1. Daniel Ehrenberg dehrenberg@kleinhornig.com 202-842-0126
Innovative Tools for Creating and Preserving Affordable  Housing: Legal Issues and Considerations
Daniel Ehrenberg

2. DC & Virginia Laws and Regulations on Community Land Trusts
District of Columbia
No Laws or Restrictions on CLTs
In 2007, DC supported a Workforce Housing Land Trust Design and Implementation Plan – What is now City First Homes
Virginia
Defines a CLT in 2 places in the Virginia Code, as a not-for-profit, community organization, controlled by a membership board that acquires land for perpetuity, transferred per long-term ground leases, transfers the improvements on such land to tenants and has a preemptive purchase option on the improvements at a formulaic price designed to keep the improvements affordable.
However, Definition only used to exclude CLT from definition of Landlord for Landlord-Tenant law purposes

3. Maryland Laws and Regulations on Community Land Trusts
Due to an unfavorable history of ground leases going back to the days of Lord Baltimore and Lord Calvert, Maryland has created an entire regime of regulating the creation and operation of “Affordable Housing Land Trusts” as either a Non-Profit or a State Government Entity
An AHLT needs to register as such with SDAT
An AHLT must use an Affordable Housing Land Trust Agreement so as to not be subject to Laws concerning Ground Leases, especially the right of tenant to redeem such Ground Leases to convert to Fee Simple Ownership
MD’s law is called the
Affordable Housing Land Trust Act,
§§ et seq. of Real Property Code of Maryland.

4. What does the Ground Lease do?
The 99 year ground lease ties the improvements and the land together:
Ensures that the house and land is inheritable
Outlines rights and responsibilities of the homeowner and the CLT (i.e., upkeep, mortgage and CLT fee payments)
Establishes use restrictions (i.e., residency, sales price)
Establishes affordability restrictions (i.e., maximum income of initial occupants)

5. Issues with Separating Land from Improvements
How does One separate the Land from the Improvements and the Improvements from Personal Property? Who owns and gets to keep what at end of lease and what can be removed from the Land?
Most CLTs require the homeowner to obtain the CLT’s prior consent to make Improvements. (CLT does not want home to become too expensive for the next homeowner.) What constitutes maintenance or repairs of existing Improvements v. a new or added Improvement?
Is the Land taxed separately from the Improvements? Who pays the tax? How is the Property assessed with a resale-restricted price? Most CLTs require the homeowner pay the entire tax for the land and improvements.
Who is liable for anything that occurs on the property? Who pays for insurance? Most CLTS make the homeowner responsible for insurance.
All of these issues need to be
addressed in the Ground Lease.

6. Issues with Separating Land from Improvements
How does One separate the Land from the Improvements and the Improvements from Personal Property? Who owns and gets to keep what at end of lease and what can be removed from the Land?
Most CLTs require the homeowner to obtain the CLT’s prior consent to make Improvements. (CLT does not want home to become too expensive for the next homeowner.) What constitutes maintenance or repairs of existing Improvements v. a new or added Improvement?
Is the Land taxed separately from the Improvements? Who pays the tax? How is the Property assessed with a resale-restricted price? Most CLTs require the homeowner pay the entire tax for the land and improvements.
Who is liable for anything that occurs on the property? Who pays for insurance? Most CLTS make the homeowner responsible for insurance.
All of these issues need to be
addressed in the Ground Lease.

7. Using Restrictive Covenants instead Ground Leases
Advantages of Restrictive Covenants:
Avoid land acquisition challenges
Avoid perceptions of homeowner as 2nd class citizen
Better known and create greater security for financing by Banks
Disadvantages of Restrictive Covenants:
Enforceability is less tested
May violate Rule against Perpetuities or Rule against Restraints on Alienation – no end date
Less skin in the game by CLT since it does not own the Land – CLT has less proximate interest in home, no leased fee
Less Incentive for Stewardship and to know early if problems arise

8. How do you make (and keep) the property affordable?
Initial Long-Term Investment (Subsidy)
Subsidize the cost of acquisition or construction
Help the homebuyer purchase an existing home
All of the initial long-term investment is retained and recycled in the home
Resale formula requires that the home be sold at a price that is affordable for other low-income families

9. Affordability v. Equity
Community Land Trust Home
Traditional
Subsidized Homeownership
Affordable Rental Unit
Initially affordable
Affordable at resale
Some equity for owners
Initially affordable
Not affordable at resale
All equity for owners
Permanently affordable
No equity for renters

10. What’s the Role of the CLT?
The CLT is an active steward of the property:
Preserve affordability
Preserve quality
Protect security
As a steward, the CLT works with the homeowner during the purchase, occupancy, and resale

11. What are the key parts of active stewardship?
Initial and ongoing education
Approving actions of the homeowner
Monitoring actions of the homeowner
Enforcing obligations of the homeowner
Supporting the homeowner

12. Key Steps in Forming a CLT
Find a champion
Develop a business plan and financial model
Draft the ground lease
Find houses
Find & educate potential buyers

13. Resources Klein Hornig LLP Grounded Solutions Network
Provides technical assistance and other support to CLTs throughout the country.
Contact: Jason Webb (focuses on start up CLTs)
Start-Up CLT Hub:
CLT Technical Manual:
Habitat Report on Permanent Affordability: