Chapter 691
AN ACT
HB 3485
Relating to affordable housing covenants;
creating new provisions; and amending ORS 94.504 and 197.309.
Be It Enacted by the People of
the State of
SECTION 1. The Legislative Assembly finds and declares
that:
(1) There is a serious
shortage of decent, safe and sanitary housing available and affordable to low
and moderate income households in the State of
(2) The inadequacy in
the supply of decent, safe and sanitary affordable housing endangers the public
health and jeopardizes the public safety and general welfare of the state.
(3) To obtain the
benefits of covenants and restrictions that seek to preserve and maintain
affordable housing, the Legislative Assembly authorizes the creation and enforcement
of affordable housing covenants.
SECTION 2. As used in sections 1 to 6 of this 2007 Act:
(1) “Affordable housing
covenant” means a nonpossessory interest in real property imposing limitations,
restrictions or affirmative obligations that encourage development or that
ensure continued availability of affordable rental and owner-occupied housing
for low or moderate income individuals.
(2) “Area median income”
means the median income for the standard metropolitan statistical area in which
the affordable housing is located, as determined by the Housing and Community
Services Department, adjusted for household size.
(3) “Eligible covenant
holder” means:
(a) A public body, as
defined in ORS 174.109;
(b) An agency of the
(c) A public benefit
corporation or religious corporation, as those terms are defined in ORS 65.001,
one purpose of which is to provide affordable housing for low or moderate
income households;
(d) A consumer housing
cooperative, as defined in ORS 456.615;
(e) A manufactured
dwelling park nonprofit cooperative corporation; or
(f) A federally
recognized Indian tribe.
(4) “Low income
household” means a household with income less than or equal to 80 percent of
the area median income.
(5) “Moderate income
household” means a household with income less than or equal to 120 percent and
greater than 80 percent of the area median income.
(6) “Subsidy” includes,
but is not limited to:
(a) A grant, loan or
contract made by a federal agency, a federally recognized Indian tribe or a
public body, as defined in ORS 174.109;
(b) A grant, loan or
contract made by a nonprofit corporation or a limited liability company the sole member of which is a nonprofit corporation;
(c) A subsidized loan
from a lending institution that makes loans for residential housing; or
(d) A subsidized private
transaction.
(7) “Third-party right
of enforcement” means a right provided in an affordable housing covenant to a
third party to enforce the terms of the covenant.
SECTION 3. (1) A person may create an affordable
housing covenant as a condition of giving or receiving a subsidy during
ownership or upon conveyance of real property, in the form of a covenant,
servitude, easement, condition or restriction in a deed, declaration, land sale
contract, trust deed, mortgage, security agreement, assignment, will, trust,
rental agreement, lease or other written instrument that is:
(a) Executed by the
owner of the real property and the covenant holder; and
(b) Recorded in the deed
and mortgage records of the county in which the real property is located.
(2) The affordable
housing covenant creates a real property right in an eligible covenant holder
to:
(a) Limit the use of
real property to occupancy by low or moderate income households in rental or
owner-occupied housing;
(b) Restrict the rental
rate or sale price of real property to ensure affordability by future low and
moderate income households; or
(c) Limit, restrict or
condition the use and enjoyment of real property to create or retain rental or
owner-occupied affordable housing for occupancy by low or moderate income
households.
(3) The affordable
housing covenant may be conveyed, assigned, modified or terminated by a written
instrument recorded in the deed and mortgage records of the county in which the
real property is located. The affordable housing covenant may be:
(a) Conveyed or assigned
by a written instrument executed by the conveying or assigning covenant holder
and the accepting covenant holder;
(b) Modified by a
written instrument executed by the covenant holder and the owner of the real
property; or
(c) Terminated by a
written instrument executed by the covenant holder and a third party with the
right to enforce the covenant.
(4) An affordable
housing covenant is not invalid because a holder of the covenant is not an
eligible covenant holder. A covenant holder who is not an eligible covenant
holder may not modify, terminate or commence an action to enforce the covenant.
However, the covenant holder may convey or assign the covenant to an eligible
covenant holder who may modify or terminate the covenant or commence an action
to enforce the covenant.
(5) An affordable
housing covenant is unlimited in duration unless:
(a) The instrument
creating the covenant provides otherwise;
(b) The duration of the
covenant is modified prior to the expiration of its stated term; or
(c) The covenant is
terminated.
(6) Upon termination of
an affordable housing covenant for any reason prior to the expiration of its
stated term, the covenant holder is entitled to receive the difference between
the fair market value of the real property immediately before termination and
the fair market value of the real property immediately after termination.
(7) An interest in real
property in existence when an affordable housing covenant is created is not
impaired by the affordable housing covenant unless the owner of the interest is
a party to the affordable housing covenant, subordinates the interest to the
affordable housing covenant or otherwise agrees to be bound by the affordable
housing covenant.
(8) The instrument
creating an affordable housing covenant may grant the eligible covenant holder,
or a designee of the eligible covenant holder, a right to enter the real
property to ensure compliance with the covenant and, if the right is granted,
the instrument shall designate the time and manner in which the eligible
covenant holder or designee may enter the real property.
(9) An affordable
housing covenant holder may assign a third-party right of enforcement, by a
written instrument executed by the covenant holder and recorded in the deed and
mortgage records of the county in which the real property is located, to a
person that qualifies to be an eligible covenant holder but that is not the
holder of that covenant.
(10) An affordable
housing covenant is automatically terminated if:
(a) The only holder of
the covenant is a corporation, as defined in ORS 65.001, that is dissolved
without conveying or assigning the covenant; and
(b) No person is entitled
to exercise a third-party right of enforcement pursuant to subsection (9) of
this section.
SECTION 4. An affordable housing covenant may:
(1) Include limitations,
restrictions and affirmative obligations on the sale price or rental rate of
real property or the use of real property or the income or assets of purchasers
or tenants;
(2) Limit
the amount of equity appreciation that a property owner may derive from
ownership of the real property;
(3) Grant a right of
first refusal or an option to purchase to the eligible covenant holder;
(4) Restrict the class
of persons to whom real property may be sold, leased or rented according to,
but not limited to, household income, assets, residency and prior
homeownership;
(5) Limit
the use of the real property to residential use as the primary residence of a
low or moderate income household;
(6) Limit, condition or
prohibit leasing or subletting;
(7) Impose obligations
for maintenance and insurance of the real property;
(8) Limit, condition or
prohibit the owner from allowing liens on the real property; and
(9) Make other
limitations, conditions or prohibitions that affect the affordability of real
property for low or moderate income households.
SECTION 5. An action affecting an affordable housing
covenant may be commenced or intervened in by:
(1) The owner of an
interest in the real property burdened by the covenant;
(2) An eligible covenant
holder of the benefit of the covenant;
(3) A person that has a
third-part right of enforcement; or
(4) A public body, as
defined in ORS 174.109, in the jurisdiction of which the real property burdened
by the covenant is located.
SECTION 6. (1) An affordable housing covenant is valid
and enforceable even though the covenant is not of a character traditionally
recognized at common law or is inconsistent with a common law doctrine of real
property law that might invalidate, impair enforcement of or cause the
termination of the covenant, including but not limited to common law doctrine
that holds that:
(a) The covenant is not
appurtenant to an interest in the real property.
(b) The covenant imposes
a negative burden.
(c) The covenant imposes
affirmative obligations upon the owner of an interest in the burdened real
property or the eligible covenant holder.
(d) The covenant is held
by an eligible covenant holder that does not have an interest in the real
property that is benefited by enforcement of the covenant against the burdened
property.
(e) The benefit of the
covenant does not touch or concern real property in any other way.
(f) There is no privity
of estate or privity of contract.
(g) The covenant can be
or has been conveyed or assigned to a covenant holder.
(h) The covenant is an
unreasonable restraint on alienability.
(i) The covenant is a
clog on the equity of redemption.
(j) The covenant lacks
adequate consideration.
(2) An affordable
housing covenant is valid and enforceable even if the covenant violates the
rule against perpetuities set forth in ORS 105.950 to 105.975.
(3) If a court denies
equitable enforcement of an affordable housing covenant because of a change of
circumstances that renders the covenant not in the public interest, the court
may award damages as the only remedy in an action to enforce the affordable
housing covenant.
(4) The court may not
use a comparative economic test as a basis for a determination that an
affordable housing covenant is not in the public interest.
SECTION 7. ORS 94.504 is amended to read:
94.504. (1) A city or
county may enter into a development agreement as provided in ORS 94.504 to
94.528 with any person having a legal or equitable interest in real property
for the development of that property.
(2) A development
agreement shall specify:
(a) The duration of the
agreement;
(b) The permitted uses
of the property;
(c) The density or
intensity of use;
(d) The maximum height
and size of proposed structures;
(e) Provisions for
reservation or dedication of land for public purposes;
(f) A schedule of fees
and charges;
(g) A schedule and
procedure for compliance review;
(h) Responsibility for
providing infrastructure and services;
(i) The effect on the
agreement when changes in regional policy or federal or state law or rules
render compliance with the agreement impossible, unlawful or inconsistent with
such laws, rules or policy;
(j) Remedies available
to the parties upon a breach of the agreement;
(k) The extent to which
the agreement is assignable; and
(L) The effect on the
applicability or implementation of the agreement when a city annexes all or
part of the property subject to a development agreement.
(3) A development
agreement shall set forth all future discretionary approvals required for the
development specified in the agreement and shall specify the conditions, terms,
restrictions and requirements for those discretionary approvals.
(4) A development
agreement shall also provide that construction shall be commenced within a
specified period of time and that the entire project or any phase of the
project be completed by a specified time.
(5) A development
agreement shall contain a provision that makes all city or county obligations
to expend moneys under the development agreement contingent upon future
appropriations as part of the local budget process. The development agreement
shall further provide that nothing in the agreement requires a city or county
to appropriate any such moneys.
(6) A development
agreement must state the assumptions underlying the agreement that relate to
the ability of the city or county to serve the development. The development
agreement must also specify the procedures to be followed when there is a
change in circumstances that affects compliance with the agreement.
(7) A development
agreement is binding upon a city or county pursuant to its terms and for the
duration specified in the agreement.
(8) The maximum duration
of a development agreement entered into with:
(a) A city is 15 years;
and
(b) A county is seven
years.
(9) ORS 94.504 to
94.528 do not limit the authority of a city or county to take action pursuant
to sections 1 to 6 of this 2007 Act.
SECTION 8. ORS 197.309 is amended to read:
197.309. (1) Except as
provided in subsection (2) of this section, a city, county or metropolitan
service district may not adopt a land use regulation or functional plan provision,
or impose as a condition for approving a permit under ORS 215.427 or 227.178, a
requirement that has the effect of establishing the sales price for a housing
unit or residential building lot or parcel, or that requires a housing unit or
residential building lot or parcel to be designated for sale to any particular
class or group of purchasers.
(2) [Nothing in] This
section [is intended to] does not
limit the authority of a city, county or metropolitan service district to:
(a) Adopt or enforce a land use regulation,
functional plan provision or condition of approval creating or implementing an
incentive, contract commitment, density bonus or other voluntary regulation,
provision or condition designed to increase the supply of moderate or lower
cost housing units; or
(b) Enter into an
affordable housing covenant as provided in sections 1 to 6 of this 2007 Act.
SECTION 9. (1) Sections 1 to 6 of this 2007 Act apply
to a covenant:
(a) Created under
sections 1 to 6 of this 2007 Act on or after the effective date of this 2007
Act.
(b) Created before the
effective date of this 2007 Act if the covenant would have been enforceable
under sections 1 to 6 of this 2007 Act had it been created on or after the
effective date of this 2007 Act.
(2) Sections 1 to 6 of
this 2007 Act do not invalidate an otherwise enforceable affordable housing
covenant, as defined in section 2 of this 2007 Act, created before, on or after
the effective date of this 2007 Act.
Approved by the Governor June 27, 2007
Filed in the office of Secretary of State June 27, 2007
Effective date January 1, 2008
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