2016 -- H 7574 SUBSTITUTE A

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LC004726/SUB A/2

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2016

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A N   A C T

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

TERMINATION OF TIME SHARES

     

     Introduced By: Representatives Tobon, Barros, Shekarchi, Marshall, and Carnevale

     Date Introduced: February 11, 2016

     Referred To: House Judiciary

     It is enacted by the General Assembly as follows:

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

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

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     34-41-2.05. Termination of time shares. -- (a) This section applies to all time share

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estates except it shall apply to time-share licenses only to the extent expressly provided by the

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time-share instrument.

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

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     (1) By agreement of the time-share owners having at least eighty sixty percent (80%)

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(60%) of the time shares, or such larger majority as the time-share instrument may specify. ; or

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

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

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

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

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

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

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share property after completion of the construction or repairs;

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

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physical configuration because of land use laws or regulations;

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

 

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

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

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

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     (c) An agreement to terminate all time shares pursuant to subsection (b)(1) of this section

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shall comply with the following:

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

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

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

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

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

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be recorded in every municipal office of land evidence records in which a portion of the time-

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share property is situated, and is effective only upon recordation.

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

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

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

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

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

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

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

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

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

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

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

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vests upon termination in the trustee for the benefit of the time-share owners, to be transferred

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pursuant to the contract. Proceeds of the sale must be distributed to time-share owners and

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

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owners as provided in subsection (h).

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

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

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

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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

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this chapter or the time-share instrument.

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

 

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provision for the payment of the claims of the creditors for time-share expenses, distribution must

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be made, in proportion to their respective interests as provided in subsection (h), to the former

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time-share owners and their successors in interest of (i) the proceeds of any sale pursuant to this

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

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owners, and (iii) any other funds held for the use and benefit of the former time-share owners.

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

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property before the termination may enforce those liens in the same manner as any other

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lienholder. All other creditors of the association are to be treated as if they had perfected liens on

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the time-share property immediately before termination.

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

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interest in the estate or interest in each unit equal to the sum of the time shares therein that will be

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owned by each former time-share owner. Otherwise, not more than one hundred eighty (180)

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days prior to the termination, an appraisal must be made of the fair market value of each time

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share by one or more impartial qualified appraisers selected either by the trustee designated in the

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termination agreement, or by the managing entity if no trustee was so designated. The appraisal

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must also state the corresponding fractional or percentage interests calculated in proportion to

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those values and in accordance with this subsection. A notice stating all of those values and

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corresponding interests and the return address of the sender must be sent by certified or registered

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mail, return receipt requested, by the managing entity or by the trustee designated in the

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termination agreements, to all of the time-share owners. The appraisal governs the magnitude of

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each interest unless (i) at least twenty-five percent (25%) of the time-share owners deliver, within

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sixty (60) days after the date the notices were mailed, written disapprovals to the return address of

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the sender of the notice, or (ii) the final judgment of a court of competent jurisdiction, entered

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during or after that period, holds that the appraisal should be set aside. The appraisal and the

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calculation of interests must be made in accordance with the following:

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

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

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

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

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

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pursuant to subsection (c) had already elapsed.

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

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

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share applies.

 

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

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in a time-share property does not of itself terminate those time shares.

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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 - RHODE ISLAND REAL ESTATE TIME-SHARE ACT -

TERMINATION OF TIME SHARES

***

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     This act would amend the Rhode Island Real Estate Time-Share Act to provide for

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dissolution of the time-share form of ownership by fewer than sixty percent (60%) of the owners

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in certain circumstances.

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     This act would take effect upon passage.

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