by Andy Jacobson
Minnesota has historically followed the legal doctrine of caveat emptor (i.e., let the buyer beware) in connection with the real estate transactions. About 20 years ago, however, the Minnesota legislature began to pass legislation that has eroded the caveat emptor doctrine, particularly in the context of residential real estate. The most significant erosion occurred in 2002, with the legislature's enactment of a general residential seller disclosure requirement. More recently, this pattern of increased disclosure requirements has continued, with the addition of methamphetamine related disclosures in 2005 and the airport zone related disclosure requirements in 2006. This multi-decade shift from caveat emptor in residential real estate has resulted in an array of seller disclosure requirements, that are now scattered throughout the Minnesota statutes. Below is a list of the current statutory seller disclosure requirements that apply to residential property.
1. Hazardous Waste Disposal or Contamination (1983). This statute requires sellers, who knew or should have known that a property being sold was used as a hazardous waste disposal facility or is subject to extensive hazardous waste contamination, to record an affidavit that discloses that the land is contaminated, including details as to the nature and scope of the contamination and a disclosure that the future use of the property may be restricted because of the contamination.
2. Underground Storage Tanks (1985). This disclosure requirement is a bit different, in that landowners are obligated to notify a state agency of the existence, location and status of underground (and above ground) storage tanks located on their property. In addition, before a landowner can transfer its property, it is required to provide an affidavit to the county recorder that includes a disclosure of the existence, location and status of any storage tanks on the property.
3. Condominium Re-Sale (1985). Concerned that condominium purchasers were being subjected to unreasonable condominium association practices and dues, the legislature enacted a requirement that sellers of condominium units provide potential buyers with copies of relevant homeowner's association documents, and established a ten (10) day review and rescission period to buyer's following their receipt of those disclosure documents.
4. Location and Status of Wells (1989). Minnesota's Well Disclosure law requires sellers to make a written disclosure of the existence, location and status of all known wells on a property. Sellers are relieved of this disclosure obligation if the deed conveying the property certifies that the status and number of wells on the property has not changed since the last previously filed well disclosure certificate.
5. Individual Sewage Treatment Systems (1994). The septic disclosure provisions require a seller to disclose the manner in which sewage from the property is managed (e.g., public sewer or septic), and to disclose the existence, location and status of any individual sewage treatment systems located on or serving the property.
6. Condition of Property (2002). This “catch-all” disclosure requirement, which applies to residential (not commercial) properties, represents the legislature's most sweeping departure from the caveat emptor doctrine and requires a seller to disclose all material facts of which the seller is aware that could adversely and significantly affect an ordinary buyer's use and enjoyment of the property; or any intended use of the property of which the seller is aware. The statute does provide an option that the disclosure requirements may be waived (in writing) by the buyer.
7. Methamphetamine (2005). This statute requires sellers to disclose whether methamphetamine has been produced on a property and, if so, the seller must also disclose if a “no occupancy” order was issued or vacated, or if no order was issued, the status of contamination removal and remediation of the property.
8. Airport Zoning Regulation (2006). This requirement applies to properties located in airport safety zone A, B, or C, and requires the seller to both determine if its property is within one of these zones and, if so, to disclose the existence of airport zoning regulations that affect the property.
In addition to the Minnesota requirements discussed above, Congress enacted a lead paint disclosure requirement in 1992 that requires sellers of residential property constructed prior to 1978 to provide prospective buyers with a prescribed lead paint disclosure pamphlet and to disclose any known presence of lead paint on the property. Given the multitude of disclosure requirements, it appears that when it comes to residential real estate in Minnesota, there is not much left of the traditional doctrine of caveat emptor.
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