00 Mhpreg Agreement
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Free recording in accordance with
California Government Code
Sections 6103 and 27383
Recording requested by
and when recorded mail to:
Multifamily Housing Program
Department of Housing and
Community Development
P.O. Box 952052
Sacramento, CA 94252-2052
DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT
MULTIFAMILY HOUSING PROGRAM (NOFA 8/28/00)
REGULATORY AGREEMENT
LOAN NUMBER 00-MHP-
This Regulatory Agreement (the “Agreement”) dated , 200 , is made and
entered into by and between _____________________, a ___________________ (the
“Borrower”) and the Department of Housing and Community Development, a public
agency of the State of California (the “Department”).
RECITALS:
A. Borrower has applied to the Department for a loan (the “Loan”) for the
development of a Rental Housing Development located at
, California, consisting of a total of rental units (the
"Development"), of which _____ Assisted Units are to be occupied by
Eligible Households as provided in this Agreement. The Development is located
on the real property described in Exhibit A hereto (the “Property”). The
Department has conditionally agreed to provide the Loan under the Multifamily
Housing Program pursuant to chapter 6.7 of part 2 of division 31 of the Health
and Safety Code commencing with section 50675 (the “Program”) and the
Multifamily Housing Program Guidelines dated August 28, 2000, and any
amendments thereto (the “Guidelines”). The obligations imposed on the
Borrower by the Program, the Guidelines, any regulations governing the Program
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adopted by the Department, and the Department’s policies and procedures are
collectively referred to herein as the “Program Requirements.”
B. As required by the Program, Borrower and the Department have entered into
that Standard Agreement, numbered , and dated ,
200__, regarding the Development and governing the terms of the Loan (the
"Standard Agreement").
C. Also as required by the Program and in addition to the Standard Agreement,
Borrower has executed or will execute each of the following documents in form
approved by the Department:
1. A promissory note evidencing the Loan specifying, inter alia, the principal
amount thereof, the interest accruing thereon and the terms of repayment
thereof (the "Note").
2. A deed of trust, assignment of rents, security agreement, and fixture filing
securing the Note and naming the Department as beneficiary and the
Borrower as trustor, and recorded or to be recorded against the Property
(the "Deed of Trust"). The Deed of Trust shall have such priority and be
subject only to such matters of record as may be approved in writing by
the Department.
3. Such other documents and instruments as the Department may
reasonably require.
D. The Standard Agreement, the Note, the Deed of Trust, this Agreement and such
other documents and instruments as are reasonably required by the Department
are collectively referred to herein as the "Loan Documents."
E. As further consideration for the Loan and in furtherance of the purposes of the
Program, Borrower has agreed to enter into this Agreement. The purpose of this
Agreement is to regulate and restrict the occupancy, rents, operation, ownership
and management of the Development in compliance with the Program
Requirements.
NOW, THEREFORE, the parties hereto agree as follows:
1. Recitals. The foregoing recitals are a part of this Agreement.
2. Property. Borrower is the owner in fee of the Property and all improvements now
and hereafter located thereon.
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[Or substitute one of the following as appropriate.]
Property. Borrower is the owner of a leasehold interest in the Property and the
owner of a fee interest in all improvements now or hereafter located thereon.
Property. The Property is owned in fee by ______________________________
a _______________________________ (the “Public Agency”). Borrower has
an agreement with the Public Agency for construction and operation of the
improvements located on the Property. [Modify as appropriate.]
3. Definitions. Unless the context requires otherwise, or the terms are defined
herein, the terms used in this Agreement shall be governed by the definitions set
forth in the Program statutes, which include by reference definitions found in
chapter 2 of part 1 of division 1 of the Health and Safety Code (commencing with
§ 50050) and the definitions included in the Program Requirements.
The following terms shall have the respective meanings assigned to them in this
paragraph unless the context in which they are used clearly requires otherwise:
a. “Fiscal Year” for the Development shall mean the annual period
commencing on and concluding on
each year.
b. "Net Cash Flow" shall mean all Operating Income of the Development
less the amounts paid therefrom as allowed in clauses (1) through (6) of
subparagraph b. of paragraph 20 hereof.
c. "Restricted Unit" means any Assisted Unit and any Unit that is subject to
rent and occupancy restrictions that are comparable to those applicable to
Assisted Units. Restricted Units include Units subject to a TCAC
Regulatory Agreement and all Units subject to similar long-term, low-
income restrictions imposed by other public agencies.
4. Compliance with Program Requirements. The Borrower agrees that at all times
its actions regarding the Development and the use of funds provided under the
Standard Agreement shall be in conformity with all Program Requirements,
including the requirements of this Agreement and the other Loan Documents.
The Borrower acknowledges that it is familiar with the Program Requirements
and has access to professional advice to the extent necessary to enable the
Borrower to fully comply with the Program Requirements.
5. Term of Agreement. This Agreement shall commence on the date set forth
above and remain in full force and effect and shall apply to the Development
through and including the fifty-fifth (55th) anniversary of the date of recordation of
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this Agreement pursuant to paragraph 33 hereof regardless of any prepayment
of the Loan or sale, assignment, transfer or conveyance of the Development,
unless terminated earlier by the Department or extended by the mutual consent
of the parties.
6. Assisted Units, Restricted Units and Special Needs Populations Units.
a. For the full term of this Agreement, Borrower shall provide within the
Development, the number, type and size of Assisted Units set forth in
Exhibit B, Part I, attached hereto and incorporated herein.
b. Restricted Units shall not differ substantially in size or amenity level from
non-Restricted Units within the Development with the same number of
bedrooms, and Restricted Units shall not be segregated from
non-Restricted Units.
c. Within the limits of subparagraph b. above, and subject to the
requirements of subparagraph a. above, Borrower may change the
designation of a particular Unit from Assisted Unit to non-Assisted Unit,
and vice versa, over time.
d. Borrower shall comply with all the requirements for Special Needs
Populations Units and supportive services, if any, as set forth in Exhibit B,
Part II. For Developments with Special Needs Populations Units, Borrower
shall file and maintain with the Department a supportive services plan
detailing the services and programs to be provided to the tenants with
special needs. The supportive services plan shall be subject to the review
and approval of the Department. Unless otherwise approved by the
Department, the supportive services set forth in the plan shall be
consistent with the supportive services set forth in Borrower’s application
for the Program Loan.
7. Tenant Selection Procedures. Borrower shall rent Assisted Units in the
Development to Eligible Households in accordance with the Management Plan
developed by the Borrower and approved by and on file with the Department
(the “Management Plan”) pursuant to paragraph 13 of this Agreement. The
Management Plan shall:
a. detail actions to be taken by Borrower to affirmatively market all Units in a
manner that ensures equal access to all persons in any category
protected by federal, state or local laws governing discrimination, and
without regard to any arbitrary factor;
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b. specify reasonable criteria for determination of tenant eligibility, including
household size;
c. require that eligible tenants be selected based on order of application,
lottery, or other reasonable method approved by the Department;
d. require eligible applicants to be notified of eligibility and, based on
turnover history, when a Unit may be available;
e. require ineligible applicants to be notified of the reason for their
ineligibility;
f. specify procedures through which applicants deemed to be ineligible may
appeal this determination;
g. require maintenance of a waiting list of eligible applicants;
h. specify procedures for obtaining information regarding prospective
tenants' incomes as necessary to certify that such income does not
exceed the income limit limitations; and
i. be made available to prospective tenants upon request.
8. Non-Discrimination. Borrower shall not discriminate against any tenant or
prospective tenant on the basis of sex, sexual orientation, race, color, religion,
ancestry, national origin, disability, marital status, familial status, source of
income, or any other arbitrary factor in violation of any state, federal or local law
governing discrimination in rental housing. The restriction of housing to elderly
and Special Needs Populations is permitted where the housing is intended to
benefit those targeted groups in compliance with applicable law, and only with
prior approval of the selection criteria by the Department.
9. Rental Agreement and Occupancy Procedures.
a. Each Eligible Household selected to occupy an Assisted Unit in the
Development shall enter into a written rental or occupancy agreement with
the Borrower, the form of which shall be subject to approval by the
Department and be consistent with the Program Requirements. Such
rental agreement shall, inter alia, provide for good cause eviction,
reference the appeal and grievance procedures set forth in the
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Management Plan, and require the tenant annually recertify household
income and size.
b. The Borrower may establish reasonable rules of conduct and occupancy.
Such rules shall be consistent with state law and the Program
Requirements and shall not distinguish or discriminate between Restricted
Units and non-Restricted Units. The rules shall be in writing and shall be
given to each tenant upon occupancy. Any change to such rules shall
become effective no less than thirty (30) days after giving written notice
thereof to each household in the Development.
10. Assisted Unit Rents.
a. For the Initial Operating Year, Borrower shall charge Rents for the
Assisted Units in the Development in accordance with Exhibit B hereto.
b. After the Initial Operating Year, Rents for Assisted Units may be adjusted
no more often than every twelve (12) months. The amount and method of
adjustment for Assisted Units shall be in accordance with the Low Income
Housing Tax Credit Program (“LIHTC”) provided that the annual increase
rate shall not exceed 150 percent (150%) of the annual change rate for
the Consumer Price Index for All Urban Consumers, Western Region, All
Items, as published by the Bureau of Labor Statistics, United States
Department of Labor.1 The adjusted Rent amount shall not exceed the
amount published by the Department for the applicable Unit size and
income limit, as shown in Exhibit B.
c. Notwithstanding the previous subparagraph, Rents for Assisted Units
subsidized under Section 8 of the Housing Act of 1937 or any comparable
federal or state rental assistance program may be adjusted more often
than annually, as required by the respective rental assistance program.
d. Units in the Development covered by project-based rental assistance, if
any, are described in Exhibit C. For such Units:
(1) Borrower shall in good faith apply for and accept all available
renewals of project-based rental assistance; and
1 In the event that such index is no longer published or available, the Department shall designate an
alternative index reasonably reflecting the same factors as the CPI .
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(2) If the project-based rental assistance is terminated, Rents for Units
previously covered by this assistance may be increased above the
limits shown in the schedule published by the Department for the
applicable Unit size and income limit, but only to the minimum
extent required for project feasibility, as determined by the
Department. In addition, Rents for Units designated in Exhibit C as
restricted to households with incomes not exceeding a specified
percentage of state median income shall not in any event be
increased to an amount in excess of thirty percent (30%) of fifty
percent (50%) of area median income, adjusted by bedroom size in
accordance with the requirements of the LIHTC.
11. Rents for non-Assisted Units and Commercial Space. Borrower shall establish
and implement a rent structure and operations budget for non-Assisted Units
and/or Commercial Space, as applicable, which ensures the Fiscal Integrity of
the Development. Rent for Market Restricted Units shall be in compliance with
Exhibit B hereto. Borrower shall estimate all income and expenses attributable
to the non-Assisted Units and, if applicable, Commercial Space, in the annual
operating budget described in paragraph 15 herein, and shall report all income
and expenses attributable to non-Assisted Units and Commercial Space in the
annual report described in paragraph 17 herein.
12. Certification of Tenant Income and Household Size.
a. The income and household size of all households occupying Assisted
Units shall be certified by the Borrower prior to occupancy and recertified
annually thereafter in the manner specified in the Development's
approved Management Plan and in accordance with the applicable rules,
regulations, and procedures governing the LIHTC.
b. If, at the time of tenant recertification, the income of a household
occupying an Assisted Unit exceeds the income limit designation for the
Assisted Unit, the household will be subject to LIHTC requirements
regarding over-income occupancy, except that Assisted Units designated
in Exhibit B hereto as restricted to households with incomes not
exceeding a specified percentage of State Median Income (“SMI”) shall be
subject to the following:
(1) If the household’s income exceeds the income limit designation for
the Assisted Unit by more than ten percent (10%) of SMI, but
remains below the income limit for “lower income households” as
defined by Heath and Safety Code section 50079.5, the Borrower
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shall increase the household’s rent to the level applicable to other
households with similar incomes, and shall designate the next
available comparable Assisted Unit as a Unit restricted for
occupancy by households at the income limit formerly applicable to
the first Unit, thereby restoring the Assisted Unit allocation set forth
in said Exhibit B.
(2) If the household’s income exceeds the income limit for “lower
income households,” the Borrower shall increase the household’s
Rent to the level for a comparable non-Assisted Unit for a
household of similar income, and designate the next available
comparable Unit as an Assisted Unit and either:
(a) the Unit shall be designated as a non-Assisted Unit, if the
Development contains such Units; or
(b) the lease for the Unit shall terminate one year following the
recertification date, if the Development does not contain
non-Assisted Units and the household fails to provide the
Borrower evidence that the household’s income has
declined to a level below the income limit for “lower income
households.”
13. Management and Maintenance.
a. Borrower is responsible for all maintenance, repair, and management
functions, including without limitation, the following: selection of tenants;
recertification of family income and size; evictions; collection of Rents;
routine and extraordinary repairs; and replacement of capital items.
Borrower shall maintain all Residential Units, common areas and
Commercial Space in a safe and sanitary manner in accordance with local
health, building, and housing codes and the Management Plan described
below.
b. Borrower is responsible for operating the Development in accordance with
the management plan developed by the Borrower and approved by and
on file with the Department (the "Management Plan"). All amendments to
this plan require prior written approval of the Department.
c. Borrower may, with the prior written approval of the Department, contract
with a management agent for the performance of the services or duties
required in subparagraphs a. and b. of this paragraph 13. However, such
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an arrangement does not relieve the Borrower of responsibility for proper
performance of these duties. Such contract shall be subject to prior
written approval by the Department and shall contain a provision allowing
the Borrower to terminate the contract without penalty upon no more than
thirty (30) days' notice. Upon a determination by the Department, and
notice to the Borrower thereof, that the contractor performing the functions
required in subparagraphs a. and b. has failed to operate the
Development in accordance with this Agreement and the approved
Management Plan, the Borrower shall exercise such right of termination
forthwith and make immediate arrangements, which shall be subject to
Department approval, for continuing performance of the functions required
in subparagraphs a. and b.
d. Upon a determination by the Department, and notice to the Borrower
thereof, that the Borrower has failed to operate the Development in
accordance with this Agreement, the Department may require the
Borrower to contract with a qualified management agent to operate the
Development, or to make such other arrangements as the Department
deems necessary to ensure performance of the functions required in
subparagraphs a. and b.
e. Borrower shall operate, maintain and repair both Restricted and
non-Restricted Units equally without regard to their designation as
Restricted Units or non-Restricted Units.
14. Hazard and Liability Insurance and Condemnation.
a. The Borrower shall at all times keep the Development insured against loss
by fire and such other hazards, casualties, liabilities and contingencies,
and in such amounts and for such periods as required by the Department.
All insurance policies and renewals thereof shall be issued by a carrier
and in form acceptable to the Department.
b. Insurance proceeds and condemnation awards for any loss to or taking of
the Development or the Property, or any portion thereof, shall be applied
or utilized as provided in the Deed of Trust.
c. In the event of any fire or other casualty to the Development or eminent
domain proceedings resulting in condemnation of the Development or any
part thereof, Borrower shall have the right to rebuild the Development, and
to use all available insurance or condemnation proceeds therefore,
provided that, as determined by the Department at its sole discretion, (a)
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such proceeds are sufficient to keep the Loan in balance and rebuild the
Development in a manner that provides adequate security to the
Department for repayment of the Loan or if such proceeds are insufficient,
then Borrower shall have funded any deficiency, (b) the Department shall
have the right to approve plans and specifications for any major rebuilding
and the right to approve disbursements of insurance or condemnation
proceeds for rebuilding under a construction escrow or similar
arrangement, and (c) no material breach or default then exists under the
Loan Documents. If the casualty or condemnation affects only part of the
Development and total rebuilding is infeasible, then proceeds may be
used for partial rebuilding and partial repayment of the Loan in a manner
that provides adequate security to the Department for repayment of the
remaining balance of the Loan.
15. Annual Operating Budget.
a. For the Initial Operating Year, Borrower shall operate the Development
and expend Operating Income in accordance with the initial operating
budget approved by and on file with the Department. Such budget shall
show all anticipated Operating Income, debt service, Operating Expenses
and amount payable to reserves for the Initial Operating Year.
b. No later than sixty (60) days prior to the beginning of each subsequent
Fiscal Year of the Development, the Borrower shall submit to the
Department a proposed annual operating budget on a form provided by
the Department. The proposed annual operating budget shall set forth
the Borrower's estimate of Operating Income, Operating Expenses and
debt service for the upcoming year, amounts payable to reserves, and
proposed Rent adjustments.
c. If the Development contains either non-Assisted Units or Commercial
Space, or both, each annual operating budget shall show amounts,
sources and uses of income allocated between Assisted Units, Restricted
Units, non-Restricted Units, and Commercial Space. The allocation
method used for each budget line item shall be subject to Department
approval, and shall apportion income and expenses in a manner that
accurately reflects the particular physical, operational and economic
characteristics of the Development.
16. Periodic Reports. During the Initial Operating Year, Borrower shall submit to the
Department such periodic reports as deemed necessary by the Department to
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monitor the Borrower's compliance with this Agreement. The reports may
include, but are not limited to:
a. an income and expense statement for the reporting period;
b. a summary of the occupancy of the Development, indicating the number
and type of Units reserved for Eligible Households, the number of vacant
Units, and the number of evictions completed or in process;
c. a report on maintenance or other issues anticipated to impact the current
budget needs of the Development;
d. information on the status of waiting lists for the Assisted Units, including
the number of households on lists for different Unit sizes and by income
group; and
e. other information as required by the Department to accurately monitor
Borrower's performance hereunder.
If, after the Initial Operating Year, the Department determines that such periodic
reports continue to be necessary, the Department shall so notify the Borrower as
part of the annual budget approval process. Upon such notification, Borrower
shall submit the requested reports.
17. Annual Report and Audit.
a. Borrower shall file an annual report with the Department no later than
ninety (90) days after the end of each Fiscal Year for the Development.
The report shall be in such form and contain such information as required
by the Department.
b. As part of the annual report, the Borrower shall submit an audit of the
Development prepared in accordance with generally accepted auditing
standards by an independent certified public accountant. The Department
may require the audit to be accompanied by a supplemental report
prepared in accordance with Department requirements.
18. Required Reserves. Borrower shall establish, fund and maintain reserve
accounts for the term of this Agreement as listed below. All such accounts shall
be in the name of the Borrower, earn interest, and, unless otherwise approved in
writing by the Department, insured by an agency of the federal government or
other comparable federal insurance program. All interest earned on a reserve
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account shall become a part of the account. Withdrawals from the reserve
accounts shall require prior written approval of the Department. Should the
Department fail to take action on a request for a withdrawal from a reserve
account within thirty (30) days of documented receipt of the request, that request
will be deemed approved.
a. Replacement Reserve Account. Commencing no later than the date
funds are disbursed pursuant to the Loan Documents, Borrower shall
establish a segregated replacement reserve account. Borrower shall
make monthly deposits from Operating Income to the replacement
reserve account in the amount set forth in Exhibit C. Borrower shall also
deposit any Development funds designated for replacement reserves into
this account, including those identified in Exhibit C. The amount of the
minimum monthly deposit may be adjusted, as determined by the
Department, in its sole discretion, based on a physical needs assessment
or reserve study performed by an independent third party at the
Borrower’s expense as requested by the Department or as based on
another reasonable indicator of future reserve needs.
b. Operating Reserve Account. If shown in Exhibit C, Borrower shall
establish an operating reserve account or sub-account within the
Development’s general operating account no later than sixty (60) days
from the date of recordation of this Agreement. Borrower shall fund the
operating reserve account with an initial deposit in an amount as specified
in Exhibit C, and through monthly deposits from Operating Income in
amounts as specified in Exhibit C or in approved annual operating
budgets. Borrower shall not be required to make monthly deposits to the
operating reserve account at any time the current balance of the operating
reserve account exceeds the gross operating income of the Development
for the previous twelve (12) months.
c. Other Reserve Accounts. Borrower certifies that Exhibit C hereto contains
a complete listing of all reserve accounts established or to be established
for the Development. All withdrawals from these accounts shall require
prior written Department approval, except as specifically noted in
Exhibit C.
19. Accounting Records. In a manner subject to Department approval, Borrower
shall maintain an accrual or modified accrual basis general ledger accounting
system that is posted monthly and that accurately and fully shows all assets,
liabilities, income and expenses of the Development. All records and books
relating to this system shall be retained for not less than seven (7) years and in
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such a manner as to ensure that the records are reasonably protected from
destruction or tampering. All records shall be subject to inspection and audit by
the Department or its representative.
20. Use of Income from Operations.
a. The Borrower, or Borrower's management agent, shall promptly deposit
all Operating Income in a segregated account established in the
Borrower's name exclusively for the Development and insured by an
agency of the federal government or other comparable federal insurance
program.
b. Withdrawals from the account shall be made only in accordance with the
provisions of this Agreement, and the approved annual operating budget,
and shall be disbursed, applied, or reserved and set aside for payment
when due, in the following priority, to the extent available:
(1) salaries, wages, and any other compensation due and payable to
the employees or agents of the Borrower employed on site in
connection with the maintenance, administration or operation of the
Development, along with all withholding taxes, insurance
premiums, Social Security payments and other payroll taxes or
payments required in connection with such employees;
(2) all charges incurred in the operation of the Development in
connection with utilities, real estate taxes and assessments, and
liability, fire and other hazard insurance premiums;
(3) regularly scheduled non-contingent payments of interest, principal,
impounds, fees and charges, if any, required on loans, including
the Loan, which are secured by liens on the Property, which have
been approved by the Department, payments on which are to be
made prior to the determination of Net Cash Flow, as specified in
Exhibit C, hereto;
(4) all other incurred Operating Expenses, including the fee of the
managing agent and any extraordinary expenses, in accordance
with the approved annual operating budget of the Development or
as otherwise approved in advance by the Department;
(5) deposits to required reserve accounts;
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(6) Distributions, in accordance with paragraph 21 of this Agreement.
The Borrower may depart from the foregoing priorities of payment only
upon the express written approval of the Department. Net Cash Flow
shall be distributed in accordance with paragraph 22 hereto.
21. Distributions.
a. Borrower shall be limited to annual Distributions in the amount set forth in
Exhibit C. If the Development generates insufficient cash flow to permit
full payment of permitted Distributions in a particular year, Distributions in
future years shall not be increased to cover allowable but unpaid
Distributions.
b. Borrower may deposit all or a portion of the amount permitted for
Distributions into a Development account for distribution in subsequent
years. Such future distributions shall not reduce the otherwise permitted
Distributions in those subsequent years.
c. Distributions shall be permitted for a particular Fiscal Year, including
Distributions from an accumulated Distributions account, only after the
Borrower submits a complete annual report and operating budget and the
Department determines that the report and budget demonstrate
compliance with all Program Requirements.
d. No Distributions shall be made to the Borrower or to any person or entity
having a beneficial interest in Borrower in the following circumstances:
(1) when written notice of default has been issued by any entity,
including the Department, with an equitable or beneficial interest in
the Development;
(2) when the Department determines that the Borrower or Borrower’s
management agent has failed to comply with the Department’s
written notice of any reasonable requirement for proper
maintenance or operation of the Development;
(3) if all currently required debt service, including mandatory payments
on the Loan, and Operating Expenses have not been paid; or
(4) if the replacement reserves account or any other required reserve
account is not fully funded pursuant to this Agreement.
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e. Any additional services for the Development, the payment for which are
not to be included as Distributions, shall be set forth in Exhibit C hereto.
The specific amounts of such payments shall be set forth in the annual
budget and included in the annual reports.
f. Distributions attributed to Commercial Space and non-Restricted Units, as
shown in approved annual operating budgets and annual reports, shall not
be subject to the limits of this paragraph 21.
22. Use of Net Cash Flow.
a. Net Cash Flow attributable to those portions of the Development other
than any non-Restricted Units or Commercial Space shall be applied to
payment of interest, principal, impound fees and charges, if any, on loans
which are secured by liens on the Property, including the Loan, which
have been approved by the Department and which are to be paid from
Net Cash Flow in the amounts, proportion and in accordance with the
terms specified in Exhibit C hereto. Upon payment in full of the loans
payable from Net Cash Flow as set forth in Exhibit C, all Net Cash Flow
shall be paid to the Department as excess cash, used to reduce rents in
Assisted Units, or used for other purposes related to the Development as
approved by the Department.
b. Net Cash Flow attributed to non-Restricted Units and Commercial Space,
as shown in annual operating budgets and annual reports approved by
the Department, may be distributed to or on behalf of Borrower.
23. Department Review and Inspections.
a. At any time during the term of this Agreement, the Department or its
designee may enter and inspect the physical premises and inspect all
accounting records pertaining to the construction, development or
operation of the entire Development. Upon request by the Department,
the Borrower shall notify occupants of upcoming inspections of their Units
in accordance with state law.
b. In addition to the annual audit required in paragraph 17 above, and at the
Department's request, the Borrower shall provide, at Borrower’s expense,
a special audit of the Development certified by an independent certified
public accountant. The Department may also perform or cause to be
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performed audits of any and all phases of the Borrower's activities related
to the Development.
c. The Department may request any other information that it deems
necessary to monitor compliance with the Program Requirements and the
requirements set forth in this Agreement and the Standard Agreement.
The Borrower shall promptly provide such information.
24. Restrictions on Sale, Encumbrance, and Other Acts.
a. Except with the Department’s prior written approval, Borrower shall not:
(1) make any sale, encumbrance, hypothecation, assignment,
refinancing, pledge, conveyance, or transfer in any other form of
the Property or Development or of any of its interest in either of
them;
(2) substantially add to, remodel, remove, reconstruct, or demolish any
part of the Development;
(3) permit the use of the Development for any purpose other than that
permitted by this Agreement;
(4) incur any liability or obligation in connection with the Property or
Development, other than for current Operating Expenses, nor incur
any liability, charge, assessment, or obligation whatsoever that is
secured in whole or in part by any interest in or lien or
encumbrance on the Property provided that the Department may
permit refinancing or additional financing secured by the Property
to the extent necessary to maintain or improve the Development's
Fiscal Integrity, or to maintain affordable Rents;
(5) enter into any contract relating to rehabilitating or managing the
Development;
(6) enter into any lease for more than a single rental Unit, a ground
lease of the Property or any interest therein, except for the rental of
Commercial Space in the Development; or
(7) if the Borrower or its successor in interest is a partnership,
discharge or replace any general partner or amend, modify or add
to its partnership agreement, or amend, modify or add to the
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organizational documents of the general partner; except that it may
transfer limited partnership interests without such approval. The
withdrawal, removal, and/or replacement of a general partner of the
partnership pursuant to the terms of the partnership agreement
shall not constitute a default under any of the Loan Documents,
and any such actions shall not accelerate the maturity of the Loan,
provided that any required substitute general partner is reasonably
acceptable to the Department and is selected with reasonable
promptness.
b. The Department shall approve a sale, transfer or conveyance of the
Property or Development provided all of the following conditions are met:
(1) the transferor Borrower is in compliance with this Agreement or the
sale, transfer or conveyance will result in the cure of any existing
violations of this Agreement;
(2) the transferee Borrower agrees to assume all obligations of the
transferor Borrower pursuant to this Agreement, the other Loan
Documents and the Program Requirements;
(3) the transferee Borrower demonstrates to the Department's
satisfaction that it has the ability to own and operate the
Development in full compliance with this Agreement and the
Program Requirements; and
(4) any terms of the sale, transfer or conveyance shall not jeopardize
the Department's security or the transferee Borrower’s ability to
comply with all Program Requirements.
c. The Department may grant its approval for a sale, transfer or conveyance
of the Property or Development subject to such terms and conditions as
may be necessary to preserve or establish the Fiscal Integrity of the
Development or to ensure compliance with the Program Requirements.
Such conditions may include, but are not limited to, the deposit of sales
proceeds, or a portion thereof, to maintain required reserves or to offset
negative cash flow.
d. If Borrower or its successor in interest is a limited partnership, the
execution and delivery of the purchase option and right of first refusal
agreement described in the partnership agreement shall not constitute a
default under the Loan Documents or accelerate the maturity of the Loan
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thereunder, provided that such purchase option is and remains
subordinate to the documents securing the Loan. Any requisite consent
of the Department to (a) the exercise of said purchase option and right of
first refusal agreement by the Development sponsor identified therein, and
to (b) the assumption without penalty of Loan obligations by the
Development sponsor and the release of Borrower from such obligations
shall not be unreasonably withheld, but may be conditioned upon the
execution of an operating guaranty from the Borrower in form provided by
the Department. Subject to any such consent requirement, the exercise
of rights under such agreement shall not constitute a default under the
Loan Documents or accelerate maturity of the Loan.
e. If Borrower or its successor in interest is a limited partnership and the
purchase option and right of first refusal agreement described in the
partnership agreement is not exercised and the Development is sold
subject to low-income housing use restrictions contained in this
Agreement, the requisite consent of the Department to said sale, and to
the assumption without penalty of Loan obligations by the purchaser and
the release of Borrower from such obligations, shall not be unreasonably
withheld, but may be conditioned upon, among other requirements , the
execution of an operating guaranty from the Borrower in form provided by
the Department.
f. The Borrower agrees that if it is organized as a partnership or other legal
entity, Borrower shall not dissolve the partnership or other legal entity prior
to the expiration of the term of this Agreement, without the prior written
approval of the Department.
25. Violation of Agreement by Borrower.
a. In the event of the Borrower's breach, violation or default in the
performance of any covenant, agreement or obligation of the Borrower set
forth in this Agreement including, but not limited to, Borrower's covenant
to perform its obligations under the Loan Documents, the Department
shall give the Borrower written notice in the manner specified in
paragraph 38 of this Agreement, specifying the nature of the violation,
breach or default and the action needed to cure. If the default, breach or
violation is not cured to the satisfaction of the Department within the time
period specified in the notice, which shall not be less than the applicable
time to cure as stated in paragraph 26 of this Agreement, the Department
may declare a default hereunder and may take any one or more of the
following actions:
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(1) Collect all Rents and income in connection with the operation of the
Development and use the same and the reserve funds for the
operation and maintenance of the Development.
(2) Take possession of the Development and bring any action
necessary to enforce any rights of the Borrower growing out of the
operation of the Development, and operate the Development in
accordance with the terms of this Agreement until such time as the
Department, in its sole discretion, shall determine that the Borrower
is again in a position to operate the Development in accordance
with the terms of this Agreement.
(3) Apply to any court, state or federal, for specific performance of this
Agreement or for the appointment of a receiver to take over and
operate the Development in accordance with the terms of this
Agreement, or for such other relief as may be appropriate. It is
agreed by the Borrower that the injury to the Department arising
from a default under any of the terms of this Agreement would be
irreparable and that the amount of compensation, which would
provide adequate relief to the Department, in light of the purposes
and requirements of the Program, would be impossible to
ascertain.
(4) Accelerate all amounts, including outstanding principal and interest,
due under the terms of the Loan Documents and demand
immediate repayment thereof. Upon a failure to repay such
accelerated amount in full, the Note provides that the Department
may proceed with a foreclosure or sale under the power of sale in
accordance with the provisions of the Deed of Trust and state law
regarding foreclosures.
(5) Seek such other appropriate remedies as may be available under
the law.
b. In the event that the breach or violation involves charging tenants Rent or
other charges in excess of those permitted under this Agreement, the
Department may demand the return of such excess Rents or other
charges to the affected households. If legal action is necessary to
enforce the provisions of this Agreement, the Department may seek the
return of such overcharges to the affected households.
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c. The remedies of the Department hereunder and under the other Loan
Documents are cumulative, and the exercise of one or more of such
remedies shall not be deemed an election of remedies and shall not
preclude the exercise by the Department of any one or more of its other
remedies.
26. Time to Cure.
a. Monetary Default. If a monetary event of default occurs under the terms
of any of the Loan Documents, prior to exercising any remedies
thereunder the Department shall give Borrower written notice of such
default. Borrower shall have a period of seven (7) days after such notice
is given within which to cure the default prior to exercise of remedies by
the Department under the Loan Documents, or such longer period of time
as may be specified in the Loan Documents.
b. Non-Monetary Default. If a non-monetary event of default occurs under
the terms of any of the Loan Documents, prior to exercising any remedies
thereunder, the Department shall give Borrower written notice of such
default. If the default is reasonably capable of being cured within thirty
(30) days, as determined by the Department in its sole discretion,
Borrower shall have such period to effect a cure prior to exercise of
remedies by the Department under the Loan Documents, or such longer
period of time as may be specified in the Loan Documents. If the default
is such that it is not reasonably capable of being cured within thirty (30)
days, as determined by the Department in its sole discretion, or such
longer period if so specified, and if Borrower (a) initiates corrective action
within said period, and (b) diligently, continually, and in good faith works to
effect a cure as soon as possible, then Borrower shall have such
additional time as is determined by the Department, in its sole discretion,
to be reasonably necessary to cure the default prior to exercise of any
remedies by the Department. If Borrower or its successor in interest is a
limited partnership, if Borrower fails to take corrective action or to cure the
default within such a specified time, the Department shall give Borrower
written notice thereof, whereupon the limited partner may remove and
replace the general partner with a substitute general partner who shall
effect a cure within a reasonable time thereafter in accordance with the
foregoing provisions. In no event shall the Department be precluded from
exercising remedies if its security becomes or is about to become
materially jeopardized by any failure to cure a default or the default is not
cured within ninety (90) days after the first notice of default is given.
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27. Property Tax Exemption. To the extent the property tax exemption provisions of
section 214 of the Revenue and Taxation Code are applicable to the Borrower
and the Development, Borrower shall take all actions necessary to qualify the
Development for the maximum exemption from property taxes available pursuant
to said section 214 of the Revenue and Taxation Code. Such actions may
include, but are not limited to the following:
a. Modify, add to or delete from the articles of incorporation, bylaws or other
organizational documents of Borrower or of the managing general partner
of Borrower;
b. Apply for nonprofit, tax-exempt status to the appropriate state or federal
agency;
c. Provide the certifications and assurances required by section 214 of the
Revenue and Taxation Code; and
d. Comply with the procedures and requirements imposed by local
government agencies as a condition of receiving the property tax
exemption.
28. Controlling Agreement.
a. Borrower specifically agrees and acknowledges that, notwithstanding any
internal accounting procedures or provision pertaining to the use of
receipts, payments, reserves and distributions contained in its partnership
or other organizational documents or agreements, the terms of this
Agreement and the Program Requirements shall control as to the use of
the funds provided under the Standard Agreement and all Operating
Income from the Development.
b. In the event of any inconsistencies or conflicts between the terms of this
Agreement and the terms of the other Loan Documents, the terms of this
Agreement shall control.
29. Assignment of Department Rights. The Department retains the right at its sole
discretion to assign all or part of its rights under this Agreement for the purpose
of ensuring compliance and enforcement of Borrower's duties and obligations
hereunder. In addition, the Department may designate an agent to act on its
behalf in monitoring compliance and enforcing the provisions hereof.
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30. Amendment. This Agreement shall not be altered or amended except in writing,
executed between or among all the parties.
31. Partial Invalidity. If any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions
hereof shall not in any way be affected or impaired thereby.
32. Binding on Successors. This Agreement shall bind, and the benefits hereof shall
inure to, the respective parties hereto, their legal representatives, executors,
administrators, transfers, successors in interest and assigns, provided, however,
that the Borrower may not assign this Agreement or any of its obligations
hereunder, voluntarily or by operation of law, without the prior written approval of
the Department. The term "Borrower" as used herein shall include and apply to
any person or entity succeeding to the legal, equitable, proprietary or possessory
interest of Borrower in the Development.
33. Recording Agreement. This Agreement, and all amendments hereto, shall be
executed by each of the parties. This Agreement, or, where approved by the
Department in writing, a memorandum thereof, shall be recorded against the
Property in the official records of the county in which the Development is
situated, superior to the lien of the Deed of Trust.
34. Indemnification and Waiver.
a. Borrower agrees to indemnify the Department and its agents, employees
and officers against, and holds the Department and its agents, employees
and officers harmless from, any losses, damages, liabilities, claims,
actions, judgments, court costs and legal or other expenses (including
attorneys' fees) of every name, kind and description, which the
Department may incur as a direct or indirect consequence of: (1) the
making of the Loan to the Borrower; (2) Borrower's failure to perform any
obligations as and when required by this Agreement or any of the other
Loan Documents; (3) any failure at any time of any of Borrower's
representations or warranties to be true and correct; (4) any act or
omission by Borrower, any contractor, subcontractor, material supplier,
engineer, architect or other person or entity with respect to the Property or
the construction, management, maintenance or operation of the
Development; or (5) the presence of any recognized environmental
conditions at the Development or on the Property. Borrower shall pay
immediately upon the Department's demand any amounts owing under
this indemnity together with interest from the date the indebtedness arises
until paid at the rate of ten percent (10%) per annum. Borrower’s duty to
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indemnify and save harmless includes the duties to defend as set forth in
section 2778 of the Civil Code. Borrower shall indemnify and hold
harmless the Department and its agents, officers and employees as set
forth herein regardless of the existence or degree of fault or negligence
whether active or passive, primary or secondary on the part of the
Department, the Borrower or their respective agents, officers, employees,
contractors or subcontractor; provided, however, that Borrower's duty to
indemnify and hold harmless hereunder shall not extend to liability arising
from the gross negligence or willful misconduct of the Department.
Borrower's duty to indemnify the Department shall survive the term of this
Agreement, the release and cancellation of the Note, and the
reconveyance or partial reconveyance of the Deed of Trust.
b. The Borrower waives and releases any and all rights to any types of
express or implied indemnity against the Department or its agents, officers
or employees.
c. The Borrower expressly waives the protections of section 1542 of the Civil
Code in relation to subparagraphs a. and b. above. Said section 1542
provides as follows: A general release does not extend to claims which
the creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor.
35. No Waiver. No waiver by the Department of any breach or violation of or default
under this Agreement shall be deemed to be a waiver of any other or subsequent
breach or violation thereof or default thereunder.
36. Captions. The captions used in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
or the intent of this Agreement.
37. Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of California. All code references herein refer
to the California Codes, unless specifically indicated otherwise.
38. Notice. Except for any notice required under applicable law to be given in
another manner, any notices, demands or communications between the parties
hereto shall be sufficiently given if, and shall not be deemed given unless,
dispatched by certified mail, postage prepaid, return receipt requested or
delivered by express delivery service with delivery receipt, to the address of the
respective party as set forth below, or to such other address as the respective
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party may have designated by written notice given to the other party in the
manner provided herein. Such written notices, demands and communications
shall be effective on the date shown on the delivery receipt as the date delivered,
the date on which delivery was refused, or the date on which delivery was
attempted.
39. Attorneys’ Fees. The prevailing party in any action to enforce this Agreement,
including residents of Assisted Units, shall be entitled to reasonable attorneys’
fees as determined by the trier of fact in that forum.
40. Department’s Approval, Etc. Whenever this Agreement or any of the other Loan
Documents requires the approval, consent, or other determination by the
Department, the Department shall act reasonably and in good faith.
41. Compliance with Internal Revenue Code (“IRC”) Section 42(h)(6)(E)(ii). In the
event a regulatory agreement required by the Tax Credit Allocation Committee is
recorded against the Property as a condition of the award of federal tax credits,
the Department agrees to comply with the provisions set forth in IRC section
42(h)(6)(E)(ii). As of the date of this Agreement, IRC section 42(h)(6)(E)(ii) does
not permit the eviction or termination of tenancy (other than for good cause) of
an existing tenant of any low-income unit or any increase in the gross rent with
respect to such unit not otherwise permitted under section 42 for a period of
three (3) years after the date the building is acquired by foreclosure or instrument
in lieu of foreclosure.
42. Special Conditions. The Borrower agrees to comply with and be bound by the
special conditions, if any, set forth in Exhibit C hereto.
43. Exhibits. The following exhibits are attached hereto, incorporated herein and
made a part of this Agreement:
Exhibit A, Legal Description of the Property;
Exhibit B, Unit Designation and Rent Schedule; and
Exhibit C, Special Conditions.
In witness whereof the parties hereby execute and enter into this Agreement as of the
date first set forth above and agree to be bound hereby:
DEPARTMENT: Mailing Address:
DEPARTMENT OF HOUSING AND Department of Housing and
COMMUNITY DEVELOPMENT, a public Community Development
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agency of the State of California Monitoring and Management Br.
P.O. Box 952054
Sacramento, CA 94252-2054
By: Attn: Program Manager
Nadine Ford, Manager
Multifamily Housing Program Principal Place of Business:
Department of Housing and
Community Development
Monitoring and Management Br.
1800 Third Street
Sacramento, CA 95814
BORROWER: Mailing Address:
By:
[Original Signature]
Name: Principal Place of Business:
Title:
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EXHIBIT A TO REGULATORY AGREEMENT
LEGAL DESCRIPTION
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EXHIBIT B TO REGULATORY AGREEMENT
I. UNIT DESIGNATIONS AND RENT SCHEDULE
Borrower shall comply with Rent provisions of all regulatory agreements
regulating the Property.
The Initial Operating Year ends at the end of the initial Fiscal Year, which is:
_________________,200_.
During the Initial Operating Year:
A. Borrower shall charge Rents for Assisted Units that do not exceed Rents
set forth in the schedule below; and
B. Borrower shall charge Rents for Units other than Assisted Units in
amounts not less than the amounts shown herein.
After the Initial Operating Year, Rents may be increased in accordance with
paragraph 10 of this Agreement.
No. of
Bedrooms
MHP
Assisted
Units
Restricted
(including
Assisted)
non-
Restricted
Units
Total
Units Rent Utility
Allowance
Net Rent
(gross –
util.
allw.)
A
nnual Net
Rent Income Limit
%SMI
%AMI
%SMI
%AMI
%AMI
%AMI
%SMI
%AMI
%AMI
0 Market
Rate
0 Mngr.
Totals
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II. SPECIAL NEEDS POPULATIONS PROJECT REQUIREMENTS
A. For the full term of this Agreement, Borrower shall restrict occupancy of
______ units within the Development to the following Special Needs
Population or Populations:
B. For these units, Borrower shall select tenants in strict accordance with the
criteria and procedures identified in the supportive services plan for the
Development approved by the Department, as may be amended from
time to time. For the full term of this Agreement, Borrower shall make a
good-faith effort to provide all the supportive services identified in the
supportive services plan for the Development approved by the
Department. At a minimum, Borrower shall provide without cost to tenant
the following services, or arrange for their provision:
C. No later than ninety (90) days after the end of each Fiscal Year for the
Development, Borrower shall submit for Department review and approval
a report on the Special Needs Population households in the Development.
This report shall be on a form provided by the Department, and shall
include a listing of the number and type of Special Needs Population
residents, a description of the supportive services provided to them, and
such other matters as the Department may require.
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EXHIBIT C TO REGULATORY AGREEMENT
SPECIAL CONDITIONS
In the event of any inconsistencies or conflicts between these Special Conditions and
the terms of this Agreement or any of the other Loan Documents, the terms of these
Special Conditions shall control.
Requirements for Project-Based Rental Assistance (paragraph 10.d).
The following Units shall be covered by project-based rent subsidies:
No. of
Units Bedrooms Assistance Program MHP Income Limit
Required Reserves (paragraph 18).
Replacement Reserves (paragraph 18.a).
Monthly Deposit Amount: $
[ ] based on .006 times $
[ ] based on a physical needs assessment
Initial Capitalization Amount: $
Operating Reserve (paragraph 18.b).
Name:
Funding Source:
Deposit Amount: $ per month
Initial Capitalization
Amount
$
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Other Reserves (paragraph 18.c).
Name:
Funding Source:
Deposit Amount: $ per
Withdrawals Require
Prior Department
Approval ?
Name:
Funding Source:
Deposit Amount: $ per
Withdrawals Require
Prior Department
Approval ?
Loan Payments to be made Prior to Determination of Net Cash Flow
(paragraph 20b.(3)).
Lender:
California Department of Housing and Community
Development
Initial Principal Amount: $
Payment Amount
(including future
adjustments, caps and
balloons): $ per year for 30 years (0.42% of principal), then
reset based on HCD monitoring costs
Term to Maturity: 55 years
Lien Position:
Interest Rate 3% simple
Lender:
Initial Principal Amount: $
Payment Amount
(including future $
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adjustments, caps and
balloons):
Term to Maturity:
Lien Position:
Interest Rate
Distributions (paragraph 21).
The Borrower shall be limited to an annual Distribution in an amount not to exceed the
sum of:
(a) The greater of: (1) $__________ for the Fiscal Year ending
________, 200, said amount to be adjusted for inflation for each
year in accordance with changes in the Consumer Price Index for
All Urban Consumers, West Region, All Items, as published by the
Bureau of Labor Statistics, United States Department of Labor2; or
(2) the amount needed for the payment of the minimum deferred
developer fees necessary to attain tax credit threshold basis limit,
as determined by the Department following completion of a
Development cost audit acceptable to the Department; plus
(b) Thirty percent (30%) of the amount of cash flow remaining after
payment of all debt service on loans to be paid prior to
determination of Net Cash Flow, operating expenses, required
reserve deposits and the amount of Distributions permitted by (a),
above.
Use of Net Cash Flow (paragraph 22 ).
Net Cash Flow shall be applied towards payment of the following loans, in the
percentages noted:
Lender: California Department of Housing and Community Development
Initial Principal
Amount: $
Percentage of Net
Cash Flow: %
2 In the event that such index is no longer published or available, the Department shall designate an
alternative index reasonably reflecting the same factors as the CPI.
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Term to Maturity: 55 years
Lien Position:
Interest Rate:
Initial Principal
Amount: $
Percentage of Net
Cash Flow: %
Term to Maturity: years
Lien Position:
Interest Rate:
[Insert applicable Special Conditions.]