HB 24-1175

HB 24-1175, titled "Local Governments Rights to Property for Affordable Housing," gives local governments the right to purchase certain multifamily rental properties before they are sold to other buyers. This applies specifically to existing affordable housing with at least five units and older properties (30 years or more) with between 15 and 100 units, ensuring these can be preserved as long-term affordable housing. The law requires property sellers to notify local governments well in advance of any sale plans so that the government has time to make an offer if it chooses. This bill is now signed into law and will take effect on August 7, 2024, helping local communities secure more affordable housing options for residents.

Official Summary

The act creates a right of first refusal and a right of first offer for local governments to make an offer to purchase certain types of multifamily rental properties. Both the right of first refusal and the right of first offer terminate on December 31, 2029, and a local government is not entitled to exercise either right after that date unless the local government exercised the right before December 31, 2029 and the process has not concluded. For multifamily rental properties that are existing affordable housing consisting of not less than five units, a local government has a right of first refusal to make a matched offer for the purchase of such property, subject to the local government's commitment to using the property as long-term affordable housing. Existing affordable housing is housing that is subject to one or more restricted use covenants or similar recorded agreements to ensure affordability consistent with affordable housing financial assistance requirements. The act requires the seller of such property to give notice to the local government and to the Colorado housing and finance authority at least 2 years before the final expiration of the last remaining affordability restriction on the property of the date of such expiration, a second notice not less than 6 months before the final expiration of the last remaining affordability restriction, and additional notice when the seller takes certain actions as a precursor to selling the property. Sharing information provided by the seller in certain notices is subject to execution of a nondisclosure agreement. Upon receiving the third notice indicating an intent to sell the property or of a potential sale of the property, the local government has 14 calendar days to preserve its right of first refusal and an additional 30 calendar days to make an offer and must agree to close on the property within 60 calendar days of the acceptance of the local government's offer; except that, if the seller has received an entirely cash offer from a third-party buyer, then the local government must agree to close within the same time period as is set forth in the third-party buyer's offer. If the price as listed in the seller's notice is reduced by 5% or more or if the required terms and conditions of an acceptable offer that has been communicated to the local government materially change, the seller must provide notice of the change within 7 days and the local government may exercise or re-exercise its right of first refusal. If the seller rejects an offer by the local government, the seller must provide a written explanation of the reasons, invite the local government to make one subsequent offer within 14 days, and must accept or reject the local government's subsequent offer within 14 days of the subsequent offer being made. For all other multifamily rental properties that are 30 years or older and have not more than 100 units and not less than 15 units, a local government has a right of first offer. A seller of such property must provide notice of intent to sell the property to the local government before the seller enters into an agreement with a licensed broker to solicit and procure purchasers or otherwise lists the property for sale on the multiple listing service. After receipt of the notice, the local government has 7 days to respond by either indicating the local government is interested in receiving due diligence information on the property to evaluate whether it wants to make an offer, which response must include a nondisclosure agreement in a form acceptable to the seller, or waiving any right to purchase the property. If the local government does not respond within this time period, it is deemed to have waived its right of first offer with respect to the property. The local government's right of first offer is subject to the property being used or converted for the purpose of providing long-term affordable housing or mixed-income development. If the local government has requested due diligence information, the seller has 5 days to provide the information to the local government and the local government then has 14 days to make an offer or waive its right of first offer. If a response is not provided in this period, the right of first offer is deemed waived. The seller has 14 days to accept or reject the local government's offer, and, if the seller does not provide notice, the offer is deemed rejected. If the seller accepts the offer, the parties have 30 days to negotiate and execute a contract for the purchase of the property and then 60 days to close on the transaction, unless both parties agree to other terms. In exercising its right of first refusal or first offer, the local government may partner with certain other entities for the financing of the transaction and may also assign either right with respect to all applicable properties in the local government's jurisdiction or with respect to a single property to certain other entities that are then subject to all the rights and requirements of the local government in exercising either right. The act allows certain sales of property to be exempt from the right of first offer or from both the right of first refusal and the right of first offer. Upon completion of the requirements of the seller for the right of first refusal and for the right of first offer, the local government, or its assignee if it has assigned either right, is required to execute and record a certificate of compliance stating that the seller has complied with all applicable provisions for the right of first refusal or right of first offer. The act also requires the attorney general's office to enforce the provisions of the act and grants the attorney general's office, the local government, or a local government's assignee standing to bring a civil action for violations of the right of first refusal or first offer established by the act. If a court finds that a seller has materially violated the law with respect to the right of first refusal or first offer, respectively, the court must award a statutory penalty of not less than $10,000 for a first offense and not less than $30,000 for any subsequent offenses but the court cannot award a statutory penalty that is more than $100,000. APPROVED by Governor May 30, 2024 EFFECTIVE August 7, 2024(Note: This summary applies to this bill as enacted.)

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