9.i Discussion on agreement extending option to purchase city owned property on Olinda LandStaff Report
Date of Meeting: August 21, 2018
To: City Council
From: Neil Soltis, Administrator
Re: Option agreement for the sale of City property on Olinda Lane
Background:
3.65 acres — Olinda Lane N — lot between 21710 and 21750
This lot was acquired by New Scandia Township as a condition of approving the Hawkinson Highlands
subdivision. Prior to the development of this subdivision, the Township owned an outlot adjacent to the
property to be platted. The development agreement provided for the transfer of the outlot to the
developer in exchange for one of the new lots created by the subdivision with the condition that the lot
remain as open space for a period of five years after conveyance. There was some opposition to the
sale of the Township's land to the developer, which neighboring property owners viewed as park land.
The minutes of the Township Board meeting of December 4, 1990 indicate that the intent was not to
restrict the lot for park use, but to allow the Town to sell it as a buildable lot in the future should it ever
become necessary. The agreement with the developer required the Township to share the
development costs for the new lot.
Earlier in the year the Council requested City Attorney Andy Pratt to draft an option agreement that
would provide the adjoining property owners the option to purchase the property at its appraised
value.
Issue: Should the Council approve the terms of the option agreement?
Proposal Details: A copy of the option agreement follows this report.
Fiscal Impact: The proceeds from the sale of the lot would provide funding for Park Improvements
and would repay the advance from the Capital Improvement Fund.
Options:
1. Approve the option agreement
2. Modify the terms of the option agreement
3. Defer action pending additional information
4. Take no action
Recommendation: Option 1
OPTION AGREEMENT FOR PURCHASE OF REAL PROPERTY
THIS OPTION AGREEMENT FOR PURCHASE OF REAL PROPERTY (the "Agreement"), is
made and entered into this day of , 2018, by and among Terry D. Gorham and
Colleen E. Gorham, married to each other, whose principal address is 21750 Olinda Lane North, Scandia,
Minnesota, James H. Caldwell and Kari A. Caldwell, married to each other, whose principal address is
21710 Olinda Lane North, Scandia, Minnesota (the Gorhams and the Caldwells are referred to herein as
the "Buyers"), and the City of Scandia, Minnesota, a municipal corporation and political subdivision
under the laws of the State of Minnesota (the "Seller").
WITNESSETH:
WHEREAS, the Seller is the fee simple owner of certain real property (Property Identification
No. 1403220220009) (the "Property"), consisting of approximately 3.65 acres and located in between the
real property owned by the Caldwells and the Gorhams, legally described as follows: Lot 9, Block 1,
Hawkinson Highlands, Washington County, Minnesota;
WHEREAS, the Property is currently vacant and is located on the shore of Goose Lake;
WHEREAS, each of the Buyers desire to purchase all or a part of the Property, to include with
their own current properties;
WHEREAS, the Seller has obtained an appraisal of the Property, dated March 4, 2018, by
Richard T. Koons, Certified Residential Appraiser, which valued the Property at $140,000 (the
"Appraised Value");
WHEREAS, the Seller is willing to enter into separate purchase agreements with the Buyers to
split off and sell the Property for the Appraised Value plus all necessary and proper fees, all under the
terms of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by the parties hereto, and for the mutual covenants contained herein, the parties
agree as follows:
1. DEFINITIONS. For the purposes of this Agreement, the following terms shall have the following
meanings:
(a) "Execution Date" shall mean the day upon which the last party to this Agreement shall duly
execute this Agreement;
(b) "Option Fee" shall mean a down payment from each Buyer of five percent (5%) of the total
purchase price of the Property, which fee is calculated to be $7,000;
(c) "Option Term" shall mean that period of time commencing on the Execution Date and ending 60
days thereafter;
(d) "Option Exercise Date" shall mean that date, within the Option Term, upon which a Buyer sends
its written notice to the Seller, exercising its Option to purchase all or a part of the Property;
(e) "Option Notice" shall mean the written notice from the Buyers to the Seller, indicating how much
of the Property a certain Buyer wishes to purchase. The Option Notice must be executed by each
Buyer. The Buyers may decide among themselves how much of the Property each Buyer will
acquire.
2. GRANT OF OPTION. For and in consideration of the Option Fee payable to Seller as set forth
herein, Seller does hereby grant to each Buyer the exclusive right and Option to purchase the Property
upon the terms and conditions as set forth herein.
3. PAYMENT OF OPTION FEE. Each Buyer agrees to pay the Seller a down payment of five percent
(5%) of the total purchase price of the Premises, which fee is calculated to be $7,000. The Option Fee
must be received by the Seller before an Option may be exercised by a Buyer.
4. EXERCISE OF OPTION. A Buyer may exercise its exclusive right to purchase the Property pursuant
to the Option, at any time during the Option Term, by giving written notice thereof to Seller. Each Buyer
must execute the Option Notice, to ensure that the Buyers are in agreement as to how much of the
Property each one will purchase. In the event a Buyer does not exercise its exclusive right to purchase the
Property granted by the Option during the Option Term, the Seller will return the Option Fee to such
Buyer. In such case, this Agreement shall become null and void as to the Seller and such Buyer.
5. PURCHASE AGREEMENTS. If the Buyers execute the Option and provide the Option Notice, the
Seller agrees to sell and the Buyers agree to buy the Property, according to the allocation of the Property
agreed to in the Option Notice, and all parties agree to execute a separate contract for such purchase and
sale of the Property in accordance with the following terms and conditions:
(a) Purchase Price. The purchase price for the Property shall be One Hundred Forty Thousand and
No/100 Dollars ($140,000), which is the Appraised Value of the Property. Each Buyer shall receive a
credit toward the purchase price in the amount of the Option Fee, which is $7,000 allocated to each
Buyer. The purchase price shall be allocated to each Buyer depending on the ultimate allocation of
the Property. For example, if one Buyer acquires 55 percent of the Property, such Buyer will pay
$77,000 ($140,000 x .55 = $77,000), while the other Buyer will pay $63,000 ($140,000 x .45 =
$63,000).
(b) Closing Date. The closing date shall occur within 60 days after the Option Exercise Date, or as
otherwise negotiated between the Buyers and the Seller. A subsequent purchase agreement entered
into between a Buyer and a Seller shall contain all standard contingencies for acquisitions of vacant
property.
(c) Fees and Expenses. The Seller's fees and expenses relating to the sale of the Property, including
but not limited to attorney fees, title costs and closing costs, shall be borne and paid by each Buyer on
a pro rata basis. For example, if one Buyer elects to acquire 55 percent of the Property, such Buyer
shall be responsible to pay 55 percent of the Seller's fees and expenses. The Seller shall itemize each
fees and expenses and forward to each Buyer in advance of the closing date.
(d) Default by Buyer; Remedies of Seller. In the event a Buyer, after exercise of the Option, fails to
proceed with the closing of the purchase of the Property pursuant to the terms and provisions as
contained herein or under a subsequent purchase agreement, the Seller shall be entitled to retain the
Option Fee as liquidated damages and shall have no further recourse against such Buyer.
(e) Default by Seller, Remedies of Buyer. In the event the Seller fails to close the sale of the Property
pursuant to the terms and provisions of this Agreement or under a subsequent purchase agreement,
such affected Buyer shall be entitled to either sue for specific performance of the purchase agreement
or terminate such purchase agreement and sue for money damages.
6. MISCELLANEOUS.
(a) Execution by All Parties. This Agreement shall not become effective and binding until fully
executed by both of the Buyers and the Seller.
(b) Governing Law. This Agreement shall be governed by and construed in accordance with the laws
of the State of Minnesota.
(c) Successors and Assigns. This Agreement shall apply to, inure to the benefit of and be binding
upon and enforceable against the parties hereto and their respective heirs, successors, and or
assigns, to the extent as if specified at length throughout this Agreement.
(d) Time. Time is of the essence of this Agreement.
(e) Entire Agreement. This Agreement contains all of the terms, promises, covenants, conditions and
representations made or entered into by or between the parties hereto and supersedes all prior
discussions and agreements whether written or oral between the parties with respect to the Option
and all other matters contained herein and constitutes the sole and entire agreement between the
parties with respect thereto. This Agreement may not be modified or amended unless such
amendment is set forth in writing and executed by all parties with the formalities hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Option Agreement for the Purchase of
Real Property to be executed under proper authority:
BUYERS:
Terry D. Gorham
Colleen E. Gorham
James H. Caldwell
Kari A. Caldwell
CITY OF SCANDIA, MINNESOTA
Christine Maefsky, Mayor
Neil Soltis, City Administrator