2012 -- S 2520

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LC01008

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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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:

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

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Land Dwellings" is hereby amended to read as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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upon which the residential dwelling is located is for lease.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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on the offer.

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

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

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

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

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to this section.

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

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

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

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owner pursuant to this section.

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      (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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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owners' association is not required pursuant to this section.

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

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

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

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

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

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

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

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

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of the land.

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

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

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

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

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closing on the offer.

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

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

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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

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

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

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

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

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

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

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

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

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

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

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

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the rules of the court annexed arbitration program.

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

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

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

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

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

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

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

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

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

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

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hereby amended by adding thereto the following sections:

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

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

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

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which the increase shall take effect.

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

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

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

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

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

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

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

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

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the rules of the court annexed arbitration program.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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and apart from the leased land.

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

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

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

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analysis and consider alternative and comparative investments.

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

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     (1) Completion of the binding arbitration process; or

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

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this section.

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

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

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34-18.2-4 herein shall not apply to:

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

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

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park or campground is located; or

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

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seasonal basis.

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     SECTION 3. This act shall take effect upon passage.

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LC01008

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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 provide for the fair and reasonable compensation of homeowners for the

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

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

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

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

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     This act would take effect upon passage.

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LC01008

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