Bill > HB1178

This bill establishes provisions for homeownership through shared equity agreements, which are written contracts where an "investor-owner" contributes a fixed percentage, not exceeding thirty percent, towards an "occupant-owner's" down payment and monthly mortgage for an "eligible home," defined as a single-family residence that meets building codes, is the occupant's primary residence, and is not a manufactured or mobile home. In exchange for this contribution, the occupant-owner grants the investor-owner a "shared equity encumbrance," which is a claim on the home that secures repayment of the contribution and other agreed amounts, but is subordinate to the occupant-owner's primary mortgage. These agreements must be recorded with the county register of deeds, clearly identify both parties, specify the home's location and legal description, set a term of up to fifteen years (renewable), and grant the occupant-owner exclusive possession and sole responsibility for all home expenses, while allowing them to buy out the investor's share early. The agreement cannot bind future buyers, restrict lawful use of the home, include prepayment penalties, or prevent refinancing, provided the mortgage terms comply with the bill's requirements for a fixed or limited variable interest rate for the agreement's duration. Termination can occur upon buyout, mortgage maturity, transfer of ownership, default, death of the occupant-owner (with provisions for successors), or expiration of the term, with renewal options. Upon termination, the home is appraised, and the investor-owner is paid the greater of their contribution percentage of the appraised value or their original contribution plus interest. The occupant-owner is solely responsible for all financial obligations, including any losses if the home's value decreases, and the investor-owner is released from any obligation upon receiving full payment. These agreements create a private co-ownership arrangement that prevents the use of public housing funds for financing.

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https://sdlegislature.gov/#/Session/Bill/26662