In addition to the statutory procedure for terminating a buyer’s rights in a purchase agreement pursuant to Minnesota Statutes, Section 559.21 – which is only available to sellers – Minnesota Statutes, Section 559.217 makes available to either buyers or sellers two mechanisms for the cancellation of purchase agreements with respect to residential real property:
Pursuant to Minnesota Statutes, Section 559.217, Subd. 1, the term “purchase agreement”, means an:
whether or not the instrument is subject to M.S. Section 559.21.
Pursuant to Minnesota Statutes, Section 559.217, Subd. 1, the term “residential real property”, means real property, including vacant land:
Pursuant to Minnesota Statutes, Section 559.217, Subd. 2, either the buyer, or the seller, may cancel a purchase agreement for residential real property pursuant to Minnesota Statutes, Section 559.217.
If the procedures identified in Minnesota Statutes, Section 559.217 are followed in a timely manner by either the buyer or the seller, but not by both:
unless the party upon whom the notice was served – within the 15 day notice period:
Nevertheless, under federal law, it’s possible that the seller may not be allowed to retain the earnest money when the buyer applied for, but was unable to obtain, FHA or VA mortgage financing.
If both the buyer and the seller serve in a timely manner a cancellation notice pursuant to Minnesota Statutes, Section 559.217:
In making such determination, the court is allowed to consider the terms of the canceled purchase agreement in making its determination.
The court’s order regarding the disposition of the earnest money may be required because a real estate broker cannot release the earnest money to a buyer, or a seller, without receiving either:
However, obtaining a court order may involve a considerable expense, including the payment of court filing fees, motion fees, and attorney fees.
Therefore, achieving a negotiated settlement with the other party regarding the earnest money may be advisable.
Minnesota Statutes, Section 559.217, Subd. 3, identifies the procedure which may be followed by either party if:
In other words, if there is either:
by the second party, the first party can serve a notice upon:
declaring a conditional cancellation of the purchase agreement.
Under this procedure, the conditional cancellation notice must:
In addition, the conditional cancellation notice must state that the purchase agreement will be canceled 15 days after service of the notice upon the other party to the purchase agreement, unless prior to the cancellation date, the party upon whom the notice is served either:
The actual form of the notice required is identified in the statute, and should be followed verbatim.
The notice of conditional cancellation must be served upon the required parties in the same manner as:
which usually requires personal service upon the required parties.
On occasion, if the parties to be served cannot be located, service by publication of the notice may be necessary.
The statutory notice requirement cannot be waived by any provision of the purchase agreement to the contrary.
Once notice has been provided to all of the required parties in the manner specified by statute, the purchase agreement will be canceled unless within 15 days after service of the notice upon the other party to the purchase agreement, the party upon whom the notice was served:
However, obtaining a court order may involve a considerable expense, including the payment of court filing fees, motion fees, and attorney fees.
Therefore, negotiating a settlement agreement with the other party regarding the earnest money may be advisable.
Minnesota Statutes, Section 559.217, Subd. 4, identifies the procedure to be followed by either party if:
The statute identifies that:
either the purchaser or the seller may confirm the cancellation by serving upon:
The actual form of notice which is required is identified in the statute, and should be followed verbatim.
The confirmation of cancellation notice must be served upon the required parties in the same manner as:
which usually requires personal service upon the required parties.
On occasion, if the parties to be served cannot be located, service by publication of the notice may be necessary.
The statutory notice requirement cannot be waived by any provision of the purchase agreement to the contrary.
Once notice has been provided to all of the required parties in the manner specified by statute, the cancellation of the purchase agreement will be confirmed unless – within 15 days after the service of the notice upon the other party to the purchase agreement – the party upon whom the notice was served either:
However, obtaining a court order may involve a considerable expense, including the payment of court filing fees, motion fees, and attorney fees.
may be advisable.
In addition, the availability of the remedy identified in Minnesota Statutes, Section 559.217, Subd. 4 has perhaps been limited by a 2011 Minnesota Court of Appeals decision.
Therefore, consultation with a Minnesota attorney is suggested before attempting to utilize the provisions of Minnesota Statutes, Section 559.217, Subd. 4.
A seller or a purchaser upon whom the notice is served may commence a proceeding under section 559.211 to obtain a court order to suspend the cancellation of a purchase agreement under this section, and in the proceeding the court may award court filing fees, attorney fees, and costs of service actually expended to the prevailing party in an amount not to exceed $3,000.
Therefore, while obtaining a court order suspending the cancellation of a purchase agreement may involve a considerable expense, if successful, the party requesting the order may receive reimbursement of up to $3,000 in expenses.
However, if a party is not successful in obtaining a court order suspending a cancellation, such party may have to pay up to $3,000 in costs and attorney fees to the other party.
Therefore, if a party:
the party initiating the declaratory cancellation action risks:
Therefore, declaratory cancellations should be pursued only when there is certainty that the purchase agreement by its terms has been canceled without a right to cure.
Therefore, notwithstanding the provisions of any purchase agreement to the contrary, the earnest money may be distributed to the party completing the cancellation procedure – in the absence of a court order to the contrary.
When a cancellation under this section has been completed,
the party who served the notice, or that party’s attorney,
may execute an affidavit stating
The Affidavit of Cancellation may be used to support any claim to the earnest money.
A copy of the affidavit of cancellation, when attached to a copy of the notice, is prima facie evidence of the facts therein stated.
Therefore, the facts recited in an Affidavit of Cancellation are presumed to be true, unless contradicted by other evidence.
Except as provided in subdivision 2 [court order awarding the earnest money],
the affidavit of cancellation,
when delivered to a third party holding earnest money under the purchase agreement,
is a sufficient basis for that person to release the earnest money to the party initiating the cancellation.
Therefore a residential real property broker may release earnest money to a party submitting an Affidavit of Cancellation – in the absence of a court order to the contrary.
Therefore, an Affidavit of Competing Cancellation is presumed to establish that the purchase agreement has been canceled, as of a certain date, unless contradicted by other evidence.
The laws regarding the cancellation of Minnesota purchase agreements are complicated, and the available procedures are not well-suited to do-it-yourselfers.
If you have an e-mail account, and a good Internet connection, Attorney Gary C. Dahle can assist you in any Minnesota County.
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