2023 -- H 5749

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LC001470

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2023

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A N   A C T

RELATING TO PROPERTY -- COMMUNITY OPPORTUNITY TO PURCHASE ACT

     

     Introduced By: Representatives Speakman, Morales, Henries, Alzate, Felix, Giraldo,
Potter, Cruz, Tanzi, and Stewart

     Date Introduced: February 21, 2023

     Referred To: House Municipal Government & Housing

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 34 of the General Laws entitled "PROPERTY" is hereby amended by

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adding thereto the following chapter:

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CHAPTER 18.3

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COMMUNITY OPPORTUNITY TO PURCHASE ACT

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     34-18.3-1. Legislative findings and purpose.

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     (a) The general assembly finds as follows:

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     (1) The state faces a severe and continuing housing crisis. Many state residents are unable

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to obtain or retain affordable housing.

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     (2) This crisis has profoundly negative effects on the state. It causes dislocation, which

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frays the social ties that bind our neighborhoods and communities together. It forces vulnerable

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residents to leave their home, the state, for new communities where they are strangers. And it

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contributes to homelessness, which is itself a severe and continuing crisis in the state.

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     (3) The state's housing crisis is caused, in large part, by a shortage of affordable rental

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housing. The creation and preservation of such housing is therefore of paramount public concern.

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     (4) One obstacle to the creation and preservation of affordable rental housing is rapid

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turnover in the state's real estate market. Nonprofit organizations seeking to create and preserve

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affordable housing may be willing and able to pay market prices to purchase residential buildings

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for sale, but nevertheless find themselves unable to purchase such buildings before they leave the

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market. Nonprofit organizations serving the broader public interest must often move more

 

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deliberately and borrow purchase money from non-traditional lenders in such real estate

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transactions than private entities concerned solely with profit.

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     (b) The purpose of this chapter (which may be referred to as the "community opportunity

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to purchase act") is to enhance nonprofit organizations' ability to purchase multi-family residential

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buildings, at market prices, within a reasonable period of time and to thereby promote the creation

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and preservation of affordable rental housing.

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     34-18.3-2. Definitions.

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     As used in this chapter:

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     (1) "Area median income" means the unadjusted area median income published by the U.S.

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Department of Housing and Urban Development for the geographic area that includes the state.

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     (2) "Fee interest" means ownership of real property in fee simple absolute.

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     (3) "Multi-family residential building" or "building" means any privately-owned real

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property in the state improved with five (5) or more residential rental units (whether or not the

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property also includes non-residential uses). Any privately-owned real property on which five (5)

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or more residential units are under construction, and any privately-owned vacant lot on which the

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local zoning and other applicable laws would permit the construction of five (5) or more residential

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rental units.

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     (4) "Notice of special restrictions" means an agreement executed by a qualified nonprofit

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and recorded against a multi-family residential building purchased by such qualified nonprofit

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substantially in the form published by Rhode Island housing.

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     (5) "Purchase of a multi-family residential building," or "purchase," means to acquire any

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interest that is transferred pursuant to the sale of a multi-family residential building.

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     (6) "Purchaser" means the individual, individuals, entity, or entities engaged or seeking to

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engage, in the purchase of a multi-family residential building.

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     (7) "Rhode Island housing" means the Rhode Island housing and mortgage finance

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corporation ("RIHMFC") created pursuant to chapter 55 of title 42.

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     (8) "Sale of a multi-family residential building," or "sale," means any of the following:

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     (i) The transfer, in exchange for money or any other thing of economic value, of a present

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interest in the multi-family residential building, including beneficial use, where the value of the

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present interest is the fee interest in the multi-family residential building, or substantially equal to

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the value of that fee interest;

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     (ii) If an interest in the multi-family residential building is held by a trust, the transfer, in

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exchange for money or any other thing of economic value, of a beneficial interest in the trust, where

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the value of the beneficial interest in the trust is substantially equal to the value of the fee interest

 

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of the multi-family residential building; or

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     (iii) If an interest substantially equal to the value of the fee interest of the multi-family

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residential building is held by any kind of corporate entity or partnership (including, but not limited

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to, a corporation, limited liability company, general partnership, limited partnership, or limited

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liability partnership), and if that interest is substantially equal in value to the total value of assets

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held by the corporate entity or partnership, the transfer in exchange for money or any other thing

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of economic value, of a controlling interest in the corporate entity or partnership. For purposes of

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this section, in any instance in which multiple entities (whether those entities are natural persons,

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trusts, corporate entities, partnerships, or any other kind of entity, or any combination of different

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kinds of entities) hold interests in a multi-family residential building, the transfer of multiple

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interests by or in those entities shall be considered the transfer of a single interest, if the transfers

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are made in connection with substantially the same transaction or set of transactions.

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     (iv) "Sale of a multi-family residential building," or "sale," does not include any of the

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following:

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     (A) Any transfer made under a mortgage, deed of trust, or deed in lieu of foreclosure;

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     (B) Any transfer made in connection with any bankruptcy proceeding (including, but not

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limited to, any transfer made by a bankruptcy trustee);

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     (C) Any transfer of an interest in real property held by the federal government, by the state

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government, or by any special district created by state law (including, but not limited to, any

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transfer of any such interest held because of a taxpayer's nonpayment of tax);

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     (D) Any transfer by devise or intestacy, or any other transfer made in connection with a

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bona fide effort to pass an interest in real property to one's devisees or heirs (including, but not

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limited to, such transfers made in connection with a living trust);

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     (E) Any transfer between or among spouses, domestic partners, siblings (including, but not

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limited to, half-siblings, step-siblings, and adoptive siblings), parents (including, but not limited to,

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step-parents and adoptive parents) or guardians and their children, grandparents and their

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grandchildren, aunts or uncles and their nieces or nephews, great-aunts or great-uncles and their

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grand-nieces or grand-nephews, or first or second cousins, or any combination thereof; or

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     (F) Any transfer of an interest in a multi-family residential building income restricted at or

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below an average of eighty percent (80%) of area median income for a minimum of ten (10) years

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if such transfer is to an entity controlled by a housing authority, and that entity also participates in

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the management, direction, or control of the building.

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     (9) "Sell," "sale," or "sold" means a transaction for the transfer of real estate from a seller

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to a buyer, including, but not limited to, exchanges of real estate between the seller and buyer and

 

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transactions involving the creation of a sales agreement.

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     (10) "Seller" means the individual, individuals, entity, or entities engaged, or seeking to

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engage, in the sale of a multi-family residential building.

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     (11) "Qualified nonprofit housing development corporation" means a nonprofit

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corporation, which has applied under 42 U.S.C. § 501(c)(3) for approval as a § 501(c)(3)

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corporation with the Internal Revenue Service, or been so approved, and which is organized and

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operated with one of its principal purposes being to provide housing for low- and moderate-income

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persons.

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     34-18.3-3. Qualified nonprofits.

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     (a) Annual selection of qualified nonprofits. Rhode Island housing shall establish a process

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for certifying on an annual basis, nonprofit organizations that meet the following criteria:

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     (1) The organization is a bona fide nonprofit as evidenced by the fact that it is exempt from

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federal income tax under 26 USC § 501(c)(3);

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     (2) The organization has demonstrated a commitment to the provision of affordable

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housing for low- and moderate-income residents, and to preventing the displacement of such

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residents;

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     (3) The organization has demonstrated a commitment to community engagement as

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evidenced by relationships with neighborhood-based organizations or tenant counseling

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organizations; and

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     (4) The organization has demonstrated the capacity (including, but not limited to, the legal

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and financial capacity) to effectively acquire and manage residential real property at multiple

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locations in the state.

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     (b) Nonprofit organizations that Rhode Island housing certifies as having met these criteria

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shall be known as "qualified nonprofits." An organization's certification as a qualified nonprofit

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shall be valid for three (3) years. Rhode Island housing shall solicit new applications for qualified

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nonprofit status at least once each calendar year, at which time existing qualified nonprofits shall

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be eligible to apply for renewed certification as qualified nonprofits. In the absence of new

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information raising doubts about whether the organization qualifies as a qualified nonprofit, an

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existing qualified nonprofit's application for renewed certification as a qualified nonprofit shall be

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routinely and swiftly granted.

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     34-18.3-4. Existence and publication of qualified nonprofits list.

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     RIHMFC shall publish on its website, and make available upon request, a list of qualified

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nonprofits. In addition to such other information as RIHMFC may include, this list shall include

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contact information for each qualified nonprofit. This contact information shall include, but need

 

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not be limited to, a mailing address, an email address that the qualified nonprofit monitors regularly,

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and a telephone number.

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     34-18.3-5. Priority for Rhode Island nonprofits.

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     Qualified Rhode Island nonprofits shall be given priority over qualified out-of-state non-

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profits.

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     34-18.3-6. General provisions - First right to purchase conferred.

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     (a) This chapter shall be construed to confer upon each qualified nonprofit a first right to

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purchase any multi-family residential building for sale in the state. This first right to purchase shall

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consist of both a right of first offer, and a right of first refusal.

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     (b) Confidential information protected. Any information obtained from a seller by a

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qualified nonprofit under this chapter including, but not limited to, disclosures made and terms and

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conditions of an offer of sale made shall be kept confidential to the maximum extent permitted by

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law, except that a qualified nonprofits may, if otherwise permitted by law, share such information

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with other qualified nonprofits to facilitate qualified nonprofit exercise of the rights conferred by

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this chapter. Nothing in this chapter permits or requires the disclosure of information where such

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disclosure is otherwise prohibited by law.

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     (c) Preexisting rights unaffected. This chapter shall not be construed to impair any contract,

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or affect any property interest held by anyone other than the seller of a multi-family residential

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building (including, but not limited to, any interest held under a mortgage, deed of trust, or other

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security interest; any option to purchase: or any right of first offer or right of first refusal), in

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existence before the effective date of this chapter.

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     34-18.3-7. State owned buildings.

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     When any state-owned property, either land or buildings, is to be sold, RIHMFC shall be

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given the right of first refusal lasting sixty (60) days to enter into an agreement to purchase it at the

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appraised value. The municipality where the property is located shall be given the right of second

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refusal (lasting another sixty (60) days) to purchase, before the property goes on the open market.

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     34-18.3-8. Enforcement - Seller certification.

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     (a) Every seller of a multi-family residential building in any city or town shall, within

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fifteen (15) days of the sale of that building, submit to RIHMFC a signed declaration, under penalty

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of perjury, affirming that the sale of that building substantially complied with the requirements of

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this chapter. Each such declaration shall include the address of the relevant building and RIHMFC

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shall publish all such addresses on its website at least once per week.

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     (b) Failure to file the declaration required by this section shall be an infraction punishable

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by a fine not to exceed five thousand dollars ($5,000).

 

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     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 -- COMMUNITY OPPORTUNITY TO PURCHASE ACT

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     This act would grant a right of first refusal to qualified nonprofits for the purchase of certain

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multi-family residential properties at market prices, within a reasonable period of time to promote

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the creation and preservation of affordable rental housing.

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     This act would take effect upon passage.

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