The original developer of Rio Rancho has been requiring payments from new developers in order to waive land-use covenants.
Original developer AMREP’s attorney, Mathew Spangler, said it’s unreasonable to expect the company to waive its property rights without compensation, but other officials believe the price for waivers is unreasonably high and hurting development.
Most of Rio Rancho was initially designated for single-family housing.
A letter from State Sen. Craig Brandt, R-Rio Rancho, to the New Mexico Attorney General sent last year, which the Observer obtained through an Inspection of Public Records Act request, accuses AMREP of using restrictive covenants to threaten litigation, demand payment and hinder real-estate development using antiquated platting.
These accusations led to a series of questions to the AG’s office regarding what Brandt called a recent trend in which AMREP has demanded money from property owners in exchange for a waiver of covenants AMREP’s parent organization had recorded in 1961.
He said in the letter that AMREP claims it is entitled to be paid for the waiver of restrictive covenants, which pertain to property owned by someone other than AMREP. According to Brandt, AMREP believes it can decide on an individual basis whether anyone may develop property formerly belonging to Rio Rancho Estates Inc. in any manner not consistent with the restrictive covenants.
A recent example Brandt alluded to was AMREP legally requiring Rio Rancho Public Schools to obtain a waiver before the district could build Joe Harris Elementary in Unit 10 when AMREP doesn’t own property in that area.
“What property right does AMREP retain to enforce covenants that have been ignored or substantial waivers granted, effectively negating the covenants?” Brandt asked.
As far as the cost for a waiver, AMREP CEO and President Chris Vitale told Metro Commercial Realty Associate Broker Jake Vosburgh last year in an email, which the Observer obtained from the City of Rio Rancho through an IPRA request, that the price for a waiver was $2,000 per acre, plus reimbursement of transaction costs.
“The pricing is good through Oct. 1, 2018, at which point we will be doing our quarterly internal review, which normally results in an increase in the pricing for the following quarter,” Vitale wrote. “The waiver would allow for the contemplated residential use of the property.”
Vosburgh was selling a 24-acre parcel of land near Idalia Road for close to $400,000 when he asked Vitale about the covenant. At $2,000 an acre, the cost of a waiver would be just under $50,000
• Restriction No. 1: No structures shall be erected, altered, placed or permitted to remain on any building plot in Rio Rancho Estates other than single-family dwellings, and accessory buildings, such as a garage, garden house and the like. No structure built on said premises shall be higher than a one-story building.
• Restriction No. 2: No building shall be erected or placed on any building plot that has an area less than 21,780 square feet.
Other restrictions mentioned forbid signs or advertisements, animals outside of household pets and fences or hedges that would block the view from an adjoining lot.
In his letter, Brandt said it is evident in Rio Rancho that many properties have been developed that do not conform to the covenants.
“Many constituents of mine are very concerned about what is happening and how it will impact the value of their properties and the (Rio Rancho) economy, as well as the effects it will have for RRPS as it tries to move forward to plan and build new schools to meet the needs of citizens,” Brandt said.
According to public documents, AMREP brought up the issue of the covenant waiver after it became aware RRPS was going to proceed with construction on the elementary school.
“Please be aware that certain restrictive covenants (the “Covenants”) applicable to Unit 10 of Rio Rancho Estates restrict the area proposed for the school to single-family residential development,” Spangler said in a letter to RRPS Superintendent Sue Cleveland.
RRPS spokeswoman Beth Pendergrass said in an email that the district has not paid for a waiver, but is still communicating with AMREP.
AMREP on the record
Spangler wrote in an email to the Observer that through the covenants, AMREP reserved its right to obtain any and all economic benefits from a particular lot other than the rights that were specifically transferred to a purchaser. That means AMREP can get economic benefits from any use of the property not in conformity with the covenants.
“For example, the additional value that would be available for the subdivision of a lot from a 1-acre lot into eight lots of 5,000 square feet per lot was reserved to AMREP through the covenants,” Spangler said. “The purchaser of the lot did not pay for the right to develop the property other than in accordance with the covenants.
“The fact that a purchaser of a lot subject to the covenants may now want to own something that the purchaser does not own (i.e., the ability to develop the property without restriction) does not eliminate the existence of the covenants nor necessitate providing the purchaser of the lot with a windfall by waiving the covenants at no cost.”
Spangler said that AMREP has the right to enforce the covenants.
“Similar to a water right or a mineral right, AMREP’s enforcement right can be held by AMREP, waived by AMREP or assigned to another person by AMREP,” he said.
“Because AMREP has an ongoing right to enforce the covenants, in the past many lot purchasers who have desired to construct improvements on a lot which conflict with the covenant restrictions have requested AMREP to waive its right of enforcement. These lot purchasers recognized the AMREP covenant enforcement right and requested AMREP give up an existing property right which AMREP holds.”
Spangler said AMREP may request payment to relinquish that right.
“The requested payment is similar to payments commonly made for the purchase of a mineral right or a water right,” he said.
Spangler said certain officials at the City of Rio Rancho have raised concerns with the covenant restrictions — particularly with respect to AMREP not having a uniform method to provide waivers.
To address this concern, he said, AMREP notified the city in July 2018 that:
• when it determines that a waiver would be granted for any structure that has received a certificate of occupancy from the city after July 2018, AMREP will waive its covenant enforcement right in exchange for a maximum payment of $2,000 per acre of land included in the waiver, plus out-of-pocket expenses for attorney fees and other transaction costs, subject to small increases for the passage of time, and
• for any structure that has received a certificate of occupancy from the city on or before July 2018, upon request from the owner of the property, AMREP will provide a waiver of the covenants for such structure, subject to a processing fee of $50 per home for a single-family residential structure or $100 per acre for any other structure, such as commercial, industrial or multi-family. Those fees are meant to partly cover the cost and time of AMREP reviewing documentation and verifying the structure.
Spangler said AMREP has also offered other solutions to the city.
“But there does not seem to be much of an interest by the city in pursuing a global solution,” he said. “The city has indicated that they view the covenants as a private-land issue. As New Mexico is a state with a history of strong property rights, AMREP is surprised that we are now being called upon to release these property rights for the benefit of other land owners without just compensation.
“It is easy to try to cast AMREP as the villain by making statements such as ‘extortion,’ but when the facts are actually understood — property rights that had not been acquired by a land owner that now wants to be obtained for free — it becomes difficult to have much sympathy for complaints on the subject.”
The AG’s office responded to Brandt’s letter stating that his inquiries were not appropriate for an AG advisory letter. Matt Baca, spokesman for the AG’s office, said in an email that because it appears to be more of a private contractual dispute than anything else, the matter is more appropriately addressed by a court.
Mayor Gregg Hull said in an email that he shares the concerns brought to his attention by citizens and businesses regarding AMREP’s tactics because of the detrimental impacts it could have on economic development efforts, job creation and community prosperity.
Rio Rancho City Manager David Campbell said in an email that unless these issues can be resolved otherwise, Rio Rancho’s local government may need to pursue a definitive court ruling to protect the city’s economy and its residents’ and taxpayers’ interests.
The Observer found almost a dozen waivers granted to developers recorded at the Sandoval County Clerk’s office. The latest one was filed June 19.