Despite today’s economic reality, real estate developers should consider the unique opportunities of pursuing land use entitlements now.  While there is expense entailed in pursuing annexation, zoning, subdivision and related approvals, many jurisdictions are experiencing a significant drop in tax and fee revenues due to reduced development activity.  Accordingly, developers who are able to pursue land use entitlements during this difficult economy may find these jurisdictions more responsive to development proposals than they historically have been.

Although obtaining entitlements now may be “early” (end users or the ultimate land plan may be unknown), jurisdictions have been recognizing such circumstances and the need for flexible zoning that will allow for diverse development opportunities.  Planned Unit Development (PUD) or similar zoning can provide for standards that differ from the jurisdiction’s generally applicable zoning or technical standards to accommodate a variety of users.

Because there are fewer development applications being submitted today, applications may be processed in an abbreviated period of time.  And, as it traditionally may take years to process and obtain final approval of complete land use entitlements, there is no better time than the present to initiate that process.

On Wednesday, October 13th, a group of attorneys general and bank regulators from all 50 states and the District of Columbia announced a coordinated probe into potentially improper foreclosure practices of various national lenders.  At the heart of these investigations are allegations that some banks used erroneous or incomplete paperwork in foreclosing on residential mortgage loans.  Getting particular attention is the alleged practice of using “robo-signers” to sign foreclosure documents without reviewing the background materials and loan documentation.Loan Docs.jpg

According to news reports, it is not expected that many individuals will regain homes they lost to foreclosure even if improper steps were taken.

Economists speculate that these investigations and the related internal reviews of foreclosure procedures by various lenders could have the short-term effect of temporarily propping up residential housing prices but the long-term effect of prolonging the housing downturn by delaying the inevitable.

Photo by Casey Serin (flickr).

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If Colorado voters approve Amendment 61 in November, it is likely to eliminate the primary tool used by real estate developers to finance the installation of infrastructure in new developments. 

Amendment 61, together with its sister initiatives, Amendment 60 and Proposition 101, has recieved a lot of attention here in Colorado as we approach the November election.  While many believe that all three could have serious fiscal consequences for Colorado, it is Amendment 61 that is garnering some national attention.  The Wall Street Journal has recently reported on Amendment 61.  

Among other things, Amendment 61, if adopted, will:

  • expressly prohibit all types of borrowing by special districts other than bonded debt, including, for example, short‑term loans, certificates of participation, and lease-purchase transactions;
  • require voter approval for any bonded debt that is issued;
  • require that all bonded debt have a term and be repaid within 10 years; and
  • limit the amount of outstanding bonded debt to a total of 10% of the then-existing assessed values of the property within the special district’s boundaries.

 Real estate developers often form special districts for the purpose of installing and operating infrastructure for new projects.  The infrastructure must be installed before any development can occur, so either bonds are issued by the special district in order to fund the cost of installation of infrastructure, or the developer installs the infrastructure and the special district agrees to reimburse the developer with future bond proceeds or tax revenues.   Whether bonds are issued to pay the infrastructure costs directly from the outset or the special district enters into a reimbursement arrangement of some sort, the provisions of Amendment 61 would apply.  Amendment 61 would prohibit the reimbursement arrangements altogether, as such arrangements are essentially borrowing by the special district not in the form of bonds.  And, based on the timing of issuing bonds to raise capital to pay directly for the installation of infrastructure, the amount of bonds that cab be issued will be capped at 10% of the assessed value of the vacant land, which generally has a far lower value than the developed land. 

These and other issues with Amendment 61 have the attention of the local government community.  Because of the intersection between special districts and real estate, the real estate community should be paying attention too. 

.Photo by Daquella manera (flickr)

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On Wednesday, September 29th, J.P. Morgan Chase announced that it will halt foreclosures in 23 states due to loan documentation flaws.  On Wednesday, J.P. Morgan spokesman, John Kelly, stated the firm “does not expect to find any factual problems or that customers have been harmed, but if we do find any cases we will take appropriate action.”

Speculation is that this step by high-profile J.P. Morgan may pressure other lenders to make the same move of freezing foreclosures.  Presumably, such a break in foreclosure filings will allow institutions to get a handle on potentially flawed loan and foreclosure documentation.

The consequences of this decision by J.P. Morgan are difficult to foresee, but should other large lenders follow their lead residential forecl osure activity would certainly decrease, with potentially significant impacts on the residential housingmarket.  Some see a potentially positive result and suggest that a delay in foreclosure sales would permit the residential market to find a floor.  Others fear that it is only after resolving the buildup of foreclosures that the nation’s housing market will recover, and any delay in foreclosures will delay this recovery.

C.R.S. 38-35.7-101, et. seq., mandates certain disclosures in connection with the sale of “residential real property.”  However, a close reading of that statute reveals that certain of those disclosures apply not only to traditional residential properties (e.g. single family homes), but to commercial, multi-family projects, as well.  While it’s common practice in Colorado to include the so-called “special taxing district” disclosure (C.R.S. 38-35.7-101) in all commercial purchase and sale agreements, it appears that this statute also requires that disclosures concerning methamphetamine laboratories and the potable water source be included in contracts for the sale of commercial, multi-family projects.  Consider adding these “residential” disclosures to your next multi-family purchase and sale agreement.  The form of potable water source disclosure is set forth in C.R.S 38-35.7-104; an illustrative methamphetamine disclosure is set forth below.

Methamphetamine Disclosure.  If the Property is residential, and Seller knows that methamphetamine was ever manufactured, processed, cooked, disposed of, used or stored at the Property, Seller is required to disclose such fact. No disclosure is required if the Property was remediated in accordance with state standards and other requirements are fulfilled pursuant to § 25-18.5-102, C.R.S. Buyer further acknowledges that Buyer has the right to engage a certified hygienist or industrial hygienist to test whether the Property has ever been used as a methamphetamine laboratory. If Buyer’s test results indicate that the Property has been contaminated with methamphetamine, but has not been remediated to meet the standards established by rules of the State Board of Health promulgated pursuant to § 25-18.5-102, C.R.S., Buyer shall promptly give written notice to Seller of the results of the test, and Buyer may terminate this Contract, notwithstanding any other provision of this Contract.

http://www.michie.com/colorado/lpext.dll?f=FifLink&t=document-frame.htm&l=jump&iid=115d17d4.210a391e.0.0&nid=1dc05#JD_38-357-101