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HomeMy WebLinkAbout5.A.1. Release of Lien for Rehabilitation Loan for Property Located at 129 Main St N CITY OF SHAKOPEE S-f1. J. Memorandum CASE NO.: Not Applicable CO~JSENT TO: Mayor and City Council Mark McNeill, City Administrator FROM: R. Michael Leek, Community Development Director f?M-- SUBJECT: Request to Release Lien for Rehabilitation Loan for Property Located at 129 Main Street North MEETING DATE: July 15,2008 REVIEW PERIOD: Not Applicable INTRODUCTION: The City has received the attached request to release a lien in the amount of $1,111.50 against the subject property. DISCUSSION: Several years ago the City secured a Small Cities Development Block Grant, and with a portion of the funds established a residential rehab loan program. This program is administered for the City by the Carver County Community Development Program. The property owner received a loan under the program, and in December of 2000, entered into a loan repayment agreement in the amount of $3,705.00. The loan was not totally repaid, and is thus subject to a lien in the amount set forth above. Ms. Egan, who is 95 years old, entered nursing care in February of this year. Ms. Egan apparently entered into a reverse mortgage, and with her admission to nursing care is seeking to turn the property over to the lender. Because of the City's lien the lender has not been able to accept the property. On her behalf, Anita Lewis has requested that the lien be released so the property can revert to the mortgage company. Staff did confer with the City Attorney, Jim Thomson, regarding the City's option in this case. From a legal perspective, should the Council release the lien it does not pose a concern that the decision would have a precedential affect. If the City were to receive other lien release requests, they would be evaluated, and a decision reached, on a case by case basis. A decision to release the lien in this case would not be binding on future City Councils. A possible concern that the Council may have is that the lien is the bank's problem because of the reverse mortgage they granted Ms. Egan. I have learned from staff at the Carver Count HRA that the reverse mortgage was apparently in the amount of about $124,000. Scott County's current listed value is on the order of$141,OOO. Thus, this is not a case where Ms. Egan was loaned more than the value of the home. H:\CC\2008\07-15\Egan Lien Release 07152008.doc 1 Based on the information we have, it appears that the bank's mortgage is superior to the city's lien because the mortgage was of record when the city's lien was recorded. Consequently, if the city council chooses not to release the lien, the city's options would be to: (1) Try to collect the amount directly from the borrower; (2) Foreclose on the lien, in which case the mortgage would need to be paid before the city received any money; or (3) Wait until the property sells and have the lien paid as part of that sale (assuming that there is enough equity in the property). It does not appear to staff that it would be desirable or productive to attempt to collect the remainder owed from Ms. Egan. Nor does it seem a certainty that the lien would be repaid ifthe second and third options were selected. If the homeowner does deed the property to the bank, the bank would take title subject to the city's lien. That is probably why she is now asking the city to release the lien. If the city council chooses not to release the lien, the bank could decide to go through a foreclosure proceeding on the property, which is what staff understands would be the case. The city's lien would in any event be extinguished as part of the foreclosure proceeding. VISIONING RELATIONSHIP: This action supports Goal F, "Housekeeping." ACTION REQUESTED: Offer a motion to authorize the appropriate City officials to take the necessary steps to release the City's lien in the amount of$I,II1.50 against the property located at 129 Main Street North, and move its adoption. H:\CC\2008\07-15\Egan Lien Release 07152008.doc 2 Doc. No. .A 492518 OFFICE OF THE COUNTY RECORDER SCOTT COUNTY, MINNESOTA Certified Ated and/or Recorded on 12-28-2000 at 11 ~OO Receipt: 67807 Pat Boeckman, County Recorder 01 EXEMP~ by (r I Deputy Fee: $19.50 - COMMUNITY DEVELOPMENT PROGRAM REPAYMENT AGREEMENT Y- Ckwen CoWl' IJ12A City of Shakopee THIS AGREEMENT, made and entered into this 19th day of December, 2000, by and between Dorothv L. Eoan, a sinole person (hereinafter referred to as "Borrower"), and The City.of Shakopee, having its principal office at 129 Holmes Street South, Shakopee, Minnesota (hereinafter referred to as "Lender). WHEREAS, the Borrower has applied for a loan under said program to improve and rehabilitate that certain real estate situated in the City of Shakopee described below and; WHEREAS, Lender has paid Three Thousand Seven Hundred Five and 00/100** Dollars ($3705.00**) on Borrower's behalf as a no-interest loan (hereinafter referred to as "Loan") for improving the below described real estate under the Small Cities' Development Program, the receipt and sufficiency of which is hereby acknowledged by Borrower; and; WHEREAS, Borrower and Lender desire to set forth herein the provision for Borrower's repayment of the Loan, and to provide for'securing said repayment with the mortgage on the property described below (herein referred to as the "Mortgage"). NOW, THEREFORE, in consideration of said Loan and in accordance with Minnesota Statutes, the parties hereto do hereby agree as follows: 1. Borrower covenants and agrees with Lender to pay to the order of the Lender a sum. equal to a percentage of the full amount of the Loan with 10% of the full amount of the Loan forgiven each year the borrower remains in the home, without interest, at such place Lender may designate in writing to Borrower, upon the occurrence of any of the following events within the period of ten (10) years after the date of the Loan as set forth above: a. The sale, transfer, or conveyance (whether by deed, contract for deed, or otherwise); and whether voluntary or involuntary; either while the Borrower is living or by reason of the death of the Borrower; or b. The below-described real estate ceases for any reason to be the principal place of residence of the Borrower; Repayment of the Loan as required under the terms of this paragraph 1 shall be made to Lender not later than the 30th day following the sale, transfer, or other conveyance referred to in paragraph 1 (a) above. For the purposes bf this Agreement this will be Maturity Date. 2. As security for Borrower's obligation of repayment, and subject to the terms and conditions of this agreement, Borrower hereby grants, and Lender shall and hereby does have, a lien on the real estate hereinafter described in the full amount necessary to satisfy said repayment obligation and the cost, including reasonable Attomeyfees, or collecting the same. The real estate.subject to said lien is situated in Shakopee, Minnesota, in the County of Scott and is legally described as: The South 58 feet of the West 108 feet of the North Half (N1/2) of Block One (1), East Shakopee, Scott County, Minnesota, according to the plat thereof on file and of record in the office of the Register of Deeds in and for said County and State; subject to utility easement now existing over said premises, and reserving to parties of the first part, their heirs and assigns, an easement to maintain and repair the existing water line extending to the property of parties of the first part retained by them, as same now exists in the above-described premises. PID # 27.0040090 3. Promptlyatter the date if any sale, transfer or other conveyance of the above described real estate (or, in the event of a sale by contract or deed aUeast ten (10) days prior to such date of sale), Owner or his/her heirs, executors,or Representatives, shall give the City notice thereof. 4. In the event Owner or his/her heirs, executors or representatives shall fail or refuse to make a required repayment within said limited period, the City may, with or without notice of Owner, foreclose said lien in the same manner as an action for the foreclosure of mortgages upon said.real Estate, as by statute provided. 5. Said lien shall terminate and shall be of no further force or effort in the event the City has not, on or before December 19.2010 commenced an action in the aforesaid manner to foreclose the same. . State of Minnesota ) ) County of Carver ) On the 19th day of December, 2000, before me, a Notary Public with and for the said County, personally appeared Dorothv L. Eaan, a sinale person to me known to be the person( s) described in and who executed the foregoing instrument and acknowledging that !~~,~~e~:;eeaclandd~. Notary Public Ie AMANDA B. SMOOT I ~." NOTARY PUBLIC - MINNESOTA . , My CommISSIon ExPlfflS 1-31-2005 1\ - m State of Minnesota ) ) County of Carver ) On the 19th day of December, 2000, before me, a Notary Public with and for the said County, personally appeared Amanda Smoot, Community Development Specialist to me known to be the person( s) described in and who executed the foregOing instrument and acknowledging the she executed the same as her free act and deed. ~" ,';'oC:Z 1~ ......__...,. ~.A.../-..4:'. ~ L!....v........-a._a...- Notary Public .~.&+~*.................. .....-"'.&..iL.)i>................~. 1",.-. .1, '" JUDITH A. CABS I . "'<,\~I' NOTARY PUBLlc.MINNESOTA This document was prepared by: _JI/\ MY COMMISSION EXPIRES 1-:11-2005 ..( C C t H . & R d I t '" arver oun y ouslng e eve opmen 1\. · Authority 500 North Pine Street Suite 204 Chaska MN 55318 This instrument is exempt from registration tax under Section 287.06 of Minnesota Statutes. 6. This agreement shall run with the aforesaid real estate and shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, representatives, successors, and assigns. 7. If this Agreement is executed by the contract for deed vendor or a mortgage of the property, as one of the Owners, such execution shall be deemed for the purpose of establishing and continuing the existence of the indebtedness described herein and the lien granted herein. However, in the event of default of the terms hereof, neither the City of Shakopee nor its assigns shall take any action against such contract for deed vendor except such as may be necessary in order to subject to the satisfaction of said indebtedness the property described herein. IN TESTIMONY WHEREOF, the parties have executed this Agreement as of the day and year first written above. ~~~ Borrower: l ..... Borrower Borrower Contract Vendor (if applicable) Contract Vendor (if applicable) Contract Vendor (if applicable) Contract Vendor (if applicable) The Carver County HRA for the ~t~t City of Shakopee ._~ Grant Administrator By: Amanda Smoot, its Community Development Specialist ~ -f:..