Bill Text: NJ S772 | 2010-2011 | Regular Session | Introduced
Bill Title: The "Residential Distressed Property Leaseback Act."
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2010-01-12 - Introduced in the Senate, Referred to Senate Commerce Committee [S772 Detail]
Download: New_Jersey-2010-S772-Introduced.html
STATE OF NEW JERSEY
214th LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2010 SESSION
Sponsored by:
Senator STEPHEN M. SWEENEY
District 3 (Salem, Cumberland and Gloucester)
Senator ROBERT W. SINGER
District 30 (Burlington, Mercer, Monmouth and Ocean)
SYNOPSIS
The "Residential Distressed Property Leaseback Act."
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel
An Act concerning certain residential sale-leaseback transactions, and supplementing Title 46 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. This act shall be known and may be cited as the "Residential Distressed Property Leaseback Act."
2. As used in this act:
"Distressed homeowner" means any person residing in a property as an owner-occupied residence that is collateralized by a mortgage, and the property is the subject of a foreclosure as evidenced by a notice of intention to foreclose served upon the person pursuant to the "Fair Foreclosure Act," P.L.1995, c.244 (C.2A:50-53 et al.) and the filing of a notice of lis pendens concerning the foreclosure action pursuant to N.J.S.2A:15-6 et seq.
"Distressed property buyer" means any person who purchases a property from a distressed homeowner or otherwise secures an interest in title to the property from the distressed homeowner, with the intention of permitting the distressed homeowner to reside at the property as a tenant pursuant to a residential lease agreement, or a tenant-buyer if the residential lease agreement is accompanied by an option to purchase agreement for the property.
"Distressed property conveyance" means any transaction involving the sale or other transfer of interest in title by a distressed homeowner to a distressed property buyer, permitting the distressed homeowner to reside at the property as a tenant pursuant to a residential lease agreement, or a tenant-buyer if the residential lease agreement is accompanied by an option to purchase agreement for the property.
"Option to purchase agreement" means a contract between a distressed property buyer and distressed homeowner which contains an exclusive, irrevocable right for a specified period, provided by the distressed property buyer to the distressed homeowner for a fee or other consideration, to purchase a property that was subject to a distressed property conveyance for a determinable price. The distressed homeowner as a tenant-buyer shall not be required to exercise the optional right to purchase the property under any contract agreed to with the distressed property buyer.
"Property" means residential real property in this State, consisting of one to four dwelling units, at least one of which is occupied by a distressed homeowner as a primary residence, and which will continue to be occupied by the distressed homeowner as a primary residence following a distressed property conveyance, either as a tenant pursuant to a residential lease agreement, or a tenant-buyer if the residential lease agreement is accompanied by an option to purchase agreement for the property.
"Residential lease agreement" means a contract between a distressed property buyer and distressed homeowner that contains terms, including the monthly rental obligation, under which the distressed homeowner, as former owner of a property, is permitted to lease the property for a specified period and reside there as a tenant.
3. a. Any distressed property conveyance between a distressed homeowner and distressed property buyer shall be in writing in a form containing at least 12-point type. The distressed property buyer shall provide an executed copy of the written agreement, properly notarized by a notary public who is commissioned pursuant to the "Notaries Public Act of 1979," P.L.1979, c.460 (C.52:7-10 et seq.), to the distressed homeowner at the time at which the homeowner signs the agreement.
b. The written agreement for the distressed property conveyance shall contain at least the following:
(1) the name and mailing address of the distressed homeowner;
(2) the name and mailing address of the distressed property buyer;
(3) the date on which the conveyance agreement is signed by both the distressed homeowner and distressed property buyer;
(4) the recorded physical location of the property that is the subject of the conveyance;
(5) the purchase price or other consideration provided for the property that is the subject of the conveyance, and an indication that this consideration represents the greater of: at least 82% of the current appraised fair market value of the property; or at least the amount necessary to satisfy any lien or encumbrance upon the property, unless the lien or encumbrance is forgiven as part of a short sale, as set forth under paragraph (2) of subsection d. of this section;
(6) the period of time the distressed property buyer has to purchase or otherwise acquire title to the property and otherwise perform all conditions contained in the conveyance agreement;
(7) the amount of any down payment or other initial consideration provided by the distressed property buyer to the distressed homeowner at the time of the execution of the conveyance agreement;
(8) the address at which the settlement of the conveyance agreement will occur;
(9) the name of the attorney or other representative for one or both parties handling and administering the settlement of the conveyance agreement;
(10) the date on which the settlement of the conveyance agreement shall occur;
(11) a notice that, as a condition of the settlement of the conveyance agreement, a residential lease agreement shall be executed between the distressed property buyer and distressed homeowner, as former owner of the property, unless the conveyance agreement involves a short sale, as set forth under paragraph (2) of subsection d. of this section;
(12) a notice that, as an option accompanying the settlement of the conveyance agreement, an option to purchase agreement may be executed between the distressed property buyer and distressed homeowner, as former owner of the property, permitting the distressed homeowner the opportunity to purchase back the property from the distressed property buyer; and
(13) a notice concerning a seven-day right of cancellation on the conveyance agreement, which includes:
(a) an attorney review period of seven days for any party to the agreement, from the date the conveyance agreement is executed by all parties;
(b) instructions that cancellation of the conveyance agreement during the seven-day period shall be effectuated in writing, sent by certified mail, informing the recipient of the decision to cancel the agreement, which may be done with or without cause; and
(c) the following text presented to the distressed homeowner in bold face 14-point type:
This agreement is an important legally binding contract that will result in the forfeiture of some or all ownership interest you have in this property. Please take the next seven (7) days to review this agreement with competent legal counsel to determine if this arrangement is in your best interest.
c. Any distressed property conveyance between a distressed homeowner and distressed property buyer shall comply with the provisions of this act, and may be conducted by an attorney or a title insurance company licensed pursuant to "The Title Insurance Act of 1974," P.L.1975, c.106 (C.17:46B-1 et seq.).
d. The purchase price or other consideration provided for the property that is the subject of the conveyance agreement shall be the greater of:
(1) at least 82% of the current appraised fair market value of the property as determined by a real estate appraiser licensed or certified pursuant to the "Real Estate Appraisers Act," P.L.1991, c.68 (C.45:14F-1 et al.); or
(2) at least the amount necessary to satisfy any lien or encumbrance upon the property including, but not limited to, mortgage principal, mortgage interest, mortgage arrears and tax arrears, unless the conveyance agreement involves a short sale, in which the purchase price or other consideration for the conveyance is less than the amount a person is owed under a lien or encumbrance on the property, but that person agrees to accept the lesser amount resulting from the conveyance and forgive any unpaid balance remaining on the lien or encumbrance.
e. Any money or other consideration due to the distressed homeowner from the distressed property buyer at the time of the settlement of the conveyance agreement shall be paid directly to the homeowner in full, and shall not be held in escrow.
4. a. As a condition of the settlement of the conveyance agreement for a distressed property conveyance set forth pursuant to section 3 of this act, a residential lease agreement shall be executed for the same property between the distressed property buyer and distressed homeowner, as former owner of the property, unless the conveyance agreement involves a short sale as set forth under paragraph (2) of subsection d. of that section 3.
b. The residential lease agreement shall be in writing in a form containing at least 12-point type. The distressed property buyer shall provide an executed copy of the written lease agreement, properly notarized by a notary public who is commissioned pursuant to the "Notaries Public Act of 1979," P.L.1979, c.460 (C.52:7-10 et seq.), to the distressed homeowner, as former owner of the property, who will reside at the property as a tenant, at the time at which the distressed homeowner signs the agreement.
c. The written residential lease agreement shall contain at least the following:
(1) the name and mailing address of the distressed property buyer and any agent for the buyer acting as a landlord for the property;
(2) the name of the former distressed homeowner residing at, and responsible for, the property as a tenant;
(3) the name of any additional occupant residing at the property;
(4) the date on which the residential lease agreement is signed by both the former distressed homeowner to be a tenant under the agreement and the distressed property buyer;
(5) the recorded physical location of the property that is the subject of the residential lease agreement, which shall be the same property that is the subject of the distressed property conveyance set forth pursuant to section 3 of this act;
(6) the monthly rental obligation for the former distressed homeowner as a tenant residing on the property, with an indication:
(a) that the monthly rental obligation shall not exceed 31% of the tenant's gross monthly income, as required by subsection d. of this section; and
(b) that each monthly rental obligation may not be declared due more than 30 days immediately preceding the month during which the tenant shall reside at the property, as required by subsection e. of this section;
(7) the length of time of the residential lease agreement;
(8) the mailing address to which the monthly rental obligation shall be remitted, if different from the mailing address for the distressed property buyer and agent provided under paragraph (1) of this subsection; and
(9) the amount of any security deposit required by the residential lease agreement, and an indication that all information concerning the investment or deposit of the security deposit shall be provided to the former distressed homeowner as a tenant under the agreement, as required by section 1 of P.L.1967, c.265 (C.46:8-19).
d. The monthly rental obligation of the former distressed homeowner as a tenant set forth in the residential lease agreement shall not exceed 31% of his gross monthly income at the time of executing the agreement, determined as follows:
(1) the average of salary or wages for the three most recent calendar months, as evidenced by an employer provided paycheck, pay stub, or other similar proof of compensation; or
(2) the average of the bank deposits for compensation for work, for the three most recent calendar months, if the tenant is self-employed.
e. The monthly rental obligation set forth in the residential lease agreement may not be declared due more than 30 days immediately preceding the month during which the former distressed homeowner as a tenant under the agreement shall reside at the property.
f. In addition to the provisions of this section, the residential lease agreement shall comply with any State law applicable to residential real property in this State consisting of one to four dwelling units.
5. a. As an option accompanying the settlement of the conveyance agreement set forth pursuant to section 3 of this act and an executed residential lease agreement set forth pursuant to section 4 of this act, an option to purchase agreement may be executed between the distressed property buyer and distressed homeowner, as former owner of the property, permitting the distressed homeowner the exclusive, irrevocable right, as a tenant-buyer, to purchase back the property from the distressed property buyer. The terms and conditions of the option to purchase agreement shall be contingent upon the tenant-buyer's fulfillment of all obligations under the residential lease agreement. The failure to fulfill any obligation under the residential lease agreement shall render the option to purchase agreement voidable by the distressed property buyer.
b. The option to purchase agreement shall be in writing in a form containing at least 12-point type. The distressed property buyer shall provide an executed copy of the written option to purchase agreement, properly notarized by a notary public who is commissioned pursuant to the "Notaries Public Act of 1979," P.L.1979, c.460 (C.52:7-10 et seq.), to the distressed homeowner, as former owner of the property, residing as a tenant-buyer under the executed residential lease agreement set forth pursuant to section 4 of this act and this agreement, at the time at which the distressed homeowner signs the option to purchase agreement.
c. The written option to purchase agreement shall contain at least the following:
(1) the name and mailing address of the distressed homeowner as the tenant-buyer under the executed residential lease agreement and the option to purchase agreement;
(2) the name and mailing address of the distressed property buyer;
(3) the date on which the option to purchase agreement is signed by both the former distressed homeowner as a tenant-buyer and the distressed property buyer;
(4) the recorded physical location of the property that is the subject of the option to purchase agreement, which shall be the same property that is the subject of the distressed property conveyance and residential lease agreement set forth pursuant to sections 3 and 4 of this act;
(5) (a) the purchase price or other consideration provided for the property that is the subject of the option to purchase agreement; or
(b) the manner in which the purchase price or other consideration shall be determined at the time the distressed homeowner, as a tenant-buyer, exercises his optional right to purchase back the property from the distressed property buyer, which shall include an appraisal of the property by a real estate appraiser licensed or certified pursuant to the "Real Estate Appraisers Act," P.L.1991, c.68 (C.45:14F-1 et al);
(6) the amount of any fee or other consideration provided by the distressed homeowner as a tenant-buyer at the time of the execution of the option to purchase agreement as consideration for the agreement, which shall not exceed 3.5% of the purchase price or other consideration provided for the property pursuant to paragraph (5) of this subsection; and, the amount, if any, of this fee or other consideration that shall be applied as credit towards the purchase of the property if the tenant-buyer exercises his optional right to purchase back the property from the distressed property buyer;
(7) the amount of any money to be provided by the former distressed homeowner as a tenant-buyer to the distressed property buyer, to be credited towards the purchase of the property, remitted on a monthly basis in excess of the monthly rental obligation established pursuant to the executed residential lease agreement between the parties;
(8) the amount of any charge or fee to the distressed homeowner as a tenant-buyer for services included in the option to purchase agreement that is distinct from the fee, money, or other consideration described in paragraphs (5) through (7) of this subsection;
(9) a notice that the distressed property buyer shall be responsible for the payment of taxes, insurance, assessments, and any other charges against the property during the length of time of the agreement, and if the former distressed homeowner as a tenant-buyer exercises his optional right to purchase back the property, the distressed property buyer shall deliver the deed and convey title to the property free of any liens or encumbrances as a condition of the settlement of the option to purchase agreement; and
(10) a notice that the distressed property buyer, as a condition of the settlement of the option to purchase agreement, shall not possess a mortgage on the property that is the subject of the agreement in an amount greater than the purchase price or other consideration provided for the property as agreed to between the distressed property buyer and former distressed homeowner as a tenant-buyer pursuant to paragraph (5) of this subsection.
d. The option to purchase agreement shall provide for a length of time of at least three years within which the former distressed homeowner as tenant-buyer may exercise his exclusive, irrevocable right to purchase back the property from the distressed property buyer.
e. With respect to the amount of any fee or other consideration provided by the former distressed homeowner as a tenant-buyer at the time of the execution of the option to purchase agreement as consideration for the agreement, as set forth in paragraph (6) of subsection c. of this section:
(1) the entire fee or other consideration shall be provided by the tenant-buyer at the time of the execution of the option to purchase agreement;
(2) the distressed property buyer may declare some or all of the fee or other consideration to be non-refundable, regardless of whether the tenant-buyer exercises his right to purchase back the property from the distressed property buyer pursuant to the option to purchase agreement, or declare that some or all of the fee or other consideration shall be applied as credit toward the purchase of the property, if the tenant-buyer does exercise his right to purchase back the property, so long as this declaration is agreed to by the tenant-buyer and expressly stated in the agreement; and
(3) the fee or other consideration provided to the distressed property buyer shall not constitute an equitable ownership interest in the property.
f. With respect to any money provided by the distressed homeowner as a tenant-buyer to the distressed property buyer, remitted as a monthly credit towards the purchase of the property in excess of the monthly rental obligation established pursuant to the executed residential lease agreement between the parties, as set forth in paragraph (7) of subsection c. of this section:
(1) the distressed property buyer may declare some or all of the money to be non-refundable, if the tenant-buyer does not exercise his right to purchase back the property from the distressed property buyer pursuant to the option to purchase agreement, so long as this declaration is agreed to by the tenant-buyer and expressly stated in the agreement; and
(2) the money provided the distressed property buyer shall not constitute an equitable ownership interest in the property.
g. If the distressed homeowner as a tenant-buyer exercises his right to purchase back the property from the distressed property buyer pursuant to the option to purchase agreement, any amount still owed toward the purchase price or other consideration on the property, as set forth in the agreement, following the application of any fee, money, or other consideration described under paragraphs (6) and (7) of subsection c. of this section by the distressed property buyer as credit towards the purchase, shall be the sole responsibility of the tenant-buyer.
6. a. A distressed homeowner or distressed property buyer may bring an action in a court of competent jurisdiction for legal and equitable relief against the other party for failing to comply with the provisions of this act, or if the other party violates any of the contract provisions set forth in any written agreement for a distressed property conveyance, residential lease agreement, or option to purchase agreement between the parties as provided by this act. The relief sought by the distressed homeowner or distressed property buyer may include enforcement or rescission of any agreement, damages, including consequential damages, and restitution.
b. A distressed property buyer, in accordance with N.J.S.2A:18-51 et seq. and any other applicable State eviction law, may initiate an eviction action against a distressed homeowner as a tenant under a residential lease agreement, for failure to comply with the provisions of that agreement.
7. The provisions of this act shall not be construed to affect, modify, or rescind any right, benefit, privilege or obligation, or available legal remedy to enforce or cancel any right, benefit, privilege or obligation, under any applicable State and federal law concerning the purchase of a property, and any mortgage or other financing of the purchase, that is the subject of a distressed property conveyance.
8. This act shall take effect on the first day of the third month next following enactment, and shall apply to any distressed property conveyance agreement and related residential lease and option to purchase agreements executed on or after the effective date.
STATEMENT
This bill, titled the "Residential Distressed Property Leaseback Act," intends to regulate those transactions in which a distressed homeowner, facing a foreclosure action, conveys property or an interest in title to the property to another party, a "distressed property buyer," with the intention of residing at the property as a tenant; and in some cases, possessing a prearranged opportunity to purchase back the property from the distressed property buyer. The bill applies to residential real property in this State, consisting of one to four dwelling units, at least one of which is occupied by the distressed homeowner as a primary residence.
Any such distressed property conveyance shall be in writing, as well as properly notarized by a notary public at the time the distressed homeowner signs the agreement. This agreement shall include a seven-day right of cancellation by any party, which shall be effectuated in writing, sent by certified mail, informing the recipient of the decision to cancel the agreement.
The purchase price or other consideration provided for the property that is the subject of the conveyance shall be the greater of: (1) at least 82% of the current appraised fair market value of the property as determined by a real estate appraiser licensed or certified pursuant to the "Real Estate Appraisers Act," P.L.1991, c.68 (C.45:14F-1 et al.); or (2) at least the amount necessary to satisfy any lien or encumbrance upon the property including, but not limited to, mortgage principal, mortgage interest, mortgage arrears and tax arrears, unless the conveyance agreement involves a short sale, in which the purchase price or other consideration for the conveyance is less than the amount a person is owed under a lien or encumbrance on the property, but that person agrees to accept the lesser amount resulting from the conveyance and forgive any unpaid balance remaining on the lien or encumbrance.
As a condition of the settlement of the distressed property conveyance, a residential lease agreement shall be executed for the same property between the distressed property buyer and distressed homeowner, as former owner of the property, unless the conveyance agreement involves a short sale as described above. As with the conveyance agreement, the residential lease agreement shall be in writing, and notarized by a notary public at the time the former homeowner, who will reside at the property as a tenant, signs the agreement.
The monthly rental obligation of the former distressed homeowner as a tenant set forth in the residential lease agreement shall not exceed 31% of his gross monthly income at the time of executing the agreement, determined as follows: (1) the average of salary or wages for the three most recent calendar months, as evidenced by an employer provided paycheck, pay stub, or other similar proof of compensation; or (2) the average of the bank deposits for compensation for work, for the three most recent calendar months, if he is self-employed. This obligation may not be declared due more than 30 days immediately preceding the month during which the former distressed homeowner as a tenant under the agreement shall reside at the property.
Additionally, the residential lease agreement shall comply with any State law applicable to residential real property in this State consisting of one to four dwelling units.
As an option accompanying the settlement of the conveyance agreement and an executed residential lease agreement, an option to purchase agreement may be executed between the distressed property buyer and distressed homeowner, as former owner of the property, permitting the distressed homeowner the exclusive, irrevocable right, as a tenant-buyer, to purchase back the property from the distressed property buyer. The terms and conditions of the option to purchase agreement shall be contingent upon the tenant-buyer's fulfillment of all obligations under the residential lease agreement. The failure to fulfill any obligation under the residential lease agreement shall render the option to purchase agreement voidable by the distressed property buyer.
The option to purchase agreement, as with the conveyance agreement and residential lease agreement, shall be in writing, and notarized by a notary public at the time the former homeowner, who will reside at the property as a tenant-buyer pursuant to the executed residential lease agreement and option to purchase agreement, signs the latter agreement.
The option to purchase agreement shall provide for a length of time of at least three years within which the former distressed homeowner as tenant-buyer may exercise his exclusive, irrevocable right to purchase back the property from the distressed property buyer. The agreement shall contain provisions concerning any fee or other consideration provided by the tenant-buyer as consideration for the agreement, which shall not exceed 3.5% of the purchase price or other consideration for the property, as well as provisions concerning the amount of money to be provided, in monthly installments in excess of the monthly rental obligation, and credited toward the purchase of the property.
With respect to the amount of any fee or other consideration provided as consideration for the option to purchase agreement: (1) the entire fee or other consideration shall be provided by the tenant-buyer at the time of the execution of the agreement; (2) the distressed property buyer may declare some or all of the fee or other consideration to be non-refundable, regardless of whether the tenant-buyer exercises his right to purchase back the property from the distressed property buyer pursuant to the option to purchase agreement, or declare that some or all of the fee or other consideration shall be credited toward the purchase of the property, if the tenant-buyer does exercise his right to purchase back the property, so long as this declaration is agreed to by the tenant-buyer and expressly stated in the agreement; and (3) the fee or other consideration provided the distressed property buyer shall not constitute an equitable ownership interest in the property.
With respect to any money provided as a monthly credit towards the purchase of the property: (1) the distressed property buyer may declare some or all of the money to be non-refundable, if the tenant-buyer does not exercise his right to purchase back the property from the distressed property buyer pursuant to the option to purchase agreement, so long as this declaration is agreed to by the tenant-buyer and expressly stated in the agreement; and (2) the money provided to the distressed property buyer shall not constitute an equitable ownership interest in the property.
If the former distressed homeowner as a tenant-buyer exercises his right to purchase back the property from the distressed property buyer pursuant to the option to purchase agreement, any amount still owed toward the purchase price or other consideration on the property, as set forth in the agreement, following the application of any of the credit toward the purchase, shall be the sole responsibility of the tenant-buyer.
A distressed homeowner or distressed property buyer may bring an action in a court of competent jurisdiction for legal and equitable relief against the other party for failing to comply with the provisions of the bill, or if the other party violates any of the contract provisions set forth in any written agreement for a distressed property conveyance, residential lease agreement, or option to purchase agreement between the parties. The relief sought by the distressed homeowner or distressed property buyer may include enforcement or rescission of any agreement, damages, including consequential damages, and restitution.
In addition, a distressed property buyer, in accordance with N.J.S.2A:18-51 et seq. and any other applicable State eviction law, may initiate an eviction action against a distressed homeowner as a tenant under a residential lease agreement, for failure to comply with the provisions of that agreement.
