How to Properly Defend a Residential Tenant’s Rent Escrow in Minnesota

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If you are a landlord of residential rental property in the state of Minnesota, you may be subject to a rent escrow action to remedy alleged “violation(s)” at your property.

Table of Contents

What is a rent escrow action?

A rent escrow action is a Minnesota statutory provision that permits a residential tenant to deposit the amount of rent due with the county court administrator instead of paying the landlord to remedy an alleged “violation.”  See generally §504B.385.

OK.  What qualifies as a “violation?”

A “violation” is defined in Minnesota Statute §504B.001 subdivision 14 which spells out three separate and distinct types: a code violation, a covenant violation, or a contract violation (or any combination thereof).

  1. Code.  A violation of any state, county or city health, safety, housing, building, fire prevention, or housing maintenance code applicable to the building  (“Code”).
  2. Covenant.  A violation of any of the covenants set forth in §504B.161, subd. 1 clause (1) and (2)(premises fit for intended use and keep in reasonable repair) or §504B.171, subd. (1) (not allow unlawful activities) (“Covenant”).
  3. Contract.  A violation of an oral or written agreement, lease, or contract for the rental of a dwelling in a building (“Contract”).

How must the residential tenant communicate the “violation” to the landlord?

Minnesota Statute §504B.385 requires “written notice” of each violation.  Tort case law has imported the duty of a landlord to warn, thus in extreme situations, the court may find the landlord knew or should have known of the violation, despite no written notice from the tenant.

How much “violation” notice is required before a residential tenant can file a rent escrow action?

If a landlord receives a written Code violation, typically from a city or municipal inspector, the tenant cannot file its written notice or file the rent escrow action until the time granted by the inspector has expired without satisfactory repairs, unless the tenant alleges the time granted is excessive.  Typically this timeline is 14 days or more.

If a landlord receives written notice of a Covenant or Contract violation, the landlord has 14 days to correct the “violation.”

Although Minn. Stat. §504B.385 does have specific text on how the written notice is to be communicated, “must be delivered personally” or “sent to the person or place where rent is normally paid” landlords would be wise to focus on the “violation” not whether the type of notice is spelled out in the statute.

What if the tenant did not deposit all rent owed with Court Administration?

A landlord may file a counterclaim for possession into the case if the landlord believes the tenant did not deposit the full amount of rent with the court administrator.  To do so, the landlord must properly state the claim, file the counterclaim, and serve the counterclaim. Raising a counterclaim may result in a continued or “consolidated” hearing, but a landlord should plan to attend the original rent escrow hearing date unless explicitly instructed otherwise from court administration.

What should a landlord do if a tenant alleged “violation” is true but not repaired or remedied?

A landlord should immediately remove all violations and document the repaired or remedied violation(s) through photographs and send day and time stamped emails to the tenant documenting the repair or remedy.  A landlord should look closely to all Code violations to consider whether or not the work requires a licensed contractor. For some Covenant and Contract violations, landlords should consider whether or not it makes sense to hire a licensed contractor to do the work.

What should a landlord do if a tenant alleged “violation” is false and does not need repair?

Even if a landlord believes the violation to be false, landlords should properly notice the tenant, visit the property, and document the current status of the alleged violation.  Take photos or video of the violation prior to the hearing and email those to the tenant for day and time stamping. Ideally the person who documents the violation attends the hearing to avoid hearsay–the person can testify as a witness from personal knowledge to the truth of the matter of the violation by describing the conditions and photos.

What may a court find if the tenant prevails in the rent escrow action and proves a “violation?”

The rent escrow statute, Minn. Stat. §504B.385 authorizes the court to award to do any or all of the following upon finding that a “violation” exists:

  • Impose relief provided in §504B.425 including retroactive rent abatement.
    • Order the landlord to remedy the violation(s)
    • Order the tenant to remedy the violation(s) and deduct the cost from the rent.
    • Appoint an administrator with powers of §504B.445
      • Direct rents deposited with administrator to use rents to remedy the violations
      • Grant other relief it deems just and proper including reasonable attorneys fees, not to exceed $500.  Please note that the residential lease may expose the landlord to more attorney fees than the statutory amount.
  • Order the deposited rent to be released.
  • Order rent deposited with the court as it becomes due or abate future rent until the landlord remedies the violation.
  • If the court finds a landlord “willfully failed” to comply with a court order to remedy a violation, the court may impose fines under Minn. Stat. §504B.391, $250 for first failure to comply, $500 for second failure to comply, and $750 for third and each subsequent failure to comply with an order regarding the same violation.  If it is the third or subsequent time the landlord fails to comply with a court order to remedy a violation, the landlord can be found guilty of a gross misdemeanor.

What are the landlord defenses to a rent escrow action?

Minnesota statute §504B.415 spells out specific landlords defenses to rent escrow actions.

  1. The violation does not exist OR has been removed or remedied.
  2. The violation was caused by willful, malicious, negligent, or irresponsible conduct of a complaining residential tenant or anyone under the tenant’s direction or control; or
  3. A residential tenant of the residential building has unreasonably refused entry to the landlord or the landlord’s agent to a portion of the property for the purpose of correcting the violation, and that effort to correct was made in good faith.

How do you recommend a landlord prove a defense in court?

Landlords who present one of the three statutory defenses in court must prove their facts by a preponderance of the evidence.  Proving a violation more likely than not did not exist or does not remain or has been removed will require introduction of non-hearsay evidence such as photographs, business records, or first hand witness testimony.  If a tenant disagrees and believes a Covenant or Contract violation remains, a landlord will need to be more persuasive than the tenant for a no violation determination. The court often has to decide whether the tenant or the landlord has presented more “credible” evidence and/or testimony.  Landlords in contested cases would be wise to hire third party contractors to investigate and document that the violation has been removed. Examples include, hiring a building inspector to document and prove interior conditions are not “violations” based upon his or hers years of experience and training, a licensed exterminator to document and testify that no “infestation” exists, or a licensed plumber to conclude that he or she has verified that no leak exists.

How does the court calculate rent abatement?

If the court finds a “violation” has been proved by a preponderance of the evidence, the court may abate rent to the extent the uncorrected violations impaired or impaired the tenants’ use and enjoyment of the property.  The award of abatement is open to interpretation but generally residential tenants must prove reasonably exact, non-speculative damages and that the landlord knew or should have known about the violations. Except for obvious life safety hazards (such as collapsed porch or stairs in complete disrepair) that landlords “should have” known about, the rent abatement clock starts from the date of first written notice (or should have known for clear hazards) of the violation from the tenant to the landlord.

Courts use a proportionate approach when it retroactively abates rent and typically equates higher percentages of rent abatement when residential tenants produce evidence of clear loss of use and enjoyment (30-50% for persistent bed bugs and bed bug bites) and lower percentages of rent abatement for less severe loss of use and enjoyment (5% for broken front door).  Notably, individual “violation” percentages can be added for a sum monthly total. Lastly, violations may be plead by multiple residential tenants in the same building at the same time. In this circumstance, the rent abatement formula applies to each and every unit where the court finds an uncorrected “violation”

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