HSB 750 (LSB 6902YC (3) 91)

HOUSE FILE _____ 

BY  (PROPOSED COMMITTEE ON JUDICIARY BILL BY CHAIRPERSON HOLT)

A BILL FOR

An Act relating to business entity-owned residential arrangements, and including effective date provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 216.12, subsection 1, paragraph a, Code 2026, is amended to read as follows:
   a.  Any bona fide religious institution with respect to any qualifications it may impose based on religion or sexual orientation when the qualifications are related to a bona fide religious purpose, unless the religious institution owns or operates property for a commercial purpose or membership in the religion is restricted on account of race, color, or national origin.  This paragraph does not apply to the sale, rental, or occupancy of a dwelling that is a single-family residence, duplex, triplex, or quadruplex located on a subdivided lot within a parcel of land of twenty-five acres or more that is owned by a religious organization, association, or society, or a nonprofit institution or organization operated, supervised, or controlled by or in conjunction with a religious organization, association, or society.
    Sec. 2.  NEW SECTION.  558C.1  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Business entity” means a partnership, corporation, joint venture, limited liability company, trust, or other business organization or business association, however organized.
   2.  “Managing entity” means a business entity that owns residential property used in a residential arrangement.
   3.  “Residential arrangement” means an arrangement in which the purchaser of an interest in a business entity is entitled to exclusive possession of residential property owned by the business entity if the purchaser holds the interest in the business entity.
   4.  “Residential property” means real property and improvements for a single-family residence, duplex, triplex, or quadruplex. “Residential property” does not include a unit as defined in section 557A.2.
    Sec. 3.  NEW SECTION.  558C.2  Disclosure requirements —— prohibited actions —— enforcement.
   1.  An agreement for the purchase of an interest in a managing entity shall disclose to the purchaser that the agreement is for the purchase of an interest in the business entity and not for the purchase of any residential property.
   2.  A purchase agreement, operating agreement, bylaws, rules, or other governing document relating to a residential arrangement or the ownership interest in the managing entity shall not require that a dispute arising from the arrangement or ownership interest be resolved in a forum other than a court established under the laws of this state or the United States.
   3.  A managing entity shall not take any action relating to an interest in the managing entity in a manner that would constitute a violation of chapter 216 if the interest in the managing entity were an interest in real property, including but not limited to any of the following:
   a.  Restricting or prohibiting the transfer of an interest.
   b.  Imposing discriminatory conditions to retain or maintain an interest.
   c.  Refusing to grant an interest to an otherwise qualified person.
   4.  Notwithstanding any provision in an agreement between an owner of an interest and a managing entity, an owner may transfer the interest without approval by the managing entity.
   5.  A managing entity shall not charge a fee or share in the proceeds of the transfer of an interest from an owner to a subsequent purchaser.
   6.  a.  A violation of this chapter constitutes an unlawful practice under section 714.16 and chapter 714H.
   b.  A court that finds a violation of this chapter may enjoin a managing entity or a person affiliated with the managing entity from taking any action in furtherance of development of, or construction on, residential property used in a residential arrangement subject to a civil action under this section, including the following:
   (1)  Seeking to become or operating as a public utility as defined in section 476.1.
   (2)  Receiving, directly or indirectly, any public moneys or benefit.
    Sec. 4.  Section 714.16, subsection 2, Code 2026, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  t.  It is an unlawful practice for a person to violate chapter 558C.
    Sec. 5.  Section 714H.3, subsection 2, Code 2026, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  0g.  Chapter 558C.
    Sec. 6.  EFFECTIVE DATE.  This Act, being deemed of immediate importance, takes effect upon enactment.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill regulates certain business entity-owned residential arrangements.
   The bill defines “business entity”, “managing entity”, “residential arrangement”, and “residential property”.
   The bill requires that an agreement for the purchase of an interest in a managing entity must disclose to the purchaser that the agreement is for the purchase of an interest in the entity and not for the purchase of any residential property.
   The bill prohibits a purchase agreement, operating agreement, bylaws, rules, or other governing document relating to a residential arrangement or ownership interest from requiring that disputes be resolved in a forum other than a court established under the laws of this state or the United States.
   The bill requires that a managing entity not take action relating to an ownership interest in a manner that would violate Code chapter 216 (Iowa civil rights Act) if the interest is an interest in real property. Prohibited actions include restricting or prohibiting the transfer of an interest, imposing discriminatory conditions to retain or maintain an interest, or refusing to grant an interest to an otherwise qualified person.
   The bill provides that, notwithstanding any agreement to the contrary, an owner may transfer the ownership interest without approval by the managing entity.
   The bill prohibits a managing entity from charging a fee or sharing in the proceeds of the transfer of an ownership interest from an owner to a subsequent purchaser.
   The bill provides that a violation of the bill constitutes an unlawful practice under Code section 714.16 (consumer fraud Act) and Code chapter 714H (consumer fraud —— private actions). Several types of remedies are available if a court finds that a person has committed an unlawful practice under Code section 714.16, including injunctive relief, disgorgement of moneys or property, and civil penalties not to exceed $40,000 per violation. In an action under Code chapter 714H, a court may order equitable relief, including reasonable attorney fees and injunctive relief. If the violation constitutes willful and wanton disregard for the rights and safety of another, in addition to an award of actual damages, statutory damages up to three times the amount of actual damages may be awarded to the prevailing consumer. A court that finds a violation of the bill may enjoin a managing entity or a person affiliated with the managing entity from further developing or constructing residential property used in a residential arrangement subject to a civil action under the bill, including seeking to become or operating as a public utility, or receiving any public moneys or benefit directly or indirectly. 
   Current law exempts certain entities from prohibited unfair or discriminatory practices related to housing, including certain religious institutions. The bill creates an exception to the religious exemption, providing that the sale, rental, or occupancy of a dwelling that is a single-family house, duplex, triplex, or quadruplex located on a subdivided lot with a parcel of land 25 acres or more that is owned by a religious organization, association, or society, or a nonprofit institution or organization operated, supervised, or controlled by or in conjunction with a religious organization, association, or society is subject to the unfair or discriminatory practices prohibited by law. 
   The bill takes effect upon enactment.