2013 -- S 0412 SUBSTITUTE A AS AMENDED

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LC01129/SUB A/3

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO PROPERTY - RESIDENTIAL LANDLORD AND TENANT ACT

     Introduced By: Senators Metts, Pichardo, Crowley, and Jabour

     Date Introduced: February 26, 2013

     Referred To: Senate Judiciary

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 34-18-23 of the General Laws in Chapter 34-18 entitled

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"Residential Landlord and Tenant Act" is hereby amended to read as follows:

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     34-18-23. Limitation of liability upon sale or change of management. -- (a) (1) A

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landlord who conveys premises that include a dwelling unit subject to a rental agreement in a

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good faith sale to a bona fide purchaser is relieved of liability under the rental agreement and this

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chapter as to events occurring after written notice to the tenant of the conveyance. In no event

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may the relief from liability predate the conveyance itself.

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      (2) Written notice, for purposes of this section, must include the name(s), address, and

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telephone number of the person or persons purchasing the property and assuming liability. To be

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effective, the written notice must also certify compliance with section 45-24.3-17 which prohibits

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sale or lease of property until any outstanding housing code violations have been corrected or the

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seller or lessor has provided to the buyer or lessee, as well as to the enforcing officer, all notices

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regarding violations, as required by the statute.

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      (b) A manager of premises that include a dwelling unit is relieved of liability under the

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rental agreement and this chapter as to events occurring after written notice to the tenant of the

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termination of his or her management. The written notice must include the name(s), address, and

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telephone number of the person or persons assuming management and/or the person or persons

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within the state exercising ownership or responsibility over the property.

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      (c) Nothing in this section shall be construed to affect the tenant's rights and duties under

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an existing rental agreement, and the purchaser of property or any immediate successor in interest

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to a mortgagor, other than a third-party bona fide purchaser, of a premises containing four (4) or

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fewer dwelling units takes title subject to the same rights and responsibilities toward the tenant

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which the seller or mortgagor had.

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     SECTION 2. Chapter 34-18 of the General Laws entitled "Residential Landlord and

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Tenant Act" is hereby amended by adding thereto the following section:

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     34-18-38.1. Eviction of tenants in foreclosed properties only for just cause. – (a) As

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used in this section, the following words shall, unless the context clearly requires otherwise, have

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the following meanings:

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     (1) "Bona fide lease" or "bona fide tenancy" means a lease or tenancy shall not be

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considered bona fide unless:

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     (i) The mortgagor, or the child, spouse or parent of the mortgagor under the contract, is

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not the tenant;

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     (ii) The lease or tenancy was the result of an arms-length transaction; and

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     (iii) The lease or tenancy requires the receipt of rent that is not substantially less than fair

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market rent for the property, or the dwelling unit's rent is reduced or subsidized due to a federal,

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state or local subsidy.

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     (2) "Entity" means a business organization, or any other kind of organization including,

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without limitation, a corporation, partnership, trust, limited liability corporation, limited liability

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partnership, joint venture, sole proprietorship or any other category of organization and any

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employee, agent, servant or other representative of such entity.

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     (3) "Eviction" means an action, without limitation, by a foreclosing owner of a housing

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accommodation which is intended to actually or constructively evict a tenant or otherwise compel

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a tenant to vacate such housing accommodation.

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     (4) "Foreclosing owner" means an entity that holds title in any capacity, directly or

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indirectly, without limitation, whether in its own name, as trustee or as beneficiary, to a housing

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accommodation that has been foreclosed upon and either:

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     (i) Held or owned a mortgage or other security interest in the housing accommodation at

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any point prior to the foreclosure of the housing accommodation or is the subsidiary, parent,

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trustee, or agent thereof; or

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     (ii) Is an institutional mortgagee that acquires or holds title to the housing

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accommodation within three (3) years of the filing of a foreclosure deed on the housing

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accommodation; or

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     (iii) Is the Federal National Mortgage Association or the Federal Home Loan Mortgage

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Corporation.

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     (5) "Foreclosure" means an action to terminate a mortgagor’s interest in property by sale

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of property pursuant to a power of sale in a mortgage, as described in section 34-11-22 or

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conveyance of the property by the mortgagor in lieu of foreclosure or an action filed in court

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pursuant to section 34-27-1.

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     (6) "Housing accommodation" means a building or structure containing four (4) or fewer

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dwelling units, or part thereof of land appurtenant thereto, and any other real or personal property

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used, rented or offered for rent for living or dwelling purposes, together with all services

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connected with the use or occupancy of such property.

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     (7) "HUD" means the United States Department of Housing and Urban Development and

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any successor to such department.

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     (8) "Institutional mortgagee" means an entity or an entity which is the subsidiary, parent

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or trustee to such entity, that holds or owns mortgages or other security interests in three (3) or

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more housing accommodations or that acts as a mortgage servicer of three (3) or more mortgages

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of housing accommodations.

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     (9) "Just cause" means one of the following:

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     (i) The tenant has failed to pay rent in effect prior to the foreclosure, as long as the

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foreclosing owner notified the tenant in writing of the amount of rent that was to be paid and to

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whom it was to be paid;

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     (ii) The tenant has materially violated either an express or legally required obligation or

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covenant of the tenancy or occupancy, other than the obligation to surrender possession upon

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proper notice, and has failed to cure such violation within thirty (30) days after having received

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written notice thereof from the foreclosing owner;

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     (iii) The tenant is committing a nuisance in the unit; is permitting a nuisance to exist in

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the unit; is causing substantial damage to the unit or is creating a substantial interference with the

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quiet enjoyment of other occupants;

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     (iv) The tenant is using or permitting the unit to be used for any illegal purpose;

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     (v) The tenant who had a written bona fide lease or other rental agreement which

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terminated, on or after July 1, 2013, has refused, after written request or demand by the

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foreclosing owner, to execute a written extension or renewal thereof for a further term of like

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duration and in such terms that are not inconsistent with this chapter;

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     (iv) The tenant has refused the foreclosing owner reasonable access to the unit for the

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purpose of making necessary repairs or improvement required by the laws of the United States,

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the state of Rhode Island or any subdivision thereof, or for the purpose of inspection as permitted

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or required by agreement or by law or for the purpose of showing the unit to a prospective

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purchaser or mortgagee;

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     (vii) The foreclosing owner:

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     (A) Seeks to permanently board up or demolish the premises because the premises has

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been cited by a state or local minimum housing code enforcement agency for substantial

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violations affecting the health and safety of tenants and it is economically unfeasible for the

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foreclosing owner to eliminate the violations; or

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     (B) Seeks to comply with a state or local minimum housing code enforcement agency

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that has cited the premises for substantial violations affecting the health and safety of tenants and

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it is unfeasible to so comply without removing the tenant; or

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     (C) Seeks to correct an illegal occupancy because the premises has been cited by a state

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or local minimum housing code enforcement agency or zoning official and it is unfeasible to

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correct such illegal occupancy without removing the tenant; and provided further that nothing in

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this section shall limit the rights of a third-party owner to evict a tenant at the expiration of an

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existing lease.

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     (10) "Mortgagee" means an entity to whom property is mortgaged, the mortgage creditor

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or lender including, but not limited to, mortgage services, lenders in a mortgage agreement and

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any agent, servant or employee of the mortgagee or any successor in interest or assignee of the

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mortgagee’s rights, interests or obligations under the mortgage agreement.

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     (11) "Mortgage servicer" means an entity which administers or at any point administered

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the mortgage; provided, however, that such administration shall include, but not be limited to,

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calculating principle and interest, collecting payments from the mortgager, acting as escrow agent

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or foreclosing in the event of a default.

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     (12) "Tenant" means a person or group of persons, who at the time of foreclosure, is

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entitled to occupy a housing accommodation pursuant to a bona fide lease or tenancy. A person

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who moves into the housing accommodation owned by the foreclosing owner, subsequent to the

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foreclosure sale, without the express written permission of the foreclosing owner shall not be

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considered a tenant under this section.

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     (13) "Unit" or "residential unit" means the room or group of rooms within a housing

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accommodation which is used or intended for use as a residence by one household.

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     (b) Notwithstanding any provision of the general or public laws to the contrary, a

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foreclosing owner shall not evict a tenant except for just cause, or unless a binding purchase and

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sale agreement has been executed for a bona fide third party to purchase the housing

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accommodation from a foreclosing owner, and the foreclosing owner has disclosed to the third-

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party purchaser that said purchaser may be responsible for evicting the current occupants of the

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housing accommodation after the sale occurs; or with respect to a housing accommodation in a

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housing accommodation insured by the Federal Housing Administration, unless HUD denies a

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request by any tenant for an occupied conveyance or if a tenant does not submit to HUD a request

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for continued occupancy before the deadline set forth in a notice to occupants of pending

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acquisition delivered to the tenant by the foreclosing owner.

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     (c) Within thirty (30) days of the foreclosure, the foreclosing owner shall post in a

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prominent location in the building in which the rental housing unit is located, a written notice

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stating:

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     (1) The names, addresses, telephone numbers and telephone contact information of the

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foreclosing owner, the building manager or other representative of the foreclosing owner

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responsible for the management of such building;

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     (2) The address to which rent charges shall be sent;

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     (3) That in order to remain on the premises as a tenant of the foreclosing owner, the

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household must submit within thirty (30) days a completed form to be provided with said written

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notice to the same address where rent charges shall be sent, said form to be substantially similar

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to the request for continued occupancy form used by HUD and shall contain an authorization to

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conduct a credit check of the person or persons submitting the form. This requirement shall be

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satisfied if the foreclosing owner or someone acting on his behalf has:

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     (i) Posted in a prominent location in the building;

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     (ii) Mailed by first class mail to each unit; and

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     (iii) Slid under the door of each unit in the building a document stating the names,

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addresses, and telephone contact information of the foreclosing owner, the building manager or

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other representative of the foreclosing owner responsible for the management of such building

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and stating the address to which rent and use and occupancy charges shall be sent.

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     (d) A foreclosing owner shall not evict a tenant except for actions that constitute just

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cause:

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     (1) A foreclosing owner shall not evict a tenant for the following actions that constitute

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just cause until thirty (30) days after the notice required by subsection (c) of this section is posted

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and delivered:

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     (i) The tenant has failed to pay the rent in effect prior to the foreclosure, as long as the

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foreclosing owner notified the tenant in writing of the amount of rent that was to be paid and to

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whom it was to be paid;

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     (ii) The tenant has materially violated an obligation or covenant of the tenancy or

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occupancy, other than the obligation to surrender possession upon proper notice;

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     (iii) The tenant who had a written bona fide lease or other rental agreement which

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terminated, on or after July 1, 2013, has refused, after written request or demand by the

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foreclosing owner, to execute a written extension or renewal thereof for a further term of like

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duration and in such terms that are not inconsistent with this section; and

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     (iv) The foreclosing owner:

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     (A) Seeks to permanently board up or demolish the premises because the premises has

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been cited by a state or local minimum housing code enforcement agency for substantial

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violations affecting the health and safety of tenants and it is economically unfeasible for the

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foreclosing owner to eliminate the violations; or

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     (B) Seeks to comply with a state or local minimum housing code enforcement agency

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that has cited the premises for substantial violations affecting the health and safety of tenants and

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it is unfeasible to so comply without removing the tenant; or

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     (C) Seeks to correct an illegal occupancy because the premises has been cited by a state

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or local minimum housing code enforcement agency or zoning officials and it is unfeasible to

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correct such illegal occupancy without removing the tenant.

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     (2) A foreclosing owner shall not evict a tenant for the following actions that constitute

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just cause until the notice required by subsection (c) is posted and delivered:

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     (i) The tenant is committing a nuisance in the unit; is permitting a nuisance to exist in the

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unit; is causing substantial damage to the unit or is creating a substantial interference with the

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quiet enjoyment of other occupants;

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     (ii) The tenant is using or permitting the unit to be used for any illegal purpose; and

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     (iii) The tenant has refused the foreclosing owner reasonable access to the unit for the

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purpose of making necessary repairs or improvements required by the laws of the United States,

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the state of Rhode Island or any subdivision thereof, or for the purpose of showing the unit to a

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prospective purchaser or mortgagee.

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     (e) The following procedures shall be followed for the eviction of a tenant pursuant to

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subsection (d) of this section:

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     (1) For evictions brought pursuant to paragraph (d)(1)(i), the foreclosing owner shall

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follow section 34-18-35;

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     (2) For evictions brought pursuant to paragraph (d)(1)(ii) or subdivision (d)(2), the

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foreclosing owner shall follow section 34-18-36;

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     (3) For evictions brought pursuant to paragraphs (d)(1)(iii) or (d)(1)(iv) or for evictions

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brought where a binding purchase and sale agreement has been executed for a bona fide third

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party to purchase the housing accommodation from a foreclosing owner or for evictions brought

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with respect to housing accommodations located on premises insured by the Federal Housing

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Administration as provided in subsection (b), or for eviction brought against a tenant who fails to

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return the form requesting continued occupancy pursuant to subsection (c), the foreclosing owner

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shall follow the procedures for terminating a month to month tenancy set forth in section 34-18-

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37; provided, that any obligations of the foreclosing owner arising under the Federal Protecting

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Tenants at Foreclosure Act of 2009, as such is amended and extended from time to time, shall

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first have been satisfied; and provided, further, that in any eviction brought against a tenant

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pursuant to said subsection (c), the tenant may raise an affirmative defense that the form was not

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posted or served upon the tenant as required by said subsection (c).

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     (f) A foreclosing owner may evict any person other than a tenant by following the

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procedures for terminating a month to month tenancy set forth in section 34-18-37.

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     (g) If a foreclosing owner disagrees with the amount of rent paid by the tenant to the

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foreclosing owner, the foreclosing owner may bring a claim in district court to claim that the

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rental charge is unreasonable and set a new rental rate. A bona fide lease between the foreclosed

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upon owner and the lessee or proof of rental payment to the foreclosed upon owner shall be

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presumed to be a reasonable rental rate.

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     (h) Nothing herein shall be deemed to limit the right of any tenant to knowingly waive

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the provisions of this section for consideration acceptable to such tenant.

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     SECTION 3. Section 34-18-20 of the General Laws in Chapter 34-18 entitled

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"Residential Landlord and Tenant Act" is hereby amended to read as follows:

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     34-18-20. Disclosure. -- (a) A landlord or any person authorized to enter into a rental

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agreement on his or her behalf shall disclose to the tenant in writing, at or before the

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commencement of the tenancy, the name, address and number of:

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      (1) The person authorized to manage the premises; and

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      (2) An owner of the premises or a person authorized to act for and on behalf of the

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owner for the purpose of service of process and receiving and receipting for notices and demands.

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      (b) The information required to be furnished by this section shall be kept current. This

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section extends to and is enforceable against any successor landlord, owner, or manager.

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      (c) A person who fails to comply with subsection (a) of this section becomes an agent of

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each person who is a landlord for:

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      (1) Service of process and receiving and receipting for notices and demands; and

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      (2) Performing the obligations of the landlord under this chapter and under the rental

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agreement and expending or making available for the purpose of all rent collected from the

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premises.

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     (d) A landlord who becomes delinquent on a mortgage securing real estate upon which

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the dwelling unit is located for a period of one hundred twenty (120) days shall notify the tenant

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of the fact that the property may be subject to foreclosure; and until the foreclosure occurs the

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tenant must continue to pay rent to the landlord as provided under the rental agreement.

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     SECTION 4. Chapter 34-27 of the General Laws entitled "Mortgage Foreclosure and

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Sale" is hereby amended by adding thereto the following sections:

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     34-27-7. Notice to tenants of foreclosure sale. – (a) The mortgagee shall provide to each

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bona fide tenant a written notice:

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     (1) Stating that the real estate is scheduled to be sold at foreclosure;

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     (2) Stating the date, time and place initially scheduled for the sale;

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     (3) Informing of the availability and advisability of counseling and information services;

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     (4) Providing the address and telephone number of the Rhode Island Housing Help

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Center and the United Way 2-1-1 Center;

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     (5) Reminding the recipient to continue paying rent to the landlord until the foreclosure

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sale occurs; and

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     (6) Stating that this notice is not an eviction notice.

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     (b) The notice shall be mailed by first class mail at least one business day prior to the first

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publication of the notice required by subsection (a) of section 34-27-4. A form of written notice

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meeting the requirements of this section shall be promulgated by the department of business

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regulation for use by mortgagees no later than sixty (60) days after the effective date of this

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section. The notice may be addressed to "Occupant" and mailed to each dwelling unit of the real

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estate identified in the application for the loan secured by the mortgage being foreclosed. Failure

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of the mortgagee to provide notice as provided herein shall not affect the validity of the

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foreclosure.

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     (c) For purposes of this section, a lease or tenancy shall be considered bona fide only if:

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     (1) The mortgagor or the child, spouse, or parent of the mortgagor under the contract is

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not the tenant;

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     (2) The lease or tenancy was the result of an arms-length transaction; and

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     (3) The lease or tenancy requires the receipt of rent that is not substantially less than fair

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market rent for the property or the unit’s rent is reduced or subsidized due to a federal, state, or

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local subsidy.

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     34-27-8. Certificate of foreclosing owner exemption status. – (a) For purposes of this

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section, the director of business regulation shall exempt any foreclosing owner from this chapter

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if:

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     (1) The foreclosing owner has completed foreclosures on less than three percent (3%) of

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the total number of one to four (4) family dwelling unit mortgages owned by the foreclosing

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owner in Rhode Island in the preceding calendar year;

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     (2) The foreclosing owner has filed the required certificate of exemption in affidavit

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form, in a manner prescribed by the department, within ninety (90) days of enactment of this act,

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and annually thereafter, on or before January 15th of each calendar year.

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     34-27-9. Suspension, revocation, and nonrenewal of exemption certificate. – Upon

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determination by the department of business regulation, that a foreclosing owner has violated any

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provisions of this chapter, the director may, following a hearing, issue a final order suspending,

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revoking or refusing to renew any certificate of exemption, pursuant to this chapter. Hearings

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conducted pursuant to this chapter shall be in accordance with the "Administrative Procedures

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Act" chapter 42-35.

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     SECTION 5. This act shall take effect upon passage.

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LC01129/SUB A/3

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PROPERTY - RESIDENTIAL LANDLORD AND TENANT ACT

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     This act would provide a tenant of a foreclosed property greater protection against

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eviction.

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     This act would take effect upon passage.

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LC01129/SUB A/3

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