not make it into law this past legislative session but are likely to reappear in a future session.

Vehicle Miles Traveled and Metro Comprehensive Planning


The Governor’s Climate Change Advisory Group found that land-use changes are necessary for Minnesota to meet its emission reduction goals. This spurred legislative efforts to plan cities and infrastructure to reduce per capita vehicle miles traveled (VMT) (defined as nonfreight motor vehicles driven per person per calendar year). A bill was introduced in February 2009 that would allow cities to create “growth areas” and would limit population density outside of these areas. The legislature did not take action on the bill this term. Bill No. H.F. 1035.

A second, related bill (also introduced in February 2009, and also not yet acted upon) set a goal of reducing per capita VMT traveled by at least 17 percent from their 2005 levels by 2025. The bill would not allow mandating that individuals drive less, but it would require the Commissioner of Transportation to implement policies aimed at reducing VMT. It would also require the Metropolitan Council to adopt this 17 percent VMT reduction goal and to identify land-use and transportation strategies to accomplish it. Bill No. H.F. 898.

Transportation Improvement Districts


In 2009, cities sought state authority to create transportation improvement districts (TIDs) in order to charge property owners fees to fund street construction and maintenance. The League of Minnesota Cities (LMC) made this a 2009 legislative goal, but no law was passed. Individual cities have previously tried to impose TID fees. In 1997, the City of Eagan charged a “road unit connection charge” as a condition on building permits to finance road construction in new developments, but the Minnesota Supreme Court invalidated it as an illegal tax in Country Joe v. City of Eagan (1997).

Under current law, cities cannot require payment of TID fees. While both the LMC’s and individual cities’ efforts to charge TID fees have so far failed, the issue will likely resurface in future legislative sessions.

Vetoed Warranty Bills


Legislators introduced a number of bills in 2009 aimed at increasing homeowner protections. While these bills were all vetoed (with the exception of the written residential warranty law discussed above), these proposals may resurface in coming years.

Two of the warranty bills would have given homeowners additional remedies against contractors. One would have allowed homeowners to obtain damages for reasonable short-term housing costs if a breach of warranty made short-term housing necessary. Chapter 103 (2009 H.F. 239). The other would have let owners recover reasonable attorney fees and costs from a contractor in a breach of warranty lawsuit. Chapter 136 (2009 H.F. 211).

Another bill, Chapter 104 (2009 H.F. 412), sought to clarify the repose period for breach of warranty claims. The bill would have allowed owners to sue contractors within two years of discovering a breach or, if they discovered a breach more than 10 years after the warranty date, within one year of discovery.

Chapter 112 (2009 H.F. 330), a fourth warranty bill, would have extended the time that homeowners have to notify contractors of losses or damages. Contractors are currently liable for damages reported within six months of the homeowner discovering them; this bill would have made contractors liable for up to one year after the damage is discovered.

A final, vetoed warranty bill, Chapter 140 (2009 H.F. 362), would have modified the notice requirement for homeowners to obtain repairs from contractors. The current law requires written notice of the alleged loss or damage. The new bill would have held contractors liable for repairs if they knew about the loss or damage, even if the homeowner provided no written notice.