2012 -- S 2520

=======

LC01008

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

____________

A N A C T

RELATING TO PROPERTY -- LEASED LAND DWELLINGS

     

     

     Introduced By: Senator Michael J. McCaffrey

     Date Introduced: February 16, 2012

     Referred To: Senate Judiciary

It is enacted by the General Assembly as follows:

1-1

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

1-2

Land Dwellings" is hereby amended to read as follows:

1-3

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

1-4

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

1-5

indicating that the association has at least fifty-one percent (51%) of the home owners owning

1-6

residential dwellings on the landowners land as members and has articles of incorporation

1-7

specifying all rights and powers, including the power to negotiate for and acquire land on behalf

1-8

of the member homeowners, then, before leased land may be sold for any purpose and before it

1-9

may be leased for any purpose that would result in a discontinuance, the owner shall notify the

1-10

association by certified mail of any bona fide offer that the owner intends to accept, to buy the

1-11

leased land or to lease it for a use that would result in a discontinuance. The owner shall also give

1-12

notice by certified mail to the incorporated home owners' association of any intention to sell or

1-13

lease the land for a use which will result in a discontinuance within fourteen (14) days of any

1-14

advertisement or other public notice by the owner or his agent that the land is for sale or the land

1-15

upon which the residential dwelling is located is for lease.

1-16

      (b) The notice to the home owners' association shall include the price, calculated as a

1-17

single lump sum amount which reflects the present value of any installment payments offered and

1-18

of any promissory notes offered in lieu of cash payments or, in the case of an offer to rent the

1-19

capitalized value of the annual rent, and the terms and conditions of the offer. Any incorporated

1-20

home owners' association entitled to notice under this section shall have the right to purchase, in

2-1

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

2-2

fide offer to lease, the land, provided it meets the same price and the same terms and conditions

2-3

of any offer of which it is entitled to notice under this section by executing a contract or purchase

2-4

and sale or lease agreement with the owner within one hundred eighty (180) days of notice of the

2-5

offer. No owner shall attempt to terminate the tenancy of any member of the incorporated home

2-6

owners' association except for nonpayment of rent for a period of one hundred and eighty (180)

2-7

days following a notice of sale or lease under this section. No owner shall unreasonably refuse to

2-8

enter into, or unreasonably delay the execution of a purchase and sale or lease agreement with a

2-9

home owners' association that has made a bona fide offer to meet the same price and the same

2-10

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

2-11

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

2-12

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

2-13

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

2-14

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

2-15

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

2-16

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

2-17

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

2-18

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

2-19

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

2-20

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

2-21

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

2-22

on the offer.

2-23

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

2-24

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

2-25

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

2-26

informing the purchaser or lessee of the home owners association's right of first refusal pursuant

2-27

to this section.

2-28

      (2) In addition, the home owners' association shall record in the land evidence records of

2-29

the city or town where the leased land is located, a copy of its articles of incorporation together

2-30

with a statement setting forth its statutory right of first refusal to purchase or lease the land of the

2-31

owner pursuant to this section.

2-32

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

2-33

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

2-34

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

3-1

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

3-2

owners' association shall not be required to meet any terms or conditions that would result in the

3-3

removal of members of the association from the property which is the subject of the offer.

3-4

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

3-5

the time periods provided in this section, beginning on the date of notice to the home owners'

3-6

association. The effective period of the right of first refusal shall apply separately for each

3-7

substantially different bona fide offer to purchase the land or to lease it for a purpose that would

3-8

result in a discontinuance, and for each offer the same as an offer made more than three (3)

3-9

months prior to the later offer; provided, however, that in the case of the same offer made by a

3-10

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

3-11

association was required by this section, the right of first refusal shall apply only if the

3-12

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

3-13

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

3-14

owners' association is not required pursuant to this section.

3-15

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

3-16

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

3-17

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

3-18

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

3-19

      (d) In any instance in which the incorporated home owners' association of leased land is

3-20

not the successful purchaser or lessee of the land, the seller or lessor of the land shall prove

3-21

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

3-22

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

3-23

of the land.

3-24

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

3-25

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

3-26

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

3-27

home owners' association may exercise its right of first refusal or until the time set in the offer for

3-28

closing on the offer.

3-29

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

3-30

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

3-31

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

3-32

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

3-33

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

3-34

terminations. Each homeowner whose residential dwelling is removed or destroyed shall be paid

4-1

fair and reasonable compensation by the land owner for all loss or damages caused to the

4-2

homeowner. The landowner shall make a written offer of compensation to the homeowner of fair

4-3

compensation within thirty (30) days before removal or destruction of the residential dwelling. If

4-4

the homeowner believes that the offer does not constitute fair and reasonable compensation, the

4-5

homeowner may submit the matter to binding arbitration pursuant to chapter 3 of title 10.

4-6

     (1) Selection of arbitrator. After submission to arbitration by the homeowner, one

4-7

arbitrator shall be selected from the list of qualified arbitrators of the court annexed arbitration

4-8

program of the superior court in the same manner as arbitrators are selected in accordance with

4-9

the rules of that program. Each party shall share the expenses of arbitration in accordance with

4-10

the rules of the court annexed arbitration program.

4-11

     (2) Hearings. The arbitrator shall call a hearing and provide seven (7) days notice of the

4-12

time and place of the hearing to the parties. The hearing shall be informal, and the rules of

4-13

evidence prevailing in judicial proceedings shall be binding. Any and all documentary evidence

4-14

and other data deemed relevant by the arbitrator may be received in evidence. The arbitrator shall

4-15

have the power to administer oaths and to require by subpoena the attendance and testimony of

4-16

witnesses, and the production of books, records, and other evidence, relative or pertinent to the

4-17

issues presented to the arbitrator for determination. The decision of the arbitrator shall be binding

4-18

upon the parties, subject to the provisions of chapter 3 of title 10.

4-19

     (g) This chapter shall not apply to chapter 31-44 of the Rhode Island general laws.

4-20

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

4-21

hereby amended by adding thereto the following sections:

4-22

     34-18.2-4. Rent increases for leased land. – (a) A landowner defined in section 34-18.2-

4-23

2 shall give the homeowner sixty (60) days written notice prior to any lot rent increase going into

4-24

effect. The written notice shall set forth the current rent, the proposed rent, and the date upon

4-25

which the increase shall take effect.

4-26

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

4-27

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

4-28

“excessive” as defined in this section, the homeowner or authorized homeowners’ association

4-29

may submit the matter to binding arbitration pursuant to chapter 3 of title 10.

4-30

     (1) Selection of arbitrator. After submission to arbitration by the homeowner, one

4-31

arbitrator shall be selected from the list of qualified arbitrators of the court annexed arbitration

4-32

program of the superior court in the same manner as arbitrators are selected in accordance with

4-33

the rules of that program. Each party shall share the expenses of arbitration in accordance with

4-34

the rules of the court annexed arbitration program.

5-1

     (2) Hearings. The arbitrator shall call a hearing and provide seven (7) days notice of the

5-2

time and place of the hearing to the parties. The hearing shall be informal, and the rules of

5-3

evidence prevailing in judicial proceedings shall be binding. Any and all documentary evidence

5-4

and other data deemed relevant by the arbitrator may be received in evidence. The arbitrator shall

5-5

have the power to administer oaths and to require by subpoena the attendance and testimony of

5-6

witnesses, and the production of books, records, and other evidence, relative or pertinent to the

5-7

issues presented to the arbitrator for determination. The decision of the arbitrator shall be binding

5-8

upon the parties, subject to the provisions of chapter 3 of title 10.

5-9

     (c) An “excessive” rent increase for purposes of this section is an increase which is

5-10

unreasonable based on the landowner’s total expenses, including debt service and a reasonable

5-11

return on the landowner’s investment or equity in the leased land, provided, that the debt service

5-12

is directly related to acquisition of the land. Debt service used to or otherwise employed for

5-13

purposes other than that which is directly related to the acquisition or capital management of the

5-14

leased land shall be excluded. Further, the arbitrator shall perform an analysis as to the land

5-15

owner’s need for rent increase and services provided to the homeowner. This analysis shall be

5-16

performed for a period of not less then three (3) years prior to the application for rental increase.

5-17

Specifically excluded in any such analysis shall be any debt service incurred using the leased land

5-18

as collateral or other security for investment, enterprises, businesses or similar ventures separate

5-19

and apart from the leased land.

5-20

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

5-21

“excessive” rent increase standard as defined in this section. For purposes of determining a

5-22

reasonable return on the landowner’s investment or equity, the arbitrator shall perform a risk

5-23

analysis and consider alternative and comparative investments.

5-24

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

5-25

     (1) Completion of the binding arbitration process; or

5-26

     (2) One hundred-twenty (120) days after the written notice given under subsection (a) of

5-27

this section.

5-28

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

5-29

     34-18.2-5. Leased land exempt. – The provisions of subsection 34-18.2-3(f) and section

5-30

34-18.2-4 herein shall not apply to:

5-31

     (1) Any land owner who holds a recreation facility license pursuant to chapter 28-21; or

5-32

     (2) A trailer park or campground license issued by the municipality wherein said trailer

5-33

park or campground is located; or

6-34

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

6-35

seasonal basis.

6-36

     SECTION 3. This act shall take effect upon passage.

     

=======

LC01008

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PROPERTY -- LEASED LAND DWELLINGS

***

7-1

     This act would provide for the fair and reasonable compensation of homeowners for the

7-2

removal or destruction of their residential property on leased land, and would also provide for a

7-3

process of binding arbitration for a landowner and homeowner to resolve their dispute over the

7-4

compensation to be paid. This act would also provide binding arbitration for a landowner and a

7-5

homeowner of a leased land dwelling to resolve claims of excessive rent increases.

7-6

     This act would take effect upon passage.

     

=======

LC01008

=======

S2520