What Is A Land Use Restriction Agreement
LIHTC Tax Credits In exchange for submission to land use restrictions, LIHTC`s multi-family real estate owner receives a number of tax credits that allow dollar reductions for every dollar on their federal income taxes. LIHTC real estate receives tax credits each year for the first 10 years of the contract. Tax credits are paid to the owner only because of his property on eligible property. Tax credits cannot be separated individually from the property, i.e.: You cannot sell tax credits. Since the tax credits remain on the property, an interest in the property can be sold, which results in the buyer receiving the tax credits. What is a Land Use Agreement (LURA) A Land Use Restriction Agreement (LURA) subjects multi-family real estate to a land use restriction contract (LURA) in which the owner waives part of his land use rights in exchange for the commitment of future tax credits, restrictions on tenant income, rental restrictions for lower-income tenants and other accessibility restrictions. Restrictions on land use are recorded in the ARUA, which is registered in the public registration and works with the country (i.e. the restriction of actions). As the LURA works with the land, if an apartment building is sold during the term of the contract, the LURA restrictions are mandatory for the purchaser. The objective of a LURA is to provide affordable housing to low-income households by limiting the maximum rent that can be calculated for a unit and by requiring that certain units or units be made available only to households with incomes below one percentage (for example.
B 40%, 60%, 80% of average median income. Termination of the LURA under LIHTC During the restriction period of the LIHTC program, land use restrictions are maintained, limiting the operation of apartment buildings. The specific length of time for which the restrictions are maintained is indicated in the LURA. The LURA restrictions end in one of three ways: 1) the qualified termination process; 2) by enforcement procedures; 3) by the natural course of the period (30 years or more). LURA -- The owner`s land use restriction agreement at the time of purchase, which sets out the owner`s obligation to comply with the occupancy, tenancy and resale restrictions on the owner`s property. All LRAs contain standard LIHTC rental restrictions that contain an owner who sets aside at least 40% of project units for residents earning less than 60% of median surface income (AMI) or at least 20% of project units for residents earning less than 50% of median surface income. These are called 40/60 and 20/50 tests. These restrictions should normally last at least 15 years.
In addition to the basic requirement for a property to meet the 40/60 test or the 20/50 test and keep rents at this level for at least 15 years, the LURA agreements also include an extended utility period, often 15 years, but sometimes longer or shorter depending on the country. It is important to recognize that when an owner sells a property and the LURA is still active, the new purchaser must always follow all its rules. Multi-family real estate with a LURA contract or other regulatory contract (HAP contract) that limits rents and/or income is underwritten and treated differently from traditional market real estate.