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1988-080-Amending Market Price Program Deed RestrictionsRESOLUTION NO. 1988 -80 A RESOLUTION OF THE TOWN OF LOS GATOS AMENDING THE BELOW MARKET PRICE PROGRAM DEED RESTRICTIONS RESOLVED, by the Town Council of the Town of Los Gatos, that the Town Council adopts the attached amended deed restrictions to be recorded on the Below Market Price Housing units and Council furthermore authorizes the Town Manager to execute said deed restrictions in the name and in behalf of the Town of Los Gatos. BE IT FURTHER RESOLVED that this resolution rescinds resolution #1981 -229. PASSED AND ADOPTED at a regular meeting of the Town Council of the Town of Los Gatos held on the 16 day of May , 1988, by the following vote: AYES: COUNCILMEMBERS Joanne Benjamin Thomas J Ferrito Robert L Hamilton, Brent N. Ventura and Mayor Eric D Carlson NOES: COUNCILMEMBERS ABSTAIN: COUNCILMEMBERS ABSENT: COUNCILMEMBERS SIGNED: ATTEST: CLERK OF THE TOWN OF LOS GA DEED RESTRICTIONS Subject to the following restrictions: I. Leasing An Owner of the real property conveyed hereby and any improvements thereon (hereinafter "the Premises ") is not permitted to lease, rent, sublet, or otherwise assign his /her interest in the premises, except that the premises may be leased for limited periods of time when the owner is required to live elsewhere and expects to return within one year. In order to lease under such circumstances, the Owner must be qualified within the income limits at the time of the lease under the Below Market Price ( "BMP ") Program established under Chapter 3.90 of the Town Zoning Ordinance and any subsequent amendments or recodifications thereof otherwise a sale of the property will be required. Tenants will be limited to persons whose income is below 80% of the County's Median Income as defined by the Federal Department of Housing and Urban Development and used in the administration of the Department's Section 8 Housing Program. All leases must be arranged through the Town, or its assignee or designee and the Owner must accept tenants qualified by the Town or its assignee or designee and not lease the property in excess of his /her monthly cost; furthermore, rents shall not exceed Fair Market rents established by the Federal Housing and Urban Department of Development. II. Option Whenever the Owner (as used herein "Owner" refers to Grantee and all successors in interest) of the premises shall no longer desire to own the premises, Owner shall 1 notify Town in writing that effect. Such notice sha' >e personally delivered or deposited in the United States mail, postage prepaid, first class, certified, addressed to Town Manager, Town of Los Gatos, P.O. Box 949, Los Gatos, CA. 95031. Town, or its assignee or designee, shall then have the right to exercise an option to purchase said premises, at the price set forth herein, by delivery of written notice, by personal delivery or certified mail, to the owner at any time within six months from the receipt by Town of the written notice from Owner of intent to sell or dispose of said premises. III. Right of First Refusal. Town may designate a governmental or non - profit organization to exercise its right of first refusal. Town or its designee may assign this right to an individual private buyer who meets the Town's eligibility qualifications. After exercise of the right by the Town, its assignee or designee, in the manner hereinafter prescribed, Town, its designee or assignee may assign said right to purchase to any substitute individual private buyer who meets Town's eligibility requirements and is approved by the Town; provided, that such subsequent assignment shall not extend any time limits contained herein. Any attempt to transfer title or any interest herein in violation of these covenants shall be void. IV. Price The purchase price shall be paid in cash at the close of escrow or as otherwise agreed by the parties. The purchase price of the premises shall be fixed at the lower amount arrived at via the two methods listed below. In no event shall the selling price exceed the resale price limit for the income category within which the unit was originally sold as established in Exhibit B of the Town Council 2 Resolution Specifying F )s, Procedures, and Criteria fc he Town's Below Market Price Housing Program in effect on the date that the Town is notified of the Owner's intent to sell. Method 1. Town or its designee shall have an appraisal made by an appraiser of its choice to establish the market value. Cost to be borne by the Town or its assignee or designee. The Owner may also have an appraisal made by an appraiser of Owner's choice to establish the market value; cost to be borne by Owner. If agreement cannot be reached, the average of the two appraisals shall be termed the market price. Method 2. The resale price shall be determined by adjusting the original price paid by the Owner (hereinafter referred to as the "Seller ") as follows: (A) Adding an amount, if any, to compensate for the lesser of the two percentages calculated from the following two indexes: i) any increase in the Median Income Index for Santa Clara County, as published by the United States Department of Housing and Urban Development for the years the Owner /Seller has lived in the unit. For that purpose, the Index prevailing on the date of the purchase by the Seller of the premises shall be compared with that estimated, on the date of receipt by the Town of notice of intent to sell, to be prevailing sixty (60) days subsequent to said receipt; or, ii) any increase in the cost of living as measured by the housing component of the Consumer Price Index for the San Francisco - Oakland area published by the U.S. Department of Labor, Bureau of Labor Statistics (hereinafter "the Index "). For that purpose, the Index prevailing on the date of the purchase by the selling Owner of said Premises shall be compared with the latest Index available on the date of receipt by Town of notice of intent to sell. The percentage increase in the Index, if any, shall be computed and the base price shall be increased in the same percentage; provided, however, that the price shall in no event be lower than the purchase price paid by the Seller. 3 (B) The p e calculated in the preceeding ragraph shall be increased by the value of any substantial structural or permanent fixed improvements which cannot be removed without substantial damage to the Premises or substantial or total loss of value of said improvements and by the value of any appliances, fixtures, or equipment which were originally acquired as part of the Premises by Owner; provided, that such price adjustment for replacement appliances, fixtures, or equipment shall be allowed only when the expenditure is necessitated by the non- operative or other deteriorated condition of the original appliance, fixture, or equipment. If at the time of replacement the original appliance, fixture, or equipment had in excess of twenty percent (20 %) of its original estimated useful life remaining, Owner shall document to the Town's satisfaction the condition of the appliance, fixture, or equipment which necessitated its replacement. No such price adjustment shall be made significantly in excess of the reasonable cost to replace the original appliance, fixture, or equipment with a new appliance, fixture, or equipment of comparable quality as hereinafter provided. No such adjustment shall be made except for improvements, appliances, fixtures or equipment made or installed by the selling Owner. No improvements, appliance, fixture or equipment shall be deemed substantial unless the actual initial cost thereof to the Owner exceeds one percent (1.0 %) of the purchase price paid by the Owner for the Premises; provided, that this minimum limitation shall not apply in either of the following situations: Where the expenditure was made pursuant to a mandatory assessment levied by the homeowners' association for the development in which the Premises is located, whether levied for improvements to the Premises, the common area, or related purposes. No price adjustment shall be made for any assessment which is levied for maintenance purposes or for any other purpose or improvement for which Owner would not be entitled to a price adjustment had such expenditure been made directly by and at the option of the Owner. 4 Where the expenditure was made for the replacement of appliances, fixtures, or equipment which were originally acquired as part of the Premises by Owner. No adjustments shall be made for the value of any improvements, appliances, fixtures or equipment unless the Owner shall present to the Town valid written documentation of the cost of said improvements. The value of such improvements by which the sale price shall be adjusted shall be determined as follows: (1) The value of any improvement, appliance, fixture or equipment, the original cost of which was less than Five Thousand Dollars ($5,000) shall be the depreciated value of the improvement, calculated in accordance with principles of straight -line depreciation applied to the original cost of the improvement, based upon the estimated original useful life of the improvement, appliance, fixture or equipment. (2) The value of any improvement, appliance, fixture or equipment, the original cost of which was Five Thousand Dollars ($5,000) or more, shall be the appraised market value of the improvement when considered as an addition or fixture to the premises (i.e., the amount of which said improvement enhances the market value of the premises) at the time of sale. Said value shall be determined in the same manner as the market value of the premises in Method 1 above. (3) On January 1, 1984, and every two years thereafter, regardless of the date of execution or recordation hereof, the amount of Five Thousand Dollars ($5,000) referred to in paragraphs (a) and (b) immediately above shall be automatically adjusted for the purpose of those paragraphs in the following manner. On each adjustment date the Consumer Price Index for the San Francisco - Oakland area 9 published by the U.S. f trtment of Labor, Bureau of Lat statistics ( "Index ") prevailing on January 1, 1982, shall be compared with the Index prevailing on the date of recordation of this deed. The percentage increase in the Index, if any, shall be computed and the sum of Five Thousand Dollars ($5,000) shall be increased in the same percentage. In no event shall the sum be reduced below Five Thousand Dollars ($5,000). (4) No price adjustments will be made except upon presentation to Town of written documentation of all expenditures made by Owner for which an adjustment is requested. (5) The sale price determined under paragraph (A) above, shall be adjusted by decreasing said price by an amount to compensate for deferred maintenance costs, which amount shall be determined as follows: Upon receipt of notice of Owner's intent to sell, Town or its designee shall be entitled to inspect the Premises. Town or its designee shall have an opportunity to determine whether all plumbing, electrical and heating systems are in working order; whether any violations of applicable building, plumbing, electric, fire or housing codes exist; whether all appliances which were originally furnished to Owner as part of the Premises, or any replacements thereof, are in working order; whether walls, ceilings, and floors are clear and free of holes or other defects (except for holes typical of picture hangers); whether doors, windows, screens and similar appurtenances are cracked, broken or torn; and whether carpets, drapes and similar features which were originally furnished to Owner as part of the premises, or any replacement thereof, are clean and free of holes, tears or other defects. In the event deficiencies are noted, the Town or its designee shall obtain estimates to cure the observed deficiencies. The Owner shall cure the deficiencies in a reasonable manner acceptable to Town or designee within sixty (60)days of being notified of the results of the inspection, but in no event later than close of escrow. Should Owner f to cure such deficiencies pri to the scheduled date of close of escrow, at the option of Town, its designee or assignee, escrow may be closed, title passed and moneys paid to the selling Owner subject to the condition that such funds as are necessary to pay for curing such deficiencies (based upon written estimates obtained by Town) shall be withheld from the moneys due the selling Owner and held by the escrow holder for the purpose of curing such deficiencies. Town, its designee or assignee shall cause such deficiencies to be cured and upon certification of completion of work by Town, escrow holder shall utilize such funds to pay for said work. Any remaining funds shall be paid to the selling Owner. No other payment shall be due said Owner. Regardless of which method is used, Method I or Method II, in no event shall the selling price exceed the resale price limit for the income category within which the unit was originally sold as established in Exhibit B of the Town Council Resolution Specifying Rules, Procedures, and Criteria for the Town's Below Market Price Housing Program in effect on the date that the Town is notified of the Owner's intent to sell. V. Failure to Exercise Option In no event shall Town become in any way liable to Owner, nor become obligated in any manner, by reason of the assignment of its right to purchase, nor shall Town be in any way obligated or liable to Owner for any failure of Town's assignee to consummate a purchase of the premises or to comply with the terms of any purchase and sale agreement. Until such time as the Town's right to purchase is exercised, waived, or expired, the Premises and any interest in title thereto shall not be sold, leased, rented, assigned, or otherwise transferred to any person or entity except with the express written consent of Town or its designee, which consent shall be consistent 7 with the Town's goal of creating, preserving, maintaining, and protecting housing in Los Gatos for persons of low and moderate income. This provision shall not prohibit the encumbering of title for the sole purpose of securing financing; however, in the event of foreclosure or transfer by deed in lieu of foreclosure, the provisions of Section XI of this instrument shall govern. VI. Maximum Duration of Option The provisions in this deed relating to the option of Town's and Developers' right to purchase shall terminate and become void automatically fifty -nine (59) years following the date of recordation of this deed. The provisions granting the Town an option, being for the eleemosynary purpose of providing and preserving low and moderate income housing, shall remain in effect indefinitely. VII. Escrow If the Town or its designee exercises its option to purchase the Premises, close of escrow of the purchase shall be within ninety (90) days of the opening of such escrow by either Seller or Town. The escrow shall be opened upon delivery to Seller of written notice of the exercise of the option, or as soon thereafter as possible. In the event Town decides to assign the right to purchase provided herein, Town may postpone opening of escrow until selection of such assignee, or as soon thereafter as possible, provided that the opening of the escrow shall not be postponed longer than ninety (90) days after the Owner is notified of the Town's exercise of its right to purchase. In the event Town postpones opening of escrow and is unable to select such an assignee, Town retains the right to open escrow and complete the purchase provided that such escrow is opened within said ninety (90) days and the sales transaction is completed within 180 days from the Owner's notice of intent to sell. Closing Costs and title insurance shall be paid pursuant to the custom and practice in the Town of Los Gatos at the time of the opening of the escrow. Seller shall bear the expense of providing a current written report of an inspection by a licensed Structural Pest Control Operator. All work recommended in said report to repair damage caused by infestation or infection of wood- destroying pests or organisms found, and all work to correct conditions that caused infestation or infection shall be done at the expense of the Seller. Any work to correct conditions usually deemed likely to lead to such infestation or infection, but where no evidence of infestation or infection is found with respect to such conditions, is not the responsibility of the Seller, and such work shall be done only if requested by the Buyer and at the expense of the Buyer. The Buyer shall be responsible for payment of any prepayment fees imposed by any lender by reason of the sale of the premises. VIII. Liability Limit In no event shall Town become in any way liable to Seller or become obligated in any manner, by reason of the assignment of its option to purchase, nor shall Town in any way be obligated or liable to Seller for any failure of Town's assignee to consummate a purchase of the premises or to comply with the terms of any sale agreement. IX. Nature of Restrictions The restrictions contained herein shall constitute equitable servitudes and 9 covenants which shall run with the land and be binding upon Owner(s) and all successors and assigns, and all parties having or acquiring any right, title or interest in or to any part of the Premises. Any attempt to transfer title or any interest therein in violation of these covenants shall be void. X. Exemptions The following transfers of title or interest therein are not subject to the option provisions thereof: transfer by gift, devise, or inheritance to grantee's spouse or issue; taking of title by surviving joint tenant; transfer of title to spouse as part of divorce or dissolution proceedings; acquisition of title or interest therein in conjunction with marriage. However, these covenants shall continue to run with title to the Premises following such transfers. XI. Foreclosure Owner covenants to cause to be filed for record in the County of Santa Clara a request for copy of any notice of default and of any notice of sale under any deed of trust or mortgage with power of sale encumbering the premises, pursuant to Section 2924(b) of the California Civil Code. Such request shall specify that any such notice shall be mailed to the Town Manager, Town of Los Gatos, P.O. Box 949, Los Gatos, CA., 95031. Any notice of default or sale given pursuant to Civil Code Section 2924 (b) shall constitute a notice of intent to sell hereunder, and Town may exercise its preemptive right prior to any trustee sale, judicial foreclosure sale, or transfer by deed in lieu of foreclosure. If Owner fails to file such request or notice, the Town's option to purchase shall run from the date Town obtains actual 10 knowledge of a sale or proposed sale. If Town elects not to exercise its option on such default, any surplus to which Owner may be entitled pursuant to Code of Civil Procedure Section 727 shall be paid as follows: That portion of surplus (after payment of encumbrances), if any, up to but not to exceed the net amount that Owner would have received after payment of encumbrances under the formula set forth above had Town exercised its option to purchase the property on the date of the foreclosure sale, shall be paid to Owner on the date of the foreclosure sale. The balance, if any, shall be paid to the Town. In the event of default and foreclosure, the Town, or its designee or assignee, shall have the same right as the Owner to cure defaults and redeem the Premises prior to foreclosure sale. Such redemption shall be subject to the same fees, charges and penalties which would otherwise be assessed against the Owner. Nothing herein shall be construed as creating any obligation on the part of the Town to cure any such default, nor shall this right to cure and redeem operate to extend any time limitations in the default provisions of the underlying deed of trust or mortgage. The Town, or its designee or assignee, shall be entitled to recover all costs incurred in curing any such default from the Owner. In the event that the Town, or its designee or assignee, does not elect to purchase the Premises pursuant to the provisions of this section and the Premises is sold through foreclosure, the subsequent bona fide purchaser for value shall take title to the Premises free from any and all restrictions contained in this instrument. 11 XII. Destruction or Termination of Project If (1) the project is destroyed and insurance proceeds are distributed to Owner instead of being used to rebuild; or (2) in the event of condemnation, the proceeds thereof are distributed to Owner; or (3) in the event of termination of a condominium, liquidation of the association, distribution of the assets or the association is made to the members thereof, including Owner: Any surplus of proceeds so distributed remaining after payment of encumberances on said premises shall be distributed as follows: that portion of the surplus up to but not to exceed the net amount that the Owner would have received under the formula set forth above had Town exercised its option to purchase the premises on the date of the destruction, condemnation valuation date, or liquidation shall be distributed to Owner, and the balance of such surplus, if any, shall be distributed to Town. XIII. Notices All notices required herein shall be sent to the addresses set forth after the signatures to this deed. Any party changing its address shall forthwith give written notice to the other parties herein. XIV. Disputes Any dispute over any aspect of these restrictions shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and the prevailing party shall be entitled to reasonable attorney's fees. 12 XV. Acceptance By acceptance of this deed, Owner accepts and agrees to be bound by the covenants contained herein. IN WITNESS WHEREOF, the parties hereto have set their hands on dates indicated below. Dated: Dated: 13 TOWN OF LOS GATOS MANAGER, TOWN OF LOS GATOS P.O. Box 949 LOS GATOS, CA. 95031 OWNER By: ADDRESS: