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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/19/2013 - FIRST READING OF ORDINANCE NO. 054, 2013, AUTHORIZDATE: March 19, 2013 STAFF: Ken Waido AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 19 SUBJECT First Reading of Ordinance No. 054, 2013, Authorizing Revisions to the Master Covenant for the Affordable Housing Units in the Provincetowne Condominiums Development. EXECUTIVE SUMMARY This Ordinance authorizes revisions to the Master Covenant for the affordable housing units in the Provincetowne Condominiums development that would eliminate the requirement contained in the existing Covenant that future purchasers of the condominium units must qualify as being low-income families and modify the way that sales price limitations are calculated. The revised Covenant would retain the requirement that the units must be owner-occupied and set a new Maximum Purchase Price Limit. The goal is to make it easier for owners of affordable units to find buyers for their units when they need or want to sell them. Staff is not recommending that the Covenant be released completely, because staff believes that the maximum sales price and owner-occupancy restrictions in the Covenant are useful to retain. The Affordable Housing Board recommends approval of the proposed changes to the Master Covenant. BACKGROUND / DISCUSSION Section 23-111 of the City Code requires City Council authorization by ordinance before the City can sell, convey or otherwise dispose of any interest in real property owned by the City. By executing the Master Covenant, the original Provincetowne Condominium unit owners agreed to restrict the use and resale of their units, and gave the City the power to enforce those restrictions. This constitutes an interest in the Provincetown Condominiums that is owned by the City. By amending the Covenant to reduce the restrictions on resale of the units, the City would be giving up part of its property interest in the units. The proposed revised Master Covenant: • Eliminates the “Eligible Buyer” (i.e., low-income family) requirement; • Retains the owner-occupancy requirement, and • Changes the maximum purchase price of the units to be 95% of the Area Median Purchase Price as published quarterly by the National Association of Home Builders, instead of being based on a calculation of the amount an “Eligible Buyer” can afford. Attachment 1 presents a redline/strikeout version of the Revised Master Covenant showing the changes being made to the 2006 Master Covenant. Brief History In the mid-1990s, the City of Fort Collins received the Provincetowne property, consisting of approximately 330 acres, through the financial failure of a Special Improvement District (SID). The City Council’s goals at that time were to sell the SID property and recover the City’s costs, while meeting community goals for affordable housing and preservation of land for public facilities. In 1995, the City Council directed staff to market 170 acres of the Provincetowne SID property with an affordable housing “demonstration component.” The remaining approximately 160 acres was separately purchased by the City’s Department of Natural Resources to be used as a natural area. The City used a “request for proposal” process to market the property and eventually sold the property to PrideMark Development Company, L.L.C. for $1,800,000, with an agreement that at least 30% of the development project would be affordable housing that could only be sold to an “Eligible Buyer,” meaning a person, family or household whose annual income is no more than 80% of the Area Median Income for Fort Collins, and whose housing expenses would not exceed 38% of their income. The affordable units would have to be kept affordable for 25 years. March 19, 2013 -2- ITEM 19 In 1998, Kaufman and Broad (K-B Homes) acquired Pridemark and started building the required affordable housing units as part of the Provincetowne Condominiums development (see Attachment 2 for a map showing the location of the Provincetowne Condominiums). Through the sale of the SID property at a price below market value, the City of Fort Collins essentially subsidized the development of 90 units as affordable housing out of a total of 120 condominiums in the Provincetowne development in order to provide home ownership opportunities for low-income families. To help perpetuate the affordability of the units into the future, the City had the initial purchasers of the units sign, and subsequent owners acknowledge, a Master Covenant containing three key provisions that: 1. Limited the sale of the units to “Eligible Buyers” as described above (again, City subsidy to the project was for low income home ownership purposes). 2. Restricted the future sales price of the units to the maximum amount that an Eligible Buyer would be able to finance with a 30 year loan at market rate interest, so that the units would remain affordable to low income families (this would prevent an initial/subsequent owner from gaining a “windfall” profit due to the City subsidy of the initial/subsequent unit price). 3. Restricted the units to be owner occupied (again, the City’s subsidy was to provide affordable home ownership opportunities and create an owner occupied development/neighborhood, not to allow investors to purchase the units as rentals, even though they may still be affordable rentals for low income families). The Master Covenant also contained specific provisions about the City’s remedies in the event that a unit owner violated the covenants, and about what would happen to the Covenant in the event that a unit was foreclosed on. In 2006, the City submitted its Provincetowne Covenant to FHA for review and “approval.” This review showed that the City needed to make several changes to the Master Covenant in order to make it consistent with HUD regulations. For example, the Master Covenant said that the City would release the Covenant on a unit in the event of foreclosure or deed in lieu of foreclosure on the unit, if the City first got an option to buy the unit. This was not consistent with a HUD regulation that requires that covenants terminate automatically in the event of a foreclosure. In addition, some of the remedies the City had under the Master Covenant were not consistent with HUD regulations. The City then drafted, and HUD approved, a Revised Master Covenant that corrected these discrepancies. The City began using the 2006 Revised Master Covenant in October 2006, and notified the owners of affordable units in Provincetowne that before putting their units on the market they should contact the City about signing the 2006 Revised Master Covenant. Approximately 69 of the Provincetowne affordable housing units are still restricted by either the initial Master Covenant or the 2006 Revised Master Covenant. In the fall of 2011, the City learned that the Provincetowne area lost its “certification” for FHA insured mortgage financing. It became the City’s understanding that the loss was based on three “factors.” First, the Provincetowne HOA failed to submit the proper recertification paperwork before the required deadline; second, there was a concern that there were not enough owner occupied units remaining in the project (staff’s understanding is that there is a 51% minimum owner occupancy required by FHA); and third, FHA wanted the City to revise its Covenant to remove the income limitation on future purchasers. The City has since learned that the Provincetowne units are again FHA compliant. The area was reinstated on July 24, 2012. That certification will expire July 24, 2014, unless a recertification is requested by the HOA. In rechecking with FHA about whether the City had to eliminate the low-income requirement for future purchasers contained in the existing Covenant, FHA responded that as long as all deed restrictions on all units in the project terminate upon foreclosure, FHA has no further issues with the Covenant. However, over the past year and a half or so, staff has heard from realtors and owners regarding the pending sale of their Provincetowne units, complaining that it is hard to find income-qualified buyers for units, and that there is not a level playing field, from their perspective, because of the Covenant. Again, the Covenant only applied to initially 90 of 120 units. The original number of 90 units has been subsequently reduced to just 69 units mainly through foreclosures, because once a unit is foreclosed, the Covenant is released. Apparently, over the past year several Provincetown condominium units have been sold to purchasers that are not qualified as low-income families. In addition, there is information that implies that perhaps 10 of the remaining 69 units may not be owner occupied. Both cases represent violations of the Covenant. Staff is not sure how such situations can happen unless realtors and/or title companies are not thoroughly reviewing the Covenant. Also, there is a section of the Covenant that requires the seller to notify the City if they are considering sale of their unit and for potential March 19, 2013 -3- ITEM 19 purchasers to check with the City to assure the sale price is within the maximum limits allowed by the Covenant. If the City had been properly notified the requirements of the Covenant would have been known to the seller, purchaser, and/or their realtors long before sale closings were scheduled. In 2012, the Affordable Housing Board appointed a subcommittee to work with staff to review the 2006 Revised Master Covenant and see if further changes were warranted. The results of the staff subcommittee’s work were presented to the entire AHB for discussion and a recommendation to the City Council. Based on the concerns that have been raised about the effect of the Eligible Buyer restriction in the Covenant as well as other considerations, City staff and the AHB are recommending that a new 2013 Revised Master Covenant be adopted. The 2013 Revised Master Covenant would accomplish the following: 1. Eliminate the Eligible Buyer requirement so that future purchasers would not have to be low-income families; 2. Redefine the maximum purchase price to be 95% of the Area Median Purchase Price as published quarterly by the National Association of Home Builders, rather than being calculated based on what an Eligible Buyer can afford; 3. Retain the owner occupancy requirement because the units were originally sold to buyers with the indication that they would be living in an owner-occupies neighborhood; 4. Retain the changes that the City made to the Covenant in 2006 to make the Covenant consistent with HUD regulations; and 5. Make additional changes to improve the clarity and accuracy of the Covenant and ensure compliance with HUD regulation. A copy of the 2013 Revised Master Covenant, showing changes compared to the 2006 Revised Master Covenant, is attached as Attachment 1. If the 2013 Revised Master Covenant is approved, Provincetowne residents whose units are currently restricted by one of the previous covenants would be contacted and encouraged to execute the new Revised Master Covenant at their earliest convenience or prior to the sale of their units. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BOARD / COMMISSION RECOMMENDATION The Affordable Housing Board discussed the Provincetowne Covenant at its regular meeting on March 7, 2013. A memo outlining the Board's recommendation to the City Council is attached as Attachment 3. ATTACHMENTS 1. Draft 2013 Revised Master Covenant 2. Provincetowne Condominiums Location map 3. Affordable Housing Board memo Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 1 REVISED MASTER COVENANT FOR THE OCCUPANCY AND RESALE OF UNIT____, PROVINCETOWNE THIS MASTER COVENANT FOR THE OCCUPANCY AND RESALE OF UNIT____, PROVINCETOWNE (the "Covenant") is made and entered into this _________ day of ______________, 20___, by ___________________(the "Declarant"), and enforceable by the CITY OF FORT COLLINS, COLORADO, a municipal corporation, or its designee (the "City"). WITNESSETH: WHEREAS, Declarant owns the real property described as follows: Condominium Unit___, according to the Condominium Declaration for Provincetowne recorded October 16, 2001, under Reception No. 2001092980, and Condominium Map No. 12 of Provincetowne P.U.D. Filing No.2, recorded May 28, 2003, under Reception No. 20030064801, in the real estate records of the County of Larimer, Colorado. [*Insert legal description of unit*] (hereinafter an "Affordable Unit" the “Property”). WHEREAS, Provincetowne the Property is subject to a certain Provincetowne Affordable Housing Plan dated April 10, 2001, and to a Master Covenant dated ________________and recorded in the records of the Larimer County Clerk and Recorder on ________________, 20___at Reception No. ________________ (the “Master Covenant”); and WHEREAS, Under the Master Covenant, Declarant agreed to restrict the acquisition, resale or transfer of the Affordable Units Property to Eligible Buyers as that term is defined in this the Master Covenant. In addition, the Declarant agreed that this the Master Covenant shall would constitute a resale restriction setting forth the Maximum Purchase Price for which each Affordable Unit the Property may be sold, the amount of appreciation and the terms and provisions controlling the resale of the Affordable Units Property should a subsequent owner of an Affordable Unit desire to sell his or her interest in the Affordable Unit Property at any time after the date of this the Master Covenant. Finally, by this the Master Covenant, the Affordable Units shall be restricted the Property against use and occupancy inconsistent with this the Master Covenant.; and WHEREAS, the City has agreed to amend the Master Covenant to remove the requirement that acquisition of the Property be restricted to Eligible Buyers and redefine the Maximum Purchase Price. ATTACHMENT 1 Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 2 NOW, THEREFORE, for in consideration hereby acknowledged by Declarant of the City’s agreement to modify the Master Covenant, Declarant hereby represents, covenants and declares as follows: 1. Definitions. The following terms shall have the following meanings when used in this Covenant: a. "Eligible Buyer" means a natural person, family or household with a (1) Maximum Gross Annual Income that is no more than 80% of the Area Median Income for Fort Collins, and (2) whose proposed Monthly Housing Expense(s) (principal, interest, taxes, insurance, utilities, HOA expense) for a Maximum Loan at the Market Interest Rate does not exceed 38% of the Maximum Gross Annual Income adjusted to a monthly income. This definition of Eligible Buyer is to be used solely to calculate the maximum income level of buyers eligible to purchase an Affordable Unit and shall not be construed as in any way limiting the type of lending program or loan terms (except that such terms or conditions shall not be predatory) which an Eligible Buyer may accept to finance the purchase of an Affordable Unit. A person, family or household who at the time of purchase qualified as a Eligible Buyer shall continue to be deemed so qualified until such time as the Affordable Unit is Transferred. The following is the method of determining an Eligible Buyer and a hypothetical example of the determination of the Maximum Purchase Price, based on the identified assumptions and estimates: Example: 1. Maximum Annual Gross Income of Eligible Buyer: The Area Median Income ("AMI") as determined by U.S. Department of Housing and Urban Development Income Limits ("HUD"). -- Year 2003 person Household = $50,687.40 x 80% = $40,549.92 2. Monthly Housing Expense: 38% ($40,549.92 +12 x.38) = $1,284.08 Assumptions: Initial Sales Price 2 Bedroom Unit: $127,724.80 Loan Amount (97%): $123,893.05 Interest Rate: 8% Monthly Housing Expenses: Monthly Principal and Interest: $ 909.09 Est. Monthly H.O.A. Dues 60.00 Est. Gas 50.00 Est. Property Insurance 25.00 Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 3 Est. Water and Sewer 30.00 Est. Monthly Real Estate Taxes 130.00 Est. Monthly Electrical 35.00 Est. Private Mortgage Insurance 45.00 Total: $ 1,284.08 Monthly Housing b. "Market Interest Rate" means the Fannie Mae yield on 30-year mortgage commitments (priced at par) for delivery within thirty (30) days, rounded up to the nearest .125 of 1.00% as of the first business day of the month (printed in the Wall Street Journal). c. "Maximum Gross Annual Income" means no more than 80% of the Area Median Income for Fort Collins as determined by the U.S. Department of Housing and Development Income Limits ("HUD"). Income shall mean the pre-tax income from all acceptable sources as defined in the Fannie Mae Seller/Servicer Guide which income shall be verified in one or more of the following methods: i. Obtain two (2) paycheck stubs from the proposed Eligible Buyer's two (2) most recent pay periods. ii. Obtain a true copy of an income tax return from proposed Eligible Buyer for the most recent tax year in which a return was filed. iii. Obtain an income verification from the employer of the proposed Eligible Buyer. iv. Obtain an income verification certification from the Social Security Administration and/or the Colorado Department of Social Services if the proposed Eligible Buyer receives assistance from such agencies. v. Obtain an alternate form of income verification reasonably requested by the City. d. "Maximum Loan” means 97% of the purchase price for the applicable Affordable Unit. ea. "Owner" means the Declarant and any subsequent buyer, devisee, transferee, grantee, owner or holder of title of any Affordable Unit other person or persons who acquire an ownership interest in or title to the Property by purchase, devise, transfer, grant, or other conveyance. f. "Proposed Monthly Housing Expense" means the monthly total of the principal and interest, private mortgage insurance, homeowners association dues, l/12th of Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 4 estimated real property taxes and estimated gas, property insurance, water and sewer and electricity expenses. gb. "Transfer" means any sale, assignment or transfer that is voluntary, involuntary or by operation of law (whether by deed, contract of sale, gift, devise, bequest, trustee's sale, deed in lieu of foreclosure, or otherwise) of any interest in an Affordable Unit the Property, including, but not limited to a fee simple interest, a joint tenancy interest, a tenancy in common, a life estate, or any interest evidenced by a land contract by which possession of an Affordable Unit the Property is transferred and the Owner obtains title. h. "Acquisition Date" means the date of Transfer of an Affordable Unit. i. "Contract Date" means the date of contract for the proposed Transfer of an Affordable Unit to a new Owner. 2. Transfer Subject to Covenant. Declarant and each subsequent Owner of each of the Affordable Units Property hereby covenants and agrees that the Affordable Units Property shall be used, occupied and Transferred strictly in conformance with the provisions of this Covenant for so long as this Covenant remains in force and effect with respect to each such Affordable Unit the Property. Each Owner who takes title from Declarant and every subsequent Owner of each Affordable Unit the Property shall execute and record the Memorandum of Acceptance attached hereto as Exhibit A (completed with the appropriate information relating to the Affordable Unit Property and such Owner) with such Owner's deed to his or her Affordable Unit the Property in the real property records of the County of Larimer, Colorado. 3. Use and Occupancy. An Owner (other than Declarant), in connection with the purchase and ownership of an Affordable Unit the Property, must: a. occupy the Affordable Unit Property as his or her sole, exclusive and permanent place of residence during the time that such Affordable Unit the Property is owned by such Owner. A permanent residence shall mean the home or place in which one's habitation is fixed and to which one, whenever he or she is absent, has a present intention of returning after a departure or absence therefrom, regardless of the duration of the absence. In determining what is a permanent residence, the following circumstances relating to the Owner shall be taken into account: business pursuits, employment, income sources, residence for income or other tax purposes, age, marital status, residence of parents, spouse and children, if any, location of personal and real property, and motor vehicle registration; b. not engage in any business activity on or in such Affordable Unit the Property, other than except as permitted under applicable zoning ordinances and the condominium declaration governing the Affordable Unit Property; and Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 5 c. not permit any use or occupancy of such Affordable Unit the Property except in compliance with this Covenant during the period of such Owner's ownership of the Affordable Unit Property. 4. Maximum Purchase Price. Every Transfer of an Affordable Unit by Declarant or subsequent buyers to a purchaser shall be for a purchase price which does not exceed the Maximum Purchase Price as set forth herein and in the Plan. The Maximum Purchase Price shall be the maximum amount which an Eligible Buyer can finance with a 30-year, 97% loan at Market Interest Rate (as defined herein) 95% of the Area Median Purchase Price as published quarterly by the National Association of Home Builders, but not to exceed the then-current amount of the FHA loan limit for one (1) unit for Larimer County Colorado. In the event Developer Declarant conveys an Affordable Unit the Property for a sales price less than the Maximum Purchase Price and Developer Declarant is required to pay any commission to transactional or buyer real estate agents or brokers upon the sale of any Affordable Unit, Developer the Property, Declarant may increase the purchase price for the sale by the amount to be paid to such real estate agents or brokers in connection with such sale, provided the total of the purchase price and any commission does not exceed the Maximum Purchase Price and the commission does not exceed 3% of the Purchase Price. The Sales Price for a two bedroom Affordable Unit shall be based upon the Eligible Buyer's total income equaling the 3 persons Median Income in Fort Collins as determined by the U.S. Department of Housing and Urban Development Income Limits ("HUD") and the Sales Price for a three bedroom Affordable Unit shall be based upon the Eligible Buyer's total income equaling the 4 person Median Income for Fort Collins as determined by the HUD. Each such sales price is subject to increase with respect to sales occurring in the year(s) following the year of this Agreement by the increase, if any, in the 3 and 4 person, respectively, Area Median Income for the City of Fort Collins as determined by the HUD for the year in which the closing actually occurs. 5. Maximum Purchase Price. a. A selling Owner shall not permit any prospective buyer to assume any or all of the selling Owner's customary closing costs nor accept any other consideration which would cause an increase in the purchase price above the Maximum Purchase Price, and all such additional consideration, in any form, shall be considered by the City when determining whether the purchase price for the Affordable Unit Property exceeds the Maximum Purchase Price. THE MAXIMUM PURCHASE PRICE IS ONLY AN UPPER LIMIT ON PRICE APPRECIATION FOR EACH AFFORDABLE UNIT THE PROPERTY, AND NOTHING HEREIN SHALL BE CONSTRUED TO CONSTITUTE A REPRESENTATION, WARRANTY OR GUARANTEE BY THE DECLARANT OR THE CITY THAT UPON TRANSFER THE OWNER SHALL OBTAIN THE MAXIMUM PURCHASE PRICE. FURTHER, NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO PREVENT AN OWNER FROM SELLING A UNIT THE PROPERTY FOR LESS THAN THE MAXIMUM PURCHASE PRICE. Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 6 6. Transfer of Affordable Unit. a. In the event that an Owner desires to sell the Affordable Unit owned by such Owner Property, the Owner shall provide notice to the City of such Owner's intent to sell at least ten (10) days prior to engaging a broker to list the Affordable Unit Property for sale. The City may keep a list of interested purchasers and may provide same to any selling Owner in the City's discretion. b. After providing the notice required in Subsection 6.a, the selling Owner may list the Affordable Unit Property for sale with a real estate agent licensed in the State of Colorado or the selling Owner may market the Affordable Unit Property as a so-called "for sale by owner," and may enter into a contract for the sale of the Affordable Unit Property upon such terms and conditions as the selling Owner shall, in the selling Owner's sole discretion, deem acceptable, provided, however, that: (i) the purchase price shall not exceed the Maximum Purchase Price; and (ii) the selling Owner must believe in good faith that the purchaser is an Eligible Buyer and that the purchase price does not exceed the Maximum Purchase Price; and (iii) the contract must state as a contingency that the purchaser will submit the application described in Subsection 6.c below to the City within three (3) days after contract acceptance, and that the selling Owner's obligations under the contract are expressly contingent upon the City's determination that the purchaser is an Eligible Buyer and that the purchase price does not exceed the Maximum Purchase Price as evidenced by issuance of the Certificate described in Subsection 6.c below. c. Within three (3) days after contract acceptance (defined as the date of last execution of the contract by the purchaser or the selling Owner), the purchaser shall complete and submit an application form to the City requesting a determination that the purchaser is an Eligible Buyer and that the purchase price does not exceed the Maximum Purchase Price. The City shall promulgate the form of such application, which shall request only such information as is necessary to determine whether the purchaser is an Eligible Buyer and whether the purchase price exceeds the Maximum Purchase Price. The City shall make its determination within five (5) days for sales by Declarant and within fourteen (14) days in the event of any other sale after receipt of the completed application, as evidenced either by (A) the issuance of a certificate, signed by the City and in recordable form, stating that the purchaser is an Eligible Buyer, the amount of the purchase price and that the purchase price does not exceed the Maximum Purchase Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 7 Price (the "Certificate"); or (B) delivering a notice to seller and purchaser that a Certificate cannot be issued and stating the reason(s) therefore. Failure by the City to make its determination and deliver the Certificate or the notice as described above within the applicable 5 or 14-day period will be deemed an approval of the purchaser and the purchase price, and the City shall thereafter issue a Certificate with respect to the transaction immediately upon request therefore by the selling Owner or the purchaser. Delivery of the Certificate shall not be construed as a representation or warranty that the Eligible Buyer will in fact qualify for purchase money financing for the acquisition of the Affordable Unit. d. Upon the Transfer of the Affordable Unit Property, the Certificate shall be recorded by the Eligible Buyer new Owner in the real estate records of the County of Larimer, Colorado, along with the deed for the Affordable Unit, and if the Certificate is not so recorded, then the Transfer shall be voidable at the option of the City Property. If the Owner fails to record the Certificate, the Owner shall be in default under this Covenant. 7. No Rental of Affordable Units. An Owner may not rent or lease such Owner's Affordable Unit the Property for any period of time. The requirements of this Section shall not preclude an Owner from sharing occupancy of the Affordable Unit Property with non-owners on a rental basis provided Owner continues to reside in the Affordable Unit Property and to meet the obligations contained in this Covenant. 8. Remedies in the Event of Breach. a. In the event that the City has reasonable cause to believe that an Owner is violating the provisions of this Covenant, the City, by its authorized representative, may inspect the Affordable Unit owned by such Owner Property between the hours of 8:00 a.m. and 5:00 p.m., Monday through Friday, after providing such Owner with no less than twenty-four (24) hours advance written notice. b. In the event a violation of this Covenant is discovered, the City shall send a notice of violation to the Owner detailing the nature of the violation and allowing the Owner fifteen (15) days to cure such default. Said notice shall state that the Owner may request a hearing before the City within fifteen (15) days to determine the merits of the allegations. If no hearing is requested and the violation is not cured within the fifteen (15) day period, the Owner shall be considered in violation of this Covenant. If a hearing is held before the City, the decision of the City based on the record of such hearing shall be final for the purpose of determining if a violation has occurred. c. There is hereby reserved to the City the right to enforce this Covenant, by the following remedies and any other means that are lawful to the City under HUD rules: i. disgorgement of profits received by the selling Owner over the Maximum Purchase Price; and/or Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 8 ii. obtaining a court order requiring sale of an Affordable Unit the Property by the Owner thereof to either the City or a third party under a purchase right designed to preserve the affordability of the pProperty for persons of low or moderate income. The costs of such sale shall be assessed against the proceeds of the sale with the balance being paid to the Owner. In the event the City resorts to litigation with respect to any or all provisions of this Covenant and the City prevails, the City shall be entitled to recover damages and costs its costs and legal fees, including reasonable attorney's fees. d. In order to preserve the affordability of the property as an Affordable Unit Property, if the Owner intends to transfer title to the pProperty, the Owner must, at least forty- five (45) days before any transfer is effected, notify the City of its intent to sell, whereupon, the City shall have the right to purchase the pProperty ("Purchase Right") at the "Maximum Purchase Price" as calculated in paragraph 4. If the City elects to purchase the pProperty, it shall exercise the Purchase Right by notifying the Owner, in writing, of such election ("Notice of Exercise of Right") with thirty (30) days of the receipt of notice of the Owner's intent to sell, or the right shall expire. Having given such notice, the City may either proceed to exercise the Purchase Right directly by purchasing the pProperty, or may assign the Purchase Right to an eligible buyer. In either case, the City or its assignee shall enter into a contract to purchase the pProperty within seven (7) days of exercising the Purchase Right. The purchase (by the City or the City's assignee) must be completed within forty-five (45) days of the City's Notice of Exercise of Right, or the owner may sell the pProperty as provided in paragraph 6 above. The time permitted for the completion of the purchase may be extended by mutual written agreement of the Owner and the City. If the City assigns its Purchase Right to an eligible buyer, the Maximum Purchase Price shall be increased by the amount set annually by the City Manager as necessary to cover the administrative costs of assigning its Purchase Right and the City shall be entitled to these additional sales proceeds in order to cover the administrative costs associated with assigning its Purchase Right. If the Purchase Right has expired or if the City, or its assignee, has failed to complete the purchase within the forty-five (45) day period allowed above, the Owner may sell the pProperty according to paragraph 6, or nor for not more than the Maximum Purchase Price as calculated according to paragraph 4. 9. Release of Covenant in Foreclosure. This Covenant shall automatically terminate with respect to a particular Affordable Unit in the event of foreclosure or, the acceptance of a deed in lieu of foreclosure, or assignment of the insured mortgage to HUD, with respect to such Affordable Unit the Property, by a holder of a first priority deed of trust against the Affordable Unit (the "First Lien Holder") Property (which shall be the only party entitled to take the Affordable Unit Property free of this Covenant pursuant to the provisions of this Section 9). Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 9 10. Covenant Running with Land; Duration of Covenant, Termination of Master Covenant. a. The terms of this Covenant shall constitute covenants running with the Affordable Units Property, as a burden thereof thereon, for the benefit of, and shall be specifically enforceable by, the City and its successors and assigns, as applicable, by any appropriate legal action including but not limited to specific performance, injunction, reversion or eviction of non-complying Owners and/or occupants otherwise permitted in this Covenant. Upon recordation of this Covenant, the Master Covenant will be terminated and of no further force and effect with respect to the Property. b. This Covenant shall terminate, expire and be of no further force and effect with respect to a particular Affordable Unit following the first Transfer of said Affordable Unit the Property that occurs more than twenty-five (25) years after the date of first sale the recording of the Master Covenant. 11. Miscellaneous. a. Notices. Any notice, consent or approval which is required or permitted to be given hereunder shall be given by mailing the same, certified mail, return receipt requested, properly addressed and with posting fully prepaid, to any address provided herein or to any subsequent mailing address of the party as long as prior written notice of the change of address has been given to the other parties to this Covenant. Said notices, consents and approvals shall be sent to the parties hereto at the following addresses unless otherwise notified in writing: To Declarant: To the City: The City of Fort Collins, Colorado 300 LaPorte Avenue, City Hall West, Second Floor Fort Collins, Colorado 80521 Attn: City Manager Social Sustainability Administrator P.O. Box 580 Fort Collins, Colorado, 80522 with a copy to: The City of Fort Collins City Attorney's Office 300 LaPorte Avenue, City Hall West, Second Floor P.O. Box 580 Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 10 Fort Collins, Colorado 805212 b. Exhibits. All exhibits attached hereto are incorporated herein and by this reference made a part hereof All attached exhibits are incorporated into this Covenant by reference. c. Severability. Whenever possible, each provision of this Covenant and any other related document shall be interpreted in such a manner as to be valid under applicable law; but if any provision of any of the foregoing shall be invalid or prohibited under said applicable law, such provisions shall be ineffective to the extent of such invalidity or prohibition without invalidating the remaining provisions of such documents. d. Chose Choice of Law. This Covenant and each and every related document are to be governed and construed in accordance with the laws of the State of Colorado. e. Successors. Except as otherwise provided herein, the provisions and covenants contained herein shall inure to and be binding upon the heirs, successors and assigns of the parties. f. Section Headings. Paragraph or section headings within this Covenant are inserted solely for convenience of reference, and are not intended to, and shall not govern, limit or aid in the construction of any terms or provisions contained herein. g. Waiver. No claim of waiver, consent or acquiescence with respect to any provision of this Covenant shall be valid against any party hereto except on the basis of a written instrument executed by the parties to this Covenant. However, the party for whose benefit a condition is inserted shall have the unilateral right to waive such condition. h. Gender and Number. Whenever the context so requires herein, the neuter gender shall include any and all genders and vice versa and the use of the singular shall include the plural and vice versa. i. Personal Liability. Owner agrees that he or she shall be personally liable for any of the transactions contemplated herein. j. Further Actions. The parties to this Covenant agree to execute such further documents and take such further actions as may be reasonably required to carry out the provisions and intent of this Covenant or any restriction or document relating hereto or entered into in connection herewith. k. Modifications. The parties to this Covenant agree that any modifications of this Covenant shall be effective only when made by writings signed by the Declarant (or its successors) and the City and recorded with the Clerk and Recorder of Larimer County, Colorado. Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 11 1. Owner and Successors. The term Owner shall mean the Declarant and any other person or persons who shall acquire an ownership interest in an Affordable Unit the Property in compliance with the terms and provisions of this Covenant; it being understood that such person or persons shall be deemed an Owner hereunder only during the period of his, her or their ownership interest in the Affordable Unit Property and shall be obligated hereunder for the full and complete performance and observance of all covenants, conditions and restrictions contained herein during such period. Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 12 IN WITNESS WHEREOF, the parties hereto have executed this instrument on the day and year above first written. DECLARANT: ___________________________________ ____________________________________ By: ________________________________ Date:_______________________________ STATE OF COLORADO ) ) ss. COUNTY OF LARIMER ) The foregoing instrument was acknowledged before me this ____day of _______20___, by Witness my hand and official seal. My commission expires: [SEAL] ____________________________________ Notary Public Draft Revised Master Covenant – March 13, 2013 Showing Proposed Changes Tracked against 2006 Revised Master Covenant 8/11/2006 3/13/13 13 ACCEPTANCE BY THE CITY OF FORT COLLINS, COLORADO The foregoing Master Covenant for the Occupancy and Resale of Unit____, Provincetowne, and its terms are hereby accepted, approved, agreed to and adopted by the City of Fort Collins, Colorado. THE CITY OF FORT COLLINS COLORADO, a municipal corporation By: _______________________________ Darin A. Atteberry, City Manager ATTEST: _________________________________ City Clerk APPROVED AS TO FORM: ________________________________ Deputy City Attorney STATE OF COLORADO ) ) ss. COUNTY OF LARIMER ) The foregoing instrument was acknowledged before me this ____day of _______20__, by Darin A. Atteberry, as City Manager of the City of Fort Collins, Colorado, a municipal corporation. Witness my hand and official seal. My commission expires: [SEAL] ____________________________________ Notary Public ORDINANCE NO. 054,2013 OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING REVISIONS TO THE MASTER COVENANT FOR THE AFFORDABLE HOUSING UNITS IN THE PROVINCETOWNE CONDOMINIUMS DEVELOPMENT WHEREAS, on October 6, 1992, the City Council adopted Resolution 92-155, adopting an Affordable Housing Policy that defined “affordable housing” as housing that can be purchased or rented by people whose income is less than 80% of the city’s median income, and where the occupants pay not more than 30% of their gross income for housing costs, including utilities; and WHEREAS, on October 3, 1995, the City Council adopted Resolution 95-141, authorizing the City to issue a Request for Proposal (RFP) for the sale and development of a 339-acre parcel of land that the City had acquired in the early 1990s when Special Improvement District Bonds were not paid (the “Provincetowne Property”); and WHEREAS, the City’s objectives for the sale of the Provincetowne Property were to: (1) satisfy the City’s responsibilities to the SID bondholders and recover as much of the City’s costs as possible; (2) retain ownership of lands needed for public purposes such as natural areas and park sites; and (3) create an affordable housing demonstration project without the City being the developer; and WHEREAS, the RFP, issued in November, 1995, stated that the development project had to produce a “meaningful quantity” of housing affordable to those living below 80% of the median family income for Fort Collins and those living below 60% of the median family income, and had to demonstrate affordable housing concepts and methods intended to make affordable housing more acceptable to neighboring residents; and WHEREAS, on April 2, 1996, as a result of the RFP, the City entered into an Agreement of Purchase and Sale with Pridemark Development Company, LLC (“Pridemark”), which set a purchase price of $1,800,000 for approximately 170 acres of the Provincetowne Property (the “Development Property”), and obligated Pridemark to designate at least 30% of the residential units in the development as affordable housing units; and WHEREAS, on April 16, 1996, the City Council passed Ordinance No. 41, 1996, authorizing the sale of the Development Property to Pridemark; and WHEREAS, on December 18, 1997, Pridemark acquired the first two parcels of the Development Property, and the City and Pridemark entered into a Memorandum of Agreement (MOA) by which Pridemark agreed that in any development agreement it entered into with the City concerning any portion of the Development Property, it would obligate itself to develop at least 30% of the units as housing affordable to individuals earning 80% or less of the median family income of residents of the City so that they can spend not more than 30% of their income on housing costs; and WHEREAS, Pridemark further agreed in the MOA that not less than two-thirds of the affordable units it built on the Development Property would be restricted by covenant, deed or contract to remain affordable for at least 25 years from the date each unit was certified for occupancy, and the remaining one-third of the affordable units would be similarly restricted for either 5 years or 25 years depending on available financing; and WHEREAS, on March 20, 1998, the Agreement of Purchase and Sale was assigned to Kaufman and Broad Home Corporation (K-B), which had acquired Pridemark; and WHEREAS, as each additional parcel of the Development Property was acquired by K-B, K-B entered into an MOA with the City similar to the one described above; and WHEREAS, K-B built the required affordable housing units as part of the Provincetowne Condominiums development (the “Development”); and WHEREAS, on May 17, 2001, at K-B’s request, the City and K-B amended all the MOAs to state that the affordable units in the Development had to be priced so that residents would spend not more than 38% of their income on housing, instead of 30%; and WHEREAS, each affordable unit was sold subject to a Master Covenant, enforceable by the City, governing the occupancy and resale of the unit (the “Master Covenant”); and WHEREAS, the Master Covenant says that an affordable unit can only be sold to an “Eligible Buyer,” meaning a person, family or household whose gross annual income is no more than 80% of the area median income for Fort Collins, and whose proposed monthly housing expenses, including mortgage payments and utilities, will not exceed 38% of their income; and WHEREAS, the Master Covenant also sets a maximum purchase price for which an affordable unit can be sold, based on the amount that an Eligible Buyer would be able to finance, and requires that affordable units be owner-occupied; and WHEREAS, in 2006 the U.S. Department of Housing and Urban Development (HUD) reviewed the Master Covenant and requested certain changes to it in order to make it consistent with HUD regulations regarding enforcement of covenants and termination of covenants in the event of a foreclosure; and WHEREAS, after getting HUD approval on a Revised Master Covenant (the “2006 Revised Master Covenant”), the City sent copies of it to owners of affordable units in the Development and advised them that they should execute the new covenant before trying to sell their units; and WHEREAS, approximately 69 units in the Development are currently restricted by either the Master Covenant or the 2006 Revised Master Covenant (the “Covenants”); and WHEREAS, over the past year, several realtors and owners of affordable units in the Development have complained to City staff that the Eligible Buyer requirement in the Covenants has -2- made it difficult, if not impossible, for them to find buyers for their units when they needed or wanted to sell, and have requested that the Covenants on their individual units be released or modified; and WHEREAS, City staff and the Affordable Housing Board have reviewed the Covenants and considered the unit owners’ concerns and are recommending that the Covenants be revised to eliminate the Eligible Buyer requirement; and WHEREAS, if the Eligible Buyer requirement is eliminated, the method for calculating the maximum purchase price allowed for an affordable unit would also have to be changed; and WHEREAS, staff is recommending that the maximum purchase price be set at 95% of the Area Median Purchase Price, as published quarterly by the National Association of Home Builders, but not to exceed the then-current amount of the FHA loan limit for one unit in Larimer County; and WHEREAS, staff and the Affordable Housing Board considered the idea of releasing the Covenants entirely, but felt that it was important to retain the owner-occupancy requirement of the Covenants; and WHEREAS, a copy of the Revised Master Covenant, dated March 13, 2013 and showing proposed changes compared to the 2006 Revised Master Covenant, is on file in the office of the City Clerk and available for public inspection; and WHEREAS, although City Council authorization was not required for the City to be a party to the Covenants, City Council approval of the recommended changes to the Covenants is being requested because: (1) the City Council originally approved the sale of the Development Property to Pridemark based on the requirement that the Development include an affordable housing component, and that affordable housing component would be substantially changed by the proposed revisions to the Covenants; and (2) the City’s rights under the Covenants to restrict the use and resale of the affordable units constitute an interest in real property owned by the City, and the City would be giving up part of that interest by removing the Eligible Buyer requirement from the Covenants; and WHEREAS, Section 23-111 of the City Code states that the City Council is authorized to sell, convey or otherwise dispose of any interest in real property owned in the name of the City, provided that the City Council first finds, by ordinance, that such sale or other disposition is in the best interests of the City. NOW THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: -3- Section 1. That the City Council hereby finds that modifying the Covenants to remove the Eligible Buyer requirement and change the method for calculating the maximum purchase price for a Provincetowne condominium unit is in the best interests of the City. Section 2. That the City Manager is hereby authorized to execute Revised Master Covenants for Provincetowne that reflect the changes described in this Ordinance, along with such other modifications to the terms and conditions of the Covenants as the City Manger, in consultation with the City Attorney, determines are necessary or appropriate to protect the interests of the City. Introduced, considered favorably on first reading, and ordered published this 19th day of March, A.D. 2013, and to be presented for final passage on the 16th day of April, A.D. 2013. _________________________________ Mayor ATTEST: _____________________________ City Clerk Passed and adopted on final reading on the 16th day of April, A.D. 2013. _________________________________ Mayor ATTEST: _____________________________ City Clerk -4-