Contracts for Deed Pose Serious Risks to Minnesota Families

In a recent ProPublica article (produced in collaboration with Sahan Journal), the often-predatory practice of selling contracts for deed to Minnesota Somali families is investigated. Contracts for deed (also known as seller financing) offer a path to home ownership that eschews the traditional mortgage lending approach. For those facing obstacles to home ownership, such as low income and little credit, it can be an attractive alternative. Basically, a contract for deed is a financial agreement in which the buyer pays the seller directly in installments. There is no mortgage or bank involvement, but there are serious risks to a buyer’s financial stability.

In Minnesota, many prospective Somali home buyers looking for increased space, better schools and neighborhoods, and a way avoid paying or profiting from interest (a principle important to members of the East African Muslim community), have taken the non-conventional, contract for deed route. But the potential pitfalls are not always clear, and buyers are often mistaken about the lack of protections and unforeseen consequences they might face. Those consequences include the loss of thousands of dollars if they default, and loss of the property itself.

Isuroon, a nonprofit advocacy agency for Somali women and girls in Minneapolis, estimates that at least 100 Somali families purchased homes with contracts for deed last year, but there could be many more.

“Most of those contracts for deed were designed to fail,” said Luke Grundman, litigation director at Mid-Minnesota Legal Aid. “They may have sunk tens of thousands of dollars into the down payment and monthly payments. And then it’s not just the actual money but the false hope of homeownership.”

Minnesota passed a law in 2013 requiring established contract for deed sellers to provide a buyer’s notice disclosing the transaction’s disadvantages. But with no state agency to enforce disputes, the notice amounts to a list of warnings and recommendations. There is also no requirement for sellers to verify buyers’ ability to repay the debt.

Some states have laws giving buyers more protections, for example, that canceled contracts are handled through the foreclosure process. This kind of requirement gives the buyer more time to pay the overdue balance or at least some options to recoup their money.

“We need to think very hard about following some of these other states’ leads and providing more protections and more balance in the statute to make it so that if the deal fails, it’s not a total washout,” said Ron Elwood, supervising attorney with the Legal Services Advocacy Project (LSAP).

Read the full article “How Contracts for Deed Put Families at Financial Risk.”

Attorney General’s Binding Opinion on Lunch Shaming Affirms LSAP's Longstanding Work

The Minnesota Department of Education (MDE) applauded Attorney General Keith Ellison’s opinion that all students are entitled to the same healthy, full school meal, regardless of lunch debt. Commissioner Heather Mueller had asked the Attorney General for clarification after receiving reports that a number of public schools or districts across Minnesota had adopted policies whereby students with unpaid meal balances are denied lunch items from the scheduled menu for the day. Students with unpaid meal balances are provided instead with what schools and districts refer to as an “alternate meal,” a “minimum meal,” or a “courtesy meal.”

The Legal Services Advocacy Project (LSAP) requested that the MDE investigate and consult the Attorney General after surveying more than 330 Minnesota school districts earlier this year. LSAP found that 124 policies appeared to violate the Minnesota law that banned lunch shaming in July 2021. Legislation that LSAP, Hunger Solutions MN, and others had worked hard to help enact.

Under Minnesota law, the Commissioner of Education may request a formal opinion of the Attorney General on "any question arising under the laws relating to public schools." Once issued, the Attorney General's opinion is binding unless a court rules otherwise.

The opinion took effect immediately (Nov. 17, 2022) and MDE has notified school districts to immediately implement a policy that all students be offered the same meals regardless of meal debt.

"This is an important step forward for our students and our families," said Education Commissioner Mueller in MDE’s press release. "Differential treatment, lunch shaming or otherwise demeaning or stigmatizing the student for unpaid meal balances must not continue. We will continue to work to ensure all schools have the resources so all children have access to free meals while at school." More information is available in the Attorney General's opinion.

MDLC Supervising Attorney Recognized with Inaugural Award

Maren Hulden, supervising attorney with the Minnesota Disability Law Center (MDLC) was recognized this month with the PACER Center’s inaugural Paula F. Goldberg Champion for Children with Disabilities Award. The Center’s new annual award was established in honor of Paula Goldberg, co-founder and extraordinary leader of the PACER Center from 1977 - 2022. The award encourages and recognizes an individual or group who has demonstrated exceptional advocacy and leadership in support of the rights of children with disabilities by being a visionary leader, a tenacious advocate, and a true role model.

In her current role with MDLC and previously with the Legal Services Advocacy Project (LSAP), Hulden helps legislators and community members understand problems from both a systemic and human level. She has been instrumental in helping pass legislation, including recovery education, inclusive childcare, and more.

On the nomination of Hulden, Julia Page of The Arc Minnesota said, “She is one of the most effective advocates I have ever had the pleasure to work with. Maren is astute in her advocacy both in content knowledge and relationship building. Maren possesses a perfect combination of warmth, empathy, story-telling, and deep knowledge of data and policy. I truly think that she could work with anyone and get any goal accomplished. In addition to her vast knowledge as an attorney, her experience as an educator and mother of a young child with a disability give her a deep understanding of the barriers to inclusion that children with disabilities and their families face. Maren is constantly working to promote and protect the human rights of people who have disabilities, and she is deeply deserving of this award.”

Standpoint Wins Minnesota Supreme Court Appeal to Protect Victims' Privacy

Last week, the Minnesota Supreme Court ruled that communications between sexual assault counselors and their clients are protected by state law. The ruling, a major victory for advocacy groups in Minnesota, reverses a district court decision that allowed a court review of a victim’s "notes, memoranda, records, and reports" as communicated privately with a sexual assault advocacy counselor in a criminal case. Specifically, from the high court’s ruling: “This case concerns how sexual assault counselors’ statutory privilege under Minnesota Statutes section 595.02, subdivision 1(k) (2020), interacts with a criminal defendant’s interests in a fair trial.”

Standpoint (formerly the Battered Women’s Legal Advocacy Project) filed the appeal in hopes that the Minnesota Supreme Court would take the case and set a precedent for lower courts, preventing the use of subpoenaed records in violation of a 1982 law that any "opinion or information received from or about the victim" could not be disclosed without that person's consent. Over the years district courts have sometimes subpoenaed records from sexual assault counseling agencies because attorneys have argued that those records were needed under the right to due process and full defense.

Rana Alexander, Executive Director of Standpoint

Rana Alexander, Standpoint’s executive director, was the lead attorney on this case and has been advocating for the privacy and protection of victim rights in criminal cases for years. Confidentiality is one of the most critical tools sexual violence advocates have to allow them to provide essential services to victim-survivors. 

"The Minnesota Supreme Court applied a strict scrutiny standard and it said that the state has a compelling governmental interest in protecting sexual assault victims," Alexander said. "That is a huge statement from the Supreme Court in recognizing that we are serious in the state of Minnesota about ending sexual violence." Read more in the Star Tribune and read the decision here.

LSAP Part of Team That Won Reforms Protecting Accident Victims from Predatory Practices

Last week, the Minnesota State Legislature passed a bill that will crack down on settlement purchasing companies that prey on accident victims by soliciting, and in some cases harassing, them to sell their future payments. An October 2021 Star Tribune investigatory series uncovered egregious abuses of accident victims, some with serious cognitive impairments, by companies pressuring them into selling insurance settlements and annuity payments for a small fraction of the total award, often leaving them without adequate resources to take care of themselves and their families in the future. The Legal Services Advocacy Project (LSAP) was a key part of a team, including legislators and other groups, that helped craft and advocate for enactment of the strong consumer protections in the bill. Governor Walz is expected to sign the new bill into law with an effective date of August 1, 2022.

Settlement payments are often the only income for those whose lives are upended by an accident. Accident victims frequently do not understand what they are giving up with such sales, and judges are not equipped with the needed tools to assist them. Required court hearings to review such transactions are usually short and with few questions on merit.  

These deals must be approved by a court, but judges had little statutory guidance to properly scrutinize these proposed transfers. The new legislation will give judges the tools they have been asking for, including requiring them to consider numerous factors, such as the age, maturity level, and financial situation of the seller, in determining whether a deal is truly in the seller's best interest. It also allows courts to appoint an outside, independent attorney-adviser in any case, and requiring an appointment in cases involving sales of minors' settlements or prospective sellers with cognitive impairments. The new law will also prohibit aggressive marketing and sales tactics, including barring purchasing companies from harassing consumers through repeated contact.

"We are light-years ahead of where the law was," said Ron Elwood, supervising attorney of the Legal Services Advocacy Project. "I think Minnesota's law is now among the best, if not the best, consumer protection law in this area in the country."

Read the full story in the Star Tribune.