senate Bill S3504

2013-2014 Legislative Session

Establishes requirements for purchase agreements for residential real property by which the buyer must maintain the property while full payment is outstanding

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Archive: Last Bill Status - In Committee


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 08, 2014 referred to judiciary
Feb 05, 2013 referred to judiciary

S3504 - Bill Details

Current Committee:
Law Section:
Real Property Law
Laws Affected:
Add ยง246-a, RP L
Versions Introduced in 2011-2012 Legislative Session:
S7011

S3504 - Bill Texts

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Establishes requirements for purchase agreements for residential real property by which the buyer must maintain the property while full payment is outstanding.

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BILL NUMBER:S3504

TITLE OF BILL: An act to amend the real property law, in relation to
establishing requirements for land contracts

PURPOSE: To afford notice to and additional protections for homeowners
who purchase their residence pursuant to a land contract.

SUMMARY OF PROVISIONS:

Section 1. Adds a new section 246-a to establish requirements for the
use of land contracts in New York State. Specifically the bill defines a
land contract as a written agreement which requires that the property
buyer make installment payments to the seller which results in the
transfer of the property at the end of the installment term. The defi-
nition includes contracts with a deposit of $1000 or more for a term
beyond 50 days in which the buyer is required to make any necessary
repairs to the property. The bill requires that the land contract seller
shall provide a written "Land contract Consumer Caution and Counseling
Notice" by certified mail to the purchaser not less than 10 days before
contract execution. This notice must include information notifying the
consumer that they may lose the property if other individuals or enti-
ties have a legal interest or claim to the property or if they fail to
make payments or perform as mandated by the contract terms. The notice
must also include information as to the existence of any mortgages or
recorded liens, unpaid property taxes or assessments against the proper-
ty. Additionally the bill mandates that every land contract contain
specific terms including the requirement that the seller maintain escrow
funds required under the contract in a separate account and provide the
buyer with an annual accounting and proof of taxes paid. The buyer must
also record the land contract within five days of execution or be
subject to a right of recovery for payments made by th e purchaser. Land
contracts are also prohibited from containing certain provisions such as
the imposition of excessive late fees and an automatic waiver of judi-
cial intervention or a waiver of equity in the event of buyer default.

Section 2. Provides for a 120 day effective date.

JUSTIFICATION: The distinct characteristic of a land contract is that
the transfer of title to the property does not take place until all the
payments on the property have been made. The buyer under a land contract
does not receive the deed to the property until the end of the contract
term. In contrast, in a traditional real property purchase, which is
usually financed by a mortgage, the buyer gets a deed at the onset at
the closing. A mortgage is then held by the seller, or the financing
entity as a lien against the property. Because a land contract buyer
does not receive a deed until the end of the contract term, the buyer's
home and investment are at a greater risk. These risks include potential
foreclosure actions against the seller, or the seller actually encumber-
ing the property after the land contract is signed. This risk can extend
through the life of a land contract which usually spans form 10-20

years. Land contracts are typically entered into by low-income buyers
who have poor credit, or lack the funds for a down payment. Often the
housing they are purchasing under a land contract is in poor condition
and is in need of repairs. Land contract buyers currently have the worst
of both worlds in terms of statutory protection. Land contract buyers
lack the statutory protections provided to tenants, such as right to
repairs, rent notices, and defined procedures in the event of default.
Land contract buyers also lack the statutory protection of homeowners
who are purchasing by mortgage, such as recording requirements, regu-
lation of escrow accounting, limits on late fees and requiring foreclo-
sure in the event of default. This gap in statutory Protection has seri-
ous practical consequences for land contract buyers. Land contract
buyers wishing to become homeowners will often scrape up, at great
sacrifice, a down payment for the land contract and then invest substan-
tial funds in repairing the property. Buyers then make payments month
after month for years with the full expectation of receiving the deed to
the property. Many problems often occur due to the lack of oversight of
land contracts. These include the jeopardizing the investments made by
the buyer due to the seller's failure to make his required mortgage
payments resulting in foreclosure proceedings against the seller. Land
contracts will often afford buyers little redress by containing clauses
that impose excessive late fees or will allow the purchaser to enforce
forfeiture terms in a summary proceeding. The seller can also sometimes
fail to deliver the deed at the end of the contract term. Also, because
land contracts are not typically recorded, buyers are unable to finan-
cial assistance from agencies for desperately needed repairs. This bill
will provide a number of minimum mandatory notice requirements for those
wishing to enter a land contract and will as well provide a minimum
number of statutory land contract terms to help address these inequi-
ties.

LEGISLATIVE HISTORY: 2012: S.7011 Referred to Judiciary

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: This act shall take effect 120 days after becoming a
law.

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                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  3504

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                            February 5, 2013
                               ___________

Introduced  by  Sen.  YOUNG  -- read twice and ordered printed, and when
  printed to be committed to the Committee on Judiciary

AN ACT to amend the real  property  law,  in  relation  to  establishing
  requirements for land contracts

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. The real property law is amended by adding  a  new  section
246-a to read as follows:
  S  246-A.  REQUIREMENTS  FOR  LAND  CONTRACTS.  1. DEFINITION. FOR THE
PURPOSES OF THIS SECTION, "LAND CONTRACT" MEANS  ANY  WRITTEN  AGREEMENT
EXECUTED  BETWEEN  A  BUYER AND SELLER OF RESIDENTIAL REAL PROPERTY OR A
PARCEL OF REAL PROPERTY FOR RESIDENTIAL USE,  BY  INSTALLMENT  PAYMENTS,
WITH  A  DEPOSIT  OF  ONE THOUSAND DOLLARS OR MORE, AND A TERM OF NINETY
DAYS OR MORE, PURSUANT TO  WHICH  SUCH  BUYER  IS  RESPONSIBLE  FOR  ALL
REPAIRS  UPON  THE  REAL  PROPERTY AND WILL BE GRANTED TITLE TO THE REAL
PROPERTY UPON THE FULL PAYMENT OF THE STATED PURCHASE PRICE.  SUCH  TERM
SHALL  NOT  INCLUDE A MORTGAGE PURSUANT TO WHICH THE SELLER EXECUTES AND
RECORDS A DEED TO THE REAL  PROPERTY  UPON  THE  BUYER'S  EXECUTION  AND
RECORDING  OF  A  MORTGAGE  UPON  THE REAL PROPERTY; NOR SHALL SUCH TERM
INCLUDE A LEASE OF REAL PROPERTY PURSUANT TO WHICH THE LESSOR  IS  OBLI-
GATED  TO  MAKE  REPAIRS AND PAY REAL PROPERTY TAXES UPON SUCH  PROPERTY
UNTIL THE LESSEE TENDERS THE STATED PURCHASE PRICE.
  2. DISCLOSURE NOTICE. NOT LESS THAN TEN DAYS PRIOR TO THE EXECUTION OF
A LAND CONTRACT, THE SELLER SHALL PROVIDE TO THE BUYER A WRITTEN  NOTICE
DELIVERED  BY  CERTIFIED  MAIL.  SUCH  NOTICE  SHALL  BE  ENTITLED "LAND
CONTRACT-CONSUMER CAUTION AND COUNSELING NOTICE" AND SHALL  INCLUDE  THE
FOLLOWING NOTICES:
  (A)  "YOU  CAN LOSE THIS PROPERTY IF YOU FAIL TO MAKE THE PAYMENTS AND
MEET THE OTHER REQUIREMENTS OF THE LAND CONTRACT.";
  (B) "YOU CAN LOSE THIS PROPERTY IF THE SELLER OF THIS  PROPERTY  LOSES
TITLE TO THIS PROPERTY DUE TO THE FORECLOSURE OF AN EXISTING MORTGAGE OR

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD07132-01-3

S. 3504                             2

OTHER  LIEN,  OR  OTHER  LEGAL  ACTIONS WHICH MAY BE BROUGHT AGAINST THE
SELLER BY CREDITORS OR OTHERS.";
  (C) "YOU CAN LOSE THIS PROPERTY IF OTHER PERSONS HAVE A LEGAL INTEREST
OR CLAIM AGAINST THE PROPERTY.";
  (D)  "UNDER THE TERMS OF THIS CONTRACT YOU ARE RESPONSIBLE FOR REPAIRS
TO THIS PROPERTY AND THEREFORE YOU SHOULD HAVE THE  PROPERTY  ADEQUATELY
INSPECTED BEFORE ENTERING INTO THIS CONTRACT.";
  (E)  THE  NAME  AND  ADDRESSES  OF THE HOLDERS OF ANY MORTGAGES ON THE
PROPERTY WHOSE CONSENT IS REQUIRED BEFORE THE PROPERTY CAN BE SOLD;
  (F) THE EXISTENCE OF ANY MORTGAGES OR LIENS OF RECORD ON THE PROPERTY;
AND
  (G) THE UNPAID PROPERTY TAXES OR ASSESSMENTS ON SUCH PROPERTY, IF ANY.
  3. MANDATORY PROVISIONS. EVERY LAND CONTRACT SHALL PROVIDE:
  (A) THAT IF THE SELLER IS TO PROVIDE THE BUYER WITH  ESCROW  PAYMENTS,
THE  SELLER  MUST  MAINTAIN  THE  ESCROW FUNDS IN A SEPARATE ACCOUNT AND
PROVIDE THE BUYER WITH AN ANNUALIZED ACCOUNTING AND PROOF OF TAXES PAID;
  (B) THAT IF THE SELLER DOES NOT RECORD THE LAND CONTRACT  WITHIN  FIVE
DAYS  OF  THE  EXECUTION  OF SUCH CONTRACT, THE BUYER SHALL BE GRANTED A
RIGHT OF RECOVERY AGAINST THE SELLER FOR ALL  PAYMENTS  MADE  UNDER  THE
LAND CONTRACT;
  (C)  THAT  THE  BUYER  MUST BE PROVIDED WITH A COPY OF THE RECEIPT FOR
FILING THE LAND CONTRACT WITH THE COUNTY CLERK; AND
  (D) THAT THE SELLER MUST PROVIDE THE BUYER WITH WRITTEN  RECEIPTS  FOR
ANY PAYMENTS MADE UNDER THE LAND CONTRACT, INCLUDING DOWN PAYMENTS.
  4.   RECORDING  REQUIREMENT.  WITHIN  FIVE  BUSINESS  DAYS  AFTER  THE
EXECUTION OF A LAND CONTRACT, SUCH CONTRACT SHALL  BE  RECORDED  BY  THE
SELLER  IN  THE  COUNTY  CLERK'S  OFFICE IN THE COUNTY IN WHICH THE REAL
PROPERTY IS LOCATED. THE SELLER SHALL PROVIDE THE BUYER WITH A  COPY  OF
THE RECEIPT ISSUED FOR SUCH RECORDING.
  5. PROHIBITED TERMS. NO LAND CONTRACT SHALL CONTAIN THE FOLLOWING:
  (A) A PROVISION WHICH IMPOSES EXCESSIVE LATE FEES;
  (B) A PROVISION IN WHICH THE BUYER CONSENTS TO HIS OR HER REMOVAL FROM
THE CONTRACT BY THE BUYER WITHOUT THE OPTION OF JUDICIAL INTERVENTION OR
A  PROVISION  IN  WHICH  THE  BUYER  AUTOMATICALLY  CONSENTS  TO SUMMARY
PROCEEDINGS BY THE SELLER;
  (C) A PROVISION IN WHICH THE BUYER FORFEITS EQUITY  IN  THE  EVENT  OF
DEFAULT; OR
  (D) A PROVISION WHICH WAIVES ANY OF THE PROVISIONS OF THIS SECTION.
  6.  ENFORCEMENT.  THE  ATTORNEY  GENERAL MAY COMMENCE AN ACTION IN THE
NAME OF THE PEOPLE OF THE STATE OF NEW YORK TO ENFORCE THE TERMS OF THIS
SECTION. A COURT MAY GRANT INJUNCTIVE, DECLARATORY  OR  OTHER  EQUITABLE
RELIEF  IN  ANY  SUCH  ACTION  BROUGHT TO ENFORCE THE PROVISIONS OF THIS
SECTION.
  S 2. This act shall take effect on the one hundred twentieth day after
it shall have become a law.

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