Rancho Palos Verdes City Council
   

AUGUST 31, 2004 AGREEMENT BETWEEN THE CITY AND V.H. PROPERTY CORPORATION PERTAINING TO THE CITY'S ACCEPTANCE OF OPEN SPACE LOTS AUGUST 31, 2004 AGREEMENT BETWEEN THE CITY AND V.H. PROPERTY CORPORATION PERTAINING TO THE CITY'S ACCEPTANCE OF OPEN SPACE LOTS

TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL

FROM: DIRECTOR OF PLANNING, BUILDING AND CODE ENFORCEMENT

DATE: AUGUST 31, 2004

SUBJECT: AGREEMENT BETWEEN THE CITY AND V.H. PROPERTY CORPORATION PERTAINING TO THE CITY'S ACCEPTANCE OF OPEN SPACE LOTS

Staff Coordinator: Gregory Pfost, AICP, Deputy Planning Director

RECOMMENDATION

That the City Council authorize the Mayor and City Clerk to execute the Agreement between the City and V.H. Property Corporation pertaining to the City's acceptance of open space lots.

EXECUTIVE SUMMARY

The City is required to accept dedication of certain open space lots and trails throughout the Ocean Trails project. As conditioned, prior to issuance of building permits for any homes or prior to opening the 18-hole golf course, whichever occurs first, an Agreement must be entered into, addressing issues pertaining to the assumption of liability and responsibility of those specific open space lots in case of land failure or subsidence. An Agreement has been drafted that is satisfactory to both the City Attorney and the developer. Staff is recommending that the Council approve the attached Agreement.

BACKGROUND

In June 1992, the City Council approved the Ocean Trails project, which, at that time, included an 18-hole golf course, public open space and 83 single-family residential lots. Since June 1992, the project has been revised several times. The project as currently entitled includes an 18-hole golf course, 75 single-family residential lots, 4 on-site affordable housing units, a Clubhouse, Maintenance Building, open space lots, and a variety of public amenities.

The entire project site is comprised of two tracts; Tract No. 50667, which is a recorded tract, and Tract No. 50666, which is still a Vesting Tentative Tract. Conditions of approval for each Tract require that the developer dedicate fee title to the City of various open space lots. The developer is also required to dedicate various easements for trail purposes. Offers of dedication for these open space lots and trails have been recorded. In addition, the owner of the golf course is required to maintain these open space areas as part of the ongoing operation of the golf course.

In a May 1995 Settlement Agreement between the Sierra Club, the developer and the City, the City agreed to accept dedication of the various open space lots. According to the Settlement Agreement, the City is to accept the lots upon "completion of construction of the golf course and revegetation improvements". Additionally, the Coastal Permit approved for the project by the California Coastal Commission includes a similar condition, however, it requires many of the open space lots and trails to be accepted "prior to opening of the 18-hole golf course".

Although dedication of various open space lots and trail easements were noted on Final Tract Map No. 50667, which was approved by the City and recorded by the County, at the time of recordation the City had not yet accepted those dedications. The delay was caused by the failure of Landslide C and the subsequent changes of the ownership of the property. This prompted concerns from the Coastal Conservation Coalition, which were subsequently addressed in letters from the Coalition to the City. Basically, the Coalition feels that the City should have accepted the specific lots within Tract No. 50667 at the time the map was recorded.

Although technically the timing as to when the City is required to accept these lots and trails has not lapsed, the main reason why the City has not moved forward with acceptance of the open space lots sooner is because of Staff's concern regarding which party, either the City or the developer, would be liable and responsible to repair the public amenities in case of future land failure. Prior to the change of property ownership, the City was working with the Zuckermans in the preparation of an Agreement that dealt with this issue. These negotiations stalled when the property was transferred to Credit Suisse First Boston, and then again to VH Properties.

Upon hearing the Coastal Coalition's concerns expressed again at the City Council's March 2, 2004 meeting regarding the review of Revision "V" to the Ocean Trails project, at their April 20, 2004 meeting, the Council added two conditions requiring an agreement between Ocean Trails and the City pertaining to assumption of liability and responsibility pertaining to the repair of these open space lots. These conditions, found in Conditional Use Permit No. 162, state:

"I-2. Prior to the issuance of any building or grading permits for the construction of any single-family residence within Tract No. 50667 or opening of the 18-hole golf course, whichever occurs first, the Developer shall enter into an agreement with the City, which is satisfactory to the City Attorney, whereby the developer assumes liability and responsibility for any repairs that are required to be performed to address land failures or subsidence within the open space lots of Tract 50667 which are to be accepted by the City."

"I-3. Prior to the final map of Tract No. 50666, the Developer shall enter into an agreement with the City, which is satisfactory to the City Attorney, whereby the developer assumes liability and responsibility for any repairs that are required to be performed to address land failures or subsidence within the open space lots of Tract 50666 which are to be accepted by the City."

The developer has been moving forward with the hope of obtaining building permits for the first five homes in Tract No. 50667 during the first week of September. As noted in Condition I-2 above, the developer must enter into an agreement with the City prior to issuance of building permits for these homes.

DISCUSSION

Attached is a copy of the Agreement reached between the City Attorney and attorney for the property owner. As noted in the Agreement, the current Developer and any successive owner of the golf course is required to defend, indemnify and hold the City and its representatives harmless from any Claims that the City incurs due to its ownership of the open space lots (i) to rebuild or repair the open space lots in the event of a slope failure and (ii) to pay compensation or other monetary damages for failure to rebuild or repair the open space lots following a slope failure.

The developer’s obligation is reduced by the percentage that the City or its representatives caused the land failure for which indemnification is sought due to the City’s active negligence or active misconduct. This limitation on the developer’s liability does not appear to be significant risk for the City, since the golf course operator is required to maintain the open space lots. Also, this limitation expressly excludes the approval of plans or issuance of permits by the City or its representatives.

The developer and any successive owner of the golf course is responsible only for Claims, which are defined for these purposes as a slope failure, that arise during that entity’s ownership of the golf course. Upon the sale of all of its interest in the golf course, the owner is released for land failures that occur after that transfer of ownership.

The City must give the owner of the golf course written notice of any written claim for damages or to rebuild the slope within fifteen days of receipt of the written claim.

It is important to note that the Agreement will be recorded to provide notice of its provisions to any subsequent purchaser of the golf course. In addition, the cc&rs for the tracts will require any owner of a lot to release the City and the Developer from liability to pay compensation or damages in the event of such a slope failure or to or to rebuild or repair the slope failure.

FISCAL IMPACT

There are no fiscal impacts associated with this decision, since the Agreement is designed to protect the City and its representatives in the event of a slope failure except to the extent that the slope failure is caused by the active negligence or misconduct of the City or its representatives.

Respectfully submitted:

Joel Rojas, AICP

Director of Planning, Building and Code Enforcement

Reviewed By:

Les Evans

City Manager

ATTACHMENT

Proposed agreement between the City and VH Property Corporation

RECORDING REQUESTED BY AND

WHEN RECORDED RETURN TO:

LATHAM & WATKINS LLP

650 Town Center Drive

Twentieth Floor

Costa Mesa, California 92626

Attention: Kenneth A. Wolfson

______________________________________________________________________________

INDEMNITY AGREEMENT

THIS INDEMNITY AGREEMENT (the "Agreement") dated __________, __, 2004 is entered into between VH Property Corp., a Delaware Corporation, the owner of the golf course and residential project that is commonly referred to as "Ocean Trails" (hereinafter referred to as "Developer"), and the City of Rancho Palos Verdes, a public body (the "City").

RECITALS

A. Developer is in the process of developing that certain real property described and/or depicted on Exhibit A attached hereto (the "Property").

B. In connection with the development of the Property, conditions of approval have been imposed which, among other matters, require Developer to convey to the City or another accepting agency, as specified in the conditions, certain real property described and/or depicted on Exhibit B attached hereto to be used as park land, trails, open space and habitat preserves (the "Encumbered Land") in fee simple. Developer will retain easement interests in the Encumbered Land for maintenance purposes pursuant to that certain Declaration of Restrictions recorded on ____________ as Instrument No. __________ in the Official Records of Los Angeles County, California, and for other purposes as reserved in the documents conveying the Encumbered Land to the City.

C. The City has expressed concern regarding its potential liability as record owner in fee simple of the Encumbered Land to rebuild or otherwise make repairs in the event of a landslide, land subsidence or slope failure (collectively, "Slope Failure").

D. The City has required Developer, as the owner of that certain real property described and/or depicted on Exhibit C attached hereto (the "Golf Course"), and the successor owners of any portion of the Golf Course, to defend, hold harmless and indemnify the City and its representatives from any and all actions, written claims, judgments, liabilities, costs, written orders or written demands (collectively, "Claims") that City might incur as owner in fee simple of the Encumbered Land to (a) rebuild or otherwise make repairs in the event of a Slope Failure or (b) pay compensation or other monetary damages for failure to rebuild or otherwise make repairs to any portion of the Encumbered Land after a Slope Failure; except that the obligations of Developer shall be reduced by the percentage that the City, its representatives or its contractors performing work on the Encumbered Land are at fault with respect to the Slope Failure(s), as set forth in paragraph 1(a) below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals, and the mutual promises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is agreed as follows:

1. Indemnity by Developer. Developer, for itself and for its successors in interest in any portion of the Golf Course, covenants and agrees that the following covenants shall run with and burden the Golf Course:

(a) Developer hereby agrees to defend, indemnify and hold the City and its respective employees, officers, agents, attorneys, representatives, affiliates, successors and assigns (referred to collectively as "City Representatives") harmless from any and all Claims that the City or the City Representatives might incur due to City’s ownership in fee simple of the Encumbered Land to (i) rebuild or otherwise make repairs in the event of a Slope Failure and (ii) pay compensation or other monetary damages for failure to rebuild or otherwise make repairs to any portion of the Encumbered Land after a Slope Failure. The obligations of Developer hereunder shall be reduced by the percentage that the City, the City Representatives or the City’s contractors performing work on the Encumbered Land proximately caused the Slope Failure(s) for which indemnity is sought pursuant to this Agreement due to the active negligence or misconduct of the City, any City Representative or the City’s contractors performing work on the Encumbered Land. Active negligence or active misconduct by the City and the City Representatives shall expressly exclude review and approval of plans prepared by Developer or Developer’s representatives, the issuance of permits or approvals to Developer by City or the City Representatives and the inspection of the Property or any improvement thereon by the City or the City Representatives. The duty to defend set forth above shall apply upon the assertion of any such written Claim, but the duty to indemnify and hold harmless shall only apply after the entry of a nonappealable judgment by a court of competent jurisdiction that the City or any City Representatives has liability pursuant to subparagraph (i) or (ii) of this paragraph (a) or a compromise of any such Claim that has been approved by Developer in writing. Additionally, the duty to defend, indemnify and hold the City and the City Representatives harmless shall only apply if the City gives written notice to Developer of any written Claim within fifteen business days of the receipt of the same, unless Developer is not prejudiced by a delay in giving such written notice to Developer of such written Claim. The City covenants to cooperate with Developer and its attorneys in connection with the defense of any such Claim.

(b) No third party shall have the right to rely on any provision set forth in this Agreement, as it is not the intent of Developer to abrogate any defenses to any Claims that the City or the City Representatives may possess. There shall be no third party beneficiary of this Agreement.

(c) In the event that Developer is obligated to indemnify the City or the City Representatives from any Claims, Developer shall have the express right to rely on any and all defenses to such Claims that the City or the City Representatives may possess.

2. Extent of Liability. Developer, and any successor in interest in any portion of the Golf Course, shall only be liable pursuant to this Agreement for any Claims that arise during their respective period of ownership of the Golf Course. Upon the sale of all of the interest in the Golf Course held by Developer or each of its successors in interest, Developer (or such successor in interest) shall be released from its respective liability hereunder, except for any Claims hereunder which arose prior to such transfer. For purposes of this paragraph only, a Claim arises when a Slope Failure occurs on the Encumbered Land.

3. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof, and the final, complete and exclusive expression of the terms and conditions thereof. All prior agreements, representations, negotiations and understandings of the parties hereto, oral or written, express or implied, are hereby superseded and merged herein.

4. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute a duplicate original hereof.

5. Authority. The persons executing this Agreement on behalf of Developer and the City represent and warrant that they are duly authorized so as to fully and legally bind Developer and the City, respectively.

6. Applicable Law and Venue. This Agreement shall be construed under the substantive laws of the State of California. Any action that is brought to enforce this Agreement shall be filed in the County of Los Angeles, State of California.

7. Enforcement of Agreement. The parties agree that if any action or dispute arises regarding enforcement of this Agreement, or any of its terms, the prevailing party shall be reimbursed for all reasonable expenses incurred in resolving such dispute, including attorney’s fees and court costs.

8. Amendments. This Agreement can only be modified by a written amendment, executed by both parties hereto.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written.

 

"DEVELOPER":

VH PROPERTY CORP.,
a Delaware Corporation

By:

Name:

Title:

By:

Name:

Title:

THE "CITY":

CITY OF RANCHO PALOS VERDES, a public body

By:

Name:

Title:

ATTEST:

By: __________________________________

Name: Jo Purcell

Title: City Clerk

   

STATE OF CALIFORNIA

COUNTY OF __________

On before me, , a Notary Public, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Signature (Seal)

STATE OF CALIFORNIA

COUNTY OF __________

On before me, , a Notary Public, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Signature (Seal)

STATE OF CALIFORNIA

COUNTY OF __________

On before me, , a Notary Public, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Signature (Seal)

EXHIBIT A

EXHIBIT B

EXHIBIT C

SUBORDINATION

The undersigned, beneficiary under that certain __________________ ("Deed of Trust") encumbering all or a portion of the Property, which Deed of Trust was recorded on _______________, as _________________ of Official Records of Los Angeles County, California, hereby consents to the within Indemnity Agreement and hereby subordinates the lien of said Deed of Trust (as modified from time to time) to the provisions of the Indemnity Agreement; provided, however, that such subordination shall not apply with respect to (a) the undersigned, (b) any entity affiliated with the undersigned, or (c) the first transferee of the Property that is not affiliated with the undersigned, but shall only apply with respect to any party which acquires title to the Property from the first (and any subsequent) transferee of the Property that is not affiliated with the undersigned. It is the intent of the foregoing provision that under no circumstance shall the foregoing subordination result in (a) the undersigned, (b) any of its affiliates or (c) the first transferee of the Property that is not affiliated with the undersigned, being obligated to defend, indemnify or hold the City or any of the City Representatives harmless from the matters set forth in the within Indemnity Agreement, or otherwise to have any liability whatsoever under the within Indemnity Agreement.

UBS REAL ESTATE INVESTMENTS INC.,

a Delaware corporation

By:

Name:

Title:

STATE OF __________ )
) ss.
COUNTY OF )

On this ______ day of _________________, ______, before me, _________________________, a Notary Public in and for said State, personally appeared _______________________________
______________________ and ____________________________________________________
personally known to me (or proved to me on the basis of satisfactory evidence) to be the persons(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Signature _________________________________