Regular Session 2021-2022 House Bill 2701 P.N. 3282

PRINTER'S NO. 3282

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

2701

Session of

2022

INTRODUCED BY FREEMAN, SCHLOSSBERG, LONGIETTI, HILL-EVANS,

SAPPEY, BENHAM, KINSEY, DELLOSO, MADDEN, SANCHEZ, HOWARD,

OTTEN, SHUSTERMAN, FITZGERALD AND CEPHAS, JUNE 21, 2022

REFERRED TO COMMITTEE ON URBAN AFFAIRS, JUNE 21, 2022

AN ACT

Amending the act of December 3, 1959 (P.L.1688, No.621),

entitled "An act to promote the health, safety and welfare of

the people of the Commonwealth by broadening the market for

housing for persons and families of low and moderate income

and alleviating shortages thereof, and by assisting in the

provision of housing for elderly persons through the creation

of the Pennsylvania Housing Finance Agency as a public

corporation and government instrumentality; providing for the

organization, membership and administration of the agency,

prescribing its general powers and duties and the manner in

which its funds are kept and audited, empowering the agency

to make housing loans to qualified mortgagors upon the

security of insured and uninsured mortgages, defining

qualified mortgagors and providing for priorities among

tenants in certain instances, prescribing interest rates and

other terms of housing loans, permitting the agency to

acquire real or personal property, permitting the agency to

make agreements with financial institutions and Federal

agencies, providing for the purchase by persons of low and

moderate income of housing units, and approving the sale of

housing units, permitting the agency to sell housing loans,

providing for the promulgation of regulations and forms by

the agency, prescribing penalties for furnishing false

information, empowering the agency to borrow money upon its

own credit by the issuance and sale of bonds and notes and by

giving security therefor, permitting the refunding,

redemption and purchase of such obligations by the agency,

prescribing remedies of holders of such bonds and notes,

exempting bonds and notes of the agency, the income

therefrom, and the income and revenues of the agency from

taxation, except transfer, death and gift taxes; making such

bonds and notes legal investments for certain purposes; and

indicating how the act shall become effective," establishing

the Pennsylvania Lease-Purchase Home Ownership Program and

the Pennsylvania Lease-Purchase Home Ownership Program Fund.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The act of December 3, 1959 (P.L.1688, No.621),

known as the Housing Finance Agency Law, is amended by adding an

article to read:

ARTICLE IV-E

PENNSYLVANIA LEASE-PURCHASE HOME OWNERSHIP PROGRAM

Section 401-E. Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Advertisement." A written, visual or oral communication

made to a lessee or prospective lessee by means of personal

representation, newspaper, magazine, circular, billboard, direct

mailing, sign, radio, television, telephone or other means of

communication that aids, promotes or assists, directly or

indirectly, a lease-purchase agreement.

"Cash price." The price at which the lessor in the ordinary

course of business would offer the property that is subject to a

lease-purchase agreement to the lessee for cash on the date of

the lease-purchase agreement. The term may include sales tax

imposed on the agreement.

"Fund." The Pennsylvania Lease-Purchase Home Ownership

Program Fund established in section 406-E.

"Lease-purchase agreement." An agreement for the use of

personal property by an individual primarily for personal,

family or household purposes for an initial period of not less

than one month that is automatically renewable with each

payment after the initial period and that permits the individual

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to acquire ownership of the property. The term does not include

an agreement for agricultural, business or commercial purposes

or an agreement in which the individual that will use the

property is an organization.

"Lessee." An individual who leases personal property in

accordance with a lease-purchase agreement.

"Lessor." A person who in the ordinary course of business

regularly offers to lease or arranges for personal property to

be leased in accordance with a lease-purchase agreement.

"Personal property." Property that is not real property

under the laws of this Commonwealth when the property is offered

or made available for use through a lease-purchase agreement.

"Program." The Pennsylvania Lease-Purchase Home Ownership

Program established in section 402-E.

"Program funds." All money appropriated by the General

Assembly for the purpose of the program, including money from

sources other than the Commonwealth that are provided for the

program.

Section 402-E. Establishment.

The Pennsylvania Lease-Purchase Home Ownership Program is

established and shall be administered by the agency. The program

shall be dependent on the availability of program funds.

Section 403-E. Structure of program.

(a) Project types.--The program may provide funding for

projects to provide safe and sanitary dwellings for lease

purchase to low-income and moderate-income individuals to

increase access to sustainable home ownership for the households

and to revitalize distressed neighborhoods.

(b) Use of program funds.--Program funds for projects under

subsection (a) may be used for the following:

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(1) Predevelopment activities, including title searches,

market studies, project planning, architectural services,

legal and engineering studies and related fees.

(2) Acquisition and disposition of real or personal

property.

(3) Site preparation, including demolition of existing

structure, improvements and infrastructure.

aside for matching funds for counties that have established

optional county affordable housing funds under 53 Pa.C.S. Ch. 60

(relating to optional affordable housing funding). To receive

matching funds under this subsection, a county must annually

report detailed information as required by the agency on the use

of the funds for county projects. The information shall be

included in the agency's report under section 405-E.

(d) Preferences.--The agency shall adopt written policies to

give preference to projects that utilize properties from

inventories maintained by public entities, including land banks

and redevelopment agencies.

(e) Considerations.--The agency shall take into

consideration geographical distribution of program funds to

ensure that all areas of this Commonwealth participate to the

greatest extent possible.

(f) Allocation.--The agency shall allocate at least 30% of

program funds for housing projects that benefit households with

household incomes that are less than 50% of the median area

income.

Section 404-E. Plan.

(a) General rule.--Within 90 days of the effective date of

this section and by March 15 of each year thereafter, the agency

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shall adopt a plan that specifies the method by which program

funds will be distributed that year.

(b) Publication and posting.--

(1) The agency shall submit the proposed plan, including

a comment response document, to the chair and minority chair

of the Urban Affairs and Housing Committee of the Senate and

the chair and minority chair of the Urban Affairs Committee

of the House of Representatives, and to the Legislative

Reference Bureau for publication in the Pennsylvania

Bulletin, and shall post the proposed plan on the agency's

publicly accessible Internet website for public comment no

later than 45 days prior to adoption of the proposed plan

under subsection (a).

(2) All comments submitted to the agency in writing are

public records accessible for inspection and duplication in

accordance with the act of February 14, 2008 (P.L.6, No.3),

known as the Right-to-Know Law, and the agency shall

incorporate the comments into the comment response document.

Section 405-E. Reporting.

(a) Duty of agency.--Within 90 days following the close of

the first calendar year after the effective date of this section

and by July 1 of every year thereafter, the agency shall issue a

report containing a financial statement, an itemized list of

projects funded and a description of other expenditures in the

preceding year. The agency shall submit the report to the

Governor, the Auditor General, the chair and minority chair of

the Urban Affairs and Housing Committee of the Senate and the

chair and minority chair of the Urban Affairs Committee of the

House of Representatives and shall post the report on the

agency's publicly accessible Internet website.

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(b) Public record.--The report shall be a public record

accessible for inspection and duplication in accordance with the

act of February 14, 2008 (P.L.6, No.3), known as the Right-to-

Know Law.

Section 406-E. Pennsylvania Lease-Purchase Home Ownership

Program Fund.

The Pennsylvania Lease-Purchase Home Ownership Program Fund

is established in the State Treasury. Interest and earnings of

the fund shall remain in the fund. All program funds shall be

deposited into the fund. The money in the fund and interest

accruing thereon is appropriated to the agency on a continuing

basis to carry out the provisions of this article.

Section 407-E. Funding.

Implementation of this article shall be contingent upon

sufficient program funds being deposited into the fund in

accordance with section 406-E to carry out the purposes of this

article. In a year in which there are insufficient program funds

in the fund for the purposes outlined in this article, the

program shall cease until program funds exist in sufficient

amount.

Section 408-E. Disclosures required in connection with lease-

purchase agreement.

(a) Duty of lessor.--A lessor shall disclose to the lessee

all of the following in a clear and conspicuous manner:

(1) A brief description of the leased property,

sufficient to identify the property to the lessor and lessee

and a statement as to whether the property is new, used or

previously leased.

(2) The total amount of any initial payment, including

any advance payment, delivery charge or trade-in allowance to

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be paid by the lessee at or before execution of the lease-

purchase agreement.

(3) The amount and timing of lease payments.

(4) The amount of all other charges, individually

itemized, payable by the lessee to the lessor, that are not

included in the lease payments.

(5) The party who is liable for loss, damage of more

than normal wear and tear to or destruction of the leased

property.

(6) The right of the lessee to reinstate as provided in

section 410-E and the amount or method of determining the

amount of the delinquency charges, reinstatement fee or

delivery charge for reinstatement.

(7) The party responsible for maintaining or servicing

the lease property and a brief description of the

responsibility.

(8) The condition upon which the lessee or lessor may

terminate the lease prior to the expiration of the lease

term.

(9) The total of all initial payments, lease payments

and other charges necessary to acquire ownership of the

leased property.

(10) The option of the lessee to purchase the leased

property during the lease term and the price or by what

formula or method the purchase price will be determined.

(11) The cash price of the personal property that is the

subject of the lease-purchase agreement.

(12) A statement as to whether, if any part of a

manufacturer's warranty exists on the leased property when

the lessee acquires ownership of the property, the warranty

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will be transferred to the lessor.

(13) A statement that the lessee is not required to

purchase insurance for the property that is subject of the

lease from the lessor or from an insurer owned or controlled

by the lessor.

(14) A notice in a prominent place in at least 12-point

type or in legible print with letters at least one-eighth in

size, in substantially the following form:

NOTICE: THIS LEASE-PURCHASE AGREEMENT IS REGULATED

BY STATE LAW AND MAY BE ENFORCED BY THE ATTORNEY

GENERAL OR BY PRIVATE LEGAL ACTION.

(b) Lease to be written.--A lease-purchase agreement shall

be in writing and the information required by this section shall

be disclosed by the lessor prior to execution of the lease-

purchase agreement and shall be disclosed either in the lease-

purchase agreement or on a dated, separate piece of paper that

identifies the lease-purchase agreement and the parties to it.

subsection (a)(14), the information required to be disclosed by

this section shall be printed or typed in at least 10-point bold

face type and numerical amounts and percentages shall be stated

in figures. All information required by this section shall be

stated in a clear and coherent manner, using words and phrases

of common meaning. The information shall be appropriately

divided and captioned by its sections.

(d) Disclosure of additional information.--A lessor may

disclose information that is not required by this section if the

additional information is not stated, used or placed in a manner

that will contradict, obscure or distract attention from the

required information.

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Section 409-E. Terms that may not be required.

A lessor shall not require any of the following from the

lessee:

(1) The purchase of insurance from the lessor for the

property that is the subject of the lease-purchase agreement.

(2) Any payment in addition to the number of lease

payments specified in the lease-purchase agreement other than

the payment described in section 411-E that is required for

the lessee to acquire ownership of the leased property.

(3) Lease payments that in the aggregate exceed the

maximum amount specified in section 415-E.

(4) A penalty for early termination of a lease-purchase

agreement or for the return of any leased property at any

time.

(5) A fee for in-home collection of a lease payment

unless the amount of the fee is disclosed and the lessee

expressly agrees to pay the fee.

Section 410-E. Reinstatement of agreement after default.

(a) Right of lessee.--A lessee who fails to make timely

lease payments has the right to reinstate the original lease-

purchase agreement without losing any right or option previously

acquired under the lease-purchase agreement within three lease

terms after the expiration of the last lease term for which the

lessee made a timely payment, if the lessee surrenders the

leased property to the lessor when the lessor or its agent

requests the lessee to surrender the leased property.

(b) Payments, charges and fees permitted.--Before

reinstating a lease-purchase agreement, the lessor may require

the lessee to pay any unpaid lease payments, delinquent charges,

a reasonable reinstatement fee of not more than $5 and a

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delivery charge if redelivery of the leased property is

necessary.

accordance with this section, the lessor shall provide the

lessee with either the same property leased by the lessee prior

to reinstatement or substitute property that is of comparable

quality and condition. If substitute property is provided, the

lessor shall provide the lessee with all the information

required under section 408-E.

(d) Grace period.--A lessor shall allow a lessee who fails

to make a timely lease payment, before the lessee is determined

to be in default, a grace period of not less than two days if

payments are made in weekly installments and not less than five

days if payments are made in monthly installments. No lessee

shall be entitled to more than three monthly grace periods per

year.

Section 411-E. Acquiring ownership when 50% of payments equals

cash price.

(a) Limited right of lessor.--

(1) No lessor may offer a lease-purchase agreement in

which more than 50% of all lease payments necessary to

acquire ownership of the leased property exceed the cash

price of the leased property.

(2) When 50% of all lease payments made by a lessee

equals the cash price of the property to the lessee, the

lessee shall acquire ownership of the leased property and the

lease-purchase agreement shall terminate.

(b) Right of lessee to acquire ownership.--At any time after

tendering an initial lease payment, a lessee may acquire

ownership of the property that is subject to the lease-purchase

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agreement by tendering an amount equal to the amount by which

the cash price of the leased property exceeds 50% of all lease

payments made by the lessee.

Section 412-E. Advertisements and mandatory information to be

supplied.

(a) Prohibited advertisements.--No advertisement for a

lease-purchase agreement may state that:

(1) A lease of any specific property is available at

specific amounts or on specific terms unless the lessor will

lease the property at those amounts or on those terms.

(2) A payment or a lease payment is due upon origination

of a lease without disclosing all the following:

(i) The payment due upon origination of the lease.

(ii) The lease payment.

(iii) The total number of lease payments necessary

to obtain ownership of the property that is the subject

of the lease-purchase agreement.

(b) Amounts required.--All property displayed or offered

under a lease-purchase agreement shall have stamped upon or

affixed to the property and clearly and conspicuously indicated

in Arabic numerals that are readable and understandable by

visual inspection, all of the following:

(1) The cash price of the property.

(2) The amount of the lease payment.

(3) The total number of lease payments necessary to

acquire ownership of the property that is the subject of the

lease-purchase agreement.

Section 413-E. Liability of lessor for noncompliance.

(a) Extent of liability.--A lessor who fails to comply with

the requirements of this article with respect to a lease-

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purchase agreement is liable to the lessee in an amount equal to

the sum of the following:

(1) The costs of the action and reasonable attorney fees

as determined by a court.

(2) The greater of the following:

(i) The actual damages sustained by the lessee

because of the failure of the lessor.

(ii) Either of the following:

(A) In the case of an individual action, 25% of

the total amount necessary to acquire ownership of

the property that is the subject of the lease-

purchase agreement, but not less than $200 or more

than $1,000.

(B) In the case of a class action, an amount the

court determines to be appropriate except that as to

each member of the class no minimum recovery is

applicable. The total recovery under this section in

any class action or series of class actions arising

out of the same failure to comply cannot be more than

the lesser of $500,000 or an amount equal to 1% of

the net worth of the lessor.

(b) Single recovery.--If a particular lease-purchase

agreement has more than one lessee, only one recovery of damages

is allowed under subsection (a)(2) for a violation of this

article. Multiple violations in connection with a single lease-

purchase agreement shall entitle the lessee or multiple lessees

to only one recovery under this section.

(1) An action under this section must be brought no

later than two years after the occurrence of a violation that

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is subject of the suit or two years after the lessee made the

last lease payment, whichever is later.

(2) Paragraph (1) shall not be construed to bar a lessee

from asserting a violation of this article as a matter of

defense by recoupment or set-off in an action brought by a

lessor more than two years after the date of the occurrence

of the violation on an obligation arising from the lease-

purchase agreement.

(d) When offset prohibited.--

(1) A lessee may not take action to offset an amount for

which a lessor is potentially liable under subsection (a)(2)

against an amount owed by the lessee, unless the amount of

the liability of the lessor has been determined by a court of

competent jurisdiction in an action in which the lessor was a

party.

(2) Paragraph (1) shall not be construed to bar a lessee

in default on an obligation arising from the lease-purchase

agreement from asserting a violation of this article in an

original action or as a defense or counterclaim to an action

brought by the lessor to collect amounts owed by the lessee

pursuant to the lease-purchase agreement.

Section 414-E. Eligible lessees.

The program shall be limited to households that have incomes

equal to or less than 100% of the area median income or equal to

or less than 100% of the median income for the United States,

whichever is greater, as published by the Department of Housing

and Urban Development in accordance with section 3(b)(2) of the

United States Housing Act of 1937 (50 Stat. 888, 42 U.S.C. §

1437a(b)(2)).

Section 415-E. Maximum lease guidelines.

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The agency shall determine maximum lease guidelines based on

the area fair market leases for households that have incomes

equal to or less than 100% of the median income for the United

States, whichever is greater, as published by the United States

Department of Housing and Urban Development in accordance with

section 3(b)(2) of the United States Housing Act of 1937 (50

Stat. 888, 42 U.S.C. § 1437a(b)(2)).

Section 416-E. Standard lease agreement.

(a) Duty of agency.--The agency shall develop a standard

lease agreement for all lessees and lessors participating in the

program, including the following components:

(1) The length of the lease after which the lessee shall

be responsible for obtaining financing to purchase the

property within a specified period. Upon the request of the

lessee, the agency shall provide assistance to the lessee in

obtaining financing to purchase the property through the

agency's Statewide network of mortgage lenders and brokers.

(2) The amount of each monthly rental payment which is

to be deposited into an interest-bearing escrow account to be

used towards the purchase of the home at the conclusion of

the lease term.

(3) A requirement that all lessees participate in home

ownership counseling. The agency shall provide additional

financial education and credit counseling through the

agency's Housing Counseling network if it is determined that

it would be beneficial in preparing the lessees to become

homeowners.

(4) A provision that the lease term constitutes a

traditional landlord and tenant agreement with the landlord

remaining responsible for all traditional maintenance and

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financial costs associated with the property, except

utilities for which the lease clearly specifies are to be

paid by the lessee.

(b) (Reserved).

Section 417-E. Escrow accounts.

The agency shall specify the type of account that escrow

deposits are to be maintained, including the following:

(1) The specific accounting of each escrowed account if

separate accounts are not maintained for each lease-purchase

agreement.

(2) The process for handling of escrow accounts in

instances of eviction for nonpayment and damages to property.

(3) A provision stating that forfeited escrow amounts

from households that default on the lease-purchase agreement

shall revert to the fund.

Section 418-E. Guidelines.

Within 180 days of the effective date of this section, the

agency shall establish guidelines to carry out the provisions of

this article.

Section 2. This act shall take effect in 90 days.

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