2018 -- H 7970 SUBSTITUTE A

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LC005217/SUB A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2018

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A N   A C T

RELATING TO PROPERTY -- RHODE ISLAND REAL ESTATE TIME-SHARE ACT

     Introduced By: Representatives Tobon, Cunha, Edwards, Maldonado, and Marshall

     Date Introduced: March 16, 2018

     Referred To: House Corporations

     It is enacted by the General Assembly as follows:

     SECTION 1. Section 34-41-2.05 of the General Laws in Chapter 34-41 entitled "Rhode

Island Real Estate Time-Share Act" is hereby amended to read as follows:

     34-41-2.05. Termination of time-shares.

     (a) This section applies to all time-share estates, except it shall apply to time-share

licenses only to the extent expressly provided by the time-share instrument.

     (b) All time-shares in a time-share property may be terminated only as follows:

     (1) By agreement of the time-share owners having at least sixty percent (60%) of the

time-shares, or such larger majority as the time-share instrument may specify; or

     (2) Any provision in the time-share instrument notwithstanding, by a plan of termination

approved by the lesser of the lowest percentage of voting interests necessary to amend the

instrument, or as otherwise provided in the instrument for approval of termination if:

     (i) The estimated cost of construction for repairs which are necessary to restore the time-

share property to its former condition or bring the time-share property into compliance with

applicable laws or regulations exceeds the combined fair-market value of the units in the time-

share property after completion of the construction or repairs;

     (ii) It becomes impossible to operate or reconstruct a time-share property to its prior

physical configuration because of land-use laws or regulations;

     (iii) The association is not paying its debts as they become due;

     (iv) The association's debts exceed its assets;

     (v) More than twenty-five percent (25%) of the association members are delinquent in

payment of the annual maintenance fee and/or any special assessments;

     (c) An agreement to terminate all time-shares pursuant to subsection (b)(1) shall comply

with the following:

     (1) An agreement to terminate all time-shares in a time-share property must be evidenced

by the execution of a termination agreement, or ratifications thereof, in the same manner as a

deed, by the requisite number of time-share owners. The termination agreement must specify a

date after which the agreement will be void unless it is recorded before that date. A termination

agreement and a certification by the managing entity of the ratification thereof must be recorded

in every municipal office of land-evidence records in which a portion of the time-share property

is situated, and is effective only upon recordation.

     (2) Unless the termination agreement sets forth the material terms of a contract, or

proposed contract, under which an estate or interest in each time-share unit equal to the sum of

the time-shares therein is to be sold and designates a trustee to effect the sale, title to an estate or

interest in each time-share unit equal to the sum of the time-shares therein vests upon termination

in the time-share owners thereof, in proportion to their respective interests as provided in

subsection (e), and liens on the time-shares shift accordingly to encumber those interests. Any co-

owner of that estate or interest in a unit may thereafter maintain an action for partition or for

allotment or sale in lieu of partition pursuant to the laws of this state.

     (3) If the termination agreement sets forth the material terms of a contract or proposed

contract under which an estate or interest in each time-share unit equal to the sum of the time-

shares therein is to be sold and designates a trustee to effect the sale, title to that estate or interest

vests upon termination in the trustee, for the benefit of the time-share owners, in fee simple and

free and clear of all liens and encumbrances, to be transferred pursuant to the contract. Proceeds

of the sale must be distributed to time-share owners with the fractional interests in the time-shares

and lienholders as their interests may appear, in proportion to the respective interests of the time-

share owners as provided in subsection (e). After the title so vests in the trustee, the time-share

owners shall have no further real property ownership interest or other right in and to their former

unit, and their interest and rights shall be limited to only the proceeds remaining with the trustee

or the registry of the court except as may be provided in subsection (c)(4) of this section.

     (4) Except as otherwise specified in the termination agreement, so long as the former

time-share owners or their trustee hold title to the estate or interest equal to the sum of the time-

shares, each former time-share owner and his or her successors in interest have the same rights

with respect to occupancy in the former time-share unit that he or she would have had if

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termination had not occurred, together with the same liabilities and other obligations imposed by

this chapter or the time-share instrument.

     (d) After termination of all time-shares in a time-share property and adequate provision

for the payment of any liens or encumbrances on the property of the association and the claims of

the creditors for time-share expenses, distribution must be made, in proportion to their respective

interests as provided in subsection (e), to the former time-share owners and the mortgagees and

lien holders having an interest in their respective time-share units as their interests may appear

and their successors in interest of (i) the proceeds of any sale pursuant to this section, (ii) the

proceeds of any personalty held for the use and benefit of the former time-share owners, and (iii)

any other funds held for the use and benefit of the former time-share owners. Following

termination, creditors of the association holding liens perfected against the time-share property

before the termination may enforce those liens against only the proceeds from the sale of the

property in the same manner as any other lienholder. All other creditors of the association are to

be treated as if they had perfected liens on the time-share property immediately before

termination.

     (e) The time-share termination instrument may specify the respective fractional or

percentage interest in the estate or interest in proceeds from the sale of each unit equal to the sum

of the time-shares therein that will be owned by each former time-share owner. If specified in the

termination instrument, such percentage interests shall be based upon an appraisal of the fair-

market value of each time-share by one or more impartial qualified appraisers. Otherwise, not

more than one hundred eighty (180) days prior to the termination, an appraisal must be made of

the fair-market value of each time-share by one or more impartial qualified appraisers selected

either by the trustee designated in the termination agreement, or by the managing entity if no

trustee was so designated. The appraisal must also state the corresponding fractional or

percentage interests calculated in proportion to those values and in accordance with this

subsection. A notice stating all of those values and corresponding interests and the return address

of the sender must be sent by certified or registered mail, return receipt requested, by the

managing entity or by the trustee designated in the termination agreements, to all of the time-

share owners at their last known address as shown on the records of the association. The appraisal

governs the magnitude of each interest and shall be presented to the superior court sitting in the

county in which the time-share property is located for review and approval and distribution of the

proceeds of such sale pursuant to the termination plan unless (i) At least twenty-five percent

(25%) of the time-share owners deliver, within sixty (60) days after the date the notices were

mailed, written disapprovals to the return address of the sender of the notice, or (ii) The final

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judgment of a court of competent jurisdiction, entered during or after that period, holds that the

appraisal should be set aside. The appraisal and the calculation of interests must be made in

accordance with the following:

     (1) If the termination agreement sets forth the material terms of a contract, or proposed

contract, for the sale of the estate or interest equal to the sum of the time-shares, each time-share

conferring a right of occupancy during a limited number of time periods must be appraised as if

the time until the date specified for the conveyance of the property had already elapsed.

Otherwise, each time-share of that kind must be appraised as if the time until the date specified

pursuant to subsection (c) had already elapsed.

     (2) The interest of each time-share owner is the value of the time share he or she owned

divided by the sum of the values of all time-shares in the unit or units to which his or her time-

share applies.

     (f) Foreclosure or enforcement of a lien or encumbrance against all of the time-shares in a

time-share property does not of itself terminate those time-shares. Provided, however, a

foreclosure sale of a time-share association lien conducted in accordance with the Rhode Island

general laws shall be deemed to vest title in the grantee/transferee at that sale upon the recording

of the foreclosure deed, without further action if no adverse litigation contesting that foreclosure

has been commenced within one year after recording of that foreclosure deed or the effective date

of this statute, whichever is later, and if there is no cause of action commenced based solely on

the consideration for that purchase pending within one year of the recording of that foreclosure

deed or the effective date of this statute, whichever is later.

     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PROPERTY -- RHODE ISLAND REAL ESTATE TIME-SHARE ACT

***

     This act would amend several processes relative to the termination of a time-share

agreement and the division of the ownership interests thereto.

     This act would take effect upon passage.

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