Champlain Housing Trust: Ground Lease Knowledge Building Across Community Land Trusts In Europe and the United States Belgium – July 1, 2 nd, 2013 Brenda M. Torpy, CEO

Presentation Overview What is a Ground Lease? Challenges in using a Ground Lease Model Key Components of the Ground Lease Best Practices in Drafting a Ground Lease Critical Decisions- Resale Formula Questions and Answers

Ground Lease ties the improvements & land together Community Land Trust owns the land Individual owns the home and the leasehold interest in land Dual Ownership

I.Legal II.Real Estate Finance & Industry Practice III.Culture & Social Challenges to the Ground Lease Model in the US

I. Legal Solution Contract between two consenting parties Term Limit (99 years) and renewable Community in Community Land Trust – Legal Documents are not only protection of mission Rule Against Perpetuities – Prohibition against limiting commercial value of land

II. Real Estate Finance & Industry Practice Challenge: Residential real estate never separates land and home Challenge: Appraisers resist valuing house separately from land Very difficult to change an industry that is philosophically wary, if not hostile towards our mission Many years to gain acceptance from lenders and realtors to offer mortgages to CLT buyers.

III. Cultural & Social Property law and industry practice reinforced cultural value of private ownership and freedom to profit. Solution: Affordability and access to the highly prized ownership of a home. In Vermont, a rural state, owning the land had even greater significance and these attitudes needed to be overcome. CHT made CLT ownership as like the market as possible. This has deep and broad support now.

Key Components of Ground Lease Owner can use land just as a typical homeowner would Use of Land 99 years, can be renewed once Term of Lease CHT requires at least 6 months Owner Occupancy CHT charges $35/month. Market rates are approx. $300/month Ground Lease Fee To pay property taxes and insurance Owner Responsibility To maintain home Owner Responsibility Including Capital Improvement Credits Resale Formula

Signed document stating mutual understanding of unique nature of transaction Purpose: to outline the intent of the parties in signing the lease Stipulation Acknowledgement by owner that he/she was represented by legal counsel Acknowledgement that legal counsel reviewed all CLT closing documents Client Declaration Defines CLT and Lender’s rights and responsibilities Guards against homeowner refinancing without CLT approval Permitted Mortgages Best Practices (Exhibits to Lease)

Resale Formula- Critical Decisions Appraisal BasedIndex Based Owner receives a guaranteed return (1% or 2% increase of purchase price when selling) Goal: To guarantee home stays affordable Advantages: Simplicity, owner gets increase even when market value decreased Owner Receives a percentage (25%) of market appreciation Goal: To try to mirror the open market as much as possible Advantages: Easier to gain acceptance by lenders, owner benefits when market value increases

Critical Decisions

Questions?