The situation below sounds like it resulted from the use of federal funds to provide a grant or forgivable loan to a low or moderate income individual or family to purchase or renovate a home. The City of Des Moines has such a program where the City obtains
a lien on the property for the repayment of the City's assistance in the event the homeowner sells the home within a limited time. The intent of such a provision is to assure that the housing assistance is actually used to obtaining long-term housing and is
not quickly converted by the sale of the house into cash for other purposes.
Contact the jurisdiction or non-profit organization identified as the beneficiary of the restrictions. You will likely find that you can easily obtain a recordable release of the restriction under the conditions you have identified below.
Section
2-201 of the Des Moines City Code delegates authority to sign such a release to the City Manager or his designee.
Roger K. Brown, Assistant City Attorney
Phone: 515-283-4541
E-Mail: RKBrown@dmgov.org
Address: Legal Department, 400 Robert D. Ray Drive, Des Moines, IA 50309
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----- Original Message -----
Sent: Wednesday, June 6, 2018 9:21:12 PM
Subject: [ISBA RealEstate] Retention agreements as liens
Hi Colleagues,
I would value your insight into how to think about instruments called “Retention Agreements” where the retention period has passed. Should they be treated like mortgages where we are within ten years of the maturity date or like financing statements that
legally expire after five years unless renewed? I have attached the instrument in question with the identifying information masked. In this situation, the retention agreement was filed 1/28/11 and provides for a five-year “retention period” beginning on the
last date on which the Owner receives financial assistance under the program. The document is silent as to the precise date but let’s assume that it was more than five years ago. My specific question is whether retention agreements filed longer than their retention
periods need to be released.
A few observations:
1. The document does not define itself as a mortgage or a financing statement as defined by the Iowa Code.
2. Whatever we call it (a mortgage, something else), the retention agreement initially encumbered the real estate in a defined amount, in this case $4,712.54.
3. The balance of the obligation is reduced by 1/5 for every full year the Owner owns the property. Thus, because more than 5 years have passed since January 2011, it could be presumed that there is no further balance. However, you could make the
same presumption with a mortgage beyond its maturity date.
4. The full amount becomes due and payable if any of the events in section four of the agreement occur: (1) sale of property, (2) the property is surrendered as the principal residence of the Owner, or (3) the property is rented. How would an examining
attorney know whether the Owner has moved out or rented the property based on the examination of the abstract? Should we presume compliance with the agreement? If the property was rented in year 2, the balance would then come due. Would the retention agreement
continue as a lien against the property beyond the original five years. If so, for how long?
Thanks,
Tim
Timothy L. Gartin
Hastings Gartin & Boettger LLP
409 Duff
Ames, IA 50010
T: 515-232-2501 / F: 515-232-2525