HB 1178

 26.363.25  101st Legislative Session  1178
                                          2026 South Dakota Legislature
                                                  House Bill 1178
 Introduced by: Representative Novstrup
1 An    Act    to    establish provisions for  homeownership    through    shared  equity
2agreements.
3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
4 Section 1. That a NEW SECTION be added to a NEW CHAPTER in title 11:
5Terms used in this Act mean:
6      (1)     "Contribution," the amount an investor-owner agrees to contribute, as a fixed
7percentage, to an occupant-owner's down payment and monthly mortgage
8obligation;
9      (2)     "Eligible home," a single-family residence that:
10(a)      Complies with all applicable residential building code and local zoning
11requirements;
12(b)      Is the primary residence of an occupant-owner; and
13(c)      Is not a manufactured or mobile home;
14      (3)     "Investor-owner," a person that makes a contribution toward an occupant-owner's
15purchase of an eligible home;
16      (4)     "Occupant-owner," an individual who, together with the individual's spouse, if
17applicable, agrees to purchase an eligible home, assisted by the contribution of an
18investor-owner; and
19      (5)     "Shared equity agreement," a written agreement setting forth the terms and
20conditions of an arrangement in which an investor-owner makes a contribution
21toward an occupant-owner's purchase of an eligible home, in exchange for the
22occupant-owner's grant of a shared equity encumbrance in favor of the investor-
23owner.
24 Section 2. That a NEW SECTION be added to a NEW CHAPTER in title 11:
                                                                               Underscores indicate new language.
                                                                             Overstrikes indicate deleted language.
 26.363.25  2  1178
1If an investor-owner and an occupant-owner desire to enter into a shared equity
2    agreement pursuant to this Act, the investor-owner and the occupant-owner must execute
3    the agreement and record the agreement in the office of the register of deeds for the
4    county in which the home is located.
5 Section 3. That a NEW SECTION be added to a NEW CHAPTER in title 11:
6A shared equity agreement must:
7    (1)      Identify the investor-owner and occupant-owner each by full legal name, residence
8or physical location, mailing address, and phone number;
9    (2)      State the location of the eligible home, including the full legal description of the
10real property;
11    (3)      Specify the agreed-upon contribution, not exceeding thirty percent;
12    (4)      Establish a term for the agreement, not exceeding fifteen years, unless renewed
13as set forth in section 6 of this Act;
14    (5)      Provide that title to the home is held by the occupant-owner, subject to an
15encumbrance that:
16(a)    Secures the occupant-owner's obligation to repay the contribution and any
17other agreed upon amount to the investor-owner; and
18(b)    Is subordinate to the mortgage as required in section 5 of this Act.
19    (6)      Grant the occupant-owner the exclusive right of possession of the home during the
20term of the agreement;
21    (7)      Allocate to the occupant-owner all responsibility for the payment of capital
22improvements, insurance, maintenance, repairs, taxes, and utilities;
23    (8)      Allow the occupant-owner to elect to buy out the investor-owner's share prior to
24expiration of the term;
25    (9)      Contain provisions describing events of default and available remedies, including
26termination of the agreement pursuant to section 6 of this Act; and
27    (10)     Pursuant to section 7 of this Act, include provisions for:
28(a)    Payment due to the investor-owner upon termination of the agreement; and
29(b)    Conveyance of the investor-owner's interest in the eligible home to the
30occupant-owner.
31 Section 4. That a NEW SECTION be added to a NEW CHAPTER in title 11:
32A shared equity agreement may not:
                                                                               Underscores indicate new language.
                                                                             Overstrikes indicate deleted language.
 26.363.25  3  1178
1    (1)      Run with the land or be binding or enforceable at law or in equity against any
2subsequent bona fide purchaser of the real property;
3    (2)      Prohibit the occupant-owner from using the home in any lawful manner as the
4occupant-owner chooses;
5    (3)      Contain a prepayment penalty; or
6    (4)      Prevent the occupant-owner from refinancing a mortgage or lien against the home,
7provided that the terms comply with section 5 of this Act.
8 Section 5. That a NEW SECTION be added to a NEW CHAPTER in title 11:
9The occupant-owner in a shared equity arrangement is required to obtain a
10    traditional mortgage for the eligible home, which must have a fixed or limited variable
11    interest rate for at least the term of the shared equity agreement and any renewal of the
12    agreement.
13 Section 6. That a NEW SECTION be added to a NEW CHAPTER in title 11:
14A shared equity agreement terminates upon the earlier of:
15    (1)      The investor-owner's receipt of notice of the occupant-owner's election to buy out
16the investor-owner's interest in the eligible home;
17    (2)      The maturity of the mortgage against the home;
18    (3)      The transfer of ownership of the home, further encumbrance of the home, except
19refinancing as contemplated in section 4 of this Act, or any other conveyance of
20title;
21    (4)      The occurrence of an agreed-upon event of default that requires termination of the
22agreement;
23    (5)      One hundred twenty days after the death of the occupant-owner, unless the
24investor-owner consents in writing to the assumption of the agreement by the
25occupant-owner's successor; or
26    (6)      The expiration of the agreement's term, unless the investor-owner and occupant-
27owner elect, prior to the expiration, to renew the agreement for a successive term
28not exceeding fifteen years.
29 Section 7. That a NEW SECTION be added to a NEW CHAPTER in title 11:
30Upon termination of a shared equity agreement, the eligible home must be
31    appraised, at the occupant-owner's expense, by an independent licensed appraiser
                                                                             Underscores indicate new language.
                                                                           Overstrikes indicate deleted language.
 26.363.25  4  1178
1    selected by agreement of the investor-owner and the occupant-owner, and the investor-
2    owner is entitled to payment in an amount that is the greater of:
3    (1)      The contribution percentage multiplied by the appraised value of the home; or
4    (2)      The actual dollar amount contributed by the investor-owner pursuant to the
5agreement, plus interest at a rate equal to one percent higher than the maximum
6rate of the first mortgage obtained by the occupant-owner pursuant to section 5 of
7this Act.
8As of the date of termination, the occupant-owner is responsible for all financial
9    obligations associated with the home, including any amounts owing under a mortgage.
10    The investor-owner's contribution is zero percent as of the date of termination.
11The investor-owner does not bear any portion of any loss resulting from the sale
12    or appraisal of the eligible home at a value below the original purchase price of the home,
13    and the occupant-owner is solely responsible for any resulting loss.
14Upon receipt of payment in full pursuant to this section, the investor-owner must
15    execute and record a release of the encumbrance.
16 Section 8. That a NEW SECTION be added to a NEW CHAPTER in title 11:
17A shared equity agreement entered into pursuant to this Act creates a private co-
18    ownership arrangement between an investor-owner and an occupant-owner, which
19    precludes the occupant-owner from using public housing moneys to finance an eligible
20    home.
                                                                             Underscores indicate new language.
                                                                           Overstrikes indicate deleted language.