As many of you are probably aware, in 2010 a series of regulations was foisted on landlords who extended an option to purchase the rental property that they were leasing through a law known as the Homeowner and Homebuyer Protection Act, or SB 1015.
Well, it is now 2011 and the real estate investors are in a somewhat friendlier climate. Not sitting idly by, members of the Triangle Real Estate Investors Association and other NC REIA's have secured sponsorship of H654, revisions to the new Homeowner/Homebuyer Protection Act.
Some of the key provisions of the revisions to the Act include:
* Revising the definition of a lease agreement covered by the acts regulations to remove all leases that do not apply a portion of the rent to the option;
* Clarifies that a contract under which the potential purchaser is obligated to buy the property is not a covered option agreement;
* Clarifies that if the seller does not take any payments on the option prior to closing then a payment at closing does not create an equitable right of redemption;
* Allows an injured party to sue under the Unfair and Deceptive Trade Practices Act("UDTPA), but does not declare any violation of the Act an automatic violation of the UDTPA;
* The Act also makes some common sense changes to the requirements pertaining to Land Sale Contracts; and
* With respect to the so called "mortgage rescue scam protections" the Act provides that although a landlord who purchases a property from someone in foreclosure and allows them to remain as a tenant must obtain an appraisal on the property within 90 days of the purchase, he is no longer required to make sure the appraisal is delivered within 3 days of receipt.
This bill deserves your support.
Currently H 654 has passed through the House and is now in the Senate Commerce Committee. Please take some time and contact your local senators and members of the Senate Commerce Committee and let them know that you support H 654!
Showing posts with label Homeowner and Homebuyer Protection Act. Show all posts
Showing posts with label Homeowner and Homebuyer Protection Act. Show all posts
Sunday, June 12, 2011
Friday, October 1, 2010
Big Changes to Lease Backs for Sellers in Default!
The second major change for property owner's in the Homeowner and Homebuyer Protection Act("the Act"), effective October 1, 2010, affects foreclosure rescues. Below I explain how to comply with the Act and avoid trouble if you engage in these deals.
What does the Act consider a foreclosure rescue?
A rescue is a sale of real property where:
a. It is the principal residence of the seller;
b. The seller is in default (defined as the seller being more than 60 days delinquent on any loan or debt that is secured by the property, including real estate taxes) or foreclosure;
c. The purchaser or his agents make representations that the sale of the
property will enable the seller to prevent, postpone, or reverse the effect of foreclosure and to remain in the residence; and
d. The seller retains an interest in the property conveyed, including a tenancy interest, an interest under a lease-purchase agreement, an option to reacquire the property, or any other legal, equitable, or possessory interest in the property conveyed. This would include any "subject to" deals.
What types of property are affected?
Property that has one or more single-family dwellings, including an individual condominium unit, cooperative unit, manufactured home, or mobile home.
What does the Act require?
The purchaser must pay the seller at least 50% percent of the fair market value of the property as set by a licensed appraiser. The appraisal must be performed no more than 90 days before the sale. Further, the appraisal must be delivered to the seller within 3 days after it is performed and at least 7 days before the sale.
This would make "subject to" deals much more difficult if the seller is in default.
Are there any new contract requirements?
The contract shall be in writing, signed by all parties, and contain all the terms to which the parties have agreed. The contract shall contain the following:
(1) The names and addresses of all parties to the contract;
(2) The legal description of the property being transferred;
(3) Any financial obligation of the seller that will be assumed by the purchaser;
(4) The total amount to be paid by the purchaser;
(5) The fair market value of the property;
(6) A description of the interest in the property retained by the seller; and
(7) The terms of the seller's right to any future possession or ownership of the property.
If I don't comply with the act what are the penalties?
Failure to comply with the act is considered an unfair trade practice. The seller may bring an action for the recovery of damages, to void a prohibited foreclosure rescue transaction, as well as for declaratory or equitable relief, and attorney's fees.
Are there any exemptions or exclusions?
The following buyers are exempt from the Act:
a. A member of the seller's immediate family;
b. A government agency or organization;
c. A bank, savings institution, or credit union; or
d. A licensed mortgage lender or mortgage servicer.
In summation the big change is that you will need to purchase rescue properties for at least 50% of their appraised value.
If you have any questions or comments on the Act or this post feel free to contact me by e-mail or telephone.
What does the Act consider a foreclosure rescue?
A rescue is a sale of real property where:
a. It is the principal residence of the seller;
b. The seller is in default (defined as the seller being more than 60 days delinquent on any loan or debt that is secured by the property, including real estate taxes) or foreclosure;
c. The purchaser or his agents make representations that the sale of the
property will enable the seller to prevent, postpone, or reverse the effect of foreclosure and to remain in the residence; and
d. The seller retains an interest in the property conveyed, including a tenancy interest, an interest under a lease-purchase agreement, an option to reacquire the property, or any other legal, equitable, or possessory interest in the property conveyed. This would include any "subject to" deals.
What types of property are affected?
Property that has one or more single-family dwellings, including an individual condominium unit, cooperative unit, manufactured home, or mobile home.
What does the Act require?
The purchaser must pay the seller at least 50% percent of the fair market value of the property as set by a licensed appraiser. The appraisal must be performed no more than 90 days before the sale. Further, the appraisal must be delivered to the seller within 3 days after it is performed and at least 7 days before the sale.
This would make "subject to" deals much more difficult if the seller is in default.
Are there any new contract requirements?
The contract shall be in writing, signed by all parties, and contain all the terms to which the parties have agreed. The contract shall contain the following:
(1) The names and addresses of all parties to the contract;
(2) The legal description of the property being transferred;
(3) Any financial obligation of the seller that will be assumed by the purchaser;
(4) The total amount to be paid by the purchaser;
(5) The fair market value of the property;
(6) A description of the interest in the property retained by the seller; and
(7) The terms of the seller's right to any future possession or ownership of the property.
If I don't comply with the act what are the penalties?
Failure to comply with the act is considered an unfair trade practice. The seller may bring an action for the recovery of damages, to void a prohibited foreclosure rescue transaction, as well as for declaratory or equitable relief, and attorney's fees.
Are there any exemptions or exclusions?
The following buyers are exempt from the Act:
a. A member of the seller's immediate family;
b. A government agency or organization;
c. A bank, savings institution, or credit union; or
d. A licensed mortgage lender or mortgage servicer.
In summation the big change is that you will need to purchase rescue properties for at least 50% of their appraised value.
If you have any questions or comments on the Act or this post feel free to contact me by e-mail or telephone.
Monday, September 20, 2010
Big Changes to Lease Options in 2010
If you, the landlord, ever offer your tenants a lease option to purchase the rental property then you should learn about this new law. The Homeowner and Homebuyer Protection Act, Senate Bill 1015 takes effect on October 1, 2010, and can be found at http://www.ncga.state.nc.us/Sessions/2009/Bills/Senate/PDF/S1015v8.pdf.
What options are affected?
The new law affects all options to purchase contained in a lease, or executed concurrently (at or near the same time) with the lease. If you offer an existing tenant an option to purchase then this law should affect you.
Are there any changes to the option contract?
The option contract is now required to be in writing and given to purchaser. Further, the option contract must be recorded by the seller at the register of deeds within five business days after signing by both parties. In the alternative, the seller can record a "Memorandum of Option Contract," which must contain the names of the parties, the signature of the parties, a description of the property, the time during which the option must be exercised, and a statement that the purchaser has the right to cure a default once every twelve months.
The option contract itself must contain:
1) full names and address of all parties to the contract;
2) the date the contract was signed by each party;
3) a legal description of the property to be conveyed subject to the option;
4) the sales price of the property;
5) all fees or payments paid by each of the parties including the option fee;
6) all duties whose breach will result in forfeiture of the option;
7) the time period during which the option may be exercised;
8) a statement of the rights of the purchaser, including the right to cure a default once during each 12 month period; and
9) a statement in at least 14 point boldface directly above the purchaser’s signature, that the purchaser has the right to cancel the option any time prior to midnight of the third business day following the signing of the option.
What happens if the purchaser defaults?
In the case of default, as stated above the purchaser has the right to cure once every 12 month period. The seller must be given at least 30 days from receipt of the notice before he is evicted or loses the option. Additionally, the seller must provide a written notice of default that advises the purchaser of:
a) the nature of the default, including the amount if the default is a failure to pay;
b) the date by which the purchaser must cure the default or the option will be forfeit; and
c) the name and address of the seller or the attorney for the seller.
The notice of default must be served by hand, sheriff, or certified mail or equivalent.
What if the purchaser does not remedy the default?
The seller must obtain and record a mutual termination executed by both the purchaser and the seller, or obtain a judgment by a judge of competent jurisdiction that terminates the option and extinguishes the purchaser’s right of redemption. The judgment must be recorded at the register of deeds as well.
After the default notice has been served, and not cured within 30 days if it is the purchaser's first default of the year, the seller may move forward to cancel the option and the purchaser's equitable right of redemption by either:
a)filing an agreement terminating the option, signed by all parties, at the register of deeds; or
b)obtaining a court order terminatng the purchaser's option, and filing the order with the register of deeds.
What if the seller defaults?
If the seller defaults on a loan secured by the property during the option period the purchaser may cancel and rescind the option contract. The seller will have to return all monies paid by the purchaser under the option, less the fair market rental value of the property while it was occupied by the purchaser and compensation for any damage to the property by the purchaser that is beyond normal wear and tear.
What are the penalties for violating the act?
A violation of this act is an unfair and deceptive trade practice subjecting the seller to treble damages and attorney’s fees, as well as equitable and declaratory relief.
Are there any other changes taking place?
YES, there are new rules governing purchases with lease backs, and installment land contracts. You should read the act in it is entirety and/or contact the writer or other competent legal counsel. In future posts I will address these other changes.
What options are affected?
The new law affects all options to purchase contained in a lease, or executed concurrently (at or near the same time) with the lease. If you offer an existing tenant an option to purchase then this law should affect you.
Are there any changes to the option contract?
The option contract is now required to be in writing and given to purchaser. Further, the option contract must be recorded by the seller at the register of deeds within five business days after signing by both parties. In the alternative, the seller can record a "Memorandum of Option Contract," which must contain the names of the parties, the signature of the parties, a description of the property, the time during which the option must be exercised, and a statement that the purchaser has the right to cure a default once every twelve months.
The option contract itself must contain:
1) full names and address of all parties to the contract;
2) the date the contract was signed by each party;
3) a legal description of the property to be conveyed subject to the option;
4) the sales price of the property;
5) all fees or payments paid by each of the parties including the option fee;
6) all duties whose breach will result in forfeiture of the option;
7) the time period during which the option may be exercised;
8) a statement of the rights of the purchaser, including the right to cure a default once during each 12 month period; and
9) a statement in at least 14 point boldface directly above the purchaser’s signature, that the purchaser has the right to cancel the option any time prior to midnight of the third business day following the signing of the option.
What happens if the purchaser defaults?
In the case of default, as stated above the purchaser has the right to cure once every 12 month period. The seller must be given at least 30 days from receipt of the notice before he is evicted or loses the option. Additionally, the seller must provide a written notice of default that advises the purchaser of:
a) the nature of the default, including the amount if the default is a failure to pay;
b) the date by which the purchaser must cure the default or the option will be forfeit; and
c) the name and address of the seller or the attorney for the seller.
The notice of default must be served by hand, sheriff, or certified mail or equivalent.
What if the purchaser does not remedy the default?
The seller must obtain and record a mutual termination executed by both the purchaser and the seller, or obtain a judgment by a judge of competent jurisdiction that terminates the option and extinguishes the purchaser’s right of redemption. The judgment must be recorded at the register of deeds as well.
After the default notice has been served, and not cured within 30 days if it is the purchaser's first default of the year, the seller may move forward to cancel the option and the purchaser's equitable right of redemption by either:
a)filing an agreement terminating the option, signed by all parties, at the register of deeds; or
b)obtaining a court order terminatng the purchaser's option, and filing the order with the register of deeds.
What if the seller defaults?
If the seller defaults on a loan secured by the property during the option period the purchaser may cancel and rescind the option contract. The seller will have to return all monies paid by the purchaser under the option, less the fair market rental value of the property while it was occupied by the purchaser and compensation for any damage to the property by the purchaser that is beyond normal wear and tear.
What are the penalties for violating the act?
A violation of this act is an unfair and deceptive trade practice subjecting the seller to treble damages and attorney’s fees, as well as equitable and declaratory relief.
Are there any other changes taking place?
YES, there are new rules governing purchases with lease backs, and installment land contracts. You should read the act in it is entirety and/or contact the writer or other competent legal counsel. In future posts I will address these other changes.
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