establish provisions for homeownership through shared equity agreements.

26.363.25 101st Legislative Session 1178

2026 South Dakota Legislature
House Bill 1178

Introduced by: Representative Novstrup

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