A3248

An Act prohibiting certain institutional investors from purchasing or acquiring single-family homes and supplementing chapter 3 of Title 46 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. As used in P.L. , c. (C. ) (pending before the Legislature as this bill):

"Affordable housing" means an inclusionary development, as the term is defined pursuant to subsection f. of section 4 of P.L.1985, c.222 (C.52:27D-304).

"Beneficial owner" means, with respect to an entity, an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, exercises substantial control over the entity, or owns or controls not less than 25 percent of the ownership interests of the entity. "Beneficial owner" shall not include:

(1) a minor;

(2) an individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual;

(3) an individual acting solely as an employee of a corporation, limited liability company, or other similar entity and whose control over or economic benefits from such entity is derived solely from the employment status of the person;

(4) an individual whose only interest in a corporation, limited liability company, or other similar entity is through a right of inheritance; or

(5) a creditor of a corporation, limited liability company, or other similar entity.

"Commissioner" means the Commissioner of Community Affairs.

"Family limited liability company" means a limited liability company:

(1) that has no more than five members;

(2) whose membership satisfies the following criteria:

(a) each member is an individual or a family trust; and

(b) each member who is an individual is related to each of the other members who are individuals, within and including the third degree of consanguinity or affinity; and

(3) whose revenue is paid directly from one member to another.

"Family trust" means:

(1) a trust in which a majority of the beneficiaries are individuals who are related to each other within and including the third degree of consanguinity or affinity; and where each beneficiary is an individual or an organization described pursuant to section 170(c)(2) of the Internal Revenue Code;

(2) a charitable remainder annuity trust or a charitable remainder unitrust, as those terms are defined pursuant to section 664 of the Internal Revenue Code; or

(3) a charitable lead trust.

"Institutional investor":

(1) means:

(a) a partnership, corporation, limited liability company, or trust;

(b) an affiliate, subsidiary, or holding company of a partnership, corporation, limited liability company, or trust;

(d) a beneficial owner of an affiliate, subsidiary, or holding company of a partnership, corporation, limited liability company, or trust; and

(2) shall not mean:

(a) a nonprofit corporation organized for the exclusive purpose of acquiring a single-family home that is, or will be used, for the development and provision of affordable housing;

(b) a family trust; or

"Minor" means a person under the age of 18 years.

"Single-family home" means a residential property consisting of one to four dwelling units. A "single-family home" shall include a townhome.

"Small institutional investor" means an institutional investor that, in the aggregate through any combination of the institutional investor’s partnerships, corporations, limited liability companies, beneficial owners, or trusts; or affiliates, subsidiaries, or holding companies of a partnership, corporation, limited liability company, beneficial owner, or trust, owns four or fewer single-family homes.

"Townhome" or "townhouse" means a single-family dwelling unit, constructed in a group of three or more attached units in which each unit extends from foundation to the roof and with a yard or public way on not less than two sides.

2. a. Except as provided by subsection b. of this section, an institutional investor shall not place a bid on, acquire, or purchase, directly or indirectly, or through any combination of the institutional investor’s constituent persons or entities, a single-family home in this State. An institutional investor shall be considered to have acquired a single-family home if the institutional investor, whether through gift, devise, inheritance, intestate succession, or purchase, holds any ownership interest, whether directly or indirectly, or through any combination of the institutional investor’s constituent persons or entities, in a single-family home. An institutional investor shall be considered to own a single-family home if the institutional investor holds any ownership interest, whether directly or indirectly, or through any combination of the institutional investor’s constituent persons or entities, in a single-family home.

b. Except as provided in subsection c. of this section, the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not apply to:

(1) a tax exempt nonprofit organization that is described in section 501(c) of the Internal Revenue Code and exempt from federal taxation pursuant to section 501(a) of the Internal Revenue Code, which purchased a single-family home or homes for the exclusive purpose of providing, and which serve to provide, affordable housing in this State;

(2) new construction of a single-family home, unless the new construction of a single-family home replaces, in whole or in part, a single-family home on the same lot;

(3) a small institutional investor;

(4) a financial institution, including a credit union, or an institutional investor, as a direct result of any foreclosure, or a secured transaction pursuant to the "Uniform Commercial Code - Secured Transactions," N.J.S.12A:9-101 et seq.;

(5) an institutional investor, which, as a condemnor, as the term is defined pursuant to subsection (b) of section 2 of P.L.1971, c.361 (C.20:3-2), places a bid on, acquires, or purchases a single-family home pursuant to the "Eminent Domain Act of 1971," P.L.1971, c.361 (C.20:3-1 et seq.);

(6) a governmental authority;

(7) a public utility; or

(8) such other institutional investors that the Commissioner of Community Affairs, in consultation with the Director of the Division of Consumer Affairs in the Department of Law and Public Safety, determines to be: necessary to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), in the public interest, and necessary to preserve the quantity of single-family homes in this State. An institutional investor, subject to an exemption pursuant to this paragraph, shall provide additional information that the commissioner determines to be necessary for the institutional investor to qualify for an exemption pursuant to this paragraph and that effectuates the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill).

c. Notwithstanding the provisions of subsection b. of this section to the contrary, all institutional investors shall provide to the commissioner, on a form established by the Department of Community Affairs, in consultation with the Division of Consumer Affairs in the Department of Law and Public Safety, and made available on the Department of Community Affairs’ Internet website, for every taxable year by April 15 annually, and within 60 days of the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) if April 15 is not less than 90 days subsequent to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), a report containing the information required by this subsection, and such other information as required by the rules and regulations promulgated by the commissioner pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill), which information shall include but not be limited to, the number of single-family homes that, in the aggregate or through any combination of the institutional investor’s constituent persons or entities, were bid on, acquired, or purchased within the previous taxable year.

d. An institutional investor that, in violation of P.L. , c. (C. ) (pending before the Legislature as this bill), places a bid on, acquires, or purchases, directly or indirectly, or through any combination of the institutional investor’s constituent persons or entities, a single-family home in this State shall alienate the single-family home within six months of acquiring the single-family home, and any profit received shall be payable to the Attorney General.

e. (1) It shall be an unlawful practice, pursuant to and in violation of the New Jersey consumer fraud act, P.L.1960, c.39 (C.56:8-1 et seq.), for an institutional investor to place a bid on, acquire, or purchase a single-family home in violation of subsection a. of this section.

(2) An institutional investor that violates subsection a. of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be liable to a civil penalty of $500 per day that the violation continues or has not been remedied for a first offense, and $1,000 per day that the violation continues or has not been remedied for a second and any subsequent offense, which shall be collected in a civil action by a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). The Superior Court, Law Division in the county or vicinage in which the single-family home is located shall have jurisdiction over the proceedings. Process shall be in the nature of a summons or a warrant, and shall issue upon the complaint of the Attorney General. In addition, a complaint may also issue, pursuant to this paragraph, at the discretion of any person or entity, including a small institutional investor, adversely affected, which term shall be construed liberally, by a violation of P.L. , c. (C. ) (pending before the Legislature as this bill). The complainant shall be permitted to recover reasonable attorney’s fees, court costs, expenses for expert witnesses, other related fees and expenses incurred in proving a violation of P.L. , c. (C. ) (pending before the Legislature as this bill), and the amount of any actual economic benefits accruing to the violator from the violation. The penalty, expenses, or costs pursuant to this paragraph shall be recoverable by the Attorney General, or any person adversely affected by this paragraph, or both.

3. The Commissioner of Community Affairs shall, in consultation with the Director of the Division of Consumer Affairs in the Department of Law and Public Safety, and in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), adopt rules and regulations to implement the provisions of this act.

4. This act shall take effect on the first day of the sixth month next following the date of enactment, and shall apply to all bids placed and contracts for the purchase of a single-family home executed, or a single-family home owned or acquired, on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), except that the Commissioner of Community Affairs and the Director the Division of Consumer Affairs in the Department of Law and Public Safety shall take anticipatory action necessary to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

STATEMENT

This bill would prohibit certain institutional investors from placing a bid on, acquiring, or purchasing a single-family home.

Specifically, the bill would prohibit an institutional investor, subject to the exceptions provided in the bill, from placing a bid on, acquiring, or purchasing, directly or indirectly, or through any combination of the institutional investor’s constituent persons or entities, a single-family home in this State. The bill defines the term "institutional investor" to mean:

(1) a partnership, corporation, limited liability company, or trust;

(2) an affiliate, subsidiary, or holding company of a partnership, corporation, limited liability company, or trust;

(3) a beneficial owner, as defined in the bill, of a partnership, corporation, limited liability company, or trust; or

(4) a beneficial owner of an affiliate, subsidiary, or holding company of a partnership, corporation, limited liability company, or trust.

The bill specifies that an "institutional investor" does not mean: a nonprofit corporation organized for the development and provision of affordable housing; a family trust; or a family limited liability company, as those terms are defined in the bill.

The bill would not apply to certain nonprofit organizations; certain new construction of a single-family home; small institutional investors, as defined in the bill; financial institutions owning or acquiring a single-family home through foreclosure or through a secured transaction; an institutional investor acting as a condemnor; a governmental authority; a public utility; or other institutional investors allowed by the Commissioner of Community Affairs (commissioner), as specified in the bill.

The bill requires all institutional investors to provide an annual report to the commissioner containing certain information required by the bill. The bill specifies that the report is to be provided on a form established by the Department of Community Affairs (department).

The bill requires an institutional investor that places a bid on, acquires, or purchases, directly or indirectly, or through any combination of the institutional investor’s constituent persons or entities, a single-family home in this state to alienate the single-family home within six months of acquiring the single-family home. Any profit is to be payable to the Attorney General.

The bill provides that it would be an unlawful practice, pursuant to and in violation of the New Jersey consumer fraud act, for an institutional investor to place a bid on, acquire, or purchase a single-family home in violation of the bill. An institutional investor that violates the bill would also be liable to a civil penalty charged for each day, as specified in the bill, that the violation continues or has not been remedied, which is to be collected in a civil action brought by the Attorney General by a summary proceeding pursuant to the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.). Additionally, the bill permits any person or entity adversely affected by a violation to file a complaint against the institutional investor in violation of the bill. The complainant would be permitted to recover certain fees and expenses incurred in proving a violation of the bill, and the amount of any actual economic benefits accruing to the violator from the violation.

The bill requires the commissioner to adopt rules and regulations to implement the provisions of the bill. The bill would take effect on the first day of the sixth month next following the date of enactment, and apply to the acquisition of, and all bids placed and contracts executed for the purchase of, a single-family home, on or after the effective date of the bill, except that the commissioner would be permitted to take anticipatory action necessary to effectuate the provisions of the bill.