WPC5 o~6% ]:;ScׂiT2"$K0XW $.#dy\وNEC/t龼ϷZ2JDclJiM'*Jt'ݿqpn ߧt*C@SSmD-Qr݂ؑjJ A45a 37*qˡfW5c)O{>P$g)#5W0_}aU:1 H{؉v[ ԉ :Ћ|ۃM,HnF}6X8Q[zbHD$aDE Y33}V#fMKFUf>rRhWHTP#}_ x!Pk{np +6?CtVs66`z'Ox'DCɥ6_闽?*#F UON %] 0:c 0U 0 0 0 0Y 0 0 0r 0 0 0 0P 0 0 0W 0 0 0( 0 0w 0E 0 0 0C 0 0y 0  0< 0U& 0U 0UA 0( D+ AQ E:!bThin/Thick 2[ -d d !USUS.,  _  *OY).XĞXXX.6X.XĞ8/,/XXdd8Gentrification:#.XĞX.6#. aX.XĞ# W . al#<    W  # W  < V#@ [R   W#@X&uX @ [R#@lX@X&uLegalToolsAvailabletoCDCstoPreservethe *z LongTermAffordabilityofHousing#@X&uX@l#@ [R X@X&u# W  @ [R#<    W P #<X5X < ϕ#<X<X5#<X5X<.#<&%X<X5#&%%<&#1&r#%%&By:TexasCBAR,www.texascbar.org   March11,2003#&%%1&r###XX%&q#  |  q'N;+'h|?0sv  `Ev Wh eq c(#c(#(#(#=@ E <X5XXX @ E  (#(#c(#c(#A() xdE ![xA  !Z #XXX<X5)#.XĞXXX. aX.XĞControllingResalePrices#.XĞX. a'##XXX.XĞ#<X5XXX  "   #XXX<X5#1X,XXX #XXX1X,#@X&uXXX@lX@X&uA.0  RightofFirstRefusal#@X&uX@lt##XXX@X&uU#1X,XXX %P !(#(#   0  #XXX1X,#@X&uXXXWhatisit#XXX@X&u}#1X,XXX :Arightoffirstrefusalrestrictstheabilityofhomeownerstoselltheirhome "'r"# bygivingthenonprofittherighttobuybackthepropertywhenthehomeownersdecide (n#$ theywanttoselltheirhome.Arightoffirstrefusalalsotypicallyincludesoccupancyand )j$% userestrictionsrequiringthatthehomebeusedforaffordablehousing,suchas *f%& prohibitingthehomefrombeingusedasrentalhousing.Aviolationoftheserestrictions +b&' canalsotriggertherightoffirstrefusal.,^'((#(# Ї#XXX1X,#@X&uXXX0  Example#XXX@X&up #1X,XXX :NonprofitABCsellsahometoafirsttimehomebuyerfor$80,000,with  $20,000insubsidies.Fiveyearslaterthefamilydecidestosellthehome,whichnow  hasamarketvalueof$150,000,makingitunaffordabletothelowincomefamiliesthat  thenonprofitserves.Ifthenonprofitexecutedarightoffirstrefusalwhensellingthe  home,ithastherighttorepurchasethehomeforasetdiscountedprice,orbymatching  anybonafideoffer. (#(# ?B.` hp x XB   #XXX1X, #@X&uXXX0  SettingtheResaleFormula :#XXX@X&u#1X,XXXAnimportantdecisionforanonprofitthatusesarightof   firstrefusalisdeterminingtheformulaforthediscountedpriceforwhichthenonprofit   canpurchasethehousebackfromthehomeowner.Thereareseveraldifferentwaysto    designthisformula,whichinvolvesimportantpolicyissuesthatneedtobeapprovedby   thegoverningboardofanonprofit,includingmakingsuretheresaleformulakeepsthe   homeaffordablebutalsogivesownersafairreturnontheirinvestment.Formore   informationondesigningresaleformulasforhomeownershipprograms,see Designing |  ResaleFormulas,whichcanbeobtainedfromtheInstituteforCommunityEconomics, x  (413)7468660.t(#(#  X p  X0  #XXX1X,#@X&uXXXLegalRequirements#XXX@X&u #1X,XXX :Ifanonprofitwantstoincludearightoffirstrefusalaspartofits l homeownershipprogram,thenonprofitneedstorequiretherightoffirstrefusalaspart h oftheearnestmoneycontract.Therightoffirstrefusalshouldbeattachedasan d addendumtotheearnestmoneycontractandshouldbeinitialedbyallofthepartiesto ` thecontract.Attheclosing,therightoffirstrefusalisthensignedbythepurchasing \ familyandnonprofitandrecordedbythetitlecompany.X(#(# 0  Whenthenewhomeownerdecidestosellthehome,therightoffirstrefusalrequiresthe P homeownertocontactthenonprofitinwriting.Ifthehomeownerdoesnotcontactthe L nonprofit,therightoffirstrefusal"#XXX1X,_#1X,XXXifproperlyrecorded"#XXX1X,#1X,XXXshouldappearonanytitle H searchforthepropertyandalertthetitlecompanyoftherightoffirstrefusal.After D notifyingthenonprofit,thehomeownerisrequiredtoshowthatithasreceiveda @  legitimateoffertopurchasethehome.Thenonprofitisthengivenacertainnumberof +&' *OY * *  homebuyerdoesnothavetorepaytheloanaslongasthefamilystaysinthehomeand  doesnotsellorrentthehometoanotherfamily.Thenonprofitmustgivenoticeofthe  secondlienintheearnestmoneycontract.#XXX1X,#1X,XXXTheamountofthesecondlienistypically  cappedsothatcombinedvalueofthefirstlienfromthemortgagecompanyandthe  secondlienonotexceedtheappraisedvalueoftheproperty.Ifthefamilysellsorrents  thehomeduringthesettimeperiod,thefamilyhastorepaytheloan.Thenonprofitcan   thenusethisrepaymentforitsaffordablehousingprograms.#XXX1X,#1X,XXXSoftsecondsare   commonlyusedwhenanonprofitissellingahometoafamilyforbelowappraisedvalue   topreventthefamilyfrombeingabletoturnaroundandsellthehousethenextdayand   immediatelyreapthebenefitsofthesubsidieswhichthenonprofithasinvestedinthe    house. (#(# 0  #XXX1X, #@X&uXXX Example#XXX@X&u"#1X,XXX :TheSmithfamilywantstopurchaseahomefromNonprofitABCandcan   affordamortgageof$70,000.Thehousehasanappraisedvalueof$100,000. |  NonprofitABCsellsthehousefor$100,000totheSmithfamily.TheSmithsmortgage x  (andfirstlien)fromthebankisfor$70,000.Thenonprofitentersintoa softsecond t lienwiththeSmithsfor$30,000whichisamortizedovera15yearperiod.Aslongas p theSmithsremainintheirhomefor15years,theydonothavetopaybackthe l $30,000.IftheSmithssellthehomewithinthe15yearperiod,theyhavetopay h NonprofitABCoutoftheproceedsfromthesalefortheamountremainingonthe d $30,000secondlien(sincethesecondlienisamortized,theamountowedwilldecrease ` eachyear,eventuallyzeroingoutinyear15).\(#(# Ѐ #XXX1X,"#@X&uXXX@lX@X&uC.0  DeedRestrictions/RestrictiveCovenants#@X&uX@lO'##XXX@X&u0'#1X,XXX T(#(# 0  #XXX1X,'#@X&uXXXWhatisit#XXX@X&u](#1X,XXX :Anothertoolwhichnonprofitscanusetocontroltheresaleofhousesisthe v restrictivecovenant.Usedinthiscontext,arestrictivecovenantisarestrictionrecorded r inthedeedrecordsthatrequiresafamilytoresellahousetoanotherlowincomefamily n atanaffordableprice.Thenonprofitincludesnoticeoftherestrictivecovenantinthe j  earnestmoneycontract.Therestrictivecovenantisthensignedbythefamilyatthe f! closingandfiledinthedeedrecordsbythetitlecompany.b"(#(# 0  #XXX1X,(#@X&uXXXProblems#XXX@X&us+#1X,XXX :Banksmaynotlikethese.Ataminimum,therestrictivecovenantneedsto Z$  includeaprovisionexemptingsituationssuchasforeclosure.Restrictivecovenants V% ! usedinthiscontextmayalsobedifficulttoenforceandneedtoincludereasonabletime R&!" restrictions.N'"#(#(# A() xd:EE)[xA#XXX1X,+#1X,XXX F)$%  #XXX1X,-#.XĞXXX. aX.XĞ *@&' ControllingLand#.XĞX. a .##XXX.XĞ.#1X,XXX    #XXX1X,.#@X&uXXX@lX@X&uA.0  RentalHousing#@X&uX@l./##XXX@X&u/#1X,XXXL(#(# 0  Rentalhousingistheeasiestwayforanonprofittomaintainlongtermcontrolofland "r inacommunity!especiallysinglefamilyrental.Nonprofitsinvolvedininfillhousing  n developmentshouldconsiderretainingsomeunitsforrentalhousinginsteadof  j homeownership.Unfortunately,manycitiesinTexasdiscouragenonprofitsfromrenting  f singlefamilyhousingbyfailingtoprovidesubsidiesforthistypeofhousing.  b(#(# #XXX1X,/#@X&uXXX@lX@X&uB.0  CommunityLandTrusts#@X&uX@lY2##XXX@X&u:2#1X,XXX  Z (#(#  #XXX1X,2#@X&uXXX0  WhatisaCommunityLandTrust? #XXX@X&uI3#1X,XXXAcommunitylandtrust( CLT)isanonprofit ,|  corporationcreatedtoacquireandholdlandforthebenefitofacommunityandprovide (x  longterm,affordableaccesstolandandhousingforcommunityresidents.Although $t  CLTshavebeenusedextensivelyinthecontextoflandconservation,itisonlyrecently  p thattheyhavebeenusedasanaffordablehousingstrategyinlowincomecommunities. l CLTsareuniqueinthattheytreatlandandbuildingsdifferently.Whilethehousesor h otherimprovementsaretypicallyownedbyindividualslivinginthehome,thelandis d heldpermanentlybythelandtrustsothatitwillalwaysbenefitthecommunity.Thisis ` animportantdistinction,ashomeownerswillownonlytheimprovementsthatare  \ constructedonCLTland,notthelanditself.X(#(# #XXX1X,3#@X&uXXX0  HowtoSetupaCommunityLandTrust#XXX@X&u7#1X,XXX:P(#(# 0  FirstStep:Organization.Generallyspeaking,CLTsareorganizedasnonprofit, L membershipcorporationsthathaveboardsofdirectorsthatareelectedbythe H members.Therearetraditionallytwotypesofvotingmembersoftheorganization,those D wholivewithinthecommunityinCLThomes,andthosewhoareinterestedinthe @ activitiescarriedonbytheCLT,suchasneighborsandpeoplewhomayseektolivein < theCLTshomesinthefuture.TheboardofdirectorsofaCLTiselectedbythemembers  8 andwilltypicallyincludedirectorswhoareCLTresidents,directorswhoarenotCLT !4 residents,anddirectorsfromthecommunityatlarge.Creatingaboardwithadiverse "0 membershipensuresthattheCLTwillactinamannerthatisbeneficialtothe #, communityasawhole.$( (#(# 0  SecondStep:PropertyAcquisition.ForCLTstowork,anonprofitgenerallyneedstoown & "" asubstantialamountoflandtoplaceintotheCLT.CLTsacquirepropertyinamanner '## thatissimilartothatofothernonprofitorganizations.Ideally,theCLTwillreceivegifts ($$ ofpropertyfromindividualsorcorporations,oracquirepropertyfromlocalgovernments )%% atreducedprices.Inmostcases,however,aCLTwillpurchasepropertyintheopen *&& market,oftenwithfinancialassistanceprovidedfrompublicorprivatesources.Theland + '' canbeunimprovedorimprovedproperty.(#(# 0  ThirdStep:SaleofPropertytoHomeownersandRentaloftheLand.HomesonCLT  ownedlandaretypicallysoldtolowincomefamilies,butmayalsoberented.MostCLTs  willseektosellthehomestoexistingornewmembersofthecommunityinorderto  promotetheadvantagesofhomeownershipandestablishamorelastingcommitment   tothecommunity.Wherethehomesaresold,theCLTwillberequiredtoeducate   potentialpurchasersonthekeyfeaturewhichdistinguishesCLTsfromotheraffordable   housinginitiatives,theseparationoftheownershipofthelandfromtheimprovements.   WhilethisseparationpermitstheCLTtopriceitshomesfarbelowwhatistypically    chargedinthemarketplace,homeownerswillnotownthelandonwhichtheirhomeis   situated.CLTsaddressanyconcernsthatthismightcreatebyleasingtheunderlying   landtothehomeownerthroughalongterm,renewableleasethattypicallylastsfor99   years.TheleaseprovidedbytheCLTwillgivethehomeowner,aswellastheir |  descendants(thelandleasemaybehandeddownbywilltothehomeowner's x  descendants),therighttousethelandforaslongastheywishtolivethere,subjectto t compliancewiththetermsofthelease.p(#(# 0  FourthStep:ControlofPropertyandResale.CLTsutilizealandleaseasameansto h retainalimitedamountofcontroloverCLTproperty.WhenCLThomeownersdecideto d moveoutoftheirhomes,theycansellthem.However,thelandleaserequiresthatthe ` homeownersellthehometoeithertheCLToranotherlowerincomehousehold,andfor \ anaffordableprice.Theresalepriceofthehomeiscontrolledbyaresaleformulathat X theCLTdevelopswhenitisestablished,andincorporateswithinthelandlease.CLTland T leasesalsocontainprovisionswhichrequirethehomeownertomaintaincertain P standardswithrespecttotheupkeepofthehome.Ifthehomeownerfailstocomply,the L CLTwillhavetheoptiontopurchasethehomebackfromthehomeownerattheresale H pricesetinthelandlease.D(#(# 0  #XXX1X,W8#@X&uXXXHowdoesaCLTsresaleformulawork? #XXX@X&uI#1X,XXXEachCLTwilldesignaresaleformulato