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HomeMy WebLinkAboutBuyer's Occupancy and Resale Agreement with Option to Purchase (2) Recording Requested Bar JULIE RODEWALD MEL q San Luis Obispo C ity— Clerk/Recorder 6/17/2005 Fidelity National Title ■,, Recorded at the requester' equest 1:36 PM Complimentary Recording Requested Fidelity Title Company Pursuant To Government Code D 0 C # Tit 2 Pages: Section 6103 and 27383 • 2005049504 s 17 Fees When Recorded Mail To: I I II IIII III II III III I I III Others 0.00 City of Arroyo Grande PAID 50.00 P. O. Box 550 Arroyo Grande, CA 93421 Attn: City Clerk tir— St k_ BUYER'S OCCUPANCY AND RESALE AGREEMENT WITH OPTION TO PURCHASE CITY OF ARROYO GRANDE INCLUSIONARY HOUSING PROGRAM M � M Owner: d1t .1set and hfizabetth A. Muguira Address of Home: 1450 Jasmine Place Development: Jasmine Place Income Category of Home: Moderate Number of Bedrooms in Home: Three (3) Sales Price at Original Purchase: $297,926.00 This Buyer's Occupancy and Resale Agreement with Option to Purchase (the "Agreement ") is entered into as of this /0 day of J UN , 2005, by and between the City of Arroyo Grande (the "City ") and Moses and Elizabeth A. Muguira (the "Owner "). RECITALS A. Pursuant to the City of Arroyo Grande's Affordable Housing Ordinance (Ordinance No. 514 C.S.), Chapter 16.80 of the Arroyo Grande Municipal Code, a portion of all new housing constructed in the City of Arroyo Grande is required to be affordable to median to above moderate - income households. B. Jasmine Place, LLC, a Limited Liability Company (the "Developer ") entered into an Affordable Housing Agreement dated Silo . Pursuant to the Affordable Housing Agreement, the Developer agreed to sell seventeen (17) homes to moderate income households at affordable prices (the "Affordable Units "). C. Owner intends to purchase the property located in the City of Arroyo Grande, and more particularly described in Exhibit A attached hereto and incorporated herein (the "Home "). The Home is one of the Affordable Units. The Home has been designated by the City and the Developer as a moderate- income unit. D. Pursuant to the Affordable Housing Ordinance and the Affordable Housing Agreement, the Developer and the City are required to ensure the continued affordability of the Home as an Affordable Unit, and the City therefore requires the Owner to execute this A -1 Agreement as a condition of the Owner's purchase of the Home. The Owner has agreed to execute and comply with this Agreement in consideration of the Developers agreement to sell the Home to the Owner at an affordable price that is below the fair market value of the Home. E. The purpose of this Agreement is to place resale controls on the Home and to require the payment of any excess proceeds of sale to the City. This Agreement also provides the City an option to purchase the Home at a restricted price, given in consideration of the economic benefits to the Owner resulting from purchase of the Home at a below market price under the City's Affordable Housing Program. F. The Owner is receiving a first mortgage loan (the "First Mortgage Loan ") from Wells Fargo Home Mortgage (the "First Lender "). The First Mortgage Loan is secured by a deed of trust executed by the Owner in favor of First Lender and recorded in the County of San Luis Obispo (the "First Mortgage Deed of Trust "). The Owner may receive a second mortgage loan (the "Second Mortgage Loan), not to exceed fifteen percent (15 %) of the total purchase price, from N/A (the "Second Lender "). The Second Mortgage Loan is secured by a deed of trust executed by the Owner in favor of the Second Lender and recorded in the County of San Luis Obispo (the "Second Mortgage Deed of Trust "). G. This Agreement shall be secured by a deed of trust on the Home (the "City Deed of Trust "). This Agreement and the City Deed of Trust shall be subordinate to the lien of the First Mortgage Deed of Trust and Second Mortgage Deed of Trust. NOW, THEREFORE, in consideration of the benefits received by the Owner and the City hereunder, the Owner and the City agree, as follows: 1. DEFINITIONS The following terms are specially defined for this Agreement and their definitions can be found in the sections indicated below: A. "Affordable Housing Ordinance" — Recital A B. "Agreement" - First sentence of the Agreement on page 1 C. "Affordable Price" — Section 10B D. "City" - First sentence of the Agreement on page 1 E. "City Deed of Trust" - Recital G F. "City Option" - Section 12A G. "City Option Price" — Section 12B H. "Eligible Purchaser" - Section 11B I. "Excess Sales Proceeds" - Section 14 J. "Unrestricted Fair Market Value" - Section 10B A -2 K. "First City Response Notice" - Section 8 L. "First Lender" or "Second Lender " - Recital F M. "First Mortgage Deed of Trust" and "Second Mortgage Deed of Trust" - Recital F N. "First Mortgage Loan" and "Second Mortgage Loan" - Recital F O. "Home" - Recital C and Section 2 P. "Housing Price Index" — Section 10A Q. "Indexed Value" — Section 10A R. "Market Purchaser" - Section 14 S. "Marketing Period" - Section 11A T. "Maximum Allowable Sales Price" - Section 10 U. "Owner" - First sentence of the Agreement on Page 1 V. "Owner's Notice of Failure to Locate Eligible Purchaser" - Section 11E W. "Owner's Notice of Intent to Sell" - Section 7 X. "Second City Response Notice" - Section 11E Y. "Transfer" - Section 6 2. DESCRIPTION OF PROPERTY This Agreement concerns the real property in the City of Arroyo Grande, State of California with the street address set forth on page 1 of this Agreement, which is more fully described in Exhibit A attached hereto and incorporated in this Agreement by reference (the "Home "). 3. OWNER CERTIFICATIONS; OWNER OCCUPANCY REQUIREMENT The Owner certifies that the financial and other information previously provided in order to qualify to purchase the Home is true and correct as of the date first written above. The Owner shall occupy the Home as the Owner's principal place of residence. The Owner shall be considered as occupying the Home if the Owner is living in the unit for at least ten (10) months out of each calendar year. The Owner shall provide an annual written certification to the City that the Owner is occupying the Home as his or her principal place of residence. 4. LEASING OF HOME The Owner shall not lease the Home to another party. Any lease in violation of this Agreement is prohibited, and shall be a default under this Agreement and the City Deed of Trust. A -3 5. MAINTENANCE AND INSURANCE REQUIREMENTS A. The Owner shall maintain the Home, including landscaping, in good repair and in a neat, clean and orderly condition and will not commit waste or permit deterioration of the Home. B. The Owner shall maintain a standard all risk property insurance policy equal to the replacement value of the Home (adjusted every five (5) years by appraisal, if requested by City), naming the City as an additional insured. Additional insurance requirements are set forth in Section 5 of the City Deed of Trust. 6. RESTRICTIONS ON RESALE OF THE HOME Any Transfer of the Home will be subject to the provisions of this Agreement including, without limitation, the City Option described in Section 12 below. "Transfer" means any sale, assignment or transfer, voluntary or involuntary, of any interest in the Home, 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 Home is transferred and Owner retains title. Any Transfer without satisfaction of the provisions of this Agreement is prohibited. Transfers by devise or inheritance to an existing spouse or domestic partner, or a spouse as part of a dissolution proceeding, or in connection with marriage shall not be considered a Transfer for the purposes of this Agreement. 7. NOTICE OF INTENDED TRANSFER; PREPARATION OF HOME FOR SALE A. In the event the Owner intends to Transfer or vacate the Home, the Owner shall promptly give the City written notice of such intent (the "Owner's Notice of Intent to Sell "). The Owner's Notice of Intent to Sell shall be sent to the City by certified mail, return receipt requested at the address provided in Section 31 of this Agreement. The Owner's Notice of Intent to Sell shall include the information necessary for the City to determine the Maximum Allowable Sales Price of the Home, including the following information: (1) the address of the Property; (2) the date of purchase of the Home by the Owner; (3) the purchase price of the Home paid by the Owner at the time of his/her purchase; (4) a copy of the HUD -1 Settlement Statement or equivalent document from the close of escrow on the Owner's purchase of the Home; (5) the date on which Owner intends to vacate Home; (6) the date Home will be placed on the market; and (7) the name and phone number of the person to contact to schedule inspection of the Home by the City. A-4 B. Following delivery to the City of the Owner's Notice of Intent to Sell, the Owner shall prepare the Home for sale, as follows: (1) within thirty (30) days of delivery of the Owner's Notice of Intent to Sell, the Owner shall obtain and deliver to the City a current written report of inspection of the Home by a licensed structural pest control operator; (2) within the sooner of (a) sixty (60) days from the date of delivery of the Owner's Notice of Intent to Sell, or (b) prior to close of escrow on the Transfer, the Owner shall repair all damage noted in the pest report including damage caused by infestation or infection by wood - destroying pests; (3) within ten (10) business days of the date of the Owner's Notice of Intent to Sell, the Owner shall allow the City, or its designee, to inspect the Home to determine its physical condition; (4) if the Home is vacant, the Owner shall maintain utility connections until the close of escrow on the Transfer; 8. CITY RESPONSE TO OWNER'S NOTICE OF INTENT TO SELL The City shall respond in writing (the "First City Response Notice ") to the Owner's Notice of Intent to Sell within ten (10) business days of City receipt of a complete Owner's Notice of Intent to Sell that includes all information required under Section 7 above and access to inspect the Home as required under Section 7(B)(3) above. The First City Response Notice shall inform the Owner of the following information: (1) the maximum qualifying income for an Eligible Purchaser; (2) the certifications required of an Eligible Purchaser; and (3) the Maximum Allowable Sales Price the Owner may receive for the Home, calculated by the City pursuant to Section 11 below. 9. OWNER ACKNOWLEDGMENT OF CITY RESPONSE NOTICE No later than seven (7) days following the date of the First City Response Notice, the Owner shall acknowledge in writing to the City that he /she has received the City Response Notice and still intends to Transfer the Home. 10. DETERMINATION OF MAXIMUM ALLOWABLE SALES PRICE FOR RESTRICTED SALE If the Owner sells to an Eligible Purchaser, the maximum sales price (the "Maximum Allowable Sales Price ") that the Owner shall receive from the Eligible Purchaser for purchase of the Home shall be the greater of the Indexed Value or the Affordable Price, but in no event greater than the Unrestricted Fair Market Value. A. Indexed Value. The Indexed Value of the Home means the sales price of the Home at the time of purchase by the Owner, as set forth on page 1 of this Agreement, increased by fifty percent (50 %) of the annual percentage of increased value in the Housing Price Index from the date of the original purchase of the Home by the Owner to the date of receipt by the City of the Owner's Notice of Intent to Transfer, and, where applicable, adjusted pursuant to subsection (2) below to reflect the cost of deferred maintenance. "Housing Price Index" shall A -5 mean the San Luis Obispo -Arroyo Grande Metropolitan Statistical Area Housing Price Index as published from time to time by the office of Federal Housing Enterprise Oversight or, if such index is no longer published, a comparable index designated by the City of Arroyo Grande. B. Affordable Price. The Affordable Price of the Home means the affordable price for a Median Income Home, Moderate Income Home, or Above Moderate Income Home (as applicable, pursuant to the designation of the Home on page 1 of this Agreement), pursuant to City regulations. C. Unrestricted Fair Market Value. In certain circumstances it may be necessary to determine the fair market value of the Home (the "Unrestricted Fair Market Value "). These circumstances include: (1) where the parties wish to determine if the Maximum Allowable Sales Price exceeds the Unrestricted Fair Market Value in order to determine the Maximum Allowable Sales Price pursuant to Section 10; (2) where the Owner is selling the Home to an Market Purchaser at an unrestricted price pursuant to Section 13; and (3) where the Owner wishes to refinance the First or Second Mortgage Loan as described in Section 24 below. If it is necessary to determine the Unrestricted Fair Market Value of the Home, it shall be determined by a certified MAI or other qualified real estate appraiser approved in advance by the City. If possible, the appraisal shall be based upon the sales prices of comparable properties sold in the market area during the preceding three (3) -month period. The cost of the appraisal shall be shared equally by the City and the Owner, unless the appraisal is obtained from a new purchaser, or unless the appraisal is necessary because the Owner wishes to refinance the First or Second Mortgage Loan pursuant to Section 24 below, in which event the Owner shall pay the cost of the appraisal. Nothing in this section shall preclude the Owner and the City from establishing the Unrestricted Fair Market Value of the Home by mutual agreement in lieu of an appraisal pursuant to this section. D. Holdback for Damage Repair Cost. If the City finds that the Owner, through neglect, abuse, or lack of adequate maintenance, has damaged the Home, the City may require that repairs be made at the Owner's cost prior to sale or through the escrow for the sale of the Home. 11. SALE OF HOME TO ELIGIBLE PURCHASER AT RESTRICTED PRICE Following receipt of the First City Response Notice notifying the Owner of the Maximum Allowable Sales Price, the Owner may proceed to sell the Home in compliance with the following requirements: A. Marketing Period. The Owner shall have ninety (90) days from the date of the First City Response Notice (the "Marketing Period ") to market the Home and find an Eligible Purchaser. During the Marketing Period, the Owner shall use bona fide good faith efforts to sell the Home to an Eligible Purchaser in compliance with this Section 11, including listing the Home on the Multiple Listing Service, keeping the Home in an orderly condition, making the Home available to show to agents and prospective buyers, and providing buyers with Eligible Purchaser requirements, including income qualifications and the City's form of disclosure statement summarizing the terms of the buyer's resale agreement. A proposed purchaser ( "Proposed Purchaser "), who the Owner believes will qualify as an Eligible Purchaser, shall be referred to the City for an eligibility determination. A -6 B. Eligible Purchaser. A Proposed Purchaser shall qualify as an "Eligible Purchaser" if he or she meets the following requirements, as determined by the City: (1) Intent to Owner Occupy. The Proposed Purchaser shall certify that he or she will occupy the Home as his or her principal place of residence throughout his or her ownership. (2) Agreement to Sign Buyer's Resale Agreement and to Cooperate with City. The Proposed Purchaser shall agree to sign a buyer's resale and occupancy agreement with option to purchase restricting future resale of the Home and shall agree to cooperate fully with the City in promptly providing all information requested by the City to assist the City in monitoring the Proposed Purchaser's compliance with the buyer's resale and occupancy agreement with option to purchase. (3) Income Eligibility. The combined maximum income for all household members of the Proposed Purchaser shall not exceed the income level designated by the City in the First City Response Notice. C. Maximum Allowable Sales Price and Closing Costs. The purchase price for the sale of the Home by the Owner to the Eligible Purchaser shall not exceed the Maximum Allowable Sales Price calculated by the City pursuant to City regulations and Section 10 above, as set forth in the First City Response Notice. The Maximum Allowable Sales Price shall not include closing costs paid by the Eligible Purchaser. The closing costs paid by the Eligible Purchaser shall not exceed reasonable and customary buyers' closing costs in the County of San Luis Obispo. D. Disclosure and Submittals. The Owner and the Proposed Purchaser shall provide the following information and documents to the City: (1) The name, address and telephone number in writing of the Proposed Purchaser. (2) A signed financial statement of the Proposed Purchaser in a form acceptable to the City and any other supporting documentation requested by the City. The financial information shall be used by the City to determine the income eligibility of the Proposed Purchaser. (3) The proposed sales contract and all other related documents which shall set forth all the terms of the sale of the Home. Said documents shall include at least the following terms: (a) the sales price; and (b) the price to be paid by the Proposed Purchaser for the Owner's personal property, if any, for the services of the Owner, if any, and any credits, allowances or other consideration, if any. (4) A written certification, from the Owner and the Proposed Purchaser in a form acceptable to the City that the sale shall be closed in accordance with the terms of the sales contract and other documents submitted to and approved by the City. The certification shall also provide that the Proposed Purchaser or any other party has not paid and will not pay to the Owner, and the Owner has not received and will not receive from the Proposed Purchaser or any other party, money or other consideration, including personal property, in addition to what is set A -7 forth in the sales contract and documents submitted to the City. The written certification shall also include a provision that in the event a Transfer is made in violation of the terms of this Agreement or false or misleading statements are made in any documents or certification submitted to the City, the City shall have the right to foreclose on the Home or file an action at law or in equity as may be appropriate. In any event, any costs, liabilities or obligations incurred by the Owner and the Proposed Purchaser for the return of any moneys paid or received in violation of this Agreement or for any of the Owner's and/or the Proposed Purchaser's costs and legal expenses, shall be borne by the Owner and/or the Proposed Purchaser and they shall hold the City and its designee harmless and reimburse the City's and its designee's expenses, legal fees and costs for any action they reasonably take in good faith in enforcing the terms of this Agreement. (5) An executed buyer's resale and occupancy agreement and option to purchase and an executed deed of trust from the Proposed Purchaser in forms provided by the City. The recordation of the new deed of trust and buyer's resale and occupancy agreement and option to purchase shall be a condition of the City's approval of the proposed sale. (6) The name of the title company escrow holder for the sale of the Home, the escrow number, and name, address, and phone number of the escrow officer. (7) Upon the close of the proposed sale, certified copies of the recorded City deed of trust and buyer's resale agreement, a copy of the final sales contract, settlement statement, escrow instructions, and any other documents which the City may reasonably request. E. Failure To Locate Eligible Purchaser: Notice to City. If, despite bona fide good faith marketing efforts, the Owner is unable to locate an Eligible Purchaser during the Marketing Period and any extensions to the Marketing Period granted by the City, the Owner shall provide written notice to the City of this fact (the "Owner's Notice of Failure to Locate Eligible Purchaser"). Within thirty (30) days of receipt of the Owner's Notice of Failure to Locate Eligible Purchaser, the City shall provide a second response notice to the Owner (the "Second City Response Notice ") stating either (1) that the City will exercise the City Option to purchase the Home pursuant to Section 12 below, or (2) that the Owner may Transfer the Home to a person of the Owner's choosing (a "Market Purchaser ") who is not an Eligible Purchaser, at an unrestricted price (supported by an MAI or other qualified appraisal), but shall pay all Excess Sales Proceeds to the City as set forth in Section 13 below. 12. CITY PURCHASE OPTION A. Exercise of Option. If the Owner fails to sell the Home to an Eligible Purchaser at or below the Maximum Allowable Sales Price, the City shall then have the option to purchase the Home (the "City Option ") for the City Option Purchase Price, as defined below. The City Option may be exercised by the City in the Second City Response Notice (as described in Section 11E above), to be sent by the City to the Owner within thirty (30) days of receipt of the Owner's Notice of Failure to Locate Eligible Purchaser. If the Second City Response Notice states that the City will exercise the City Option, the City shall purchase the Home within forty - five (45) days of the date of the City's Second Response Notice. The City may, instead of purchasing the Home itself, assign its right to purchase the Home pursuant to the City Option to another public agency, a nonprofit corporation, or to an Eligible Purchaser. In the event of exercise of the City Option and purchase of the Home by the City or its designee, the Owner A -8 shall permit a final walk- through of the Home by the City in the final three (3) days prior to close of escrow on the Transfer. B. City Option Price. If the City exercises the City Option, the purchase price to be paid by the City (the "City Option Purchase Price ") shall be the highest of the following: (1) the outstanding principal balance of the First Mortgage Loan; (2) the total of the outstanding principal balance of the First Mortgage Loan and any purchase money Second Mortgage Loan; or (3) the appraised value of the Home with the affordability covenants intact, as determined by an appraiser selected by the City and approved by the Owner, and who employs standard appraisal practices. 13. UNRESTRICTED SALES If the Second City Response Notice states that the City will not exercise the City Option and that the Owner may proceed to Transfer the Home to a person of the Owner's choosing (a "Market Purchaser ") who is not an Eligible Purchaser, at an unrestricted price (supported by an MAI or other qualified appraisal), the Owner may proceed to do so, but the Owner shall pay all Excess Sales Proceeds to the City as set forth in Section 14 below. If the Owner Transfers the Home pursuant to this Section 13, the purchaser shall not be required to execute a buyer's resale and occupancy agreement with option to purchase, and the City shall reconvey the liens of this Agreement and the City Deed of Trust from the Home, provided that the Owner pays the Excess Sales Proceeds to the City pursuant to Section 14 below. The Owner shall provide the City with the following documentation associated with such a Transfer: (1) The name and address of the purchaser; (2) The final sales contract and all other related documents which shall set forth all the terms of the sale of the Home. Said documents shall include at least the following terms: (a) the sales price; and (b) the price to be paid by the Market Purchaser for the Owner's personal property, if any, for the services of the Owner, if any, and any credits, allowances or other consideration, if any. (3) A written certification, from the Owner and the Market Purchaser in a form acceptable to the City that the sale shall be closed in accordance with the terms of the sales contract and other documents submitted to and approved by the City. The certification shall also provide that the Market Purchaser or any other party has not paid and will not pay to the Owner, and the Owner has not received and will not receive from the Market Purchaser or any other party, money or other consideration, including personal property, in addition to what is set forth in the sales contract and documents submitted to the City. The written certification shall also include a provision that in the event a Transfer is made in violation of the terms of this Agreement or false or misleading statements are made in any documents or certification submitted to the City, the City shall have the right to foreclose on the Home or file an action at law or in equity as may be appropriate. In any event, any costs, liabilities or obligations incurred by the Owner and the Market Purchaser for the return of any moneys paid or received in violation of this Agreement or for any costs and legal expenses, shall be borne by the Owner and/or the Market Purchaser and they shall hold the City and its designee harmless and reimburse their expenses, legal fees and costs for any action they reasonably take in good faith in enforcing the terms of this Agreement. A -9 (4) A copy of the MAI or other qualified appraisal for the Home. (5) Upon the close of the proposed sale, a copy of the final sales contract, settlement statement, escrow instructions, and any other documents which the City may reasonably request. 14. PAYMENT TO CITY OF EXCESS SALES PROCEEDS If the Owner Transfers the Home at an unrestricted price pursuant to Section 13 above, or if the Owner makes a Transfer in violation of this Agreement, the Owner shall pay the Excess Sales Proceeds to the City. For purposes of this Agreement, "Excess Sales Proceeds" shall mean ninety percent (90 %) of the amount by which the Unrestricted Fair Market Value for the Home exceeds the Maximum Allowable Sales Price for the Home (in the amount that was stated in the First City Response Notice). This amount shall be a debt of the Owner to the City, secured by the City Deed of Trust. The Owner acknowledges that the City shall have no obligation to cause reconveyance of this Agreement or of the City Deed of Trust until the Excess Sales Proceeds are paid to the City. The City shall utilize the Excess Sales Proceeds for City affordable housing programs. The Owner and the City acknowledge that the formula for calculation of the amount of Excess Sales Proceeds due from the Owner to the City is intended to cause the Owner to receive the same net sales proceeds (following payment by Owner of a standard broker's commission) from sale of the Home at an unrestricted price to an Market Purchaser as the Owner would receive from sale of the Home to the City or to an Eligible Purchaser at the Maximum Allowable Sales Price. 15. DEFAULTS A. The following events shall constitute a Default by the Owner under this Agreement: (1) The City determines that the Owner has made a misrepresentation to obtain the benefits of purchase of the Home or in connection with its obligations under this Agreement; (2) The Owner fails to owner occupy the home, as required pursuant to Section 3 above, and such failure continues following written notice by the City and sixty (60) days opportunity to cure following the date of such notice. (3) The Owner makes a Transfer in violation of this Agreement; (4) The Owner otherwise fails to comply with the requirements of this Agreement and such violation is not corrected to the satisfaction of the City within ten (10) days after the date of written notice by the City to the Owner of such violation; or (5) A notice of default is issued under First or Second Mortgage Loan or other financing secured by the Home. (6) A lien is recorded against the Home other than the lien of a bone fide mortgage loan. A -10 (7) Owner places a mortgage on the Home in violation of Section 24 below. B. Upon a declaration of Default by the City under this Agreement, the City may exercise any remedies at law or in equity, including without limitation, any or all of the following : (1) Declare all Excess Sales Proceeds immediately due and payable without further demand and invoke the power of sale under the City Deed of Trust; (2) Apply to a court of competent jurisdiction for such relief at law or in equity as may be appropriate; (3) Declare a Default under the City Deed of Trust and pursue all City remedies under the City Deed of Trust; and (4) Exercise the City Purchase Option Upon Default as described in Section 17 below. 16. NOTICE OF DEFAULT AND FORECLOSURE A request for notice of default and any notice of sale under any deed of trust or mortgage with power of sale encumbering the Home shall be recorded by the City in the Office of the Recorder of the County of San Luis Obispo for the benefit of the City. The City may declare a Default under this Agreement upon receipt of any notice given to the City pursuant to Civil Code Section 29246, and may exercise its rights as provided in Sections 15 and 17. In the event of default and foreclosure, the City shall have the same right as the Owner to cure defaults and redeem the Home prior to the foreclosure sale. Nothing herein shall be construed as creating any obligation of the City 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. If the City failed to file the request for notice of default, the City's right to purchase the Home shall commence from the date a notice of default is given by the City to the Owner. 17. PURCHASE OPTION UPON DEFAULT Notwithstanding, and in addition to, the remedies provided the City in Section 16, and the City Option provided to the City in Section 12, the Owner hereby grants to the City the option to purchase the Home following written notice by the City to the Owner of the declaration of a Default by the City under this Agreement. This option to purchase is given in consideration of the economic benefits received by the Owner resulting from ownership of the Home made possible by the City's Affordable Housing Program. The City shall have thirty (30) days after a Default is declared to notify the Owner and the First Lender and Second Lender of its decision to exercise its option to purchase under this Section 17. Not later than ninety (90) days after the notice is given by the City to the Owner of the City's intent to exercise its option under this Section 17, the City shall purchase the Home for the City Option Price, payable in cash or by assuming existing debt and paying the balance in cash, calculated in the manner set forth in Section 12B. A -11 18. NONLIABILITY OF THE CITY A. No Obligation to Exercise Option. The City shall have no obligation to exercise any option granted it under this Agreement. In no event shall the City become in any way liable or obligated to the Owner or any successor -in- interest to the Owner by reason of its option to purchase under Sections 12 and 17 nor shall the City be in any way obligated or liable to the Owner or any successor -in- interest to the Owner for any failure to exercise its option to purchase. B. Nonliability for Negligence, Loss, or Damage. Owner acknowledges, understands and agrees that the relationship between Owner and the City is solely that of an owner and an administrator of a City affordable housing program, and that the City does not undertake or assume any responsibility for or duty to Owner to select, review, inspect, supervise, pass judgment on, or inform Owner of the quality, adequacy or suitability of the Home or any other matter. The City owes no duty of care to protect Owner against negligent, faulty, inadequate or defective building or construction or any condition of the Home and Owner agrees that neither Owner, or Owner's heirs, successors or assigns shall ever claim, have or assert any right or action against the City for any loss, damage or other matter arising out of or resulting from any condition of the Home and will hold the City harmless from any liability, loss or damage for these things. C. Indemnity. Owner agrees to defend, indemnify, and hold the City harmless from all losses, damages, liabilities, claims, actions, judgments, costs, and reasonable attorneys fees that the City may incur as a direct or indirect consequence of: (1) Owner's default, performance, or failure to perform any obligations as and when required by this Agreement or the Deed of Trust; or (2) the failure at any time of any of Owner's representations to the City to be true and correct. 19. RESTRICTIONS ON FORECLOSURE PROCEEDS If a creditor acquires title to the Home through a deed in lieu of foreclosure, a trustee's deed upon sale, or otherwise, the Owner shall not be entitled to the proceeds of sale to the extent that such proceeds otherwise payable to the Owner when added to the proceeds paid or credited to the creditor exceed the Maximum Allowable Sales Price. The Owner shall instruct the holder of such excess proceeds to pay such proceeds to the City in consideration of the benefits received by the Owner through purchase of the Home under the City's Affordable Housing Ordinance. 20. RESTRICTION ON INSURANCE PROCEEDS If the Home is damaged or destroyed and the Owner elects not to rebuild or repair the Home, the Owner shall pay the City the portion of any insurance proceeds received by the Owner for such destruction or damage which is in excess of the Maximum Allowable Sales Price calculated pursuant to Section 10 above. 21. TERM OF AGREEMENT All the provisions of this Agreement, including the benefits and burdens, run with the Home and this Agreement shall bind, and the benefit hereof shall inure to, the Owner, his or her heirs, legal representatives, executors, successors in interest and assigns, and to the City and its successors, until the earlier of (i) thirty (30) years from the date of purchase of the Home by A -12 Owner, or (ii) the date of Transfer of the Home to the City or another purchaser in compliance with this Agreement. 22. SUPERIORITY OF AGREEMENT The Owner covenants that he or she has not, and will not, execute any other agreement with provisions contradictory to or in opposition to the provisions hereof, and that, in any event, this Agreement is controlling as to the rights and obligations between and among the Owner, the City and their respective successors. 23. SUBORDINATION Notwithstanding any provision herein, this Agreement shall not diminish or affect the rights of the First and Second Lender under the First and Second Lender Deed of Trust or any subsequent First and Second Lender deeds of trust hereafter recorded against the Home in compliance with Section 24 of this Agreement. Notwithstanding any other provision hereof, the provisions of this Agreement and the City Deed of Trust shall be subordinate to the lien of the First and Second Lender Deed of Trust and shall not impair the rights of the First and Second Lender, or such lender's assignee or successor in interest, to exercise its remedies under the First and Second Lender Deed of Trust in the event of default under the First or Second Lender Deed of' Trust by the Owner. Such remedies under the First and Second Lender Deed of Trust include the right of foreclosure or acceptance of a deed or assignment in lieu of foreclosure. After such foreclosure or acceptance of a deed in lieu of foreclosure, this Agreement and the City Deed of Trust shall be forever terminated and shall have no further effect as to the Home or any transferee thereafter; provided, however, if the holder of such First or Second Lender Deed of Trust acquires title to the Home pursuant to a deed or assignment in lieu of foreclosure, this Agreement and the City Deed of Trust shall automatically terminate upon such acquisition of title, only if (i) the City has been given written notice of default under such First or Second Lender Deed of Trust with a sixty (60) -day cure period and (ii) the City shall not have cured the default within such sixty (60) -day period or commenced to cure and given its firm commitment to complete the cure in form and substance acceptable to the First and Second Lender, or (iii) the City shall not have exercised its option to purchase the Home pursuant to Section 17 above within such sixty (60) -day period and then proceeded diligently to cure the default within sixty (60) days of acquiring title to the Home. 24. REFINANCE OF FIRST OR SECOND MORTGAGE LOAN; FURTHER ENCUMBRANCE OF HOME A. The City agrees to promptly upon request execute and deliver any documents reasonably requested to subordinate this Agreement and the City Deed of Trust to a deed of trust securing a refinanced First Mortgage Loan and Second Mortgage Loan provided that, following such refinance, the principal amount of all debt secured by the Home will not exceed the greater of the outstanding principal balance of the refinanced First and Second Mortgage Loan or ninety- five percent (95 %) of the Indexed Value of the Home, determined in accordance with Section 10A above. B. The Owner covenants and agrees: (i) not to place any additional mortgage or deeds of trust on the Property without obtaining prior written consent of the City; and (ii) that the total principal amount of all debt secured by the Property shall not exceed ninety -five percent A -13 (95 %) of the Indexed Value of the Home, determined in accordance with Section 10A above, unless specifically approved in writing by the City. The City and the Owner agree that the requirements of this Section 24B are necessary to ensure the continued affordability of the Home to Owner and to minimize the risk of loss of the Home by Owner through default and foreclosure of mortgage loans. Owner further acknowledges that violation of the provisions of this Section 24B shall constitute a Default under this Agreement. 25. NONDISCRIMINATION The Owner covenants by and for itself and its successors and assigns that there shall be no discrimination against or segregation of a person or of a group of persons on account of race, color, religion, creed, age, disability, sex, sexual orientation, marital status, ancestry or national origin in the sale, transfer, use, occupancy, tenure or enjoyment of the Home, nor shall the Owner or any person claiming under or through the Owner establish or permit any such practice or practices of discrimination or segregation with reference to the use, occupancy, or transfer of the Home. The foregoing covenant shall run with the land. 26. RIGHTS OF BENEFICIARIES UNDER DEEDS OF TRUSTS This Agreement shall not diminish or affect the rights of the City under the City Deed of Trust. Notwithstanding any other provision in this Agreement to the contrary, this Agreement shall not diminish or affect the rights of the California Housing Finance Agency ( "CHFA "), United States Department of Housing and Urban Development ( "HUD "), the Federal National Mortgage Association ( "FNMA "), or the Veterans Administration ( "VA ") under the First and Second Mortgage Deed of Trust or any subsequent First or Second Lender deeds of trust hereafter recorded against the Home in compliance with Section 24 above. Notwithstanding any other provisions in this Agreement to the contrary, all of the provisions of this Agreement shall terminate and have no further force and effect upon the occurrence of one of the following events: A. Title is acquired by CHFA, HUD, FNMA, VA, the First or Second Lender or another party upon foreclosure of a deed of trust to the First or Second Lender or CHFA, or a deed of trust insured by HUD or guaranteed by VA. B. Title is acquired by another party by a deed in lieu of foreclosure of the First or Second Lender, CHFA, or FNMA deed of trust. 27. HUD FORBEARANCE RELIEF Notwithstanding other provisions of this Agreement, the City Option on Default pursuant to Section 17 above shall not be exercised by the City when a deed of trust insured by HUD is secured by the Home, and: (i) the owner is undergoing consideration by HUD for assignment forbearance relief; or (ii) the owner is undergoing consideration for relief under HUD's Temporary Mortgage Assistance Payment (TMAP) program. 28. INVALID PROVISIONS - If any one or more of the provisions contained in this Agreement shall for arr reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall A -14 be deemed severable from the remaining provisions contained in this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 29. CONTROLLING LAW The terms of this Agreement shall be interpreted under the laws of the State of California. The venue for any legal action pertaining to this Agreement shall be San Luis Obispo County, California. 30. NO WAIVER No delay or omission in the exercise of any right or remedy of City upon any default by Owner shall impair such right or remedy or be construed as a waiver. The City's failure to insist in any one or more instance upon the strict observance of the terms of this Agreement shall not be considered a waiver of the City's right thereafter to enforce the provisions of the Agreement. The City shall not waive its rights to enforce any provision of this Agreement unless it does so in writing, signed by an authorized agent of the City. 31. NOTICES All notices required herein shall be sent by certified mail, retum receipt requested or express delivery service with a delivery receipt and shall be deemed to be effective as of the date received or the date delivery was refused as indicated on the return receipt as follows: To the Owner: At the address of the Home. To the City: City of Arroyo Grande P. O. Box 550 Arroyo Grande, CA 93421 Attn: City Manager The parties may subsequently change addresses by providing written notice of the change in address to the other parties in accordance with this Section. 32. INTERPRETATION OF AGREEMENT The terms of this Agreement shall be interpreted so as to avoid speculation on the Home and to insure to the extent possible that its sales price and mortgage payments remain affordable to persons and families of low- and/or moderate - income. 33. EXHIBITS Any exhibits referred to in this Agreement are incorporated by such reference. A -15 IN WITNESS WHEREOF, the parties have executed this Agreement on or as of the date first written above. CITY: OWNER(): M�fles Mu uira E� By. CITYNIANAGER• Elizabeth A. Muguira STATE OF CALIFORNIA ) ) ss COUNTY OF SAN LUIS OBISPO ) On .TUNE ID , 2005, before me, gad- 1/4 Weill zec t-'DTtP/ f u6t/C_ , personally appeared . 5 - m- VEN f}Dti/Y1 ) , personally known to me (: , - • • • : • . • • • • • • • • - ) to be the person(s) whose name(s) is /are- subscribed to the within instrument and acknowledged to me that he /shelthey executed the same in his/herl heir authorized capacity(ies), and that by his/herkheir signature(-) 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. ., KELLY 1'VEIMORE LI ? ` 1�. CommMabn M 1 a-s .9.:�i Notoryq. < . , Gb » 4t u� �w �3 ` sort Luis bic - c C o „ , J /1 Mr comet, Extlr« F.b s, 2 STATE OF CALIFORNIA ) ) ss COUNTY OF SAN LUIS OBISPO ) r ' C- 1lvCL.� &et On a a' t- 1 , 200, before me, ,/t \ 4 - l. l'il f%11.. - , pn y d Q AL Lit r , personally- know/up. n1ttY 41c i i Li rL, t..../ ! ( I ii � llr 1 / � me (or proved to fn on the basis of satisfactory evidencerto 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/het: 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 o ficial seal. 11 1 APRIL A. COVIEL r ` Comm./ 1357146 1!) • UFOANIA N _ 1 ` y , ; , ''r' • NOTARY PUBLIC• CA ' Sm Luis Ohirpo Gamy Nor 1V , - _ \., MY Comw. WY N,t00i: A -16 Escrow No. 189448 -S /K •..r EXHIBIT A Title Order No. 00189448 Lot 15 of Tract No. 2505, in the City of Arroyo Grande, County of San Luis Obispo, State of California, according to map recorded August 18, 2004 in Book 24, Pages 12, 13, 14, & 15 of Maps, in the office of the County Recorder of said County. Assessor's Parcel No: a portion of 077 -121 -006 Hhibit One (Rev. 8/961 ��11r'� ^ DOCUMENT ENO OF MEN r