Price-Cap Clause Stymies Upper Lawson Participation

SAN MIGUEL COUNTY – The dizzying collection of guidelines that govern deed-restricted properties in San Miguel County took a step toward uniformity last week when the Board of County Commissioners voted unanimously to approve a single, updated deed restriction document that affected owners may choose whether or not to sign.

“I think there’s benefit to having a consistent, uniform deed restriction if possible, but we’re not trying to ram it down anyone’s throat,” explained County Planning Director Mike Rozycki.

The Amended and Restated Deed Restriction and Covenant codifies the R-1 [School District] housing deed restriction regulations into a single document that cannot be changed without written consent from the affected owner.

“Right now [the owners] really don’t know what they have,” said Rozycki. “By signing it they will have a written contract that can’t be changed.”

Prior to the creation of the new document, the deed restriction for affordable housing in the R-1 School District was established by a note placed on the subdivision plat that created the affected lot or unit. That note stated that the ownership, use and occupancy of the property were subject to certain affordable housing regulations outlined in the county Land Use Code.

While many affected owners may have understood their properties were subject to the housing regulations that were in effect at the time their subdivision plat was approved and recorded, or when they purchased their property, that was not actually the case.

“That may have been the intent, but that was not the way things were written,” said Rozycki.

In fact, since the county established the original deed restriction it has amended the relevant section of the Land Use Code some 80 times for the purpose of modifying the housing regulations.

“A lot was covered in the Land Use Code, and counties can change it as long as they go through a public process,” he explained.

In some cases the changes imposed more restrictive requirements on the owner of a deed-restricted lot or unit, while in other cases the new requirements were less restrictive. Ultimately, however, the changes have left holders of affected properties, who believed their deed restrictions could not change without their express approval, unclear about which rules actually apply to them.

The new document attempts to dispel that uncertainty.

“This makes it much clearer, much plainer what the ground rules are,” Rozycki said.

Should owners choose to sign the document, its rules will supplant the original deed restriction regulations outlined on the plat that created their subdivision and may not be changed without written approval from the owners.

The new covenant document makes several changes to the existing deed restriction guidelines, including some that should help broaden the pool of people who may qualify to buy or rent the affected properties, thereby reducing the number of situations requiring exceptions to meet purchase, rental, ownership and occupancy requirements.

“I think it increases the pool of buyers potentially, but not unduly,” Rozycki told the commissioners.

For example, the original guidelines prevented deed-restricted owners from owning other residential properties anywhere in Montrose, Ouray, San Miguel or Dolores counties. The new covenant document relaxes that restriction, limiting ownerships to a single residential property in the R-1 School District.

One change that has proven to be a sticking point with the Lawson Hill Property Owner’s Company, however, is the issue of price caps.

While the original deed restriction does not specifically address the issue, the covenant document expressly prohibits the county from imposing price caps on existing R-1 deed restricted property save for a single circumstance. In that case it could be imposed were the county to purchase a property out of foreclosure in order to retain its deed restriction and subsequently take a loss on its resale.

The purpose of the provision is to prevent the next owner from gaining a windfall when reselling it, however the new owner, a successive owner, or the respective homeowners association could buy out the price cap.

“Why should taxpayers’ money be used to give a wind fall to an individual without anything in return in the way of a public benefit,” explained County Administrator Lynn Black during the meeting last week.

While the provision works for San Bernardo and Aldasoro Ranch where the homeowners associations have no prohibitions on price caps, it is in conflict with the Lawson Hill general declaration that prohibits them.

While a number of Lawson Hill owners stated concerns about the clause at the meeting including Jody Van Stratt who worried that it could trigger more foreclosures by, in essence, tainting neighboring properties with a certain stigma, the commissioners were not swayed.

“I hear what you’re saying, but it’s kind of like you want to be in the free market but you don’t,” said Commissioner Elaine Fischer, noting that the price cap may be bought out.

“It’s amazing to me that we have built in a lot of flexibility into this process,” she continued. “I feel like there is a lot of flexibility.”

Representing the Lawson Hill property owners, attorney Tom Kennedy suggested the county might entertain an equity sharing arrangement in lieu of price capping and thereby satisfy everyone.

Black called the arrangement “a non-starter” as far as lenders are concerned after speaking with a local mortgage broker about the idea.

As a result of the impasse, the new covenant document will not yet be available to Upper Lawson Hill owners until some sort of agreement can be reached.

“Our board has been wholly behind trying to work through this agreement,” said Lawson Hill Property Owner’s Association manager Pam Hall after the meeting.

Nonetheless, “By authorizing our owners to sign it we would be in conflict with our own decs,” she said.