05 Staff Report - Rescinding Resolution 1988-80
DATE: TO: FROM: COUNCIL AGENDA REPORT August 5, 2004 MAYOR AND TOWN COUNCIL DEBRA J. FIGONE, TOWN MANAGER MEETING DATE: 8/16/04 ITEM NO. 5' SUBJECT: ADOPT A RESOLUTION ADOPTING A BELOW
MARKET PRICE HOUSINGPROGRAMDEED RESTRICTIONAGREEMENTFOROWNEROCCUPIED UNITSAND RESCINDING RESOLUTION 1988-80. RECOMMENDATION: Adopt a resolution adopting a Below Market Price Housing
Program Deed Restriction Agreement for Owner-Occupied Units and Rescinding Resolution 1988-80. BACKGROUND: The Town's Below Market Price Housing Program (BMP Program) allows low and
moderate income households the opportunity to become homeowners. It has a limited number of homes, typically condominiums or townhomes, which are sold at a price below the current market
value. In return for the ability to purchase a home at a below-market price, participating homebuyers agree to restrict the price at which they may resell the unit in the future. This
agreement takes the form of a Deed Restriction Agreement that is recorded on the property. DISCUSSION: DISCUSSION: The Council last adopted a standardBMP Program Deed Restriction Agreement
in 1988 (Resolution 1988-80). Since that time, changes in the housing industry and lessons learned through administering the program have caused staff to bring the attached revised Deed
Restriction Agreement to Council for its approval. The following changes have been incorporated in the attached draft (Exhibit A to Attachment 1): A. In Section 3, Transfer of Property,
it is now stated expressly that the transferee must show income eligibility in order to inherit a BMP unit. Previously, this section stated that PREPARED BY: Regina A. Fa!
Services Director N:\CSD\TCRPTS\BMP Deed Rest 2004.wpd Reviewed by: .) Assistant Town Manager 4JZ/Town Attorney __Clerk 62%Finance '&'-J.. Community Development Revised: 8/5/04
10:20 am Refonnatted: 5/30/02
PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: BELOW MARKET PRICE HOUSING PROGRAM DEED RESTRICTION AGREEMENT FOR OWNER-OCCUPIED UNITS August 5,2004 transferee must provide income data to the
Town, implying an income requirement only. B. In Section 5, Town's Purchase Option, language was added which allows the homeowner to request that the resale process be accelerated ifpossible.
This change will allow the program to accommodate homeowners to the extent possible, and ease their transition to a new home. C. In Section 9, Price Adjustments, new language regarding
the method for adjusting a resale price to include the cost of improvements has been inserted. This language is modeled on that used by the City of San Jose. The goal is to allow for
some incentive to improve BMP units, while providing a straightforward calculation for including the cost of those improvements in the resale price. D. In Section 9, Price Adjustments,
the amount of time allowed the owner to cure deferred maintenance deficiencies has been reduced from 60 days to 30 days. This change is meant to speed up the resale process, allowing
BMP applicants the ability to become new homeowners more quickly. E. Throughout the document, updates and refinements were made to the text, with the goal of creating a more useable
document, but without making any changes to the subject or policy. CONCLUSION: In order to improve the Below Market Price Housing Program, staffrecommends that Council adopt the attached
draft Resolution (Attachment 1) adopting a Below Market Price Housing Program Deed Restriction Agreement for Owner-Occupied Units and Rescinding Resolution 1988-80. ENVIRONMENTAL ASSESSMENT:
The recommended action is not a project defined under CEQA, and no further action is required. FISCAL IMPACT: Costs for administering the BMP Program are included in the Community Services
Department's operating budget. The recommended action will not affect the cost of the program. Attachments: 1. Draft Resolution of the Town Council of the Town ofLos Gatos adopting a
Below Market Price Housing Program Deed Restriction Agreement for Owner-Occupied Units and Rescinding Resolution 1988-80 (Exhibit A) Distribution: Laura Ellenberger, Housing Authority
of the County of Santa Clara
Attachment 1 RESOLUTION NO. 2004-RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF LOS GATOS. ADOPTING A BELOW MARKET PRICE HOUSING PROGRAM DEED RESTRICTION AGREEMENT FOR OWNER-OCCUPIED
UNlTS AND RESCINDING RESOLUTION 1988-80 WHEREAS, the Town ofLos Gatos Zoning Ordinance Sections 29.10.3000 through 29.10.3040 establishes a Below Market Price (BMP) Housing program to
assist low and moderate income Los Gatos citizens purchase homes at prices below market value; and, . WHEREAS, under Resolution 1988-80 the TownCouncil adopted Below Market Price Housing
Program Deed Restrictions, with the purpose ofmaintaining Below Market Price Housing units as affordable housing options for Los Gatos homeowners; and, WHEREAS, the Town Council now
wishes to adopt revised Below Market Price Housing Program Deed Restrictions. .....;. NOW, THEREFORE, BE ITRESOLVED that the Town Council ofthe Town ofLos Gatos (1) repeals Resolution
1988-80; and, (2) adopts the Below Market Price Housing Program Deed Restriction Agreement for Owner-Occupied Units attached as Exhibit A. PASSED AND ADOPTED at a meeting of the Town
Council of the Town ofLos Gatos, California, held on the day of , 2004 by the following vote: COUNCIL MErvIDERS: AYES: NAYS: ABSENT: ABSTAIN: SIGNED: 1
MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA ATTEST: CLERK OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA N:\CSD\TCRPTS\Resolutions\BMP Deed Restriction 2004 Reso.wpd 2
EXHIBIT A When Recorded Mail to: '-'..,i TOWN CLERK TOWN OF LOS GATOS· P.O. BOX 949 LOS GATOS, CA 95031 RECORDED WITHOUT FEE UNDER' GOVERNMENT CODE SECTION 6103 TOWN OF LOS GATOS BELOW
MARKET PRICE HOUSING PROGRAM DEED RESTRICTION AGREEMENT OWNER-OCCUPIED UNIT (APN NUMBER) This Deed Restriction Agreement is made this day of , 20_, by and between the Town of Los Gatos,
a municipal corporation of the State of California (hereinafter "TOWN") and (hereinafter"OWNER"), OWNER(s) ofthe real property located at , Los Gatos, California, which is more fully
described in Exhibit A attached hereto and incorporated by reference. Said real property (hereinafter "PROPERTY") is hereby designated as a Below Market Price (BMP) Housing Unit subject
to the " terms and conditions set forth herein. ". ) RECITALS WHEREAS, Town Code Sections 29.10.3000 et seq. establish the Below Market Price (BMP) Housing Program described herein;
and WHEREAS, the BMP Program is administered by the TOWN to increase the supply of housing affordable to families and individuals with low and median incomes by offering homes for sale
at prices which are below those otherwise prevailing in the market; and WHEREAS, the purpose of this Agreement is to place certain use restrictions on the PROPERTY, establish resale
controls with respect to the PROPERTY, and reserve for the TOWN an option to acquire thePROPERTYfrom OWNERin order to preserve indefinitely the affordability ofPROPERTY for persons oflow
and median income. NOW, THEREFORE, in consideration ofthe mutual benefits provided herein, TOWN and OWNER agree as follows: 1. OWNER CERTIFICATIONS OWNER certifies the following: a.
All financial and other information submitted by OWNER in order to qualify to purchase the PROPERTY is true and correct as of the date first written above. OWNER understands that any
material misstatement or misrepresentation shall be
deemed to be a material breach ofthis Agreement and shall be grounds for declaring a default, terminating this agreement, or seeking other such reliefand remedies as are appropriate
under the circumstances. b. OWNER shall occupy the PROPERTY as the OWNER's principal place of residence. TOWN may grant a temporary waiver ofthis occupancy requirement for good cause
in its sole discretion pursuant to Section 2 below. OWNER agrees that TOWN shall have the right, from time to time, to request reasonable verification from OWNER that he/she remains
the owner-occupant of the PROPERTY as required by this Agreement. 2. LEASING OF PROPERTY OWNER shall not lease, rent, sublet, assign or otherwise transfer the right of use or possession
to all or any portion ofthe PROPERTY without the prior written consent ofthe TOWN. TOWN may consent if the action is necessary because offamily or medical emergency, temporary job transfer,
or other causes that the TOWN, in its sole discretion, considers acceptable. Leasing ofPROPERTY shall be considered acceptable only under the following circumstances: a. All leases must
be authorized by the BMP Program Manager designated by the TOWNto assumeoverall responsibility for the execution ofthis Agreement pursuant to Section 15 ofthis Agreement. b. OWNER s.b:all
only accept tenants qualified by the TOWN, or its assignee or designee. c. PROPERTY shall not be leased in an amount greater than OWNER's montWy costs, including mortgage, homeowner's
insurance, property taxes, homeowners dues and a reasonable allowance for utilities, not including telephone or cable television services. d. Tenants are limited to persons whose income
is below 100 percent of the County Median Income for Santa Clara County Jurisdictions as defined by the United States Department ofHousing and Urban Development. Any lease in violation
ofthis Agreement is prohibited and shall constitute a default by the OWNER. 3. TRANSFER OF PROPERTY For purposes of this Agreement, "transfer" means any voluntary or involuntary sale,
assignment, conveyance, or transfer ofownership or any interest in the PROPERTY, including, but not limited to, a fee simple interest, a joint tenancy interest, a life estate, a leasehold
interest, or an interest evidenced by a land contract by which possession of the PROPERTY is transferred and OWNER retains title. Any transfer without satisfaction of the provisions
ofthis Agreement is prohibited. a. Transfers by devise or inheritance will be permitted if all of the following terms and conditions of transfer are satisfied within sixty (60) days
of the transfer: i. The Transferee shall occupy, establish, and maintain the uSe of the PROPERTY as Transferee's principal residence; 11. Transferee shall demonstrate to TOWN or its
designee that Transferee's annual household income does not exceed the income limits stated in the Below Market Price Housing Program Guidelines in effect on the date of transfer; and
111. Transferee will execute a Deed ofTrust or other instrument satisfactory to the 2
TOWN securing the covenants and conditions of the TOWN. . Ifany ofthese terms and conditions oftransfer are not satisfied, the transfer by devise or inheritance will not be permitted.
4. NOTICE OF INTENDED TRANSFER In the event the OWNERintends to transfer the PROPERTY, the OWNERshall promptly notify the .TOWN in writing ofsuch intent Said notice shall be personally
delivered or sent by certified mail, return receipt requested, to: Town Manager, Town of Los Gatos, P.O. Box 949, Los Gatos, CA 95031. OWNER's intent to transfer may be withdrawn by
OWNER, provided that notice of withdrawal is received byTOWNor its designee in writing prior to acceptance oftransfer byTOWN or its designee. 5. TOWN'S PURCHASE OPTION Except as provided
herein, OWNER hereby grants and gives to the TOWN or its designee the first rightto purchase the PROPERTY under conditions set forth herein for an amount determined in accordance with
Section 8 below. a. Ifthe TOWN, or its assignee or designee, decides to exercise its right to purchase the PROPERTY: 1. It shall notify the OWNER by personal delivery or certified mail,
return receipt requested, of its intent to exercise the right within ninety (90) days following the date of receipt of OWNER's notice of intent to transfer the PROPERTY; 11. It shall
open an escrow account within ninety (90) days ofissuing the notice of intent to purchase the PROPERTY. Once opened, the escrow must be closed within ninety (90) days, unless both parties
mutually agree, in wIlting, to an extension oftime. Close ofescrow shall mean the recordation ofa grant deed conveying the BMP unit to the TOWN, or its assignee or designee; 111. OWNER
understands that final transfer ofPROPERTY may not occur until two-hundred seventy (270) days after the notice ofintent to transfer has been received by the TOWN. iv. The OWNER may request
that the TOWN accelerate the time periods specified herein. The determination to accelerate the time period shall be at the sole discretion of the BMP Program Manager. Any request for
acceleration due to hardship shall be requested by the OWNER, in writing, not later than thirty (30) days from the date of receipt of the notification of intent to sell. The BMP Program
Manager shall make a determination and notify the OWNERwithin ten (10) business days ofreceipt ofthe request for a hardship acceleration that the request has been approved, denied, or
that additional information is required to make the determination. Inthe event the request is denied, the OWNER may submit further evidence and request a reconsideration. In any case,
the TOWN shall have a minimum ofsixty (60) days from the date of receipt of the new evidence or of the request for reconsideration of a previously issued denial, whichever is later.
b. Closing costs and title insurance shall be paid pursuant to the customs and practices in the Town of Los Gatos. OWNER shall bear the expense of providing a current 3
written report ofinspection 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 OWNER. 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 ofthe OWNER, and
such work shall only be done if requested by the buyer and at the expense of the buyer. The buyer shall be responsible for any prepayment fees imposed by any lender by reason of the
sale of the PROPERTY. . c. The TOWN, at its sole discretion, reserves the right at any time during this process to assign its right to purchase to: i. A government agency or non-profit
organization; or ii. An individual buyer who meets TbWN eligibility qualifications pursuant to the procedures and criteria in effect for the BMP Housing Program at the time the notice
of intent to purchase the PROPERTY is issued to the OWNER. iii. In the event the initial designee fails or is unable to complete the transaction, the TOWN reserves the right to reassign
the right to another eligible, qualified buyer, provided the opening ofthe escrow is not postponed longer than ninety (90) days after the OWNER is notified ofthe TOWN's decision to purchase
the PROPERTY. iv. In the event the TOWN postpones opening ofescrow and is unable to select such an assignee, TOWN retains the right to open escrow and complete the purchase, provided
such escrowis opened within ninety (90) days and the sales transaction is completed within two hundred seventy (270) days from the date of receipt of OWNER's intent to transfer the PROPERTY.
d. In no event shall TbWN become in any way liable to OWNER, nor become obligated in any manner, by reason ofthe assignment ofits right to purchase, or for any failure of TOWN or TOWN's
assignee to consummate a purchase of the PROPERTY or comply with the terms ofany purchase and sale agreement. Nothing in this Agreement shall be construed to obligate the TOWN to purchase
any unit in the event a buyer participating in the :aMP Housing Program fails to complete actions to close escrow. e. Until such time as the TOWN's right to purchase is exercised or
waived, OWNER may encumber title to the PROPERTY for the sole purpose ofsecuring financing by OWNER, in an amount up to 90% of the below market rate price as would be determined under
the provisions of Section 8 at the time the lien or encumbrance is placed against the BMP unit. The BMP unit may be refinanced only up to 90% of the below market value regardless of
the actual full market value of the BMP unit. However, in the event of foreclosure or transfer of deed in lieu of foreclosure, the provisions of Section 12 of this Agreement shall govern.
f. Tlie provisions defined herein granting the TOWN the first right to purchase the PROPERTY, established for the purpose of providing and preserving low income housing, shall remain
in effect indefinitely. 4
6. FAILURE TO EXERCISE PURCHASE OPTION If the TOWN or its designee does not exercise its right to purchase the PROPERTY within ninety (90) days of the date of receipt of OWNER's notice,
or an escrow account is not opened within ninety (90) days of the date the TOWN notifies OWNER of its intent to purchase, all restrictions, resale controls, and other terms ofthis Agreement
shall cease and become null and void and of no further effect as to the PROPERTY, unless the time period has been extended by mutual, written agreement of the parties, and OWNERmay sell
the PROPERTY to a person ofhis/her choosing in a manner free from any and all restrictions contained in this Agreement. 7. OWNER'S OBLIGATION TO COOPERATE At all times following receipt
ofTOWN's notice of intent to purchase the PROPERTY, OWNER shall ensure that the PROPERTY is clean, in good repair, and available to be shown to prospective buyers. OWNER shall cooperate
with the TOWN and its respective officers, employees, and representatives. Failure to comply with these conditions shall be deemed a material breach of OWNER's obligations pursuant to
the terms of this Agreement, and upon determination by the TOWN that OWNER has failed to comply with any of the above conditions, TOWN shall notify OWNER that the time periods stated
in Section 5 herein shall be tolled, and the applicable time periods extended accordingly, until OWNER has complied with all of the conditions of this Agreement. Acts by OWNER which
shall be deemed to be a breach ofthis obligation include, but are not limited to: a. Failure to make the unitavailable for showing to prospective buyers upon reasonable notice; b. Willful
or deliberate actions to dissuade prospective buyers from purchasing the unit; . and c. Failure or refusal to return telephone calls, complete forms, provide required reports, or perform
other actions ordinarily required by a party to. a real estate transaction in., a timely manner. .-, In addition to tolling the applicable time periods, the TOWN may pursue any other
remedies for breach specified in this Section. 8. PRICE The resale price shall be paid in cash at the close ofescrow or as otherwise agreed by the parties and fixed at the lowest of
the amounts determined by the four methods described below: l a. Method 1 -Appraisal: The TOWN or its assignee or designee may have an appraisal made by an independent appraiser of its
choice to establish the fair market value of the PROPERTY; cost is to be borne by the TOWN or its assignee or designee. Whether or not to determine the fair market value of the property
is at the discretion of the BMP Program Manager. The OWNER may also have an appraisal made by an appraiser ofher/his choice with three (3) or more years ofexperience appraising real
property for purposes offinancing, purchasing, or determining value in condemnation proceedings to establish market value; cost is to be borne by the OWNER. If possible, the appraisal
shall be based upon the sales prices ofcomparable properties sold in the market area during the preceding three-month period. Ifthe TOWN and OWNER cannot reach agreement on the fair
market value ofthe PROPERTY, the 5
average of the two appraisals shall be termed the market price. b. Method 2 -Median Income Index: The resale price shall be determined by adjusting the original purchase price paid by
the OWNERto compensate for the percentage increase, ifany, in the Median Income Index for Santa Clara County Jurisdictions, as published by the United States Department ofHousing and
Urban Development for the years the 0 WNERhas lived at the PROPERTY. The Index prevailing on the date ofthe OWNER's purchase of the PROPERTY shall be compared with the latest Index prevailing
on the date of receipt by the TOWN of notice ofintent to transfer. The percentage increase in the Index, if any, shall be computea and the original purchase price shall be increased
by the same percentage, provided that the price is not lower than the original purchase pnce. c. Method 3 -Consumer Price Index: The resale price shall be determined by adjusting the
purchase price paid by the OWNER to compensate for the percentage increase, if any, in the cost of of living as measured by the Housing Component ofthe Consumer Price Index for the San
Francisco-Oakland-San Jose area, as published by the United States Department of Labor, Bureau ofLabor Statistics. The Index prevailing on the date ofthe OWNER's purchase ofthe PROPERTY
shall be compared with the latest Index available on the date ofreceipt bythe TOWN ofnotice ofintent to transfer. The percentage increase in the Index, if any, shall be computed and
the original purchase price shall be increased by the same percentage, provided that the price is not lower than the original purchase price. d. Method 4 -Maximum Affordable Price·:
The resale price shall not exceed the maximum affordable sales price for the income category and unit type within which the PROPERTY was originally sold, as such prices are required
to be determined pursuant to the resolution ofthe Town Council of the TOWN establishing the TOWN's Below Market Price Housing Program Guidelines in effect on the date that the TOWN is
notified of the OWNER's intent to transfer. 9. PRICE ADJUSTMENTS a. Improvements: The sales price of the PROPERTY shall be increased from the base price by the dollar cost to the OWNER
ofany improvements, appliances, fixtures, or equipment permanently affixed to the PROPERTY (the "IMPROVEMENTS"), ifthat cost is in excess of one percent (1 %) of the price OWNER paid
for the PROPERTY, minus estimated depreciation ofsuch IMPROVEMENTS. Depreciation estimates shall be based upon an assumed fifteen (15) year economic life for any such improvement and
calculated on the straight line basis from the date ofcompletion ofinstallation to the date the TOWN receives notice from the OWNER ofintent to sell the PROPERTY. Receipts for payment
of the cost of such IMPROVEMENTS must be submitted by the OWNER to the TOWN within fifteen (15) working days of the receipt by the TOWN of notification of intent to sell if the depreciated
cost of such IMPROVEMENTS is to be added to the base price in determining the purchase price 6
b. of the PROPERTY. Deferred Maintenance: Upon receipt of notice of OWNER's intent to sell, TOWN or its designee shall be entitled to inspect the PROPERTY. TOWNor its designee shall
have an opportunity to determine whether: 1. all plumbing, electrical and heating systems are in working order; 11. any violations of applicable building, plumbing, electric, fire, or
housing codes exist; 111. all appliances which were originally furnished to OWNER as part of the PROPERTY, or any thereof, are in working order; IV. walls, ceilings,
and floors are clear and free of holes or other defects (except for holes typical of picture hangers); v. doors, window screens, and similar appurtenances are cracked, broken, or torn;
and, VI. carpets, drapes, and similar features which were originally furnished to OWNER as part of the PROPERTY, 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 thirty (30) days ofbeing notified of the results of the inspection, but in no event later than close of escrow. Should OWNERfail to cure
such deficiencies prior to the scheduled date ofcli?seof escrow, at the option ofTOWN, its designee or assignee, escrow may be closed, title passed and monies paid to the selling OWNER
subject to the condition that such funds as are necessary to pay for curing sl.;lch deficiencies (based upon estimates obtained by TOWN) shall be withheld from the monies
due the selling OWNER and held bythe escrow holder for the purpose ofcuring such deficiertcies. TOWN, its designee or assignee, shall cause such deficiencies to be cured and upon certification
ofcompletion ofwork 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.
10. INSURANCE OWNER shall maintain in full force and effect a policy of fire and extended coverage on the PROPERTY until such time as the PROPERTY is sold to the TOWN, its assignee or
designee, as allowed under this Agreement. 11. ENCUMBRANCES AND TAXES OWNER shall pay in a timely manner all amounts due under any mortgage or deed of trust encumbering the PROPERTY
and all real property taxes and assessments. Recordation ofa notice ofdefault under any deed oftrust with a power ofsale encumberillg the PROPERTY shall constitute an event of default.
12. FORECLOSURE a. TOWN shall cause to be filed forrecord in the office ofthe Recorder of the County 7
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 PROPERTY, pursuant to Section
2924(b) ofthe California Civil Code. Such request shall specify that any such notice shall be mailed to 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 the TOWN may exercise its right to purchase PROPERTY prior
to any trustee's sale, judicial foreclosure sale, or transfer by deed in lieu offoreclosure. b. In the event of default or foreclosure, the TOWN, or its assignee or designee, shall have
the same right as the OWNER to cure defaults and redeem the PROPERTY 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 ofthe TOWN to cure any such default, nor shall this right to cure and
redeem operate to extend any time limitations in the default provisions ofthe underlying deed oftrust or mortgage. The TOWN, or its assignee or designee, shall be entitled to recover
from the OWNERall costs incurred in curing any such default. c. Ifthe TOWN elects not to exercise its right upon such default, any excess proceeds to which the OWNER may be entitled
pursuant to the Code of Civil Procedure Section 727 shall be paid to the TOWN. Excess proceeds means the amount by which the foreclosure proceeds exceeds the purchase price that would
have been payable to the OWNER ifthe TOWN had purchased the PROPERTY on the date of the foreclosure sale. d. In the event the TOWN, or its assignee or designee, having been duly notified
ofan impending sale and fully able to exercise its rights hereunder, fails to exercise its right to purchase or prevent foreclosure or trustee's sale, a completed action of foreclosure
or trustee's sale shall render this Agreement and the restrictions imposed thereby to be null and void and of no further force or effect. The subsequent bona fide purchaser for value
shall take title to the PROPERTY free from any and all restrictions contained in this Agreement. 13. DESTRUCTION OR TERMINATION OF PROPERTY a. If the PROPERTY is destroyed, and insurance
proceeds are distributed to the OWNER instead of being used to rebuild; or b. If the PROPERTY is condemned, and the proceeds are distributed to the OWNER; or c. If the PROPERTY consists
of a unit in a condominium project, and the project is destroyed, the association liquidated, and the assets distributed to the members ofthe association, including the OWNER; then Any
excess proceeds remaining after payment of encumbrances on the PROPERTY shall be distributed to the TOWN. Excess proceeds means the amount by which the insurance, condemnation, or liquidation
proceeds exceed the purchase price that would have been payable to the OWNER if the TOWN had purchased the PROPERTY on the date of the destruction, condemnation valuation, or liquidation.
8
14. DEFAULT UNDER TIDS AGREEMENT /' \ Any transfer
which is not in substantial compliance with this Agreement shall be deemed a "prohibited transfer." At any time after receiving actual notice of a prohibited transfer or of any violation
of this Agreement, the TOWN shall give written notice to the OWNER specifying the nature ofthe prohibited transfer or other violation ofthis Agreement. Ifthe violation is not corrected
to the satisfaction of the TOWN within ten (10) days after the date of the notice, or within such further time as the TOWN determines in its sole discretion to be necessary to correct
the violation, the TOWNmay declare in writing a default under this Agreement. Upon the declaration ofa default under this Agreement, the TOWN may apply to a court of competent jurisdiction
for specific performance ofthis Agreement for an injuncti.on prohibiting a proposed sale or transfer in violation ofthis Agreement, for a declaration that the prohibited transfer is
void, or for any such other'relief as may be be appropriate. 15. PROGRAM MANAGEMENT As ofthe date first written above, TOWN has designated the Community Services Director to serve as
BMP Program Mariager with overall responsibility for the progress and execution of this Agreement. 16. PROHIBITIONS ON BONUS, COMMISSION, AND FEE OWNER shall not pay any bonus, commission,
or fee for the purpose of obtaining approval of OWNER's application for the PROPERTY, or any other approval or concurrence required by the TOWN in connection with this Agreement. 17.
SUPERIORITY OF AGREEMENT The TOWN and OWNER covenant that they have not and will not execute anyagreemenrWith provisions contradictory to or in oppositionto the provisions ofthis Agreement;
and that in any this Agreement is controlling as to the rights and obligations between the TOWN and OwNER. 18. SEVERABILITY If any provisions contained herein are for any
reason held to be invalid, illegal, or unenforceable in any respect by a court of competent jurisdiction, then such provisions shall be deemed severable from the remaining provisions
contained in this Agreement, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had never been contained herein, and the remaining provisions
shall continue in full force. 19. APPLICABLE LAW This Agreement shall be interpreted under and pursuant to the laws of the State of California. 20. LEGAL ACTION If any legal action is
commenced to interpret or enforce the terms of this Agreement: or collect damages as a result of any breach of this Agreement, then the prevailing party shall be entitled to recover
against the party not prevailing all reasonable attorney's fees and costs incurred in such action, notto exceed Seven Thousand Five Hundred Dollars and No Cents ($7,500.00) in total.
The venue for any action to enforce the terms of this Agreement or collect damages shall be in the Superior Court of the County of Santa Clara, California. 9
21. WAIVER No failure on the part of either party to exercise any right or remedy hereunder shall operate as a waiver of any other right or remedy that party may have hereunder, nor
does waiver Of a breach or default under this Agreement constitute a continuing waiver of a subsequent breach of the same or any other provision of this Agreement. 22. ENTIRE AGREEMENT
This Agreement, including Exhibit A attached hereto, sets forth the entire agreement between the parties and supersedes all other oral and written provisions. No other terms or conditions
shall be deemed to apply, unless by a mutually executed, written amendment, modification orcsuperseding agreement which references this Agreement. 23. NOTICES All notices, demands, and
communications between the parties hereto shall be sent by certified mail, return receipt requested, to the addresses set forth after the signatures on this Agreement. Any party changing
its address shall forthWIth give written notice to the other parties herein. 24. OWNER ACKNOWLEDGMENT OWNER, by accepting title to the PROPERTY, understands that under the BMP Housing
Program, the OWNER is able to purchase the PROPERTY for a price less than its full market value. In consideration for receipt ofthis benefit, OWNER ackilowledges that on a subsequent
transfer ofthe PROPERTY, OWNER will not be entitled to receive full market value for the PROPERTY. The purchase price authorized hereunder will not increase or decrease in the same manner
as other similar real property which is not encumbered by this Agreement. OWNER further acknowledges that at all times in the setting of the purchase price, the primary objective of
this Agreement is to provide housing to low and median income persons at affordable cost. 25. COVENANT RUNNING WITH THE LAND The terms and conditions set forth herein are intended to
run with the land and shall bind the OWNER and'all successors, heirs and grantees. These terms and conditions shall be made part of each deed subsequently recorded and shall bind each
successor in interest until the recordation of a subsequent and superseding agreement or other covenant instrument. 26. SUPERSESSION This Agreement shall supersede any and all resale
agreements, Deed of Trusts, deed restriction and other similar conditions and/or restrictions previously imposed on the PROPERTY, whether or not such instruments were recorded. 10
IN WITNESS WHEREOF, the TOWN and OWNERhave executed this Agreement as ofthe date first written above. Approved as to Content: Regina A. Falkner Community Services Director Approved as
to Form: Orry Korb, Town Attorney Attest: MARIAN V. COSGROVE CLERK OF THE TOWN OF LOS GATOS N:\CSD\BMP\Core Documents\proposed deed restrictions 04.wpd 11 By:---------------Debra J.
Figone, Town Manager Town of Los Gatos P.O. Box 949, Los Gatos, CA 95031 By:._--------------OWNER Address: August 5, 2004