22-0118_ARROYO CAP II-1, LLC_E12_Agenda ReportCity of San Juan Capistrano
Agenda Report
TO: Honorable Mayor and Members of the City Council
FROM: Benjamin Siegel, City Manager
SUBMITTED BY: Joel Rojas, Development Services Director
PREPARED BY: Laura Stokes, Housing Supervisor / Associate Planner LS
DATE: January 18, 2022
SUBJECT: Density Bonus Housing Agreement with Arroyo Cap II-1, LLC to
Provide Fourteen Affordable Housing Units as Part of the Petra
Avelina Residential Community
RECOMMENDATION:
Approve and authorize the City Manager to execute a Density Bonus Housing Agreement
(Attachment 1) and associated documents with Arroyo Cap II-1, LLC for the provision of
14 affordable units as part of the Peta Avelina residential community.
EXECUTIVE SUMMARY:
In 2020, the City approved the Petra Avelina residential project (previously known as the
“Tirador” project), a proposed 132-unit residential development located at the western
terminus of Calle Arroyo. To satisfy the City’s inclusionary housing requirements, the
project developer agreed to provide 10% of the residential units (14 units) to moderate
income households. Pursuant to the project’s conditions of approval, prior to issuance of
any Certificates of Occupancy for the project, the developer is required to record a density
bonus housing agreement on the property that governs the sale of the 14 affordable units.
DISCUSSION/ANALYSIS
On July 21, 2020, the City Council approved of the Petra Avelina residential project
consisting of 132 residential units, comprised of single-family and townhome units, on a
16.1-acre site at 27000 Calle Arroyo. To satisfy the City’s inclusionary affordable housing
requirement, the developer agreed to dedicate 14 units (10% of the project’s 132 units)
to moderate income households. The developer utilized development incentives and
concessions available to the project due to the provision of the affordable units.
1/18/2022
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City Council Agenda Report
October 19, 2021
Page 2 of 3
The project’s conditions of approval require that an agreement be entered into between
the City and developer to memorialize the affordable unit requirements. Working with the
City Attorney’s office, staff prepared a Density Bonus Housing Agreement which has been
reviewed and approved by the property owner, Arroyo Cap II-1, LLC. The Agreement
identifies that 14 of the project’s units will be made available to households making 120%
or less than the area median income (i.e. less than $128,050) and be sold at a price which
is affordable to households making this level of income. The Agreement also dictates the
construction phasing of the affordable units and future sale of the affordable units.
The Agreement will be recorded to run with the land and eventually be replaced with an
Equity Sharing Agreement that will be recorded against each affordable unit upon the
sale of the unit. The Equity Sharing Agreement requires the unit to be sold at a price
affordable to moderate income households at the time of the sale, or that the homeowner
share the earned equity of the unit with the City if resold at market rates. The Equity
Sharing Agreement establishes a covenant on the affordability of the unit for 30 years. In
addition, the Equity Sharing Agreement allows the City to purchase the unit if sold before
the 30 years or waive the option and receive a portion of shared appreciation if sold above
the affordability level of a moderate-income household at the time of sale. The Equity
Sharing Agreement is provided as Exhibit D in the Density Bonus Housing Agreement.
FISCAL IMPACT:
The staff time associated with preparation of the Agreement has been charged to the
developer deposit on file for the Petra Avelina project.
ENVIRONMENTAL IMPACT:
In accordance with the California Environmental Quality Act (CEQA) the recommended
action is exempt from CEQA per Section 15061(b)(3), the general rule that CEQA applies
only to projects which have the potential for causing a significant effect on the
environment. Where it can be seen with certainty that there is no possibility that the
activity in question may have a significant effect on the environment, the activity is not
subject to CEQA.
PRIOR CITY COUNCIL REVIEW:
On July 21, 2020, the City Council approved of Tentative Tract Map (TTM) 17-002, Flood
Plain Land Use Permit 20-001, and the Environmental Impact Report for the Petra Avelina
residential project.
COMMISSION/COMMITTEE/BOARD REVIEW AND RECOMMENDATIONS:
Not applicable.
City Council Agenda Report
October 19, 2021
Page 3 of 3
NOTIFICATION:
Arroyo Cap II-1, LLC c/o Landsea Homes
ATTACHMENT(S):
Attachment 1: Density Bonus Housing Agreement with Arroyo Cap II-1, LLC
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RECORDED AT THE REQUEST OF
AND WHEN RECORDED RETURN TO:
City of San Juan Capistrano
32400 Paseo Adelanto
San Juan Capistrano, CA 92675
Attention: Housing Supervisor
(Space above for Recorder’s Use)
This Density Bonus Housing Agreement is
recorded at the request and for the benefit of
the City of San Juan Capistrano and is exempt
from the payment of a recording fee pursuant
to Government Code Section 6103 and
27383.
DENSITY BONUS HOUSING AGREEMENT
BY AND BETWEEN
THE CITY OF SAN JUAN CAPISTRANO
A California Municipal Corporation
and
ARROYO CAP II-1, LLC,
A Delaware Limited Liability Company
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DENSITY BONUS HOUSING AGREEMENT
This Density Bonus Housing Agreement (hereinafter “Agreement”) is entered into as of
this ____day of __________, 2021 (hereinafter the “Effective Date”) by and between the City of
San Juan Capistrano, a municipal corporation (hereinafter “City”) and Arroyo Cap II-1, LLC, a
Delaware limited liability company (hereinafter “Owner”). City and Owner are hereinafter
sometimes referred to collectively as the “Parties” and individually as a “Party.”
RECITALS
A. Owner is the owner in fee of that certain real property real property consisting of
approximately 16.1 acres of land generally located within the City on the south side
of Calle Arroyo and north of San Juan Creek, more particularly described in the
legal description attached hereto as Exhibit A and more particularly depicted in
Exhibit B, both of which are incorporated herein by this reference (the “Property”).
B. Owner’s predecessor-in-interest submitted to the City, and the City approved, the
following entitlement applications: Architectural Control (AC) 17-033, Tentative
Tract Map (TTM) 17-002, Grading Plan Modification (GPM) 17-013, Floodplain
Land Use Permit (FP) 20-001, and Sign Permit (SP) 20-012, for the development
of a 132-unit residential project consisting of 43 two-story detached single-family
units and 89 three-story attached townhome units (14 of which will be designated
affordable units for moderate income households (the “Affordable Units”)),
including such amenities as gathering areas for barbeques, an open play turf area,
and a multipurpose pedestrian, bicycle, and equestrian trail (the “Project”).
C. The Property is located in the Planned Community Zone, regulated by
Comprehensive Development Plan (CDP) 78-1, with a General Plan Designation
of Planned Community and General Open Space, and is currently vacant.
D. Pursuant to California Law (Government Code sections 65915-65918) (the “State
Density Bonus Law”) and Section 9-3.505 of the City of San Juan Capistrano
Municipal Code (“SJCMC”), owners of projects that include specified levels of
affordable housing are entitled to apply for and receive certain density bonuses and
additional incentives in order to facilitate the economic feasibility of those projects.
E. Owner proposed to include at least ten percent of the total dwelling units in the
Project (a common interest development) for persons or families of moderate
income, as defined by Health and Safety Code Section 50093, and to offer all units
for sale to the public.
F. Owner requested a density bonus concession and waiver in order to accommodate
building an additional fourteen (14) units for a total development of 132 units.
G. Owner requested one concession: (1) Floor-to-Floor ratio be increased from 80%
to 93%.
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H. Owner also requested four waivers: (1) Minimum 8’-0” separation between
buildings where 20’-0” is required; (2) 0’-0” setback from City-owned well
property where 20’-0’ is required; (3) 10’-0” setback from 24 Hour Fitness property
where 20’-0” is required, and (4) eliminate requirement to provide one RV parking
stall for every seven units.
I. On June 9, 2020, the City’s Planning Commission approved Owner’s AC, GPM,
SP, and Density Bonus applications and recommended City Council approval of
the TTM and FP applications, by approval of Resolution Nos. 20-06-09-02 and 20-
06-09-01, subject to execution of a Density Bonus Housing Agreement between the
City and Owner.
J. The City has complied with the procedures set forth in the California
Environmental Quality Act (Public Resources Code section 21000 et seq.)
(“CEQA”) as fully set forth in the Planning Commission resolutions approving the
Project.
K. The Parties are in the processes of working Final Subdivision Map for the Project.
L. This Agreement (which includes by this incorporation by reference the attached
Exhibits) is intended to set forth the terms and conditions for the implementation
of the Project’s requirement to provide affordable housing units in exchange for
receiving the density bonus units and one concession.
M. The development of the Project on the Property pursuant to this Agreement, and
the fulfillment generally of this Agreement, are in the vital and best interests of the
City and the welfare of its residents, and in accordance with the public purposes
and provisions of applicable federal, state, and local laws and requirements.
COVENANTS
NOW, THEREFORE, in consideration of the above recitals, which are incorporated herein
by this reference, and of the mutual covenants hereinafter contained and for other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties
agree as follows:
1. DEFINITIONS AND EXHIBITS
1.1 Definitions. In addition to the terms that may be defined elsewhere this Agreement,
the following terms when used in this Agreement shall be defined as follows:
1.1.1 “Adjusted for family size appropriate to the unit” means, pursuant to the
State Density Bonus Law (Government Code section 65915 et seq.), as it exists on the Effective
Date, the same definition in Health and Safety Code section 50052.5.
1.1.2 “Affordable Housing Cost” means that purchase price which would result
in a Monthly Housing Cost (as defined below) which does not exceed the price authorized for a
Moderate Income Household pursuant to Health and Safety Code section 50052.5.
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1.1.3 “Affordable Unit” means individually and “Affordable Units” means
collectively the fourteen (14) Units within the Project to be sold by Owner to a Moderate Income
Household at an Affordable Housing Cost in accordance with this Agreement. “Affordable cost”
shall be calculated in the manner set forth in Exhibit C hereto.
1.1.4 “Agreement” means this Density Bonus Housing Agreement.
1.1.5 “Base Units” means the 118 Units that Owner would be authorized to
develop on the Property without application of the State Density Bonus Law.
1.1.6 “City” means the City of San Juan Capistrano, California, and the City’s
successors and assigns.
1.1.7 “City Deed of Trust” means a Deed of Trust executed by a Qualified
Purchaser and recorded as a lien against the Affordable Unit acquired by that Qualified Purchaser
as required by the terms of the Equity Sharing Agreement, the form of which is attached to the
Equity Sharing Agreement.
1.1.8 “Complete” or “Completed” means, for any unit, to receive or have
received a certificate of occupancy from the City.
1.1.9 “Planning Commission” means the Planning Commission of the City of
San Juan Capistrano.
1.1.10 “Density Bonus Units” means the fourteen (14) Units in addition to the
Base Units that Owner shall develop pursuant to the density allowance in the State Density Bonus
Law and the terms and conditions of this Agreement, of which Owner would not be entitled to
develop without providing the fourteen (14) Affordable Units.
1.1.11 “Effective Date” means the date the City executes this Agreement and then
on, this Agreement shall be in full force and effect.
1.1.12 “Equity Sharing Agreement” means that certain Owner Occupancy and
Equity Sharing Agreement to be entered into by and between the City and each Moderate Income
Household that purchases a For Sale Affordable Unit, which shall be recorded against each For
Sale Affordable Unit in the form attached here attached hereto as Exhibit D.
1.1.13 “Household” means all persons residing in a Unit.
1.1.14 “Housing Regulations” means the regulations published from time to time
by the California Department of Housing and Community Development pursuant to Health and
Safety Code section 50093.
1.1.15 “Income Verification Materials” means those materials specified in
Section 4.5 of this Agreement used to verify the income of a proposed purchaser of an Affordable
Unit.
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1.1.16 “Moderate Income Household” means a Household whose income does
not exceed the qualifying limits for moderate income households pursuant to Health and Safety
Code section 50093, which, as of the date of this agreement, is those households earning one
hundred twenty (120) percent or less of Median Income, adjusted for family size appropriate for
the Unit.
1.1.17 “Market Rate Units” means the Units within the Project to be sold by
Owner to a Household without restriction.
1.1.18 “Median Income” means the San Juan Capistrano, California area median
income, adjusted for family size appropriate for the unit, as periodically published by the State of
California Department of Housing and Community Development in section 6932 of Title 25 of the
California Code of Regulations, or successor regulation. Upon request by Owner, City shall
provide to Owner the amount of the Median Income.
1.1.19 “Owner” means Arroyo Cap II-1, LLC, a Delaware limited liability
company, and/or its permitted successors and assigns to all or any part of the Property.
1.1.20 “Project” means that certain residential development as more particularly
described in Recital B and Section 2 of this Agreement.
1.1.21 “Property” means that certain real property more particularly described in
the legal description in Exhibit A and improvements thereon.
1.1.22 “Qualified Purchaser” means a person or family who complies with all
income verification requirements in this Agreement and earns 120 percent or less of the Median
Income, adjusted for family size for the Unit, to be determined in accordance with the Housing
Regulations.
1.1.23 “State Density Bonus Law” means Government Code section 65915-
65918.
1.1.24 “Unit” means each of the residential dwelling units within the Project to be
sold by Owner pursuant to this Agreement.
1.2 Exhibits. The following documents are attached to, and by this reference made a
part of, this Agreement.
Exhibit “A”-- Legal Description of Property
Exhibit “B”-- Map showing Property and its Location
Exhibit “C” Affordable Cost Calculation
Exhibit “D”--Equity Sharing Agreement (and attachments)
Exhibit “E”--Phasing Plan and Map
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2. DEVELOPMENT OF THE PROPERTY
2.1 Project. Owner shall cause to be developed the Property as a 132-unit residential
project consisting of 43 two-story detached single-family units and 89 three-story attached
townhome units (14 of which will be designated affordable units for moderate income households).
2.2 Total Number of Units. The Project shall have fourteen Affordable Units pursuant
to the terms and conditions of this Agreement. Owner expressly understands and agrees that the
State Density Bonus Law currently allows up to a 6 percent increase in the number of units because
Owner has restricted 10.6 percent of the units as affordable. Owner requests fourteen (14) Density
Bonus Units, for a total limit for the Project of 132 units.
2.3 Market Rate Units. The Project shall have no more than 118 Market Rate Units
with unit sizes as may be determined by the Owner. Owner may alter the unit distribution of the
Market Rate Units in Owner’s discretion, provided that the Project has the minimum number of
Affordable Units as specified in this Agreement.
2.4 Affordable Units. The Project shall have no less than fourteen (14) units as
Affordable Units pursuant to the terms and conditions of this Agreement. The Affordable Units
shall be consistent in terms of type, design, and number of bedrooms with the Market Rate Unit
types as depicted in the Planning Commission-reviewed and Planning Commission-approved
plans for AC17-033, TTM17-002 and Tentative Tract Map No. 18148, and shall be located
throughout the Project, not clustered in one area or building.
2.5 Minimum Development Standards For Affordable Units. The Affordable Units
shall be compatible with the Project as a whole.
2.6 Phasing of Development of Affordable Units. Notwithstanding Condition of
Approval No. 71 in Exhibit A to City Resolution No. 20-07-21-02, dated July 21, 2020 (“Condition
No. 71”), Owner shall construct and develop or cause the construction and development of the
Affordable Units for Moderate Income Households and shall develop those units concurrently with
the Market Rate Units through the first six (6) phases of development, in substantial compliance
with in the Phasing Plan and Map attached hereto as Exhibit E and incorporated herein by
reference; provided, however, that at least twenty-nine (29) Market Rate Units (whether
townhomes or single-family homes) shall remain uncompleted and shall not be completed until
after all fourteen (14) of the Affordable Units are completed. In addition, Owner shall complete a
majority of the Affordable Units (at least eight units) within the first two phases of development.
In light of the fact that Affordable Units are interspersed with Market Rate Units within townhomes
and throughout the development, strict compliance with Condition No. 71 is not feasible. The
phased development described herein is intended to result in an orderly completion of units
throughout the development, to create a more cohesive community, and to achieve the City’s
policy goal of ensuring that the Affordable Units are completed before all Market Rate Units are
completed. Furthermore, phased development would facilitate more favorable financing terms for
the Owner and ultimately result in a shorter timeframe for full development.
2.7 Permits and Processing; Compliance with Laws. Owner at its sole cost and expense
shall secure or cause to be secured any and all permits that may be required by City or any other
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federal, state, or local government entity having or claiming jurisdiction over the Property or
Project. Upon securing any and all permits, Owner shall carry out and perform the development
of the Project in conformity with all applicable federal, state, and local laws and regulations, and
all conditions of approval issued by the Planning Commission for the Project.
2.8 Indemnification from Mechanic’s Liens. Owner shall indemnify, defend and hold
harmless City and all its officials, officers, employees, representatives, volunteers and agents from
any and all alleged or actual claims, causes of action, liabilities, and damages from any third party
by reason of a mechanic’s lien or work, labor, services, or materials supplied or claimed to have
been supplied to Owner or anyone holding the Property or Project, or any part thereof, through or
under Owner.
3. RECORDING OF AGREEMENT
No later than ten (10) days after City’s issuance of the first Certificate of Occupancy,
Owner shall record or shall cause to be recorded in the Official Records for Orange County,
California, an executed original of this Agreement. City shall cooperate with Owner in promptly
executing in recordable form this Agreement.
4. SALE OF UNITS
4.1 Conveyance of Units. Owner may convey title to the Units at any time after the
Effective Date, in accordance with any and all federal, state, and local laws and regulations. Owner
may offer to sell some or all Units in phases or all at once in Owner’s discretion, provided Owner’s
sale complies with applicable federal, state, and local laws and regulations. Owner shall convey
title to each Affordable Unit through a purchase and sale agreement to be serviced through an
escrow. Upon City’s request, Owner shall deliver to City a copy of the purchase and sale agreement
and preliminary title report for the conveyance of an Affordable Unit.
4.2 Notice to City. Owner shall provide to City no less than sixty (60) days written
notice prior to the close of escrow of the first Affordable Unit so that City receives notice that
Owner has commenced selling the Affordable Units.
4.3 Designation of Affordable Units. Prior to commencement of any activities to
market, offer, and /or sell the Units, Owner shall designate fourteen (14) Units as Affordable Units.
Owner shall disclose to City the Units that are designated as Affordable Units prior to
commencement of any activities to market, offer, and/or sell the Affordable Units, which shall be
no be no less than sixty (60) days prior to the close of escrow of the first Affordable Unit.
4.4 Sale of Affordable Units. The sale price of each Affordable Unit shall be the
Affordable Housing Cost. So that the City may verify the amount is not more than the Affordable
Housing Cost, Owner shall provide written notice to City of the sale price of each Affordable Unit
prior to offering for sale the Affordable Unit. City verification shall be provided within fifteen (15)
business days of City’s receipt of Owner’s written notice of the proposed sale price. Owner shall
sell each Affordable Unit only to those who qualify as a Qualified Purchaser. Owner shall not
convey title to any Affordable Unit to a Household that does not qualify as a Moderate Income
Household, and Owner shall not convey fee title to any Affordable Unit to a Moderate Income
Household at a price that exceeds the Affordable Housing Cost for that Affordable Unit.
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4.5 Income Verification. The proposed purchaser shall provide to Owner, for the
purpose of City approval, the following information: the Social Security Number of the proposed
purchaser; copies of the federal and state income tax returns filed by the proposed purchaser for
the prior two (2) calendar years; preceding six (6) months of bank statements of the proposed
purchaser; background documentation of any income (i.e. Social Security award letter, stock
interest forms, court statement regarding support payments, retirement or pension benefit
statement, etc.); copies of the two most current wage earning statements of the proposed purchaser;
the purchase price that the proposed purchaser intends to pay for the Affordable Unit; and any
other information that City may reasonably require to verify the income of the proposed purchaser.
The proposed purchaser of an Affordable Unit shall also provide, for the purpose of City approval,
a written statement signed by the proposed purchaser (in a form acceptable to the City) that
authorizes City to inspect, use, and rely on the information provided by the proposed purchaser,
and waiving and releasing any right or claim that said proposed purchaser might otherwise have
in the absence of such written authorization to maintain the privacy or confidentiality of such
information. The information, statements, agreements, and other documents that a proposed
purchaser is required to provide pursuant to this section 4.5 are collectively the “Income
Verification Materials.” Owner shall have the obligation to collect and compile all Income
Verification Materials from a proposed purchaser of an Affordable Unit.
4.6 City Verification. Owner shall not convey fee title to any Affordable Units to a
proposed purchaser until such time as City has determined (i) the proposed purchaser intends to
occupy the Affordable Unit as a principal residence; (ii) the proposed purchaser is a Moderate
Income Household; (iii) the purchase price for the Affordable Unit does not exceed the Affordable
Housing Cost; (iv) the proposed purchaser and City have executed the Equity Sharing Agreement
and City Deed of Trust, both in a recordable form; and (v) the proposed conveyance will not
otherwise violate the terms and conditions of this Agreement. Owner shall cooperate with and
reasonably assist City with its determination of the matters set forth in clauses (i)-(v) herein. Owner
shall have the obligation to deliver to City all Income Verification Materials for a proposed
purchaser of an Affordable Unit. City shall respond to a request from Owner for verification of the
matters in clauses (i)-(v) herein by written notice, which shall be delivered to Owner within fifteen
(15) business days of City’s receipt of all Income Verification Materials for the proposed purchaser
of the Affordable Unit. If City is unable to verify the proposed purchaser’s income as provided
herein due to failure by purchaser to deliver required documentation under this section, then the
prospective purchaser’s income shall be deemed to exceed the maximum allowable limit for a
Moderate Income Household. In the event the City determines a proposed conveyance would
violate this Agreement, City shall specify the reasons for the violation. If the proposed violation is
not corrected to the satisfaction of City within thirty (30) days after the date of the notice specifying
the violation, or within such further time as the City determines in its sole and absolute discretion
is necessary to correct said violation, Owner shall not convey title to the proposed purchaser. The
City may apply to a court of competent jurisdiction for specific performance of this Agreement,
for a declaration that the proposed conveyance is void, or for any such relief as may be appropriate
under law or equity.
4.7 Quality Standards for Affordable Units. At the time of conveyance of an Affordable
Unit from Owner to a Qualified Purchaser, the physical condition and quality of the Affordable
Unit shall be in the same physical condition and of the same quality as the other Market Rate Units
in the Project that Owner has offered for sale.
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4.8 Execution and Recording of Equity Sharing Agreement and City Deed of Trust. At
the close of escrow for each Affordable Unit, Owner shall cause to be executed the Equity Sharing
Agreement and the City Deed of Trust and the attachments thereto, with the Equity Sharing
Agreement and City Deed of Trust executed in a recordable form. At the close of escrow, Owner
shall record or cause to be recorded the instruments effectuating the conveyance of the Affordable
Unit in the Official Records for Orange County in the following order: (i) the grant deed conveying
title to the Qualified Purchaser, (ii) the Equity Sharing Agreement, and (iii) the City Deed of Trust..
Upon the date of recording, the terms and conditions of the Equity Sharing Agreement and the
City Deed of Trust shall be binding upon and run with the Affordable Unit. City shall cooperate
with Owner and each Qualified Purchaser to execute the Equity Sharing Agreement, City Deed of
Trust and the attachments thereto for each Affordable Unit so that the Equity Sharing Agreement
and City Deed of Trust may be recorded before the close of escrow for that particular Affordable
Unit.
4.9 Sale of Units; Indemnification. In addition to any other indemnification provided
in this Agreement, Owner shall indemnify, defend and hold harmless City and its officials, officers,
employees, representatives, agents, and volunteers (collectively, “Indemnitees”) from and against
any claims, liabilities, damages, or losses (collectively “Losses”) alleged or made against
Indemnitees by any person or entity for any alleged or actual violation of any federal, state, or
local law or regulation in connection with the sale by Owner of the Units, or otherwise arising
from any act or omission of Owner pursuant to the entirety of this Section 4, provided, however,
that Owner shall not be responsible for Losses arising from or caused by the negligence or willful
misconduct of Indemnitees.
4.10 Qualified Purchaser Marketing and Orientation. Owner shall be responsible for
marketing the Affordable Units to Qualified Purchasers. Owner shall not be responsible for
warranting the qualifications of the Qualified Purchasers or the Income Verification Materials, as
defined herein. Owner shall coordinate with designated City staff for the marketing plan of any
Affordable Units. As part of the marketing plan, and in no event later than the close of escrow of
an Affordable Unit, City shall provide to the Qualified Purchaser of the Affordable Unit an in-
person, informational session that will explain, in plain and simple language, the resale restrictions
and other provisions of the Equity Sharing Agreement.
5. TERM OF THIS AGREEMENT
5.1 Term. The term of this Agreement shall commence on the Effective Date and shall
continue until all of the Affordable Units have been conveyed to Moderate Income Households
pursuant to this Agreement and each Qualified Purchaser has entered into an Equity Sharing
Agreement with the City, which has been executed by both the City and the Qualified Purchaser,
the Qualified Purchaser has executed a City Deed of Trust in favor of the City and recorded the
Equity Sharing Agreement and City Deed of Trust for all Affordable Units pursuant to this
Agreement. Owner shall provide upon City’s request evidence that Equity Sharing Agreements
and Deeds of Trust have been recorded for all of the Affordable Units. Each and every Qualified
Purchaser of an Affordable Unit, however, shall continue to be bound by the restrictions set forth
in the Equity Sharing Agreement and City Deed of Trust.
6. DEFAULT AND TERMINATION; INDEMNIFICATION
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6.1 Default. Failure or delay by any Party to perform any term or provision of this
Agreement which is not cured within thirty (30) days after receipt of notice from the other Party
specifying the default (or such other period specifically provided herein) constitutes a default under
this Agreement; provided, however, if such default is of the nature requiring more than 30 days to
cure, the defaulting Party shall avoid default hereunder by commencing to cure within such 30 day
period, and thereafter diligently pursuing such cure to completion within an additional sixty (60)
days following the conclusion of such 30 day period (for a total of ninety (90) days). Except as
required to protect against further damages, the injured Party may not institute proceedings against
the Party in default until the time for cure has expired. Failure or delay in giving such notice shall
not constitute a waiver of any default, nor shall it change the time of default.
6.2 Rights and Remedies Cumulative. The rights and remedies of the Parties are
cumulative, and the exercise by either Party of one or more of its rights or remedies shall not
preclude the exercise by it, at the same or different times, of any other rights or remedies for the
same default or any other default by the other Party.
6.3 Indemnification. In addition to any other indemnification specifically provided in
this Agreement, Owner agrees to defend, indemnify and hold harmless City and its officers,
officials, agents, employees, representatives, and volunteers (collectively, “Indemnitees”) from
and against any loss, liability, claim, or judgment arising from any act or omission of Owner in
connection with its obligations under this Agreement, except to the extent caused by the negligence
or willful misconduct of Indemnitees.
7. ASSIGNMENT; COVENANTS RUNNING WITH THE LAND
7.1 Assignment by Owner. The qualifications and identity of Owner are of particular
concern to City. It is because of those qualifications and identity that City has entered into this
Agreement. Accordingly, Owner shall not sell, transfer, or assign the Property or Project in whole
or part, or transfer or assign Owner’s rights and obligations in this Agreement, without the City’s
prior written approval, which shall not be unreasonably withheld.
7.2 Covenants Run with the Land. The Property shall be held, sold, conveyed,
hypothecated, encumbered, used, and improved subject to the covenants, conditions, and
restrictions set forth herein. The covenants, conditions, and restrictions set forth in this Agreement
shall run with the land; shall be binding upon Owner and all persons having any right, title, or
interest in the Property, or any part thereof, including his heirs, and successive owners and assigns;
and shall inure to the benefit of City and its successors and assigns; and may be enforced by City
and any governmental or public agency successors and assigns with lawful and appropriate
jurisdiction over the subject matter of this agreement. All such covenants and restrictions shall be
deemed to run in favor of all real property owned by City which real property shall be deemed the
benefited property of such covenants, and this Agreement shall create equitable servitudes and
covenants appurtenant to real property owned by City and running with the Property in accordance
with Civil Code section 1468. Owner hereby declares its understanding and intent that the benefits
of such covenants touch and concern the land by enhancing and increasing the enjoyment and use
of the Property by the citizens of City and by furthering the health, safety, and general welfare of
the residents of City.
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7.3 Partial Releases of Portions of the Property from this Agreement.
Notwithstanding any other provision herein, the City shall cause portions of the Property to be
released from this Agreement upon the satisfaction of the following conditions:
(a) Upon the sale of the first Affordable Unit in each phase, the City shall cause to be
released from this Agreement (i) the common areas of the Property that are associated with the
subject phase and (ii) all of the Market Rate Units in such Phase. Such releases shall be in the
form of a partial release prepared by Owner (in form reasonably acceptable to the City) that is
executed by the City confirming the release of the foregoing and which is recorded in the
Official Records of Orange County, California..
(b) Upon the sale of the last Affordable Unit pursuant to this Agreement, the City
shall cause this Agreement to be fully released by a complete release prepared by Owner (in
form reasonably acceptable to the City) that is executed by the City.
8. MISCELLANEOUS
8.1 Notices
8.1.1 Delivery. As used in this Agreement, “notice” includes, but is not limited
to, the communication of notice, request, demand, approval, statement, report, acceptance,
consent, waiver, appointment or other communication required or permitted hereunder. All notices
shall be in writing and shall be considered given either: (i) when delivered in person to the recipient
named below; or (ii) on the date of delivery shown on the return receipt, after deposit in the United
States mail in a sealed envelope as either registered or certified mail with return receipt requested,
and postage and postal charge prepaid, and addressed to the recipient named below; or (iii) two
(2) days after deposit in the United States mail in a sealed envelope, first class mail and postage
prepaid, and addressed to the recipient named below; or (iv) one (1) day after deposit with a known
and reliable next-day document delivery service (such as Fed Ex), charges prepaid and delivery
scheduled next-day to the recipient named below, provided that the sending party receives a
confirmation of delivery from the delivery service provider; or (v) the first business day following
the date of transmittal of any facsimile, provided confirmation of successful transmittal is retained
by the sending Party. All notices shall be addressed as follows:
If to City: City of San Juan Capistrano
32400 Paseo Adelanto
San Juan Capistrano, CA 92675
Attn: Director of Development Services
Email: planning@sanjuancapistrano.org
With copy to: Best Best & Krieger LLP
Attn: Elizabeth W. Hull, Esq.
18101 Von Karman Ave., Suite 1000
Irvine, CA 92612
If to Owner: Arroyo Cap II-1, LLC, a Delaware limited liability
company
c/o Jack Rye, Vice President
Land Acquisitions at Landsea Homes
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11
660 Newport Center Drive, Suite 300
Newport Beach, CA 92660
jrye@landseahomes.com
With copy to: Newmeyer & Dillion, LLP
Attn: Michael W. Shonafelt, Esq.
895 Dove St.
Fifth Floor
Newport Beach, CA 92660
Michael.shonafelt@ndlf.com
8.2 Attorneys’ Fees and Costs. If any party to this Agreement institutes any action, suit,
counterclaim, appeal or arbitration for any relief against another party, declaratory or otherwise
(collectively an “Action”), to enforce the terms hereof or to declare rights hereunder or with respect
to any inaccuracies or material omissions in connection with any of the terms, conditions,
representations or warranties on the part of the other party to this Agreement, then the prevailing
party in such Action, whether by arbitration or final judgment, shall be entitled to have and recover
from the other party all costs and expenses of the Action, including reasonable attorneys’ fees and
cost incurred in bringing and prosecuting such Action and/or enforcing any judgment, order, ruling
or award (collectively, a “Decision”) granted therein, all of which shall be deemed to have accrued
on the commencement of such Action. For purposes of this section, costs shall include, without
limitation, in addition to costs incurred in prosecution or defense of the underlying action,
reasonable attorneys’ fees, costs, expenses and expert fees and costs incurred in the following: (a)
post judgment motions and collection actions; (b) discovery; and (c) appeals of any order or
judgment. For the purposes of this Agreement the term “prevailing party” shall have the meaning
set forth in California Code of Civil Procedure section 1032(a)(4).
8.3 Entire Agreement. This Agreement and all of its Exhibits set forth and contain the
entire understanding and agreement of the Parties, and there are no oral or written representations,
understandings or ancillary covenants, undertakings, or agreements which are not contained or
expressly referred to herein. No testimony or evidence of any such representations, understandings,
or covenants shall be admissible in any proceedings of any kind or nature to interpret or determine
the terms or conditions of this Agreement.
8.4 Severability. If any term, provision, covenant, or condition of this Agreement shall
be determined invalid, void, or unenforceable, the remainder of this Agreement shall not be
affected thereby to the extent such remaining provisions are not rendered impractical to perform,
taking into consideration the purposes of this Agreement.
8.5 Interpretation and Governing Law. This Agreement shall be construed as a whole
according to its fair language and common meaning to achieve the objectives and purpose of the
Parties hereto, and the rule of construction that ambiguities are to be resolved against the drafting
party shall not be employed in interpreting this Agreement. This Agreement and any dispute
arising hereunder shall be governed and interpreted in accordance with the laws of the State of
California, without regard to its conflict of laws rules.
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8.6 Time of Essence. Time is of the essence with respect to all provisions of this
Agreement in which a definite time for performance is specified; provided, however, that the
foregoing shall not be construed to limit or deprive a Party of the benefits of any grace or cure
period provided for in this Agreement.
8.7 Computation of Days. Unless otherwise specified in this Agreement, the term
“days” shall mean calendar days. For purposes of this Agreement, “business days” shall mean
every day of the week except Saturdays, Sundays, and official State holidays as recognized in
Government Code section 19853(a) or a successor statute (each, a “Holiday”). If the last day to do
a certain act pursuant to any term of this Agreement falls on a Holiday, such last day shall be
extended to the first non-Holiday after the Holiday.
8.8 Waiver. Failure by a Party to insist upon the strict performance of any of the
provisions of this Agreement by the other Party, or the failure by a Party to exercise its rights upon
the default of the other Party, shall not constitute a waiver of such Party’s right to insist and demand
strict compliance by the other Party with such provision or any other provision of this Agreement
thereafter. A waiver shall only be effective if in writing and signed by the party against whom
waiver is asserted.
8.9 Counterparts. This Agreement may be executed in two or more separate
counterparts, each of which, when so executed, shall be deemed to be an original. Such
counterparts shall, together, constitute and shall be one and the same instrument. This Agreement
shall not be effective until the execution and delivery by the Parties of at least one set of
counterparts. The Parties hereunder authorize each other to detach and combine original signature
pages and consolidate them into a single identical original. Any one of such completely executed
counterparts shall be sufficient proof of this Agreement.
8.10 Project as Private Undertaking. It is specifically understood and agreed by and
between the Parties hereto that the development of the Project is a private development, that neither
Party is acting as the agent of the other in any respect hereunder, and that each Party is an
independent contracting entity with respect to the terms, covenants, and conditions contained in
this Agreement. No partnership, joint venture, or other association of any kind is formed by this
Agreement. The only relationship between City and Owner is that of a government entity
regulating the development of private property and the Owner of such property.
8.11 Further Actions and Instruments. Each of the Parties shall cooperate with and
provide reasonable assistance to the other to the extent contemplated hereunder in the performance
of all obligations under this Agreement and the satisfaction of the conditions of this Agreement.
Upon the request of either Party at any time, the other Party shall promptly execute, file, or record
such required instruments and writings and take any actions as may be reasonably necessary under
the terms of this Agreement to carry out the intent and to fulfill the provisions of this Agreement
or to evidence or consummate the transactions contemplated by this Agreement.
[Signatures continued on next page]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the day
and year set forth in the preamble above.
“CITY”
CITY OF SAN JUAN CAPISTRANO, a California
municipal corporation
By:
Its: Mayor
“OWNER”
ARROYO CAP II-1, LLC, a Delaware limited
liability company
By:
Its:
By:
Its:
61147.80018\34036590.2
EXHIBIT A
EXHIBIT “A”
TO DENSITY BONUS HOUSING AGREEMENT
Legal Description of Property
61147.80018\34036590.2
EXHIBIT A-2
EXHIBIT “A”
TO DENSITY BONUS HOUSING AGREEMENT
Legal Description of Property
61147.80018\34036590.2
EXHIBIT A-2
61147.80018\34036590.2
EXHIBIT A-3
61147.80018\34036590.2
EXHIBIT A-4
61147.80018\34036590.2
EXHIBIT A-4
61147.80018\34036590.2
EXHIBIT B
EXHIBIT “B”
TO DENSITY BONUS AGREEMENT
Map showing Property and its Location
[Attached behind this cover page]
REVISED SITE PLAN EXHIBITPASEO TIRADORLANDSEA HOMESPARKING SUMMARYVVMHVVMHMHVVVVVVVVMHVVVSMHUBMSVMMU/OU/OU/OMMSDIMHMHMHMHMHU/OVF/HVSSF/HF/HDIMHDIDIF/HMMMSSIGNDIDIDIDIU/OMMVVVF/HVMMF/HF/HMHMHVVVVVSIGNSSPIPEDIU/OU/OVU/OU/OUBUBMSSSSSSGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGOLF TEEASPHASPHASPHASPHASPHASPHASPHASPHCONCCONCCONCCONCONCCONCCONCVVMHMHMHMHMHVVVF/HDIDIDIDIDIDIDIMMPIPESIGNMHVVMHVVDIVSSSUBSIGNDIMHVVVU/OVMMMMVMHPIPEF/HASPHASPHASPHCONCCONCCONCCONCCONCCONCGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDGROUNDOBSCUREDHV-1099.45HV-1283.76HV-1198.40STEPSASPHMMMMWV'SVASPHMHASPHDIASPHASPHASPHASPHDIMHASPHCALLE ARROYOTTTT
TTTADAADAADA ADAADAADAADA154326789101514131211212019181716272625242322293031323334353637383940414243444546474849505152545355565758596080797877768485868789889083829192819394959697989910910810710610010110210310510411011111211311412812712612512112212312412011911811511611775747372717069686766656463626112913013113228VIA CAMINATAVIA CAMINATA
V
I
A
C
AM
IN
A
T
A
PASEO ALETA
VIA ENCIMA
PASEO BRIDEL
VIA REFRESCAR
PASEO DERIVA
PASEO LEGADO
PASEO RAMA
PASEO ROCA
PASEO VIBRANTE
P
A
S
E
O
V
I
E
N
T
A
I-5 FREEW
A
Y
24 HOUR FITNESS(NOT A PART)
61147.80018\34036590.2
EXHIBIT B
EXHIBIT “C”
TO DENSITY BONUS AGREEMENT
Affordable Housing Cost Calculation
[Attached behind this cover page]
Exhibit C
Moderate Income - Monthly Housing Payment Calculation
• Income Toward Housing = Posted Orange County Income Limit (Moderate Income) x 35% =
• Monthly Housing Payment = Income Toward Housing divided by 12, less Ongoing Monthly
Expenses:
o (Less Utilities)
o (Less Property Taxes)
o (Less Property Insurance)
o (Less HOA Fees, Maintenance & Other)
• Maximum Sale Price: backed into – and driven by -- the Monthly Housing Payment considering
(1) a down payment (10%); (2) a loan amount and loan term (years); (3) an Annual Interest Rate
(Freddie Mac Primary Mortgage – currently 2.99%).
Example
Moderate Income - Monthly
Housing Payment Calculation
– Three Person
Maximum Sales Price
Orange County Income Limit
(Moderate Income)
$115,250.00
Maximum Sales Price 573,667
Income Towards Housing @
35% Income
$40,337.50
Down Payment (10%)
57,367
Monthly Income
$3,361.46
Loan Amount
516,300
Less Ongoing Monthly
Expenses
Loan Term (Years)
30
(Less Utilities)
-$290.00
Annual Interest Rate (Freddie
Mac Primary Mortgage)
2.99%
(Less Property Taxes)
-$522.50
$2,173.96
(Less Property Insurance)
-$100.00
(Less HOA Fees,
Maintenance & Other)
-$275.00
Monthly Income Available for
Mortgage
$2,173.96
61147.80018\34036590.2
EXHIBIT D
EXHIBIT “D”
TO DENSITY BONUS HOUSING AGREEMENT
Equity Sharing Agreement
[Attached behind this cover page]
61147.80018\34460533.1
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RECORDING REQUESTED PURSUANT
TO GOVERNMENT CODE SECTION 27383
When Recorded Mail To:
City of San Juan Capistrano
32400 Paseo Adelanto
San Juan Capistrano, CA 92675
Attn: Director of Planning
______________________________________________________________________________
OWNER OCCUPANCY AND EQUITY SHARING AGREEMENT
(DENSITY BONUS UNIT)
Owner:
Property:
Purchase Price: $
Original Fair Market Value: $
City Subsidy Amount: $
This Owner Occupancy and Equity Sharing Agreement (the “Agreement”) is entered into
as of this day of , 2021, by and between the City of San Juan
Capistrano (the “City”) and ___________________ (referred to in this Agreement sometimes as
“Buyer” and sometimes as “Owner”).
RECITALS
A. Landsea Homes, a Delaware corporation (“Developer”) applied for and received
development entitlements from the City for the development of a 132-unit residential project
consisting of 43 two-story detached single-family units and 89 three-story attached townhome
units (14 of which will be designated affordable units for moderate income households (the
“Affordable Units”)), including such amenities as gathering areas for barbeques, an open play
turf area, and a multipurpose pedestrian, bicycle, and equestrian trail (the “Project”).
B. Pursuant to California Law (Government Code sections 65915-65918) (the “State
Density Bonus Law”) and Section 9-3.505 of the City of San Juan Capistrano Municipal Code
(“SJCMC”), owners of projects that include specified levels of affordable housing are entitled to
apply for and receive certain density bonuses and additional incentives in order to facilitate the
economic feasibility of those projects.
C. Developer has proposed to include at least ten percent of the total dwelling units
in the Project (a common interest development) for persons or families of moderate income and
requested a density bonus concession and waiver in order to accommodate building an additional
fourteen (14) units for a total development of 132 units, in accordance with the requirements of
the Density Bonus Law and the SJCMC.
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D. On ______________, 2021, City and Developer entered into that certain Density
Bonus Housing Agreement pursuant to which the Developer agreed to sell fourteen (14) of the
units in the Development to households of moderate income.
E. Buyer intends to purchase the property located at in the City of
San Juan Capistrano, County of Orange, State of California, more particularly described in
Exhibit A attached hereto and incorporated herein (the “Property”), which Property contains one
of the dwelling units that is to be sold by Developer to a household of moderate income pursuant
to the terms of the Density Bonus Housing Agreement.
F. In order to comply with the requirements of the Density Bonus Housing
Agreement, the Developer agrees to sell the Property to Buyer for a purchase price of $
(“Original Purchase Price”). The Buyer and the City agree that the fair market
value of the property at time of purchase is $ (“Original Fair Market
Value”), which price is based on an appraisal conducted at the time of the purchase of the
Property by Buyer, or such other method as agreed to by the City and Buyer. The Original
Purchase Price has been reduced from fair market value as a direct result of the requirements
imposed by the City on the Development pursuant to the Density Bonus Housing Agreement.
The City and Buyer acknowledge that the difference between the Original Fair Market Value
and the Original Purchase Price, which is equal to $__________, is a subsidy from the City that
has enabled Buyer to acquire the Property at an affordable price (the “City Subsidy”).
G. Pursuant to Section 9-3.505(d)(3)(F) of the SJCMC, in the event that the City
grants a density bonus to a development, the City shall enter into an agreement with the
purchasers of any affordable dwelling units constructed and sold in exchange for such density
bonus that allows the City to recapture any initial subsidy and its proportionate share of
appreciation, which shall then be used within five years for any of the purposes described in
subdivision (e) of Section 33334.2 of the Health and Safety Code that promote homeownership.
The Buyer has agreed to execute and comply with this Agreement in compliance with such
requirements in consideration of the opportunity to purchase the Property at an affordable price
which is below the fair market value of the Property.
H. The purpose of this Agreement is to place controls on ownership and occupancy
of the Property; to provide the City a right of first refusal in the event Owner desires or is
compelled to Transfer the Property; and to require payment of the City Subsidy provided
pursuant to this Agreement as well as a share of the appreciation on the Property to the City for
use in affordable housing programs, in accordance with the State Density Bonus Law and section
9-3.505 of the SJCMC. The Owner shall execute a promissory note in favor of the City (the “City
Note”) to ensure the repayment of the City Subsidy, the City Shared Appreciation, as defined in
Section 9 of this Agreement and any Excess Rents received by Owner from the Property, if
required. The form of the City Note is attached to this Agreement as Exhibit B.
I. The Buyer is receiving a first mortgage loan (the “First Mortgage Loan”) from
__________ (the “First Lender”). The First Mortgage Loan is secured by a deed of trust dated
___________, executed by the Buyer in favor of First Lender and recorded in the County of
Orange concurrently herewith (the “First Mortgage Deed of Trust”).
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J. This Agreement and the City Note shall be secured by a deed of trust on the
Property (the “City Deed of Trust”). The form of the City Deed of Trust is attached to this
Agreement as Exhibit C. This Agreement and the City Deed of Trust shall be subordinate to the
lien of the First Mortgage Deed of Trust.
NOW, THEREFORE, in consideration of the benefits received by the Buyer and the City
hereunder, the Buyer 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 Cost” — First sentence of the Agreement on Page 1
b. “Agreement” — First sentence of the Agreement on Page 1
c. “Buyer” or “Owner” — First sentence of the Agreement on Page 1
d. “City” — First sentence of the Agreement on Page 1
e. “City Deed of Trust” — Recital H
f. “City Note” — Recital G
g. “City Shared Appreciation” — Section 9.a
h. “City Subsidy” — Recital E
i. “Default” —Section 10
j. “Eligible Capital Improvements” — Section 9.b
k. “Excess Rents” — Section 4
l. “Fair Market Value” — Section 11
m. “First City Response Notice” — Section 8
n. “First Lender” — Recital H
o. “First Mortgage Deed of Trust” — Recital H
p. “First Mortgage Loan” — Recital H
q. “Original Fair Market Value” — Recital E
r. “Original Purchase Price” — Recital E
61147.80018\34460533.1
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s. “Owner” or “Buyer” — First sentence of the Agreement on Page 1
t. “Owner’s Notice of Intent to Transfer” — Section 7.a
u. “Property” — Recital B and Section 2
v. “Transfer” — Section 6
2. DESCRIPTION OF PROPERTY
This Agreement concerns the real property commonly known as _____, San Juan
Capistrano, California 92675, which is more fully described in Exhibit A attached hereto and
incorporated in this Agreement by reference (the “Property”).
3. BUYER CERTIFICATIONS; OWNER OCCUPANCY REQUIREMENT
a. Owner Occupancy Requirement. The purpose of the City assistance provided
pursuant to this Agreement is to provide Buyer with the opportunity to become a homeowner.
Investment in real estate is not the primary purpose of this Agreement. Therefore, the Buyer shall
occupy the Property as the Buyer’s principal place of residence. The Buyer shall be considered as
occupying the Property if the Buyer is residing in the unit for at least ten (10) months out of any
twelve (12) month period. The City may grant a temporary waiver of this occupancy requirement
for good cause in its sole discretion.
b. Buyer Certifications. The Buyer certifies that the financial and other information
previously provided in order to qualify to purchase the Property is true and correct as of the date
first written above.
4. MAINTENANCE AND INSURANCE REQUIREMENTS
The Buyer shall maintain a standard all risk property insurance policy equal to the
replacement value of the Property (adjusted every five (5) years by appraisal, if requested by the
City), naming the City as an additional insured. Additional insurance requirements are set forth in
Section 5 of the City Deed of Trust.
5. RESTRICTIONS ON RESALE OF THE PROPERTY
Any Transfer of the Property will be subject to the provisions of this Agreement. “Transfer”
means any sale, assignment or transfer, voluntary or involuntary, of any interest in the Property,
including, but not limited to, a fee simple interest, a joint tenancy interest, a life estate, a leasehold
interest, an interest evidenced by a land contract by which possession of the Property is transferred
and Owner retains title, or a deed of trust. Any Transfer without satisfaction of the provisions of
this Agreement is prohibited and shall constitute a default by Owner for which the City may
exercise any and all remedies under this Agreement, the City Note and the City Deed of Trust. A
Transfer shall not include a conveyance: (i) to an existing spouse or domestic partner; (ii) by an
Owner to a spouse or domestic partner where the spouse or domestic partner becomes the co-
owner of the Property; (iii) between spouses as part of a marriage dissolution proceeding; (iv) by
Owner into an inter vivos trust in which Owner is the beneficiary; or (v) refinance of the First
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Mortgage Loan meeting the requirements of Section 18 of this Agreement; provided, however,
that Owner shall provide written notice to the City of all such conveyances within thirty (30) days
of the conveyance and Owner shall continue to occupy the Property as his or her principal place
of residence (except where the conveyance occurs pursuant to subsection (iii) above, in which
event the new owner shall occupy the Property and affirmatively assume Owner’s obligations
under this Agreement, the City Note, and the City Deed of Trust).
6. NOTICE OF INTENDED TRANSFER; CITY’S RIGHT OF FIRST REFUSAL;
PREPARATION OF PROPERTY FOR SALE
a. In the event the Owner intends to Transfer the Property, the Owner shall promptly
give the City written notice of such intent (the “Owner’s Notice of Intent to Transfer”). The Owner
shall give the City the Owner’s Notice of Intent to Transfer prior to notifying real estate brokers
or lenders of Owner’s intent to Transfer the Property and prior to listing of the Property on the
Multiple Listing Service. The Owner’s Notice of Intent to Transfer shall be sent to the City by
certified mail, return receipt requested at the address provided in Section 25 below. The Owner’s
Notice of Intent to Transfer shall include the information necessary for the City to determine the
Shared Appreciation of the Property including the following information:
(1) the address of the Property;
(2) the date of purchase of the Property by the Owner;
(3) the Original Fair Market Value of the Property paid by the Owner at the
time of his/her purchase as determined by City and Owner and set forth on
the first page of this Agreement;
(4) a copy of the HUD-1 Settlement Statement or equivalent document from
the close of escrow on the Owner’s purchase of the Property;
(5) if Owner has made Eligible Capital Improvements to the Property that
he/she wishes to include in the calculation of Shared Appreciation, a
description of the improvements, the date the improvements were made, a
copy of the letter granting prior City approval of the improvements
(provided, however, if the Owner did not obtain City approval of the Capital
Improvements the Owner may still include such Capital Improvements in
the Notice of Intent to Transfer, however, it shall be within the City’s sole
discretion to determine whether to accept these Capital Improvements as
Eligible Capital Improvements and if so, their value), evidence of cost of
the improvements, and an appraisal that documents the value added to the
Property by the Eligible Capital Improvements. Acceptance shall not be
unreasonably withheld.;
(6) the date the Property will be placed on the market; and
(7) the name and phone number of the person to contact to schedule inspection
of the Property by the City.
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b. Fair Market Value Appraisal. Prior to the Transfer of the Property, the Fair Market
Value of the Property at the time of Transfer 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 paid by the Owner, unless the appraisal
is obtained from a new purchaser. Further, in the event that the Owner has made Eligible Capital
Improvements, the value of which Owner wishes to retain, the appraisal shall determine the value
of such Eligible Capital Improvements in accordance with Section 9.b, below. Nothing in this
section shall preclude the Owner and the City from establishing the Fair Market Value of the
Property at the time of Transfer by mutual agreement in lieu of an appraisal pursuant to this section
c. City’s Right of First Refusal. Upon receipt of an Owner’s Notice of Intent to
Transfer, City shall have the first right to purchase the Property at the price and terms determined
by Owner but for not more than an Affordable Housing Cost purchase price as determined at such
time of proposed sale. “Affordable Housing Cost,” for the purpose of this section, shall mean thirty
percent (30%) of one hundred percent (100%) of AMI at a presumed household size appropriate
for the unit notwithstanding the references in subsection (b) of Section 50052.5 to thirty percent
(30%) of one hundred percent (100%) and with a liquid asset limitation of not more than $25,000
or otherwise set by the City Manager. Pursuant to Section 50052.5, for one bedroom units the
presumed household size for purposes of this Section 7 is two persons, and for two bedroom units
the presumed household size for purposes of this Section 7 is three persons. City shall have such
right and option (“First Option”) for forty-five (45) days after City receives notice from Owner,
after which, if not exercised, such First Option shall terminate. If City does exercise the First
Option, Owner shall not be liable for payment of the City Subsidy or the City Shared Appreciation
pursuant to Section 9 below.
7. SALE OF PROPERTY BY OWNER
Subject to Section 7(c), the Owner may Transfer the Property to a person of the Owner’s
choosing at an unrestricted price (supported by an MAI or other qualified appraisal), and the City
shall reconvey the liens of this Agreement and the City Deed of Trust from the Property, provided
that the Owner pays the full amount owed under the City Note to the City pursuant to Section 9
below. The Owner shall provide the City with the following documentation associated with such
a Transfer:
a. the name and address of the purchaser;
b. the final sales contract and all other related documents which shall set forth all the
terms of the sale of the Property, including a HUD-1 Settlement Statement. Said documents shall
include at least the following terms: (a) the sales price; and (b) the price to be paid by the 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.
c. a written certification, from the Owner and the 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
purchaser or any other party has not paid and will not pay to the Owner, and the Owner has not
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received and will not receive from the 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 Property 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 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 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.
d. a copy of the MAI or other qualified appraisal prepared for the Property in
accordance with Section 7.b.
e. upon the close of the proposed sale, a copy of the final sales contract, HUD-1
Settlement Statement, escrow instructions, and any other documents which the City may
reasonably request.
8. PAYMENT TO CITY OF CITY SUBSIDY AND SHARED APPRECIATION
a. Upon a Transfer of the Property to a person other than the City pursuant to Section
7(c), the Owner shall pay the City Subsidy plus the City Shared Appreciation, less the value of any
Eligible Capital Improvements as determined pursuant to Section 9.b below, to the City. The “City
Subsidy,” as defined in Recital D, is equal to the amount by which the Original Fair Market Value
of the Property exceeds the Original Purchase Price of the Property. “City Shared Appreciation”
shall be calculated pursuant to the City Note but by way of information the following sets forth
the method for determining the City Shared Appreciation. If there is any inconsistency between
the City Note and this Agreement with respect to the determination of City Shared Appreciation,
the City Note shall control. City Shared Appreciation shall be calculated by dividing the City
Subsidy amount by the Original Fair Market Value of the Property. The resulting percentage,
rounded to the closest one-tenth of a percentage point (0.1%), shall be multiplied by the amount
calculated by subtracting the Original Fair Market Value from the Fair Market Value at the time
of the Transfer and the product of that calculation shall equal the City Shared Appreciation.
b. The value of any Eligible Capital Improvements shall be the value of any
substantial structural or permanent fixed improvements which the Owner has made to the Property
after Owner’s purchase of the Property, provided that such improvements are: (a) made or installed
by the Owner in conformity with applicable building codes at the time of installation; and (b)
approved in writing in advance by the City or its designee. The value of such Eligible Capital
Improvements which is retained by Owner shall be limited to appraised increases in value to the
Property as a result of the improvements (as determined by the appraisal performed as described
in Section 7.b, above), including any depreciation in value of the capital improvements since the
time of installation, and not the cost of construction of the improvements to the Property.
c. The City Subsidy and the City Shared Appreciation, less the value of any Eligible
Capital Improvements, shall be a debt of the Owner to the City, evidenced by this Agreement and
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the City Note, and 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
City Subsidy and the City Shared Appreciation are paid to the City. The City shall utilize the
repayment of the City Subsidy and the City Shared Appreciation within five years of receipt of
such funds for any of the purposes described in subdivision (e) of Section 33334.2 of the Health
and Safety Code that promote homeownership.
d. Notwithstanding the foregoing, in no event shall the Owner be obligated to pay the
City Subsidy and City Shared Appreciation in an amount that would result in the amount of sales
proceeds available to the Owner being less than the Original Purchase Price for the Property as set
forth above unless the Owner has made a Transfer in violation of this Agreement.
9. 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 Property or in connection with its obligations
under this Agreement;
(2) The Owner fails to owner occupy the Property, as required pursuant to
Section 3 above;
(3) The Owner makes a Transfer in violation of this Agreement;
(4) The Owner otherwise fails to comply with the requirements of this
Agreement, the City Note, or the City Deed of Trust 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;
(5) A lien is recorded against the Property other than the lien of a bone fide
First Mortgage Loan;
(6) The Owner places a mortgage on the Property in violation of Section 18
below;
(7) The Owner declares a bankruptcy or makes an assignment of assets for the
benefit of creditors.
b. Upon a declaration of Default by the City under this Agreement, the City may:
(1) Declare the City Subsidy and City Shared Appreciation immediately due
and payable without further demand, declare a default under the City Note,
and may 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 including the collection of damages from the Owner,
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which damages shall include the City’s costs associated with administering
the City’s affordable housing program and the cost to the City of providing
sufficient assistance to a moderate-income household to acquire a market
rate home at an affordable housing cost as that term is defined in Health and
Safety Code Section 50052.5;
(3) Declare a Default under the City Note and City Deed of Trust and pursue
all City remedies under the City Deed of Trust; and
10. 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 Property shall be recorded by the City in the Office of the
Recorder of the County of Orange 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 2924b,
and may exercise its rights as provided in Section 10.
In the event of default and foreclosure, the City shall have the same right as the Owner to
cure defaults and redeem the Property 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
Property shall commence from the date a notice of default is given by the City to the Owner.
11. NON-LIABILITY OF THE CITY
a. Non-liability 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 Property 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 Property 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 Property and
will hold the City harmless from any liability, loss or damage for these things.
b. Indemnity. Owner agrees to defend, indemnify, and hold the City harmless from all
losses, damages, liabilities, claims, actions, judgments, costs, and reasonable attorney’s 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.
61147.80018\34460533.1
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12. RESTRICTIONS ON FORECLOSURE PROCEEDS
If a creditor acquires title to the Property 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 except to the
extent that such proceeds otherwise payable to the Owner exceeds the amounts owed to the City
including the City Subsidy and City Shared Appreciation pursuant to the City Note. 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 Property.
13. RESTRICTION ON INSURANCE PROCEEDS
If the Property is damaged or destroyed and the Owner elects not to rebuild or repair the
Property, the Owner shall pay the City the portion of any insurance proceeds received by the
Owner for such destruction or damage which is equal to the City Subsidy plus the City Shared
Appreciation calculated pursuant to Section 9 above, with the total amount of insurance proceeds
serving as the Fair Market Value upon Transfer of the Property, provided that in no event shall the
City receive insurance proceeds in an amount that results in the amount of insurance proceeds
available to the Owner being less than the Original Purchase Price for the Property as set forth
above.
14. TERM OF AGREEMENT
All the provisions of this Agreement, including the benefits and burdens, run with the
Property 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 this Agreement, or (ii) the date
of Transfer of the Property and payment to the City of the City Subsidy, City Shared Appreciation
and Excess Rents, if any, as required hereunder. If they keep the unit more than 30 years, right of
first refusal extinguishes.
15. 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.
16. SUBORDINATION
Notwithstanding any provision herein, this Agreement shall not diminish or affect the
rights of the First Lender under the First Lender Deed of Trust or any subsequent First Lender
deeds of trust hereafter recorded against the Property in compliance with Section 18 below.
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 Mortgage Deed of Trust and shall not
impair the rights of the First Lender, or such lenders’ assignees or successors in interest to exercise
their remedies under the First Mortgage Deed of Trust in the event of default under the First
Mortgage Deed of Trust by the Owner. Such remedies under the First Mortgage Deed of Trust
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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 Property or any
transferee thereafter; provided; however, if the holder of such First Mortgage Deed of Trust
acquires title to the Property 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 Mortgage 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 Lender.
17. REFINANCE OF MORTGAGE LOAN
The outstanding principal on the City Note shall not be due upon prepayment and
refinancing of the First Mortgage Loan, and this Agreement and the City Deed of Trust shall be
subordinated to the refinanced First Mortgage Loan, provided that following such refinance, the
principal amount of all debt secured by the Property will not exceed the original principal amount
of the First Mortgage Loan unless some other amount is approved by the City Executive Director
in his or her sole discretion. . Mortgage loans or equity lines of credit junior in lien priority to the
City deed of trust are not permitted. The City and the Owner agree that the requirements of this
Section 18 are necessary to ensure the continued affordability of the Property to Owner and to
minimize the risk of loss of the Property by Owner through default and foreclosure of mortgage
loans. Owner further acknowledges that violation of the provisions of this Section 18 shall
constitute a Default under this Agreement.
18. 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 Property, 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 Property. The
foregoing covenant shall run with the land.
19. 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 City (“CHFA”), United
States Department of Housing and Urban Development (“HUD”), the Federal National Mortgage
Association (“FNMA”), the Federal HOME Loan Mortgage Corporation (“FHLMC”), or the
Veterans Administration (“VA”) under the First Mortgage Deed of Trust, or any subsequent First
Lender deeds of trust hereafter recorded against the Property in compliance with Section 17 above.
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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, FHLMC, VA, the First Lender, or
another party upon foreclosure of a deed of trust to the First 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 Lender,
CHFA, FNMA, or FHLMC deed of trust.
20. HUD FORBEARANCE RELIEF
Notwithstanding other provisions of this Agreement, the City remedies in the event of
Default pursuant to Section 10 above shall not be exercised by the City when a deed of trust insured
by HUD is secured by the Property, 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.
21. INVALID PROVISIONS
If any one or more of the provisions contained in this Agreement shall for any reason be
held to be invalid, illegal or unenforceable in any respect, then such provision or 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 provision had never been
contained herein.
22. 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 Orange County, California.
23. 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.
24. NOTICES
All notices required herein shall be sent by certified mail, return 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:
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To the Owner:
______________________
_____________________
_____________________
At the address of the Property:
_________________________
_________________________
San Juan Capistrano, CA 9____
To the City:
City of San Juan Capistrano
32400 Paseo Adelanto
San Juan Capistrano, CA 92675
Attn: Director of Planning
With Copy to:
Elizabeth W. Hull, Esq.
Best Best & Krieger LLP
18101 Von Karman Ave., Suite 1000
Irvine, CA 92612
The parties may subsequently change addresses by providing written notice of the change
in address to the other parties in accordance with this Section.
25. INTERPRETATION OF AGREEMENT
The terms of this Agreement shall be interpreted so as to avoid speculation on the Property
and to insure to the extent possible that its sales price and mortgage payment remain affordable to
low- and moderate-income households.
26. EXHIBITS
Any exhibits referred to in this Agreement are incorporated in this Agreement by such
reference.
27. ATTORNEYS FEES
If any action is filed in a court of competent jurisdiction related to this agreement, the
prevailing party shall be entitled to recover reasonable attorneys’ fees and costs from the non-
prevailing party.
28. TAX RETURNS
Owner shall execute such documents as are necessary to provide the City with access to
Owners filed federal income tax returns.
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29. ACKNOWLEDGEMENT OF TERMS
Owner hereby acknowledges that, prior to Owner’s execution of this Agreement, the City
provided to Owner an in-person, informational session during which the City explained, in plain
and simple language, the resale restrictions and other material provisions of this Agreement.
30. ENTIRE AGREEMENT
This Agreement (along with the City Note and City Deed of Trust) sets forth the entire
understanding and agreement of the City and Owner and any amendment, alteration or
interpretation of this Note must be in writing signed by both the City and the Owner.
IN WITNESS WHEREOF, the parties have executed this Agreement on or as of the date
first written ‘above.
CITY: BUYER
______________, City Manager
City of San Juan Capistrano
_________________
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Notary Acknowledgment
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
STATE OF CALIFORNIA
COUNTY OF ______________
On , 20___, before me, _______________________________, Notary Public, personally
appeared , who proved to me on the basis of satisfactory
evidence to 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/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and
correct.
WITNESS my hand and official seal.
Signature of Notary Public
OPTIONAL
Though the information below is not required by law, it may prove valuable to persons relying on the document
and could prevent fraudulent removal and reattachment of this form to another document.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
Individual
Corporate Officer
Title(s) Title or Type of Document
Partner(s) Limited
General Number of Pages
Attorney-In-Fact
Trustee(s)
Guardian/Conservator Date of Document
Other:
Signer is representing:
Name Of Person(s) Or Entity(ies)
Signer(s) Other Than Named Above
61147.80018\34036590.2
EXHIBIT E
EXHIBIT “E”
TO DENSITY BONUS HOUSING AGREEMENT
Phasing Plan and Map
[Attached behind this cover page]
1
2
3
4
5
8
7
6
M
1
2
3
4
5
6
M
7
9
8
phase 9 for attached and phase 8 for detached will
be constructed first as models (prior to phase 1),
then converted into sellable units in their
respective final phases.
Affordable Units
Attached Product
Detached Product
TIRADOR CONSTRUCTION PHASING TM18148
SAN JUAN CAPISTRANO, CA
08-04-2021