I.
[§4.1] INTRODUCTION
The aim of this chapter is to outline and discuss those practical
problems that confront the attorneys representing the subdivision developer,
the builder and the lender providing the financing.
Clients will often look to their attorney for counsel beyond drafting
the legal documents. Therefore,
the attorney should become familiar with matters that are the responsibility
of the client, the surveyor, the engineer and others.
This chapter principally discusses typical residential subdivisions.
Commercial property is specifically covered in chapter _____.
Retail and office buildings, sometimes part of an over-all
subdivision plan, are covered in Chapter ____.
Business entities used to acquire, subdivide and sell real property
are discussed briefly; see
Chapter ____ for comprehensive treatment.
Subdivision-specific financing is discused in this chapter; however,
financing in general is treated in Chapter ____.
II.
[§4.2] CHOICE OF ENTITY
Historically, the owner-developer has been a corporation, but the
real estate developing entity may be an individual, general partnership,
limited partnership, joint venture off-shore corporations, business trust,
real estate investment trust, land trust or other vehicle of syndication.
See Chapter ____.
If the client intends to
develop the subdivision as well as build the units, the attorney should consider
whether separate
entities should be employed for the development and construction.
The attorney will be called on to point out many factors in advising
his client as to a choice of business structure.
Among the matters that the attorney should consider and discuss with
the client are:
1.
degree of risk and limitation on liability;
2.
contemplated term of the endeavor;
3.
effect of death, disability or divorce of a managing principal;
4.
potential number of investors;
5.
anticipated need for transferring or hypothecating interest in the
proposed entity;
6.
size and term of requisite financing;
7.
exposure to personal liability as guarantor;
8.
governmental regulation applicable to contemplated development, as
well as to type of entity;
9.
control of the enterprise and effect on cost of operation; and
10. tax consequences in relation to issues
which arise in organization and initial transfer and during the course of
operation, as well as on conclusion and liquidation, when appropriate, of
the enterprise. See generally
REAL PROPERTY TAX CONSIDERATIONS IN FLORIDA (CLE 1979).
In the past, a corporate entity provided additional financing
flexibility because of the special treatment
of corporations with regard to usury.
However, Florida usury law no longer distinguishes between corporate
and non-corporate borrowers. See
PRACTICE UNDER FLORIDA USURY LAW, Section 7.2 (CLE 1987).
Sometimes a developer may utilize a "nominee" corporation
to hold title for a limited period of time.
Great care must be taken in using nominee corporations, however,
inasmuch as an adverse determination that the nominee corporation is the
proper taxable entity can be disastrous.
The seminal case as to the tax treatment of corporate entities is Moline
Properties, Inc. v. Commissioner, 319 U.S. 436, 63 S.Ct. 1132, 87 L.Ed.
1499 (1943); see also: Tomlinson v.
Miles, 316 F.2d 710 (5th Cir. 1963); Paymer v. Commissioner,
150 F.2d 334 (2d Cir. 1945); F. 2d 760.
III. MATTERS TO BE CONSIDERED BEFORE
CONTRACTING TO PURCHASE
LAND TO BE SUBDIVIDED
A.
[§4.3] In General
There are many matters to be considered in regard to the suitability
of a tract of land for a residential subdivision and development.
Rather than treating the purchase as an isolated transaction, the
attorney should look ahead to the multitude of problems to be confronted in
securing all requisite approvals in order to develop, subdivide and market
the property. There also will
be problems concerning the development of the land, improvement and
construction on it, subdivision sales and the financing of each phase. These matters should be reviewed carefully by the attorney
and brought to the client's attention.
Frequently, in assisting the developer in purchasing land suitable
for development as a subdivision, the lawyer is called upon to direct
attention to the various problems referred to later in this chapter.
Many of these potential problems can be avoided by a special term or
condition in the purchase contract. It
is, therefore, important that the attorney become familiar with the subject
property early in the process. Whenever
practicable, the attorney should inspect the subject property itself in
order to discover potential problems that may not be disclosed by a survey
and to have detailed knowledge of the physical characteristics of the
property. It is the rare
exception in Florida today that land may be purchased and then easily
subdivided and sold. Therefore,
a "standard form" purchase and sale contract will not suffice to
protect one's client's interests.
References that may be consulted as to the many limitations and
controls on land use include:
1. FLORIDA ENVIRONMENTAL
AND LAND USE LAW (CLE 1987);
2. ENVIRONMENTAL
REGULATION AND LITIGATION IN FLORIDA (CLE 1981); and
3. Juergensmeyer and
Wadley, FLORIDA LAND USE RESTRICTIONS (D&S 1989).
B.
[§4.4] Vacation of Plats,
Roads, Parks and Other
Public Areas
Much of Florida's undeveloped land has already been pre-platted, and
the client's development plan may be contrary to these plats.
Public parks, utility easements and roads on the property might also
frustrate the client's intent. The
attorney may therefore be called upon to effect an abandonment of prior
plats or vacations of public areas.
Plats and public roads (other than state roads or federal highways)
may be vacated by the governing body of the county in which the client's
property is located. If,
however, the property is within the corporate limits of a municipality, the
municipality must first approve the vacation before the matter may be
decided by the county government. A
replatting does not fulfill the requirements for the vocation of a public
road.
If the existing plat is consistent with the client's development
plan, the attorney should review the plat to be sure that it has been
properly accepted and recorded. See
Attorney's Title Insurance Fund Title Note ("TN") 24.02.01, Plats
Not Meeting Formal Requirements.
The following Florida Statutes should be considered:
1. 125.01, powers and duties of county commissions;
2. 125.35, county authorized to sell real and personal
property and to lease real property;
3. 125.39, nonapplicability to county lands acquired for
specific purposes;
4. 125.411, conveyance of land by county (form deed);
5. 177.101, vacation and annulment of plats subdividing
land;
6. 336.08, relocation or change of roads (county
commissioners may establish, locate, change or discontinue public county
roads by resolution);
7. 336.09, closing and abandonment of roads; authority;
8. 336.10, closing and abandonment of roads; publication
of notice;
9. 336.11, closing and abandonment of roads; ratification
of prior actions; and
10. 336.12, closing and abandonment of roads; termination of
easement; conveyance of fee.
See also T.N. 24.01 Dedication and Vacation of Streets and
Parks.
The court in Sun Oil Company v. Gerstein, 206 So.2d 439 (Fla.
3d DCA 1968), cert. den. 211 So.2d 212, held that a wide
latitude of discretion is accorded to discontinue any street or highway laid
out by a governmental agency and "the exercise of that discretion will
not be disturbed in the absence of a clear abuse thereof or unless there
occurs an invasion of property rights."
206 So. 2d at 440. Prior
to abandonment of a road or right of way easement it is important to
determine that there is no reverter of the fee or easement to the grantor of
the property to the governmental agency.
See Dean v.
MOD Properties, Ltd., 528 So.2d 432 (Fla. 5th DCA 1988); F.S.
255.22, Reconveyance of lands not used for purpose specified.
C.
[§4.5] Zoning Changes
If the land is not properly zoned for its intended use, the
attorney and client must discuss the advisability of seeking a
rezoning; a change in zoning classification is most often required if a
portion of the subject property is to be set apart for commercial or
industrial use. The time and
expense incurred in rezoning property can be considerable.
Therefore, when representing a buyer, the attorney should include
provisions concerning rezoning in the purchase and sale agreement, such as
the right to rescind the agreement if the desired rezoning is not obtained.
The contract should permit the buyer to seek the rezoning in the name
of the seller and include a covenant of good faith and cooperation by the
seller. In the alternative, the
contract might require the seller to attempt to secure rezoning of the
property prior to closing. With
either contingency, the contract should provide that the buyer may elect to
consummate the transaction irrespective of whether the rezoning is
accomplished. There are legal
theories which may be successfully asserted to rezone property, but the
courts give wide discretion to county and municipal governments in the
exercise of this authority. Rezoning
is not a proper function of the courts, but is the function of appropriate
zoning authorities. See Town
of North Redington Beach v. Williams, 220 So.2d 22 (2d DCA Fla. 1969). A zoning ordinance will not be ruled invalid if it is
"fairly debatable" that the ordinance bears a substantial
relationship to protecting the public health, safety or welfare. See Sarasota
County v. Walker, 144 So.2d 345 (Fla. 1962); City of Miami Beach v.
Lachman, 71 So.2d 148 (Fla. 1953).
Although rezoning is a function of local government, the State plays
an ever larger role in the process. F.S.
125.66(5) sets forth the procedures counties must follow in rezoning
property. F.S. Chapter
380, Development of Regional Impact Procedures, must be complied with if the
size of the proposed development so dictates, regardless of local government
action. Finally, the power to
rezone is constrained by the comprehensive plan required by F.S.
Chapter 163, Part II. All land
development regulations must be consistent with the comprehensive plan (or
adopted element of the plan if the entire plan is not yet adopted).
Where the desired rezoning would be inconsistent with the
comprehensive plan, the plan must be amended prior to the rezoning.
The party seeking the rezoning has the burden of proof to show that
the proposed development conforms with the comprehensive plan
Machado v. Musgrove, 519 So.2d 629.
Generally, comprehensive plans may be amended only twice a year;
however, amendments affecting 5 acres or less may be effected without such
limitation under certain circumstances.
F.S. 163.3187. The
comprehensive plan procedures and pitfalls vary depending on the county, and
at time of this publication are in transition and development.
See, Kobrin and Rubin, "Concurrency," Florida Bar Journal,
January 1990, p. 55. Attorneys
are cautioned to determine the current status in the relevant county for
every transaction which may involve construction.
The following Florida Statutes should be considered:
1. 125.01(h),
county power to zone;
2. 125.66(5),
procedures for rezoning by counties of private property;
3. 166.021,
power of municipalities;
4. 166.041(3)(c),
procedures for rezoning of private property by municipalities;
5. 380.06,
developments of regional impact;
6. 163.3177,
elements of comprehensive plan;
7. 163.3187,
amendment of adopted comprehensive plan;
8. 163.3194,
legal status of comprehensive plan;
9. 163.3197,
legal status of prior comprehensive plan; and
10.
163.3201, 163.3202, 163.3213, implementation of comprehensive plan by
development regulation.
The following sections of the Florida Constitution should be
reviewed:
1. Article
VIII, Section 1 (Counties); and
2. Article
VIII, Section 2 (Municipalities).
The following administrative rule should also be reviewed:
Fla. Admin. Code 9J-5 (Harrison).
Publications and articles on zoning which would be helpful to the
attorney include:
1. L.
Davidson and M. MacConnell, FLORIDA ZONING LAW (D&S 1988) Ch. 3.02,
Initiating Zoning or Rezoning;
2. FLORIDA
ZONING & LAND USE PLANNING (CLE 1983);
3. Juergensmeyer
and Wadley, FLORIDA LAND USE RESTRICTIONS (D&S 1989);
4. Davidson,
Plan-Based Land Development and Infrastructure Controls:
New Directions for Growth Management, 2 J. Land Use & Envtl.
L. 151 (Fall, 1986);
5. Schnidman
& Baker, Planning for Platted Lands:
Land Use Remedies for Lot Sale Subdivisions, 11 F.S.U. Law Rev.
505 (Fall, 1983);
6. Pelham,
Regulating Developments of Regional Impact:
Florida and the Model Code, 29 U.Fla.L.Rev. 789 (1977);
7. Ravikoff,
Land Use Planning, 31 U. Miami L. Rev. 1119 (1977); and
8. Rhodes,
Hayler and Brown, Land Use Controls, 31 U.
Miami L. Rev. 1083 (1977).
The following newsletters which are also helpful may be obtained
without charge upon request to the publisher:
1. Growth
Management Studies Newsletter
Growth Management Studies
University of Florida College of Law, Gainesville, FL
32601;
2. Florida
Environmental and Urban Issues
FAU-FIU Joint Center
Florida Atlantic University
Boca Raton, FL 33431;
3. Technical
Memo
Florida Department of Community Affairs
Division of Resource Planning and Management
Bureau of Local Affairs
2740 Centerview Drive
Tallahassee, Florida 32399-2100
D.
Elimination Of Objectionable Restrictions And
Easements
1.
[§4.6] On The Land To Be
Subdivided
Releases
of restrictions and easements that will interfere with the development of
the proposed subdivision must be obtained; otherwise, court action must be
brought for their cancellation based upon abandonment, adverse possession,
merger or some other grounds. See,
Botts, Removal of Outmoded Restrictions, 8 U.Fla.L.Rev. 428 (1955).
Unless the buyer has acquired title to the property, the buyer may
lack standing and any court action taken to eliminate objectionable
restrictions may have to be brought on behalf of the seller.
Any restriction sought to be cancelled should be reviewed for
possible challenges to its validity. In
the past, courts took a restrictive view towards the length of time a
restriction could remain in force. More
recently, however, the courts have liberalized this position and upheld
restrictions which could remain in force almost indefinitely.
In
Balzer v. Indian Lake Maintenance, Inc., 346 So.2d 146 (Fla. 2d DCA
1977), the court reviewed a covenant which remained in force until a certain
date, and subsequently would be automatically renewed for ten-year periods
unless the owners of at least two-thirds of the lots in the subdivision
agreed in writing to change or abrogate it.
The court held that the covenant was not invalid on the theory that
it imposed a perpetual obligation incapable of abrogation.
The key to the court's ruling was that "the covenant had
definite termination dates occurring every ten years thus the covenants
could be abrogated".
The
following "Title Notes" published by Attorney's Title Insurance
Fund should be reviewed:
1. T.N. 11.04.13, Release of Restrictions By Statutory Trustees
Time - Limitations;
2. T.N. 24.03.01, Deeds Not Containing Restrictions And
Reverters Appearing In Plat Dedications - Effect;
3. T.N. 24.03.02, Replatting May Not Eliminate Restrictions;
4. T.N. 27.01.03, Effect On Reservations;
5. T.N. 28.01.06, Waiver of Restrictions On Basis of Other
Numerous Violations Not Justified As To Unimproved Property;
6. T.N. 28.03.01, Change in Character of Neighborhood and Zoning
- Marketable Record Title Act;
7. T.N. 28.03.03, Expiration of Restrictions and Reverters;
8. T.N. 28.03.08, Statutory Cancellation - Sec. 689.18, F.S.
1975; and
9. T.N. 28.03.09, Subdivider's Release T.N. 28.03.10 Tax Titles
Do Not Eliminate Restrictions 2.
2.
[§4.7] On Nearby Lands
The
developer, in choosing a tract of land to be subdivided into individual
residential lots, should be aware that HUD/FHA and many other lenders
customarily will not approve loans on residential lots unless the land in
close proximity is restricted so that it cannot be used in such a manner
that it would materially impair the property on which the loan is to be
made. Usually, the restrictions
on nearby lands are not required to be as strict or as detailed as those
within the proposed subdivision. See, Land Planning Principles for
Home Mortgage Insurance, HUD Handbook 4140.1, 8-2 (1973).
However, the attorney should be aware that some lenders may require
restrictions which are more strict and detailed than the applicable zoning
of the nearby lands.
E.
[§4.8] Easements Over Adjoining Property
It may be necessary for the developer to secure easements over
adjoining or nearby lands. Easements
are required most often in connection with drainage and utilities and
sometimes for access. Without
them, the developer may be unable to achieve the intended goal.
It must be kept in mind that such easements must be satisfactory in
form and content to the entity that will ultimately accept or approve them.
The attorney should ensure that the easements are free from
encumbrances on the servient estate. 1A
BOYER, FLORIDA REAL ESTATE TRANSACTIONS, Chapter 23.
F.
Approval By Secondary Mortgage Market Brokers &
Government Mortgage Insurers
1.
[§4.9] In General
Essential
to the success of many subdivisions is the ability of an ultimate purchaser
to finance a lot improved with a home with Federal Housing Administration
("FHA") or Veterans Administration ("VA") guaranteed
loans. As used in this chapter, FHA loans refer to those secured by
mortgages on single-family homes to be insured under the National Housing
Act, as amended, 12 U.S.C 1701 et seq. VA loans as used in this chapter refer to those for
single-family residences, guaranteed under the Serviceman's Readjustment Act
of 1944, as amended, 38 U.S.C. 1801 et seq. (Veterans
Benefit Act).
Formerly
both the FHA and VA established and monitored subdivision standards,
including approval of the subdivision site, improvements and utilities.
The VA has changed its practice and focuses of its review on the
determination of the value of homes to be purchased. The VA relies upon the local permitting authorities, lenders,
surveyors and other private parties to review the subdivision as to
environmental and related issues. However,
in subdivisions where there are private roads or substantial recreational
amenities, the attorney can anticipate a review of the covenants and
homeowners' association documents by the VA. VA Circular DVB 26-80-30 should be consulted as to VA review
of planned unit developments. This
circular may be obtained from the Office of District Counsel, P.O. Box 5002,
Bay Pines, Florida 33504. HUD/FHA
has continued to require subdivision review before granting commitments to
issue mortgages under Section 203(b) of the National Housing Act of 1934,
the most common mortgage insurance program.
See 1 Housing and Development Reporter 10:0014 (WG & L).
As
the secondary mortgage market has emerged as a major financial force, it has
taken on increasing importance to the developer and lender.
The two major purchasers of residential mortgages are the Federal
National Mortgage Association ("Fannie Mae") and Federal Home Loan
Mortgage Corporation ("Freddie Mac").
Both entities have requirements as to the property and homes securing
the mortgages they purchase and resell.
While compliance with the FHA requirements will generally satisfy
Fannie Mae and Freddie Mac requirements, these agencies should be consulted
to assure the marketability of mortgages created upon subdivision homes.
At time of this writing, the regional Fannie Mae office is:
100 Peachtree Street, N.W.
Atlanta, GA 30303
404/572-6000.
The regional Freddie Mac office is:
Federal Home Loan Mortgage Corporation
2839 Paces Ferry Road, N.W., Suite 700
Atlanta, GA 30339
404/438-3800
Guides
available from the respective regional offices include:
1. FNMA Selling Guide;
2. FNMA Servicing Guide;
3. FNMA MBS Selling and
Servicing Guide;
4. FNMA Multifamily
Guide; and
5. Freddie Mac Bulletin
6. Freddie Mac Sellers'
& Servicing Guide (includes the Freddie Mac Bulletin).
Virtually every residential lender subscribes to these loose-leaf
guides and most will make them available upon request.
Although in
the past there existed uniformity and reciprocity between VA and FHA with
regard to subdivision approval, this is no longer the case.
See HUD Circular letter 88-26 (HD-51).
Therefore, if the client seeks to satisfy both VA and FHA
requirements, both agencies should be contacted at an early stage to ensure
compliance with their respective. Fannie Mae and Freddie Mac should also be consulted, whether
FHA, VA or conventional financing is anticipated, to assure that the
important secondary mortgage market will be available to lenders.
2.
HUD/FHA Requirements
A.
[§4.10] Generally
The objective of HUD/FHA is to assure that:
1 the
improvements are sound;
2. each
property is a separate real estate entity;
3. each
unit will have satisfactory provisions for
utilities;
4. building
sites are of sufficient size and
properly arranged;
5. proper
streets, drains and public areas are made
available and accepted for maintenance by public
authority;
6. the
requirements of local codes are met; and
7. environmental
laws and regulations are followed.
B.
[§4.11] Administration of HUD/FHA Requirements
The Federal Housing Administration is part of the Department of
Housing and Urban Development ("HUD").
HUD-FHA requirements are administered and the required approvals
obtained from the insuring office having jurisdiction.
At time of this writing, the four Florida offices are:
Department of Housing and Urban Development
Gables 1 Tower
1320 South Dixie Highway
Coral Gables, FL 33146-2911
305/662-4500
Department of Housing and Urban Development
Langley Building
3751 Maguire Boulevard, Suite 270
Orlando, FL 32803-3032
407/648-6441
Department of Housing and Urban Development
700 Twiggs Street, Room 527
Post Office Box 172910
Tampa, FL 33672-2910
813/228-2501
Department of Housing and Urban Development
325 West Adams Street
Jacksonville, FL 32202-4303
904/791-2626
Subdivision review is required before HUD/FHA will commit to insure
any mortgages in a new subdivision. The
developer must apply for a Master Conditional Commitment (MCC), the purpose
of which is to enable HUD/FHA to determine that the subdivision meets its
objectives, described above. Increasingly,
HUD/FHA is emphasizing environmental requirements in its review.
There are two procedures for obtaining an MCC.
One is for developer certification whereby the developer applies for
environmental review. In the
other procedure, HUD/FHA approves the regulations within a local
jurisdiction to determine that compliance with these regulations meets
HUD/FHA requirements. In
addition, Planned Unit Developments are subject to additional review.
The HUD/FHA regional office having jurisdiction in the area where the
subdivision will be located should be consulted to determine which
procedures are applicable to the particular development.
HUD/FHA requirements for the analysis and processing of residential
subdivisions are set forth in HUD handbooks and bulletins,
which are available at the regional HUD offices.
The general requirements are set forth in HUD Handbook 4135.1,
"Procedures for Approval of Single-Family Construction
Application."
If developer certification is required, the developer will have to
submit an application for environmental review on HUD Form No. 92-250,
revised. A receipt (FHA
Form No. 2251) is then returned to the developer.
HUD Handbook 1390.4, "A Guide to HUD Environmental Criteria and
Standards Contained in 24 CFR Part 51" (August 1984), contains relevant
background material as well as an annotated copy of the regulations
regarding HUD environmental requirements.
After receiving the application, a representative travels to the site
and reviews the application and HUD/FHA prepares a subdivision feasibility
valuation report (HUD Form No. 92-1252).
This report is documentation as to HUD/FHA's inspection of the site
and includes its conclusions and recommendations regarding feasibility of
the proposal. HUD/FHA then
reviews the entire file and either recommends rejection of the application
or files a final report for environmental assessment (HUD Form No. 92-253).
If HUD/FHA recommends major changes in the proposed development, it
schedules a conference on modification.
If all conclusions are favorable, a feasibility approval letter
is sent to the developer, accompanied
by a checklist entitled "Exhibits Required For
Certificate" (HUD Form No. 2256).
This checklist guides the developer in preparing exhibits required
before the beginning of construction and before the acceptance of
applications for commitments. HUD/FHA
then returns an acknowledgment of receipt of certified exhibits (HUD Form
No. 92-257) to the developer.
The next step is issuance of HUD/FHA's commitment acceptance, the
Individual-Group Construction Application (HUD Form No. 92-258), to inform
the developer that preconstruction analysis has been completed and a
favorable determination reached. This
form also provides the developer with a list of requirements that will be
imposed as commitment conditions on individual properties.
The subdivision "Processing Record for Developer
Certification" (FHA Form No. 2259) provides an accurate file record of
all processing and compliance actions and records target dates.
There is also a streamlined area
review procedure, referred to as the "Improved Area Submission".
The required exhibits for an Improved Area Submission are:
1.
Evidence that the local government has accepted the plat of the subdivision
and the plan for its principal development elements and rights of way, and
that all required government approvals have been obtained;
2. Evidence that the streets, water and sewage system have been
or will be accepted by the local government for ownership and maintenance;
3. A copy of the recorded subdivision plat;
4. An affirmative Fair Housing Plan;
5. A copy of a U.S.G.S. Map with the area of the subdivision
outlined; and
6. Appraiser/Review Appraiser Checklist, HUD 54891.
These
Exhibits should be submitted by the lender to the HUD/FHA appraiser along
with the first application for mortgage insurance on a specific property
within the subdivision. The
developer should consult the guide that HUD/FHA has promulgated for its
lenders and appraisers on
valuation of property securing HUD/FHA guaranteed loans. "Valuation
Analysis For Home Mortgage Insurance" 4150.1 (April 1973).
In addition to program guides and applications, HUD/FHA has produced
handbooks which may be helpful to the attorney even if HUD/FHA approval is
not being sought. For example, HUD/FHA
and the VA have compiled a group of suggested forms entitled "Suggested
Legal Forms for Planned Unit Developments" (FHA Form 1400; VA Form
26-8200). These forms, which are adaptable for nationwide use, include: declaration of covenants, conditions and restrictions;
articles of incorporation and bylaws for a nonprofit corporation formed for
the maintenance, preservation and architectural control of the residence
lots and common areas in the subdivision; a dedication of common areas; a
clause for inclusion in deeds to the individual lots reserving title to the
grantor of those lands lying beneath common property; and appropriate
instructions. Other guides
include 4075.10, Designing for Home Safety (1975);
4140.2, Land Planning Procedures and Data (1973); and 4075.12,
Central Water and Sewage System (1976).
These guides and a complete index of guides may be obtained from a
regional HUD/FHA office.
The following bibliography is a list of materials on federal
assistance in subdivision development:
Housing
and Development Reporter (WG&L)
Abuses
in the Low Income Homeownership Programs - the Need for a Consumer
Protection Response by the HUD/FHA,
45 Temp.L.Q. 461 (1972).
Boykin
and Brincefield, The Federal New Communities Program:
The Legislation, Processing and Documentation, 4 Urb. Law. 189
(1972)
Downs,
Are Subsidies the Best Answer for Housing Low and Moderate Income
Households?, 4 Urb. Law. 405 (1972).
Pozen,
The Financing of Local Housing Authorities: A Contract Approved for
Public Corporations, 82 Yale L.J. 1208 (1973).
Kleven,
Inclusionary Ordinances - Policy and Legal Issues in Requiring Private
Developers to Build Low Cost Housing, 21 UCLA L. Rev. 1432 (1974).
Salsich,
Community Development - Some Reflections on the Latest Federal Initiative,
19 St. Louis U.L.J. 293 (1975).
Ellickson,
Suburban Growth Controls: An
Economic and Legal Analysis, 86 Yale L.J. 385 (1977).
Alterwitz,
Low-Income Housing Under The New Conservatism: Trickle Down Or Dry Up?
26 Santa Clara L. Rev. 461 (Spring 1986).
3.
[§4.12] VA Requirements
The
VA will permit, through its guaranteed loan program, an eligible veteran to
finance up to 100% of the cost of a home; therefore, the availability of VA
financing is essential to many subdivisions.
The procedures followed by the VA are very similar to those of the
FHA as to the determination of the reasonable value of a home for loan
guarantee purposes. The VA
requires appraisals of proposed construction and further requires that in
all requests for such appraisals, the plans submitted must be certified by
architects, surveyors, land planners, professional engineers, or such other
individuals approved by the VA as being in compliance with the VA Minimum
Property Requirements set forth in 24 CFR 200.926.
The form of such certification must be substantially as follows:
I
do hereby certify that these drawings/plans and related specifications meet
all local code requirements and are in conformity with VA
Minimum Property Requirements.
Individual
appraisals may be obtained for each dwelling or a _______ may seek a
"master certificate of reasonable value" conveying all of the
builders' plans within the subdivision at one time.
For
more information, Bulletin 26-88-31 should be requested from the regional VA
office. The developer should
request VA Form 26-1834a, which is an application for a Master Certificate
of Reasonable Value required for new subdivisions.
Builders desiring to participate in the VA loan guarantee program
should obtain a copy of VA Information Bulletin 26-88-34, which provides
basic information as well as the forms required for a builder to enroll in
the program. The best source of
information regarding the VA practices and procedures are the regular VA
Regional bulletins. All VA
Forms and Publications should by requested by publication number (using VA
Form 23-8800, "Request for VA Forms and Publications") from the
Regional Office at P.O. Box 1437 St. Petersburg, FL 33731.
Lenders
and lenders' counsel should obtain the VA Lenders Handbook, VA Pamphlet 26-7
(1977) from the Regional VA office or from the Department of Veterans
Benefits, Washington DC 20420. Additional resources include VA Pamphlet 26-6, "A Guide
for Veterans Planning to Buy or Build Homes With a VA Loan" (Revised
Jan. 1984); VA Pamphlet 27-82-2, "A Summary of Veterans Administration
Benefits" (Revised June 1986); and VA Pamphlet 26-4,
"VA-Guaranteed Home Loans for Veterans (Revised May 1987).
4.
[§4.13] Fannie Mae and Freddie Mac Requirements
Although independent from each other, Freddie Mac and Fannie Mae have
similar requirements for property before
either will purchase mortgages upon such property.
The mortgaged premises must conform to all applicable zoning and use
restrictions and building and housing codes.
Freddie Mac Sellers and Servicers' Guide Section 2209.
Preinspection and approval by Freddie Mac for condominiums and PUDs
may be available at a modest inspection fee; requests should be submitted on
Form 770. In general, see:
Housing and Development Reporter 70; Secondary Mortgage Finance
Programming (WG&L); Title III National Housing Act, 12 U.S.C. 1716 et.
seq.; Federal Home Loan Corporation Act, 12 U.S.C. 1451.
G. [§4.14]
Checklist Of Conditions To Be Considered In Purchase and Sale Agreement
1. Does the
purchase contract assure that the title to the property and easements
serving the property from adjoining land will be free of objectionable:
a. zoning classification;
b. covenants, conditions and restrictions such as those
limiting land use, controlling density and setting minimum lot sizes;
c. reverter provisions;
d. outstanding mineral rights;
e. easements such as those for ingress, egress, utilities
and drainage; and
f. plats, streets and parks?
2. Do public roads
exist for adequate access? Are roads paved? Does
the intended development call for a change in use of property which has
access by virtue of a state road? See
proposed F.A.C. rule which allows the Florida Department of
Transportation to rescind or deny curb cuts for the property.
3. Is right
secured for adequate drainage which will meet all governmental requirements,
including those of the governing water management district?
4. If a waterfront
subdivision is contemplated, will title extend to the mean high water line?
See Chapter ____, "Ownership and Use of Waterfront
Property".
5. If land is
submerged and is to be filled, are all requisite permits obtainable and are
bulkhead lines established?
6. Is there
assurance of the availability and suitability of utilities, such as gas,
electricity, water and sewer or septic tanks?
What are the connection or "tap-in" charges?
For what term can the right to those utilities and capacity be
protected? Is water pressure
adequate? Will a lift station
be required? Can the sewer
system be accessed by gravity feed? What
fire hydrant requirements will have to be met?
7. Should the
purchase be conditioned upon acceptable boundary and topographic surveys?
What state of facts would be disclosed by an accurate survey and
inspection of the property? Are
defects revealed by the survey treated as objections to title?
8. Are there any
cemetery or burial plots located on the property?
9. Should the
purchase be conditioned upon load-bearing and percolation soil tests?
10. Is the
property within such close proximity to an airport or a well field that the
lots will be disqualified for sale and financing?
Are there restrictions on height of buildings in flight paths?
11. Will the
subdivision be acceptable for financing without imposition of land use
restrictions on nearby property?
12. Are easements
across nearby property required?
13. Has
preliminary approval of the site been obtained from HUD/FHA and lenders?
14. Does the
purchase contract permit the purchaser to use existing engineering plans,
data and other work product?
15. Are terms and
release clauses of mortgages to be given or assumed in connection with a
purchase acceptable and consistent with intended development, construction
mortgage financing and requirements of regulations by all governing
governmental entities? Do all
mortgages provide for subordination to proposed plat or joinder by mortgagee
in the plat? Do the mortgages
permit development of the property as contemplated by its developer?
May the mortgages be prepaid? Is
there a penalty for prepayment? Do
the mortgages provide for the joinder by mortgagee in applications for
zoning?
16. If an
unsecured note is to be given to the seller as part of the purchase price,
is the necessary provision made for waiver of the vendor's lien?
17. If the land
being purchased forms only a part of the intended subdivision, is closing
conditioned on the ability to acquire the remaining land?
Is the purchaser protected against gaps and hiatuses between the
parcels?