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HomeMy WebLinkAboutItem 8.4 OwnershpInclusionUnits CITY CLERK_ s: s� File # 41-01.0i-Ord AGENDA STATEMENT • CITY COUNCIL MEETING DATE: January 7, 2003 SUBJECT: Approval of Resale Agreement for Use with Ownership Inclusionary Units Report Prepared By: Julia Abdala, Housing Specialist Q� ATTACHMENT: 1. Resolution Approving Resale Agreement(with Exhibit A attached) RECOMMENDATION: 1. Hear Staff presentation 7-pich 2. Receive public input 3. Direction from City Council on percentages of equity and appreciation to be shared 4. Adopt Resolution (Attachment 1) approving resale agreement appreciation to be shared. FINANCIAL STATEMENT: No financial impact to approving this Resale Agreement for use with Ownership Inclusionary Units. DESCRIPTION: The City Council approved the revised Inclusionary Ordinance at their meeting on May 21, 2002. At the public hearing on this issue,the City Council indicated that affordable units should maintain affordability for a period of 55 years. In some cases,the units to be provided will be "ownership"units rather than rental units; however,there will be cases when units will be available for sale. Staff has worked with the City Attorney to develop a standard Resale Agreement(Agreement)for such cases. It is anticipated that the first time the.Agreement will be used would be for the 103 Inclusionary condominiums to be constructed by Toll Brothers in Area G in eastern Dublin. It is important to note that the time period for the life of the Resale Agreement with Toll for that project will be 30 years as discussed under Item 1 in the Analysis section below. ANALYSIS: The Agreement(Attachment 1, Exhibit A)has several features: 0 1)Restrictions on future sale price: The Agreement restricts the future sale price of the Inclusionary "ownership"units to an amount that would allow for the same category of affordability as the initial buyer (very low-, low-, moderate-income). This ensures that future interested low-income buyers would be able to afford the resale price and qualify for a mortgage., As previously mentioned, affordable units COPIES TO: In-House Distribution 1 cr-3 ITEM 0.4 constructed in the Toll development in Area G, "The Villages", will have a modified affordability period of 30 years rather than 55 years, pursuant to the an earlier executed Affordable Housing Agreement that the City entered into with the developer. The reason for this modification is that the plans for the project were substantially underway prior to the adoption of the recent revisions to the Inctusionary Ordinance. 2) Increase in value of unit: The Agreement provides a mechanism by which a modest increase in value of the unit can be realized by the owner. The price of the Inclusionary unit may increase by the same percentage increase in the median income from the time of the initial purchase to the time of resale. The increased sale price would remain affordable to a new lower-income household since the allowed increase is tied to the median income increase. 3) Option to purchase: The Agreement provides an option for the City of Dublin to purchase the property from the owner, should it become available and beneficial to the City. By providing this option, the City of Dublin is empowered to take ownership of the property and then sell it with continued affordability restrictions if necessary. This option could become an important tool in the case of a foreclosure by the owner of an Inclusionary Unit. 4) Owner-occupied units: The Agreement requires the Inclusionary Unit to remain "owner occupied," preventing the new owners from living elsewhere and renting the unit out for profit. The City of Dublin is able to provide for exceptions in rare cases where the owner may legitimately be required to reside elsewhere on a temporary basis. 5) Input from Agencies: The Agreement was crafted with maximum input from Fannie Mae and the California Housing Finance Agency (CHFA) to allow for flexibility to the mortgage lender and, thus, facilitate the ability of lower- income households to acquire a reasonable mortgage. Many lenders will approve mortgages with more lenient underwriting criteria if they are aware that these mortgages may be sold on the secondary market to other financial agencies such as Fannie Mae. The City Attorney has discussed the various provisions with these agencies and has incorporated their recommendations in crafting a document that would be acceptable. Request for Direction from City Council Staff requests direction from the City Council on two items contained in the Resale Agreement in Exhibit A of Attachment 1. These items and the related issues are discussed below. Percentage of Equity to Be Shared in Case of City of Dublin's Abandonment of Resale Restrictions (Issue 1) Staff requests input from the City Council regarding the amount of equity that would be due to the City of Dublin in the case of the resale of an Inclusionary Unit at market resale prices. The Agreement specifies the method by which a property owner must proceed in order to sell the Inclusionary Unit, as covered in Section 3, "Option to Purchase" above. The property owner would need to notify the City of Dublin of the intention to sell by providing a "Notice of Intent to Transfer". When the property owner provides this notice, the City of Dublin has 30 days in which to deliver "Consent to Transfer" notice. With this authorization from the City of Dublin, the property owner may sell the Unit at the affordable resale price permitted by the Agreement. If the City of Dublin does'not respond to the property owner within the allotted time, the property owner can require that the City record a "Notice of Abandonment." The Recordation of the "Notice of Abandonment" effectively states that the resale restrictions are of no further force or effect and would allow the property owner to sell the unit at prevailing market rates. In the event that this should occur, the property owner would receive a large amount of equity for the property, since it was purchased at a controlled price and could be sold at market rate. Section 11 of the Agreement anticipates that a certain percentage of equity would be shared with the City, but Staff has left the percentage blank in anticipation of receiving direction from Council. Possibilities could range from 20% to as high as 80% of total equity to be provided to the City of Dublin before the close of escrow in a new sale. For example, if a buyer purchased an Inclusionary Unit at $250,000, and four years later for some reason, it is allowed to be sold on the market at $350,000, the equity in that property would be $100,000. If the City Council has determined that the City should receive 25% of the equity from this type of market rate transaction, the City would receive a check from the escrow company for $25,000. In regard to the question of what percentage of the equity should the City of Dublin receive, Staff has done some preliminary research and has not yet identified any cities that have this type of equity sharing. The City Council may find that 25% equity would be appropriate as it allows the owner to still realize a benefit from the sale of the unit, and also allows the City to continue to deposit funds into the Affordable Housing Fund. Shared Appreciation at Termination of Resale Restrictions (Issue 2) Another issue for consideration by the City Council is the percentage of equity from the sale of the Inclusionary Units at the end of the 55-year period that the City should share. After such time, the units may be sold at market rate. If the units have been price restricted for 55 years and are then allowed to sell at what the market can bear, it is highly likely that there will be a large amount of profit to the owner at that time since, the owner would have purchased the unit at a restricted price but could sell the unit at market rates. This results in a windfall to the owner at the time of the sale. This circumstance has the possibility to create the potential for confusion and ambiguity in the years leading up to the termination of the resale restrictions. One possibility that Staff has explored is that the City of Dublin could share in the appreciation of the unit. This could avoid the windfall profit that a seller might otherwise obtain after the termination of the restrictions. A provision could be added to the Agreement that would provide for the City of Dublin to receive a percentage of the increase in equity to the exact date when the agreement and the affordability restrictions terminate. If the unit is not sold for a period of years after this exact date, the equity could be prorated to establish the amount that would be shared. The percentages that could be shared vary from 10% to higher. Staff requests direction from the City Council regarding what percentage of the appreciation the City should receive. Staff believes that 25% would be reasonable because it still allows the owner to realize a benefit from the sale of the unit, and also allows the City to continue to deposit funds into the Affordable Housing Fund. RECOMMENDATION: Staff recommends that the City Council hear the Staff presentation, receive public input, provide direction to Staff on percentages of equity and appreciation to be shared, and adopt the Resolution (Attachment 1) approving the Resale Agreement in Exhibit A. G:\HOUSING\CC SR Resale Agreement 1-7-03.DOC R SOLUTIO SO. - } n ~SOLUTION OF THE CITY COUNCIL OF THE CI~ OF DUBL~ ~PRO~NG A FO~ ~S~E AG~E~NT TO ~ST~CT THE SALE OF O~E~ INCLUSION~Y UNITS~ ~E~AS, thc CiW Co~cil approved si~ficant revisions to thc CiW's Mclusion~ ZoMng Re~lations (DublM M~cipal Code, C~ptcr 8.68) on May 21, 2002; and WHE~AS, thc revisions require developers to which ~c requirements apply to coat, ct Mct~io~ UMts affordable to lower-income households; and ~E~AS, it is neccss~ that sales of the ~cMsion~ Units ~ restricted in a m~er that ensues the ~ts' ~or~biliW for thc ~its' ~c~ life; ~d WHE~AS, ~hc Ci~ Co~cil detc~ined flint the standard affoMabHi~' period for thc IncMsiona~ UMts ~H be ~ yc~s; ~d ~~AS, the Mcl~ion~ ZonMg Rc~iatio~ authorize ~e Ci~ M~cr to cxecmc a~eemems that rcsMct sMcs Mclusiona~ Units so long ~ the a~mcm is consistcm with a Co,ell-adopted fo~ ~lc a~cemcnt; ~d ~~AS, the Ci~ Co~cil approved ~ Affordable Housing A~eement with Toll B~thers, Inc, in April of 2002 ~th resp~t to the ~ca G Project that sets fo~h a specific ma~er in wMch Toll Brothers, ~c ~11 comply ~ the Inclusiona~ ZoMng RcgMations ~d thg sets an affordabili~ period of 30 yc~s ~cr th~ ~5 yc~. Toll intends to cons~ct a numar of for-sMe ~oMable ~s in thc ~ea G Project; ~d W~AS, ~c Ci~ Co~cil Mtends to approve the aaached A~eemcnt, set fo~h as Exhibit A, ~ a fo~ resale a~ecmcnL pursuit to Section 8.68.050 gthc Dublin MuMcip~ Code, for usc reacting the sale of o~crsMp Inclusion~ Units. ~c Co,cji also intends to authorize the M~agcr to cxccme a version of the fo~ resMe a~eemem revised to rcfl~t thc te~s of the Ci~'s Affor~blc HousMg ~ccmcnt ~ Toll Brothers. NOW, T~FO~, BE IT ~SOL~D that the Ci~ council of thc CiW of DublM au~ofizes the use of the a~chcd Resale A~cemem (E~bit A) as a fo~ a~Ccmem to be used resale of ~cl~io~ UMts to affor~ble pn~s. BE IT FURT~R ~SOL~D t~* the Co~cil ~hcr authorizes thc Ci~ M~ger to execute a version of the fo~ resale agreement revised to reflect the tc~s of thc CiW's ~oMable Housing A~cement ~th Toll Brothers for the ~ca G Project. PASSED, ~PRO~D, ~D ~OPTED tMs 7~ day of Janu~ 2003. AYES: NOES: ~SEN~: ABST~N: Mayor A~EST: CiW Clerk K2/G/1-07-03/reso-resMea~t.doc (Item 8.4) O:~ous~Gxcc SR Resale A~c~cm Rcso.doc ~, 4 ATTACH~NT RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: CITY OF DUBLIN 100 Civic Plaza Dublin, California 94561 Attn: City Clerk To be recorded without fee. (Space Above This Line For Recorder's Use Only) (Gov.Code,§§6103 and 27383.) RESALE RESTRICTION AGREEMENT AND OPTION TO PURCHASE Owner: Property Address: Dublin, California Name of Development: This RESALE RESTRICTION AGREEMENT AND OPTION TO PURCHASE ("Agreement") is entered into by and between the CITY OF DUBLIN, a California municipal corporation (the "City") and ("Owner") regarding certain improved real property which is more particularly described in Exhibit A attached hereto and incorporated herein and commonly known as , Dublin, CA, (the "Property") effective as of , 20_ ("Effective Date"). City and Owner are hereinafter collectively referred to as the "Parties." RECITALS A. The City has Inclusionary Zoning Regulations (Dublin Municipal Code Chapter 8.68) (the "Regulations") that require developers of rental and ownership housing to construct within their projects units that are affordable to very low-, low-, and moderate-income households ("the Program"). To further its goal of creating affordable home ownership opportunities for very low-, low-, and moderate-income persons and families, the City has initiated a program for the sale of some homes at a price below their market rate ("Program"). Pursuant to the Program, developers of housing developments agree to set aside a certain number of units for purchase or rent, as applicable, by very low-, low-, and moderate-income persons and families, as defined herein. EXHITA 204945.4 —1— DRAFT: December 15, 2002 B. Owner is an eligible [very Iow-, Iow- or moderate-]income purchaser under the Program, intends to live in the Property as an owner occupant, and agrees to maintain the Property as Owner's principal residence. C. In order to maintain and preserve the Property as housing affordable to eligible [very Iow-, Iow-, or moderate-]income purchasers, it is necessary to restrict the use and resale of the Property through imposition of the occupancy and resale restrictions set forth herein. These restrictions are intended to prevent initial and subsequent purchasers from using the Property for purposes incompatible with the Program and realizing unwarranted gains from sales of the Property at unrestricted prices. The terms and conditions of this Agreement are intended to provide the necessary occupancy and resale restrictions to ensure that the Property is used, maintained, and preserved as housing affordable to eligible [very Iow-, Iow-, or moderate-]income purchasers. To further serve the purposes of the Program, it is necessary that the City be granted an option to purchase the property so that the property may be resold by the City to an eligible household. D. The Property constitutes a valuable community resource by providing decent, safe, and sanitary housing to persons and families of [very Iow, Iow, or moderate] income who otherwise would be unable to afford such housing. To protect and preserve this resource it is necessary, proper, and in the public interest for the City to administer occupancy and resale controls consistent with the Program and the Regulations by means of this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the substantial economic benefits inuring to Owner and the public purposes to be achieved under the Program, Owner and City hereby agree as follows: 1. Definitions. a. "Affordable Unit Cost" shall be as defined in the Regulations, as follows: "Owner-occupied units are deemed affordable units if the sales price results in annual housing costs that do not exceed 35% of maximum income level for very- Iow-, Iow-, and moderate-income households, adjusted for household size and as defined below." b. "Area [Very Low, Low, or Moderate] Income for Alameda County" means those income and eligibility levels determined, updated, and published each year by the California Department of Housing and Community Development, based on Alameda County median income levels, adjusted for household size. c. "Persons and families of [very Iow, Iow, or moderate] income" means persons and families whose income does not exceed [fifty percent (50%); eighty percent (80%); or one hundred twenty percent (120%)] of the Area Median Income for Alameda County, as adjusted for household size. 204945.4 --2-- DRAFT: December 15, 2002 d. Persons and families meeting the definition set forth in Paragraph l(b) above shall be referred to as "Eligible Households." 2. Program Requirements. a. Affordability Restrictions. Owner hereby covenants and agrees that during the term of this Agreement all of the requirements and restrictions of this Agreement shall apply, and the Property shall be sold or otherwise transferred only pursuant to the terms and conditions of this Agreement and only to (i) Eligible Households at a price not to exceed the Adjusted Resale Price, as defined in Paragraph 5, (ii) the City pursuant to Paragraph 3, or (iii) a permitted transferee pursuant to Paragraph 9. b. Disclosure. DURING THE TERM OF THIS AGREEMENT THERE SHALL BE NO SALE OR OTHER TRANSFER OF THE PROPERTY WITHOUT THE WRITTEN CERTIFICATION BY THE CITY THAT THE TRANSFEREE QUALIFIES AS AN ELIGIBLE HOUSEHOLD AND THAT THE PROPERTY IS BEING TRANSFERRED AT A PRICE NOT TO EXCEED THE ADJUSTED RESALE PRICE, WHICH IS CAPPED AT THE AFFORDABLE UNIT COST AS DEFINED IN PARAGRAPH 1 a. ANY SALE OR OTHER TRANSFER OF THE PROPERTY IN VIOLATION OF THIS COVENANT SHALL BE VOID. c. Principal Residence Requirement. OWNER COVENANTS AND AGREES THAT HE/SHE/THEY SHALL OCCUPY THE PROPERTY AS HIS/HER/THEIR PRINCIPAL RESIDENCE FOR THE DURATION OF HIS/HER/THEIR OWNERSHIP AND SHALL NOT RENT OR LEASE THE PROPERTY OR PORTION THEREOF DURING THE TERM OF THIS AGREEMENT. Without limiting the generality of the foregoing, any absence from the Property by Owner for a period of ninety (90) or more days shall be deemed an abandonment of the Property as the principal residence of Owner in violation of the conditions of this Paragraph. Upon request by the City made from time to time, the Owner of the Property shall submit an affidavit to the City certifying that the Property is the Owner's principal residence and provide such documents and other evidence as may be requested to verify Owner's compliance with this requirement. Abandonment of the Property shall constitute an Option Event (as defined in Paragraph $.c below) and shall entitle the City to exercise its Option to purchase the Property. d. Hazard and Liability Insurance. At all times during the term hereof, Owner shall keep the improvements and personal property now existing or hereafter erected on the Property insured against loss by fire, vandalism and malicious mischief by a policy of standard fire and extended all-risk insurance. The policy shall be written on a full replacement value basis and shall name Beneficiary as loss payee. Upon request Owner shall provide to City certificates evidencing carriage of the insurance policies required by this Section. 3. Option to Purchase. a. Grant of Option to Purchase. Owner hereby grants to the City an option ("Option") to purchase all of Owner's right, title and interest in and to the Property upon the occurrence of an Option Event (defined in Paragraph $.c below), subject to the terms and conditions contained herein. 204945.4 -3-- DRAFT: December 15, 2002 b. Assignment of the Option. The City may assign the Option to another government entity, a non-profit affordable housing provider or a person or family that qualifies as an Eligible Household. The City's assignment of the Option shall not extend any time limits contained herein with respect to the exercise period of the Option or the period within which the Property must be purchased. c. Events Giving Rise to Right to Exercise Option. The City shall have the right to exercise its Option upon the occurrence of any of the following events (each, an "Option Event"): Receipt of a Notice of Intent to Transfer (defined in Paragraph 3.d.i below); ii. Any actual, attempted or pending sale, conveyance, transfer, lease or other attempted disposition of the Property or of any estate or interest therein, except as provided in Paragraph 10 below; iii. Any actual, attempted or pending encumbrance of the Property, including without limitation by way of mortgage or deed of trust,or by judgment, mechanics, tax or other lien, except as provided in Paragraph 9 below; iv. Recordation of a notice of default and/or notice of sale pursuant to California Civil Code section 2924 (or successor provisions) under any deed of trust or mortgage with a power of sale encumbering the Property; v. Commencement of a judicial foreclosure proceeding regarding the Property; vi. Execution by Owner of any deed in lieu of foreclosure transferring ownership of the Property; • vii. Commencement of a proceeding or action in bankruptcy, whether voluntary or involuntary, pursuant to Title 11 of the United States Code or other bankruptcy statute, or any other insolvency, reorganization, arrangement, assignment for the benefit of creditors, receivership or trusteeship, concerning the Owner; or viii. Any violation by Owner of any provision of this Agreement including, without limitation, the conditions set forth in Paragraph 2 above. d. Method of Exercising the Option. Notice of Intent to Transfer. If Owner desires to sell, convey, transfer(other than pursuant to Paragraph 9), lease, encumber (other than pursuant to Paragraph 10) or otherwise dispose of the Property or of any estate or interest therein, no less than 45 days prior to the date of such proposed sale, conveyance, transfer, lease, encumbrance or disposition, Owner shall notify City in writing to that effect (the "Notice of Intent to Transfer"). The Notice of Intent to Transfer shall be in substantially the form attached hereto as Exhibit B. In the case of a proposed sale of the Property to an identified prospective purchaser, the Owner shall submit to the City,together with the Notice of Intent 204945.4 0 —4— DRAFT: December 15, 2002 to Transfer, a copy of the prOspective purchaser's income certification, a list of all assets owned by the prospective purchaser, and other financial information reasonably requested by City along with the income certification to be provided to any lender making a loan to the prospective purchaser. The City may require documentation evidencing and supporting the income and other financial information contained in the certifications. ii. Notice of Exercise. Upon the occurrence of any Option Event, the City may exercise its Option by delivering notice, pursuant to Paragraph 16 and within the time period specified in Paragraph 3(d)(iv), to Owner of City's intent to exercise such Option pursuant to the terms of this Agreement ("Notice of Exercise"). The Notice of Exercise may be in the form attached hereto and incorporated herein as Exhibit C, or in such other form as the City may from time to time adopt. If the Option Event relates to the potential foreclosure of a mortgage under Paragraphs 3.c.iv, 3.c.v, or 3.c.vi, then the City shall also deliver the Notice of Exercise to the mortgagee or beneficiary under such mortgage, at such mortgagee's or beneficiary's address of record in the Office of the Recorder of Alameda County. iii. Notice of Consent to Transfer. If the City does not exercise the Option, it may give its consent to the occurrence of the Option Event ("Consent to Transfer"). If the Option Event involves a proposed sale of the Property to a prospective purchaser, the City's consent shall be conditioned upon (i) the proposed purchaser's qualification as an Eligible Household; (ii) the sale of the Property at a price not to exceed the Adjusted Resale Price; (iii) the prOposed purchaser's execution of a Disclosure Statement in the form attached hereto as Exhibit F or such other form or forms as may be promulgated by the City; and (iv) the proposed purchaser's assumption of Owner's duties and obligations under this Agreement pursuant to a written assumption agreement in a form acceptable to City, or execution of an agreement substantially similar to this Agreement, within thirty (30) days after the Consent to Transfer has been delivered to Owner and recordation of such assumption agreement or substitute agreement. SELLER SHALL PAY REAL ESTATE COMMISSIONS, IF ANY, WHICH SHALL NOT TO EXCEED 6% OF THE ACTUAL SALES PRICE. If the prospective purchaser (i) fails to qualify as an Eligible Household, (ii) fails to execute and deliver the Disclosure Statement to the City, or (iii) fails to execute and deliver to the City an assumption agreement or an agreement substantially similar to this Agreement within such thirty (30) day period, then the Consent to Transfer shall expire and the City may, at its option, either notify Owner of the disqualification, .thereby entitling Owner to locate another purchaser who qualifies as Eligible Household, or exercise the Option, as if no Consent to Transfer had been delivered. iv. Time Period for Notice. The City shall deliver a Consent to Transfer, if applicable, not later than thirty (30) days after the date that it receives notification of an Option Event. The City shall deliver a Notice of Exercise, if applicable, on or before the date which is the later to occur of the following: (i) thirty (30) days after the date that the City receives notification of an Option Event or (ii) fifteen (15) days after a Consent to Transfer has expired. For purposes of computing commencement of the delivery periods, the City shall be deemed to have received notification of an Option Event on the date of delivery of a Notice of Intent to Transfer, pursuant to the terms of Paragraph 16 below or on the date it actually receives notice of default, summons and complaint or other pleading, or other writing specifically stating that an Option Event has occurred. The City shall have no obligation to deliver a Notice of Exercise or Consent to Transfer, and the 204945.4 --5-- DRAFT: December 15, 2002 applicable time period for exercise of the Option shall not commence to run, unless and until the City has received notification of an Option Event in the manner specified in this subparagraph. If there is a stay or injunction imposed by court order precluding the City from delivering its Consent to Transfer or Notice of Exercise within the applicable time period, then the running of such period shall cease until such time as the stay is lifted or the injunction is dissolved and the City has been given written notice thereof, at which time the period for delivery of a Consent to Transfer or Notice of Exercise shall again begin to run. v. Notice of Abandonment. If the City fails to deliver a Notice of Exercise or Consent to Transfer within the time periods set forth in paragraph 3.d.iv, upon request by Owner, the City shall cause to be filed for recordation in the Office of the Recorder of Alameda County, a notice of abandonment, which shall declare that the provisions of the Option are no longer applicable to the Property. Unless Owner requests recordation of notice of abandonment within :~0 days of the City's failure to deliver Notice of Exercise or Consent to Transfer, the City shall have no obligation to record the notice of abandonment. Upon recordation of a notice of abandonment, the Option shall terminate and have no further force and effect. If the City fails to record a notice of abandonment, the sole remedy of Owner shall be to obtain a judicial order instructing prompt recordation of such a notice. vi. Right to Reinstatement. If the Option Event is the recordation of a notice of default, then the City shall be deemed to be Owner's successor in interest under California Civil Code Section 2924c (or successor section) solely for purposes of reinstatement of any mortgage on the Property that has led to the recordation of the notice of default. As Owner's deemed successor in interest, the City shall be entitled to pay all amounts of principal, interest, taxes, assessments, homeowners' association fees, insurance premiums, advances, costs, attorneys' fees and expenses required to cure the default. If the City exercises the Option, then any and all amounts paid by the City pursuant to this Paragraph shall be treated as Adjustments to the Base Resale Price for the Property, as defined in Paragraph 5 below. vii. Inspection of Property. After receiving a Notice of Intent to transfer or delivering a Notice of Exercise, the City shall be entitled to inspect the Property one or more times prior to the close of escrow to determine the amount of any Adjustments to the Base Resale Price. Before inspecting the Property, the City shall give Owner not less than forty-eight (48) hours written notice of the date, time and expected duration of the inspection. The inspection shall be conducted between the hours of 9:00 a.m. and 5:00 p.m., Monday through Friday, excluding court holidays, unless the parties mutually agree in writing to another date and time. Owner shall make the Property available for inspection on the date and at the time specified in the City's request for inspection. viii. Escrow. Promptly after delivering a Notice of Exercise, the City shall open an escrow account for its purchase of the Property. Close of escrow shall take place on such date which is the later to occur of the following, (a) ninety (90) days after a Notice of Exercise has been delivered, or (b) ten (10) days after Owner has performed all acts and executed all documents required for close of escrow. Prior to the close of escrow, the City shall deposit into escrow with a title company of City's choosing, the Adjusted Resale Price as defined in Paragraph 5 below and all escrow fees and closing costs to be paid by City. Commissions (not to exceed 6% of the actual sales price), closing costs and 204945.4 --6-- DRAFT: December 15, 2002 title insurance shall be paid pursuant to the custom and practice in the County of Alameda at the time of the opening of escrow, or as may otherwise be provided by mutual agreement. Owner agrees to perform all acts and execute all documents reasonably necessary to effectuate the close of escrow and transfer of the Property to the City. ix. Proceeds of Escrow; Removal of Exceptions to Title. Prior to close of escrow, Owner shall cause the removal of all exceptions to title to the Property that were recorded after the Effective Date with the exception of (i) taxes for the fiscal year in which the escrow for this transaction closes, which taxes shall be prorated as between Owner and City as of the date of close of escrow; (ii) quasi-public utility, public alley, public street easements, and rights of way of record, and (iii) such other liens, encumbrances, reservations and restrictions as may be approved in writing by City ("Permitted Exceptions"). The purchase price deposited into escrow by the City shall be applied first to the payment of any and all Permitted Encumbrances (as defined in Paragraph 10) recorded against the Property in order of lien priority, and thereafter to the payment of Owner's share of escrow fees and closing costs. Any amounts remaining after the purchase price has been so applied, if any, shall be paid to Owner upon the close of escrow. If the purchase price is insufficient to satisfy all liens and encumbrances recorded against the Property, the Owner shall deposit into escrow such additional sums as may be required to remove said liens and encumbrances. In the event that the City agrees to proceed with close of escrow prior to the date that Owner has caused all exceptions to title recorded after the Effective Date other than Permitted Exceptions to be removed, then Owner shall indemnify, defend and hold City harmless from any and all costs expenses or liabilities (including attorneys' fees) incurred or suffered by City that relate to such exceptions and their removal as exceptions to title to the Property. 4. Base Resale Price. Prior to adjustment pursuant to Paragraph 5 the base resale price ("Base Resale Price") of the Property shall be the lowest of: a. Median Income. The'original price ("Base Price") paid by Owner for acquisition of the Property pursuant to the Program, increased (but not decreased) by an amount, if any, equal to the Base Price multiplied by the percentage increase in the median household income ("Median Income") for Alameda County published by the California Department of Housing and Community Development, Division of Housing Policy Development, between the Effective Date and the date that the City receives notification of an Option Event; or b. Fair Market Value. The fair market value of the Property as determined by an appraiser selected and paid for by Owner and approved in writing by the City. To compute the Base Resale Price, the City may use the Base Resale Price Worksheet attached as Exhibit D hereto, or such other form as the City may from time to time adopt. 5. Adjustments to Base Resale Price. Subject to the Affordable Unit Cost restriction described in subparagraph (d) below, the Base Resale Price shall be increased or decreased, as applicable, by the following adjustment factors ("Adjustment"): 204945.4 --7m DRAFT: December 15, 2002 a. Capital Improvements. An increase for capital improvements made to the Property, but only if the amount of such improvements has been previously approved in writing by the City after Owner has submitted original written documentation of the cost to the City for verification. The amount of the Adjustment shall equal the original cost of any such capital improvements. A "capital improvement" for the purposes of this section is an upgrade to an existing interior or exterior component, such as replacing linoleum with wood flooring or the addition of built in shelving or recessed lighting. A "capital improvement" does not include regular or deferred maintenance such as roof replacement or plumbing or electrical replacement or repair. b. Damages. A decrease by the amount necessary to repair damage to the Property, if any, and to place the Property into saleable condition as reasonably determined by the City upon City's exercise of its Option under Section 3.d, including, without limitation, amounts attributed to cleaning; painting; replacing worn carpeting and draperies; making necessary structural, mechanical, electrical and plumbing repairs; and repairing or replacing built-in appliances and fixtures. Owner hereby covenants to, at Owner's expense, maintain the Property in the same condition as in existence on the date of City's Notice of Exercise, reasonable wear and tear excepted. c. Adjusted Resale Price Not to Exceed Affordable Unit Cost. The Base Resale Price as adjusted, is hereinafter referred to as the "Adjusted Resale Price." Notwithstanding any other provision hereof to the contrary, in no event shall the Adjusted Resale Price exceed the Affordable Unit Cost or the market value of the property, whichever is lesS. 6. Priority and Effectiveness of the Option. a. Recordation. This Agreement shall be recorded in the Office of the Recorder of the County of Alameda on or as soon as practicable after the Effective Date. The Option shall have priority over any subsequent sale, conveyance, transfer, lease or other disposition or encumbrance of the Property, or of any estate or interest therein, and in the event of exercise of the Option by City, the City shall take the Property subject only to Permitted Exceptions. Except as otherwise provided in Paragraph 7.a, the exercise of the Option by the City at any time and from time to time shall not extinguish the Option or cause a merger of the Option into any estate or other interest in the Property, and the Option shall continue to exist and be effective with respect to the Property against any and all subsequent owners in accordance with the terms and conditions hereof. b. Request for Notice of Default. The City shall file a Request for Notice of Default for recordation in the Office of the Recorder of the County 'of Alameda promptly upon execution of this Agreement (see Exhibit E). 7. Survival of Option Upon Transfer. a. In General. The City's right to exercise the Option shall survive any transfer of the Property by Owner. Each transferee, assignee or purchaser of the Property during the term hereof shall be required to execute an agreement substantially in the form 204945.4 --8-- DRAFT: December 15, 2002 of this Agreement, provided that the term of any such agreement shall be for the duration of the term hereof as of the date of any such transfer, assignment or sale. The Option may be exercised against the Property throughout the term hereof, regardless of whether the Property is owned, possessed or occupied by Owner or any successor, transferee, assignee, heir, executor, or administrator of Owner, regardless of household income (if applicable) including a debtor-in-possession, debtor or trustee pursuant to Title 1 1 of the United States Code. Notwithstanding the foregoing, the Option shall not survive (i) the sale and transfer of the Property to a third party purchaser pursuant to a judicial or non-judicial foreclosure or a deed-in-lieu of foreclosure under a power of sale contained in a mortgage or deed of trust held by an institutional lender, provided that the City has received timely notice of such Option Event and has failed to either reinstate said mortgage or deed of trust or exercise its Option, or (ii) the recording of an instrument conveying Owner's interest in the Property to the City, or its assignee, provided the conveyance is in accordance with the terms of this Agreement. b. HUD Insured Mortgage. If Owner has acquired the Property by a mortgage insured by the Secretary of the United States Department of Housing and Urban Development, and a notice of default has been recorded pursuant to California Civil Code Section 2924 (or successor provisions), then this Option shall automatically terminate if title to the Property is transferred by foreclosure or deed-in-lieu of foreclosure, or if the insured mortgage is assigned to the Secretary. 8. Voidable Transfers. As long as the Option has not been abandoned pursuant to Paragraph 3.d.v, any actual or attempted sale, conveyance, transfer or other disposition of the Property, or of any estate or interest therein, in violation of the terms and conditions of this Agreement, shall be voidable at the election of the City. 9. Permitted Transfers. Provided that the transferee assumes, within 30 days of a written request by the City, all of Owner's duties and obligations under this Agreement pursuant to a written assumption agreement in a form acceptable to City, or at City's election, execution of an agreement substantially similar to this Agreement, the following transfers ("Permitted Transfers") of title to the Property, or of any estate or interest therein, shall not be subject to the City's prior approval, shall not trigger the exercise of the Option, and shall not be considered Option Events: (a) a good-faith transfer by gift, devise or inheritance to Owner's spouse or issue; (b) a taking of title by a surviving joint tenant; (c) a court-ordered transfer of title to a spouse as part of a divorce or dissolution proceeding; (d) a transfer by Owner into an inter vivos trust in which the Owner is a beneficiary and the Owner continues to occupy the property as his/her primary residence; (e) an acquisition of title, or of any interest therein, in conjunction with marriage; or (f) any good faith transfer to an Eligible Household. Notwithstanding any Permitted Transfer, the Option shall remain effective with respect to the Property for the duration of the term hereof. 10. Permitted Encumbrances and Refinancing. This Option shall not become exercisable as the result of Owner's encumbering the Property for the purpose of securing financing to purchase the Property pursuant to the Program, to refinance indebtedness incurred to purchase the Property pursuant to the Program, or to make necessary repairs to the Property in an amount approved by City pursuant to Paragraph 5a ("Permitted Encumbrances"). The maximum aggregate amount of such encumbrances outstanding at 204945.4 --9m DRAFT: December 15, 2002 any time (the "Permitted Encumbrance Amount") shall not exceed an amount equal to ninety percent (90%) of the Base Resale Price calculated as provided in Paragraph 4. The Permitted Encumbrance Amount shall be calculated as if the City had received notification of an Option Event on the earlier of (a) the date on which the deed of trust or mortgage securing the indebtedness is filed for record in the Office of the Recorder of the County of Alameda, or (b) the date the City receives Notice of Intent to Transfer pursuant to Paragraph 3.d.i above. Owner hereby covenants and agrees that he/she/they shall use his/her/their best efforts to ensure that any deed of trust or other agreement encumbering the property shall include provisions providing for notice to be delivered to City of any default thereunder and for City's right to cure such default at City's election. 1 1. Obligation of Owner After Option Abandonment. If the City records a notice of abandonment of the Option, pursuant to paragraph 3.d.v, then the Property may be sold by Owner to a third party without restriction as to price; however, upon such sale, Owner shall pay to City an amount ("City's Share") equal to __ percent (__%) of the difference between (a) the actual sales price net of reasonable and customary real estate commissions paid (such commissions not to exceed six percent (6%) of the actual sales price), and (b) the Adjusted Resale Price. The City's Share shall be paid to the City concurrently with close of escrow on the sale of the Property, or upon receipt by Owner of the sale price for the Property, whichever shall first occur. 12. Limits on Liability. In no event shall the City become liable or obligated in any manner to Owner by reason of the assignment of this Agreement or the Option, nor shall City be in any way liable or obligated to Owner for any failure of the City's assignee to consummate a purchase of the Property or to comply with the terms of this Agreement or the Option, or any escrow instructions or agreement for the purchase of the Property. 13. Insurance Proceeds and Condemnation Award. In the event the Property is destroyed and insurance proceeds are distributed to Owner instead of being used to rebuild the Property, or, in the event of condemnation, if the insurance proceeds or award in condemnation are distributed to Owner, any surplus of proceeds remaining after payment of the senior liens and encumbrances on the Property shall be distributed as follows, subject to the rights of any institutional lender. First, that portion of the surplus up to, but not to exceed, the net amount Owner would have received pursuant to Paragraph 3.d.ix had the City exercised its Option on the date of the destruction or on the condemnation valuation date shall be distributed to Owner, and, second, the remaining surplus, if any, shall be distributed to the City. 14. Effective Date. The rights and obligations of the City and Owner set forth in this Agreement shall be effective as of the Effective Date. 15. Term of Agreement and Option. The restrictions contained herein and the City's option to purchase the Property shall continue for a period of fifty-five (55) years commencing on the Effective Date. Notwithstanding anything to the contrary in the foregoing, the Agreement shall remain in effect until the first transfer on or after the termination of the restrictions and option to purchase pursuant to this paragraph. Upon such sale, Owner shall pay to City an amount ("City's Share") equal to __ percent (__%) of the difference between (a) the actual sales price net of reasonable and customary real 204945.4 --10-- DRAFT: December 15, 2002 estate commissions paid (such commissions not to exceed six percent (6%) of the actual sales price), and (b) the Adjusted Resale Price (as set forth in paragraph 5 above) on the date of the termination of the restrictions and option to purchase pursuant to this paragraph. The City's Share shall be paid to the City concurrently with close of escrow on the sale of the Property, or upon receipt by Owner of the sale price for the Property, whichever shall first occur. Following completion of a sale in compliance with this provision, this Agreement shall terminate. 16. Notices. Except as otherwise specified in this Agreement, all notices to be sent pursuant to this Agreement shall be made in writing, and sent to the Parties at their respective addresses specified below or to such other address as a Party may designate by written notice delivered to the other Party in accordance with this Section. All such notices shall be sent by: (a) personal delivery, in which case notice shall be deemed delivered upon receipt; (b) certified or registered mail, return receipt requested, in which case notice shall be deemed delivered two (2) business days after deposit, postage prepaid in the United States mail; (c) nationally recognized overnight courier, in which case notice shall be deemed delivered one (1) day after deposit with such courier; or (d) facsimile transmission, in which case notice shall be deemed delivered on transmittal, provided that a transmission report is generated reflecting the accurate transmission thereof. City: City of Dublin, 100 Civic Center Dublin, California 94568 Attn: City Manager Owner: At the address of the Property 17. Remedies Upon Breach. a. Specific Performance. Owner acknowledges that any breach in the performance of its obligations under this Agreement shall cause irreparable harm to the City. Owner agrees that the City is entitled to equitable relief in the form of specific performance upon its exercise of the Option, and that an award of damages shall not be adequate to compensate the City for Owner's failure to perform according to the terms of this Agreement. b. Other Remedies. City shall have all of the remedies provided for at law or equity. 18. General Provisions. 204945.4 --1 1-- DRAFT: December 15, 2002 a. Attorneys' Fees. If either party initiates legal proceedings to interpret or enforce its rights under this Agreement, the prevailing party in such action shall be entitled to an award of reasonable attorneys' fees and costs in additions to any other recovery to which it is entitled under this Agreement. b. No Joint Venture; No Third-Party Beneficiary. No joint venture or other partnership exists or is created between the Parties by virtue of this Agreement. Except as expressly stated herein, this Agreement does not benefit any third party. c. Successors; Assignment. This Agreement shall inure to the benefit of and shall be binding upon the Parties to this Agreement and their respective heirs, executors, administrators, successors and assigns. City shall have the right to assign all of its rights and obligations under this Agreement without the consent of Owner. d. Entire Agreement; Amendment. This Agreement constitutes the entire agreement of the Parties with respect to the subject matter hereof, and supersedes any and all other prior negotiations, correspondence, understandings and agreements with respect thereto. There are no representations, promises, agreements or other understandings between the Parties relating to the subject matter of this Agreement that are not expressed herein. This Agreement may be modified only by an instrument in writing executed by the Parties or their respective successors in interest. e. Survival; No Merger. All of the terms, provisions, representations, warranties and covenants of the Parties under this Agreement shall survive the close of escrow of any sale of the Property and shall not be merged in any deed transferring the Property. f. Authority And Execution. Each Party represents and warrants that it has full power and authority to enter into this Agreement and to undertake all of its obligations hereunder, that each person executing this Agreement on its behalf is duly and validly authorized to do so. g. Severability. The invalidity or unenforceability of any term or provision of this Agreement shall not impair or affect the remainder of this Agreement, and the remaining terms and provisions hereof shall not be invalidated but shall remain in full force and effect. h. Waiver; Modification. No.waiver or modification of this Agreement or any covenant, condition, or limitation herein contained shall be valid unless in writing and duly executed by the Party to be charged therewith. No evidence or any waiver or modification shall be offered or received in evidence in any proceeding, arbitration, or litigation between the Parties arising out of or affecting this Agreement or the rights or obligations of any Party hereunder, unless such waiver or modification is in writing and duly executed as aforesaid. The provisions of this section may not be waived except as herein set forth. A waiver or breach of any covenant, condition or provision of this Agreement shall not be deemed a waiver of any other covenant, condition or provision hereof. 204945.4 --12-- DRAFT: December 15, 2002 i. Construction. The section headings and captions used in this Agreement are for convenience of reference only and shall not modify, define, limit or amplify any of the terms or provisions hereof. This Agreement shall not be construed as if it had been prepared by one of the Parties, but rather as if both Parties have prepared it. j. Governing Law. This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of California. k. Time of the Essence. Time is of the essence in this Agreement as to each provision in which time is an element of performance. I. Further Assurances. Each Party will, upon reasonable request of the other Party, execute, acknowledge, and deliver, or cause to be executed, acknowledged, and delivered, such further instruments and documents as may be reasonably necessary in order to fulfill the intents and purposes of this Agreement. m. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and all which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above. OWNER(S): CITY: CITY OF DUBLIN By: Its: ATTEST: 204945.4 --1 3-- DRAFT: December 15, 2002 City Clerk APPROVED ASTO FORM: City Attorney 204945.4 14 DRAFT: December 15, 2002 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California '~ ss, County of On , before me, Date Name and Title of Officer (e.g., "Jane Doe, Notary Public") personally appeared Name(s) of Signer(s) ' [] personally known to me [] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(les), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Place Notary Seal Above Signature of Notary Public OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Document Title or Type of Document: Document Date: Number of Pages: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer Signer's Name: ~ ~ Individual Top of thumb here [] Corporate Officer-- Title(s): [] Partner--[] Limited [] General ~ Attorney in Fact [] Trustee [] Guardian or Conservator [] Other: Signer Is Representing: © 1999 National Notary Association · 9350 De Soto Ave., RO. Box 2402 · Chatsworth, CA 91313-2402 · www. nationalnotary.org Prod. No. 5907Reorder: Call Toll-Free 1-800-876-6827 CERTIFICATE OF ACCEPTANCE (Pursuant to Government Code §27281) This is to certify that the interest in real property conveyed by the Resale Restriction Agreement and Option to Purchase dated from to the City of Dublin, a California municipal corporation, is hereby accepted by the undersigned office or agent on behalf of the City of Dublin pursuant to authority conferred by the Resolution No. dated ; and the grantee consents to recordation thereof by its duly authorized officer. Dated: By: Its: Attest: City Clerk 204945.4 -1-- DRAFT: December 15, 2002 EXHIBIT A Legal Description [To be inserted] 204945.4 --lin DRAFT: December 15, 2002 EXHIBIT B FORM: NOTICE OF INTENT TO TRANSFER VIA CERTIFIED MAIL - RETURN RECEIPT REQUESTED To: City of Dublin 100 Civic Center Dublin, California Attn: City Manager Date: Re: Notice of Intent to Transfer Pursuant to the terms of the Resale Restriction Agreement and Option to Purchase, dated __., the undersigned Owner(s), , hereby give(s) notice of his/her/their intent to transfer the property located at ., Dublin, California (the "Property"). Owner may be contacted at the Property or at the following address: Owner's daytime telephone number is (__) [If appficable: The proposed transfer of the Property is to the following person(s): Name: Address: Telephone: ( ) ] The proposed transfer is (check one): Sale Other Specify: Owner(s) signature(s): 204945.4 -1-- DRAFT: December 15, 2002 EXHIBIT C FORM: NOTICE OF EXERCISE Date: To: Owner or Transferee Address Re: Notice of Exercise The City of Dublin ("City") hereby gives notice that it is exercising its option to purchase the real property located at ., Dublin, California. The option has been granted to the City pursuant to the Resale Restriction Agreement and Option to Purchase between Owner and the City dated and recorded on as Instrument No. [The City has assigned its option to purchase the real property to .] An escrow for the purchase will be opened with the First American Title Company. City of Dublin By: Its: 204945.4 --1-- DRAFT: December 15, 2002 EXHIBIT D INCLUSlONARY ZONING HOMEOWNERSHIP PROGRAM INCLUSIONARY ZONING BASE RESALE PRICE WORKSHEET Date: Owner: Address: Purchase Price ("Base Price"): Date of Purchase: Years Owned: years CALCULATION BASED ON INCREASE IN MEDIAN INCOME*** Present Median Income*: $ Date of Notice of Option Event: Family of four, County of Alameda (at time of sale of unit) Original Median IncOme*: $ Effective Date: Family of four, County of Alameda (at time of purchase of unit) Increase in Median Income: $. divided by Original Median Income = Percentage increase in median income: __ * Median household incomes for Alameda County are published annually by the California Department of Housing and Community Development. Base Price $. multiplied by the .__% (percentage increase in median income). (i.e. unit price at the time of purchase) = $ Base Resale Price The Base Resale Price is the maximum gross allowable sales prices (subject to any adjustments to the base resale prices pursuant to section 5 of this agreement). Based on the above, the base resale price as of this date, , is: I By: 204945.4 --1-- DRAFT: December 15, 2002 EXHIBIT E REQUEST FOR NOTICE OF DEFAULT Order No. Escrow No. Loan No. WHEN RECORDED MAIL TO: CITY OF DUBLIN Dublin, California Attn: (Space Above This Line For Recorder's Use Only) REQUEST FOR NOTICE UNDER SECTION 2924b CIVIL CODE In accordance with Section 2924b, Civil Code, request is hereby made that a copy of any Notice of Default and a copy of any Notice of Sale under the Deed of Trust recorded as Instrument No. on , __, in the Official Records of Alameda County, California, and describing land therein as: executed by , as Trustor, in which is named as Beneficiary, and , as Trustee, be mailed to the City of Dublin, , Dublin, California , Attn: By: NOTICE: A COPY OF ANY NOTICE OF DEFAULT AND OF ANY NOTICE OF SALE WILL BE SENT ONLY TO THE ADDRESS CONTAINED IN THIS RECORDED REQUEST. IF YOUR ADDRESS CHANGES, A NEW REQUEST MUST BE RECORED. STATE OF CALIFORNIA ) ) COUNTY OF ) On before me, , a Notary Public in and for said county and state, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature (This area for official notarial seal) 204945.4 --1-- DRAFT: December 15, 2002 EXHIBIT F DISCLOSURE STATEMENT THERE ARE RESTRICTIONS ON THE SALE OF THE PROPERTY YOU ARE BUYING. EXCEPT FOR A TRANSFER TO THE CITY FOLLOWING CITY'S EXERCISE OF ITS OPTION TO PURCHASE, THIS PROPERTY MAY ONLY BE SOLD TO AN "ELIGIBLE HOUSEHOLD" AT A PRICE NOT TO EXCEED THE ADJUSTED RESALE PRICE WHICH IS CAPPED AT AN "AFFORDABLE HOUSING COST." THIS MEANS THAT YOU MAY NOT SELL THE PROPERTY FOR MARKET VALUE TO WHOMEVER YOU LIKE. THESE RESTRICTIONS WILL BE IN EFFECT UNTIL ANY SALE OF THE PROPERTY IN VIOLATION OF THE RESTRICTIONS, SHALL BE VOIDABLE AT THE ELECTION OF THE CITY. TO DETERMINE WHO AN ELIGIBLE HOUSEHOLD IS, AND WHAT THE ADJUSTED RESALE PRICE AND AFFORDABLE HOUSING COST ARE, YOU SHOULD CONTACT THE OF THE CITY OF DUBLIN. YOU SHOULD ALSO READ THE RESALE RESTRICTION AGREEMENT AND OPTION TO PURCHASE RECORDED AGAINST THE PROPERTY. YOU MAY OBTAIN A COPY FROM THE CITY OF DUBLIN OR FROM THE ESCROW COMPANY. I -lAVE READ THE FOREGOING AND I UNDERSTAND WHAT IT MEANS. BUYER BUYER 204945.4 -1-- DRAFT: December 15, 2002