A BILL TO BE ENTITLED
AN ACT to enact the homeowner and homebuyer protection act to prohibit home foreclosure rescue scams and offer protections in land installment sales.
The General Assembly of North Carolina enacts:
SECTION 1.  This act shall be known and may be cited as the "Homeowner and Homebuyer Protection Act."
SECTION 2.  Chapter 75 of the General Statutes is amended by adding a new Article to read:
"Article 6.
"Home Foreclosure Rescue Scams.
"§ 75‑120.  Definitions.
The following definitions shall apply in this Article:
(1)	Exempt transaction. – A foreclosure rescue transaction in which the transferee is any of the following:
a.	A member of the transferor's family.
b.	A bona fide nonprofit organization that regularly provides financial, housing, or social services to individuals.
c.	A State, federal, or local government agency or organization.
(2)	Foreclosure rescue transaction. – A transfer of residential real property, including a manufactured home, which includes all of the following features:
a.	The real property is the principal residence of the transferor.
b.	The transferor is in default, or at imminent risk of being in default, on a mortgage loan obligation which is secured by the transferor's principal residence.
c.	The transferor follows representations by the transferee, an agent of the transferee, or others acting in concert with the transferee, that the transfer of the residential property will enable the transferor to prevent, postpone, or reverse the effect of foreclosure and to remain in the residence.
d.	By written or oral agreement, the transferor 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.
"§ 75‑121.  Foreclosure rescue transactions prohibited; exceptions; violation.
It is unlawful for a person other than the transferor to engage in, promise to engage in, arrange, offer, promote, solicit, assist with, or carry out a foreclosure rescue transaction for financial gain or with the expectation of financial gain. This section does not apply to exempt transactions. A violation of this section is an unfair trade practice under G.S. 75‑1.1."
SECTION 3.  The General Statutes are amended by adding a new Chapter to read:
"Chapter 47G.
"Land Installment Contracts.
"§ 47G‑1.  Definitions.
The following definitions apply in this Chapter, unless the context requires otherwise:
(1)	Cure the default. – To perform the obligations under the contract which are described in the notice of intent to forfeit required by G.S. 47G‑6 and which are necessary to reinstate the contract. This term is synonymous with the term 'cure.'
(2)	Down payment. – A payment made by the purchaser to the vendor which constitutes part of the purchase price of property that is the subject of a land installment contract and which is made at or before the time of the execution of that contract.
(3)	Forfeiture. – The termination of all of a purchaser's rights, title, and interest, and those of persons claiming by or through a purchaser, in property that is the subject of a land installment contract, to the extent permitted by this Chapter, because of a breach of one or more of the purchaser's obligations under the contract. This term is synonymous with the term 'forfeiture.'
(4)	Land installment contract. – An agreement in which the vendor agrees to sell an interest in property to the purchaser and the purchaser agrees to pay the purchase price in five or more payments exclusive of the down payment, if any, and the vendor retains title to the property as security for the purchaser's obligation under the agreement. Land installment contracts do not include (i) option contracts for the purchase of real property unless the option to purchase includes, or is combined with, or is executed concurrently with a residential lease agreement, or (ii) purchase and sale agreements entered into with the good faith expectation of a separate transaction in which a third party or the vendor agrees to finance the purchase price.
(5)	Property. – Either (i) real estate located in this State, upon which there is located or there is to be located a structure or structures designed principally for occupancy of from one to four families which is or will be occupied by the purchaser as the purchaser's principal dwelling, or (ii) a manufactured home, as that term is defined in G.S. 143‑149.9, which is or will be occupied by a purchaser as the purchaser's principal dwelling.
(6)	Purchaser. – An individual who purchases an interest in property under a land installment contract, or any legal successor in interest to that individual.
(7)	Vendor. – A person who makes a sale of property by means of a land installment contract, or the person's successor in interest.
"§ 47G‑2.  Minimum contents of land installment sales contracts.
(a)	Writing Required. – Every land installment contract shall be evidenced by a contract signed by all parties to it and containing all the terms to which they have agreed.
(b)	Contents. – A land installment sales contract shall contain at least all of the following:
(1)	The full names and addresses of all the parties to the contract.
(2)	The date the contract is signed by each party.
(3)	A legal description of the property conveyed.
(4)	The sales price of the property conveyed.
(5)	Any charges or fees for services included in the contract separate from the sale price.
(6)	The amount of the purchaser's down payment.
(7)	The principal balance owed by the purchaser.
(8)	The amount and due date of each installment payment and the total number of installment payments.
(9)	The interest rate on the unpaid balance, if any, and the method of determining the interest rate.
(10)	A conspicuous statement of any pending order of any public agency or other matters of public record affecting the property.
(11)	A statement of the rights of the buyer to cure a default.
(12)	A statement setting forth the obligation of each party who is responsible for making repairs to the property, the payment of taxes, hazard insurance assessments, and other charges against the property from the date of the contract.
(13)	A provision that the purchaser has the right to accelerate or prepay any installment payments without penalty.
(14)	A description of conditions of the property that includes whether the property has water, sewer, septic, and electricity service, whether the property is in a floodplain, whether anyone else has a legal interest in the property, and whether restrictive covenants prevent building or installing a dwelling.
(15)	A statement indicating whether any real estate taxes are owed on the real estate that is the subject of the contract.
(16)	A statement of the purchaser's right to cancel pursuant to G.S. 47G‑8.
(c)	At the time the purchaser signs the contract, the vendor shall deliver to him an exact copy of the contract. If the vendor fails to provide a copy of the contract or the contract does not contain the minimum provisions, the contract signed by the purchaser is voidable at the option of the purchaser, and the vendor, on demand, shall immediately refund to the purchaser all payments and deposits that have been made. However, the contract shall not be voidable simply as a result of clerical errors, momentary delays in the provision of an exact copy of the contract to the purchaser, or other immaterial errors.
"§ 47G‑3.  Escrow of down payment.
(a)	Any down payment that a purchaser provides pursuant to a land installment contract shall be immediately deposited in a trust or escrow account in an insured bank, savings and loan association, or credit union in this State and shall remain in the account until either the vendor transfers ownership of the property or until the agreement is cancelled. Funds held in the trust or escrow account shall be deemed to belong to the purchaser and not to the vendor.
(b)	If a vendor fails to comply with subsection (a) of this section, and the contract is cancelled or rescinded and the down payment not returned to the vendor within 10 business days of notification to the vendor, the vendor shall be liable to the purchaser in an amount equal to three times the amount of the down payment.
"§ 47G‑4.  Protection of tenants' rights.
An option to purchase real property that includes or is combined or executed concurrently with a residential lease agreement, together with the lease, is considered a land installment contract for purposes of this Chapter. The provisions of Chapter 42 of the General Statutes apply to the portion of the contract that is a residential lease agreement. After a tenant exercises an option to purchase leased property under a residential lease, Chapter 42 no longer applies to the lease.
"§ 47G‑5.  Conditions of forfeiture; right to cure.
(a)	A purchaser's rights under a land installment contract shall not be forfeited except as provided in this Chapter of the General Statutes. A land installment contract cannot be forfeited unless a breach has occurred in one or more of the purchaser's obligations under the contract and the contract provides that as a result of such breach the vendor is entitled to forfeit the contract. Furthermore, the purchaser's rights shall not be forfeited until the purchaser has been notified of the intent to forfeit in accordance with G.S. 47G‑6 and been given a right to cure the default and has failed to do so within the time period allowed. A timely tender of cure shall reinstate the contract.
(b)	In addition to any other remedies at law, a vendor's violation of this section entitles the purchaser to either a claim for damages or the right to rescind the contract and seek the return of all payments, deposits, and down payments that have been made under the contract. If the purchaser elects to rescind the contract, the vendor is entitled to an offset of an amount equal to the fair market value of the use of the property during the duration of the purchaser's possession of the property.
"§ 47G‑6.  Notice of intent to forfeit.
(a)	The notice of intent to forfeit shall contain all of the following:
(1)	The name, address, and telephone number of the vendor and the vendor's agent or attorney giving the notice, if any.
(2)	A description of the contract, including the names of the original parties to the contract.
(3)	A legal description of the property.
(4)	A description of each default under the contract on which the notice is based.
(5)	A statement that the contract will be forfeited if all defaults are not cured by a date stated in the notice which is not less than 90 days after the notice of intent to forfeit is sent or any longer period specified in the contract or other agreement with the vendor.
(6)	An itemized statement of or, to the extent not known at the time the notice of intent to forfeit is given or recorded, a reasonable estimate of all payments of money in default and, for defaults not involving the failure to pay money, a statement of the action required to cure the default.
(7)	Any additional information required by the contract or other agreement with the vendor.
(b)	Any notice of intent to forfeit must be served on the purchaser in accordance with the provisions for service of process set forth in G.S. 1A‑1, Rule 4. Any notice of intent to forfeit must also be served on the occupant of the dwelling that is the subject of the land installment contract, if different from the purchaser.(c)	In addition to any other remedies at law, a vendor's violation of this section entitles the purchaser to either a claim for damages or the right to rescind the contract and seek the return of all payments, deposits, and down payments that have been made under the contract. If the purchaser elects to rescind the contract, the vendor is entitled to an offset of an amount equal to the fair market value of the use of the property during the duration of the purchaser's possession of the property.
"§ 47G‑7.  Periodic statements of account.
The vendor shall provide the purchaser with a statement of account at least once every 12‑month period for the term of a land installment contract. The statement must include at least the following information:
(1)	The amount paid under the contract.
(2)	The remaining amount owed under the contract.
(3)	The number of payments remaining under the contract.
(4)	The amounts paid to taxing authorities on the purchaser's behalf, if collected by the vendor.
(5)	The amounts paid to insure the property on the purchaser's behalf, if collected by the vendor.
(6)	If the property has been damaged and the vendor has received insurance proceeds, an accounting of the proceeds applied to the property.
"§ 47G‑8.  Purchaser's right to cancel contract.
(a)	In addition to any other rights or remedies provided by law, the purchaser may cancel and rescind an installment land contract for any reason by sending by certified or registered mail, return receipt requested, or by delivering in person a signed written notice of cancellation to the vendor not later than the fourteenth day after the date of the signing of the contract.
(b)	If the purchaser cancels the contract pursuant to subsection (a) of this section, the vendor shall, not later than the tenth day after the date the vendor receives the purchaser's notice of cancellation, return to the purchaser the executed contract and any property exchanged or payments made by the purchaser under the contract.
"§ 47G‑9.  Requirement that vendor hold unencumbered legal title.
(a)	A potential vendor may not execute a land installment contract with a potential purchaser if the vendor does not own the property free from any liens, mortgages, or other encumbrances.
(b)	Except as provided in this subsection, a vendor, or the successors in interest of the vendor, must maintain fee simple title free from any liens or other encumbrances to property covered by a land installment contract for the entire duration of the contract. This subsection does not apply to a lien or encumbrance placed on the property that is:
(1)	Placed on the property because of the conduct of the purchaser.
(2)	Agreed to by the purchaser as a condition of a loan obtained to place improvements on the property, including utility and fire protection improvements.
(3)	Placed on the property by the vendor prior to the execution of the land installment contract in exchange for a loan used only to purchase the property if all of the requirements below are met:
a.	The vendor, not later than the third day before the date the contract is executed, notifies the purchaser in a separate written disclosure:
1.	Of the name, address, and telephone number of the lienholder or, if applicable, the servicer of the loan.
2.	Of the loan number and outstanding balance of the loan.
3.	Of the monthly payments due on the loan and the due date of those payments.
4.	In 14‑point type, of the fact that if the vendor fails to make timely payments to the lienholder, the lienholder may attempt to collect the debt by foreclosing on the lien and selling the property at a foreclosure sale.
b.	The lien:
1.	Is attached only to the property sold to the purchaser under the contract.
2.	Secures indebtedness that at no time is or will be greater in amount than the amount of the total outstanding balance owed by the purchaser under the installment land contract.
c.	The lienholder:
1.	Does not prohibit the property from being encumbered by a land installment contract; and
2.	Consents to verify the status of the loan on request of the purchaser and to accept payments directly from the purchaser if the vendor defaults on the loan.
(c)	A violation of this section is a violation of G.S. 75‑1.1 and, in addition to other rights or remedies provided by law, entitles the purchaser to cancel and rescind the contract and receive from the vendor:
(1)	The return of all payments of any kind made to the vendor under the contract; and
(2)	Reimbursement for any payments the purchaser made to a taxing authority for the property and the value of any improvements made to the property by the purchaser.
(d)	A vendor is not liable under this section if:
(1)	A lien is placed on the property by a person other than the vendor; and
(2)	Not later than the thirtieth day after the date the vendor receives notice of the lien, the vendor takes all steps necessary to remove the lien and has the lien removed from the property.
"§ 47G‑10.  Late fees.
No vendor may charge a late payment charge under a land installment contract in excess of four percent (4%) of the amount of the payment past-due. A late payment charge that violates this section is hereby declared usurious.
"§ 47G‑11.  Attorneys' fees.
A vendor shall be liable for the purchaser's attorneys' fees and costs if the purchaser prevails in a lawsuit to enforce the provisions of this Chapter of the General Statutes."
SECTION 4.  This act becomes effective October 1, 2009.