CHAPTER 121

FORMERLY

HOUSE BILL NO. 226

AN ACT TO AMEND TITLE 31 OF THE DELAWARE CODE RELATING TO HOUSING AND THE DELAWARE STATE HOUSING AUTHORITY.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE :

Section 1. Amend Title 31of the Delaware Code by inserting therein a new Chapter 44 as follows:

“Chapter 44. Custodianship

§ 4400. Petition for custodianship.

For any Delaware State Housing Authority financed housing development, as defined by 31 Del. C. § 4001(15), the Delaware State Housing Authority may petition for the establishment of a custodianship with the Court of Chancery upon the grounds that there has existed for 5 days or more after notice to the landlord and owner:

(1) A lack of heat, lack of running water, lack of light, lack of electricity or lack of adequate sewage facilities and the rental agreement or any state or local statute, code, regulation or ordinance places a duty upon the landlord to so provide;

(2) Unsound financial condition(s), such that operational needs are not being met, due to mismanagement and/or malfeasance or the transaction of business without proper authority in violation of Chapter 40 of this Title, and/or the Rules and Regulations of the Delaware State Housing Authority; or

(3) Any other condition(s) imminently dangerous to the life, health or safety of the tenants.

§ 4401. Parties.

(a) In a proceeding brought pursuant to § 4400 of this Title, the Delaware State Housing Authority shall join as defendants:

(1) The record owner(s) at the time of the filing of the petition and/or such owner’s heirs, executors, administrators or successors as existing at the time petition is filled; and

(2) Persons having an equitable or legal interest of record at the time the petition filed, including an interest to a judicial sale or a statutory sale pursuant to § 8771 et. seq. of Title 9.

(b) Lien holders as persons whose real or equitable interests in the housing development may be adversely affected by a petition pursuant to this Chapter shall not be deemed to be necessary parties and shall not be required to be joined as a defendants. Notice in writing, however, shall be given to the above classes of persons in the manner prescribed from time to time by the Rules of Civil Procedure of the Court of Chancery for the State of Delaware.

(c) The Chancery Court may make all necessary rules respecting the form of process, the manner of issuance and return thereof, modes of proof and the manner of notice to persons having an interest in the housing development which relate to the custodian proceedings.

§ 4402. Defenses.

It shall be a sufficient defense to this proceeding if any defendant of record establishes that:

(1) The condition or conditions described in the petition do not exist at the time of the hearing;

(2) The condition or conditions alleged in the petition have been caused by the negligent acts of one or more of the tenants or members of tenants’ families, or by persons on the premises with his, her or their consent; or

(3) Such condition or conditions would have been corrected, were it not for the refusal by tenant(s) to allow reasonable access to the property in order for the landlord and/or his or her agent to take timely corrective action.

§ 4403. Stay of judgment by defendant.

(a) Upon filing with the Court of Chancery, the matter shall be expedited pursuant to the process established by the Chancery Court Rules of Civil Procedure. If, after the hearing, the Court determines that the petition should be granted, the Court shall immediately enter an Order thereon and appoint a custodian as authorized herein; provided however, prior to the entry of an Order and appointment of a custodian, the owner or any mortgagee or the lien or of record or other person having an interest in the property may apply to the Court to be permitted to remove or remedy the conditions specified in the petition. If such person demonstrates the ability to perform promptly the necessary work and posts security for the performance thereof within the time, and in the amount and manner, deemed necessary by the Court, then the Court may stay judgment and issue an order permitting such person to perform the work within a time fixed by the Court and requiring such person to report to the Court periodically on the progress of the work. The Court shall retain jurisdiction over the matter until the work is completed.

(b) If, after the issuance of an order under subsection (a) of this section, but before the time fixed in such order for the completion of the work prescribed therein, there is reason to believe that the work will not be completed pursuant to the Court's order or that the person permitted to do the same is not proceeding with due diligence, the Court or the petitioner, upon notice to all parties to the proceeding, may move that a hearing be held to determine whether judgment should be rendered immediately as provided in subsection (c) of this section.

(c)(1) If, upon a hearing authorized in subsection (b) of this section, the Court shall determine that such party is not proceeding with due diligence, or upon the actual failure of such person to complete the work in accordance with the provisions of the order, the Court shall appoint a custodian as authorized herein.

(2) Such order shall direct the custodian to apply the security posted to executing the powers and duties as described herein.

(3) In the event that the amount of such security should be insufficient to accomplish the above objectives, such order shall direct the custodian to collect the rents, profits and issues to the extent of the deficiency. In the event that the security should exceed the amount necessary to accomplish the above objectives, such order shall direct the custodian to return the excess to the person posting the security.

§ 4404. Custodianship procedures.

(a) The Court shall appoint a custodian qualified to carry out the responsibilities of this Chapter and such custodian may be the Delaware State Housing Authority, or its successor agency, by agreement of all parties of interest pursuant to § 4404(b), or otherwise by Order of the Court.

(b)(1) Upon its appointment, the custodian shall make within 15 days an independent finding and recommendation to the Court as to whether or not there is proper cause shown for the need for rent to be paid to it, and for the employment of a private contractor to correct the condition complained of in § 4400 of this title and found by the Court to exist.

(2) If the custodian makes such a finding and recommendation to the Court and the Court adopts the custodian’s recommendation, the custodian shall file a copy of the Court’s order with the Recorder of Deeds of the county where the property lies and it shall be a lien on that property where the violation complained of exists.

(3) Upon completion of the aforesaid contractual work and full payment to the contractor, the custodian shall file a certification of such with the Court and the Recorder of Deeds of the appropriate county, and this filing shall release the aforesaid lien.

(4) The custodian shall forthwith give notice to all lien-holders of record.

(5) If the custodian shall make a finding at such time or any other time that for any reason the appointment of the custodian may not be appropriate and/or is no longer necessary, it shall make application to the Court for discharge after notice to all interested parties and, if so ordered, shall make legal distribution of any funds in its possession, including the return of any security posted pursuant to this Chapter.

§ 4405. Powers and duties of custodian.

The custodian shall have all the powers and duties accorded a custodian foreclosing a mortgage on real property, and all other powers and duties deemed necessary by the Court. Such powers and duties shall include, but are not necessarily limited to, collecting and using all rents and profits of the property, prior to and despite any assignment of rent, for the purposes of:

(1) Correcting the condition or conditions alleged in the petition;

(2) Materially complying with all applicable provisions of any federal, state, local statute, code, regulation or ordinance governing the maintenance, construction, use or appearance of the surrounding grounds;

(3) Paying all expenses reasonably necessary for the proper operation and management of the property including insurance, mortgage payments, taxes and assessments, and fees for the services of the custodian and any agent he should hire;

(4) Paying the costs of the custodianship proceeding; and

(5) In accordance with the Delaware Landlord Tenant Code, compensating the tenants for whatever deprivation of their rental agreement rights resulted from the condition or conditions alleged in the petition.

§ 4406. Discharge of custodian; costs.

(a) In addition to those situations described in § 4404 of this title, the custodian may also be discharged when:

(1) The condition or conditions alleged in the petition have been remedied;

(2) The property materially complies with all applicable provisions of any state or local statute, code, regulation or ordinance governing the maintenance, construction, use or appearance of the surrounding grounds;

(3) The costs of the above work and any other costs as authorized herein have been paid or reimbursed from the rents and profits of the property; and

(4) The surplus money, if any, has been paid over to the owner.

(b) Upon subsections (a)(1) and (a)(2) of this section being satisfied, the owner, mortgagee or any lien or may apply for the discharge of the custodian after paying to the custodian all moneys expended by the custodian and all other costs which have not been paid or reimbursed from the rents and profits of the property.

(c) If the Court determines that future profits of the property will not cover the cost of satisfying subsections (a)(1) and (a)(2) of this section, the Court may discharge the custodian and order such action as would be appropriate in the situation, including but not limited to terminating the rental agreement; and may order the vacation of the development within a specified time.”

Approved July 7, 2005