2014 -- S 3126

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LC006014

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO PROPERTY - LEASED LAND DWELLINGS

     Introduced By: Senator Michael J.McCaffrey

     Date Introduced: June 19, 2014

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 34-18.2-3 of the General Laws in Chapter 34-18.2 entitled "Leased

Land Dwellings" is hereby amended to read as follows:

     34-18.2-3. Transfer of leased land -- Right of first refusal. -- (a) In any instance in

which a land owner landowner has been sent a certified letter from an incorporated home owners'

homeowners' association indicating that the association has at least fifty-one percent (51%) of the

home owners homeowners owning residential dwellings on the landowners' land as members and

has articles of incorporation specifying all rights and powers, including the power to negotiate for

and acquire land on behalf of the member homeowners, then, before leased land may be sold for

any purpose and before it may be leased for any purpose that would result in a discontinuance, the

owner shall notify the association by certified mail of any bona fide offer that the owner intends

to accept, to buy the leased land or to lease it for a use that would result in a discontinuance. The

owner shall also give notice by certified mail to the incorporated home owners' homeowners'

association of any intention to sell or lease the land for a use which will result in a discontinuance

within fourteen (14) days of any advertisement or other public notice by the owner or his agent

that the land is for sale or the land upon which the residential dwelling is located is for lease.

      (b) The notice to the home owners' homeowners' association shall include the price,

calculated as a single lump sum amount which reflects the present value of any installment

payments offered and of any promissory notes offered in lieu of cash payments or, in the case of

an offer to rent the capitalized value of the annual rent, and the terms and conditions of the offer.

Any incorporated home owners' homeowners' association entitled to notice under this section

shall have the right to purchase, in the case of a third party bona fide offer to purchase, or to lease

in the case of a third party bona fide offer to lease, the land, provided it meets the same price and

the same terms and conditions of any offer of which it is entitled to notice under this section by

executing a contract or purchase and sale or lease agreement with the owner within one hundred

eighty (180) days of notice of the offer. No owner shall attempt to terminate the tenancy of any

member of the incorporated home owners' homeowners' association except for nonpayment of

rent for a period of one hundred and eighty (180) days following a notice of sale or lease under

this section. No owner shall unreasonably refuse to enter into, or unreasonably delay the

execution of a purchase and sale or lease agreement with a home owners' homeowners'

association that has made a bona fide offer to meet the same price and the same terms and

conditions of an offer for which notice is required to be given pursuant to this section. Failure of

the incorporated home owners' homeowners' association to execute such a purchase and sale

agreement or lease within the first one hundred eighty (180) day period shall serve to terminate

the right of the association to purchase or lease the land. The time periods may be extended by

agreement of the association and the owner. Nothing herein shall be construed to require an

owner to provide financing to any association or to prohibit an owner from requiring an

association which is offering to lease land to have within its possession a sum equivalent to the

capitalized value of the proposed rent of the land and requiring that a portion of the sum, of an

amount necessary to pay the rent on the land for a period of no greater that two (2) years, be kept

in escrow for such purpose during the term of the lease. In the event that an incorporated home

owners' homeowners' association accepts an offer under this section, the tenancy of the members

of the association shall be extended on a month to month basis until the time set in the offer for

closing on the offer.

      (c) (1) When an owner has been properly notified under the terms of this section of the

existence of an incorporated home owners' homeowners' association, the owner shall include in

any purchase and sale agreement or lease agreement which would be subject to this section, a

statement informing the purchaser or lessee of the home owners homeowners association's right

of first refusal pursuant to this section.

      (2) In addition, the home owners' homeowners' association shall record in the land

evidence records of the city or town where the leased land is located, a copy of its articles of

incorporation together with a statement setting forth its statutory right of first refusal to purchase

or lease the land of the owner pursuant to this section.

      (3) The right of first refusal created herein shall not be deemed to allow a homeowners'

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association to vary the terms of any offer made to an owner and to make a counteroffer to said

owner. The homeowners' association shall have the right of first refusal only on the exact terms

and conditions as set forth in the offer received by the owner; provided, however, that the home

owners' homeowners' association shall not be required to meet any terms or conditions that would

result in the removal of members of the association from the property which is the subject of the

offer.

      (4) The right of first refusal created herein shall inure to a home owners' homeowners'

association for the time periods provided in this section, beginning on the date of notice to the

home owners' homeowners' association. The effective period of the right of first refusal shall

apply separately for each substantially different bona fide offer to purchase the land or to lease it

for a purpose that would result in a discontinuance, and for each offer the same as an offer made

more than three (3) months prior to the later offer; provided, however, that in the case of the same

offer made by a prospective buyer who has previously made an offer for which notice to a home

owners' homeowners' association was required by this section, the right of first refusal shall apply

only if the subsequent offer is made more than six (6) months after the earlier offer. The right of

first refusal shall not apply with respect to any offer received by the owner for which notice to a

home owners' homeowners' association is not required pursuant to this section.

      (5) No right of first refusal shall apply to a government taking by eminent domain or

negotiated purchase, a forced sale pursuant to a foreclosure, transfer by gift, devise or operation

of law, or a sale to a person who would be included within the table of descent and distribution if

there were to be a death intestate of a land owner landowner.

      (d) In any instance in which the incorporated home owners' homeowners' association of

leased land is not the successful purchaser or lessee of the land, the seller or lessor of the land

shall prove compliance with this section by filing an affidavit of compliance in the official land

evidence records of the city or town where the property is located within seven (7) days of the

sale or lease of the land.

      (e) No land owner landowner shall attempt to increase any rental amount due regarding

leased land from the time of his or her receipt of any bona fide offer to purchase or to lease for a

purpose which would result in a discontinuance, until the expiration of the time period during

which a home owners' homeowners' association may exercise its right of first refusal or until the

time set in the offer for closing on the offer.

      (f) In the event that an owner terminates the tenancies of all of the members of the

incorporated association, the right of first refusal created by this section shall inure to the benefit

of the former membership of the association for a period of one year after the termination of the

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tenancies, or until the houses which they occupied are removed or destroyed, whichever first

occurs, with the former members having the same rights and obligations as existed prior to the

terminations.

     (g) The landowner shall tender a written lease incorporating the terms and conditions of

the tenancy to all tenants and prospective tenants. The lease shall not be inconsistent with the

provisions of this chapter.

     (h) A covenant of good faith and fair dealing shall be deemed to be incorporated into the

terms and conditions of all tenancies between a homeowner and landowner involving a residential

dwelling which is located on leased land, as well as the negotiation process associated therewith.

     SECTION 2. Chapter 34-18.2 of the General Laws entitled "Leased Land Dwellings" is

hereby amended by adding thereto the following sections:

     34-18.2-4. Termination of lease. -- (a) A landowner desiring to terminate a tenancy with

a homeowner based on the discontinuation of the use of the leased land as leased land (and not for

cause) shall provide the affected homeowner(s) with at least fifteen (15) months' notice thereof.

     (b) In the event of a termination of a tenancy (or a failure to renew a tenancy) with a

homeowner without cause as provided in subsection (a) of this section, or in the event of a

termination (or a failure to renew a tenancy) for cause, the landowner shall take reasonable steps

to take control of any residential dwelling remaining on the leased land following said

termination, and shall, upon at least ninety (90) days of said advertising sell the dwelling pursuant

to commercially reasonable terms. The proceeds of such sale shall be applied as follows:

     (1) First, to satisfy any federal, state or local liens on the dwelling;

     (2) Second, to cover the fair and reasonable costs incurred by the landowner to secure the

dwelling and accomplish its sale;

     (3) Third, to satisfy any arrearages for unpaid rent or other costs remaining due under the

tenancy;

     (4) Fourth, to satisfy any mortgage or other liens on the property; then

     (5) The balance shall be remitted to the homeowner.

     (c) During the aforesaid ninety (90) day notice period, the homeowner may avert the

advertising and sale of the dwelling by the landowner as aforesaid, by satisfying any arrearages

for unpaid rent or other costs remaining due under the tenancy, and causing the dwelling to be

removed from the formerly leased land, by sale or otherwise.

     34-18.2-5. Rent increases for leased land. – (a) A landowner, as defined in § 34-18.2-2,

shall give the homeowner sixty (60) days' written notice prior to any lot rent increase. The written

notice shall set forth the current rent, the proposed rent, and the date upon which the increase

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shall take effect.

     (b) If a homeowner or a homeowners' association, having, the power and authority to

negotiate rental terms on behalf of member homeowners, believes that the rent increase is

"excessive" as defined in this section, the homeowner or authorized homeowners' association may

submit the matter to binding arbitration pursuant to chapter 3 of title 10. In the event the parties

are unable to agree upon an arbitrator, an arbitrator shall be appointed in the manner set forth in

chapter 3, of title 10. The costs and expenses of the arbitrator shall be borne equally by the

landowner and the homeowner or authorized homeowners' association.

     (c) An "excessive" rent increase, for purposes of this section, is an increase which

unreasonably exceeds the fair rental value of the property based on market conditions at the time.

     (d) The arbitrator shall promptly hear the dispute and render a decision based on the

"excessive" rent increase standard as set forth in this section.

     (e) No lot rent increase shall go into effect until the earlier of:

     (1) Completion of the binding arbitration process; or

     (2) Ninety (90) days after the written notice given under subsection (a) of this section.

     (f) This section shall not apply to chapter 31 of title 44 of the Rhode Island general laws.

     34-18-2.6. Leased land exempt. – The provisions of §§ 34-18-2.4 and 34-18-2.5 of this

chapter shall not apply to any landowner who holds a recreation facility license under chapter 21

of title 23, or a trailer park or campground license issued by the municipality in which it is

located on leased land which is leased to at least ninety percent (90%) of the homeowners on a

seasonal basis.

     SECTION 3. This act shall take effect upon passage.

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LC006014

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PROPERTY - LEASED LAND DWELLINGS

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     This act would establish a procedure for compensation of a homeowner for removal or

destruction of their residential property on leased land, and an arbitration procedure for disputes

over compensation to be paid, and for excessive rent increases.

     This act would take effect upon passage.

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LC006014

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