How to Respond to a Rent Escrow Action

Minnesota landlords should ensure their properties aren’t at risk

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There may be nothing more important for property owners who lease to residential tenants than maintaining their property and quickly responding to tenant repair concerns. This is in part because Minnesota landlord-tenant law protects tenants from sub-standard housing by allowing tenants to bring a rent escrow action.

A rent escrow is a simple, low-cost court-process for tenants to get needed repairs completed when a landlord refuses. Landlords will want to avoid situations in which a rent escrow might be necessary, as the process increases their costs and the time involved in making necessary repairs.

How to avoid a rent escrow action?

Regardless of language in the tenant’s lease agreement, Minnesota law requires landlords to make several promises, or covenants, about the habitability of their property to their tenants. These promises cannot be waived by tenants under any circumstance. Many landlords are unaware of how extensive these covenants are, which include promises that:

  • Common areas will be maintained
  • Housing will be kept in reasonable repair during the lease (except when tenant willfully causes disrepair)
  • Housing will comply with applicable state and local health and safety laws
  • Housing will be made reasonably energy efficient

If a tenant requests repairs be made for better energy efficiency, a court will determine if the resulting energy cost savings over a 10-year period are greater than the repair cost. If those savings are greater, the law requires the landlord to make the repair. These covenants apply even if the tenant has agreed to perform some maintenance of the rental—an arrangement allowed under Minnesota law only if the lease clearly states the tenant’s specific jobs and the tenant is compensated fairly.

What happens if a tenant brings a rent escrow action?

Tenants can’t file a rent escrow without notifying the landlord of the repair issue and giving the landlord an opportunity to make the repair. Tenants have two routes to begin the rent escrow process, either:

  • Notify a local housing or building inspector of the repair
  • Notify the landlord in writing of the repair or lease violation

Minnesota law requires that the local authority charged with code enforcement determine if the landlord is in violation of local code. If the inspection finds repairs are necessary, the landlord will be given time to make the repair. If the tenant notifies the landlord of a repair, the landlord has 14 days to make the repair before a tenant can file the rent escrow in court.

What’s the risk to landlords?

The first problem landlords encounter under a rent escrow is that the tenant’s rent money will be deposited with the court until the matter is resolved. If the matter does not resolve quickly, the landlord could expect several months without payment of rent. Landlords who don’t adequately respond to repair complaints also put themselves at risk of having the court give the tenant authority to hire contractors to complete the necessary repairs, potentially increasing the landlord’s costs.

Minnesota law also allows the court to order rent abatement—a reduction of the tenant’s past and future rent. The longer a landlord ignores a tenant’s legitimate requests for repairs, the greater the amount the court may order returned to the tenant. The amount abated can be subjective; the court will attempt to determine either:

  • the difference in rental value of the property between the condition of the property with and without the needed repairs
  • the extent to which the use and enjoyment of the property has been decreased because of the defect

How to respond?

If the repairs are necessary, landlords should respond by quickly completing the repairs. If the repairs are not necessary, the landlord can respond by filing a counterclaim for possession, which is essentially a request for the tenant’s eviction. Tenants can’t use the rent escrow to avoid paying rent. The law requires tenants deposit the full amount of rent due with the court. If the tenant fails, the court will likely dismiss the rent escrow and order eviction. However, if the court determines that the eviction is intended as a penalty for a tenant’s good faith claim for rent escrow, Minnesota law requires landlord’s eviction request be denied.

If a landlord receives word a tenant, or tenants, are complaining about how well the property is maintained, they should consult an experienced Minnesota real estate attorney to determine what steps to take.

Minnesota

There may be nothing more important for property owners who lease to residential tenants than maintaining their property and quickly responding to tenant repair concerns.

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