1.1                          A bill for an act
  1.2             relating to landlord and tenant; requiring the housing 
  1.3             finance agency to select a central depository 
  1.4             institution for tenant security deposits and for 
  1.5             interest earnings to be deposited in the housing trust 
  1.6             fund; requiring landlords to deposit tenant security 
  1.7             deposits in the central depository institution; 
  1.8             amending Minnesota Statutes 1994, sections 462A.201, 
  1.9             subdivisions 1 and 4, and by adding subdivisions; and 
  1.10            504.20, subdivision 2, and by adding a subdivision; 
  1.11            Minnesota Statutes 1995 Supplement, section 462A.201, 
  1.12            subdivision 2; proposing coding for new law in 
  1.13            Minnesota Statutes, chapter 462A. 
  1.14  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.15     Section 1.  Minnesota Statutes 1994, section 462A.201, 
  1.16  subdivision 1, is amended to read: 
  1.17     Subdivision 1.  [CREATION.] (a) The housing trust fund 
  1.18  account is created as a separate account in the housing 
  1.19  development fund. 
  1.20     (b) The housing trust fund account consists of: 
  1.21     (1) money appropriated and transferred from other state 
  1.22  funds; 
  1.23     (2) interest accrued from real estate trust accounts as 
  1.24  provided under section 82.24, subdivision 8; 
  1.25     (3) interest accrued from tenant security deposits as 
  1.26  provided in section 462A.2015; 
  1.27     (4) gifts, grants, and donations received from the United 
  1.28  States, private foundations, and other sources; and 
  1.29     ~~(4)~~ (5) money made available to the agency for the purpose 
  2.1   of the account from other sources. 
  2.2      Sec. 2.  Minnesota Statutes 1995 Supplement, section 
  2.3   462A.201, subdivision 2, is amended to read: 
  2.4      Subd. 2.  [LOW-INCOME HOUSING.] (a) The agency may, in 
  2.5   consultation with the advisory committee established in 
  2.6   subdivision 4, use money from the housing trust fund account, 
  2.7   except for the amount attributable to interest accrued from 
  2.8   tenant security deposits, to provide loans or grants for 
  2.9   projects for the development, construction, acquisition, 
  2.10  preservation, and rehabilitation of low-income rental and 
  2.11  limited equity cooperative housing units and homes for 
  2.12  ownership.  Up to one-third of the funds attributable to 
  2.13  interest accrued from tenant security deposits shall be used for 
  2.14  rental housing.  No more than 20 percent of available funds may 
  2.15  be used for home ownership projects.  
  2.16     (b) A rental or limited equity cooperative housing project 
  2.17  must meet one of the following income tests: 
  2.18     (1) at least 75 percent of the rental and cooperative units 
  2.19  must be rented to or cooperatively owned by persons and families 
  2.20  whose income does not exceed 30 percent of the median family 
  2.21  income for the metropolitan area as defined in section 473.121, 
  2.22  subdivision 2; or 
  2.23     (2) all of the units funded by the housing trust fund 
  2.24  account must be used for the benefit of persons and families 
  2.25  whose income does not exceed 30 percent of the median family 
  2.26  income for the metropolitan area as defined in section 473.121, 
  2.27  subdivision 2. 
  2.28     The median family income may be adjusted for families of 
  2.29  five or more. 
  2.30     (c) Homes for ownership must be owned or purchased by 
  2.31  persons and families whose income does not exceed 50 percent of 
  2.32  the metropolitan area median income, adjusted for family size. 
  2.33     (d) In making the grants, the agency shall determine the 
  2.34  terms and conditions of repayment and the appropriate security, 
  2.35  if any, should repayment be required.  To promote the geographic 
  2.36  distribution of grants and loans, the agency may designate a 
  3.1   portion of the grant or loan awards to be set aside for projects 
  3.2   located in specified congressional districts or other 
  3.3   geographical regions specified by the agency.  The agency may 
  3.4   adopt emergency and permanent rules for awarding grants and 
  3.5   loans under this subdivision.  The emergency rules are effective 
  3.6   for 180 days or until the permanent rules are adopted, whichever 
  3.7   occurs first. 
  3.8      Sec. 3.  Minnesota Statutes 1994, section 462A.201, is 
  3.9   amended by adding a subdivision to read: 
  3.10     Subd. 2a.  [TENANT ASSISTANCE PROGRAMS.] The agency shall, 
  3.11  in consultation with the tenant assistance programs advisory 
  3.12  committee, established under subdivision 4a, distribute 
  3.13  two-thirds of the money in the housing trust fund attributable 
  3.14  to the annual interest earned on tenant security deposits that 
  3.15  is transferred to the housing trust fund by the central 
  3.16  depository institution, as provided in section 462A.2015.  The 
  3.17  agency shall distribute the funds equitably throughout the state 
  3.18  by distributing an equal amount of the funds in each 
  3.19  congressional district each year.  The agency shall use the 
  3.20  money for the purposes of promoting tenant and landlord 
  3.21  education efforts, alternative dispute resolution projects, 
  3.22  tenant support programs, and community-based revolving loan fund 
  3.23  programs designed to assist landlords and tenants in preserving 
  3.24  housing and preventing homelessness.  The money cannot be used 
  3.25  for rental or energy assistance grants. 
  3.26     Sec. 4.  Minnesota Statutes 1994, section 462A.201, 
  3.27  subdivision 4, is amended to read: 
  3.28     Subd. 4.  [ADVISORY COMMITTEE.] The agency shall 
  3.29  establish ~~an eight member~~ a ten-member advisory committee under 
  3.30  section 15.059 to advise or assist the agency in providing loans 
  3.31  or grants from the housing trust fund account.  Eight members of 
  3.32  the committee shall be appointed by the agency and must 
  3.33  represent the interests of realtors, lenders, nonprofit 
  3.34  developers, apartment owners, low income persons, housing 
  3.35  advocates, advocates for the homeless, and single or multifamily 
  3.36  builders.  Two members shall be members of the tenant assistance 
  4.1   programs advisory committee, established in subdivision 4a, 
  4.2   appointed by the tenant assistance programs advisory committee 
  4.3   as a whole.  Members of the committee shall be reimbursed for 
  4.4   expenses but shall not receive any other compensation for 
  4.5   services on the committee.  Money in the housing trust fund 
  4.6   account may be used for the expenses of the advisory committee 
  4.7   and the agency related to the development and implementation of 
  4.8   the program described in this section. 
  4.9      Sec. 5.  Minnesota Statutes 1994, section 462A.201, is 
  4.10  amended by adding a subdivision to read: 
  4.11     Subd. 4a.  [TENANT ASSISTANCE PROGRAMS ADVISORY COMMITTEE.] 
  4.12  The agency shall establish an eight-member advisory committee 
  4.13  under section 15.059, subdivisions 1 to 4, to advise and assist 
  4.14  the agency in making tenant assistance program grants, except 
  4.15  that no member shall be paid per diem.  Four members of the 
  4.16  advisory committee must be tenants, two from the metropolitan 
  4.17  area and two from outside the metropolitan area.  One of the 
  4.18  members must be a manufactured home park tenant.  One member 
  4.19  must be an expert on landlord-tenant law.  Two members must be 
  4.20  housing advocates, one from the metropolitan area and one from 
  4.21  outside the metropolitan area.  The agency shall make 
  4.22  appointments to the advisory committee that reflect the racial 
  4.23  and economic diversity of renters. 
  4.24     Sec. 6.  Minnesota Statutes 1994, section 462A.201, is 
  4.25  amended by adding a subdivision to read: 
  4.26     Subd. 4b.  [ADMINISTRATIVE COSTS.] The agency may use money 
  4.27  in the housing trust fund account to pay the expenses of the 
  4.28  advisory committees and the agency incurred in developing and 
  4.29  administering this section and section 462A.2015. 
  4.30     Sec. 7.  [462A.2015] [TENANT SECURITY DEPOSITS; CENTRAL 
  4.31  ACCOUNT.] 
  4.32     Subdivision 1.  [DEFINITIONS.] The following terms have the 
  4.33  meanings given them for the purposes of this section: 
  4.34     (1) "central depository institution" or "depository 
  4.35  institution" means a federal or state bank, savings bank, 
  4.36  savings association organized under the laws of any state or the 
  5.1   United States, credit union organized under the laws of any 
  5.2   state or the United States, or an industrial loan and thrift 
  5.3   company organized under chapter 53, selected by the agency to 
  5.4   administer tenant security deposits as provided in this section; 
  5.5   and 
  5.6      (2) "security deposit" means the deposit given by a tenant 
  5.7   to a landlord under section 504.20. 
  5.8      Subd. 2.  [TENANT SECURITY DEPOSIT ACCOUNT.] The agency 
  5.9   shall select a central depository institution for tenant 
  5.10  security deposits.  The agency or the central depository 
  5.11  institution selected by the agency shall be responsible for the 
  5.12  following duties and any others identified by the agency as 
  5.13  necessary or convenient for the administration of the tenant 
  5.14  security deposits of the tenants' trust fund account: 
  5.15     (1) notice to landlords that on or after January 1, 1997, 
  5.16  security deposits collected by landlords must be deposited into 
  5.17  the central depository institution with the landlord's and the 
  5.18  tenant's names and addresses, and the amount of the tenant's 
  5.19  security deposit; 
  5.20     (2) notice to a tenant of a deposit or withdrawal of that 
  5.21  tenant's security deposit; 
  5.22     (3) providing deposit and withdrawal envelopes and forms 
  5.23  for landlords; and/or 
  5.24     (4) forwarding interest earned on money in the account that 
  5.25  is in excess of the tenant's interest to the housing trust fund 
  5.26  account on a regular basis, as determined by the agreement 
  5.27  between the agency and the central depository institution. 
  5.28     The central depository institution shall be compensated 
  5.29  from funds in the tenant security deposit account according to 
  5.30  the agreement between the agency and the depository institution. 
  5.31     Sec. 8.  Minnesota Statutes 1994, section 504.20, 
  5.32  subdivision 2, is amended to read: 
  5.33     Subd. 2.  Any deposit of money shall not be considered 
  5.34  received in a fiduciary capacity within the meaning of section 
  5.35  82.17, subdivision 7, but shall be ~~held~~ deposited by the 
  5.36  landlord for the tenant who is party to the agreement ~~and~~ into 
  6.1   the central depository institution, as provided in section 
  6.2   462A.2015.  The deposit shall be accompanied by the landlord's 
  6.3   and the tenant's names and mailing addresses.  The tenant's 
  6.4   security deposit shall bear simple noncompounded interest at the 
  6.5   highest current passbook savings account rate ~~of four percent~~ 
  6.6   ~~per annum until May 1, 1997, and 5-1/2 percent per annum~~ 
  6.7   ~~thereafter,~~ computed from the first day of the next month 
  6.8   following the full payment of the deposit to the landlord to the 
  6.9   last day of the month ~~in which the landlord, in good faith,~~ 
  6.10  ~~complies with the requirements of subdivision 3 or to the date~~ 
  6.11  ~~upon which judgment is entered in any civil action involving the~~ 
  6.12  ~~landlord's liability for the deposit, whichever date is~~ 
  6.13  ~~earlier.  Any interest amount less than $1 shall be excluded~~ 
  6.14  ~~from the provisions of this section~~ of the tenancy.  The 
  6.15  landlord may withdraw the tenant's security deposit and interest 
  6.16  earned as provided in this subdivision at the end of the tenancy.
  6.17     Sec. 9.  Minnesota Statutes 1994, section 504.20, is 
  6.18  amended by adding a subdivision to read: 
  6.19     Subd. 2a.  [TRANSITION INTEREST RATE.] Except as otherwise 
  6.20  provided in this subdivision, a security deposit collected 
  6.21  before January 1, 1997, for a tenancy ending after that date 
  6.22  shall bear simple noncompounded interest at a rate of four 
  6.23  percent per year computed from the first day of the next month 
  6.24  following the full payment of the deposit to the landlord to the 
  6.25  last day of the month in which the landlord, in good faith, 
  6.26  complies with the requirements of subdivision 3 or to the date 
  6.27  upon which judgment is entered in any civil action involving the 
  6.28  landlord's liability for the deposit, whichever date is 
  6.29  earlier.  Any interest amount less than $1 shall be excluded 
  6.30  from the provisions of this section.  If the landlord deposits 
  6.31  the security deposit in the central depository institution, as 
  6.32  provided in subdivision 2, it shall bear interest as provided in 
  6.33  subdivision 2, from the date the landlord deposits it in the 
  6.34  central depository institution until it is withdrawn at the end 
  6.35  of the tenancy. 
  6.36     Sec. 10.  [EFFECTIVE DATES.] 
  7.1      Sections 6 and 7 are effective the day after final 
  7.2   enactment.  Section 8 is effective January 1, 1997, and applies 
  7.3   to any security deposit collected by a landlord on or after that 
  7.4   date.  Section 9 is effective January 1, 1997.