Deed restrictions are guiding legal documents more powerful than Aspen/Pitkin County Housing Authority (APCHA) regulations, according to Executive Director Matthew Gillen. Certain deed restrictions, many of which were written in the ’70s or ’80s, do not include the same requirements as APCHA’s most recent, preferred deed restriction language — which includes sales via the lottery system.
Deed restrictions, or stipulations written into the deed of a property, can dictate things like to whom the house is sold or how property appreciation is calculated. APCHA is legally obligated to follow the parameters of a deed restriction when brokering a transaction.
“The deed restriction is the fundamental governing legal document,” he said. “If it doesn’t say that it has to go to lottery and a willing buyer and seller come to us and say, ‘This is what we’d like to happen,’ we will act as the broker to make that happen.”
In a recent column by Aspen Times columnist Elizabeth Milias, she alleged that a transaction between the owner of the 1-bedroom/1-bath unit at 400 E. Hyman Ave. and City of Aspen Mayor Torre circumvented APCHA rules and regulations by selling directly to Torre.
That is false.
In an Aug. 17, 2023, transaction, Mountain Enterprises 80-B, through authorized signatory Kathleen Denson, sold the unit to Torre for $106,363. The unit did not go to lottery and was one of 19 deed-restricted units brokered by APCHA that did not go to lottery in 2023.
The transaction still fell under the purview of APCHA due to language in the deed restriction, written in 1982, which stipulated, among other things, the sales price and buyer of the property: “The three dwelling units located on the above-described property shall and hereby are restricted to use as employee housing as described in Section 24-11, 4(b)(3) of the Municipal Code of the City of Aspen and to rental and sales terms and price guidelines and occupancy limitations within ‘moderate income’ housing eligibility guidelines now established by the City Council of the City of Aspen, or as such guidelines may from time-to-time be amended by the City Council.”
APCHA is the body that verifies the qualifications of the renter or buyer and brokers the sales transaction with deed restrictions, such as the Aug. 17 sale.
The most up-to-date version of deed restriction language authored by APCHA includes that the sale of any deed-restricted property goes through the lottery process to select a buyer. But if a deed restriction on a property does not direct APCHA to lottery the property, APCHA cannot do so. The buyer only has to qualify under the parameters written in the pre-existing deed restriction.
Many of the deed restrictions written decades ago are not written the way APCHA would like to see them written, according to Gillen. But when APCHA brokers transactions between properties with outdated deed restrictions, it presents an opportunity to update the deed restriction.
400 E. Hyman Ave. Unit A301 now has the current APCHA deed restriction, stipulating the unit be sold through the lottery process — meaning Torre will have no say in who buys his unit when he decides to sell.
Converting old deed restrictions to APCHA’s current deed restriction language is a priority for APCHA.
Through its regulations, APCHA does have the right of first refusal in transactions they broker — meaning they could assume ownership of a property and sell it via lottery. Gillen said APCHA exercises this right primarily in instances of fixing up a dilapidated property and selling it at a price to recoup APCHA’s financial investment. He pointed to two properties in Woody Creek that APCHA currently owns and is in the process of repairing with intent to sell via lottery.
He said that to his knowledge, no owner of a deed-restricted property has ever approached APCHA and asked for their property to be sold via lottery without explicit language in the deed restriction to do so.
Special Warranty Deeds from Aug. 17 show that Mountain Enterprises-80B sold 400 E. Hyman Ave. Unit A301 to APCHA for $10. On the same day, another Special Warranty Deed shows APCHA sold the unit to Torre for $106,363. According to Priscilla Prohl-Cooper, escrow manager with Title Company of the Rockies, and Gillen, every sale brokered by APCHA is structured this way, with the $10 price from seller to APCHA & the structure of seller to APCHA for $10 then APCHA to buyer for sale price (in Torre’s case, $106k). She said it is dictated by language in APCHA contracts and has been so as long as she could remember. She also said the $10 price from the seller to APCHA is standard across all APCHA-involved transactions.
Gillen could not speak to exactly why it is structured this way. The sales price was calculated by a simple interest formula of appreciation — the lesser of 6% or Consumer Price Index during each year of ownership based on the purchase price.
Today, APCHA uses the lower of 3% or CPI annual appreciation, meaning the unit likely will appreciate even more slowly now than it did based off the 1982 standard using the lower of 6% or CPI.
In the Special Warranty Deeds, APCHA is listed as the grantor/grantee of the transactions, depending if they are selling or buying.
The City of Aspen municipal code enumerates exemptions to the Real Estate Transfer Tax — a 0.5% tax that supports the Wheeler Opera House and a 1.0% tax that supports the 150 Fund for affordable housing.
Deed-restricted units are not subject to the 1% tax but still have to pay the 0.5% tax.
Section 23.48.040(a) states that “Any document wherein the United States, or any agency or instrumentality thereof, the State, any county, city and county, municipality, district or other political subdivision of this State is either the grantor or grantee” — meaning any APCHA-brokered property is exempt from the 1% tax.
And Section 23.48.070(c)(1) states “All deed-restricted employee housing subject to the Aspen/Pitkin County Housing Authority Guidelines, as amended from time to time” are exempt.
The overwhelming majority of deed-restricted units fall under APCHA purview. But if a deed restriction does not require APCHA involvement, a transaction involving that property would be entitled to a $100,000 exemption from the RETT.
“There’s a couple of places, like the Smuggler subdivision, where they have their own (deed restriction) on the whole subdivision,” Gillen said. “They are able to (sell property in the subdivision) outside the lottery. But whenever possible, we do it through the lottery.”
Still, a property does not have to be sold in order to bring its deed restriction up to current APCHA standards. APCHA incentivizes homeowners to update their deed restriction when it can, most recently with its Essential Repairs Pilot Grant Program. It offers up to $10,000 to homeowners for home repairs and requires the deed restriction on the property is up-to-date.
Gillen said APCHA does not have an estimate of how many deed restrictions exist currently in Pitkin County similar to the 1982 deed restriction on 400 E. Hyman Ave.
“I hate to speak in generalities when we would have to deal with a specific restriction because they were written 30,40, 50 years ago,” he said. “I’d love to say (APCHA) were out there studying them all, but we don’t have the resources and it wouldn’t be the best use of time to be doing that. So when (old deed restrictions) come up, we look at them. If necessary, we get a legal opinion and see what we need to do.”
For Gillen, the sale of 400 E. Hyman Unit A301 is a success because the transaction updated the deed restriction on the property to exist in perpetuity and requires the next sale of the unit to go to a lottery.