COMMUNITY LAND TRUST
The Island Housing Trust is modeled after Community Land Trusts across the country whose approach to creating permanently affordable housing involves selling homes to income-qualified homebuyers and ground leasing the land beneath the homes for a nominal fee through a long-term renewable ground lease. More information about Community Land Trusts nationally can be found at Burlington Associates’ website.
KEY COMPONENTS OF THE TRUST'S GROUND LEASE
The ground lease is the legally binding agreement that gives the lessee/homeowner the right to use the land. The lease attempts to balance the interests of the lessee as a homeowner with the long-term interests of the Trust and the Island community. There are a number of important terms that are defined by the Trust's ground lease. These include:
TERM – The lease is for 99 years, providing long-term security and access for the homeowner, and may be renewed by the homeowner – or their heirs – for an additional 99-year term.
IMPROVEMENTS – The homeowner owns all buildings, structures, fixtures and any other improvements (such as landscaping) on the land. The Trust, however, controls the use and sale of these Improvements.
RESPONSIBLE USE – The homeowner can only use the land for residential purposes as permitted by the building and land use codes and regulations.
OWNER OCCUPANCY –The homeowner must live in the home for a minimum of eleven months of each calendar year.
SUBLETTING – The house (or Improvements) can only be leased or subleased to income-qualified persons approved by the Trust for an amount that does not exceed the homeowner’s carrying costs.
LEASE FEE – The homeowner pays a monthly ground lease fee of $50 to the Trust in exchange for access to and use of the leased premises.
TAXES AND ASSESSMENTS – The homeowner is responsible for the payment of all real estate taxes on the land and the Improvements.
CONSTRUCTION AND ADDITIONS – The homeowner is allowed to build or change the Improvements in accordance with all applicable laws. Although the Trust will not regulate Improvements, the homeowner must be aware of the limitations on the resale price; in some cases, investment may not be recovered.
FINANCING – The homebuyers must secure a mortgage from lending institutions that comply with the Trust’s and federally lending guidelines (e.g. Fannie Mae).
TRANSFER TO HEIRS – The homeowner may leave, give or sell their home to designated heirs.
TRANSFER TO INCOME-QUALITIED BUYERS – The homeowner may sell or transfer the Improvements (the house). Improvements can only be sold however, to the Trust or to an income-qualified homebuyer for no more than a maximum resale price as described below.
PURCHASE OPTION –- In the event that the homeowner elects to sell their home (rather than transfer to a designated heir) the Trust has an option to purchase.
RESALE FORMULA –- The Trust’s resale formula strikes a balance between the goal of allowing a fair rate of return for the seller (maximum of 4% annual appreciation) and the goal of limiting the resale prices to a level that will assure continued affordability. The resale formula will be consistent in all residential leasehold situations – so that all Trust homeowners get the same deal.
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