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08-02-10 Town Council Packets(2) 1 MEMORANDUM 2 3 TO: Snowmass Village Town Council 4 5 FROM: John Dresser 6 7 DATE: August 2, 2010 8 9 SUBJECT: Emergency Ordinance No. 14, Series of 2010 14 12 13 14 I. PURPOSE AND ACTIONS REQUESTED OF COUNCIL: 15 16 While reviewing a claimed exemption to the Real Estate Transfer Tax "RETT 17 the Town Council became aware of differing interpretations of the exemption 18 codified in the Snowmass Village Municipal Code "SVMC at Section 4- 95(14) 19 for foreclosure sales. 20 21 II. SUMMARY OF PROJECT 22 23 Clarify the existing exemption for transfers involving foreclosures. 24 25 III. BACKGROUND 26 27 Staff believes that the exemption codified in Section 4 -95 (14) was originally 28 intended to exempt a transfer made solely to recover collateral used to support a 29 loan without the additional burden of transfer tax to the lender and that the 30 exemption was not created to allow a purchaser of a Note in foreclosure to 31 subsequently obtain title upon completion of the foreclosure without transfer tax. 32 The exemption was created to induce lenders to finance purchases of real property 33 and allow recovery of the real property supporting the loan without tax. The 34 exemption was not created to allow lenders who recover real property to 35 subsequently sell property to third parties with transfer tax regardless of the 36 methodology employed (ie: assignment of the note after foreclosure proceedings 37 have commenced, or assignment of a Certificate of Purchase after the lender has 38 recovered the real property by foreclosure). 39 40 IV. APPLICABLE REGULATIONS 41 42 Section 4- 95(14) of the SVMC 43 44 V. DISCUSSION ITEMS: ALTERNATIVES AND IMPLICATIONS 45 46 By clarifying the provisions of SVMC Section 4- 95(14) to allow exemption for 47 foreclosures by lenders and not exempt subsequent transfers by lenders who have 48 recovered real property, TOSV will follow the intent of the exemption provided 1 49 and prevent differing interpretations from depriving TOSV of RETT due. In order 50 to accomplish this clarification, the exemption is available only to the person or 51 entity who is the holder of the note at the commencement of foreclosure 52 proceedings and limit the value to the value of the loan in default. The language is 53 italicized and bold in the Ordinance. 54 55 VI. STAFF RECOMMENDATIONS AND FINDINGS 56 57 Staff recommends that Town Council approve Ordinance 14, Series of 2010 as an 58 emergency measure. Adopting the Ordinance as an emergency measure means the 59 Ordinance will pass on one reading and be effective immediately. Options 60 include: approve, amend or deny. 2 1 TOWN OF SNOWMASS VILLAGE 2 TOWN COUNCIL 3 4 ORDINANCE No. 14 5 SERIES OF 2010 6 7 AN EMERGENCY ORDINANCE AMENDING SECTION 4 -95 OF THE SNOWMASS 8 VILLAGE MUNICIPAL CODE TO CLARIFY THE EXEMPTION TO THE SNOWMASS 9 VILLAGE REAL ESTATE TRANSFER TAX CREATED IN SECTION 4 -95 10 SUBSECTION 14. 11 12 WHEREAS, the Town Council has become aware of the possibility of differing 13 interpretations of certain exemptions to the Snowmass Village Real Estate Transfer 14 Tax; and 15 16 WHEREAS, the Town Council desires to clarify the interpretation of Section 4- 17 95(14) of the Snowmass Village Municipal Code; and 18 19 WHEREAS, the Town Council; and 20 21 WHEREAS, the Town Council believes that purchasing a note, Certificate of 22 Purchase or other indicia of ownership in order to obtain ownership is a transfer of real 23 property for "consideration" that should not be exempt; and 24 25 WHEREAS, in order that the current language of Section 4- 95(14) can clearly 26 convey the extent of the exemption provided by the Section, the Town Council finds that 27 the language should be amended to clarify the extent and circumstances under which 28 said exemption can be claimed; and 29 30 WHEREAS, the Town Council finds that because of the differing interpretations 31 regarding the exemption, together with the plethora of foreclosure actions in the 32 uncertain economic climate the Town is currently experiencing could result in 33 irreparable harm to public infrastructure and institutions such that urgency and need 34 requiring immediate adoption of this Ordinance exist and that immediate adoption of 35 the Ordinance is necessary for the preservation of public property, health, welfare, 36 peace and safety. 37 1 38 NOW, THEREFORE, BE IT ORDAINED, by the Town Council of the Town of 39 Snowmass Village, as follows: 40 41 1. Section 4 -95 Exemptions The provisions of Section 4 -95 of the Municipal 42 Code are hereby amended and restated, as follows: 43 44 Sec. 4 -95. Exemptions. 45 46 The land transfer tax imposed by this Article shall not apply to: 47 48 (1) Any transfer wherein the United States, or any agency or instrumentality thereof, the 49 State, any county, city and county, municipality, special district or other political 50 subdivision of the State, is either the grantor or grantee. 51 52 (2) Any transfer by gift of real property, where there is no consideration other than love 53 and affection or charitable donation. 54 55 (3) Any transfer by document, decree or agreement partitioning, terminating or 56 evidencing termination of a joint tenancy, tenancy in common or other co- ownership 57 in property; however, if additional consideration of value is paid in connection with 58 such partition or termination, the tax shall apply and be based upon such additional 59 consideration. 60 61 (4) Any transfer of title or change of interest in real property by reason of death, 62 pursuant to a will, the law of descent and distribution, or otherwise. 63 64 (5) Transfers made pursuant to reorganization, merger or consolidation of corporations, 65 or by a subsidiary to a parent corporation for no consideration other than 66 cancellation or surrender of the subsidiary's stock, or transfers made to or from a 67 corporation, partnership, limited partnership, joint venture, business trust or other 68 association or organization if that association or organization is owned by the 69 persons by or to whom such transfer was made, and if such persons will have the 70 same relative interests either in the association or organization or in the real 71 property immediately before and after said transfer, and if there is no consideration 72 other than their respective interests in the new association or organization or in the 73 property. 74 2 75 (6) Transfers to make effective any plan confirmed or ordered by a court of competent 76 jurisdiction under the Bankruptcy Code or in any equity receivership proceeding. 77 78 (7) Any transfer made and delivered without consideration for the purpose of: 79 confirming, correcting, modifying or supplementing a transfer previously made; 80 making minor boundary adjustments; removing clouds on titles; or granting 81 easements, rights -of -way or licenses. 82 83 (8) Any decree or order of a court of record quieting, determining or resting title, except 84 for a decree of foreclosure, including a final order awarding title pursuant to a 85 condemnation proceeding. 86 87 (9) Any transfer of cemetery lots. 88 89 (10) Any lease of any real property (or assignment or transfer of any interest in any 90 such lease), provided that the terms and conditions of such lease do not constitute a 91 taxable lease as defined herein of the property. 92 93 (11) The conveyance, assignment, transfer or consummated sale of right to use 94 timeshare estate, provided that such estate does not constitute a taxable lease, and 95 further that the conveyance, transfer or sale is or was subject to sales tax and that 96 such sales tax has been paid in accordance with law. 97 98 (12) Any mineral transfer or royalty transfer. 99 100 (13) Transfers to secure a debt or other obligation, or the release of real property 101 which is security for a debt or other obligation. 102 103 (14) a) Any transfer by deed in lieu of foreclosure, on the condition that: 104 L Such transfer shall be exempt only if the grantee in such deed is 105 the same person or entity which is the holder, payee, or beneficiary 106 (as determined at the time of the transfer by deed) of the debt or f07 instrument which is being canceled, in whole or in part, in exchange 108 for the transfer; and 3 109 ii. Such transfer shall be exempt only to the extent of the current 110 amount of the debt which is being canceled in exchange for the 111 transfer. 112 b) Any transfer by sheriff's deed, trustee's deed or other conveyance of real 113 property in connection with an execution sale, foreclosure sale by the 114 public trustee under a power of sale, court decree foreclosing a mortgage, 115 deed of trust or other security instrument, or court decree of lien 116 foreclosure, on the condition that. 117 i. Such transfer shall be exempt only if the grantee in such deed is 118 the same person or entity which is the holder, payee, or beneficiary (as 119 determined at the time of the commencement of foreclosure or execution) 120 of the debt or instrument which is the basis of the proceeding, or such 121 person or entity is a junior lienor exercising redemption rights pursuant to 122 a lien that was recorded prior to commencement of the foreclosure or 123 execution; and 124 ii. Such transfer shall be exempt only to the extent of the current 125 amount of the obligation satisfied at the execution or foreclosure 126 sale, plus any obligations to prior lien holders paid from the sale; 127 and 128 iii. The certificate of purchase or other evidence of purchase issued 129 by the person or entity conducting the sale shall, if the above 130 described conditions are met, be exempt from the within transfer tax. 131 If the conditions are not so satisfied, there shall be a tax imposed as 132 provided herein, at the time of the issuance of the certificate of 133 purchase or other evidence of purchase issued by the person or 134 entity conducting the sale, which payment shall be made to the Town 135 in escrow. If no redemption is made by the owner, the tax shall 136 become absolute to the Town upon expiration of owner's redemption 137 periods. If redemption is made by owner, the tax shall be refunded to 138 the person who paid it to the Town. A transfer of the certificate of 139 purchase or other evidence of purchase issued by the person or 140 entity conducting the sale shall be subject to a transfer tax. The deed 141 issued by the person or entity conducting the sale is not a transfer 142 subject to the transfer tax. 4 143 144 (15) Any executory contract for the sale of real property, of less than three (3) years' 145 duration, under which the vendee is entitled to or does take possession thereof without 146 acquiring title thereto, or any assignment or cancellation of any such contract. 147 148 (16) Any transfer that is made pursuant to a valid and legally enforceable contract for 149 sale entered into prior to the effective date of the ordinance codified herein, provided 150 that an application for exemption is made with the Town prior to the effective date of the 151 ordinance codified herein upon such forms and in such a manner as may be prescribed. 152 Similarly, any transfer that is made pursuant to a valid and legally enforceable contract 153 for sale entered into prior to the increase in tax rate provided for in Section 4 -94(b) shall 154 be taxed at the initial rate of one -half percent (.5 provided that an application for 155 exemption is made with the Town prior to the effective date of the increase upon such 156 forms and in such a manner as may be prescribed. 157 158 (17) Any sale or conveyance of real property or improvements for the purpose of 159 constructing or providing low or moderate priced housing units for sale or lease to low, 160 moderate and middle income persons pursuant to a plan authorized and supervised by 161 the Town or the Snowmass Village Housing Department and the initial sale or resale of 162 such units to qualified purchasers pursuant to regulations adopted by said Department. 163 164 (18) Any transfer for the purpose of raising investment/equity funds or capital (e.g., sale 165 of partnership interests or stock) to facilitate development or redevelopment of real 166 estate wherein the transferor retains a significant interest in the real estate to be 167 developed or redeveloped or in the entity to which the real estate is so transferred. 168 169 (19) Any transfer to a straw man or intermediary for the purpose of obtaining 170 nonrecognition of gain or loss as contemplated by Section 1031 of the Internal Revenue 171 Code of 1986, or otherwise, where vesting of title in the straw man or intermediary is 172 transitory and the straw man or intermediary receives no consideration or only a 173 nominal fee for participation in the transaction. Should the Internal Revenue 174 Service determine that the transaction does not meet the requirements of Section 1031 175 for purposes of nonrecognition of gain or loss, then this exemption shall be inapplicable. 176 177 2. Severability If any provision of this Ordinance or application hereof to any 178 person or circumstance is held invalid, the invalidity shall not affect any other 5 179 provision or application of this Ordinance which can be given effect without the 180 invalid provision or application, and, to this end, the provisions of this Ordinance 181 are severable. 182 183 3. Effective Date. This Ordinance is hereby adopted as an emergency measure 184 and upon passage shall be effective immediately. 185 186 4. Direction to Town Clerk. The Town Clerk is directed to publish this 187 Ordinance once within ten (10) days and such publication shall specify that 188 this Ordinance has been adopted as an emergency measure. 189 190 READ, APPROVED AND ADOPTED by the Town Council of the Town of 191 Snowmass Village as an emergency ordinance on August, 2010 upon a motion by 192 Council Member the second of Council Member 193 and upon a vote of in favor and against. 194 195 196 197 TOWN OF SNOWMASS VILLAGE 198 199 200 201 Bill Boineau, Mayor 202 203 ATTEST: 204 205 206 207 208 Rhonda B. Coxon, Town Clerk 209 210 211 APPROVED AS TO FORM: 212 213 214 215 John C. Dresser, Jr., Town Attorney 6