Judicial and non-judicial foreclosures are both available in Rhode Island. Non-judicial foreclosures are more common because, typically, they are faster and less expensive. However, in the last ten years, judicial foreclosures have become more and more commonplace, particularly in the consumer context.

This response generally describes non-judicial foreclosures via exercise of a power of sale in a mortgage. See R.I. Gen Laws §§ 34-11-22 and 34-27-4. This process is available for both consumer and commercial mortgages. However, for consumer mortgages, there are additional requirements (a mediation process) that the lender must complete prior to exercising the power of sale as described here. See R.I. Gen Laws § 34-27-9. Moreover, the lender must strictly comply with any requirements set forth in the mortgage, promissory note, and associated loan documents. Woel v Christiana Trust as Trustee for Stanwich Mortgage Loan Trust Series 2017-17, 228 A.3d 339, 348 (R.I. 2020).

To exercise the power of sale, a lender must first send written notice to the mortgagor, via certified mail, of the time and place of sale. This notice must be sent at least twenty (20) days prior to the first day that notice of sale is published in a qualifying local newspaper. See § 34-27-4(b). For consumer mortgages, such notice must be sent at least thirty (30) days prior to publication.

The next step is to cause notice of the sale to be published in a qualifying newspaper at least once per week during the three (3) weeks preceding the sale date, with the first notice being published at least twenty one (21) days prior to the sale date. See § 34-27-4(a).

On the date of sale, an auction will be held at which the lender is eligible to bid. Upon receipt of the purchase price, the foreclosing lender delivers to the high bidder a foreclosure deed and supporting affidavits reciting compliance with the statutory procedures, which is sufficient to convey title to the mortgaged premises.

This is only a general overview of the non-judicial foreclosure process in Rhode Island, and is not an exhaustive list of all requirements and procedures.

The equity of the property owner is deemed to be personal property, a pledge of which is subject to Article 9 of the Uniform Commercial Code. A lender may foreclose by following the procedures set forth in Part 6 of Article 9. R.I. Gen. Laws §§ 6A-9-601 – 624.

Foreclosure can be accomplished through a public or private sale, provided that all aspects of the sale or disposition are commercially reasonable. Notice of the sale must be provided to the debtor, any secondary obligors, and lienholders with interests in the collateral to be sold.

It is also possible for a lender to accept the pledged equity, in full or partial satisfaction of the secured obligation, by following the procedures in § 6A-9-620 – 621 to obtain the consent of the debtor, secondary obligors, and lienholders.

Note that pledged equity is typically in the form of a member interest in a limited liability company. The rights of a transferee of such a member interest are likely limited by the Rhode Island Limited Liability Company Act, R.I. Gen Laws Title 7, Chapter 16, and the operating agreement of the property owner.

The power of sale is exercised by the publication of a notice of foreclosure sale in a newspaper of general circulation beginning not less than 21 days prior to the foreclosure sale date. In addition, written notice must be given to the mortgagor at least 20 days (for non-consumer mortgages) or at least 30 days (for consumer mortgages) prior to the date of first publication in the newspaper.

Finally, in the event that the more instrument establishes greater or additional notice requirements, those requirements must also be followed strictly. See Woel v. Christiana Trustas Trustee for Stanwich Mortgage Loan Trust Series 2017-17, 228 A.3d 339, 348 (R.I. 2020).

See 2.1 Foreclosure Process for more detail.

The borrower has the right to redeem the mortgage by paying the secured obligations in full prior to the sale of the property at foreclosure. Rhode Island follows the so-called “gavel rule”, which provides that the right of redemption ceases when the auctioneer declares the property sold at the public auction. In re Medaglia, 402 B.R. 530, 532 (Bankr. D.R.I. 2009); In re Vertullo, 610 B.R. 399, 413 (B.A.P. 1st Cir. 2020).

There is no barrier, such as the election of remedies doctrine, to a lender simultaneously pursuing foreclosure of a mortgage and a money judgment against a borrower or other party liable for the secured obligation.

A judicial foreclosure can be reasonably expected to last three to six months to complete from the filing of the complaint to the entry of an order confirming the sale. In contrast, a non-judicial foreclosure of non-residential property can be completed in as few as 50 days. Both of these timelines should be viewed as minimums. In practice, these timelines can be delayed based upon factors outside of the lender’s control.

A deficiency is computed by subtracting the sale price at a foreclosure sale from the amount of the secured obligation including principal, interest, and all other sums secured by the mortgage. A lender can pursue the borrower, or other party liable on the secured obligation, by bringing a civil action against that party. The lender would seek a money judgment in essentially the same way that it would pursue collection of an unsecured obligation.

Rhode Island law governing partnerships is likewise applied to joint ventures.

A joint venture can be any “association of two or more persons to carry out a single business enterprise for profit”; and “the law governing the relationship between partners is applicable to joint venturers”. SeeScully Signal Co. v Joyal, 881 F. Supp. 727, 740 (D.R.I. 1995). A joint venture may involve a “passive” partner who does not take an active role in the venture as an ongoing matter. That is, joint venture or operating agreements need not require active cooperation between partners in a real estate joint venture (except insofar as that partner must take the minimum action necessary to form the venture, such as by executing an operating agreement).

Rhode Island has adopted the Uniform Partnership Act, the provisions of which also govern joint ventures. R.I. Gen. Laws § 7-12.1-1 et seq. As an alternative to the joint venture, real estate projects are often structured using the limited-liability company (LLC) corporate form, governed by the Rhode Island Limited-Liability Company Act, R.I. Gen. L. § 7-16-1 et seq.

Joint venturers, like partners under Rhode Island law, owe a fiduciary duty “of the utmost care and loyalty” to both the partnership and to the other partners themselves. See Marsh v Billington Farms, LLC, C.A. No 04-3123, 2006 WL 2555911, at *4 (R.I. Super. 31 August 2006) (citing Sullivan v Hoey, 102 R.I. 487, 488, 231 A.2d 789, 790 (1967)).

Traditional equitable remedies are available for breach of this fiduciary duty, including restitution, disgorgement, and accounting. See, for example, R.I. Economic Development Corp. v Wells Fargo Securities, LLC, No PB-12-5616, 2013 WL 4711306, at *16 (R.I. Super. 28 August 2013). Courts may impose a constructive trust “upon property that is obtained in violation of a fiduciary duty”, though a plaintiff must show both duty and breach by clear and convincing evidence. See Manchester v Pereira, 926 A.2d 1005, 1013 (R.I. 2007). Courts may also order preliminary injunctive relief to maintain the status quo during an action. See Handy & Harman Elec. Materials Corp. v Molex Inc., C.A. No 99-6323, 2000 WL 1727355, at *12 (R.I. Super. Oct. 16, 2000) (ordering preliminary injunctive relief pending appraisal process defined by parties’ joint venture agreement).

The same is also true under Rhode Island law of members of a closely held corporation – i.e., a corporation whose shareholders “act among themselves as partners”. See A. Teixeira & Co. v Texeira, 699 A.2d 1383, 1387 (R.I. 1997). “The existence of such a fiduciary duty is a fact-intensive inquiry”, and Rhode Island courts look to “the small number of shareholders in plaintiff corporation, the active participation by these shareholders in management decisions, and their close and intimate working relations”. Id. Thus, in the Marsh decision, for example, members of a real estate joint venture (including non-managing members) owed fiduciary duties to each other, notwithstanding the fact that the venture was organised as an LLC. The court reasoned that “the very nature of the entire land development project suggests that the members of the LLC acted as if they were partners”, including the “active participation” and “intimate relationship” in the venture by non-managing members. 2006 WL 2555911, at *5.

If parties to a joint venture are deadlocked, or have reached a decisionmaking stalemate which cannot be resolved under the venture’s governing documents, a member may apply the Superior Court for an order of dissolution, as provided by the Uniform Partnership Act, R.I. Gen. Laws § 7-12.1-901(4)(iv).

For limited-liability companies, the company’s managers shall act by majority vote unless the entity’s governing documents provide otherwise. R.I. Gen. Laws § 7-16-19. Managers may be removed (with or without cause) and elected by a majority vote of the members. Id. § 7-16-16.

Deadlock in the governance of an entity (whether a partnership or LLC) is also grounds for appointment of a receiver under R.I. Gen. Laws § 10-21-6(a)(3)(iii), which authorises the court to appoint a receiver if “persons responsible for management of the [entity] are deadlocked in the management of the [entity’s] affairs”. The court in a receivership action has “exclusive jurisdiction to direct the receiver and determine any controversy related to the receivership or receivership property”. Id. § 10-21-5. The appointed receiver, in turn, has a broad set of powers to break the deadlock, including power to manage company property, distribute or transfer property (with court approval), or continue operating the business in the ordinary course. Id. § 10-21-12. For further discussion of Rhode Island law governing receiverships, see 5.1 Receivers.

Rhode Island law makes no provision allowing for automatic entry of either a final judgment or interlocutory relief.

While there does not appear to be any case in this jurisdiction testing the enforceability of an automatic-remedy provision in an operating agreement, it is unlikely that such a provision would be enforceable. Courts in this jurisdiction do not have discretion to issue preliminary injunctive relief absent specific judicial findings on the elements for such relief. See, for example, United Parcel Serv, Inc. v Griffiths, 297 A.3d 502, 503 (R.I. 2023). Such a provision would also conflict with the ordinary rule that “before an interlocutory injunction is issued in such cases, an adversary hearing should be conducted so that the court may ‘review what has gone on between the disputants’”. See School Comm. of City of Pawtucket v Pawtucket Teachers’ Alliance Loc. No 930, 117 R.I. 203, 206, 365 A.2d 499, 501 (1976); see, also, Iorio v Waste Connections of R.I., Inc., C.A. No PC-2021-01558, 2021 WL 2533129, at *15 (R.I. Super. 16 June, 2021) (“[A]n alleged breach of an agreement does not automatically entitle the plaintiff to a temporary injunction pending trial; ... temporary injunctions require specific matters be demonstrated by the applicant, including a probable right to the relief sought and probable, imminent, and irreparable injury in the interim”.).

Rhode Island has enacted the Uniform Partnership Act, which will govern the winding up of a joint venture organised as a partnership. See R.I. Gen. Laws § 7-12.1-801 et seq.

For an LLC, the Superior Court may conduct the winding up of the business, on application by a member or member’s representative. See R.I. Gen. Laws § 7-16-45.

It is most common to encounter an absolute, unlimited, unconditional guarantee of payment in this jurisdiction. However, on occasion, other types of guarantees are also encountered, including as non-recourse carve-out “bad boy” guarantees.

No rules or limitations apply to non-recourse carve-out guarantees.

Rhode Island has a typical Statute of Frauds which requires that guarantees be memorialised by a writing (R.I. Gen. Laws § 9-1-4(4)). Otherwise, there are no unusual rules in this jurisdiction pertaining to enforceability of guarantees.

In many contexts, the Rhode Island Supreme Court follows rules expressed in the American Law Institute’s Restatement of the Laws for the relevant subject matter. Accordingly, the reader is referred to the Restatement (Third) of Suretyship and Guaranty (1996) for specific questions.

There are no expedited judicial procedures available in the jurisdiction that are particularly appropriate in a guarantee-enforcement context.

There are no statutory rules affecting a lender’s ability to enforce guarantee provisions. In many contexts, the Rhode Island Supreme Court follows rules expressed in the American Law Institute’s Restatement of the Laws for the relevant subject matter. Accordingly, the reader is referred to the Restatement (Third) of Suretyship and Guaranty (1996) for specific questions.

Rhode Island has several statutory vehicles that enable a claimant in a real estate dispute to obtain a relatively quick resolution to the matter in the Superior Court, negating one of the primary advantages of arbitration. These include: the immediate recording of a Lis Pendens in the chain of title to the property in dispute; the filing of a lawsuit that includes a claim for immediate injunctive relief (temporary restraining order), together with a claim for Declaratory Judgment; and if the dispute involves a claim by a contractor for money owed for improvements to real estate, a Mechanics’ Lien can be filed. These mechanisms provide for rapid hearings, and often result in a quicker resolution than can be attained in arbitration. In addition, disputes over real estate often require the filing for preliminary injunction relief to maintain the status quo. As a result, the enforcement of an arbitration clause may result in the claim being litigated in multiple venues.

In Rhode Island, the Superior Court has created a Business Calendar that provides a forum for a rapid resolution of issues early in any litigation. The business calendar judges will conference the case almost immediately, and critical issues can be addressed up front. The Superior Court also has a calendar that exclusively handles real estate matters. Litigants are often afforded an opportunity to mediate a dispute with another Superior Court judge. In light of these practices, it is most common for real estate related disputes to be litigated in the Rhode Island Superior Court.

See 6.2 Arbitration or Litigation?

In a dispute over the ownership of a parcel of real estate in Rhode Island, an aggrieved party has a powerful tool to preserve the status quo until the matter is resolved. The Rhode Island legislature in R.I. Gen. Laws § 9-4-9 enacted a broad statute allowing a litigant to record a Lis Pendens in the chain of title to the property which is the subject of the dispute. The filing of the Lis Pendens can be recorded immediately after the legal claim is filed in the appropriate court.

It is important to note that the Lis Pendens does not create a “lien” against the property, it only places all prospective purchasers on notice of the pendency of the dispute. The Lis Pendens should include a brief statement of the substance of the dispute, the identity of the litigants, the court where the matter is pending and the date of filing. Because the Lis Pendens only constitutes notice of the dispute, the Rhode Island Supreme Court has held that pre-filing notice to the record owner is not required. A copy of the Lis Pendens must be mailed to all parties to the pending lawsuit within seven (7) days of its recording.

Once the Lis Pendens is recorded any potential purchaser is deemed to be on notice of the claim against title by the individual or entity recording the Lis Pendens. As a practical matter, the recording of a Lis Pendens impacts the marketability of the subject property. Once recorded, an aggrieved property owner can file a motion to quash the Lis Pendens. The record title owner often files a counterclaim asserting a claim of slander of title. If the filing of the Lis Pendens results in a lost sale of the property to a third party, the potential damages can be substantial, if the Lis Pendens is found to have been improvidently filed.

As in most other jurisdictions, litigation involving real property often includes a claim for injunctive relief. Depending on the timing of any impending transfer of the interest in the property, the litigant may seek a Temporary Restraining Order (TRO) in addition to the filing of the Lis Pendens. In Rhode Island, a litigant can seek an immediate hearing on a TRO in Superior Court either on the Formal and Special Cause Calendar or before a judge on the Business Calendar sitting in the County where the property is located. A litigant should file an affidavit along with the motion for injunctive relief setting out facts supporting the required elements. Pursuant to Rule 65(a) of the Superior Court Rules of Civil Procedure the moving party must show that: 1) the plaintiff has a likelihood of success on the merits; 2) will suffer irreparable harm without the requested injunctive relief; 3) the balancing of the equities are in the moving party’s favour; and 4) the granting of the injunctive relief will preserve the status quo. The irreparable harm standard is generally satisfied due to the unique nature of real estate that precludes the ability to quantify the resulting harm to the aggrieved claimant.

See 7.4 Availability of Temporary Injunctions.

Rhode Island’s Mechanics’ Lien Statute, R.I. Gen. Laws §§ 34-28-1 through 34-28-37 creates a powerful mechanism for obtaining full payment for work performed improving real property. The filing of a Mechanics’ Lien is a multi-stage process, with many specific filing and timing requirements that are strictly enforced. A properly recorded Mechanics’ Lien includes the filing of a Lis Pendens. Once perfected, notice and a copy of the lien is mailed to every person or entity that has an interest in the property including mortgage holders, lien holders, and other mechanics’ lien holders. A timely response must be filed by every person or entity receiving notice that has an interest in the property. The failure to timely file an answer, known as an “Account and Demand” by the return date, may result in the loss of priority to the Mechanics’ Lien holder. This can and has resulted in recalcitrant lien holders of record losing their priority position vis-à-vis the Mechanics’ Lien holder. A Mechanics’ Lien holder is entitled to attorneys’ fees and costs associated with pursuing payment. A Mechanics’ Lien holder can seek to foreclose on the property to satisfy the amount owed.

At this time, Rhode Island does not have law or regulatory schemes specific to REITs. They are, however, closely regulated at the federal level, and it is advisable to seek specialised counsel in connection with the creation, management, and taxation of REITs.

See 8.1 REIT/SFR Regulation.