TELLURIDE — Widely circulated reports that a piece of vacant land perched high above Telluride in the exclusive enclave of Aldasoro Ranch could lose its deed restriction as a result of foreclosure proceedings brought against its present owner are false, San Miguel County officials said Tuesday.
In February the parcel appeared on the county’s list of properties scheduled for foreclosure sale (originally scheduled for June 18) with an outstanding debt of about $193,736.
“We keep hearing a lot of rumors that people think the deed restriction will go away,” said San Miguel County Administrator Lynn Black. “It’s the county’s position that the deed restriction will remain.”
The 1.78-acre parcel, identified as Lot 138, Aldasoro Ranch, is protected under the county’s R-1 housing deed restriction that ensures that the lot may only be purchased by qualifying local employees who intend to live there full-time, and not by second homeowners or speculative buyers.
“If it was to go to foreclosure without the deed restriction, it would turn into a speculative foreclosure,” said San Miguel County Commissioner Elaine Fischer at a recent Board of County Commissioners meeting.
“That’s obviously, in my mind, a scandalous situation when it comes to protecting affordable housing,” she said, underscoring a sentiment shared by fellow commissioners Art Goodtimes and Joan May.
Most recently Lot 138 sold for $225,000 in 2006; it was assessed at $212,750 this year, according to county records.
“[Deed restriction is] designed to function as a secondary housing market,” explained Assistant San Miguel County Attorney Becky King.
“The theory is that we eliminate second homebuyers so locals are only competing with locals,” she said.
Were the lot’s deed restriction to disappear, it would immediately become worth much more than it is presently.
For example, Lot 136, a 2.77-acre vacant, free market parcel in Aldasoro Ranch sold this past January for $775,000; it was assessed at $850,000 for 2009.
Also in Aldasoro Ranch nearby Lot 108, a 2.13-acre vacant, free-market parcel, sold for $939,000 in 2008. It was also assessed at $850,000 for 2009.
“The misinterpretation out there was that if it was allowed to go to sale there would be a bidding war for it,” said San Miguel Regional Housing Authority Executive Director Shirley Greve.
“We had no inquiries about it whatsoever until that rumor started,” she said.
The speculation that the deed restriction could terminate most likely came about because of language that reflected a period of time when the Federal National Mortgage Association, or Fannie Mae, would not guarantee loans on deed restricted properties, said King.
“The banks wouldn’t lend on deed-restricted properties because they weren’t convinced they were going to get their money back” in the event of foreclosure, she said.
Although Fannie Mae has since lifted those rules, the county, in the meantime made an option available on its deed-restricted properties in order to ensure that local homebuyers could continue to get mortgages. The option allowed properties to convert to free market in the event that banks were to end up holding the Treasurers Deed for them.
“If it went to foreclosure sale, and the bank were the only bidder, it would go to free market unless the county exercised its option to purchase the note,” said Black, clarifying that if a party other than bank were the winning bidder, the property would also remain deed-restricted.
As a result, that may be why many people believe that in the case of foreclosure the loss of deed restriction is the rule, not the exception.
Rather, “The deed restriction can’t terminate,” said King. “It’s only the option in the agreement that makes it possible.”
In this case the county did purchase the note on June 11 – one week before Lot 138 was scheduled to be auctioned to the highest bidder on the courthouse steps – with a check for just over $213,000, made out to Community Bank.
“We just went to the bank and said we wanted to acquire the note,” King explained. “We now hold that note and the deed of trust was assigned to us.”
Accordingly, “[The county has] stepped into the bank’s shoes,” said San Miguel County Treasurer and Public Trustee Janice Stout.
“At this point it can tell me to just postpone the sale, withdraw and stop the foreclosure, or sell [the property],” she explained.
The county is in negotiations with the current owner, and is hoping to negotiate a deed in lieu of foreclosure, according to King.
As for the deed restriction, “At this point it can’t terminate at all,” she said.
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