Costa Mesa City Council
March 18, 2025

Annual Progress Report
2024

181
Jurisdiction Costa Mesa ANNUAL ELEMENT PROGRESS REPORT
Note: "+" indicates
an optional field
Reporting Period 2024 (Jan. 1 - Dec. 31)
Housing Element Implementation Cells in grey contain auto-calculation formulas Planning Period 6th Cycle 10/15/2021 - 10/15/2029
Notes
2 3 6
Prior APN+ Current APN Street Address Project Name+
Local
Jurisdiction
Tracking ID
Unit Category
(2 to 4,5+)
Tenure
R=Renter
Very Low-
Income Deed
Restricted
Very Low-
Income Non
Deed
Restricted
Low- Income Deed
Restricted
Low- Income
Non Deed
Restricted
Moderate-
Income Deed
Restricted
Moderate-
Income Non
Deed Restricted
Above
Moderate-
Income
Total Moderate Income Units
Converted from Above
Moderate
Date Converted Notes
Summary Row: Start Data Entry Below 0 0 0 0 0 0 0 0
Table F2
Above Moderate Income Units Converted to Moderate Income Pursuant to Government Code section 65400.2 For up to 25 percent of a jurisdiction’s moderate-income regional housing need allocation, the planning agency may include the number of units in an existing multifamily building that were converted to deed-restricted rental housing for moderate-income households by the imposition of affordability covenants and restrictions for the unit. Before adding information to this table, please ensure housing developments meet the requirements described in Government Code 65400.2(b). 5 Project Identifier Unit Types
1 4
Affordability by Household Incomes After Conversion Units credited toward Moderate Income RHNA

182
Jurisdiction Costa Mesa
Reporting Period 2024 (Jan. 1 - Dec. 31)
Planning Period 6th Cycle 10/15/2021 - 10/15/2029 ANNUAL ELEMENT PROGRESS REPORT Housing Element Implementation
2 3 4
APN Street Address Project Name+ Local Jurisdiction
Tracking ID+
Realistic Capacity
Identified in the
Housing Element
Entity to whom the site
transferred Intended Use for Site
1 Summary Row: Start Data Entry Below
Note: "+" indicates an optional field
Cells in grey contain auto-calculation
formulas
Table G
Locally Owned Lands Included in the Housing Element Sites Inventory that have been sold, leased, or otherwise disposed of Project Identifier
NOTE: This table must only be filled out if the housing element sites inventory contains a site which is or was owned by the reporting jurisdiction, and has been sold, leased, or otherwise disposed of during the reporting year.

183
Jurisdiction Costa Mesa Note: "+" indicates an optional field Reporting Period 2024
(Jan. 1 - Dec.
31)
Cells in grey contain auto-calculation
formulas
Designation Size Notes
1 2 3 4 5 6 7
APN Street Address/Intersection Existing Use Number of
Units
Surplus
Designation
Parcel Size (in
acres) Notes
NOTE: This table must contain an invenory of ALL
surplus/excess lands the reporting jurisdiction owns
Summary Row: Start Data Entry Below
Parcel Identifier

ANNUAL ELEMENT PROGRESS REPORT
Housing Element Implementation
Table H
Locally Owned Surplus Sites
For Orange County jurisdictions, please format the APN's as follows:999-999-99

184
Jurisdiction Costa Mesa ANNUAL ELEMENT PROGRESS REPORT
Reporting Period 2024 (Jan. 1 - Dec. 31) Housing Element Implementation Planning Period 6th Cycle 10/15/2021 - 10/15/2029
Project Type Date
Units (Beds/Student
Capacity) Granted
Density Bonus
Notes
2 3 5 6
APN Street Address Project Name + Local Jurisdiction
Tracking ID +
Unit Category
(SH - Student Housing) Date Very Low- Income
Deed Restricted
Very Low- Income
Non Deed
Restricted
Low- Income Deed
Restricted
Low- Income Non
Deed Restricted
Moderate- Income
Deed Restricted
Moderate- Income
Non Deed
Restricted
Above
Moderate-
Income
Total Additional Beds
Created Due to Density
Bonus
Notes
Summary Row: Start Data Entry Below
Note: "+" indicates an optional field
Cells in grey contain auto-calculation formulas
Table J
Student housing development for lower income students for which was granted a density bonus pursuant to subparagraph (F) of paragraph (1) of subdivision (b) of Section 65915 Project Identifier Units (Beds/Student Capacity) App roved 1 4
NOTE: STUDENT HOUSING WITH DENSITY BONUS ONLY. This
table only needs to be completed if there were student housing projects WITH a density bonus approved pursuant to
Government Code65915(b)(1)(F)
Annual Progress Report January 2020

Annual Progress Report
2024

185
Jurisdiction Costa Mesa ANNUAL ELEMENT PROGRESS REPORT
Reporting Period 2024 (Jan. 1 - Dec. 31)
Planning Period 6th Cycle 10/15/2021 - 10/15/2029
NoDoes the Jurisdiction have a local tenant preference policy? If the jurisdiction has a local tenant preference policy, provide a link to the jurisdiction's webpage containing authorizing local ordinance and supporting materials.

Notes
Table K
Tenent Preference Policy
Local governments are required to inform HCD about any local tenant preference ordinance the local government maintains when the jurisdiction submits their annual progress report on housing approvals and production, per Government Code 7061 (SB 649, 2022, Cortese).

Effective January 1, 2023, local governments adopting a tenant preference are required to create a webpage on their internet website containing authorizing local ordinance and supporting materials, no more than 90 days after the ordinance becomes operational.

186
Jurisdiction Costa Mesa
Reporting Year 2024 (Jan. 1 - Dec. 31)
Total Award Amount Total award amount is auto-populated based on amounts entered in rows 15-26.

Task $ Amount Awarded $ Cumulative Reimbursement
Requested
Other
Funding Notes
Housing Element Update $165,520.00 $161,023.33 Other
Used funds along with SB2 Grant funding sources to
identify potential housing sites and stratgies,
evaluate current housing element documents,
develop a housing plan, create a community
outreach plan and conduct workshops, outreach
meetings, study sessions and public hearings.

Inclusionary Housing Ordinance $128,232.00 $155,400.13 None Used funds to meet with staff and stakeholders,
conduct staff analyses, create a technical study for
in-lieu fees, hold public hearings for the adoption of
the ordinance and develop an affordable housing
agreement template and staff review process.

General Plan Amendment and
Zoning Actions necessary to
implement the Housing Element
$206,248.00 $9,733.12 None Currently drafting the RFP to complete the housing programs
Summary of entitlements, building permits, and certificates of occupancy (auto-populated from Table A2) Current Year
Deed Restricted 0
Non-Deed Restricted 0
Deed Restricted 0
Non-Deed Restricted 0
Deed Restricted 0
Non-Deed Restricted 1
7 8
Completed Entitlement Issued by Affordability Summary
Income Level
Very Low
Low
Moderate
Above Moderate
Total Units

ANNUAL ELEMENT PROGRESS REPORT
Local Early Action Planning (LEAP) Reporting
(CCR Title 25 §6202)
In Progress
Please update the status of the proposed uses listed in the entity’s application for funding and the corresponding impact on housing within the region or jurisdiction, as applicable, categorized based on the eligible uses specified in Section 50515.02 or 50515.03, as applicable.
500,000.00 $
Task Status
In Progress
Completed

187
Current Year
Deed Restricted 0
Non-Deed Restricted 24
Deed Restricted 0
Non-Deed Restricted 45
Deed Restricted 0
Non-Deed Restricted 20
34 123
Current Year
Deed Restricted 0
Non-Deed Restricted 18
Deed Restricted 0
Non-Deed Restricted 40
Deed Restricted 0
Non-Deed Restricted 28
213
299
Moderate
Above Moderate
Total Units
Building Permits Issued by Affordability Summary
Income Level
Very Low
Low
Total Units
Certificate of Occupancy Issued by Affordability Summary Income Level
Very Low
Low
Moderate
Above Moderate

188

CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 25-199 Meeting Date: 3/18/2025
TITLE:

FIRST READING OF AN ORDINANCE TO AMEND TITLE 13 OF THE COSTA MESA MUNICIPAL

CODE PERTAINING TO ACCESSORY DWELLING UNITS TO CONFORM TO RECENT REVISIONS TO STATE LAW (CODE AMENDMENT PCTY-24-0002)
DEPARTMENT: ECONOMIC AND DEVELOPMENT SERVICES

DEPARTMENT/PLANNING DIVISION
PRESENTED BY: CHRIS YEAGER, SENIOR PLANNER
CONTACT INFORMATION: CHRIS YEAGER, SENIOR PLANNER, 714-754-4883 RECOMMENDATION:

The Planning Commission recommends the City Council adopt the revisions to the City’sAccessory Dwelling Unit (ADU) provisions to reflect recent State laws and respond to comments from the California Department of Housing and Community Development (HCD). Therefore, staff recommends the City Council introduce for first reading, by title only, Ordinance No. 2025-XX approving Code Amendment PCTY-24-0002, amending Title 13 of the Costa Mesa Municipal Code (CMMC) pertaining to ADUs to conform to recent revisions to State law.

189

City of Costa Mesa
Agenda Report

77 Fair Drive
Costa Mesa, CA 92626
Item #: 25-199 Meeting Date: 3/18/2025
TITLE: FIRST READING O F AN ORDINANCE TO AMEND TITLE 13 OF THE COSTA MESA

MUNICIPAL CODE PERTAINING TO ACCESSORY DWELLING UNITS TO CONFORM TO RECENT REVISIONS TO STATE LAW (CODE AMENDMENT PCTY-24-0002)

DEPARTMENT: ECONOMIC AND DEVELOPMENT SERVICES DEPARTMENT/PLANNING

DIVISION

PRESENTED BY: CHRIS YEAGER, SENIOR PLANNER

CONTACT INFORMATION: CHRIS YEAGER, SENIOR PLANNER, 714-754-4883

RECOMMENDATION:

The Planning Commission recommends the City Council adopt the revisions to the City’s Accessory Dwelling Unit (ADU) provisions to reflect recent State laws and respond to comments from the California Department of Housing and Community Development (HCD ). Therefore, staff recommends the City Council introduce for first reading, by title only, Ordinance No. 2025 -XX approving Code Amendment PCTY-24-0002, amending Title 13 of the Costa Mesa Municipal Code (CMMC) pertaining to ADUs to conform to recent revisions to State law.

BACKGROUND:

On January 1, 2020, the City of Costa Mesa’s ADU and Junior Accessory Dwelling Unit (JADU) Urgency Ordinance went into effect allowing for ADUs and JADUs to be constructed citywide in residential and mixed-use zones. The Urgency Ordinance was adopted on December 17, 2019. Details about the meeting are found in the following link:
http://ftp.costamesaca.gov/costamesaca/council/agenda/2019/2019-12-17/NB-2.pdf

On March 2, 2021, City Council adopted Ordinance 2021-03 which provided the framework of the City’s current ADU standards. The staff report is linked:
http://ftp.costamesaca.gov/costamesaca/council/agenda/2021/2021-03-02/CC-8.pdf

On February 21, 2023, City Council modified the ordinance to comply with new State laws that went into effect at that time. Following adoption, the ordinance was provided to the California Department of Housing and Community Development (HCD) for review as required by State law. The staff report is linked,
https://costamesa.legistar.com/LegislationDetail.aspx?ID=6031044&GUID=965EA92D-CA6D-48F1- A84D-3C77DA936D66

190

Item #: 25-199 Meeting Date: 3/18/2025

On September 11, 2024, HCD sent a letter (Attachment 3) to the City requesting modifications to the ADU Ordinance to conform with recently-adopted State law. Pursuant to HCD direction and revised State law, City staff subsequently sent a response to HCD outlining proposed revisions to the ordinance (Attachment 4).

In addition to ordinance modifications requested by HCD, City staff proposes to update the ordinance to comply with recently adopted State Laws pertaining to ADUs including Senate Bill (SB) 477, SB 1211, and Assembly Bill (AB) 2533.

 SB 477: This bill primarily aims to reorganize and renumber California’s ADU statutes to make them clearer and more understandable for local governments and the public.

 SB 1211: This bill requires more flexibility for developing ADUs on multifamily properties. It allows the demolition of both covered and uncove red parking spaces for ADUs without requiring replacement parking. It also increases the number of detached ADUs allowed on existing multifamily lots from two to eight ADUs provided that the number of ADUs does not exceed the number of existing primary units.

 AB 2533: This bill focuses on the legalization of unpermitted ADUs and Junior ADUs that were built before January 1, 2020. It aims to simplify the pro cess for homeowners to bring their unpermitted ADUs into legal compliance.

On January 27, 2025, the Planning Commission received a presentation and provided feedback on the proposed ordinance. Agenda details for the meeting are found in the following link:
https://costamesa.legistar.com/LegislationDetail.aspx?ID=7104638&GUID=38429968-1C83-4987- A2F2-56E18D4CD203

On February 24 , 2025, the Planning Commission reviewed the proposed Code Amendment. The Planning Commission supported the ordinance and voted 5-1 to recommend that the City Council adopt the ordinance. Agenda details for the meeting are found in the following link:
https://costamesa.legistar.com/LegislationDetail.aspx?ID=7144849&GUID=7A6DF926-D55C-4442- A32B-C52A8F5F07C3

Implementation Programs
The City’s ADU program has successfully increased housing opportunities in the City. Since this same time last year, the City has permitted approximately 90 ADUs. In addition, City staff regularly reviews the City’s ADU program to improve processing, permi tting efficiencies and project streamlining. City staff ha s launched a new program on the City’s website to offer customers “pre -approved ADU designs”. The use of pre-approved ADU plans will allow customers to benefit from an expedited permit process which will reduce application time and overall costs. Seven ADU plan designs are currently being pre-plan checked for conformance and will be made available to the public on the City website this spring.

Because the State ADU provisions are constantly evolving, City staff also closely monitors State ADU laws to ensure that the City’s ADU provisions are up to date and consistent. In response to recent State ADU related l egislation, staff and the City Attorn ey have prepared amendments to the ADU ordinance that have been recently considered by the Planning Commission.

191

Item #: 25-199 Meeting Date: 3/18/2025

ANALYSIS:

The proposed ordinance changes amend Section 13-35 (“Accessory Dwelling Units”) of Title 13 of the CMMC. Proposed amendments in the Ordinance include renumbering referenced government code sections, clarifying the required site density of ADUs and size of ADUs, removing regulatory requirements for JADUs, and modifying and clarifying various ADU/JADU development standards.

The existing ADU Ordinance ( CMMC Section 13-35) consists of sections devoted to (a) Purpose, General Plan Consistency, and Definitions, (b) ADU Standards, (c) JADU Standards, and (d) General Development Standards. Overall, the structure and intent of the ADU Ordinance is proposed to remain the same. Attachment 1 includes the proposed ordinance with deletions shown in “strikethrough” and additions shown “underlined”. Below is a summary of the proposed ADU Ordinance changes in each section of CMMC Section 13-35:

(a) Purpose, General Plan Consistency, Definitions.

This section has no proposed modifications.

(b) Accessory Dwelling Units

CMMC Section 13 -35(b) includes general standards for ADUs. The section includes a variety of amendments including clarifying the required ministerial nature of ADU approvals, clarifying the number of ADUs permitted on a lot, and clarifying maximum sizes of ADUs.

“Single-Family” Development
Pursuant to CMMC Section 13-35(b)(4)(a), the City’s current ADU provisions allow a maximum of one ADU and one JADU on a single -family dwelling lot. HCD’s letter indicated that the City must revise the ordinance to allow for “one converted ADU”, “one detached, new construction ADU” and “one JADU” on a single -family lot. Therefore, changes are proposed in the draft ordinance to reflect compliance with State law and would allow for an additional ADU on a single-family dwelling lot.

“Multifamily” Development
Pursuant to CMMC Section 13 -35(b)(4)(b), the current ADU provisions allow a maximum of two detached ADUs on multiple -family dwelling properties and does not allow for ADUs within new construction multifamily residence s. SB 1211 recently modified State ADU law to allow up to eight detached ADUs on multifamily lots, with the caveat that the number of detached ADUs does not exceed the number of existing primary units on the lot. In addition, new construction multifamily dwellings are permitted to construct one ADU within the structure. Therefore, changes are proposed in the draft ordinance to allow up to eight detached ADUs and to allow one ADU within a new multifamily dwelling structure on a multifamily lot to reflect State law.

Multifamily “Maximum Size” Detached ADU
Pursuant to CMMC Section 13 -35(b)(5)(b), the City’s detached multifamily ADU maximum size is limited to 800 square feet unless only one ADU is proposed (instead of two currently permitted), in which case the d etached ADU could be 1,200 square feet. HCD’s letter indicated that this standard needed to be updated to comply with State ADU law. To respond to this HCD comment, staff updated CMMC Section 13.35(b)(5)(b) to be consistent with Government Code Section 66321, which restricts local ADU ordinances to allowing a minimum detached ADU of 850 square feet, or 1,000 square feet 192

Item #: 25-199 Meeting Date: 3/18/2025

if it provides more than one bedroom. Therefore, changes to the City’s ADU “maximum size” standards are proposed for detached ADUs on a multifamily lot to reflect State law.

Underlying Zone
Pursuant to CMMC Section 13-35(b)(2), ADUs are required to conform to the development standards of the underlying zone unless otherwise provided in the ADU Ordinance. Pursuant to the Government Code, on ly certain development standards can be applied to ADUs. Certain requirements of the underlying zone would not be permissible pursuant to the Government Code and therefore, the section is proposed to be deleted from the ordinance.

“Short-term Rentals Prohibited”
As discussed below, regarding “Recorded Covenants”, the City is not permitted to require a deed restriction for ADU projects. The deed restriction section of the City’s ADU provisions included a provision which prohibited short-term rentals for ADUs. Since the section has been modified, CMMC Section 13-35(b)(8) is proposed to prohibit ADU rentals of less than 31 days.

(c) Junior ADUs

“Short-term Rentals Prohibited”
Pursuant to CMMC Section 13-35(c)(4), “a Junior ADU shall not be rented for periods of less than 31 days unless otherwise authorized by the municipal code”. HCD’s letter indicates that Government Code Section 66333 does not provide rental term limits for JADUs and thus, “prohibiting short -term rentals is inconsistent with State JADU Law”. Staff believes and the Planning Commission confirmed that allowing JADUs to be rented for short -term housing would reduce the number of long -term housing units in the City. Specifically, the loss would result in the potential removal of more affordable long-term housing units in Costa Mesa for the benefit of short-term vacation rental operations such as “VRBO” and “Airbnb”.

As indicated in the attached HCD letter, the City may adopt an ordinance without the requested changes if findings are included in the resolution adopting the ordinance that explains the reasons why the City believes that the ordinance complies with State ADU law. Staff has included the following reasons/findings in the draft ADU ordinance update:

Pursuant to Government C ode Section 66310, the legislature has determined the following: (1) ADUs and JADUs are “a valuable form of housing in California”; (2) ADUs and JADUs "provide housing for family members, students, the elderly, in -home health care providers, the disabled, and others, at below market prices within existing neighborhoods”; (3) Homeowners who create accessory dwelling units benefit from added income, and an increased sense of security”; (4) “Allowing accessory dwelling units in single-family or multifamily res idential zones provides additional rental housing stock in California”; (5) “California faces a severe housing crisis”; (6) “The state is falling far short of meeting current and future housing demand with serious consequences for the state’s economy, our ability to build green infill consistent with state greenhouse gas reduction goals, and the well-being of our citizens, particularly lower and middle -income earners”; (7) “Accessory dwelling units offer lower cost housing to meet the needs of existing and future residents within existing neighborhoods, while respecting architectural character”; and (8) Accessory dwelling units are an essential component of California’s housing supply. Thus, allowing JADUs to be rented for short -term rentals that are 193

Item #: 25-199 Meeting Date: 3/18/2025

facilitated by online marketplaces would reduce and threaten the availability of the City’s long-term housing, including affordable housing, within the City during the State housing crisis, and therefore allowing the prohibition of short -term lodging of the City’s JADUs is consistent with State ADU law, specifically Government Code Section 66310.

(d) Development Standards

CMMC Section 13-35(d) provides development standards that are applicable to ADUs, including, but not limited to, standards related to: setbacks, height, stairways and balconies, architectural standards, and garage conversions. Government Code Section 66323 identifies certain ADUs which are not subject to local development standards; however, the current ordinance requires that all ADUs meet the local development standards. As requested by the HCD, the proposed Ordinance [CMMC Section 13-35(d) and 13-35(d)(1)] has been revised to exempt the following ADUs from local standards:

1. All converted ADUs (converted accessory structures are eligible for a 150 square foot expansion for purposes of ingress and egress);

2. All converted JADUs;

3. 800 square foot or less new-construction detached units with four -foot setbacks and height not exceeding 18 feet (two additional feet of height may be permitted to accommodate a roof pitch on the ADU that is aligned with the roof pitch of the primary unit) with single-family primary dwellings; and,

4. Detached units with multifamily primary dwelling structures not exceeding 18 feet (two additional feet of height may be permitted to accommodate a roof pitch on the ADU that is aligned with the roof pitch of the primary units).

ADUs are subject to the State Government Code 66323 standards which include applicable four-foot side and rear setbacks, separate entry, and applicable height restrictions. No additional standards may be applied to these units. For other ADUs that are subj ect to local control, the City can only establish development standards which would not preclude an 800 square-foot ADU.

“Recorded Covenants”
Pursuant to CMMC Section 13 -35(d)(5), a recorded covenant (deed restriction) is required as a condition of issuing building permits for ADUs and JADUs. The recorded restriction prohibits separate sales of ADUs and JADUs, restricts the units to the maximum size allowed by the code and prohibits short-term rentals. Pursuant to the HCD ADU Handbook, Cities may not impo se deed restrictions on ADUs. The section is proposed to be modified to apply to JADUs only and is limited to prohibiting the separate sale of the JADU from the main residence.

“Architectural Standards”
State ADU provisions limits development standards to be “objective” . Therefore, various City ADU development standards have been modified including architectural standards which have changed to require matching materials, finishes, and colors of the primary dwelling(s). In addition, garage conversion design standards would be modified to be recommendations.

194

Item #: 25-199 Meeting Date: 3/18/2025

"Parking”
Pursuant to SB 1211, CMMC Section 13-35(d)(14)(b) is proposed to be modified to clarify that an ADU may be constructed in the place of any required uncovered parking space without requiring replacement parking spaces. The City’s current code (pursuant to previous State ADU law) only allows for the removal of garage and car port parking spaces without replacement. The revised code would allow any parking space in any form to be removed and not replaced in conjunction with the development of an ADU.

Public Comment

Prior to the Planning Commission study sessions, t he California Housing Defense Fund submitted a comment letter (attachment 5) suggesting additional amendments which were incorporated into the proposed ordinance. The incorporated changes include removing reference to ADUs complying with “underlying zone” standards, b olstering the Development Standards section to list out all the State exempt units and their required development standards; and removing the requirement for a deed restriction for ADUs as required by State law.

GENERAL PLAN CONFORMANCE:

The City’s approved 6th Cycle Housing Element includes Program 3E which states to “continue to promote the construction of ADUs as part of an overall housing plan”. The proposed ordinance amendment is consistent with the General Plan in that it provides great er opportunities for ADUs pursuant to current State ADU law.

ENVIRONMENTAL DETERMINATION:

The project is exempt from environmental review under the California Environmental Quality Act (“CEQA”) pursuant to Public Resources Code Section 21080.174 and CEQA Guidelines Section 15282(h), “the adoption of an ordinance regarding second units in a single -family or multifamily zone by a city or county to implement the provisions of Sections 65852.1 and 65852.2 of the Government Code” relating to “granny” housing and “second unit ordinances” are exempt from the requirements of CEQA. Similarly, the ministerial approval of an ADU would not be a “project” pursuant to CEQA purposes (See Guidelines Section 15378), and environmental review is not required with the review/approval of individual ADU applications.

ALTERNATIVES:

1. Give first reading with modifications. The City Council may recommend approval with modifications provided that the revisions are consistent with State law.

2. Not adopt the changes to the City’s ADU provisions. The City Council may choose to not adopt the proposed Code amendments.

3. Continue the Ordinance review to a date certain. The City Council may continue the item to a date certain with direction for staff to return with additional information, changes and/or clarifications.

195

Item #: 25-199 Meeting Date: 3/18/2025

PUBLIC NOTICE:

Pursuant to government Code Section 65854(a), a public notice was published once in the Daily Pilot newspaper on March 1, 2025, exceeding the minimum 10 days prior to the March 18, 2025, public hearing.

FISCAL REVIEW:

The adoption of the proposed Ordinance increases the number of ADUs allowed on both “Single family” and “Multi-family” dwelling lots which can result in an increase of the overall number of ADUs within the City. Revenue earned from the incr ease of ADUs will be part of the General fund (Fund 101) and Park Development Fees Fund (Fund 208).

LEGAL REVIEW:

The proposed Resolution, draft Code Amendment and report have been prepared in conjunction with and review by the City Attorney’s Office

CITY COUNCIL GOALS AND PRIORITIES:

This item supports the following City Council Goal:

 Diversify, Stabilize and Increase Housing to Reflect Community Needs

CONCLUSION:

The ADU Ordinance amendments are consistent with the General Plan and are proposed to clarify existing ADU provisions and comply with recently adopted State ADU laws. The proposed adoption of the Accessory Dwelling Unit Code Amendment would allow for clarifications and compliance with State law for the construction and conversion of new ADUs and JADUs.

196
ATTACHMENT 1
Ordinance No. 2025-xx Page 1 of 4

ORDINANCE NO. 2025-xx

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF COSTA
MESA, CALIFORNIA APPROVING CODE AMENDMENT PCTY-24-0002
AMENDING CHAPTER V, ARTICLE 1, SECTION 13-35 (ACCESSORY DWELLING UNITS) OF TITLE 13 OF THE COSTA MESA MUNICIPAL

CODE TO CONFORM TO RECENT REVISIONS TO STATE LAW

THE CITY COUNCIL OF THE CITY OF COSTA MESA , CALIFORNIA DOES HEREBY FIND AND DECLARE AS FOLLOWS:

WHEREAS, updates to the City’s Accessory Dwelling Unit (ADU) and Junior Accessory Dwelling Unit (JADU) provisions are required to provide consistencies between the City’s Zoning Code and the State law; and
WHEREAS, in response to the implementation of State and local law regarding ADUs and JADUs, City staff and the California Department of Housing and Community Development (HCD) found inconsistencies in the City’s ADU provisions that require updating; and
WHEREAS, recently adopted State housing laws, including SB 477, SB 1211, AB2533, and AB 1033, require updates to the City’s ADU and JADU provisions; and WHEREAS, the City has acknowledged all HCD comments in the proposed Ordinance with the exception of prohibiting the use of JADUs for short-term rentals.

Pursuant to Government Code Section 66310, the legislature has determined the following: (1) ADUs and JADUs are “a valuable form of housing in California”; (2) ADUs and JADUs "provide housing for family members, students, the elderly, in-home health care providers, the disabled, and others, at below market prices within existing neighborhoods”; (3) Homeowners who create accessory dwelling units benefit from added income, and an increased sense of security”; (4) “Allowing accessory dwelling units in single-family or multifamily residential zones provides additional rental housing stock in California”; (5) “California faces a severe housing crisis”; (6) “The state is falling far short of meeting current and future housing demand with serious consequences for the state’s economy, our ability to build green infill consistent with state greenhouse gas reduction goals, and the well-being of our citizens, particularly lower and middle-income earners”; (7) “Accessory dwelling units offer lower cost housing to meet the needs of 197

Ordinance No. 2025-xx Page 2 of 4

existing and future residents within existing neighborhoods, while respecting architectural character”; and (8) Accessory dwelling units are, therefore, an essential component of California’s housing supply. Thus, allowing JADUs to be rented for short-term rentals that are facilitated by online marketplaces would reduce and threaten the availability of housing, including affordable housing, within the City during the State housing crisis, and therefore allowing the prohibition of short-term rentals of the City’s JADUs is consistent with State ADU law, specifically Government Code Section 66310; and WHEREAS, Government Code section 66316 provides in part, “if a local agency has an existing accessory dwelling unit ordinance that fails to meet the requirements of this subdivision, that ordinance shall be null and void;” and WHEREAS, this Ordinance is necessary to implement State and local ADU provisions, establish the minimum development standards in the Costa Mesa Municipal Code to regulate ADUs, and to ensure consistency with State law.

Now, therefore, THE CITY COUNCIL OF THE CITY OF COSTA MESA HEREBY ORDAINS AS FOLLOWS:

Section 1: Code Amendment. Section 13-35 (Accessory Dwelling Units). Chapter V, Article 1, Section 13-35 (Accessory Dwelling Units) of Title 13, Planning, Zoning and Development of the Costa Mesa Municipal Code, as specified in Exhibit A, attached hereto and incorporated herein by this reference, is hereby amended as set forth therein.

Section 2. Repeal. All portions of prior ordinances, including those within Urgency Ordinance 19-19, to the extent that they are inconsistent with the terms of this Ordinance are hereby repealed and replaced by this Ordinance.

Section 3. Compliance with CEQA. Adoption of this Ordinance is exempt from the California Environmental Quality Act (“CEQA”) pursuant to Public Resources Code Section 21080.17 and CEQA Guidelines Section 15282(h), in that the adoption of an ordinance regarding second units in a single-family or multifamily zone by a city or county to implement the provisions of Sections 65852.1, 65852.150 and 65852.2 is exempt from the requirements of CEQA. In addition, the proposed ordinance amendment is exempt from CEQA pursuant to CEQA Guidelines Section 15061(b)(3) in that there is no possibility that the minor updates to the City’s ADU provisions will have a significant impact on the environment.
198

Ordinance No. 2025-xx Page 3 of 4

Section 4. Inconsistencies with State Law. Any provision of this Ordinance which is inconsistent with State law shall be interpreted in a manner which is the most limiting on the ability to create ADUs or Junior ADUs, but which is consistent with State law. Any provision of the Costa Mesa Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance.

Section 5. Severability. If any section, subsection, sentence, clause, phrase or portion of this Ordinance is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council of the City of Costa Mesa hereby declares that it would have adopted this Ordinance and each section, subsection, sentence, clause, phrase, or portion thereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases or portions be declared invalid or unconstitutional.

Section 6. Effective Date. This Ordinance shall take effect on the 31st day after adoption.

Section 7. Certification. The Mayor shall sign and the City Clerk shall certify to the passage and adoption of this Ordinance and shall cause the same to be published or posted in the manner required by law.

Section 8. Transmit Ordinance to HCD. The City Clerk is directed to send a copy of this ordinance to the Department of Housing and Community Development within 60 days of the adoption of this Ordinance.

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Ordinance No. 2025-xx Page 4 of 4

PASSED AND ADOPTED this _____ day of ________, 2025

_________________________________
John Stephens, Mayor

ATTEST: APPROVED AS TO FORM

______________________________ ________________________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss

CITY OF COSTA MESA )

I, Brenda Green, City Clerk of the City of Costa Mesa, do hereby certify that the above and foregoing is a true and correct copy of Ordinance No. 2025-xx ____ introduced at a regular meeting of the City Council of the City of Costa Mesa held on the ____ day of _____, 2025, and was thereafter adopted at a regular meeting held on the _____ day of _______, 2025, by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

Said ordinance has been published or posted pursuant to law.

Witness my hand and the official seal of the City of Costa Mesa this ____ day of _______, 2025.

_______________________________
Brenda Green, City Clerk
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§ 13-35 Accessory dwelling units.
(a) Purpose, general plan consistency, definitions.
(1) Purpose and interpretation. The intent of this section is to ensure that accessory dwelling units (ADUs) and Junior ADUs remain as an accessory uses in residential and mixed-use zones, that the structures on parcels are organized to accommodate an ADU and/or Junior ADU, and that such dwelling units do not adversely impact surrounding residents or the community. This section 13-35 is intended to retain the ability of the city to regulate ADUs in terms of design, aesthetics, massing and integration with existing structures and to comply with the requirements of state law.
(2) General plan consistency. In adopting these standards, the city recognizes that the approval of dwelling units may, in some instances, result in dwelling densities exceeding the maximum densities prescribed by the general plan. The city finds that this occurrence is consistent with the general plan, as allowed under state planning and zoning law applicable to ADUs, and that the amendment furthers the goals, objectives, and policies of the general plan housing element.
(3) Definitions. For purpose of this section 13-35 only:
a. The terms "accessory dwelling unit" (ADU), "public transit," "passageway" and "tandem parking" all have the same meaning as that stated in Government Code section 65852.266313 as that section may be amended from time to time.
b. "Junior ADU" shall have the same meaning as that stated in Government Code section 65852.2266313(dh)(1) as that section may be amended from time to time.
c. A structure is considered "existing" if a building permit was issued and finalized before an ADU or JADU application is submitted under this section.
d. The terms "single-family dwelling" and "multifamily dwelling" exclude all detached accessory structures.
e. The term "single-family dwelling" is a dwelling (excluding any ADU or Junior ADU) that is not attached to another dwelling. Single-family dwellings may include detached single-family homes where there is more than one primary dwelling on a lot.

ATTACHMENT 2
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f. A "multifamily dwelling" is a dwelling (excluding any ADU or Junior ADU) within a multifamily dwelling structure.
g. A "multifamily dwelling structure" is a structure which contains at least two lawful dwellings within the structure, excluding ADUs and Junior ADUs. Storage rooms, boiler rooms, passageways, attics, basements, garages and other non-habitable spaces are considered within a "multifamily dwelling structure" if such non-habitable spaces are within the same structure as at least two other multifamily dwellings. (b) Accessory dwelling units.
(1) Residential and mixed use zones only. ADUs are permitted in si ngle-family, multifamily, and mixed-use zones (i.e., zones where single-family and/or multifamily dwellings are allowed), and only on a legal lot with proposed or existing residential dwelling(s) which will remain on site. By way of illustration only, the zones where accessory dwellings are allowed are shown on the Citywide Land Use Matrix at section 13-30. If there is any conflict between the requirement that ADUs be approved in (and only in) zones where single-family and multifamily dwellings are allowed and the Land Use Matrix, the former shall control.
(2) Underlying zone. Except as otherwise provided in this section, ADUs shall conform to the development standards of the underlying zone.Reserved. (3) Ministerial. Any application for an ADU that meets the requirements of this section shall be approved ministerially by the city by applying the standards herein and without a public hearing or notice of decision or zoning approval in compliance with government code section 66317.
(4) Maximum number of dwelling units. The following is the maximum number of ADUs and or Junior ADUs allowed on any lot. Only one category may be used per lot including lots that include a mixture of single-family and multiple family dwellings with the exception as allowed in subsection c below. a. Single-family. One detached, new construction ADU, one conversion ADU, and one junior ADU Only one ADU and only one Junior ADU may be permitted on a lot with a proposed or existing single-family dwelling subject to the following:

1. Conversion within a single-family dwelling.
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(i) An ADU or and Junior ADU may be within the existing footprint of a lawful single-family dwelling. Alternatively, an ADU may be within a lawfully constructed existing detached accessory structure; in this case up to 150 square feet may be added beyond the physical dimensions of the existing accessory structure solely to accommodate ingress and
egress to the ADU; and
(ii) Each such ADUs and Junior ADUs must have
independent exterior access from the single-family dwelling, and have side and rear setbacks sufficient for fire safety; orand

2. New construction (attached or detached). One new construction ADU may be permitted on a lot with proposed or existing single- family dwelling. One new construction Junior ADU may be allowed on the lot if the Junior ADU is to be in a single-family dwelling that meets all applicable legal standards.
b. Multifamily. Junior ADUs are not allowed on a lot with more than one residence. One ADUs are not is allowed within new construction residences where, after construction, there will be at least two residences on the lot (e.g. detached residential structures, duplexes, apartments); up to two ADUs are allowed with such structures pursuant to subsection 32, below. For lots with an existing legal multifamily dwelling (e.g., a legal non- conforming multifamily dwelling), the applicant may have ADU(s) pursuant to one of the following:

1. Maximum ADUs within existin g multifamily dwelling structure. No more than 25%, with any partial unit rounded down) of the number of existing multifamily dwelling units on the lot, but at least one unit, shall be permitted as ADU(s) constructed within the enclosed nonlivable space (e.g., a space in a dwelling not intended for human habitation, including living, sleeping, eating, cooking, or sanitation)storage rooms, boiler rooms, hallways, attics, basements, or garages) of the existing multifamily dwelling structures; or

2. Maximum attached ADUs. No more than one attached ADU is permitted. The attached ADU shall be included in the number of detached ADUs. The ADU shall be attached to the multifamily dwelling structure; or
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3. 2. Maximum detached ADUs. No more than two eight detached ADUs are permitted, provided that the number of accessory dwelling units allowable pursuant to this clause shall not exceed the number of existing units on the lot.. Both The units shall be detached from every residence on site (but need not be detached from each other) with the exception of one ADU, which may be attached to the multifamily dwelling structure. This section shall apply to detached structures that are converted and new construction detached ADUs. Conversion detached ADUs are not subject to height, setbacks, and maximum square footage; or

4. Maximum mixed (detached/within) ADUs. No more than 25%, with any partial unit rounded down) of the number of existing multifamily dwelling units on the lot, but at least one unit, shall be permitted as ADU(s) constructed within the enclosed nonlivable space (e.g., storage rooms, boiler rooms, hallways, attics, basements, or garages) of the existing multifamily dwelling structures; and no more than two ADUs that are detached from each multifamily dwelling structure on site.
c. Common interest developments. One conversion ADU may be permitted per unit on lots developed with common interest developments. (5) Maximum size.
a. Single-family.

1. Detached. For lots with a proposed or existing single-family dwelling, a detached ADU shall not have more than 1,200 square feet.

2. Attached. An ADU attached to a single-family dwelling shall be no more than the greater of 50% of the square footage of the existing single-family dwelling or 1,000 square feet.
b. Multifamily, exterior new construction.

1. Detached. For lots with an existing legal multifamily dwelling structure the maximum square footage for a detached ADU is 850 square feet or 1,000 square feet for an ADU that provides more than one bedroom, except as allowed in Government Code Section 66323.; proposing one new construction detached ADU, the ADU shall not exceed 1,200 square feet. For lots with an existing or 204

proposed legal multifamily dwelling structure proposing two detached ADUs, the ADUs shall not exceed 800 square feet; or

2. Attached. For lots with an existing legal multifamily dwelling structure, an attached ADU shall not exceed the greater of 1,000 square feet or 50% of the average floor area of the existing multiple family dwelling units.
c. Interior conversions. Notwithstanding subsections a and b immediately above, ADUs which are converted from space entirely within lawful existing structures, and ADUs entirely within proposed lawful single-family dwellings, are not subject to a limit on maximum square footage. (6) Minimum size.
a. ADUs may be efficiency units. Notwithstanding the general limitation on efficiency units being no smaller than 220 square feet, ADUs may also be less than 220 square feet, provided that they are no smaller than 150 square feet, and comply with all other legal requirements. (7) Conversions of dwelling units.
a. Total conversion of single-family dwelling. An entire existing single- family dwelling may be converted to an ADU if the ADU complies with all applicable requirements of this section and a new single-family residence with a total gross floor area exceeding that of the ADU is constructed in full compliance with code requirements.
b. Partial conversion/addition. A portion of the existing single-family or multifamily dwelling may be converted to an ADU with new additional square footage, which additional square footage shall comply with all standards applicable to attached ADUsthe underlying zone, and all converted square footage shall comply with standards applicable to conversions. The maximum square footage of the attached ADU shall be based upon the size of the existing dwelling before construction of the ADU addition.
(8) Short-term rentals prohibited. An ADU shall not be rented for periods of less than 31 days.
(c) Junior ADUs.
(1) Rule. Junior ADUs shall comply with the requirements of this subsection, in addition to the requirements of subsection (d) of this section 13-35. 205

(2) Maximum size. A Junior ADU shall not exceed 500 square feet in gross floor area.
(3) Owner occupancy requirement. The owner of a parcel proposed for a Junior ADU shall occupy as a primary residence either the primary dwelling unit or the Junior ADU. Owner-occupancy is not required if the owner is a governmental agency, land trust, or "housing organization" as that term is defined in Government Code section 65589.5(k)(2), as that section may be amended from time to time.
(4) Short-term rentals prohibited. A Junior ADU shall not be rented for periods of less than 31 days unless otherwise authorized by the municipal code. (5) Location of Junior ADU. A Junior ADU shall be entirely within an existing or proposed single-family dwelling, including an attached garage. (6) Kitchen requirements. A Junior ADU shall include an efficiency kitchen, including a cooking facility with appliances, outlet for a small refrigerator, food preparation counter and storage cabinets that are of reasonable size in relation to the size of the Junior ADU.
(7) Parking. No additional parking is required beyond that already required for the primary dwelling.
(8) Fire protection; utility service. For the purposes of any fire or life protection ordinance or regulation or for the purposes of providing service for water, sewer, or power, a Junior ADU shall not be considered a separate or new unit, unless the Junior ADU was constructed in conjunction with a new single-family dwelling.

No separate connection between the Junior ADU and the utility shall be required for units created within a single-family dwelling, unless the Junior ADU is being constructed in connection with a new single-family dwelling. (9) Exterior and interior access. The Junior ADU shall include an exterior entrance separate from the main entrance to the single-family dwelling. If the Junior ADU shares bathroom facilities with the main dwelling, the Junior ADU shall also have interior entry to the main dwelling's living area. (d) Development standards and requirements. The following development standards shall not apply to a unit built subject to Government Code section 66323 (a), which includes: 1.) all converted unitsADUs (converted accessory structures are eligible for a 150 square foot expansion for purposes of ingress and egress), 2.) all converted JADUs, 3.) maximum 800 -square -foot, new-construction, detached ADUs with four- foot side and rear setbacks and height not exceeding 18 feet (two additional feet of 206

height may be permitted to accommodate a roof pitch on the ADU that is aligned with the roof pitch of the primary unit), with single-family primary dwellings, and 4.) detached units with multifamily primary dwelling structures with four-foot side and rear setbacks and height not exceeding 18 feet (two additional feet of height may be permitted to accommodate a roof pitch on the ADU that is aligned with the roof pitch of the primary units). Otherwise, Aall ADUs and Junior ADUs must comply with the following requirements unless the below standards and requirements preclude the development of an 800 square foot ADU with four-foot side and rear setbacks:
(1) Ministerial project. Any application for an ADU or Junior ADU that meets the requirements of this section or as permissible in Government Code Section 66332 shall be approved without a public hearing.
(2) Application by owner. An application for a building permit for an ADU or Junior ADU building permit shall be made by the owner of the parcel on which the primary unit sits and shall be filed with the city on a city-approved application form and subject to the established fee set by city council resolution as it may be amended from time to time.
(3) Separate sale prohibited. Except as otherwise provided by law (e.g., Government Code section 65852.26), ADUs and Junior ADUs may not be sold or otherwise conveyed separate from the primary residence. (4) Utilities.
a. All ADUs and Junior ADUs must be connected to public utilities (or their equivalent), including water, electric, and sewer services. b. Except as provided in subsection c immediately below, the city may require the installation of a new or separate utility connection between the ADU and the utility. For Junior ADUs, see subsection (c)(8), above. c. No separate connection between the ADU and the utility shall be required for units created within a single-family dwelling, unless the ADU is being constructed in connection with a new single-family dwelling. d. Each ADU and Junior ADU shall have a separate mailing address as assigned by the City.
(5) Recorded covenants. Before obtaining a building permit,Prior to final inspection and occupancy of JADUs, the owner shall file with the county recorder, in a form approved by the city attorney, a covenant which does all of the following:
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a. Prohibit the sale of the ADU and Junior ADU separate from the single- family residence; and
b. Unless subsequently prohibited by an amendment to state law, for ADUs approved on or after January 1, 2025, the JADU shall be considered legal only as long as either the primary residence or the JADU is occupied by the owner of record unless the owner is another governmental agency, land trust, or housing organizationor state law is amended to prohibit such requirements. Junior ADUs require owner occupancy of either the single-family dwelling or the Junior ADU; and c. Restrict the ADU or JADU to the maximum size allowed by Municipal Code section 13-35, as it may be amended from time to time; and d. Unless authorized by this Code, prohibit renting the ADU for periods less than 31 days; and
de. Confirm that the restrictions shall be binding upon any successor in ownership of the property, and lack of compliance shall result in legal action against the property owner for noncompliance.
(6) Passageway. No passageway shall be required in conjunction with the construction of an ADU.
(7) Building permits required. Applications for ADUs and Junior ADUs shall conform to the requirements for, and shall obtain, a building permit consistent with the requirements of Title 5 (Buildings and Structures). By way of reference only, current requirements generally require all dwellings to have no less than 220 square feet. Fire sprinklers shall not be required if they are not required for the primary residence; if, however, the ADU is attached to the primary dwelling, and if an addition to the dwelling would require sprinklers for an addition to the primary dwelling in the same location, then sprinklers shall be required. (8) Setbacks.
a. None. No setbacks are required for either: (1) those portions of ADUs that are created by converting existing living area or existing accessory structures to a new ADU; or (2) constructing new ADUs in the same location, while not exceeding the existing dimensions of an existing structure, including height. Notwithstanding the foregoing, ADUs shall, at minimum, comply with setbacks that are sufficient for fire and life safety. 208

b. Other setbacks. For all other ADUs, there shall be a minimum of setbacks of four feet from side and rear property lines and full compliance with all applicable front yard setbacks for the underlying zone (except as required by (Gov. Code, § 66321, subd. (b)(3)). Second floor ADUs shall provide setbacks in conformance with the underlying zone. All mechanical equipment associated with the ADU shall maintain the minimum setbacks. c. Distance between structures. The minimum required distance between a detached ADU and the primary dwelling unit, and all other structures on the property, including garages, shall be six feet unless otherwise established by the California Building Code.
(9) Height. Except as authorized in subsection b, below, in no event may any portion of a new construction ADU exceed 27 feet or two stories. or exceed the height of any other dwelling that could legally be on the property. In all cases, a height of at least 18 feet shall be allowed for ADUs. An additional two feet in height may be permitted to accommodate a roof pitch on the ADU that is aligned with the roof pitch of the primary dwelling unit. Furthermore, except as authorized in subsection a and b, below, an ADU shall be entirely only on the first floor. a. Second floor or two-stories. An ADU on a lot which has an existing lawfully constructed dwelling, may be in whole or in part on a second floor, or be a two- story ADU, if all five of the following occur:

1. All portions of the ADU structure on a second floor are at least 25 feet from the front property line; and

2. Each stairwell for the ADU is interior or complies with subsection (10), below; and

3. The second floor of any portion of the ADU, if built above a detached garage, does not exceed the footprint of the garage; and

4. No windows are installed on the second floor on side elevations if such windows are within 25 feet of a neighboring dwelling and face the neighboring property unless such windows have a minimum sill height of at least five feet; and

5. The second floor (or the entire two story ADU as applicable) meets the setbacks applicable to additions for the underlying zone. b. Within structure. The ADU is built entirely within either:
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1. A proposed or existing lawfully constructed single-family dwelling, except that an external stairwell to the ADU which meets all requirements of this Code, including the requirements of subsection (10), below, may be constructed to allow access to the ADU; or

2. The non-habitable space of an existing multifamily structure or within an accessory structure on a lot with a multifamily structure. (10) Exterior stairways, balconies.
a. Exterior stairways. A new exterior stairway to a second-floor ADU shall not be visible from the public right of way at the front of the property.

Second floor landings using an exterior stairway shall be kept to the minimum size required to comply with applicable codes. Stairways and landings shall incorporate screening materials designed to eliminate views into abutting properties. Stairways and landings, which exceed building code minimum sizes, are prohibited. Stairways and landings shall not be counted toward residential open space requirements.
b. Balconies. New balconies which face the street and are located at the front of the main residential structure are permitted provided that the balcony be set back a minimum of 20 feet from the front property line. On corner properties, balconies may face the side street provided that they maintain the setback for the underlying zone. Balconies within 25 feet of a neighboring residence shall incorporate screening to ensure there are no direct views into the abutting property. New construction balconies that are not facing the front of the property or a side street, are prohibited. c. Roof decks. No new roof decks are allowed for ADUs.
(11) Architectural standards.
a. Attached and detached ADUs. Each Attached and detached ADUs ADU which is attached to the primary dwelling shall appear to be part of the primary dwelling. It shall have the same design, materials, finishes, and colors as the primary dwelling and shall be in accordance with code design standards and guidelines applicable to the zone. b. Detached ADUs. Any detached ADU shall be compatible in exterior appearance with the primary unit or units in terms of design, materials, finishes, and colors within the same property on which it is proposed to be 210

constructed, in accordance with code design standards and guidelines applicable to the zone.
c. New construction Junior ADUs. New construction Junior ADUs shall match exterior appearance with the primary unit in terms of design, materials, finishes, and colors within the same property on which it is proposed to be constructed, in accordance with code design standards and guidelines applicable to the zone.
(12) Recommended gGarage conversions .design considerations. a. No blank Blank facade. When a garage is converted to an ADU, if the facade of the converted garage is visible from a public right-of-way, the following design considerations are recommended:facade shall implement at least one of the following:

1. Be covered with landscaping that covers at least 50% of the wall, or

2. Include openings of at least 10% of the facade with at least one door that complies with section (13) below or one window which matches the material and design of the existing windows on the residence.
b. Driveway. The driveway may only be removed if it is replaced with landscaping or open space, and the curb cut and driveway apron are removed and replaced with a curb and gutter which meet city standards.

Partial driveway removals may be permitted if the remaining driveway provides the minimum parking dimensions per subsection (14) below. (13) Entry. The entrance to an ADU or Junior ADU shall match the materials and color of the primary residence(s), not be located on the same building elevation as the main reentrance of the primary residence(s) and shall be located along the building side, rear, or within the interior of the property, unless the economic and development services director approves an alternative configuration due to unique development circumstances.
(14) Parking.
a. The owner may provide parking that is at least eight and a half (8.5) feet wide and 18 feet long and may be provided as:

1. Tandem parking on an existing driveway in a manner that does not encroach onto a public sidewalk; or
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2. Within a setback area or in locations determined feasible by the city. Locations will be determined infeasible based upon specific site or regional topographical or fire and life safety conditions, or that such parking is not permitted anywhere else in the city. b. When any parking space or parking structure an existing garage, carport, or covered parking structure is converted or demolished in conjunction with the construction of an ADU or converted to an ADU, the off-street parking spaces do not have to be replaced, notwithstanding any other provision of this code to the contrary (e.g., the definition of "driveway" in section 13-6, Table 20-8(c) a driveway does not lose its status as a lawful "driveway" if it leads to a structure that was either converted from a garage into either an ADU or Junior ADU or demolished in conjunction with the construction of an ADU or Junior ADU. In no event shall the demolition of a parking space or parking structure garage be considered "in conjunction with" the construction of an ADU if the ADU will not be constructed within any portion of the footprint of the demolished garage.
(15) Non-conforming. The city shall not require, as a condition of a permit for an ADU or Junior ADU the correction of nonconforming development standards. (16) Short-term rentals prohibited. ADUs and Junior ADUs shall not be rented for a term of less than 31 days, unless otherwise authorized by this Code. (167) Open space and landscaping. ADUs which exceed 800 square feet in gross floor area shall meet the open space requirements of section 13-32 and shall be subject to provide landscaping as required in section 13-106.

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STATE OF CALIFORNIA - BUSINESS, CONSUMER SERVICES AND HOUSING AGENCY GAVIN NEWSOM, Governor

DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT

DIVISION OF HOUSING POLICY DEVELOPMENT
2020 W. El Camino Avenue, Suite 500
Sacramento, CA 95833
(916) 263-2911 / FAX (916) 263-7453
www.hcd.ca.gov
September 11, 2024
Barry Curtis
E
conomic and Development Services Director
City of Costa Mesa
77 Fair Drive
Costa Mesa, CA 92626
Dear Barry Curtis:

RE: Review of Co
sta Mesa’s Accessory Dwelling Unit (ADU) Ordinance under State ADU Law (Gov. Code, §§ 66313 - 66342)
Please Note: As
of March 25, 2024, with the Chaptering of Senate Bill (SB) 477 (Chapter 7, Statutes of 2024), the sections of Government Code relevant to State ADU and junior accessory dwelling unit (JADU) Law have been renumbered (Enclosure 1).

Thank you for submitting the City of Costa Mesa (City) accessory dwelling unit (ADU) Ordinance No. 2023-03 (Ordinance), adopted February 22, 2023, to the California Department of Housing and Community Development (HCD). HCD has reviewed the Ordinance and submits these written findings pursuant to Government Code section 66326, subdivision (a). HCD finds that the Ordinance does not comply with State ADU and JADU Laws in the manner noted below. Under section 66326, subdivision (b)(1), the City has up to 30 days to respond to these findings. Accordingly, the City must provide a written response to these findings no later than October 11, 2024.

The Ordinance addres
ses many statutory requirements; however, HCD finds that the Ordinance does not comply with State ADU Law in the following respects:

1. Statutory Numb
ering - The Ordinance contains several references to code sections that were deleted by SB 477, effective March 25, 2024. These include Government Code sections 65852.2, 65852.22 and 65852.26. The contents of these sections were relocated to Government Code, Title 7, Division 1, Chapter 13 (sections 66310-66342, see Enclosure). The City must amend the Ordinance to refer to the correct code sections

2. Section 13.35 (b)(3) – Ministerial Approval – The Ordinance states, “Any application for an ADU that meets the requirements of this section shall be approved ministerially by the city by applying the standards herein and without a public hearing or notice of decision or zoning approval.” However, Government ATTACHMENT 3
-1-
213
Code secti
on 66317, subdivision (a) states, “The permitting agency shall either approve or deny the application to create or serve an accessory dwelling unit or a junior accessory dwelling unit within 60 days from the date the permitting agency receives a completed application if there is an existing single-family or multifamily dwelling on the lot.” It later requires that “If a permitting agency denies an application for an accessory dwelling unit or junior accessory dwelling unit pursuant to subdivision (a), the permitting agency shall, within the time period described in subdivision (a), return in writing a full set of comments to the applicant with a list of items that are defective or deficient and a description of how the application can be remedied by the applicant.”

The City must amend the Ordinance to add these provisions.

3. Section 13.35 (b)(4)a. and (b)(4)b. – Unit Allowance – The Ordinance states that, “Only one category may be used per lot…” when introducing the different formats of allowable units with single family dwellings. Later, the Ordinance states “…the applicant may have ADUs pursuant to one of the following…” when introducing the formats of units allowable with multifamily dwellings.

Government Code section 66323, subdivision (a), states, “Notwithstanding sections 66314 to 66322, inclusive, a local agency shall ministerially approve an application for a building permit within a residential or mixed-use zone to create any of the following: (1) One accessory dwelling unit and one junior accessory dwelling unit per lot with a proposed or existing single-family dwelling…(A) The accessory dwelling unit or junior accessory dwelling unit is within the proposed space of a single family dwelling or existing space of a single-family dwelling or accessory structure.” Subparagraph (2) permits “[o]ne detached, new construction, accessory dwelling unit that does not exceed four- foot side and rear yard setbacks.” The use of the term “any” followed by an enumeration of by-right ADU types permitted indicate that any of these ADU types can be combined on a lot zoned for single-family dwellings.

This permits a homeowner, who meets specified requirements, to create one converted ADU; one detached, new construction ADU; and one JADU. Thus, if the local agency approves an ADU that is created from existing (or proposed) space, and the owner subsequently applies for a detached ADU (or vice versa) that meets the size and setbacks pursuant to the subdivision, the local agency cannot deny the application, nor deny a permit for a JADU under this section.

HCD notes that the Legislature, in creating the list, did not use “or” or “one of” to indicate only one or another would be applicable to the exclusion of the other.

This subdivision also applies to ADUs created pursuant to Government Code section 66323, subdivisions (a)(3) and (4), on lots with proposed or existing multifamily dwellings. Limiting single-family lots to one ADU would prevent -2-
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property
owners from creating ADUs by-right under subdivision (a). Therefore, the City must amend the Ordinance to allow state-mandated by-right ADU combinations. Therefore, the City must amend the Ordinance to comply with State ADU Law.

4. Section 13.35 (b)(4) – JADUs and Multifamily – The Ordinance states, “Junior ADUs are not allowed on a lot with more than one residence.” However, Government Code section 66333, subdivision (a) requires that local ordinances "limit the number of junior accessory dwelling units to one per residential lot zoned for single-family residences with a single-family residence built, or proposed to be built, on the lot." If the underlying lot is zoned for single-family residences, then statute permits a maximum of one JADU per lot (not per single-family residence on the lot). Therefore, the City must amend the language to note that lots zoned for single family residences may have a single JADU per lot.

5. Section 13.35 (b)(4) – Multifamily – The Ordinance states, “ADUs are not allowed within new construction residences where, after construction, there will be at least two (2) residences on the lot (e.g. detached residential structures, duplexes, apartments)….” However, Government Code section 66314, subdivision (d)(2) permits one ADU subject to local development standards on a lot if “[t]he lot is zoned to allow single-family or multifamily dwelling residential use and includes a proposed or existing dwelling.” Therefore, the City’s restriction on ADUs with new construction multifamily residences conflicts with statute. The City must remove this reference.

6. Section 13.35 (b)(5)(b) – Maximum Sizes – The Ordinance states, “For lots with an existing legal multifamily dwelling structure proposing one (1) new construction detached ADU, the ADU shall not exceed one thousand two hundred (1,200) square feet. For lots with an existing or proposed legal multifamily dwelling structure proposing two (2) detached ADUs, the ADUs shall not exceed eight hundred (800) square feet…” However, local design standards may not preclude a unit created subject to Government Code section 66323; therefore, the maximum sizes stated in this section may not apply to any unit created subject to Government Code section 66323, subdivision (a)(4).

The City must amend the Ordinance to comply with State ADU Law.

7. Section 13.35 (b)(4)c. – Common Interest Developments – The Ordinance states, “One conversion ADU may be permitted per unit on lots with common interest developments.” However, ADU law applies to any lot that is zoned to allow residential development. Civil Code Section 4751, subdivision (a) states “Any covenant, restriction, or condition contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of any interest in a planned development, and any provision of a governing document, that either effectively prohibits or unreasonably restricts the construction or use of an -3-
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accessor
y dwelling unit or junior accessory dwelling unit on a lot zoned for single-family residential use that meets the requirements of Article 2 (commencing with Section 66314) or Article 3 (commencing with Section 66333) of Chapter 13 of Division 1 of Title 7 of the Government Code, is void and unenforceable. “ Therefore, this section is inconsistent with development allowances permissible under Government Code sections 66314 and 66323.

State ADU Law provides for the creation of detached and attached ADUs, not just conversions, in areas zoned to allow single-family and multifamily dwelling residential use. The City must amend the Ordinance to comply with State ADU Law.

8. Section 13.35 (c)(4) and (d)(16) – JADU Rental Terms – The Ordinance states, “A Junior ADU shall not be rented for periods of less than 31 days unless otherwise authorized by the municipal code.” It later states “ADUs and Junior ADUs shall not be rented for a term of less thirty-one (31) days, unless otherwise authorized by this code.” However, Government Code section 66333 does not provide rental term limits for JADUs and is thus inconsistent with State JADU Law. Therefore, the City must amend the Ordinance accordingly.

9. Section 13.35 (c)(5) – Attached Garage – The Ordinance states, “A Junior ADU shall be entirely within an existing or proposed single- family dwelling.” However, Government Code section 66333, subdivision (d) expands this allowance to state “For purposes of this subdivision, enclosed uses within the residence, such as attached garages, are considered a part of the proposed or existing single-family residence.” Therefore, the City must amend the Ordinance accordingly.

10. Section 13.35 (d) – Development Standards – The Ordinance states, “All ADUs and Junior ADUs must comply with the following requirements….” However, local design standards provided by the Ordinance pursuant to Government Code section 66314, may not preclude a unit built subject Government Code section 66323 (a), which includes all converted units, all JADUs, 800 square foot new-construction detached units with four-foot setbacks with single-family primary dwellings, and detached units with multifamily primary dwelling structures. The City must note the exceptions.

11. Section 13.35 (d)(3) – Separate Sale – The Ordinance states, “Except as otherwise provided by law, (e.g. Government Code section 65852.26), ADUs… may not be sold or otherwise conveyed separate from the primary residence.” Please note that with the adoption of AB1033, the City now has the option to adopt an ordinance to govern the separate sale of an ADU from its primary dwelling.

12. Section 13.35 (d)(5) – Deed Restrictions – The Ordinance requires a covenant as a precondition to a building permit. However, Government Code section -4-
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66315 stat
es, “No additional standards, other than those provided in Section 66314, shall be used, or imposed….” A deed restriction would be an “additional standard” and thus cannot be imposed. Therefore, the City must remove this section.

13. Section 13.35 (d)(5)b. – Owner-Occupancy – The Ordinance requires owner- occupancy “for ADUs approved on or after January 1, 2025….” However, effective January 1, 2024, Government Code section 66315 states “No additional standards, other than those provided in Section 66314, shall be used or imposed, including an owner-occupant requirement...” The City must remove this section to comply with the State ADU Law.

14. Section 13.35 (d)(8)b., 13.35 (d)(9)a.1. - Front Setbacks – The Ordinance requires “Minimum of setbacks of four (4) feet from side and rear property lines and full compliance with all applicable front yard setbacks for the underlying zone. Second floor ADUs shall provide setbacks in conformance with the underlying zone.” It later requires that “All portions of the ADU structure on a second floor are at least twenty-five (25) feet from the front property line….” However, Government Code section 66321, subdivision (b) prohibits “Any requirement for a zoning clearance or separate zoning review or any other minimum or maximum size for an accessory dwelling unit, size based upon a percentage of the proposed or existing primary dwelling, or limits on lot coverage, floor area ratio, open space, front setbacks, and minimum lot size, for either attached or detached dwellings that does not permit at least an 800 square foot accessory dwelling unit with four-foot side and rear yard setbacks to be constructed in compliance with all other local development standards.” Therefore, the City’s application of front setback restrictions that would preclude such a unit would be inconsistent with State ADU Law. The City must amend the Ordinance accordingly.

15. Section 13.35 (d)(9) – Height – The Ordinance states, “Except as authorized in subsection b, below, in no event may any portion of a new construction ADU exceed two (2) stories or exceed the height of any other dwelling that could legally be on the property. In all cases, a height of at least eighteen (18) feet shall be allowed for ADUs. An additional two feet in height may be permitted to accommodate a roof pitch on the ADU that is aligned with the roof pitch of the primary dwelling unit.”

However, Government Code section 66321, subdivision (b)(4)(D) requires “A height of 25 feet or the height limitation in the local zoning ordinance that applies to the primary dwelling, whichever is lower, for an accessory dwelling unit that is attached to a primary dwelling.” Additionally, section 66321, subdivision (b)(4)(B) requires the allowance of “an additional two feet in height to accommodate a roof pitch on the accessory dwelling unit that is aligned with the roof pitch of the primary dwelling unit” under the conditions of that -5-
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subsecti
on. Therefore, the City must amend the Ordinance to comply with State ADU Law.

16. Section 13.35 (d)(10) a. – Exterior Stairways – The Ordinance states, “A new exterior stairway to a second floor ADU shall not be visible from the public right of way at the front of the property.” However, local design standards provided by the Ordinance pursuant to Government Code sections 66314 through 66323, may not preclude a unit built subject Government Code section 66323, which includes all converted units, all JADUs, 800 square foot new construction detached units with four-foot setbacks, and detached units with multifamily primary dwelling structures. Visibility restrictions on a stairway necessary to serve such a unit may not preclude the unit or its stairway. Therefore, the City must note that section 66323 units are excepted and should add “when feasible” to the existing language.

17. Section 13.35 (d)(11)(b) – “Compatible” – The Ordinance states, “Any detached ADU shall be compatible in exterior appearance with the primary unit or units in terms of design, materials, finishes, and colors….” However, Government Code section 66314, subdivision (b)(1) requires that a local agency “Impose objective standards on accessory dwelling units”. Government Code section 66313, subdivision (h) defines “Objective standards” as “standards that involve no personal or subjective judgment by a public official and are uniformly verifiable by reference to an external and uniform benchmark or criterion available and knowable by both the development applicant or proponent and the public official prior to submittal.” As “compatible” is a term that is subjective, this section is inconsistent with State ADU Law. Therefore, the City must amend the Ordinance to remove subjective terminology.

18. Section 13.35 (d)(11)c. – JADUs and Exterior Appearance – The Ordinance states, “Junior ADUs shall match exterior appearance with the primary unit in terms of design, materials, finishes, and colors within the same property on which it is proposed to be constructed….” However, local design standards provided by the Ordinance pursuant to Government Code sections 66314 through 66322, inclusive, may not preclude a unit built subject Government Code section 66323, which includes all JADUs. Therefore, the City must remove this section.

19. Section 13.35 (d)(12) – Garage Conversion – The Ordinance requires design standards in the event of a garage conversion. However, local design standards provided by the Ordinance pursuant to Government Code sections 66314 through 66322, inclusive, may not preclude a unit built subject Government Code section 66323, which includes all converted units and all JADUs, both of which may be created in garages. Therefore, the City’s design standards may not preclude converted units. The City must note the exceptions.
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20. Section

13.35 (d)(13) – Entry – The Ordinance requires that entry for ADUs and JADUs “…not be located on the same building elevation as the main reentrance of the primary residence(s) and shall be located along the building side, rear, or within the interior or the property….” However, local design standards provided by the Ordinance pursuant to Government Code sections 66314 through 66322, inclusive, may not preclude a unit built subject Government Code section 66323. The City must note the exceptions.

21. Section 13.35 (d)(17) – Open Space and Landscaping – The Ordinance requires that, “ADUs which exceed eight hundred (800) square feet in gross floor area shall meet the open space requirements of section 13-32 and shall be subject to provide landscaping….” However, and as above, local design standards provided by the Ordinance pursuant to Government Code sections 66314 through 66322, inclusive, may not preclude a unit built subject Government Code section 66323. The City must note the exceptions.

Please note that the City has two options in response to this letter. The City can either amend the Ordinance to comply with State ADU Law
1 or adopt the Ordinance without
changes and include findings in its resolution adopting the Ordinance that explain the reasons the City believes that the Ordinance complies with State ADU Law despite HCD’s findings

2. If the City fails to take either course of action and bring the Ordinance into compliance with State ADU Law, HCD must notify the City and may notify the California Office of the Attorney General that the City is in violation of State ADU Law

3. HCD appreciates the City’s efforts in the preparation and adoption of the Ordinance and welcomes the opportunity to assist the City in fully complying with State ADU Law.

Please contact Mike Van Gorder, of our staff, at (916) 776-7541 or at [email protected] if you have any questions or would like HCD’s technical assistance in these matters.

Sincerel
y,

Jamie Candelaria
Senior Housing Accountability Manager
Housing Policy Development Division
1 Gov. Code. § 66326, subd. (b)(2)(A).
2 Gov. Code, § 66326, subd. (b)(2)(B).
3 Gov. Code, § 66326, subd. (c).
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State ADU/JADU Law Statutory Conversion Table
New Government Code Sections Previous Government Code Sections Article 1. General Provisions
66310 65852.150 (a)
66311 65852.150 (b)
66312 65852.150 (c)
66313 General Definition Section
65852.2 (j)
65852.22 (j)
Article 2. Accessory Dwelling Unit Approvals
66314 65852.2(a)(1)(A), (D)(i)-(xii), (a)(4)-(5)
66315 65852.2 (a)(8)
66316 65852.2 (a)(6)
66317 65852.2 (a)(3), (a)(7)
66318 65852.2 (a)(9), 65852.2 (a)(2)
66319 65852.2 (a)(10)
66320 65852.2 (b)
66321 65852.2 (c)
66322 65852.2 (d)
66323 65852.2 (e)
66324 65852.2 (f)
66325 65852.2 (g)
66326 65852.2 (h)
66327 65852.2 (i)
66328 65852.2 (k)
66329 65852.2 (l)
66330 65852.2 (m)
66331 65852.2 (n)
66332 65852.23.

Article 3. Junior Accessory Dwelling Units
66333 65852.22 (a)
66334 65852.22 (b)
66335 65852.22 (c)
66336 65852.22 (d)
66337 65852.22 (e)
66338 65852.22 (f)-(g)
66339 65852.22 (h)
Article 4. Accessory Dwelling Unit Sales
66340 65852.26 (b)
66341 65852.26 (a)
66342 65852.2 (a)(10)
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ATTACHMENT 4
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Proposed Ordinance Revisions Pursuant to HCD Letter Dated Sept. 11, 2024

1. Statutory Numbering - The Ordinance c
ontains several references to code sections
that were deleted by SB 477, effective Ma rch 25, 2024. These include Government Code sections 65852.2, 65852.22 and 65852.26. The contents of these sections were relocated to Government Code, Title 7, Division 1, Chapter 13 (sections 66310-66342, see Enclosure). The City mu st amend the Ordinance to re fer to the correct code sections.

Proposed Revision
Update code sections accordingly.

2. Section 13.35 (b)(3) – Ministerial Approval – The Ordinance states, “Any application for an ADU that meets the requirements of this section shall be approved ministerially by the city by applying the standards herein and without a public hearing or notice of decision or zoning approval.” However, Government Code section 66317, subdivision (a) states, “The permitting agency shall either approve or deny the application to create or serve an accessory dwelling unit or a junior accesso ry dwelling unit within 60 days from the date the permitting agency receives a completed application if there is an existing single-family or multifamily dwelling on the lot.” It later requires that “If a permitting agency denies an application for an accessory dwelling unit or junior accessory dwelling unit pursuant to subdivision (a), the permitting agency shall, within the time period described in subdivision (a), return in writing a full set of comments to the applicant with a list of items that are defective or deficient and a description of how the application can be remedied by the applicant.” The City must amend the Ordinance to add these provisions.

Proposed Revision
Ministerial. Any application for an ADU that meets the requirements of this section shall be approved ministerially by the ci ty by applying the standards herein and without a public hearing or notice of decision or zoning approval in compliance with government code section 66317.

3. Section 13.35 (b)(4)a. and (b)(4)b. – Un
it Allowance – The Ordinance states that,
“Only one category may be used per lot…” when introducing the different formats of allowable units with single family dwellings . Later, the Ordinance states “…the applicant may have ADUs pursuant to one of the following…” when introducing the formats of units allowable with multifamily dwellings.

Government Code section 66323, subdivision (a), states, “Notwithstanding sections 66314 to 66322, inclusive, a local agency shall ministerially approve an application for a building permit within a residential or mixed-us e zone to create any of the following: (1) One accessory dwelling unit and one junior accessory dwelling unit per lot with a proposed or existing single-family dwelling…(A ) The accessory dwelling unit or junior accessory dwelling unit is within the proposed space of a single family dwelling or existing space of a single-family dwelling or accessory structure.” Subparagraph (2) permits “[o]ne -2-
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detached, new construction, accessory dwelling unit that does not exceed four-foot side and rear yard setbacks.” The use of the term “any” followed by an enumeration of by-right ADU types permitted indicate that any of these ADU types can be combined on a lot zoned for single-family dwellings.

This permits a homeowner, who meets specif ied requirements, to create one converted ADU; one detached, new construction ADU; and one JADU. Thus, if the local agency approves an ADU that is created from exis ting (or proposed) space, and the owner subsequently applies for a detached ADU (or vice versa) that meets the size and setbacks pursuant to the subdivision, the local agency cannot deny the app lication, nor deny a permit for a JADU under this section. HCD notes that the Legislature, in creating the list, did not use “or” or “one of” to indicate only one or another woul d be applicable to the exclusion of the other.

This subdivision also applies to ADUs cr eated pursuant to Gove rnment Code section 66323, subdivisions (a)(3) and (4), on lots with proposed or existing multifamily dwellings.

Limiting single-family lots to one ADU would prevent property owners from creating ADUs by-right under subdivision (a). Therefore, the City must am end the Ordinance to allow state-mandated by-right ADU combinations . Therefore, the City must amend the Ordinance to comply with State ADU Law.

Proposed Revision
(4) Maximum number of dwelling units. The following is the maximum number of ADUs and or Junior ADUs allowed on any lot. Only one category may be used per lot including lots that include a mixture of single-family and multiple family dwellings
with the exception as allowed in subsection “c” below.
a. Single-family. Only one ADUs and only one Junior ADUs may be permitted on a lot with a proposed or existing single-family dwelling subject to the following:

1. Conversion within a single-family dwelling.
(i) An ADU or Junior ADU may be wit hin the existing footprint of a lawful single-family dwelling. Alternativel y, an ADU may be within a lawfully constructed existing detached accessory structure; in this case up to one hundred fifty (150) square feet may be added beyond the physical dimensions of the existing accessory structure solely to accommodate ingress and egress to the ADU; and
(ii) Each such ADUs and Junior ADU s must have independent exterior access from the single-family dwelling, and have side and rear setbacks sufficient for fire safety; or

2. New construction. One (1) new construction ADU may be permitted on a lot with proposed or existing singl e-family dwelling. One (1) new -3-
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construction Junior ADU may be allowed on the lot in lieu of a conversion Junior ADU, if the new construction Junior ADU is to be in a single-family dwelling that meets all applicable legal standards.

4. Section 13.35 (b)(4) – JADUs and Multifamily – The Ordinance states, “Junior ADUs are not allowed on a lot with more than one residence.” However, Government Code section 66333, subdivision (a) requires that local ordinances "limit t he number of junior accessory dwelling units to one per residential lot zoned for single-family residences with a single-family residence built, or proposed to be built, on the lot." If the underlying lot is zoned for single-family residences, then statute permits a maximum of one JADU per lot (not per single-family residence on the lot). Therefore, the City must amend the language to note that lots zoned for single family residences may have a single JADU per lot.

Proposed Revision

No Changes. The Government Code and the CMMC have the same intent. HCD’s ADU handbook identifies that “lots with multiple detached single-family dwellings are not eligible to have JADUs”. The changes reflected in comment No. 3 above, would allow for JADUs to be converted or constructed as permitted by State Law.

5. Section 13.35 (b)(4) – Multifamily – The Ordinance states, “ADUs are not allowed within new construction residences where, after construction, there will be at least two (2) residences on the lot (e.g. detached resid ential structures, dupl exes, apartments)….” However, Government Code section 66314, subdivision (d)(2) permits one ADU subject to local development standards on a lot if “[ t]he lot is zoned to allow single-family or multifamily dwelling residential use and incl udes a proposed or existing dwelling.” Therefore, the City’s restriction on ADUs with new construction multifamily residences conflicts with statute. The City must remove this reference.

Proposed Revision

Multifamily. Junior ADUs are not allowed on a lot with more than one residence.

One ADUs are not is allowed within new construction residences where, after construction, there will be at least two residences on the lot (e.g. detached residential structures, duplexes, apartment s); up to two ADUs are allowed with such structures pursuant to subsection 3, below. For lots with an existing legal multifamily dwelling (e.g., a legal non- conforming multifamily dwelling), the applicant may have ADU(s) pursuant to one of the following:

6. Section 13.35 (b)(5)(b) – Maximum Sizes – The Ordinance states, “For lots with an existing legal multifamily dwelling structure proposing one (1) new construction detached ADU, the ADU shall not exceed one thousand two hundred (1,200) square feet. For lots with an existing or proposed le gal multifamily dwelling structure proposing two (2) detached ADUs, the ADUs shall not exceed eight hundred (800) square feet…” However, local design standards may not preclude a unit created subject to Government Code section 66323; therefore, the maximum sizes stated in this section may not apply to any -4-
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unit created subject to Government Code section 66323, subdivision (a)(4). The City must amend the Ordinance to comply with State ADU Law.

Proposed Revision
Multifamily, exterior construction.

1. Detached. For lots with an existing legal multifamily dwelling structure proposing one new construction detached ADU, the ADU shall not exceed 1,200 square feet. For lots with an ex isting or proposed legal multifamily dwelling structure proposing two det ached ADUs, the ADUs shall not exceed 800 square feetthe maximum square footage for either an attached or detached ADU is 800 squar e feet or 1,000 square feet for an ADU that provides more than one bedroom; or

7. Section 13.35 (b)(4)c. – Common Interest Developments – The Ordinance states, “One conversion ADU may be permitted per unit on lots with common interest developments.” However, ADU law applies to any lot that is zoned to allow residential development. Civil Code Section 4751, subdivision (a) states “Any covenant, restriction, or condition contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of any interest in a planned development, and any provision of a governing document, that ei ther effectively prohibits or unreasonably restricts the construction or use of an accessory dwelling unit or junior accessory dwelling unit on a lot zoned for single-family residential use that meets the require ments of Article 2 (commencing with Section 6631 4) or Article 3 (commencing with Section 66333) of Chapter 13 of Division 1 of Title 7 of the Government Code, is void and unenforceable. “ Therefore, this section is inconsistent with development allowances permissible under Government Code sections 66314 and 66323. St ate ADU Law provides for the creation of detached and attached ADUs, not just conver sions, in areas zoned to allow single- family and multifamily dwellin g residential use. The City mu st amend the Ordinance to comply with State ADU Law.

Proposed Revision

No Changes. The provision allows fo r additional ADUs than what would be permissible by the Government Code. The Government code would allow for one of the units to construct ADUs in a “first come, first serve” basis. This code section allows for each individual unit within the Common Interest Development to convert space into an ADU.

8. Section 13.35 (c)(4) and (d)(16) – JADU Rental Terms – The Ordinance states, “A Junior ADU shall not be rent ed for periods of less t han 31 days unless otherwise authorized by the municipal code .” It later states “ADUs and Junior ADUs shall not be rented for a term of less thirty-one (31) days, unless otherwise authorized by this code.” However, Government Code section 66333 does not provide rental term limits for JADUs and is thus inconsistent with State JADU Law. Therefore, the City must amend the Ordinance accordingly.

Proposed Revision
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The City strongly disagrees with the comment provided by HCD. The intent seems to infer that HCD is in favor of removi ng housing units to allow for short term vacation rentals which has been proven to reduce the number of available housing units. The City is committed to providing housing and believes that allowing JADUs to be used as short-term rentals, will reduc e the number of units available in the City. In light of this, the City respectfully encourages HCD to revisit their comment and modify its position. Should HCD continue to demand this change, staff would propose the following revision:

CMMC Section 13.35(c)(4) Short-term rentals prohibited. A Junior ADU shall not be rented for periods of less than 31 days unless other wise authorized by the municipal code. Reserved.

CMMC Section 13-35(d)(16) Short-term rentals prohibited. ADUs and Junior ADUs shall not be rented for a term of le ss thirty-one (31) days, unless otherwise authorized by this code.

9. Section 13.35 (c)(5) – Attached Garage – The Ordinance states, “A Junior ADU shall be entirely within an existing or proposed single- family dwelling.” However, Government Code section 66333, subdivision (d) expands this allowance to state “For purposes of this subdivision, enclosed uses within the re sidence, such as attached garages, are considered a part of the proposed or existing single-family residence.” Therefore, the City must amend the Ordinance accordingly.

Proposed Revision

No Changes. CMMC Section 13-35(a)(3)(d) defines “single-family dwelling” and “multifamily dwelling” as excluding all detached accessory structures. The section has been implemented to mean that attached accessory structures are included in the definition of single-family dwelling and multifamily dwelling.

10. Section 13.35 (d) – Development Standards – The Ordinance states, “All ADUs and Junior ADUs must comply with the following requirements….” Ho wever, local design standards provided by the Ordinance pursuant to Government Code section 66314, may not preclude a unit built subject Government Code section 66323 (a), which includes all converted units, all JADUs, 800 square foot new-construction detached units with four- foot setbacks with single-family primary dwellings, and det ached units with multifamily primary dwelling structures. The City must note the exceptions.

Proposed Revision
Development standards . The following standards sha ll not preclude a unit built subject to Government Code section 66323 (a), which includes all converted units, all JADUs, 800 square foot new-cons truction detached units with four-foot setbacks with single-family primary dwellings, and detached units with multifamily primary dwelling structures Otherwise, Aall ADUs and Junior ADUs must comply with the following requirements:
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11. Section 13.35 (d)(3) – Separate Sale – The Ordinance states, “Except as otherwise provided by law, (e.g. Government Code section 65852.26), ADUs… may not be sold or otherwise conveyed separate from the primary residence.” Please note that with the adoption of AB1033, t he City now has the option to a dopt an ordinance to govern the separate sale of an ADU from its primary dwelling.

The City is aware of the adoption of AB1033.

12. Section 13.35 (d)(5) – Deed Restrictions – The Ordinance requires a covenant as a precondition to a building permit. However, Government Code section 66315 states, “No additional standards, other than those provided in Section 66314, shall be used, or imposed….” A deed restriction would be an “additional standard” and thus cannot be imposed. Therefore, the City must remove this section.

Proposed Revision
Recorded covenants. Before obtaining a building permitPrior to occupancy , the owner shall file with the county recorder, in a form approved by the city attorney, a covenant which does all of the following:

13. Section 13.35 (d)(5)b. – Owner-Occupancy – The Ordinance requires owner- occupancy “for ADUs approved on or after January 1, 2025….” However, effective January 1, 2024, Government Code section 66315 states “No additional standards, other than those provided in Sect ion 66314, shall be used or im posed, including an owner- occupant requirement...” The City must remove this section to comply with the State ADU Law.

Proposed Revision
Unless subsequently prohibited by an amendment to state law, for ADUs approved on or after January 1, 2025, the ADU sha ll be considered legal only as long as either the primary residence or the ADU is occupied by the owner of record or state law is amended to prohibit such require ments. Junior ADUs require owner occupancy of either the single-family dwelling or the Junior ADU; and Reserved

14. Section 13.35 (d)(8)b., 13.35 (d)(9)a.1. - Front Setbacks – The Ordinance requires “Minimum of setbacks of four (4) feet from side and rear property lines and full compliance with all applicable front yard setbacks for the underlying zone. Second floor ADUs shall provide setbacks in conformanc e with the underlying zone.” It later requires that “All portions of the ADU structure on a second floor are at least twenty-five (25) feet from the front property line….” However, Gove rnment Code section 66321, subdivision (b) prohibits “Any requirement for a zoning clearance or separate zoning review or any other minimum or maximum size for an accessory dwelling unit, size based upon a percentage of the proposed or existing prim ary dwelling, or limits on lot coverage, floor area ratio, open space, front setbacks, and minimum lot size, for either attached or detached dwellings that does not permit at least an 800 square foot accessory dwelling unit with -7-
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four-foot side and rear yard setbacks to be constructed in compliance with all other local development standards.” Therefore, the City’s application of front setback restrictions that would preclude such a unit would be inconsis tent with State ADU Law. The City must amend the Ordinance accordingly.

Proposed Revision

See No. 10 above.

15. Section 13.35 (d)(9) – Height – The Ordinance states, “Except as authorized in subsection b, below, in no event may any portion of a new construction ADU exceed two (2) stories or exceed the height of any other dwelling that could legally be on the property.

In all cases, a height of at least eighteen (18) feet shall be allowed for ADUs. An additional two feet in height may be permitted to acco mmodate a roof pitch on the ADU that is aligned with the roof pitch of the primary dwelling unit.”

However, Government Code section 66321, subdivision (b)(4)(D) requires “A height of 25 feet or the height lim itation in the local zoning ordi nance that applies to the primary dwelling, whichever is lower, for an accessory dwelling unit that is attached to a primary dwelling.” Additionally, section 66321, subdivision (b)(4)(B) requires the allowance of “an additional two feet in height to accommodate a roof pitch on the accessory dwelling unit that is aligned with the roof pitch of the primary dwelling unit” under the conditions of that subsection. Therefore, the City must amend t he Ordinance to comply with State ADU Law.

Proposed Revision

No Changes. The CMMC allows for an A DU to have a maximum height of “any other dwelling that could legally be constructed on the site”. The maximum height for residential buildings throughout the City is 27 feet or more which exceeds the Government Code and is therefore more permissive.

16. Section 13.35 (d)(10) a. – Exterior Stairways – The Ordinance states, “A new exterior stairway to a second floor ADU shall not be visible from the public right of way at the front of the property.” However, loca l design standards provided by the Ordinance pursuant to Government Code sections 663 14 through 66323, may not preclude a unit built subject Government Code section 66323, which includes all converted units, all JADUs, 800 square foot new construction detached units with four-foot setbacks, and detached units with multif amily primary dwelling structures . Visibility restrictions on a stairway necessary to serve such a unit may not preclude the unit or its stairway.

Therefore, the City must note that section 66323 units are excepted and should add “when feasible” to the existing language.

Proposed Revision

See No. 10 above.
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17. Section 13.35 (d)(11)(b) – “Compatible” – The Ordinance states, “Any detached ADU shall be compatible in exterior appearance with the primary unit or units in terms of design, materials, finishes, and colors….” However, Government Code section 66314, subdivision (b)(1) requires that a local agency “Impose objective standards on accessory dwelling units”. Government Code section 66313, subdivision (h) defines “Objective standards” as “standards that involve no personal or subjective judgment by a public official and are uniformly verifiable by reference to an external and uniform benchmark or criterion available and knowable by both the development applicant or proponent and the public official prior to submittal.” As “compatible” is a term that is subjective, this section is inconsistent with State ADU Law. Ther efore, the City must amend the Ordinance to remove subjective terminology.

Proposed Revision

See No. 10 above.

18. Section 13.35 (d)(11)(c) – JADUs and Exterior Appearance – The Ordinance states, “Junior ADUs shall match exterior appearance with the primar y unit in terms of design, materials, finishes, and colors within the same property on which it is proposed to be constructed….” However, local design standards provided by the Ordinance pursuant to Government Code sections 66314 through 66322, inclusive, may not preclude a unit built subject Government Code section 66323, which includes all JADUs.

Therefore, the City must remove this section.

Proposed Revision

JADUs are meant to be converted from existing space. Converted JADUs are converted from existing space and therefore, match what is already there. CMMC Section 13-35(a)(4)(a)(2) allows for “One new construction Junior ADU may be allowed on the lot if the Junior ADU is to be in a single-family dwelling that meets all applicable legal standards.” Therefore, the following is proposed:

CMMC Section 13-35(d)(11)(c) Junior ADUs. New construction Junior ADUs shall match exterior appearance with the primary unit in terms of design, materials, finishes, and colors within the same property on which it is proposed to be constructed, in accordance with code design standards and guidelines applicable to the zone.

19. Section 13.35 (d)(12) – Garage Conversion – The Ordinance requires design standards in the event of a garage conversion. However, local design standards provided by the Ordinance pursuant to Government Code sections 66314 through 66322, inclusive, may not preclude a unit built subject Government Code section 66323, which includes all converted units and all JADUs, both of which may be created in garages. Therefore, the City’s design standards may not preclude c onverted units. The City must note the exceptions.
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Proposed Revision

See No. 10 above.

20. Section 13.35 (d)(13) – Entry – The Ordinance requires that entry for ADUs and JADUs “…not be located on the same building elevation as the main reentrance of the primary residence(s) and shall be located al ong the building side, rear, or within the interior or the property….” However, loca l design standards provided by the Ordinance pursuant to Government Code sections 66314 through 66322, inclusive, may not preclude a unit built subject Government Code section 66323. The City must note the exceptions.

Proposed Revision

See No. 10 above.

21. Section 13.35 (d)(17) – Open Space and Landscaping – The Ordinance requires that, “ADUs which exceed eight hundred (800) square feet in gross floor area shall meet the open space requirements of section 13-32 and shall be subject to provide landscaping….” However, and as above, lo cal design standards provided by the Ordinance pursuant to Government Code sections 66314 through 66322, inclusive, may not preclude a unit built subject Government Code section 66323. The City must note the exceptions.

Proposed Revision

See No. 10 above.

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Proposed Ordinance Revisions Pursuant to Recent Bills

In addition to the ordinance review provided by HCD, the City is moving forward to modify its ordinance to comply with the recently adopted State Laws pertaining to ADUs including SB1211 and AB 2533. Below, you will find how the City intends to modify its ordinance to comply.

1. SB1211 – Replacement Parking - The bill amends Government Code section 66314(d)(11) to extend the prohibition on requiring replacement parking when any parking space (whether covered or uncovered) is de molished or converted to accommodate an ADU. Previously, only garages and carports were covered, but SB 1211 expands this to include all types of parking spaces
Proposed Revision

CMMC Section 13-35(d)(14)(b) Parking. When an existing garage, carport, or covered parking structure a parking space or parking structure is converted or demolished in conjunction with the construction of an ADU or converted to an ADU, the off-street parking spaces do not have to be replaced, notwithstanding any other provision of this code to the contrary (e .g., the definition of "driveway" in section 13-6, Table 20-8(c) a driveway does not lose its status as a lawful "driveway" if it leads to a structure that was either converted from a garage into either an ADU or Junior ADU or demolished in conjunction with the construction of an ADU or Junior ADU. In no event shall the demolition of a garage parking space or parking structure be considered "in conjunction with" the construction of an ADU if the ADU will not be constructed wit hin any portion of the f ootprint of the demolished garageparking space or parking structure.

2. SB1211 – Non-Livable Space - The bill introduces a definition for "livable space" in Government Code section 66313(e) to clarify which portions of multifamily buildings can be converted into ADUs. "Livable space" is defined as any space intended for human habitation, such as areas for living, sleeping, cooking, or sanitation.

Proposed Revision

CMMCS Section 13-35(b)(4)(b)(1) Maximum ADUs within existing multifamily dwelling structure. No more than 25%, with any parti al unit rounded down) of the number of existing multifamily dwelling units on the lot, but at least one unit, shall be permitted as ADU(s) constructed within the enclosed nonlivable space (e.g., a space in a dwelling not in tended for human habitation, including living, sleeping, eating, cooking, or sanita tion) storage rooms, boiler rooms, hallways, attics, basements, or garages) of the existing multifamily dwelling structures; or

3. SB1211 – Increase in Detached ADUs -The bill amends Government Code section 66323(a)(4)(A) to increase the maximum number of detached ADUs allowed on lots with existing multifamily dwellings. The previous limit was two detached ADUs per lot; SB 1211 -11-
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increases this to allow up to eight det ached ADUs or one detached ADU per primary dwelling unit on the lot, whichever is less.

Proposed Revision

CMMCS Section 13-35(b)(4)(b)(3) Maximum Detached ADUs. No more than two eight detached ADUs are permitted , provided that the number of accessory dwelling units allowa ble pursuant to this clause shall not exceed the number of existing units on the lot. Both The units shall be detached from every residence on site (but need not be detache d from each other). This section shall apply to detached structures that are convert ed and new construction detached ADUs.

Conversion detached ADUs are not subject to height, setbacks, and maximum square footage; or

4. AB2533 – Legalizing Unpermitted ADUs and JADUs -This bill focuses on the legalization of unpermitted ADUs and Junior ADUs (JADUs) that were built before January 1, 2020. It aims to simplify the process for homeowners to bring their unpermitted ADUs into compliance.

Proposed Revision

CMMCS Section 13-35(d)(1) Ministerial project . Any application for an ADU or Junior ADU that meets the r equirements of this section or as permissible in Government Code Section 66332 shall be approved without a public hearing. -12-
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Jan 27, 2025
City of Costa Mesa
77 Fair Drive
Costa Mesa, CA 92626
By Email: [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; [email protected]; CC: [email protected]; [email protected]; [email protected]; [email protected]; [email protected]
Re: Proposed amendments to the City’s Accessory Dwelling Unit and Junior Accessory Dwelling Unit Regulations
Dear Costa Mesa Planning Commission,
The California Housing Defense Fund (“CalHDF”) submits this letter as a public comment concerning item 1 on the agenda for the Planning Commission meeting scheduled for January 27, 2025, an amendment to the City’s regulations for ADUs and JADUs. This proposed ordinance fails to comply with state law in several ways, and the City should address these problems before approving the ordinance.

Background
The law gives local governments authority to enact zoning ordinances that implement a variety of development standards on ADUs. (Gov. Code, § 66314.) The standards in these local ordinances are limited by state law so as not to overly restrict ADU development. (See id.) Separately from local ADU ordinances, Government Code section 66323 establishes a narrower set of ADU types that local governments have a ministerial duty to approve. “Notwithstanding Sections 66314 to 66322 ... a local agency shall ministerially approve” these types of ADUs. (Id. at subd. (a).) This means that ADUs that satisfy the minimal requirements of section 66323 must be approved regardless of any contrary provisions of the local ADU ordinance. (Ibid.) Local governments may not impose their own standards on such ADUs. (Gov. Code, § 66323, subd. (b) [“A local agency shall not impose any objective development or design standard that is not authorized by this section upon any accessory dwelling unit that meets the requirements of any of paragraphs (1) to (4), inclusive, of subdivision (a).”].) 2221 Broadway, PH1, Oakland, CA 94612
[email protected]
ATTACHMENT 5
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In addition, A
DUs that qualify for the protections of Government Code section 66323, like other ADUs, must be processed by local governments within 60 days of a complete permit application submittal. (Gov. Code, § 66317, subd. (a).) St
ate law also prohibits creating regulations on ADU development not explicitly allowed by state law. Government Code Section 66315 states, “No additional standards, other than those provided in Section 66314, shall be used or imposed, including an owner-occupant requirement, except that a local agency may require that the property may be used for rentals of terms 30 days or longer.”
Impe
rmissible Underlying Standards
Cit
y code section 13-35(b)(2) imposes all underlying city zoning standards on ADUs, except as modified by that section. City code section 13-35(b)(7) applies underlying city zoning standards on additions to existing dwellings to facilitate the conversion of space to ADUs.

Neither of these provisions are allowed by state law.

As discussed supra, Government Code section 66323 mandates that the City approve a specific class of ADUs subject only to specified height and setback requirements, notwithstanding any local code requirements to the contrary. This means, for example, that the City cannot impose landscaping regulations,
floor area ratio regulations, parking
requirements, front setbacks, etc. on ADUs that qualify for the protections of Government Code section 66323.

Furt
hermore, Government Code section 66323, subdivision (a)(1) provides for an expansion of 150 square feet for the purposes of ingress and egress. As discussed supra, the City may not impose any zoning requirements on such an expansion.

Impe
rmissible Size Limitations
Cit
y code section 13-35(b)(5)(a)(1) limits detached ADUs in conjunction with a single-family home to 1,200 square feet, and code section 13-35(b)(5)(b)(1) limits detached ADUs in conjunction with multifamily dwellings to 850 square feet or 1,000 square feet for an ADU that provides more than one bedroom.

Ho
wever, these limits are not allowed for ADUs subject to the protections of Government Code section 66323, subdivisions (a)(1) and (a)(4). In the case of section 66323, subdivision (a)(1), state law does not allow a maximum unit size for a conversion of a portion of an existing structure into an ADU on a single-family property. For section 66323, subdivision (a)(4), state law does not allow a size limitation for any detached ADUs constructed on multifamily properties, provided they comply with the specified height and 2 of 5
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setback requirements.

Impermissible Deed Restriction Requirement

City code section 13-35(d)(5) requires a deed restriction to be placed on the property prior to final inspection and occupancy of an ADU. This is a clear violation of Government Code section 66323, which prohibits any standards not explicitly authorized in that section. Deed restrictions are also not permitted by Government Code section 66315, which forbids standards not listed in section 66314, and it is unclear why the City would want applicants to go through the trouble of filing such a deed restriction, other than to discourage ADU development by increasing development cost.

The California Department of Housing and Community Development (“HCD”) has communicated that such deed restrictions are unlawful. The January 2025 HCD ADU Handbook specifically forbids deed restrictions as a condition of ADU development (see page 22).

Additionally, such deed restrictions imposed on ADUs (or on other accessory structures) are unenforceable. This is due to the absence of horizontal privity between the Town and the applicant. In other words, since the Town does not own the applicant’s property at the time of the application, and does not own a neighboring property to whose benefit the proposed restriction(s) redound, black letter property law bars the restrictions from binding future property owners. (See, e.g., Scaringe v. J. C. C. Enters (1988) 205 Cal.App.3d 1536 [describing the types of privity relationship between covenanting parties that allow enforcement of a deed restriction]; see also Civ. Code, §§ 1460 et seq.)

Impermissible Development Standards

CalHDF notes that City code section 13-35(d) states, “The following standards shall not preclude a unit built subject to Government Code section 66323 (a), which includes all converted ADUs, all converted JADUs, 800-square-foot, new-construction, detached ADUs with four-foot setbacks with single-family primary dwellings, and detached units with multifamily primary dwelling structures. Otherwise, all ADUs and Junior ADUs must comply with the following requirements:”

However, “shall not preclude” does not have the same meaning as “shall not apply to.” The wording of this paragraph strongly implies that the standards in section 3-35(d) apply to all ADUs, unless they would prohibit an ADU covered by Government code section, 66323 subdivision (a). This is not permissible. The City must explicitly exempt ADUs eligible for the protections of Government Code section 66323, subdivision (a) from all development standards other than the basic height and setback standards contained in state law.

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This means that the following development standards cannot be imposed on ADUs subject to the protections of Government Code section 66323, subdivision (a):
● Setbacks. City code section 13-35(d)(8)(b) requires all ADUs to comply with front setbacks based on the underlying zoning district, and second floor portions of ADUs to comply with all setback requirements of the underlying zoning district. City code section 13-35(d)(9)(a) separately imposes a 25 foot front setback and the underlying zoning setback requirements on the second
floor of an ADU. City code section
13-35(d)(9)(a)(4) imposes fenestration requirements on the 2nd floor portion of ADUs.

None of these requirements are permitted for ADUs eligible for the protections of Government Code section 66323, as discussed supra. Government Code section 66323 requires that local agencies allow ADUs up to 20 feet in height in some circumstances. If the applicant can create two stories out of such a structure, then the City may not impose any regulations on the second
floor other than what is
explicitly allowed by section 66323. See page 18 of the ADU Handbook for further information.
● Building-to-Building Separation. City code section 13-35(d)(8)(c) requires all ADUs to be six feet from all other structures on the property. This requirement is not permitted for ADUs eligible for the protections of Government Code section 66323, as discussed supra. See page 18 of the ADU Handbook for further information.

Additionally, building-to-building separation is separately regulated by the building code.
● Architectural Standards. City code sections 13-35(d)(11), 13-35(d)(12)(a), and 13-35(d)(13) impose design standards on all ADUs and new construction JADUs.

However, as discussed supra, if the ADU or JADU qualifies for the protections of Government Code section 66323, subd. (a)(1), then the city must approve it ministerially, via building permit only, and cannot impose any such design regulations, as this section of state law only permits specified height and setback regulations, as discussed supra. Additionally, section 13-35(d)(12)(a) is phrased as a design “consideration.” Regardless of how this is phrased, a city official may not deny an application for a section 66323 ADU based on this standard. ● Landscaping. City code section 13-35(d)(17) imposes landscaping requirements on all ADUs that exceed 800 square feet. However, such requirements may not be imposed on any ADUs that qualify for the protections of Government Code section 66323, subdivision (a). It should be noted that while Government Code section 66323, subdivision (a)(2) has a size limit of 800 square feet, there are no size limits for ADUs described in subdivisions (a)(1), (a)(3), and (a)(4). The City therefore may not impose landscaping requirements on ADUs that qualify for the protections of those subdivisions, whether or not they exceed 800 square feet in size. 4 of 5
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⧫ ⧫ ⧫
CalHDF appreciates the City’s effort to implement state law governing ADU construction.

However, the City should amend its ordinance to ensure that it complies with state law.

CalHDF is a 501(c)3 non-profit corporation whose mission includes advocating for increased access to housing for Californians at all income levels, including low-income households.

You may learn more about CalHDF at www.calhdf.org.

Sincerely,
Dylan Casey
CalHDF Executive Director
James M. Lloyd
CalHDF Director of Planning and Investigations
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CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 25-136 Meeting Date: 3/18/2025
TITLE:

AFFORDABLE HOUSING / DISPOSITION AND DEVELOPMENT AGREEMENT AND GROUND

LEASE, SUBDIVISION OF THE SUBJECT PROPERTY INTO TWO PARCELS, AND MASTER PLAN WITH DENSITY BONUS, FOR THE DEVELOPMENT OF A 70-UNIT SENIOR AFFORDABLE

MULTI-FAMILY RESIDENTIAL PROJECT LOCATED ON A PORTION OF THE SENIOR CENTER PARKING LOT AT 695 WEST 19TH STREET
DEPARTMENT: ECONOMIC AND DEVELOPMENT SERVICES

DEPARTMENT/PLANNING DIVISION
PRESENTED BY: VICTOR MENDEZ, SENIOR PLANNER
CONTACT INFORMATION: VICTOR MENDEZ, SENIOR PLANNER, (714) 754-5276 RECOMMENDATION:

Planning Commission recommends the City Council:

1. Find the project is categorically exempt from the California Environmental Quality Act (CEQA) per CEQA Guidelines Section 15332 (Class 32), In-Fill Development Projects.

2. Approve the Affordable Housing / Disposition and Development Agreement (AH/DDA) (including a Regulatory Agreement) and Ground Lease, subject to such non-substantive changes as may be approved by the City Manager and City Attorney.

3. Approve the Master Plan (PMAP-24-0001) with Density Bonus, and Tentative Parcel Map 2023-160.

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City of Costa Mesa
Agenda Report

77 Fair Drive
Costa Mesa, CA 92626
Item #: 25-136 Meeting Date:
03/18/2025
TITLE: AFFORDABLE HOUSING / DISPOSITION AND DEVELOPMENT

AGREEMENT AND GROUND LEASE, SUBDIVISION OF THE SUBJECT

PROPERTY INTO TWO PARCELS, AND MASTER PLAN WITH DENSITY BONUS, FOR THE DEVELOPMENT OF A 70 -UNIT SENIOR AFFORDABLE MULTI -FAMILY

RESIDENTIAL PROJECT LOCATED ON A PORTION OF THE SENIOR CENTER PARKING LOT AT 695 WEST 19TH STREET

DEPARTMENT: ECONO MIC AND DEVELOPMENT SERVICES

DEPARTMENT/PLANNING DIVISION

PRESENTED BY: VICTOR MENDEZ, SENIOR PLANNER

CONTACT INFORMATION: VICTOR MENDEZ, SENIOR PLANNER (714) 754-5276 RECOMMENDATION:

Planning Commission recommends the City Council:

1. Find the project is categorically exempt from the California Environmental Quality Act (CEQA) per CEQA Guidelines Section 15332 (Class 32), In -Fill Development Projects.

2. Approve the Affordable Housing / Disposition and Development Agreement (AH/DDA) (including a Regulatory Agreement) and Ground Lease , subject to such non-substantive changes as may be approved by the City Manager and the City Attorney.

3. Approve the Master Plan (PMAP -24-0001) with Density Bonus, and Tentative Parcel Map 2023-160.

APPLICANT OR AUTHORIZED AGENT:

The applicant is Tish Kelly, on behalf of Jamboree Housing Corporation (JHC) via an Option-To-Lease Agreement with the City of Costa Mesa.

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BACKGROUND:

Jamboree Housing Corporation (JHC) has filed applications to develop a 70 -unit affordable senior and permanent supportive housing project at the northeast corner of the Senior Center parking lot, which is located at 695 West 19th Street. The project site is directly across from an existing senior housing project known as “The Tower on 19th.” Jamboree Housing Corporation (JHC) is a local non-profit affordable housing developer which has built approximately 100 affordable housing projects throughout California consisting of over 2,000 units since 1990.

Since the 4th Cycle Housing Element in 2008, the Senior Center parking lot has been identified as a contemplated site for affordable senior housing. This concept has been included in both the previous 5th and current 6th Housing Element cycles. Specifically, Housing Program 2D of the Costa Mes a 6 th Cycle Housing Element states “Pursue opportunities for senior housing on the Senior Center parcel identified as part of the candidate housing site analysis and/or other sites within the City.”

On July 21, 2020, the City Council approved an Exclusive Negotiating Agreement (ENA) with JHC. The ENA provided an exclusive opportunity for JHC to study the feasibility of acquiring a long -term leasehold interest at the site for the purpose of developing an affordable senior housing project. While the exclusiv ity of the ENA expired in 2022, conversations between the City and JHC continued.

On February 20, 2024, the City Council reviewed JHC's concept (“screening”) for a senior affordable housing project in the Senior Center’s parking lot. The proposed project at that time included a combination of 60 independent living and permanent supportive housing units located in a podium style four -story building over surface parking. The City Council was supportive of the proposed development plan and also suggested more units and amenities, including pedestrian improvements, and supported a reduction in parking because of the project’s location in a walkable and transit-rich area.

The February 20, 2024, agenda report and meeting video can be viewed at the links below:

Report:
https://costamesa.legistar.com/LegislationDetail.aspx?ID=6504116&GUID=ADB4CE5 A-CCEE-4094-9DA6-10D826406BD9
Video: https://costamesa.granicus.com/player/clip/4088?view_id=14&redirect=true

Subsequently, on July 16, 2024 , the City Council approved an Option to Lease with JHC. The purpose of th e Option was for JHC and the City to negotiate the form and terms of the required Affordable Housing Agreement and for JHC to seek the necessary project approvals. An amendment to the Option to Lease was signed on October 31, 240

2024, extending the term until February 28, 2025. On February 18, 2025, the City Council extended the term of the Option to Lease to April 30, 2025.

On December 9, 2024, the Planning Commission reviewed JHC’s proposal for a 70 - unit senior housing project for residents aged 55 and over . As part of its review, staff recommended that the Planning Commission take the following actions:

1. Find that the lease and use of the City property for affordable senior housing purposes are consistent with the General Plan regarding location, purpose, and extent, as required by California Government Code Section 65402;

2. Recommend City Council approval of the Master Plan (PMAP -24-0001) with Density Bonus and Tentative Parcel Map 2023 -160 (modified to reflect an easement identified as Note 17 for public access and parking areas); and

3. Find that the project qualifies for a categorical exemption from the Ca lifornia Environmental Quality Act (CEQA) under CEQA Guidelines Section 15332 (Class 32), for in-fill development projects.

Public comments at the Planning Commission meeting reflected a mix of project support and concerns. Supporters emphasized the project’s alignment with the General Plan’s Housing Element goals to expand senior housing options, the project site is close to transit and amenities, and the critical need for affordable housing for seniors on fixed incomes. Public concerns included potential parking shortages during construction, increased traffic on West 19th Street, impacts on Senior Center programming, and the reduction of Senior Center parking spaces.

The Planning Commission discussed off -site parking, shared amenities, construction impacts, on -site improvements, and off -site improvements on Pomona Avenue. A condition pertaining to Pomona Avenue improvements has not been included in the draft City Council resolution.

The Planning Commission voted (5-0-2, with Vice Chair Toler and Commissioner Zich absent) to adopt Resolution PC 2024-30 finding that the proposed long-term leasing of real property for the development of senior affordable housing is in conformance with the City of Costa Mesa General Plan, and recommend City Council approval of an updated Tentative Parcel Map with an easement identified as Note 17 for public access and parking areas, Master Plan with Density Bonus, and Affordable Housing / Disposition and Development Agreement ( AH/DDA) (including a Regulatory Agreement) and Ground Lease.

The December 9, 2024, agenda report and meeting video can be viewed at the links below:

Report: CITY OF COSTA MESA - File #: 25-102
241

Video: https://costamesa.granicus.com/player/clip/4198?view_id=14&redirect=true Public Engagement
JHC, in collaboration with City staff, has also held two community outreach meetings to engage residents and stakeholders regarding the proposed project. The first meeting took place on February 1, 2024, at the Senior Center, with approximately 40 -50 attendees, including City staff. The second meeting was held on December 3, 2024, also at the Senior Center, with approximately 40-50 attendees, including City staff. The goal of both events was to gather community input and to consider and address concerns about the project. During both meetings, JHC provided visual presentations and responded to questions from the event attendees. Several of the topics discussed by the attendees included, but was not limited to, the cost of the units, unit eligibility, safety and security of the site, parking impacts from the new housing on the senior center operations, noise and dust during construction and parking and access during the project construction period.

Throughout the planning process, the City and JHC have p rioritized open communication and community engagement to ensure the project aligns with both community expectations and housing needs. Public outreach meetings provided an opportunity for residents to share feedback and express concerns regarding the project’s impacts. In response, JHC and City staff have worked collaboratively to address key issues, including eligibility, safety, parking, and construction access.

The public expressed several concerns regarding the senior affordable housing project.

The public inquiry included clarification of persons/income ranges eligible to rent, what priority would be given to Costa Mesa residents, and how tenants would be qualified.

Additionally, there were concerns about safety, particularly due to the area’s lack of adequate lighting at night. Many also raised worries about losing parking spaces and the availability of parking during construction, as well as the potential impacts to Senior Center programming.

For safety, the project incorporates secured access points, well-lit common areas, and design features enhancing resident security. In response to parking impacts, parking studies confirm adequate availability for both the Senior Center and the housing project, supplemented by a Parking Management Plan to optimize use and mitigate overflow concerns during peak times or special events. Regarding project construction and access to the Senior Center, JHC has coordinated a comprehensive construction parking and access plan, including temporary off -site parking, valet services, and shuttles to minimize disruptions to Senior Center operations. These efforts demonstrate a collaborative approach to balancing community needs with the benefits of the proposed development.

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ANALYSIS:

The Senior Center property is 2.66 -acres in size and is currently occupied by the City of Costa Mesa Senior Center building and parking lot. The subject site is a corner lot located at the southeast corner of West 19 th Street and Pomona Avenue. To the west of the project site (across Pomona Avenue) is Smart & Final, a retail grocery store chain, and to the south are one- and two-story multifamily residential properties along Plumer Avenue. To the east of the project site are existing commercial uses including restaurants and retail.

The project site is designated General Commercial by the City’s Land Use Element of the General Plan and is zoned C1 ( Local Business District). The General Commercial designation is intended for a wide range of commercial uses that serve both local and regional needs such as retail stores, theaters, restaurants, and service establishments.

The C1 zone allows for a wide ra nge of similar goods and services with a focus on serving the local neighborhood. The site is located within the 19 West Urban Plan which was adopted as a residential overlay zone by the Costa Mesa City Council on April 4, 2006. The Urban Plan’s purpose is to incentivize mixed-use development, including the development of residential projects, in Westside Costa Mesa. When a Master Plan application is approved, the underlying zoning district’s development standards are superseded by the 19 West Urban Plan standards.

The project site also resides within a “Measure K” corridor. This Measure, approved by Costa Mesa voters on November 8, 2022, is intended to revitalize commercial corridors by promoting new housing in commercial and industrial areas while preserv ing the character of adjacent residential neighborhoods.

Project Description

The project proposes to subdivide the Senior Center property to create a new 1.5-acre parcel on the eastern portion of the property, currently occupied by the Senior Center parking lot. The development is proposed on the new parcel at the northeast corner of the Senior Center parking lot. The proposed project includes a 93,972 square -foot (including the first -floor parking area), four -story building with 70 residential units designed over a podium garage. The maximum building height is approximately 57.5 feet. The residential building is designed in a Spanish-revival style that includes useable resident balconies, decorative windows, and is designed with changes in elevation plane to provide for articulation and light.

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Figure 1 – Site Plan

As proposed, 35 of the housing units would be restricted to low -income senior households (60% or below of the area median income), and 34 units would be restricted to permanent supportive housing units occupied by very low income senior households (30% or below of the area median income). According to JHC, the supportive housing services would include resident case work and life improvement services such as financial classes and employment assistance; however, would not include any dedicated on-site medical services. One unit will be un -restricted and occupied by an on-site resident manager. One -bedroom units make up 68 of the project’s 70 u nits.

There are three different floor plans for the one-bedroom units ranging in size from 566 square feet to 614 square feet. The two, two-bedroom units, which includes the on-site manager’s unit, are proposed to be 855 square feet.

Required Project Entitlements
Tentative Parcel Map 2023-160

A Tentative Parcel Map (TPM) is required pursuant to Municipal Code Chapter III Planning Applications, Section 13 -28(r) for the proposed subdivision of the existing

2.66-acre property into two parcels. One of the parcels will be for a 1.5-acre portion of the property that JHC proposes to lease from the City, and that can specifically be referenced in other documents where JHC needs to demonstrate “site control” for purposes of obtaining project financing. The TPM inc ludes an easement over the proposed 1.5 -acre parcel (which will be ground leased) to retain public and Senior 244

Center access and parking areas. Notwithstanding the ground lease, ownership of the subject property will remain with the City.

Master Plan PMAP-24-001

A Master Plan is required pursuant to Municipal Code Chapter III Planning Applications, Section 13-28(g) to establish the overall development plan (i.e., site layout, building placement, architecture, floor plans, parking, and landscaping, etc.) f or the proposed residential project. In this case, an approved Master Plan will result in the property’s underlying zoning district regulations being superseded by the 19 West Urban Plan overlay zone provisions.

Density Bonus

The project is proposed as a 100 percent affordable housing development and is therefore subject to State Density Bonus Law provisions. State Density Bonus Law (Government Code Section 65915, et seq.) and Costa Mesa Municipal Code (CMMC) Section 13-152 (Density Bonuses and other Inc entives) entitles applicants to density increases, incentives or concessions, waivers or reductions of development standards, and reduced parking ratios to encourage the construction of affordable housing units.

JHC is not proposing to increase the number of dwelling units pursuant to State Density Bonus Law; however, as a qualifying project, they are entitled to five incentives or concession and an unlimited number of waivers that result in identifiable cost reductions to assist in the development of affor dable units. JHC is requesting approval of four of its five allowed State Density Bonus Law concessions to the following development standards: (1) development lot open space, (2) residential unit open space, (3) front setback, and (4) parking stall width when located adjacent to support column.

Affordable Housing Agreement and Affordable Housing Plan

Because the project has at least 50 for -rent residential units, pursuant to City Council Ordinance 2024 -02 (Costa Mesa Municipal Code Section 13 -333), the applicant is required to submit a draft affordable housing agreement and affordable housing plan with its planning applications. These documents are normally subject to review by the Economic and Development Services Department to determine if they are complete and in substantial conformance with applicable requirements. However, this project is unique in that it will occur on land owned by the City, and therefore, the Affordable Housing Agreement has been integrated into the Disposition and Development Agreement to be considered by the City Council. The Affordable Housing Plan is included in the project submittal.

Affordable Housing/ Disposition and Development Agreement ( AH/DDA) ( including Regulatory Agreement) and Ground Lease

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The proposed project’s location on City property requires City Council approval of a n AH/DDA (including a Regulatory Agreement) and Ground Lease. The draft agreements are included collectively as Exhibit C within the resolution. The terms of the AH/DDA and ground lease are described as follows:

The City and JHC have jointly negotiated and prepare d the AH/DDA and associated documents. There are a few items which remain under discussion and finalization with the Jamboree team. The draft documents include the following components:

Term of Residential Affordability
The AH/DDA requires that the residential development have an affordability term of 99 years, which exceeds the required 55 -year minimum required by State and City regulations.

Developer Obligations
 The AH/DDA requires JHC to be the developer of the senior affordable project. The AH/DDA cannot be assigned to another developer without City consent, which could require renegotiating the agreements.
 JHC must provide the City with Annual Financial Statements within five days of the Effective Date of the AH/DDA and each December 1st thereafter.  JHC must maintain and make necessary repairs to the 1.5-acre ground lease area, including the future residential project, grounds, driveways, parking areas, and landscaping.
 JHC must create a Capital Replacement Reserve and deposi t $300 per Unit per year into the fund, with improvement plans using the funds to be approved by the City Manager.
 JHC must prepare and submit application for Tax Credit Allocation Committee (TCAC) credits as soon as practicable following the Effective Dat e (date of City Council approval).
 JHC must provide notification to the City whenever additional identified funding is approved towards the project.
 JCH must pay a Social Services Fee of $2,203, per unit (with 3% annual increase) for social services with a plan to be approved by City.  Annual Operating Budget to be submitted for review and approval of the City.

The Developer is responsible for securing financing for all phases of the project, including construction, maintenance, repairs, and ongoing operations. The use of City land constitutes the primary financial contribution by the City for this project, with additional financial assistance identified below.

Schedule of Performance
Attachment 4 of the AH/DDA lays out a Schedule of Performance for specific milestones. The Schedule includes timing for when the Developer submits certain information to the City , when the agreements are signed, opening and closing of escrow, and construction schedules.
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Construction of the project must be within 194 days after JHC receives allocation of 9% Tax Credits from the TCAC. Although JHC has indicated that construction will likely last 22 months, the Schedule of Performance requires construction to be completed within three years, to accommodate any unanticipated delays.

Regulatory Agreement
Attachment 5 of the AH/DDA includes provisions for the ongoing operation and management of the residential project at affordable rental rents. For example, JHC must submit to the City for approval the person or entity proposed to be the Property Manager. The Regulatory Agreement also requires the following operational plans to be approved by the City:
 Property management plan, including tenant selection
 Social services program
 Parking management plan

The Regulatory Agreement includes a rental priority section that requires JHC to use best efforts to provide rental priority to residen ts of Costa Mesa, including those displaced by City activity, or those who live and/or work in the City. The Regulatory Agreement also contemplates coordination of residential programming with the Senior Center to allow for special events. There is also a “float up” provision in the event that rental subsidies become unavailable during the lease term, which would allow for temporary rental increases of very low income units (30% AMI) to low income (60% AMI) rents. This could require identifying additional very low income units in the City’s Housing Element or providing rental subsidies.

The Regulatory Agreement includes an Annual Monitoring requirement, including payment of a small monitoring fee to the City for staff time associated with reviewing required submittals and monitoring reports.

Ground Lease
JHC proposes to ground lease the 1.5 acre proposed parcel from the City for 99 years, at an amount of $1 per year. JHC is responsible for any taxes, assessments, impositions, fees, and utilities on the property. The ground lease also provides for “additional rent” to be paid to the City (following repayment of all City loans ) from residual receipts of the project and from proceeds of refinancing. The ground lease includes a re -opener option at 55 years to consider changes related to ground lease rent, social services, and parking access and management plan, if requested by either party. In addition to the AH/DDA, the ground lease requires JHC to construct the project and the ground lease area to be used continually during the lease term for a senior residential project affordable to lower-income seniors. JHC must maintain insurance on the property and comply with laws and governmental regulations. JHC must indemnify the City from and against liability and damages. JHC is responsible for repairing damage to the property and the building . In certain circumstances, such as non - availability of funding, the lease can be terminated, and improvements removed. The 247

ground lease includes terms to address situations if JHC defaults on the lease. A public access, egress and parking easement shall be recorde d against the ground leased site, and these easements will not be subordinated to any other liens on the leased property.

At the termination of the ground lease, following a valid and recordable quitclaim deed, all project improvements will become property of the City, free and clear or all liens, encumbrances, and deeds of trust, excepting those on title with the consent or request of the City. The project improvements must be in well -maintained and habitable condition at this time, except for reasonable wear and tear. There are provisions for City inspection of the property.

City Financial Assistance
The City of Costa Mesa is providing financial assistance to this project in several different ways. In addition to the ground lease of $1 per year fo r use of City land, the City is offering the following: 1) initial deferral of City permit and development impact fees of up to $700,000, to be repaid in a loan; 2) potential use of HOME funds (subject to a competitive application process) in the amount of $1.5 million, which, if approved, would be in the form of a loan to be repaid.

Site Parking & Senior Center Access

Parking
As a 100 -percent affordable housing project, State Density Bonus Law entitles the proposed development to be exempted from the requirement of parking. Pursuant to the 19 West Urban Plan, residential projects are typically subject to a parking ratio requirement of 1.5 parking spaces for each one-bedroom unit, and two parking spaces for each two -bedroom unit, which would have resulted in a 141 parking space requirement (106 tenant spaces and 35 guest spaces). The project site is also subject to Assembly Bill (AB) 2097, which prohibits the City from imposing minimum parking requirements for developments located within one-half mile of a major transit stop (there are two major transit stops located within one-half mile of the project site). As such, the City cannot require parking spaces under its local land use regulations. However, the City may require parking through its ground lease.

The applicant is proposing 133 parking spaces on -site, including 59 spaces located within the footprint/podium of the new bui lding and 74 parking spaces located in the surface parking lot (see Exhibit 1). All surface parking areas will remain open, with drive aisles fully interconnected, ensuring seamless access without any gates restricting entry from the streets. Additionally, roll-up garage gates will be installed at the podium garage. These gates will remain open during Senior Center business hours, providing access for residents, senior center employees, and guests. After business hours, the gates will be closed for security purposes but can be accessed with a key fob for 248

residents and city employees . All parking spaces and drive aisles will remain interconnected to maintain efficient flow throughout the site.

Exhibit 1 Parking Distribution Summary

Parking
Current
Number of Parking Spaces Provided
145
Parking Location
Covered - Under Podium 59
(40 reserved for housing units)
Surface - Jamboree Site 66
Surface - Senior Center Site 8
Total 133

Construction Phasing Plan
The applicant indicates that the project will be constructed in two phases spanning a period of 22 months from close of escrow, tentatively November 2025 until September of 2027. “Phase 1” involves demolition and site grading, along with the installation o f infrastructure, start of public right -of-way improvements, and construction of the building’s podium structure. “Phase 2” will focus on modifications to ingress and egress, completion of right-of-way improvements, and finalization of the building and sit e work including landscaping.

JHC is committed to ensuring that the project is constructed efficiently and in a timely manner (see the below Exhibit 2), in order to meet funding deadlines and program requirements. To minimize disruptions, JHC’s management team and construction managers will maintain open communication with City staff and the Senior Center operators.

Exhibit 2: Construction Milestones
Milestone Projected Timing
Escrow Closing November 2025
Construction Start November 2025
Construction Completion September 2027
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Lease Up Begins September 2027
100% Qualified Occupancy February 2028

Parking Management to Maintain Access to Senior Center During Construction

Recognizing that construction activity will impact how members utilize the Senior Center during the temporary construction period, JHC has prepared a construction parking management plan. As contemplated by JHC, a various amount of site parki ng will always be available during construction based on construction activities, and the specific phases of construction. In response to Senior Center parking limitations, JHC will also actively engage with nearby businesses, such as “Smart & Final”, and property owners like “The Lighthouse Church” to explore potential off -site parking solutions during the project’s construction phases. A construction parking management plan is currently being reviewed by City staff and incorporates the use of vans to shut tle individuals to and from remote parking lot(s) on demand, and the use of free valet. Staff and JHC are analyzing the need to provide sufficient parking that is secure and ADA - compliant and provides clear wayfinding signage. During construction, the park ing situation will also be actively advertised to Senior Center users and managed by a professional parking operation service. JHC has also committed to having regular “check-ins” with Senior Center staff to evaluate the success or challenges of the shuttle system and to make any adjustments immediately in response to the needs of the users of the Senior Center. JHC is also committed to being a good neighbor and will engage with the Senior Center and adjacent community prior to commencing construction to share schedules and seek collaborative input on how to resolve potential concerns.

ENVIRONMENTAL DETERMINATION:

As further detailed in the Planning Commission staff report, the project qualifies for a Class 32 exemption pursuant to CEQA as it is an in-fill development with no anticipated significant impacts in regard to traffic, noise, air quality, or water quality. Parking studies confirm sufficient availability to meet combined demand from the Senior Center and housing project. Construction impacts will be managed through a parking and access plan, ensuring minimal disruption to Senior Center operations. Lastly, the Public Works Department and utility companies have reviewed the proposed development and found that it can be adequately served by all required utilities and public services. Consequently, it can be determined that the project can be exempted from further CEQA action under the Class 32 exemption.

ALTERNATIVES:

The City Council may choose not to move forward with the proposed Affordable Housing / Disposition and Development Agreement (AH/DDA) (including Regulatory Agreement) and Ground Lease, Tentative Parcel Map, and Master Plan with Density Bonus; 250

however, this project would create a valuable housing opportunity in Costa Mesa, addressing the needs of the growing senior population and contributing to the diversity of housing options, while enh ancing the health, safety, and well-being of the Westside community by providing secure, stable housing for seniors, promoting social connectivity, and improving access to essential services and amenities.

The City Council could move forward but request r evisions to the proposed Affordable Housing / Disposition and Development Agreement (AH/DDA) (including Regulatory Agreement) and Ground Lease, Tentative Parcel Map, and Master Plan with Density Bonus.

The City’s decision as to whether to move forward with the Ground Lease and AH/DDA is completely discretionary as the City owns the property. If the Ground Lease and AH/DDA are approved, however, should the City Council deny the project approvals or direct a reduction in the proposed density of the housing project, and the development is determined to be consistent with applicable, objective general plan, zoning, and subdivision standards and criteria, including design review standards, then the City Council must make the following written findings: (1) The housing development project would have a specific, adverse impact upon the public health or safety unless the project is disapproved or approved upon the condition that the project be developed at a lower density; and (2) There is no feasible method to satisfactorily mitigate or avoid the adverse impact, other than the disapproval of the housing development project or the approval of the project upon the condition that it be developed at a lower density. (Feasible means capable of being accomplished in a successful manner within a reasonable period of time, taking into account economic, environmental, social, and technological factors.)

FISCAL REVIEW:

As required by the Ground Lease, the City will receive a nominal lease payment of one dollar per year from the developer for a period of 99 years. This nominal lease payment is not intended to generate income but rather to provide consideration for the lease to secure the developer’s access to the property during the lease term to obtain funding and undertake construction and operation of the affordable housing project. The senior affordable multi -family residential apartment project is subject to various permit and Development Impact Fees totally approximately $700,000, which are one -time fees allocated to pay costs relating to issuance of permits and to fund specific improvements to infrastructure throughout the City. The City anticipates offering an initial deferral of the following fees for: 1) approximately $350,000 for Park Development Impact Fees, or a rate of $5,000 per unit for the development of the 70 units; 2) estimated Traffic Impact Fee of $51,710; 3) an approximate Drainage Impact Fee of $57,530; 4) and an approximate Fire System Development Fee of $27,000. The project would also require permit fees of approximately $220,000 which would also be deferred. The deferred fees would be repaid over the term of the lease pursuant to a Promissory Note and Deed of Trust from net operating income.
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Should the developer successfully apply for available HOME funds, these funds would also be repaid from net operating income. Additional rent will be paid from net operating income after loans from the City are fully repaid.

LEGAL REVIEW:

The City Attorney’s Office has reviewed this report and approves it as to form. The City Attorney’s Office also negotiated and drafted the terms of the Affordable Housing / Disposition and Development Agreement, Promissory Note, Deed of Trust, Regulatory Agreement and Ground Lease.

PUBLIC NOTICE:

Pursuant to Title 13, Section 13-29(d), of the Costa Mesa Municipal Code, three types of public notification have been completed no less than 10 days prior to the date of the public hearing:

4. Mailed notice. A public notice was mailed to all property owners and occupants within a 500 -foot radius of the project site on Thursday, March 6, 2025. The required notice radius is measured from the external boundaries of the property.

5. On-site posting. A public notice wa s posted on each street frontage of the project site on Friday, March 7, 2025.

6. Newspaper publication. A public notice was published once in the Daily Pilot newspaper on Saturday, March 8, 2025.

Any public comments received prior to the March 18, 2025, City Council meeting, may be viewed at this link: CITY OF COSTA MESA - Calendar (legistar.com)

CITY COUNCIL GOALS AND PRIORITIES:

This item supports the City Council Goals to “Diversify, stabilize and increase housing to reflect community needs”, and the City Council Strategic Objective to “Present to the City Council for consideration a development plan and land use documentation for affordable senior housing at the Senior Center site”.

CONCLUSION:

The proposed project directly supports the City Council’s goal to diversify, stabilize and increase housing to reflect community needs, by providing much -needed senior affordable housing. The project provides opportunities for a special needs group (senior population) to remain in the community, close to vital services, and surrounded by a supportive environment. Not only does the project address housing shortages for a vulnerable population, but it also reflects Costa Mesa’s commitment to inclusivity and community revitalization. Lastly, housing has been contemplated at this site since the original development of the Senior Center, and affordable housing was specifically 252

identified to be facilitated at this site by the City’s adopted General Plan Housing Element.

The Planning Commission reviewed the proposed senior affordable housing project and unanimously determined that the proposed development was in conformity with the General Plan and recommended that the City Council approve the project.

Therefore, it is recommended that the City Council:

1. Find the project is categorically exempt from the California Environmental Quality Act (CEQA) per CEQA Guidelines Section 15332 (Class 32), In -Fill Development Projects.

2. Approve the Affordable Housing / Disposi tion and Development Agreement (AH/DDA) (including Regulatory Agreement) and Ground Lease, subject to such non-substantive revisions as are approved by the City Manager and the City Attorney.

3. Approve the Master Plan (PMAP-24-0001) with Density Bonus, and Tentative Parcel Map 2023-160.

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ATTACHMENT 1

Resolution No. 2025-xx Page 1 of 32

RESOLUTION NO. 2025-xx

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA,

CALIFORNIA, APPROVING THE SUBDIVISION, MASTER PLAN WITH DENSITY

BONUS, AND AFFORDABLE HOUSING / DISPOSITION AND DEVELOPMENT AGREEMENT AND GROUND LEASE FOR THE DEVELOPMENT OF A 70 -UNIT

SENIOR AFFORDABLE MULTI -FAMILY RESIDENTIAL PROJECT LOCATED O N A PORTION OF THE SENIOR CENTER PARKING LOT AT 695 WEST 19TH STREET

THE CITY COUNCIL OF THE CITY OF COSTA MESA HEREBY FINDS AND DECLARES AS FOLLOWS:

WHEREAS, a Tentative Parcel Map, Master Plan, and Density Bonus Application was filed by Tish Kelly, on behalf of Jamboree Housing Corporation (JHC), requesting approval of the following: Tentative Parcel Map, Master Plan, and Density Bonus to facilitate the development of a 70- unit affordable senior and supportive housing project.

The project proposes to develop an approximate 93,972 square- foot, four story building on the Costa Mesa Senior Center parking lot (a City owned property) located at 695 West 19th Street;
WHEREAS, on July 21, 2020, the City Council approved an Exclusive Negotiating Agreement (ENA) with JHC to study and determine the feasibility for the right to acquire a long- term leasehold for an affordable senior housing project to be developed on a portion of the City’s Senior Center parking lot; WHEREAS, the ENA was approved for a one- year term with an allowable 120- day extension, which was granted by the City, but ultimately expired in 2022; WHEREAS, the proposed mixed-use project is located within the boundary of the 19 West Urban Plan, and the Costa Mesa Municipal Code (CMMC) Section 13- 28(g)(4) and provisions of the 19 West Urban Plan requires that a screening be conducted for residential or mixed-use development projects in a mixed-use overlay district; WHEREAS, a screening provides awareness of the application to the community and gives the City Council an opportunity to offer comments on the merits and appropriateness of the proposed development before the applicant submits the formal planning application(s);
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Resolution No. 2025-xx Page 2 of 32

WHEREAS, a screening for Urban Master Plan UMP -21-007 was conducted by the City Council February 20, 202 4, pursuant to the requirements of the 19 West Urban Plan:

WHEREAS, the Master Plan proposes a mixed- use development and is consistent with and meets the objectives of the 19 West Urban Plan as mixed- use developments are encouraged and is compatible with the existing commercial and residential uses nearby;
WHEREAS, on August 6, 2024, the City Council approved the Affordable Housing Ordinance (Ordinance No. 2024-02);
WHEREAS, per the Affordable Housing Ordinance (Ordinance No. 2024- 02), the project requires an Affordable Housing Plan and Affordable Housing Agreement as the project meets the affordable housing requirem ents in that the development proposes more than 50 rental units;
WHEREAS, pursuant to State Density Bonus Law, the project includes a request for a density bonus based upon being a 100% senior affordable housing project, excluding the manager’s unit, pursuant to Government Code Section 65915(b)(1)(G); WHEREAS, of the 69 affordable units, 34 units will be dedicated to seniors with incomes at or below 30% of the area median income (AMI), and 35 units will be dedicated to seniors with incomes at or below 60% of the AMI; WHEREAS, State Density Bonus Law entitles affordable housing projects to certain waivers, incentives and concessions.

WHEREAS, t he applicant has proposed to use four incentives/concessions to deviate from the following development standards: reduced parking space next to columns; reduced front building setback (along West 19 th Street); reduced open space; and reduced residential open space;
WHEREAS, the Planning Commission is the recommending body and the City Council is the final decision -maker for the Tentative Parcel Map, Master Plan, Density Bonus and other associated regulatory agreements;
WHEREAS, a duly-noticed public hearing was held by the Planning Commission to make a project recommendation to the City Council on December 9, 2024 with all persons having the opportunity to speak for and against the proposal; 255

Resolution No. 2025-xx Page 3 of 32

WHEREAS, after reviewing the project and c onsidering public comments, the Planning Commission recommended City Council approval of the project; WHEREAS, Pursuant to California Government Code Section 65402(a) , “If a general plan or part thereof has been adopted, no real property shall be acquired by dedication or otherwise for street, square, park or other public purposes, and no real property shall be disposed of, no street shall be vacated or abandoned, and no public building or structure shall be constructed or authorized, if the adopted general plan or part thereof applies thereto, until the location, purpose and extent of such acquisition or disposition, such street vacation or abandonment, or such public building or structure have been submitted to and reported upon by the planning agency as to conformity with said adopted general plan or part thereof.”
WHEREAS, t he long -term leasing of the Senior Center property to a private entity by the City is subject to Government Code Section 65402(a).

WHEREAS, pursuant to Section 65402(a), the Planning Commission (“Planning Agency”) on December 9, 2024, determined that the project and specifically the disposition of the property for a long- term lease for affordable senior housing purposes is in conformance with the City’s General Plan in regard to location, purpose and extent:

Location of the Ground Lease:

The proposed property ground lease area is located in the eastern portion of the City on the City’s Senior Center Parking lot . The proposed ground lease location for the development of affordable senior housing units is compatible with the adjacent Senior Center in that both the existing use and proposed use serve the same populations. In addition, most of the services provided by the City’s Senior Center at this location caters to the senior population that would be housed at the proposed affordable senior housing development. There is also another senior housing development (“Tower on 19 th”) located nearby at 678 West 19 th Street which includes an affordability covenant and Section 8 housing units; therefore, the proposed location of the development is neighborhood compatible. The location of the property ground lease disposition is consistent with numerous General Plan policies regarding affordable housing, and providing for the development of a mix and balance of housing opportunities, in consideration of the need of the business 256

Resolution No. 2025-xx Page 4 of 32

and residential segments of the community . Lastly, the site is identified in the City’s General Plan Housing Element as a location to plan for senior housing.

Purpose of the Ground Lease:

The purpose of the ground lease is consistent with the General Plan Housing Element Program 2D regarding development of affordable senior housing on the City’s Senior Center site specified specifically by the City’s Housing Element, and the purpose of numerous Housing Element General Plan polices such as, but not limited to, Housing Element Policy 2.1 which states to “facilitate the development of housing that meets the needs of all segments of the population including affordable housing and households with specialized needs ”, and Housing Element Policy 2- 4 which states to “e ncourage housing programs and future actions that address the need for affordable housing options as well as the housing needs of Costa Mesa’s senior resident population and the large households’ population”.

Extent of the Ground Lease:

The proposed ground lease is for the use and development of a portion of the surface parking lot located at the existing 2.66- acre City -owned Senior Center property at 695 West 19th Street. The extent of the use and lease area would be for the purposes of providing affordable senior housing units. The City of Costa Mesa General Plan Housing Element Program 2D specifies to “facilitate development of senior housing options” and specifically identifies the Senior Center as a development option that is to be considered for this use. The City’s Housing Element specifies that 60 affordable units shall be provided, and the application provides for more than 60 units and therefore the extent of the ground lease and associated project more than complies with the General Plan.

WHEREAS, a duly-noticed public hearing was held by the City Council on March 18, 2025 with all persons having the opportunity to speak for and against the proposal; WHEREAS, pursuant to the California Environmental Quality Act (CEQA), the project is exempt from the provisions of the California Environ mental Quality Act (CEQA) per Section 15332 (Class 32), for In-Fill Development projects; WHEREAS, the CEQA categorical exemption for this project reflects the independent judgement of the City of Costa Mesa.
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WHEREAS, pursuant Government Code Section 65863, the “No Net Loss Law” cities are required to ensure that housing development opportunities remain available throughout the housing element planning period to accommodate a jurisdiction’s regional housing needs assessment (RHNA). This Government Code further stipulates that “If the city approves a development of a parcel identified in its Housing Element sites inventory with fewer units than shown in the Housing Element, it must either make findings that the Housing Element’s remaining sites have sufficient capacity to accommodate the remaining unmet RHNA by each income level , or identify and make available sufficient sites to accommodate the remaining unmet RHNA for each income category.”
WHEREAS, the Senior Center property is identified in the City’s Housing Element Sites Inventory List to provide 40 very low -income units and 20 low -income units, totaling 60 units , and the project proposes 34 very low -income units, and 35 low - income units, resulting in a site shortfall of six very-low-income units.

WHEREAS, the required finding pursuant Government Code Section 65863 can be made as the City’s Housing Element “Site Analysis” includes a surplus of more than six very-low-income housing unit s which will ensure that the Housing Element’s remaining sites have sufficient capacity to accommodate the remaining unmet RHNA by each income level.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF COSTA MESA HEREBY RESOLVES as follows: based on the evidence in the record and the findings contained in Exhibit A, and conditions as shown in Exhibit B, the City Council hereby finds that the proposed project is in conformance with the General Plan and approves the Tentative Parcel Map, Master Plan with Density Bonus, Affordable Housing / Disposition and Development Agreement , and Ground Lease, as shown in Exhibit C, attached hereto.

PASSED AND ADOPTED this 18
th day of March, 2025.

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Resolution No. 2025-xx Page 6 of 32

_____________________________
John Stephens, Mayor

ATTEST: APPROVED AS TO FORM:

________________________ _____________________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss

CITY OF COSTA MESA )

I, BRENDA GREEN, City Clerk of the City of Costa Mesa, DO HEREBY CERTIFY that the above and foregoing is the original of Resolution No. 202 4-xx and was duly passed and adopted by the City Council of the City of Costa Mesa at a regular meeting held on the 18
th day of March, 2025, by the following roll call vote, to wit:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of Costa Mesa this 19
th day of March, 2025.

___________________________
Brenda Green, City Clerk
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Resolution No. 2025-xx Page 7 of 32

EXHIBIT A

FINDINGS

A. The proposed project complies with Costa Mesa Municipal Code Section 13 - 29(g)(13) – “Parcel Map Findings” because:

Finding: The creation of the subdivision and related improvements is consistent with the general plan, any applicable specific plan, and this Zoning Code.

Facts in Support of Finding: The creation of the subdivision aligns with the General Plan by promoting residential development that meets the community's housing needs. Additionally, the subdivision complies with the local Zoning Code and State laws by conforming to established development regulations. Overall, this project supports the City's vision for balanced development and affordable senior housing.

Finding: The proposed use of the subdivision is compatible with the general plan.

Facts in Support of Finding: The proposed development aligns with the General Plan by addressing the critical need for affordable housing options for seniors wit
hin the community. Located in the 19 West Urban Plan area, this development promotes the C ity's goals of increasing residential density while enhancing accessibility to essential services and transportation. Furthermore, the project supports the General Plan's emphasis on creating inclusive neighborhoods, thereby fostering a supportive environment for vulnerable populations and contributing to the overall well-being of the community.

Finding: The subject property is physically suitable to accommodate the subdivision in terms of type, design and density of development, and will not result in substantial environmental damage nor public health problems, based on compliance with the Zoning Code and general plan, and consideration of appropriate environmental information.

Facts in Support of Finding: The proposed development will be situated in an urbanized area, specifically on a portion of the existing Senior Center's asphalt parking lot. The site meets the minimum lot size requirement and is a typical shaped lot that can accommodate the building and necessary utilities. The soils are consistent with those of the existing Senior Center and nearby apartment building across West 19 th Street, consisting of soil with no significant differences and/or known contaminants. There are no wildlife habitat or bodies of water on the site or nearby, further ensuring that the development will not result in substantial environmental damage. This strategic location allows for the efficient use of already developed land, minimizi
ng the need for additional site
disturbance and preserving green spaces elsewhere in the community. By repurposing this underutilized area, the project will enhance the functionality of 260

Resolution No. 2025-xx Page 8 of 32

the Senior Center while providing much-needed affordable housing for seniors.

Finding: The design of the subdivision provides, to the extent feasible, for future passive or natural heating and cooling opportunities in the subdivision, as required by State Government Code section 66473.1.

Facts in Support of Finding: The design of the proposed development thoughtfully considers the orientation of the lot, aligning in a manner that maximizes solar exposure, ensuring natural passive heating during colder months. Additionally, the layout incorporates an outdoor courtyard at the center of the development and green spaces to promote natural airflow and cooling, minimizing the need for artificial heating or air conditioning . This approach reflects the principles outlined in State Government Code section 66473.1.

Finding: The division and development will not unreasonably interfere with the free and complete exercise of the public entity and/or public utility rights - of-way and/or easements within the tract.

Facts in Support of Finding: The proposed development has been designed to ensure that all existing public entity and utility rights -of-way and easements within the subdivision remain accessible and unobstructed. Coordination with utility providers and the Ci ty will be maintained throughout the development process to avoid any disruptions and ensure that essential services can continue to operate efficiently.

Finding: The discharge of sewage from this land division into the public sewer system will not violate the requirements of the State Regional Water Quality Control Board pursuant to Division 7 (commencing with State Water Code section 13000).

Facts in Support of Finding: The applicant has submitted a Preliminary Water Quality Management Plan (PQWMB), which demonstrates that the project will implement best management practices to effectively manage wastewater and prevent any violations of water quality standards.

B.

The proposed project complies with Costa Mesa Municipal Code Section 13 - 29(g)(5) “Master Plan Findings” because:

Finding: The master plan meets the broader goals of the G eneral Plan, any applicable specific pla n, and the Zoning Code by exhibiting excellence in design, site planning, integration of uses and structures and protection of the integrity of neighboring development.

Facts in Support of Finding: The proposed development is consistent with the broader goals of the General Plan by promoting housing opportunities , as specified in General Plan Land Use Policy LU-1.1, Housing Element Policies HOU-2.1, and Housing Element Policy 2 -4. The project is designed to integrate 261

Resolution No. 2025-xx Page 9 of 32

with the existing Senior Center, enhanc ing community services and accessibility, which supports the 19 West Urban P lan’s emphasis on mixed- use development. Additionally, the design reflects high- quality architectural standards and thoughtful site planning that maintain the character and integrity of the surrounding residential and commercial areas. By prioritizing community amenities, the development fosters a sense of place while contributing to the overall livability of the highly urbanized environment.

Finding: The Master plan findings can be made for mixed -use development projects in the mixed -use overlay district identified in Chapter V, Article 11, mixed-use overlay district.

Facts in Support of Finding: The proposed development complies with the master plan findings outlined in Chapter V, Article 11 of the Mixed- Use Overlay District, which are further detailed in the following section.

Finding: As applicable to affordable multi -family housing developments, the project complies with the maximum density standards allowed pursuant to the general plan and provides affordable housing to low and very-low income households, as defined by the California Department of Housing and Community Development. The project includes long- term affordability covenants in compliance with State law.

Facts in Support of Finding: The proposed development of 69 units of affordable senior and permanent supportive housing complies with the General Plan’s requirements by providing affordable housing to low and very -low-income households, as defined by the California Department of Housing and Community Development. While the 19 West Urban Plan does not establish specific density standards, the project adheres to the required Floor Area Ratio (FAR) guidelines, ensuring efficient use of the site. Of the 69 affordable units, 34 are set aside for seniors with incomes at or below 30% of the Area Median Income (AMI), while 35 units are designated for seniors with incomes at or below 60% of the AMI.

Furthermore, all units will be guaranteed to remain affordable for a minimum of 55 years through the associated regulatory agreements.

C.

The proposed project complies with Costa Mesa Municipal Code Section 13 -

83.53(c) - Master Plan Findings for Mixed-Use Overlay District” because:

Finding: The project is consistent with the general plan, meets the purpose and intent of the mixed- use overlay district, and the stated policies of the urban plan as applicable.

Facts in Support of Finding: The proposed development is consistent with the General Plan and meets the purpose and intent of the mixed- use overlay district by integrating residential uses within the context of the existing Senior Center. This project not only provides muc h-needed housing for seniors but also complements 262

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the area’s revitalization goals by enhancing the mix of uses, promoting community amenities, and encouraging accessibility to nearby commercial services.

Additionally, the development supports the urban plan’s policies by maximizing site utilization without exceeding the capacity of the General Plan transportation system, ultimately attracting more residents and fostering a vibrant, mixed- use environment.

Finding: The project includes adequate resident -serving amenities in the common open space areas and/or private open space areas in areas including, but not limited to, patios, balconies, roof terraces, walkways, and landscaped areas.

Facts in Support of Finding: The proposed development includes a variety of resident-serving amenities within both common and private open space areas.

Ground-level amenities facing 19th Street will feature office spaces, a community room, media lounge, and a dog run, while the upper levels will offer an outdoor courtyard, fitness center, laundry room, and library, fostering a sense of community among residents. Although the project does not meet the minimum development lot open space requirement or the residential open space per dwelling unit, State density bonus law allows concessions, and therefore the project would not need to comply with these standards.

Finding: The project is consistent with the compatibility standards for residential development in that it provides adequate protection for residents from excessive noise, odors, vibration, light and glare, and toxic emanations.

Facts in Support of Finding: T he project includes STC -rated windows and sound insulation materials to effectively mitigate external noise, ensuring that residential interior noise levels remain within acceptable limits . A dditionally, proper ventilation systems and landscaping buffers are incorporated to control odors from nearby commercial areas. Furthermore, the development adheres to environmental regulations that limit exposure to toxic emanatio ns, while lighting design employs shielding and strategic placement to minimize light spill and glare.

Finding: The proposed residences have adequate separation and screening from adjacent commercial/industrial uses through site planning considerations, structural features, landscaping, and perimeter walls.

Facts in Support of Finding: The project incorporates a minimum setback from adjacent commercial and residential properties, enhancing separation and reducing potential conflicts. Additionally, the des ign includes landscaping buffers, such as trees and shrubs, that provide natural screening to minimize visual impact and enhance privacy for residents. Structural features, including soundproofing measures and wall s, further ensure that the residential environment remains comfortable and secure, effectively mitigating any adverse effects from surrounding 263

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D.

uses.

The proposed project complies with Costa Mesa Municipal Code Section 13- 29(g)(3) – “Density Bonus and Concession or Incentive Findings” because:

Finding: The request is consistent with State Government Code section 65915 et. seq. regarding density bonuses and other incentives, the general plan, any applicable specific plan, and Chapter IX special regulations, Article 4 density bonuses and other incentives.

Facts in Support of Finding: The proposed development of affordable senior and permanent supportive housing at 695 West 19th Street qualifies for five incentives and unlimited waivers or reductions of development standards, as it provides a 100 percent affordable housing development
and is located within
half a mile of a major transit stop. Excluding the manager's unit, 69 of the units will be available to seniors with income levels ranging from 30% to 60% of the Area Median Income (AMI), with 34 units designated for seniors experiencing homelessness and 35 units set aside for those at or below 60% of the AMI. The requested concessions, including a reduction of the open space requirement to approximately 5%, a residential open space reduction to approximately 169 SF per unit, a front setback reduction to 0' -6", and zero additional width for parking spaces adjacent to a column
are necessary to ensure the project's feasibility
while providing vital housing for low -income seniors. These concessions align with the goals of the General Plan, and the 19 West Urban Plan, promoting affordable housing development in a highly urbanized area.

Finding: The requested density bonus and incentive or concession constitute the minimum amount necessary to provide housing at the target rents or sale prices and/or a child-care facility.

Facts in Support of Finding: The requested density bonus and incentives for the proposed development constitutes the minimum necessary to provide affordable housing at target rents, as the project aims to serve a total of 70 units, exceeding the City’s Housing Element Sites Inventory capacity for 60 units at the subject site. While the number of very low -
income units has been slightly
reduced to 34, the number of low -income units has significantly increased to 35.

According to the applicant and including State and federal funding sourcing, the concessions are required to allow the below market rate project to feasibly
proceed economically.

Finding: The granting of the incentive or concession is required in order to provide for affordable housing costs, as defined in Health and Safety Code section 50052.5 or for rents for the targeted units.

Facts in Support of Finding: The granting of the requested concessions is essential to the feasibility of the proposed 100% affordable senior residential 264

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development, as these modifications enable the project to provide critical housing for low -income seniors in Costa Mesa within a project scope and budget that can achieve the minimum and competitive criteria to obtain applicable grant funding . Specifically, the reductions in open space and front setback requirements allow for enhanced amenities and more efficient use of space, ultimately ensuring that the project can deliver affordable rents consistent with Health and Safety Code section 50052.5.

Finding: The g ranting of the incentive or concession and/or the waiver or reduction of development standards does not have a specific, adverse impact, as defined in paragraph (2) of subdivision (d) of Government Code section 65589.5 upon health, safety, or the physical environment, and for which there is no feasible method to satisfactorily mitigate or avoid the specific adverse impact.

Facts in Support of Finding: The proposed concessions support the community's health, safety, and physical environment by facilitating the addition of residential units in an urbanized area designated for such development, as outlined in the City’s Housing Element and the applicable 19 West Urban Plan.

These additional units will help achieve a better balance between jobs and housing, leveraging the proximity to schools, parks, retail centers, and employment opportunities. Moreover, the site is already surrounded by existing senior affordable residential apartments and can utilize existing infrastructure, ensuring that the development will
not encroach on land reserved for open
space. The reduction in open space, front yard setback and required parking space width adjacent to a structural column are not anticipated to result in impacts to public health, safety or the physical environment.

Finding: The granting of the incentive or concession and/or the waiver or reduction of development standards does not have an adverse impact on any real property that is listed in the California Register of Historical Resources.

Facts in Support of Finding: The proposed project is located on a site that is not listed in the California Register of Historical Resources and is neither adjacent to any such properties, ensuring that the granting of the requested incentives and concessions will not adversely impact any historically significant real property.

Pursuant to Senate Bill 166 [Government Code Section 65863], the “No Net Loss Law” was amended to ensure that housing development opportunities remain available throughout the housing element planning peri od to accommodate a jurisdiction’s regional housing needs assessment (RHNA). One aspect of this amended legislation requires that “If the city approves a development of a parcel identified in its Housing Element sites inventory with fewer units than shown in the Housing Element, it must either make findings that the Housing Element’s remaining sites have sufficient capacity to accommodate the remaining unmet 265

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RHNA by each income level [emphasis added] or identify and make available sufficient sites to accomm odate the remaining unmet RHNA for each income category”.

• The proposed Affordable Senior Housing project includes a total of 70 units, exceeding the City’s Housing Element Sites Inventory capacity for 60 units for the subject site.

However, according to the City’s adopted Housing
Element “Sites Analysis” (Appendix B), the Senior Center property is identified with providing 40 very -low-income units and 20 low -income units.

The proposed Senior Housing affordable project includes 34 very low - income units and 35 low -income units, and therefore is deficient six very - low-income units. Although the development as proposed would be deficient very-low-income units (as specified in the City Housing Element “Sites Analysis”), the City’s Housing Element proposes a 96 unit surplus of very - low income units beyond the required RHNA specified very -low income category and therefore a finding can be made that the City’s adopted Housing Element’s remaining sites have sufficient capacity to accommodate the remaining unmet RHNA by each income level.

E. California Environmental Quality Act

California Environmental Quality Act (CEQA) - Class 32 exemption applies to in -fill development projects (CEQA Guidelines §15332). A project can qualify for a Class 32 exemption if the proposed project: (1) is consistent with applicable General Plan designation and all general plan policies, as well as with applicable zoning designation and regulations; (2) the proposed development occurs within City limits on a project site of no more than fi
ve (5) acres substantially surrounded by urban
uses; (3) the project site has no value as habitat for endangered, rare, or threatened species; (4) the approval of the project would not result in any significant effects relating to traffic, noise, air quality, or water quality; and (5) the site can be adequately served by all required utilities and public services (CEQA Guidelines §15332). The project is consistent with General Plan policies and regulations. The subject site is situated in a “built-out” urbanized environment and spans 1.5 acres, encompassing a section of the existing developed Senior Center's asphalt parking lot. The subject site does not have any known habitat for endangered, threatened, or rare species of wildlife. Traffic, noise, air quality, and water quality assessments have been conducted to evaluate the potential impacts of the proposed development, and no significant impacts have been identified. In support of this conclusion, several assessments were conducted relative to traffic, air quality, water quality and noise. A summary of those assessments is provided below:

Traffic
The addition of 70 units represents a net increase in the number of residences in the area. Thus, the City’s Transportation Division completed a trip generation analysis to compare the proposed 70- unit project with existing transportation conditions. The City requires a traffic impact analysis (TIA) for all development 266

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projects that generate 50 or more net vehicle trips that end during a peak hour.

The proposed pr oject does not meet this threshold since the anticipated additional peak AM and PM hours will result in less than 50 vehicle trips (14 and 17.5 peak hour trips, respectively). Therefore, a TIA is not required. Based on this analysis
, the Transportation Division concluded that there will be nominal traffic impacts from the proposed project and that traffic generated by the project can easily be accommodated within Costa Mesa’s circulation network.

Air Quality
The residential use is also expected to have nominal air quality impacts due to its small-
scale. The development will consist primarily of residential units, which typically generate lower emissions compared to larger commercial projects. Therefore, with less than 227 daily trips, the project’s daily operational contributions to air quality impacts would be negligible. From a construction standpoint, potential air quality impacts are given more weight when being developed on a project site that is five acres or more (pursuant to the South Coast Air Qual ity Management District (SCAQMD)) . In this case, the development site would be approximately 1.5 acres and it is relatively flat and will not require significant site grading. Because this site is significantly less than the SC AQMD threshold, it is reasonable to conclude that construction- related air quality impacts will be minimal and not raise to a level that would violate any State or local air quality standards . In addition, staff is not aware of any other construction activities off -site that are plann ed in the vicinity that would contribute to a cumulative air quality impact. Notwithstanding this, the project will be conditioned to incorporate measures to minimize emissions during construction and operation to ensure compliance with standards set by the SCAQMD.

Water Quality
The applicant has submitted a preliminary water quality management plan (PWQMP), which confirmed that there are no existing contamination plumes on the site or in the surrounding area. This plan also conceptually addresses how the project will filter/clean water originating from the site prior to its downstream release to ensure the project does not contribute to a deceased level of water quality. Because of the measures that will be implemented, the project is not anticipated to have an adverse water quality
impact. To ensure compliance
with applicable water quality standards, the project will be conditioned to provide a final WQMP for City approval prior to issuance of permits and all WQMP structural and non- structural best managem ent practices will be implemented prior to building permit final.

Noise
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From a noise perspective, the applicant submitted a study demonstrating that it will comply with the requirements of the City’s Noise Ordinance. In addition, and although not subject to CEQA compliance, t he submitted noise study confirms that future residential interior noise levels will not exceed 45 CNEL when using complete window assemblies (including both glass and frames).

Exterior project noise levels will also not exceed the 65 CNEL limit. As a result, community noise is not expected to adversely affect future residents of the project.

Lastly, the Public Works Department and utility companies have reviewed the proposed development and found that it can be adequately served by all required utilities and public services. Consequently, it can be determined that the project can be exempted from further CEQA action under the Class 32 exemption.

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EXHIBIT B

RECOMMENDED CONDITIONS OF APPROVAL
Plng. 1. Approval of the Tentative Parcel Map, Master Plan, and Density Bonus is valid for two (2) years from the effective date of this approval and will expire at the end of that period unless applicant establishes the use by one of the following actions: 1) a building permit has been issued and construction has commenced, and a valid building permit has been maintained by making satisfactory progress as determined by the Building Official; 2) a certificate of occupancy has been issued. A time extension can be requested no less than thir ty (30) days or more than sixty (60) days before the expiration date of the permit and submitted with the appropriate fee for review to the Planning Division. The Director of Development Services may extend the time for an approved permit or approval to be exercised up to 180 days subject to specific findings listed in Title 13, Section 13-
29(k)(6). Only one request for an extension of
180 days may be approved by the Director. Any subsequent extension requests shall be considered by the original approval authority.

2. The 70-unit project shall consist of one unrestricted manager’s unit and 69 income-restricted senior affordable units made up of 34 very -low-income qualifying households and 35 low -income qualifying households pursuant to the County of Orange Median Family Income (MFI) levels in accordance with Section 42(g) of the Internal Revenue Code (IRC) as published from time to time by California Tax Credit Allocation Committee (TCAC). Approval of fewer units may be permitted subject to the approval by the Director of Economic and Development Services
, subject to
consistency with the City’s Housing Element, and any applicable State law. City approval of modification to the approved ground lease and/or affordable housing regulatory agreements may also be required.

3. Prior to issuance of a grading permit, the applicant and City shall enter into a ground lease having a minimum term of 99 years and the term of affordability covenants shall be co-extensive with the lease term .

4. The applicant shall defend, with the attorneys of City’s choosing or otherwise acceptable to City, indemnify, and hold harmless the City, its elected and appointed officials, agents, officers and employees from any claim, legal action, or proceeding (collectively referred to as "proceeding") brought against the City, its elected and appointed officials, agents, officers and/or employees arising out of, or which are in any way related to, the applicant’s project, or any approvals granted by City related to the applicant’s project. The indemnification shall include, but not be limited to, damages, fees and/or costs awarded against the City, if any, and cost of suit, attorney's fees, and other costs, liabilities and expenses incurred in connection with such proceeding whether incurred by the applicant, the City and/or the parties initiating or bringing such proceeding. This indemnity provision shall include the applicant's obligation to indemnify the City for all the City's costs, fees, and damages that the City in curs in 269

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enforcing the indemnification provisions set forth in this section.

5. If any section, division, sentence, clause, phrase or portion of this resolution is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining provisions.

6. Address assignment shall be requested from the Planning Division prior to submittal of working drawings for plan check. The approved address of individual units, suites, buildings, etc., shall be blueprinted on the site plan and on all floor plans in the working drawings.

7. The project is subject to compliance with all applicable Federal, State, and local laws. A copy of the applicable Costa Mesa Municipal Code requirements has been forwarded to the Applicant and, where applicable, the Authorized Agent, for reference.

8. The applicant shall contact the Planning Division to arrange a Planning inspection of the site prior to the release of occupancy/utilities. This inspection is to confirm that the conditions of approval and code requirements have been satisfied.

9. Street addresses shall be visible from the public street and may be displayed either on the front door, on the fascia adjacent to the main entrance, or on another prominent location. When the property has alley access, address numerals shall be displayed in a prominent location visible from the alley. Numerals shall be a minimum six (6) inches in height with not less than one- half-inch stroke and shall contrast sharply with the background.

10. No modification(s) of the approved building elevations including, but not limited to, change of architectural type, changes that increase the building height, removal of building articulation, or a change of the finish material(s), shall be made during construction without prior Planning Division written approval. Failure to obtain prior Planning Division approval of the modification could result in the requirement of the applicant to (re)process the modifi cation through a discretionary review process or a variance, or in the requirement to modify the construction to reflect the approved plans.

11. The project shall be limited to the type of building as described in this staff report and in the attached plans. Any change in the use, size, or design shall require review by the Planning Division and may require an amendment to the Master Plan.

12. The Master Plan herein approved shall be valid until revoked, but shall expire upon discontinuance of the acti vity authorized hereby for a period of 180 days or more and may be referred to the Planning Commission and/or City Council for modification or revocation at any time if the conditions of approval have not been complied with, if the use is being operated in violation of applicable laws or ordinances, or it, in the opinion of the Economic and Development Services Director or designee, any of the findings upon which the approval was based are no longer applicable.

Bldg. 13. All noise-generating construction a ctivities shall be limited to 7 a.m. to 7 270

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p.m. Monday through Friday and 9 a.m. to 6 p.m. on Saturday. Noise - generating construction activities shall be prohibited on Sunday and the following federal holidays: New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Limited construction activities may be permitted at other times to prevent operational impacts to the Senior Center subject to approval of the Economic and Development Service Director or designee.

14. Prior to issuance of a building permit, the City’s Building and Fire Departments shall review the proposed development plans to determine compliance with all building and safety and fire codes, and to ensure safety, suitable occupancy and the necessary occupant ingress and egress.

15. The maximum occupancy, as determined by provisions of the Uniform Building Code or other applicable codes, shall be posted in public view within the premises, and it shall be the responsibility of management to ensure that this limit is not exceeded at any time.

16. Comply with the requirements of the adopted California Residential Code, California Building Code, California Electrical Code, California Mechanical Code, California Plumbing Code, California Green Building Standards, California Energy Code, and California Code of Regulations also known as the California Building Standards Code, as amended by the City of Costa Mesa at the time of plan submittal or permit issuance.

Requirements for accessibility to sites, facilit ies, buildings, and elements by individuals with disability shall comply with Chapter 11A and 11B of the California Building Code.

17. If soil contamination exists, then remediation plans shall be submitted to both the Building Division and the County of Orange for review, approval and issuing a permit. Building permit(s) shall not be issued until the soil is certified as clean and usable by a Soil’s Engineer.

18. Maximum allowable area of building shall be determined in accordance with the applicable provisions of California Building Code sec. 506.2

19. Construction/ improvements that encroach within Public Utility Easements shall require written approvals from the utility companies associated with that easement.

20. The ground adjacent immediately to the foundation shall be sloped away from the building at a slope of not less than 5% for a minimum distance of 10 feet measured perpendicular to the face of the wall CBC sec. 1804.3.

See also exception. ii- On graded sites the top of exterior foundati on shall extend above the elevation of the street gutter at point of discharge or the inlet of an approved discharge devise a minimum of 12 inches plus 2 percent California Building Code sec. 1808.7.4 i - On graded sites the top of exterior foundation shall extend above the elevation of the street gutter at point of discharge or the inlet of an approved discharge devise a minimum of 12 inches plus 2 percent. California Residential Code CRC 403.1.7.3 ii - Lots shall be graded to drain surface water away from foundation walls. The grade shall fall a minimum of 6 inches within the 271

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first 10 feet. CRC R401.3

21. At any stage of project construction, any parking spaces that are removed on-site must be replaced at off -site locations at a minimum one -to-one basis. Additionally, throughout the development process, the applicant shall use reasonable efforts to minimize the impact of construction on the eight parking stalls in front of the Senior Center. These stalls will be designated as ADA -compliant in accordance with the Westside Costa Mesa Senior Construction Parking Management Plan.

22. At any stage of construction, subcontractors will be restricted to parking within the footprint of the construction site or designated locations, ensuring that no parking occurs in the surrounding residential neighborhood, in accordance with the Westside Costa Mesa Senior Construction Parking Management Plan.

23. The developer shall designate a staff member from their team to serve as a liaison with the community during the co nstruction period. This liaison will be responsible for addressing any questions, comments, or concerns, as outlined in the Westside Costa Mesa Senior Construction Parking Management Plan.

24. The Westside Costa Mesa Senior Construction Parking Management Plan acknowledges that adjustments may be necessary as new information arises before and during the construction period. The construction management plan shall remain dynamic and flexible to effectively address the evolving needs of the City and the seni
or community throughout the
duration of the project.

25. Prior to final inspection or Certificate of Occupancy (C of O), the applicant shall submit for approval to the City of Costa Mesa’s Director of Economic and
Development Services a Parking Management Plan prepared by a California-licensed traffic engineer with experience in the field of parking and, more specifically, the preparation of parking management plans that establish a shared parking arrangement that will meet the parking needs of the residents, guests, employees/contractors, and potential residents of the senior affordable residential building and
of the City of Costa Mesa
Senior Center , including during the Senior Center’s publicized regular operating hours, and during special events. . If the parking demand is anticipated to exceed 40 spaces for special events, the applicant shall submit a Special Use Permit to the City for review and approval.

In addition to the above, at a minimum, the Parking Management Plan shall also include:
• Provisions that the senior affordable residential building shall provide a maximum of 40 parking spaces within the podium parking structure to accommodate daily operations for residents, staff, deliveries and visitors of the senior affordable residential development.
• Registration of all tenant vehicles to be parked within the footprint 272

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of the senior affordable residential building;
• Issuance of a parking sticker or similar authorization to be displayed for tenant vehicles parked within the footprint of the senior affordable residential building;
• Provisions prohibiting the use of assigned parking spaces for storage purposes other than an operational vehicle;
• Provisions to timely remove vehicles deemed to be abandoned from the property;
• Provisions that stipulate that any tenant vehicle not parked in its assigned space is subject to immediate towing; and if permitted by applicable law, during the Senior Center’s publicized regular operating hours and during Senior Center special events, t he eight accessible parking spaces located on the parcel containing the City of Costa Mesa Senior Center shall be reserved for the exclusive use of the Senior Center.
• Provisions that require the applicant to submit a Special Use Permit to the City for review and approval for any planned event at the senior residential building that is outside of usual or ordinary operations and is anticipated to require the use of more than 40 parking spaces.

The City -approved Parking Management Plan, may be administratively amended from time- to-time by the City of Costa Mesa’s Director of Economic and Development Services to the extent required to address identifiable, recurring, and documented parking and/or circulation issues that have not been addressed by the lessee or their designee following written notice of such issues to the lessee or their designee and the expiration of not less than a 60-day cure period, and shall be implemented by the lessee or their designee for the life of the leasehold interest in the subject property (unless the lessee or their designee and the City of Costa Mesa’s Director of Economic and Development Services agree on an alternate solution and further amend the Parking Management Plan. If mutually determined by the lessee or their designee and the City of Costa Mesa’s Director of Economic and Development Services, additional parking shall be provided via off -site parking or other parking mitigation measure, including, to the extent financially feasible and if no alternative parking mitigation measure is available or suffi cient, valet parking. In no case shall future amendments to the Parking Management Plan reduce the total approved number of parking spaces available for the affordable senior center residential building and the City of Costa Mesa Senior Center.

PRIOR TO ISSUANCE OF A DEMOLITION OR GRADING PERMIT
Plng. 1. Demolition permits for existing structure(s) shall be obtained and all work and inspections completed prior to final building inspections. Applicant is 273

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notified that written notice to the Air Quality Management District may be required ten (10) days prior to demolition.

2. SCAQMD Rule 403 shall be adhered to and ensure the cleanup of construction-related dirt on approach routes to the site. Rule 403 prohibits the release of fugitive dust emissions from any active operation, open storage pile, or disturbed surface area beyond the property line of the emission sources. Particulate matter deposits on public roadways are also prohibited.

3. All construction contractors shall comply with South Coast Air Qu ality Management District (SCAQMD) regulations, including Rule 403, Fugitive Dust. All grading (regardless of acreage) shall apply best available control measures for fugitive dust in accordance with Rule 403. To ensure that the project is in full compliance with applicable SCAQMD dust regulations and that there is no nuisance impact off the site, the contractor would implement each of the following:
• Moisten soil not more than 15 minutes prior to moving soil or conduct whatever watering is necessary to pr event visible dust emissions from exceeding 100 feet in any direction.
• Apply chemical stabilizers to disturbed surface areas (completed grading areas) within five days of completing grading or apply dust suppressants or vegetation sufficient to maintain a stabilized surface.
• Water excavated soil piles hourly or covered with temporary coverings.
• Water exposed surfaces at least twice a day under calm conditions.

Water as often as needed on windy days when winds are less than 25 miles per day or during very d ry weather in order to maintain a surface crust and prevent the release of visible emissions from the construction site.
• Wash mud- covered tired and under -carriages of trucks leaving construction sites.
• Provide for street sweeping, as needed, on adjacent roadways to remove dirt dropped by construction vehicles or mud, which would otherwise be carried off by trucks departing project sites. • Securely cover loads with a tight fitting tarp on any truck leaving the construction sites to dispose of debris.
• Cease gr ading during period when winds exceed 25 miles per hour.

4. Adequate watering techniques shall be employed to partially mitigate the impact of construction– generated dust particulates. Portions of the project site that are undergoing earth moving operations shall be watered such that a crust will be formed on the ground surface and then watered again at the end of the day.

5. Grading operations shall be suspended during first and second stage ozone episodes or when winds exceed 25 mph.

6. Prior to issuance of grading permits, developer shall identify to the 274

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Development Services Director or designee a construction relations officer to act as a community liaison concerning on- site activity, including resolution of issues related to dust generation from grading/paving activities.

7. Prior to issuance of grading permits, developer shall submit for review and approval a Construction Management Plan. This plan features methods to minimize disruption to the neighboring uses to the fullest extent that is reasonable and practicable. The plan shall include construction parking and vehicle access and specifying staging areas and delivery and hauling truck routes. The plan should mitigate senior center operations and neighborhood disruption during construction. The truck route plan shall preclude truck routes through residential areas and major truck traffic during peak hours. The total truck trips to the site shall not exceed 200 trucks per day (i.e., 100 truck trips to the site plus 100 truck trips from the site) unless approved by the Development Services Director or Transportation Services Manager.

8. Design, grading, and construction shall be performed in accordance with the requirements of the California Building Code applicable at the time of grading as well as the appropriate local grading regulations, and the recommendations of the project geotechnical consultant as summarized in a final written report, subject to review by the City of Costa Mesa Building official prior to issuance of grading permits.

9. Prior to i ssuance of grading permits, the developer shall conduct at least two in -person community meetings with members/users and staff of the Senior Center and affected neighbors. The second meeting shall be held four months prior to issuance of grading permits. The purpose of these meetings is to:
• Identify and understand potential impacts of the proposed development on Senior Center operations;
• Gather input from Senior Center users and affected neighbors regarding their concerns and needs related to the constructi on process;
• Discuss and identify method of stakeholders and interested public preferred methods of receiving project information updates and frequencies (e.g. website, flyers, text alerts, social media, etc.); • Ensure project information updates and materials are translated into Spanish to reach a broader audience;
• Discuss that during any stage of the construction process, any parking removed on-site will be replaced at off-site locations on a one-to-one basis, ensuring that the number of the replacement parking is consistent with the spaces being displaced.
• Discuss and identify off -site parking locations, along with the proposed shuttle and valet services to ensure accessibility for Senior Center users;
• Discuss and identify specific Senior Center activities and programming that can be consistently hosted at the new
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residential development for a specified number of years after building occupancy; and
• Develop and present solutions to effectively mitigate disruptions, ensuring minimal impact on the daily activit ies and services of the Senior Center and affected neighbors.

The developer shall document the feedback received and respond within a reasonable timeframe to any questions or concerns, including, if warranted, outlining proposed solutions . The developer shall provide copies of any such correspondence to the Director of Economic & Development Services.

Bldg. 10. Prior to the Building Division (AQMD) issuing a demolition permit contact South Coast Air Quality Management District located at: 21865 Copley Dr. Diamond Bar, CA 91765- 4178 Tel: 909- 396-2000 Or Visit their web site
http://www.costamesaca.gov/modules/showdocument.aspx?documentid= 23381 The Building Div. will not issue a demolition permit until an Identification no. is provided by AQMD.

11. Prior to the issuance of grading permits, submit a precise grading plan, an erosion control plan and a hydrology study. A precise grading plan shall not be required if any of the following are met: ( 1) An excavation which does not exceed 50 CY on any one site and wh ich is less than 2 ft in vertical depth, or which does not create a cut slope greater than 1 ½:1 (excluding foundation area) ; (2) A fill less than 1 foot in depth placed on natural grade with a slope flatter than 5:1, which does not exceed 50 CY on any one lot and does not obstruct a drainage course; and (3) A fill less than 3 ft in depth, not intended to support structures, which does not exceed 50 CY on any one lot and does not obstruct a drainage course.

Prior to issuing the Building permit, the rough gr ading certificate shall be submitted to the Building Division.

12. Prior to the issuance of grading permits, submit a soils report for this project. Soil’s Report recommendations shall be blueprinted on both the architectural and the precise grading plans.

Plng. 13. Prior to the issuance of grading permits, the developer shall submit a comprehensive Wayfinding Plan for all temporary construction related off - site parking locations for senior center operations , designed to inform seniors about shuttle schedules , contact information, service frequencies, hours of operations, etc. Signage shall be clearly visible, easy to read, and strategically placed to ensure accessibility for all seniors.

Plng. 14. Prior to the issuance of grading permits, the developer shall have entered into with the City an Affordable Housing/Disposition and Development Agreement (“AH/DDA”), and a Ground Lease and Regulatory Agreement substantially in the forms attached to the AH/DDA.
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CODE REQUIREMENTS
The following list of federal, state and local laws applicable to the project has been compiled by staff for the applicant’s reference. Any reference to “City” pertains to the City of Costa Mesa.

Plng. 1. Permits shall be obtained for all signs according to the provisions of the Costa Mesa Sign Ordinance.

Bldg. 2. Comply with the requirements of the adopted California Building Code, California Electrical Code, California Mechanical Code, California Plumbing Code, California Green Building Standards, California Energy Code, and California Code of Regulations also known as the California Building Standards Code, as amended by the City of Costa Mesa at the time of plan submittal or permit issuance. Requirements for accessibility to sites, facilities, buildings and elements by individuals with disability shall comply with chapter 11B of the California Building Code. A change of occupancy shall require compliance with the Disabled access requirements of chapter 11B of the California Building Code.

Bldg. 3. Plans shall be prepared under the supervisi on of a registered California Architect or Engineer. Plan shall be stamped and signed by the registered California Architect or Engineer.

Fire 4. Comply with the requirements of the 2022 California Fire Code, including the reference standards, as adopted and amended by Costa Mesa Fire & Rescue.

Bus.

Lic.

5. All contractors and subcontractors must have valid business licenses to do business in the City of Costa Mesa. Final inspections, final occupancy and utility releases will not be granted until all such licenses have been
obtained.

6. Business license shall be obtained prior to the initiation of the business.

PRIOR TO ISSUANCE OF A BUILDING PERMIT
Plng. 1. Prior to issuance of building permits, the applicant shall contact the US Postal Service with regard to location and design of mail delivery facilities.

Such facilities shall be shown on the site plan, landscape plan, and/or floor plan.

2. The conditions of approval and ordinance or code provisions of the Master Plan shall be blueprinted on the face of the site plan as part of the plan check submittal package.

Trans 3. The applicant shall submit a Traffic Impact Fee to the Transportation Division prior to issuance of building permits to fulfill mitigation of off -site traffic impacts. The fee is required in an amount determined by the Transportation Division pursuant to the prevailing schedule of charges adopted by the City Council. The fee is calculated based on the average daily trip generation rate of 3.24 trip ends per dwelling unit for the proposed project. At the current rate, the estimated Traffic Impact Fee is 277

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$50,525. NOTE: The fee will be recalculated at the time of issuance of building permits and based upon any changes in the prevailing schedule of charges adopted by the City Council and in effect at that time.

4. Comply with the requirements of the latest edition of the California Building Code, California Residential Code, California Electrical Code, California Mechanical Code , California Plumbing Code , California Green Building Standards Co de and California Energy Code (or the applicable adopted California Building Code, California Residential Code California Electrical Code, California Mechanical Code California Plumbing Code, California Green Building Standards and California Energy Code at the time of plan submittal) and California Code of Regulations also known as the California Building Standards Code, as amended by the City of Costa Mesa.

Plng. 5. Two (2) sets of detailed landscape and irrigation plans, which meet the requirements set forth in Costa Mesa Municipal Code Sections 13- 101 through 13-108, shall be required as part of the project plan check review and approval process. Plans shall be forwarded to the Planning Division for final approval prior to issuance of building permits.

6. Two (2) sets of landscape and irrigation plans, approved by the Planning Division, shall be attached to two of the final building plan sets.

7. Existing mature trees shall be retained wherever possible. Should it be necessary to remove existing trees, th e applicant shall submit a written request and justification to the Planning Division. A report from a California licensed arborist may be required as part of the justification. If possible, replacement trees shall be of a size consistent with trees to be removed and required on a 1:1 basis. This requirement shall be completed under the direction of the Planning Division.

8. Subject to exceptions to allow for ADA paths of travel or other specific purposes identified by the applicant’s landscape architect, a ll landscaped areas shall be separated from paved vehicular areas by 6” high continuous Portland Cement Concrete curbing.

9. The landscaping of this project shall comply with the City’s landscaping requirements and any applicable guidelines (i.e. Water Efficient Landscape Guidelines). The final landscape plan shall meet tree count, tree selection, shrub count, groundcover and turf requirements per the City’s Zoning Code.

10. Prior to issuance of building permits, a final landscape plan indicating the landscape palette and the design/material of paved areas shall be submitted for review and approval by the Planning Division. The driveway entrances shall also be enhanced with pervious pavers, colored concrete, or other treatment to the satisfaction of the Development Services Director.

11. Concrete wheel stops shall be installed 2’ from the front edge of open parking spaces, or where applicable, landscape planters shall be increased 2’ in depth to allow curbing to serve as a wheel stop.

12. Prior to final inspe ction or Certificate of Occupancy (C of O) , the owner 278

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shall provide proof of a recorded agreement between Jamboree Housing Corporation and City of Costa Mesa for reciprocal access and shared parking. The agreement shall provide for a combined total of 133 parking spaces. The agreement shall require that shared parking spaces are maintained free and clear of any obstructions. The applicant shall prepare and submit the agreement for approval to the Development Services Director and the City Attorney’s Office. The Development Services Director is authorized to approve modifications to the shared parking agreement, including but not limited to authorizing the use of other shared parking sites, if he/she finds that the modification is in substantial conformance with the intent of this condition.

13. The material for the shared driveway shall be permeable interlocking pavers.

14. The applicant shall provide for a bicycle rack on the property, based on locational and capacity approval from Planning and Transportation Services, to allow for parking credit of one standard parking space. A greater amount of bicycle racks can be provided upon approval of the Planning Division.

15. No exterior roof access ladders, roof drain scuppers, or roof drain downspouts are permitted. This condition relates to visually prominent features of scuppers or downspouts that not only detract from the architecture but may be spilling water from overhead without an integrated gutter system which would typically channel the rainwater from the scupper/downspout to the ground. An integrated downspout/gutter system which is painted to match the building would comply with the condition. This condition shall be completed under the direction of the Planning Division.

16. Prior to the issuance of Building Permits, the Applicant shall submit a Lighting Plan and Photometric Study for the approval of the City’s Development Services Department. The Lighting Plan shall demonstrate compliance with the following: (a) Lighting design and layout shall limit spill light to no more than 0.5- foot candle at the property line of the surrounding neighbors, consistent with the level of lighting that is deemed necessary for safety and security purposes on site; and (b) Glare shields may be required for select light standards.

17. Applicant shall secure the premises with appropriate security lighting and employee inspection of adjacent areas under which applicant has control, to prevent trash, graffiti and littering. Any lighting under the control of applicant shall be dir ected in such a manner so as not to unreasonable interfere with the quiet enjoyment of nearby residences. Applicant shall further provide adequate lighting above the entrance to the premises sufficient in intensity to make visible the identity and actions of all persons entering and leaving the premise.

18. The applicant shall work with any utility agencies’ right -of-way areas and/or easements related to any overhead power lines, and receive clearance prior to issuance of building permits.
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19. Trash facilitie s shall be screened from view, and designed and located appropriately to minimize potential noise and odor impacts to residential areas either within the garages or within the side year areas (behind fences).

20. All on -site utility services shall be installed underground or on the roof (e.g., satellite dishes), in which case such utility services shall be obscured from view.

21. On-site lighting shall be provided in all parking areas, vehicular access ways, and along major walkways. The lighting shall be dir ected onto driveways and walkways within the project and away from dwelling units and adjacent properties to minimize light and glare impacts and shall be of a type approved by the Development Services Director.

22. The parking area and pedestrian paths shall be equipped with lighting of sufficient power to illuminate and make easily discernable the appearance and conduct of all persons on or about the site.

23. Transformers, backflow preventers, and any other approved above - ground utility improvement shall be located outside of the required street setback area and shall be screened from view, under direction of Planning staff. Any deviation from this requirement shall be subject to review and approval of the Development Services Director.

24. Installation of all new utility meters shall be performed in a manner so as to obscure the installation from view from any place on or off the property.

The installation shall be in a manner acceptable to the public utility and shall be in the form of a vault, wall cabi net, or wall box under the direction of the Planning Division.

25. Any mechanical equipment such as air -conditioning equipment and duct work shall be screened from view in a manner approved by the Planning Division.

26. The applicant shall maintain free of litter all areas of the premises under which applicant has control, including any use of off -site valet and shuttle parking lots.

27. Truck Deliveries shall not occur anytime between the hours of 8:00 p. m. and 7:00 a.m ; provided that special deliveries or s taging (e.g., import/export) will occur prior to 7:00 a.m. to avoid disruptions in traffic.

28. The applicant shall submit a detailed block wall plan for review. The location and heights of block walls shall comply with Code requirements, as well as any visibility standards for traffic safety related to ingress and egress.

29. Prior to issuance of building permits, the Developer shall pay a park impact fee or dedicate parkland to meet the demands of the proposed development.

Fire 30. Prior to issuance of a buil ding permit, the City’s Building and Fire Departments shall review the proposed development plans to determine compliance with all building, safety, and fire codes, and to ensure safety, suitable occupancy, and the necessary occupant ingress and egress 280

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PRIOR TO FINAL INSPECTION/OCCUPANCY
Plng. 1. The applicant shall contact the Planning Division to arrange Planning inspection of the site prior to the release of occupancy/utilities. This inspection is to confirm that the conditions of approval and code requirements have been satisfied.

2. Prior to final inspection or Certificate of Occupancy (C of O) the applicant shall provide a scaled and dimensioned digital site plan(s) for the project site, on either a CD or thumb drive, to the Planning Division. All site plans shall include an accurate and precise drawing of all building footprints and property line locations for the entire project site. All buildings shall be annotated with its corresponding address and suites if applicable.

3. Landscaping and irrigat ion shall be installed in accordance with the approved plans prior to final inspection or occupancy clearance.

4. Prior to final building inspection, a bicycle rack shall be installed in a location such that it is functional, accessible and visible to the user.

5. All contractors and subcontractors must have valid business licenses to do business in the City of Costa Mesa. Final inspections, final occupancy, and utility releases will not be granted until all such licenses have been obtained.

Trans 6. Prior to final inspection or Certificate of Occupancy (C of O) the applicant shall submit a detailed plan to Public Works restricting left turns into the development, by extending the existing median on West 19th Street 10 feet to the east.

Trans 7. All parking spaces shall conform with the City of Costa Mesa Parking Design Standards unless otherwise approved.

Plng. 8. The applicant shall submit an internal sign plan that ensures compatibility between the residential development and the existing Senior Center site.

TENTATIVE PARCEL MAP
Plng. 1. Unless determined otherwise by the Economic and Development Service Director or designee, building and grading permits shall not be issued until proof that a final parcel map has been recorded with the County of Orange.

2. The applicant shall show proof of compliance with all applicable conditions of approval prior to recordation of the final map. This condition shall be completed under the direction of the Planning Staff.

Eng. 3. The Parcel shall be developed in full complianc e with the State Map Act and the City of Costa Mesa Municipal Code (C.M.M.C.), except as authorized by the Costa Mesa City Council and/or Planning Commission.

The attention of the Subdivider and his engineer is directed to Section 13 - 208 through 13-261 inclusive, of the Municipal Code.

4. Fulfill City of Costa Mesa Drainage Ordinance No. 06 -19 requirements prior to approval of Final Tract Map.

5. The Subdivider’s engineers shall furnish the Engineering Division a storm 281

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runoff study to the City of Costa Me sa showing existing and proposed facilities and the method of draining this area and tributary areas without exceeding the capacity of any street or drainage facility on- site or off-site.

This study to be furnished with the first submittal of the Final Parcel Map.

Unless otherwise authorized by the City, cross lot drainage shall not occur.

6. In order to comply with the latest DAMP, the proposed Project shall prepare a Water Quality Management Plan conforming to the Current National Pollution Discharge El imination System (NPDES) and the Model WQMP, prepared by a Licensed Civil Engineer or Environmental Engineer, which shall be submitted to the City of Costa Mesa Engineering Divisions for review and approval. A WQMP (Priority or Non-Priority) shall be maintained and updated as needed to satisfy the requirements of the adopted NPDES program. The plan shall ensure that the existing water quality measures for all improved phases of the project are adhered to.

Location of BMPs shall not be within the public right-of-way.

7. As approved by the City Engineer, t he maintenance of the private on -site drainage facilities, BMPs, parkway culverts and other common areas shall be transferred to the lessee and said lessee shall indemnify and hold harmless the City of Costa Mesa for any liability arising out of or in any way associated with the connection of the private drainage system with the City’s drainage system and shall execute and deliver to the City of Costa Mesa the standard (indemnity) Hold Harmless Agreement required for such conditions prior to issuance of permits.

8. Sewer improvements shall meet the approval of the Costa Mesa Sanitary District; call (949) 631 -1731 for information. Water system improvements shall meet the approval of Mesa Water District; call (949) 631- 1200 for information.

9. Prior to recordation of a Final Parcel Map, the surveyor/engineer preparing the map shall tie the boundary of the map into the Horizontal Control System established by the County Surveyor in a manner described in Subarticl e 12, Section 7- 9-337 of the Orange County Subdivision Code.

10. Survey monuments shall be preserved and referenced before construction and replaced after construction, pursuant to Section 8771 of the Business and Profession Code.

11. The elevations shown on all plans shall be on Orange County benchmark datum.

12. Prior to recordation of a Final Parcel Map, the subdivider shall submit required cash deposit or surety bond to guarantee monumentation.

Deposit amount to be determined by the City Engineer.

13. The Subdivider shall conduct soil investigations and provide the results to the City of Costa Mesa Engineering and Building Divisions pursuant to Ordinance 97-11.

14. Prior to occupancy, the surveyor/engineer shall submit to the City Engineer a Digital Graphic File, reproducible mylar of the recorded Parcel 282

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Map, and approved off -site plan and nine copies of the recorded Parcel Map.

15. The Final Parcel Map shall be submitted to the Engineering Division for checking. Map check fee shall be paid per C.M.M.C. Section 13-231.3.

16. A current copy of title and preliminary title shall be submitted to the Engineering Division with the first submittal of the Final Parcel Map.

17. Obtain a permit from the City of Costa Mesa, Engineering Division, at the time of development and then remove any existing driveways and/or curb depressions that will not be used and replace with full height curb, sidewalk and landscape per City of Costa Mesa Standard Drawings and Streetscape and Median Development Standards.

18. Obtain a permit fro m the City of Costa Mesa, Engineering Division, at the time of development and then modify landscaped median located in West 19th Street as shown on the Offsite Plan. Location and dimensions are subject to the approval of the Transportation Services Manager.

19. Obtain a permit from the City of Costa Mesa, Engineering Division, at the time of development and then construct P.C.C. driveway approach per City of Costa Mesa Standards as shown on the Offsite Plan. Location and dimensions are subject to the approv al of the Transportation Services Manager.

20. Submit for approval to the City of Costa Mesa, Engineering Division, Street Improvement and Storm Drain Plans, that show Sewer and Water Improvements, prepared by a Civil Engineer.

21. Prior to recordation of a Final Parcel Map, the surveyor/engineer preparing the map shall submit to the County Surveyor a digital -graphics file of said map in a manner described in Sub article 12, Section 7-9- 337 of the Orange County Subdivision Code.

SPECIAL DISTRICT REQUIREMENTS
AQMD 1. Prior to the Building Division (AQMD) issuing a demolition permit, contact South Coast Air Quality Management District located at:
21865 Copley Dr
Diamond Bar, CA 91765-4178
Tel: 909-396-2000
OR
Visit their web site:
http://www.costamesaca.gov/modules/showdocument.aspx?documentid= 23381
The Building Division will not issue a demolition permit until an identification number is provided by AQMD.

Sani. 2. It is recommended that the developer contact the Costa Mesa Sanitary District at (949) 645-8400 for current district requirements.

Water 3. Applicant is reminded that additional conditions of development may be imposed by Mesa Consolidated Water District (949) 631- 1200 and/or other serving utilities. Subject to approval by the board of directors, Mesa Consolidated Water District may require payment of a developer impact 283

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fee prior to installation of water service or construction of required master plan facilities.

Customer shall contact the Mesa Water District – Engineering Desk and submit an application and plans for project review. Customer must obtain a letter of approval and a letter of project completion from Mesa Water District.

School 4. Pay applicable Newport Mesa Unified School District fees to the Building Division prior to issuance of building permits.

CDFA 5. Comply with the requirements of the California Department of Food and Agriculture (CDFA) to determine if red imported fire ants exist on the property prior to any soil movement or excavation. Call CDFA at 1- 888- 4FIREANT for information.

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EXHIBIT C

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AFFORDABLE HOUSING /

DISPOSITION AND DEVELOPMENT AGREEMENT

by and between

CITY OF COSTA MESA
a California municipal corporation

and

JHC-ACQUISITIONS LLC,
a California limited liability company

an affiliate of

JAMBOREE HOUSING CORPORATION,
a California nonprofit public benefit corporation

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TABLE OF CONTENTS
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1. SUBJECT OF AGREEMENT .......................................................................................... 1

1.1 Purpose of Agreement........................................................................................... 1

1.2 The Site ................................................................................................................. 1

1.3 Parties to the Agreement ....................................................................................... 1

1.3.1 The City .................................................................................................... 1

1.3.2 The Developer ........................................................................................... 2

1.4 Definitions............................................................................................................. 2

1.5 Prohibition Against Change in Ownership, Management and Control of Developer and Prohibition Against Transfer of the Site ....................................... 7

1.6 Representations by Developer .............................................................................. 9

1.7 Representations by City ...................................................................................... 10

1.8 Covenants of City ............................................................................................... 12

1.9 Risk of Physical Loss .......................................................................................... 13

1.10 Condemnation ..................................................................................................... 13

2. FINANCING THE PROJECT; DISPOSITION OF THE SITE ..................................... 13

2.1 Developer’s Financing Plan ................................................................................ 13

2.1.1 [Intentionally Omitted] ........................................................................... 13

2.1.2 Application to TCAC .............................................................................. 13

2.1.3 Project Budget ......................................................................................... 14

2.1.4 Developer Submittals .............................................................................. 15

2.2 Disposition of Site ................................................................................... 15

2.2.1 Ground Lease of Site .............................................................................. 15

2.2.2 Escrow..................................................................................................... 15

2.2.3 Condition of Title; Developer Title Insurance ........................................ 16

2.2.4 Due Diligence Review; Physical and Environmental Condition of Site; “As-Is” Sale ................................................................................ 17

2.2.5 Ground Lease; Possession....................................................................... 20

2.2.6 Disposition Conditions............................................................................ 21

2.2.7 Developer Acquisition Conditions .......................................................... 22

2.2.8 Waivers ................................................................................................... 23

2.2.9 Failure to Meet Closing Conditions; Termination .................................. 23

2.2.10 City’s Delivery of Documents and Funds to Escrow .............................. 24

2.2.11 Developer’s Delivery of Documents and Funds to Escrow .................... 24

2.2.12 Close of Escrow; Recording of Instruments; Disbursement of Funds ....................................................................................................... 24

2.3 [Intentionally Omitted] ....................................................................................... 25 ............................................................................................................................ 2.4 Subordination ...................................................................................................... 25

2.5 City to Pay No Broker’s Fees ............................................................................. 25 .......................................................................................................................................... 3.

DEVELOPMENT OF THE SITE ................................................................................... 26

3.1 Scope of Development ........................................................................................ 26 287
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3.2 Changes to Construction Plans ........................................................................... 26

3.3 Cost of Development .......................................................................................... 26

3.4 Construction Contract; Construction Schedule ................................................... 27

3.5 Indemnity; Insurance Requirements ................................................................... 27

3.6 Remedies for Defaults Re Insurance ................................................................... 29

3.7 City and Other Governmental Agency Permits .................................................. 29

3.8 Rights of Access ................................................................................................. 30

3.9 Local, State and Federal Laws ............................................................................ 30

3.10 Anti-Discrimination ............................................................................................ 31

3.11 Taxes and Assessments ....................................................................................... 31

3.12 Right of City to Satisfy Other Liens on the Site After Title Passes .................... 32

3.13 Release of Construction Covenants .................................................................... 32

3.14 Limitation on Encumbrances, Including Mechanic’s Liens ............................... 32

3.15 Holder Not Obligated to Construct Improvements ............................................. 33

3.16 Notice of Default to Mortgage, Deed of Trust or Other Security Interest Holders; Right to Cure ........................................................................................ 33

3.17 Failure of Holder to Complete Improvements .................................................... 34

3.18 Right of City to Cure Mortgage, Deed of Trust or Other Security Interest Default.................................................................................................... 34

3.19 Hazardous Materials ........................................................................................... 35

3.19.1 Indemnity ................................................................................................ 35

3.19.2 Definitions............................................................................................... 35

3.20 Materiality ........................................................................................................... 36

4. USE OF THE SITE ......................................................................................................... 36

4.1 Uses In Accordance with City Regulatory Agreement ....................................... 36

4.2 Nondiscrimination............................................................................................... 36

4.3 Effect of Violation of the Terms and Provisions of this Agreement After Completion of Construction ...................................................................... 37

4.4 Maintenance of the Site ...................................................................................... 38

5. DEFAULTS AND REMEDIES ..................................................................................... 38

5.1 Defaults – General .............................................................................................. 38

5.2 Legal Actions ...................................................................................................... 38

5.2.1 Specific Performance .............................................................................. 38

5.2.2 Institution of Legal Actions; Attorney’s Fees ......................................... 39

5.2.3 Applicable Law ....................................................................................... 39

5.2.4 Acceptance of Service of Process ........................................................... 39

5.3 Rights and Remedies Are Cumulative ................................................................ 39

5.4 Inaction Not a Waiver of Default........................................................................ 39

5.5 Termination by City ............................................................................................ 39

5.6 City’s Option to Acquire Plans ........................................................................... 40

6. GENERAL PROVISIONS ............................................................................................. 40

6.1 Notices, Demands and Communications Between Parties ................................. 40

6.2 Conflicts of Interest............................................................................................. 41 288
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6.3 Enforced Delay; Extension of Times of Performance ........................................ 41

6.4 Non-Liability of Officials and Employees of City ............................................. 41

6.5 Interpretation; Entire Agreement, Waivers; Attachments .................................. 41

6.6 Time of Essence .................................................................................................. 42

6.7 Maintenance of Books and Records ................................................................... 42

6.8 Right to Inspect ................................................................................................... 42

6.9 Binding Effect of Agreement .............................................................................. 42

6.10 Severability ......................................................................................................... 42

6.11 Counterparts ........................................................................................................ 42

6.12 Amendments to this Agreement.......................................................................... 43

6.13 Submission of Documents to the City for Approval ........................................... 43

6.14 Consents by City Manager .................................................................................. 43

6.15 Limited Recourse Obligations ............................................................................ 43

ATTACHMENTS

ATTACHMENT 1 - SITE MAP
ATTACHMENT 2 - LEGAL DESCRIPTION
ATTACHMENT 3 - SCOPE OF DEVELOPMENT
ATTACHMENT 4 - SCHEDULE OF PERFORMANCE
ATTACHMENT 5 - FORM OF CITY NOTE
ATTACHMENT 6 FORM OF CITY DEED OF TRUST
ATTACHMENT 7 FORM OF CITY REGULATORY AGREEMENT AND

DECLARATION OF COVENANTS AND RESTRICTIONS
ATTACHMENT 8 - FORM OF RELEASE OF CONSTRUCTION COVENANTS ATTACHMENT 9 - PROJECT BUDGET
ATTACHMENT 10 FORM OF NOTICE OF AFFORDABILITY RESTRICTIONS ON

TRANSFER OF PROPERTY
ATTACHMENT 11 - FORM OF GROUND LEASE
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AFFORDABLE HOUSING /

DISPOSITION AND DEVELOPMENT AGREEMENT
This Affordable Housing/Disposition and Development Agreement ( “Agreement” and sometimes referred to as the “AH/DDA”) is entered into as of _________, 2025 (“Effective Date”) by and between CITY OF COSTA MESA, a California municipal corporation (the “City”), and JHC-ACQUISITIONS LLC, a California limited liability company (the “Developer”). City and Developer (individually referred to herein as a “ Party,” and collectively referred to herein as the “Parties”) hereby agree as follows:

1. SUBJECT OF AGREEMENT

1.1 Purpose of Agreement
The purpose of this Agreement is to assist in the financing and development of a n up to seventy (70) unit senior affordable rental housing pro ject on the “Site,” with sixty -nine (69) of such units to be restricted for rental to and occupancy by “Eligible Tenants” at an “Affordable Rent” (as those terms are hereinafter defined), and related improvements (collectively the “Project”).

As used herein, the term “Unit” refers to each of the up to sixty -nine (69) rental dwelling units on the Property, and the term “Units” refers to all of the rental dwelling units on the Property.

Each Unit will be subject to the “City Regulatory Agreement” (as that term is hereinafter defined).

The development of the Site and the occupancy of the affordable rental housing project as developed for households of limited incomes, all as provided in this Agreement, are in the vital and best interests of the City of Costa Mesa and the health, safety, and welfare of its residents, and in accord with the public purposes and provisions of applicable state and local laws and requirements under which the Project has been undertaken.

1.2 The Site
The “Site” comprises approximately one and five -tenths (1.5) acres of that certain real property owned in fee by City and located at 695 W. 19 th Street (APN 424 -211-01) (the “ City Property”). The City Property is improved with the Costa Mesa Senior Center and adjoining parking lot. The Site is a portion of the parking lot area of the City Property. The Site is depicted on the Site Map, which is attached hereto and incorporated herein as Attachment No. 1. At such time as the Site is established as a separate legal parcel, t he legal description of the Site shall be inserted into Attachment No. 2, which is attached hereto and incorporated herein by this reference.

1.3 Parties to the Agreement

1.3.1 The City
City is the City of Costa Mesa , a California municipal corporation. The principal office of City is located at 77 Fair Drive , Cosa Mesa, California 92626, or such other address as City shall hereafter designate in writing to Developer. 290

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1.3.2 The Developer
Developer is JHC-Acquisitions LLC, a California limited liability company. The principal office and mailing address of Developer for purposes of this Agreement is 17701 Cowan Avenue, Suite 200, Irvine CA 92614.

By executing this Agreement, each person signing on behalf of Developer warrants and represents to City that Developer has the full power and authority to enter into this Agreement, that all authorizations required to make this Agreement binding upon Developer have been obtained, and that the person or persons executing this Agreement on behalf of Developer are fully authorized to do so.

Whenever the term “Developer” is used in this Agreement, such term shall include any and all nominees, assignees, or successors in interest as herein provided.

1.4 Definitions
“30% Low Income Household ” shall mean those households whose household income does not exceed thirty percent (30%) of the Orange County Median Income, as determined in accordance with Section 42(g) of the IRC, as published from time to time by TCAC. “Affiliate” means any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with the subject entity which, if the subject entity is a partnership or limited liability company, shall include eac h of the constituent members or partners, respectively thereof. The term “control” as used in the immediately preceding sentence, means, with respect to a person that is a corporation, the right to the exercise, directly or indirectly, of more than fifty percent (50%) of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person.
“Affordable Rent” shall mean the amount of monthly rent, including a reasonable utility allowance, that does not exceed the maximum allowable rent to be charged by Developer and paid by 30% Low Income Households or Low Income Households, as the case may be, occupying the Units as determined in accordance with Section 42(g)(2) of the IRC, and as published from time to time by TCAC.
“Annual Financial Statement” shall mean the financial statements prepared by Developer for each calendar year, including a balance sheet, income statement, statement of retained earnings, statement of cash flow, and footnotes thereto, prepared in accordance with generally accepted accounting principles consistently applied, as audited by an independent certified public accountant.
“Approved Title Exceptions” shall have the meaning ascribed in Section 2.3.3.a hereof. “City Deed of Trust ” shall mean a leasehold deed of trust with assignment of rents to secure the City Note, substantially in the form attached hereto and incorporated herein as 291

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Attachment No. 6. The City Deed of Trust shall be recorded against Developer’s leasehold interest in the Site.
“City Easement Agreement ” shall mean an e asement agreement to be executed and recorded against the Developer’s leasehold interest in the Premises in favor of City and for the benefit of City and City’s guests, invitees, vendors, employees and service personnel of the Costa Mesa Senior Center, which will provide (i) non -exclusive access rights over the driveway and drive aisles to be constructed as part of the Project that will provide ingress and egress to and from the public right-of-way to the Costa Mesa Senior Center, and (ii) non- exclusive rights to park in the uncovered surface parking spaces to be constructed as part of the Project and on the ground floor of the affordable housing development to be constructed as part of the Project, and for utilities and drainage, all pursuant to the terms and conditions set forth in the Easement Agreement. “City Loan” shall mean the financial assistance to be provided by City to Developer in an amount up to Seven Hundred Thousand Dollars ($700,000), in the form of deferred permit fees and development impact fees, to assist Developer with the costs Developer incurs to construct the Project.
“City Ground Lease” shall mean a ground lease substantially in the form attached hereto and incorporated herein as Attachment No. 11.
“City Manager” shall mean the individual duly appointed to the position of City Manager of the City, or his or her authorized designee. Whenever an administrative action is required by City to implement the terms of this Agreement, the City Manager, or his or her authorized designee, shall have authority to act on behalf of City, except with respect to matters reserved for City Council determination.
“City Note” shall mean a promissory note, substantially in the form attached hereto and incorporated herein as Attachment No. 5, in favor of City, evidencing the City Loan. “City Regulatory Agreement ” shall mean a regulatory a greement and declaration of covenants and restrictions, substantially in the form attached hereto and incorporated herein as Attachment No. 7. The City Regulatory Agreement shall be recorded against the Site , upon establishment of the Site as a separate legal parcel prior to the development of the Project. “City Title Policy” shall have the meaning ascribed in Section 2.3 hereof. “Close of Escrow ” or “Closing Date ” shall mean the date set forth in Section 2.2.2.c hereof, on which all of the following occur: (i) Escrow closes and Developer or an Affiliate of Developer obtains a leasehold interest in the Site, (iii) the close of the Construction Loan and any other funding obtained by Developer to construct the Project on the Site; and (iii) Developer’s receipt of its first tranche of Tax Credit equity from the Qualified Tax Credit Investor. “Closing Conditions” shall mean collectively the City Disposition Conditions set forth in Section 2.2.6 hereof and Developer Acquisition Conditions set forth in Section 2.2.7 hereof. 292

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“Construction Lender ” shall mean the first trust deed lender that provides the Construction Loan to Developer. The Construction Lender may or may not also be the Take-Out Lender.
“Construction Loan” shall mean the construction loan for the Project, currently estimated to be in the approximate amount of [Thirty-Four Million Five Hundred Fifty Dollars ($34,550,000)], to be provided by the Construction Lender. “Days” shall mean calendar days and the statement of any time period herein shall be calendar days, and not business days, unless otherwise specified. “Business days” (whether or not such term is capitalize d) shall mean any days on which City Hall for the City is open to the public.
“Density Bonus Laws” shall be the state density bonus law, California Government Code section 65915, et seq. , and the City density bonus ordinance, Costa Mesa Municipal Code section 13-153, et seq., as those sections may be amended from time to time. If there is an irreconcilable contradiction in requirements or limits in the state or City density bonus laws, the state density bonus law shall control; provided, however, that the preceding clause is to be narrowly construed and to the greatest extent possible all provisions in the state and City density bonus laws shall be given operation and effect.
“Developer Entities” shall have the meaning ascribed in Section 3.5 hereof. “Disapproved Title Exceptions ” shall have the meaning ascribed in Section 2.3.3.a hereof.
“Due Diligence Period” shall have the meaning ascribed in Section 2.3.4.a hereof. “Effective Date” shall be the date set forth in the preamble. “Eligible Tenant” shall mean a household which qualifies as (i) a Senior Household, and (ii) a 30% Low Income Household or a Low Income Household, as applicable pursuant to this Agreement and the City Regulatory Agreement.
“Escrow” shall mean the escrow established with Escrow Agent for City’s conveyance of a leasehold interest in the Site to Developer, and for the recording of the City Deed of Trust, City Regulatory Agreement, Memorandum of Ground Lease, Notice of Affordability Restrictions and any other recordable instruments against the Site.
“Escrow Agent” shall mean First American Title Insurance Company, or another escrow company mutually acceptable to City and Developer.
“Force Majeure” shall mean an enforced delay as described in Section 6.3 hereof. “Hazardous Materials” shall have the meaning ascribed in Section 3.19.2 hereof. “IRC” shall mean the United States Internal Revenue Code of 1986, as amended. 293

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“Jamboree” shall mean Jamboree Housing Corporation, a California nonprofit public benefit corporation.
“Low Income Household ” shall mean those households whose household income does not exceed sixty percent (60%) of the Orange County Median Income, as determined in accordance with Section 42(g) of the IRC, as published from time to time by TCAC. “Management Unit” shall mean the one (1) unit in the Project that may be occupied by on-site management and staff.
“Memorandum of Ground Lease” shall mean a memorandum, substantially in the form attached as Exhibit B to the Ground Lease, to be recorded against the Site on the Closing Date. “Net Operating Income” shall have the meaning ascribed in the City Note. “Notice of Affordability Restrictions” shall mean a notice of affordability restrictions on Transfer of p roperty substantially in the form attached hereto and incorporated herein as Attachment No. 10. The Notice of Affordability Restrictions shall be recorded against Developer’s leasehold interest in the Site.
“Opening of Escrow” shall have the meaning and be the date set forth in Section 2.3.2.a hereof.
“Operating Income” shall have the meaning ascribed in the City Note. “Orange County Median Income ” shall mean the median household income for the County of Orange, adjusted for family size, to be determined in accordance with Section 42(g) of the IRC, as published from time to time by TCAC.
“Outside Closing Date” shall mean the date that is One Hundred Ninety-Four (194) days after the first date on which Developer has received the allocation of 9% Tax Credits from TCAC for the Project.
“Partnership Agreement ” shall mean the agreemen t that sets forth the terms of Developer’s limited partnership, as such agreement m ay be amended from time to time . The Partnership Agreement shall not conflict with the cash flow payments to City set forth in the City Note.
“Permitted Exceptions” shall have the meaning ascribed in Section 2.2.5.a hereof. “Project” shall mean the construction on the Site of an affordable rental housing complex with not less than sixty (60) and up to seventy (70) units, with all but one (1) of such units restricted for rental to and occupancy by Eligible Tenants, related interior and exterior improvements and amenities appropriate and/or necessary for the development. The Project, including the Project improvements and amenities, is more particularly described in the Scope of Development attached hereto and incorporated herein as Attachment No. 3.
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“Project Budget” shall mean, collectively, that certain budget, sources and uses of funds statement, and cash flow projection referred to in Section 2.1.3 of this Agreement and attached hereto as Attachment No. 9 which is incorporated herein by this reference, which budget, sources and uses of funds statement, and cash flow projection may not be materially changed without the prior approval of the City Manager, which approval shall not be unreasonably withheld (a material change is one or more change(s) tha t causes the total Project cost to increase or decrease by a cumulative amount of five percent (5%) or more from what is shown in Attachment No. 9); notwithstanding the foregoing, Developer shall promptly notify City, in writing, if Developer makes changes to the Project Budget which cause the total Project cost to increase or decrease by a cumulative amount of more than five percent (5%) from what is shown in Attachment No. 9. “Project Entitlements” shall mean, collectively, any and all permits and approvals required in connection with the Project, and all conditions of approval issued in connection with any of the foregoing, and as any of such permits and/or approvals are amended from time to time. “Project Entitlements” shall not include grading permits and/or building permits. “PTRs” or “Preliminary Title Report(s) ” shall have the meaning ascribed in Section 2.3.3 hereof.
“Qualified Tax Credit Investor” shall mean a person or entity who (i) is an experienced limited partner and investor in multifamily housing developments receiving low income housing tax credits issued by the State of California or the United States federal government and (ii) has obtained or is contractually obligated to obtain a limited partnership or limited liability company membership interest in Developer whereby it will receive ninety percent (90%) or more of the Tax Credits generated in connection with the Project. City shall have the right to reasonable prior approval of any person or entity proposed by Developer as the Qualified Tax Credit Investor and of the terms and conditions of the P artnership Agreement. City shall diligently review any documents and/or proposals submitted by Developer with respect to the proposed Qualified Tax Credit Investor and Partnership Agreement.
“Release of Construction Covenants ” shall mean a r elease of construction covenants, substantially in the form attached hereto and incorporated herein as Attachment No. 8. “Released/Indemnified Parties” shall have the meaning ascribed in Section 3.5 hereof. “Schedule of Performance” shall mean that certain s chedule attached hereto and incorporated herein as Attachment No. 4.
“Senior Household” shall mean a household in which at least one member of the household is fifty-five (55) years of age or older and each other resident in the same dwelling unit is a “qualified permanent resident,” a “permitted health care resident,” (as those terms are defined in California Civil Code sections 51.3(b) or a person under 55 years of age whose occupancy is permitted under California Civil Code section 51.3(b)(2). “Senior Loan ” shall mean the Construction Loan and the Take -Out Loan and any Refinancing thereof.
“Site” shall have the meaning ascribed in Section 1.2 hereof. 295

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“Social Services Fee” shall mean a minimum of [ Two Thousand Two Hundred Three Dollars ($2,203)] per Unit year, increasing annually by three percent (3%), which are to be set aside and used exclusively for the Social Services to be provided to the residents of the Project. “Take-Out Lender” shall mean the lending institution that makes the Take-Out Loan. The Take-Out Lender may or may not also be the Construction Lender. “Take-Out Loan” shall mean the permanent financing to be obtained by Developer in order to take out the Construction Loan.
“Tax Credit Program” shall mean the low-income housing tax credit program authorized pursuant to Internal Revenue Code s ection 42, California Health and Safety Code s ections 50199.6-50199.19, Revenue and Taxation Code s ections 17057.5, 17058, 23610.4, 23610.5, and applicable federal and State regulations.
“Tax Credits” shall mean the low income housing tax credits granted by TCAC for the Project pursuant to s ection 42 of the Internal Revenue Code and/or California Revenue and Taxation Code, sections 17057.5, 17058, 23610.4, 23610.5 and California Health and Safety Code section 50199, et seq.
“Tax Credit Regulatory Agreement” shall mean that certain regulatory agreement to be recorded against the Site as a condition of the receipt by the Project of an allocation by TCAC of nine percent (9%) Tax Credits.
“TCAC” shall mean the California Tax Credit Allocation Committee. “Title Company” shall mean First American Title Insurance Company, or another title company mutually acceptable to City and Developer.
“Unit” and “Units” shall have the meaning ascribed in Section 1.1 hereof.

1.5 Prohibition Against Change in Ownership, Management and Control of Developer and Prohibition Against Transfer of the Site
The qualifications and identity of Developer are of particular concern to City. It is because of these qualifications and identity that City intends to and has entered into this Agreement and the City Ground Lease with Developer. Consequently, no person, whether a voluntary or involuntary successor of Developer, shall acquire any rights or powers under this Agreement and/or the City Ground Lease nor shall Developer assign all or any part of this Agreement, the City Ground Lease, the Site, or the City Regulatory Agreement without the prior written approval of City. A voluntary or involuntary sale or transfer of any interest in Developer or the Site during the term of this Agreement shall be deemed to constitute an assignment or transfer for the purposes of this Section 1.5, and the written approval of City shall be required prior to effecting such an assignment or transfer. Any purported transfer, voluntarily or by operation of law, except with the prior written consent of City, shall render this Agreement absolutely null and void and shall confer no rights whatsoever upon any purported assignee or transferee. During the term of this Agreement and the City Regulatory Agreement, Developer shall not, except as permitted by this Agreement, assign or attempt to assign this Agreement or any rights or duties herein, nor make any total or 296

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partial sale, transfer, conveyance, or assignment of the whole or any part of the Site or any of the improvements thereon.

Notwithstanding any other provision of this Agreement to the contrary, City approval of an assignment of this Agreement or transfer of the Site, or any interest therein, shall not be required in connection with:
a. the conveyance or dedication of any portion of or interest in the Site to City, or other appropriate governmental agency, including public utilities, where the granting of such conveyance or easement permits or facilitates the development of the Project on the Site or is otherwise required to provide public access to the City’s property and for parking; b. any assignment of the limited partner interests in Developer to an Affiliate of Developer or Jamboree;
c. the transfer of the Project or any interest in the Site to Jamboree, an entity controlled by Jamboree, a nonprofit corporation in which a majority of the board of directors are members of the board of directors of Jamboree (any of the foregoing a “ Jamboree Affiliate Entity”), or a partnership or limited liability company in which a Jamboree Affiliate Entity is a general partner or managing member;
d. any mortgage, deed of trust, or other form of conveyance required for any reasonable method of financing or refinancing the development of the Project on the Site that is contemplated in the Project Budget or has otherwise been approved, in writing, by the City Manager, including all direct and indirect costs related thereto , and any refinancing of such mortgage, deed of trust, or other form of conveyance provided such refinancing does not result in a loan to value ratio in excess of 80% or a debt coverage ratio of less than 1.15 to 1; e. transfers of limited partnership interests resulting from the death or mental or physical incapacity of an individual;
f. transfers of limited partnership interests in trust for the benefit of a spouse, children, grandchildren, or other family member, or for charitable purposes; g. the admission of the Qualified Tax Credit Investor to Developer as a limited partner thereof;
h. the transfer of limited partnership interests by the Qualified Tax Credit Investor to an entity that has the same general partner or managing member as the Qualified Tax Credit Investor or an Affiliate thereof;
i. the transfer of the Project or Site after expiration of the fifteen (15) year compliance period to a Jamboree Affiliate Entity or a partnership or limited liability company in which a Jamboree Affiliate Entity is a general partner or managing member pursuant to a purchase option or right of first refusal agreement entered into in accordance w ith Developer’s limited partnership agreement;
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Notwithstanding anything in this Section 1.5 to the contrary, (i) any transfer or assignment by Developer or any successor in interest to Developer not requiring approval by City shall be effective when made but shall not be deemed to relieve Developer or any successor party from the obligation to timely complete development of the Project unless and until the transferor and transferee execute and deliver to City an assignment and assumption agreement in a form and with content reasonably acceptable to Ci ty’s legal counsel ; and (ii) a ny transfer or assignment by Developer or any successor in interest to Developer requiring the approval by City pursuant to this Section 1.5 shall not be effective and shall not be deemed to relieve Developer or any successor party from the obligation to timely complete development of the Project unless and until the transferor and transferee execute and deliver to City an assignment and assumption agreement in a form and with content reasonably acceptable to City’s legal counsel.

This Section 1.5 shall not be applicable to the leasing of individual Units to Eligible Tenants in accordance with this Agreement and the City Regulatory Agreement, and no assignment and assumption agreement shall be required in connection therewith.

1.6 Representations by Developer
Developer represents and warrants to City as follows:
a. Developer is duly established and in good standing under the laws of the State of California and has duly authorized, executed and delivered this Agreement and any and all other agreements and documents required to be executed and delivered by Developer in order to carry out, give effect to, and consummate the transactions contemplated by this Agreement. This Agreement is enforceable against Developer in accordance with its terms. b. Developer does not have any contingent obligations or contractual agreements which will adversely affect the ability of Developer to carry out its obligations hereunder.
c. There is no action or proceeding pending or, to Developer ’s knowledge, threatened, for the dissolution or liquidation of Developer and there is no action or proceeding pending or, to Developer’s knowledge, threatened by or against Developer which could affect the validity and enforceability of the terms of this Agreement, or adversely affect the ability of Developer to carry out its obligations hereunder.
d. The execution and delivery of this Agreement and all other documents to be executed by Developer pursuant to this Agreement will not constitute or result in any default or event that with notice or the lapse of time, or both, would be a default, breach, or violation of any other agreement, instrument, or arrangement by which Developer is bound. e. The execution and delivery of this Agreement and all other documents to be executed by Developer pursuant to this Agreement and the consummation of the transactions contemplated herein will not violate any provision of or require any consent, authorization, or approval under any law or administrative regulation or any other order, award, judgment, writ, injunction or decree applicable to, or any governmental permit or license issued to Developer.
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f. To Developer’s knowledge, no representation, warranty, or covenant of Developer in this Agreement, or in any document or certificate furnished or to be furnished to City pursuant to this Agreement, contains any untrue statement of a material fact or omits to state a material fact ne cessary to make the statements contained herein or therein not misleading.
g. All financial information delivered to City, including, without limitation, information relating to the financial condition of Developer, the Site, and the Project accurately represents such financial condition and has been prepared in accordance with accepted accounting principles consistently applied, unless otherwise noted in such information. h. Developer reasonably believes that it has, and will as required by its obligations hereunder, dedicate, allocate and otherwise make available, sufficient financial and other resources to perform its obligations under this Agreement. Nothing contained herein shall be deemed to require Developer’s partners to contribute additional capital to Developer.

Each of the representations and warranties contained in this Section 1.6 shall be restated as of the Close of Escrow. If Developer becomes aware of any fact or circumstance which would materially change or render materially incorrect, in whole or in part, any representation or warranty made by Developer under this Agreement, whether as of the date given or at any time thereafter through the Close of Escrow (whether or not the representation or warranty was based on knowledge as of a particular date), Developer will get prompt written notice of such changed fact or circumstance to City Manager and City may, as its sole remedy, terminate this Agreement by written notice to Developer . All representations or warranties herein shall survive the Close of Escrow. As used in this Section 1.6, the term “knowledge” or “known” shall mean the actual (not constructive or imp uted) knowledge of the Executive Vice P resident and Chief Development Officer of Jamboree without any investigation or inquiry or duty of investigation or inquiry.

1.7 Representations by City
City represents and warrants to Developer as follows:
a. City is a California municipal corporation. The execution, performance, and delivery of this Agreement by City has been fully authorized by all requisite actions on the part of City. The persons who have executed this Agreement on behalf of City are authorized to bind City by their signatures hereto.
b. City does not, as far as is known to City, have any contingent obligations or contractual agreements which will adversely affect the ability of City to carry out its obligations hereunder.
c. There are no pending or, to City’s knowledge, threatened, legal proceedings to which City is or may be made a party or to which it or any of its property is or may become subject, which will adversely affect the ability of City to carry out its obligations hereunder.
d. There is no action or proceeding pending or, to City’s knowledge, threatened, looking toward the dissolution or liquidation of City and there is no action or 299

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proceeding pending or, to City’s knowledge, threatened by or against City which could affect the validity and enforceability of the terms of this Agreement, or adversely affect the ability of City to carry out its obligations hereunder.
e. City is not the subject of a bankruptcy proceeding.
f. To City’s knowledge, the execution and delivery of this Agreement and all other documents to be executed by City pursuant to this Agreement will not constitute or result in any default or event that with notice or the lapse of time, or both, would be a default, breach, or violation of any other agreement, instrument, or arrangement by which City is bound. g. To City’s knowledge, the execution and delivery of this Agreement and all other documents to be executed by City pursuant to this Agreement and the consummation of the transactions contemplated herein will not violate any provision of or require any consent, authorization, or approval under any law or administrative regulation or any other order, award, judgment, writ, injunction or decree applicable to, or any governmental permit or license issued to City.
h. To City’s knowledge, no representation, warranty, or covenant of City in this Agreement, or in any document or certificate furnished or to be furnished to Developer pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading.
i. City has not entered into and, t o City’s knowledge, t here are no unrecorded purchase agreements, option agreements, rights of first refusal, conditional sales contracts or other title retention agreements which would prevent City from conveying a leasehold interest to the Site to Developer pursuant to the terms of the Agreement. j. To City’s knowledge, there is not currently any contemplated eminent domain proceeding that would affect the Site.
k. There is no pending or , to City’s knowledge, threatened claims, allegations or lawsuits of any kind, whether for personal injury, property damage, landlord tenant disputes, property taxes or otherwise, that could materially and adversely affect the development or operation of the Project in accordance with this Agreement. l. To the City’s knowledge, no Hazardous Materials are or have heretofore been generated, treated, used, stored, disposed of or deposited in or otherwise exist in or on any portion of the Site, and no Hazardous Materials exist in or on the Site that would cause the Site to be unsuitable for the development or operation of the Project or that may support a claim for damages result in liability at common law or under applicable federal, state or local environmental statute, rule, regulation or ordinance and no underground storage tanks, pipelines or clarifiers are located on the Site.
m. To City’s knowledge, t here are no current zoning, building, environmental protection, clear air, pollution, fire or health code violations with respect to the Site or current violations pertaining to the use and occupancy of the Site. 300

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n. City has not entered into and, to City’s knowledge, t here are no leases, occupancy agreements, licenses or other rights to occupy all or any portion of the Site. o. To City’s knowledge, there are no service, supply, management or other contracts or agreements affecting the Site that will survive the Close of Escrow, except for the Approved Title Exceptions.

Each representation and warranty contained in this Section 1.7 shall be restated as of the Close of Escrow. If City becomes aware of any fact or circumstance which would materially change or render materially incorrect, in whole or in part, any representation or warranty made by City under this Agreement, whether as of the date given or at any time thereafter through the Close of Escrow (whether or not the representation or warranty was based on knowledge as of a particular date), City will get prompt written notice of such changed fact or circumstance to Developer and Developer may, as its sole remedy, terminate this Agreement by written notice to City. All representations or warranties herein shall survive the Close of Escrow . As used in this Section

1.7, the term “knowledge” or “known” shall mean the actual (not constructive or imputed) knowledge of the City Manager, without any investigation or inquiry or duty of investigation or inquiry.

1.8 Covenants of City. From the effective date of this Agreement through the Close of Escrow, City covenants and agrees as follows:
a. City will not enter into a lease or license of the Site without the prior written approval of Developer, which shall not be unreasonably withheld or delayed. b. City will continue to maintain in effect all policies of insurance currently maintained on the Site.
c. City will continue to maintain the Site in substantially the same manner as it has prior to the execution of this Agreement. d. City shall not take any action or consent to any action which would cause a lien, obligation or encumbrance to be placed or imposed upon th e Site, take or consent to any action affecting title to the Site or amend, modify or extend the term of any matter affecting title to the Site that results in any exception to title existing as of the Close of Escrow without the prior written consent of Developer.
e. City shall not construct or install or permit to be constructed or installed any improvements on the Site without the prior written approval of Developer, which shall not be unreasonably withheld or delayed.
f. City will provide prompt written notice to Developer of any casualty or condemnation affecting any portion of the Site, any matter relating to zoning changes, increase in tax assessments, notices of violations issued by any governmental authority with respect to the Site or any litigation, arbitration or other judicial or administrative proceeding which concerns or affects the Site of which the City obtains knowledge.
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1.9 Risk of Physical Loss . Prior to City’s delivery of possession of the Site to Developer at the Close of Escrow, the risk of loss or damage to the Site shall remain upon the City.

If the Site suffers a material release of a Hazardous Material and such release is known to the City and not caused by the Developer, then City shall give written notice thereof to Developer promptly and in such event, or in the event Developer otherwise learns of such a release Developer shall have the right to terminate this Agreement upon written notice to the City given prior to the Close of Escrow.

1.10 C
ondemnation. In the event that, prior to the Close of Escrow, any governmental entity (other than City) shall commence any action of eminent domain or similar type proceedings to take any portion of the Site, City shall give prompt notice thereof to Developer and Developer or City, or both, shall have the option either to (i) elect not to lease the Site, in which event this Agreement shall terminate or (ii) complete the lease of the Site, in which case City shall be entitled to all proceeds of such taking against the Site; provided, however, that City agrees that it shall not settle or compromise the proceedings with respect to the Site without Developer’s prior written consent, which will not be unreasonably withheld.

2. FINANCING THE PROJECT; DISPOSITION OF THE SITE

2.1 Developer’s Financing Plan
Developer contemplates financing the development of the Project (other than permanent financing) with a combination of funds from the proceeds of the following: (i) the City Loan; (ii) 9% Tax Credits; (i ii) the Construction Loan; and (iv) such other financing sources as may be obtained by Developer in accordance with the terms and conditions of this Agreement. City and Developer acknowledge and agree that Developer contemplates applying to City for a loan of HOME funds to assist Developer with the costs Developer incurs to develop the Project, and if approved, the repayment terms of such loan shall be substantia lly similar to the terms set forth in the City Note, except as may be required due to the source of the funding. Developer shall utilize all of such funding exclusively for development of the Project thereon, and not for any other purpose.

2.1.1 City Loan
City shall provide Developer with the City Loan to assist Developer in construction of the Project on the Site. The City Loan shall be in the form of a deferral of the permit fees and development impact fees that otherwise would be paid by Developer to City at issuance of building permits for the Project.

2.1.2 Application to TCAC
Developer shall prepare and submit a complete application to TCAC for an allocation of 9% Tax Credits as soon as reasonably practicable following the Effective Date.

Developer agrees to promptly submit to City all of the following documents at such time as the same are submitted by Developer to TCAC or other applicable body or when such documents are received by Developer, as applicable (any documents submitted prior t o the Effective Date shall also have been submitted by Developer to City prior to the Effective Date):
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a. A true and correct copy of the preliminary reservation letter from TCAC, a copy of the letter of intent from the Qualified Tax Credit Investor reflecting the total amount of the syndication proceeds and the timing of the payment of such proceeds. b. A copy of the Placed in Service Application submitted to TCAC, including any cost certification submitted in connection therewith. c. A complete copy of the regulatory agreement between TCAC and Developer. (As more fully discussed in Section 3.11 of the City Regulatory Agreement, should City be prevented by a final order of a court of competent jurisdiction, applicable and binding appellate opinion, or regulatory body with jurisdiction from enforcing, for any reason, the affordability restrictions set forth in this Agreement, City shall be a third -party beneficiary under said agreement and shall have full authority to enforce any breach or default by Developer thereunder in the same manner as though it were a breach or default under this Agreement.) d. Complete copies of all correspondence or transmittals from TCAC or other jurisdiction (such as the Internal Revenue Service) containing any notification regarding the Project’s noncompliance with applicable provisions of the Low -Income Housing Tax Credit Program.

In addition to the foregoing sources of funding for the Project, Developer, in consultation with City, shall diligently seek other sources of funding that are or may be available to help fund the Project.

In the event that Developer timely submits a complete application for Tax Credits as set forth above, but due to no fault of Developer does not receive an allocation of Tax Credits in that Round, Developer shall be permitted hereunder to submit an application for Tax Credits in the next successive round of applications for 9% Tax Credits following the first application submittal.

In the event that Developer timely submits a complete application for Tax Credits in the next Round as set forth above, but due to no fault of Developer does not receive an allocation of Tax Credits in the Second Round, Developer shall be permitted hereunder to submit an application for Tax Credits in the next successive round of applications for 9% Tax Credits.

In the event that Developer timely submits a complete application for Tax Credits in the following round as set forth above, but due to no fault of Developer does not receive an allocation of Tax Credits in the following Round, Developer shall be permitted hereunder to submit an application for Tax Credits in the next successive round of applications for 9% Tax Credits .

Developer shall not be permitted to submit an application for Tax Credits after the last Round without City’s consent in the event Developer does not receive an allocation in the last Round.

2.1.3 Project Budget
The development budget for the Project, anticipated sources and uses of funds for the development of the Project and the financial projections for the Project are set forth in the Project Budget (Attachment No. 9).
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2.1.4 Developer Submittals
Promptly upon Developer ’s receipt of a notification of an award of any of the financing described in the Project Budget, Developer shall submit to the City Manager a copy of such award or evidence of such award.

Within five (5) days after the Effective Date, Developer shall provide to City a copy of Developer’s most recently prepared Annual Financial Statement, and a copy of Developer ’s most recent internally prepared, unaudited financial statement, which shall include a balance sheet, income statement, statement of retained earnings, statement of cash flows, and footnotes thereto, prepared in accordance with generally accepted accounting principles consistently applied.

2.2 Disposition of Site

2.2.1 Ground Lease of Site
In accordance with and subject to the terms and conditions of this Agreement, City agrees to ground lease the Site to Developer, and Developer agrees to ground lease the Site from City pursuant to the terms of the Ground Lease.

2.2.2 Escrow
a. The ground lease of the Site shall take place through the Escrow with the Escrow Agent. The opening of the Escrow (the “Opening of Escrow”) shall be deemed to be the date that a fully executed copy of this Agreement is delivered to the Escrow Agent, which shall occur not later than five (5) days after receipt by Developer of a preliminary reservation letter from TCAC for 9% Tax Credits. Developer shall have the obligation to deliver this Agreement to Escrow Agent, and Escrow Agent is instructed to notify City and Developer in writing of the date of the Opening of Escrow.
b. This Agreement, once deposited in Escrow, shall constitute the joint escrow instructions of City and Developer to Escrow Agent. Additionally, if Escrow Agent so requires, City and Developer agree to execute the form of escrow instructions that Escrow Agent customarily requires in real property escrows administered by it. In the event of any conflict or inconsistency between Escrow Agent’s standard instructions and the provisions of this Agreement, the provisions of this Agreement shall supersede and be controlling. c. Escrow shall close on the Closing Date, which shall be the date that is two (2) business days after each of the Closing Conditions set forth below has been satisfied or waived by the benefited Party or Parties; provided that, subject to extensions of time attributable to Force Majeure, Escrow shall close on or before the Outside Closing Date . If any Party reasonably determines that a Closing Condition for its benefit will not or cannot be satisfied prior to the Outside Closing Date , the Parties shall meet and confer in a good faith effort to determine whether such Closing Condition will be waived or modified, provided that each Party reserves the right to insist upon the full and timely satisfaction of all of the Closing Conditions for its benefit in its sole and absolute discretion. If such meet and confer process is unsuccessful in resolving the matter, any Party not then in Default may terminate this Agreement by delivery of written notice to the other Party or Parties and all funds and documents deposited with Escrow Agent shall be 304

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promptly refunded or returned, as the case may be, by Escrow Agent to the depositing Party; provided, however, that if Escrow is so terminated, the Parties shall bear their own costs for Escrow, and termination of this Agreement shall be the sole and exclusive remedy at law or in equity by the Parties.
d. Developer shall be solely responsible for all costs and expenses related to the Survey (as defined below), documentary transfer taxes if any, the costs of extended title insurance coverage, any marginal cost to obtain title insurance coverage in excess of the value of Developer’s leasehold estate in the Site, any title insurance endorsements (other than those obtained by City to “insure -over” a title exception), and fifty percent (50%) of the Escrow fees.

City shall be responsible for the other fifty percent (50%) of the Escrow Fees, the costs of the standard leasehold owner’s policy of title insurance in the amount of the value of Developer’s leasehold estate, and any endorsements obtained by City to “insure-over” title exceptions. Escrow Agent is authorized on the Close of Escrow to pay and charge the Developer for any fees, charges, and costs payable under this paragraph as set forth on the settlement statements approved by the Parties. Before such payments are made, Escrow Agent shall notify City and Developer of the fees, charges, and costs necessary to close under the Escrow, by delivering draft settlement statements to the Parties for their mutual approval.

2.2.3 Condition of Title; Developer Title Insurance
a. No later than ten (10) business days after the Opening of Escrow , Developer shall promptly obtain a preliminary title report for the Site (the “PTR”) from the Title Company and shall deliver a copy (or cause a copy to be delivered) to City together with copies of (or hyperlinks to) all of the title exception documents. Developer shall have until 5:00 p.m.

Pacific Time on the date that is thirty (30) days after obtaining the PTR to review and approve or disapprove any title exceptions in the PTR, and notify City in writing of any such title exceptions to which Developer objects. Developer ’s failure to timely deliver such written notice of approved/disapproved title exceptions shall constitute Developer ’s disapproval of all title exceptions. Developer shall also cause an ALTA survey (“Survey”) to be performed within thirty (30) days after Developer obtains the PTR and shall promptly deliver a copy of the Survey to City together with any objections (if any) to any title exceptions shown on the Survey within said thirty (30) day period. City shall have ten (10) business days after delivery by Developer to City of any written objection to a title exception to notify Developer in writing that City will: (a) remove one or more of the applicable exception(s) or cause them to be removed by the end of the Due Diligence Period (as defined below) or reasonably insured over by the Title Company (subject, however, to Developer’s approval of the form of such insurance); or (b) decline to remove exceptions (or to cause them to be reasonably insured); provided, however, that City shall cause to be removed from title any d eeds of trust, liens or other monetary encumbrances (other than non- delinquent real property taxes) at or prior to the Close of Escrow all of which shall constitute a “Disapproved Title Exception” (as hereinafter defined). Failure by City to so notify Developer shall be deemed to be City’s election not to remove or otherwise address the applicable title exception(s). If City notifies Developer that City will remove (or cause to be removed) one or more of such title exceptions, then City shall do so on or before the Close of Escrow (unless this Agreement is terminated by Developer pursuant to this Agreement). If the City fails to so notify Developer as to any exception initially disapproved by Developer, or if City expressly declines in writing to remove o r insure over title exceptions, then Developer shall have an additional ten (10) day period after the 305

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expiration of City’s 10-day response period or the date Developer receives City’s timely response, whichever first occurs, to notify City in writing of Developer’s election to either (a) terminate this Agreement or (b) accept title subject to the title exceptions that City has not agreed to remove. A failure of Developer to timely respond shall constitute Developer ’s election to terminate this Agreement. If Developer fails to so terminate this Agreement, Developer shall be deemed to have approved and accepted the applicable title exceptions (which, together with any title exceptions approved or created by Developer, are hereinafter referred to as the “ Approved Title Exceptions”). As used herein, the term “ Disapproved Title Exceptions ” shall mean any title exceptions that the City has agreed to remove, cause to be removed, or cause to be “insured over.” b. In the event that the Title Company amends or updates the PTR after the Developer’s approval of the initial PTR (any such update, a “PTR Update”), Developer shall furnish City with a written statement of approval or objections to any matter first raised in a PTR Update within five (5) business days after its receipt of such PTR Update and a copy of each new exception raised therein (each, a “PTR Update Review Period”). Should Developer fail to notify City in writing of any objections to any matter first disclosed in a PTR Update prior to the expiration of the PTR Update Review Period, as applicable, Developer shall be deemed to have approved such matters which shall then be considered Approved Title Exceptions. If, however, Developer objects to such new exception, then City shall have until 5:00 p.m. Pacific Time on the fifth (5th) business day after receipt of Developer ’s objections in which to notify Developer, in City’s sole discretion, that City will either (i) remove one or more of the applicable excep tion(s) or cause them to be removed by the Close of Escrow or reasonably insured over by the Title Company (subject, however, to Developer’s approval of the form of such insurance); or (b) decline to remove exceptions (or to cause them to be reasonably insured) (except that City shall remove all Disapproved Title Exceptions). If City fails to so notify Developer as to any exception, or declines to remove or insure over title exceptions, then Developer shall have until 5:00 p.m. Pacific Time on the fifth (5th) business after City ’s election (or deemed electi on) not to cure the disapproved exception in which to elect (A) to terminate this Agreement by written notice to City or (B) to waive in writing Developer’s previous disapproval of (and thereby accept) any items that City does not elect to remove. If Developer gives City such written notice of termination, then this Agreement shall thereupon terminate without further action by the Parties. If Developer fail s to make an election within the five (5) business day period referenced above, then Developer shall be deemed to have agreed to accept title subject to the matters first disclosed in the PTR Update and such matters shall be deemed to be Approved Title Exceptions hereunder.

2.2.4 Due Diligence Review; Physical and Environmental Condition of Site; “As- Is” Sale.
a. Due Diligence Period. No later than ten (10) business days after the Opening of Escrow , City shall deliver to Developer copies of all materials documents in the possession of City that pertain to the Site (the “Documents”). Upon the execution of this Agreement until the date that is sixty (60) days after the date on which the Documents have been delivered to Developer (the “ Due Diligence Period ”), Developer and its contractors and consultants who are designated in writing to City (“Developer Designee’s”) shall have the right to enter onto the Site for the purpose of performing the Survey, hazardous materials inspections, soils inspections and other physical inspections and investigations; provided, however, that: (a) Developer shall deliver copies of all final inspection reports to City ; (b) no inspections or 306

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investigations shall damage the Site or any improvements thereon or shall be “invasive” unless City has received a plan describing the scope of the inspection or investigation and the City Manager has approved such plan in writing, which approval shall not be unreasonably withheld; (c) Developer shall immediately repair all damage caused by or related to its inspections; and (d) neither Developer nor any of Developer ’s Designees shall enter the Site unless Developer has provided City reasonable written evidence (such as insurance certificates and/or copies of policies) that the activities of Developer and the Developer Designees are covered by reasonable liability insurance naming City as an additional insured. Developer shall defend, indemnify and hold City harmless from and against any and all claims, liabilities, losses, damages, costs and expenses (including, without limitation, attorneys’ fees and cost) resulting from the entry onto the Site for such purposes or for purposes of performing the Survey; provided, however, such indemnification shall not extend to Developer ’s mere discovery of pre -existing conditions on the Site or damage caused by the gross negligence or willful misconduct of the City or its agents or employees . If Developer disapproves of any condition of the Site or any Document, which approval or disapproval shall be in Developer ’s sole and absolute discretion, then Developer may terminate this Agreement by written notice to City given on or prior to 5:00 P.M. Pacific Time on the last day of the Due Diligence Period that sets forth the basis for the disapproval (which basis shall be in Developer’s sole and absolute discretion and not subject to any approval by City). b. “As-Is” Acquisition, “With All Faults ”. Developer acknowledges and agrees that, except as expressly set forth herein, Developer is acquiring a leasehold interest in the Site in its “AS IS” physical and environmental condition, WITH ALL FAULTS, IF ANY,

AND, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, WITHOUT ANY

WARRANTY, EXPRESS, IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING,

BUT NOT LIMITED TO , ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE . Except as expressly set forth in this Agreement, including, without limitation, in Section 1.7 above, neither City nor any agents, representatives, officers, or employees of City have made any representations or warranties, direct or indirect, oral or written, express or implied, to Developer or any agents, representatives, or employees of Developer with respect to the physical and environmental condition of the Site , its fitness for any particular purpose, or its compliance with any laws, and Developer is not aware of and does not rely upon any such representation to any other party.

Except as expressly set forth herein, including, without limitation, in Section 1.7 above, neither City nor any of its representatives is making or shall be deemed to have made any express or implied representation or warranty, of any kind or nature, as to (a) the physical and environmental status of the Site , (b) the Site ’s compliance with applicable laws pertaining to its physical and environmental condition, (c) the accuracy or completeness of any information or data provided or to be provided by City with respect to the physical and environmental condition of the Site, or (d) any other matter relating to the physical and environmental condition of the Site. c. T
ermination and Waiver . Developer acknowledges and agrees that in the event Developer does not approve of the condition of the Site under this Section 2.2.4, Developer’s sole right and remedy shall be to terminate this Agreement under and in accordance with Section 2.2.4.a (above). Consequently, subject to City’s representations and warranties in this Agreement, including, without limitation, in Section 1.7 above, Developer hereby waives any and all objections to or complaints regarding the Site, and its condition, including, but not limited to, federal, state or common law based actions and any private right of action under state and 307

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federal law to which the Site is or may be subject, including, but not limited to, any federal and state and local laws pertaining to Hazardous Materials, physical characteristics and existing conditions, including, without limitation, structural and geologic conditions, subsurface soil and water conditions and solid and hazardous waste and Hazardous Materials on, under, adjacent to or otherwise affecting the Site. Subject to City’s representations and warranties in this Agreement, including, without limitation, in Section 1.7 above, Developer further hereby assumes the risk of changes in applicable laws and regulations relating to past, present and future environmental conditions on the Site and the risk that adverse physical characteristics and conditions, including, without limitation, the presence of Hazardous Materials or other contaminants, may not have been revealed by its investigations.
d. Releases and Waivers . Except for (a) a breach by C ity of any representation, warranty or covenant contained in this Agreement, and (b) any “Property Condition Claims” (as defined below) to the extent caused by the gross negligence or willful misconduct of any of the “Released Parties” (as defined below) , Developer and anyone claiming by, through or under Developer also hereby waives its right to recover from and fully and irrevocably releases City and its council members, board members, employees, officers , directors, representatives, agents, servants, attorneys, successors and assigns (“Released Parties”) from any and all claims, responsibility and/or liability that it may now have or hereafter acquire against any of the Released Parties for any costs, loss, liability, damage, expenses, demand, action or cause of action arising from or related to (i) the condition (including any defects, errors, omissions or other conditions, latent or otherwise, and the presence in the soil, air, structures and surface and subsurface waters of materials or substances that have been or may in the future be determined to be Hazardous Materials or otherwise toxic, hazardous, undesirable or subject to regulation and that may need to be specially treated, handled and/or removed from the Site under current or future federal, state and local laws regulations or guidelines), valuation, salability or utility of the Site, or its suitability for any purpose whatsoever (collectively, the “ Property Condition Claims ”), and (ii) any information furnished by the Released Parties under or in connection with this Agreement (other than the City ’s representations and warranties hereunder). With the exception of any claims excluded pursuant to clauses (a) and (b) above in this paragraph d, t his release includes claims of which Developer is presently unaware or which Developer does not presently suspect to exist which, if known by Developer, would materially affect Developer ’s release to City . Developer specifically waives the provision of California Civil Code section 1542, which provides as follows:
“A GENERAL RELEASE DOES NOT EXTEND TO

CLAIMS THAT THE CREDITOR OR RELEASING PARTY

DOES NOT KNOW OR SUS PECT TO EXIST IN HIS OR HER

FAVOR AT THE TIME OF EXECUTING THE RELEASE AND

THAT, IF KNOWN TO HIM OR HER, WOULD HAVE

MATERIALLY AFFECTED THE SETTLEMENT WITH THE
DEBTOR OR RELEASED PARTY.”
In this connection and to the extent permitted by law, Developer hereby agrees, represents and warrants that Developer realizes and acknowledges that factual matters now unknown to it may have given or may hereafter give rise to causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses which are presently unknown, unanticipated and unsuspected, and Developer further agrees, represents and warrants that the 308

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waivers and releases herein have been negotiated and agreed upon in light of that realization and that with the exception of any claims excluded pursuant to clauses (a) and (b) above in this Section

2.2.4.d, Developer nevertheless hereby intends to release, discharge and acquit Released Parties from any such unknown causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses which might in any way be included as a material portion of the consideration given to City by Developer in exchange for City’s performance hereunder.

Developer hereby agrees that, if at any time after the Close of Escrow any third party or any governmental agency seeks to hold Developer responsible for the presence of, or any loss, cost or damage associated with, Hazardous Materials in, on, above or beneath the Site , or emanating therefrom, then with the exception of (x) a breach by City of any representation, warranty or covenant contained in this Agreement, and (y) any Property Condition Claims to the extent caused by the gross negligence or willful misconduct of any of the Released Parties, (I) Developer waives any rights it may have against City in connection therewith, including, but not limited to, any federal and state and local laws pertaining to Hazardous Materials, and (II) Developer agrees that it shall not (i) implead City, (ii) bring a contribution action or similar action against City, or (iii) attempt in any way to hold City responsible with respect to any such matter.

The provisions of this Section shall survive the Close of Escrow.

City and Developer have each initialed this Section 2.2.4 to further indicate their awareness and acceptance of each and every provision hereof:

_____________________ ________________________
CITY’S INITIALS DEVELOPER’S INITIALS
e. Environmental Indemnity. From or after the Close of Escrow, Developer shall indemnify, protect, defend and hold harmless City , and City’s officials, officers, attorneys, employees, consultants, agents and representatives, from and against any and all claims, liabilities, suits, losses, costs, expenses and damages, including but not limited to attorneys ’ fees and costs, arising directly or indirectly out of any claim for loss or damage to any property, including the Site, injuries to or death of persons, or for the cost of cleaning up the Site, and removing Hazardous Materials or toxic substances, materials and waste therefrom, by reason of contamination or adverse effects on the environment, or by reason of any statutes, ordinances, orders, rules or regulations of any governmental entity or agency requiring the cleanup of any Hazardous Materials caused by or resulting from any Hazardous Material, or toxic substances or waste first released onto any portion of the Site after the Close of Escrow . For the avoidance of doubt, the environmental indemnity in this paragraph e shall not apply with respect to any Hazardous Materials or toxic substances, materials and/or waste therefrom that first came onto the Site, or were released onto the Site, prior to the Close of Escrow, except to the extent that such release of Hazardous Materials or toxic substances, or materials and/or waste therefrom were exacerbated or caused by Developer’s activities during its occupancy of the Premises.

2.2.5 G
round Lease ; Possession
a. Close of Escrow. At the Close of Escrow, the City shall convey a ground leasehold interest in the Site to Developer pursuant to the Ground Lease. Such conveyance 309

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shall be subject to: (i) current real property taxes and assessments not yet due for the tax year during which the conveyance occurs, (ii) all Approved Title Exceptions , and (iii) the instruments required to be recorded pursuant to this Agreement, including the City Deed of Trust, City Regulatory Agreement, and Notice of Affordability Restrictions, Memorandum of Ground Lease and any such grants of easements for public egress, access and use of parking facilities on the Site as are provided for in any a greements between City and Developer (collectively, the “ Permitted Exceptions”).
b. Possession of Site; Use and Occupancy of Units and Other Improvements. Possession of the Site shall be delivered by City to Developer upon the Close of Escrow as provided for in Agreement. Upon taking possession of the Site , Developer may commence the construction of the Project pursuant to this Agreement. Developer shall not permit the possession, use, or occupancy of any Units or other improvements on the Site , for Eligible Tenants or for any other persons or entities, unless and until Developer has obtained from City and any other governmental agency with jurisdiction over the Project and Site any and all necessary permits, including certificates of occupancy for the Units being sought by Developer to be used and occupied pursuant to this Agreement.

2.2.6 D
isposition Conditions
Subject to City and Escrow Agent executing escrow instructions consistent with the requirements of this Agreement, City’s obligation to close Escrow on the Site shall be conditional and contingent upon the satisfaction, or waiver by City in its sole and absolute discretion, of each and all of the following conditions (collectively, the “City Disposition Conditions”):
a. Developer shall have delivered to Escrow Agent (i) City Deed of Trust, (ii) City Regulatory Agreement, (iii) Notice of Affordability Restrictions , and (i v) Memorandum of Ground Lease, all duly executed and acknowledg ed by Developer for recordation, and Escrow Agent shall have recorded, or shall record, each of the same. b. Developer shall have obtained all of the Project Entitlements for the development of the Project on the Site in accordance with this Agreement. c. Developer shall have processed through City a parcel map that established the Site as a separate legal parcel, subject to existing title exceptions and any easements to be granted by Developer by separate instrument for public egress, access and parking. d. Developer has obtained permit ready status for grading and building for the Project on the Site.
e. Developer shall have executed and delivered to Escrow Agent the City Ground Lease and City Note.
f. Developer shall have submitted to the City Manager the evidence of insurance required pursuant to Section 3.5 of this Agreement. 310

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g. Developer shall have delivered to the City Manager the financial statements and other documents required by Section 2.1.4 herein, and the City Manager shall have approved the same (such approval not to be unreasonably withheld or delayed). h. Developer shall have obtained and delivered to the City Manager conditional financing commitment letters for all of the financing set forth in the Project Budget outlining the financial terms, conditions and requirements of an investment in or loan to the Developer’s limited partnership in the forms required by TCAC pursuant to its t ax credit application.
i. Developer has closed on the Construction Loan and all of the construction financing set forth in the Project Budget ; or, concurrent with the Close of Escrow , Developer will close on the Construction Loan and all of the construction financing set forth in the Project Budget.
j. The Title Company shall be irrevocably committed to issue the City Title Policy at the Close of Escrow.
k. No administrative action/quasi-judicial proceeding or litigation has been filed or is pending or will be pending as of the Close of Escrow. l. Each of Developer’s representations and warranties contained in this Agreement are true and correct in all material respects as of the date made and as of the Close of Escrow.
m. Developer is not in material default of this Agreement.

2.2.7 Developer Acquisition Conditions
Subject to Developer and Escrow Agent executing escrow instructions consistent with the requirements of this Agreement, Developer’s obligation to acquire a leasehold interest in the Site shall be conditional and contingent upon the satisfaction, or waiver by Developer in its sole and absolute discretion, of each and all of the following conditions (collectively, the “Developer Acquisition Conditions”):
a. City shall have delivered to Escrow Agent (i) Memorandum of Ground Lease; (ii) City Regulatory Agreement; and (iii) Notice of Affordability Restrictions, all duly executed and acknowledged by Developer for recordation, and Escrow Agent shall have recorded, or shall record, each of the same.
b. Developer shall have obtained all of the Project Entitlements for the development of the Project on the Site in accordance with this Agreement. c. City shall have approved a parcel map establish ing the Site as a separate legal parcel , subject to existing title exceptions and any easements to be granted by Developer by separate instrument for public egress, access and parking. 311

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d. Developer has obtained permit ready status for grading and building for the Project on the Site.
e. City shall have executed and delivered to Escrow Agent the City Ground Lease.
f. The City Manager shall have approved Developer’s evidence of insurance required pursuant to Section 3.5 of this Agreement (which approval shall not be unreasonably withheld, conditioned or delayed if Developer’s insurance complies with said Section 3.5).
g. The City Manager shall have approved (such approval not to be unreasonably withheld, conditioned, or delayed) Developer’s financial statements and other documents required by Section 2.1.4 herein.
h. Developer shall have obtained conditional financing commitment letters for all of the financing set forth in the Project Budget outlining the financial terms, conditions and requirements of an investment in or loan to the Develop er’s limited partnership in the forms required by TCAC pursuant to its tax credit application. i. Developer has closed on the Construction Loan and all of the construction financing set forth in the Project Budget; or, concurrent with the Close of Escrow, Developer will close on the Construction Loan and all of the construction financing set forth in the Project Budget.
j. The Title Company shall be irr evocably committed to issue to Developer on the Close of Escrow an ALTA owner’s leasehold title policy consistent with the provisions in Section 2.3.3 hereof and subject only to the Permitted Exceptions. k. No administrative action/quasi-judicial proceeding or litigation has been filed or is pending or will be pending as of the Close of Escrow. l. City is not in material default of this Agreement.
m. Each of the City’s representations and warranties contained in this Agreement are true and correct in all material respects as of the date made and as of the Close of Escrow.
n. No material change has occurred to the physical condition of the Site except as permitted by this Agreement.

2.2.8 Waivers
City may at any time or times, at its election, waive any of the City Disposition Conditions, but any such waiver shall be effective only if contained in a writing signed by City and delivered to Developer. Developer may at any time or times, at its election, waive any of the Developer Acquisition Conditions, but any such waiver shall be effective only if contained in a writing signed by Developer and delivered to City.
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2.2.9 Failure to Meet Closing Conditions; Termination
In the event that each of the Closing Conditions is not fulfilled, or waived by City or Developer pursuant to Section 2.2.8, the other Party not in default under this Agreement may, at its option, terminate this Agreement, thereby releasing the P arties from further obligations hereunder. In the event this Agreement is terminated, all documents and funds delivered by Developer to City or the Escrow Agent shall be returned to Developer and all documents and funds delivered by City to Developer or the Escrow Agent shall be returned to City. Nothing in this paragraph shall be construed as releasing any Party from liability for any default of its obligations hereunder or breach of its representations and warranties under this Agreement occurring prior to the termination of this Agreement.

2.2.10 City’s Delivery of Documents and Funds to Escrow . No later than 12:00 noon on the day that is two (2) business days before the anticipated Closing Date, City shall deliver to Escrow Agent the following:
a. City Regulatory Agreement, duly executed and acknowledged for recordation.
b. Notice of Affordability Restrictions , duly executed and acknowledged for recordation.
c. Memorandum of Ground Lease, duly executed and acknowledged for recordation.
d. Executed City Ground Lease.
e. An executed certificate of non-foreign status in a form provided by the Escrow Agent and approved by City and Developer.
f. Any and all other sums and documents required by Escrow Agent to carry out and close the Escrow pursuant to this Agreement, including City’s portion for any title insurance or escrow fees.

2.2.11 Developer’s Delivery of Documents and Funds to Escrow . No later than 12:00 noon on the day that is two (2) business days before the anticipated Closing Date (except as noted below), Developer shall deliver to Escrow Agent the following:
a. City Regulatory Agreement , duly executed and acknowledged for recordation.
b. City Deed of Trust, duly executed and acknowledged for recordation.
c. Consent to Notice of Affordability Restrictions, duly executed and acknowledged for recordation.
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d. Memorandum of Ground Lease , duly executed and acknowledged for recordation.
e. Executed City Note.
f. Executed City Ground Lease.
g. Executed City Easement Agreement.
h. Executed deed of trust for the Construction Loan.
i. Any and all other sums (which may be deposited on the Close of Escrow) and documents required by Escrow Agent to carry out and close the Escrow pursuant to this Agreement, including Developer’s portion of any title insurance or escrow fees.

2.2.12 Close of Escrow; Recording of Instruments; Disbursement of Funds . On the Closing Date, and only after all of the Closing Conditions have been met or waived pursuant to this Agreement, Escrow Agent (or Title Company as the case may be) shall perform the following:
a. Record the following instruments in the following order:
(i) Memorandum of Ground Lease , (ii) City Easement Agreement, (iii) City Regulatory Agreement, (iv) City Deed of Trust, and (v) Notice of Affordability Restrictions. b. Deliver to the City Manager and Developer conformed copies of all recorded instruments identified in Sections 2.3.12.a above. c. Deliver to the City Manager the original executed City Note. d. Deliver to the City Manager the City Title Policy.
e. Deliver to the Developer an ALTA owner’s leasehold title policy consistent with the provisions of this Agreement and subject only to the Permitted Exceptions. f. Pro-rate and pay all taxes, escrow fees, recording costs, and other costs of closing the Escrow pursuant to this Agreement and in accordance with a closing statement that has been delivered by Escrow Agent (or Title Company as the case may be) and has been mutually agreed upon by the Parties prior to the Closing Date. g. Perform any other actions mutually agreed upon by the Parties that may be necessary or proper to Close the Escrow and commence the development of the Project on the Site.

2.3 City Title Insurance.

As one of the City Disposition Conditions , Developer shall pay for and City shall obtain from the Title Company standard lessor’s policy of title insurance together with such endorsements as may be reasonably requested by City with liability in the amount of $___________, showing 314

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Developer’s leasehold interest in the Site, and insuring the validity and priority (in accordance with this Agreement) of, respectively, the Memorandum of Ground Lease, the City Easement Agreement, City Regulatory Agreement, and Notice of Affordability Restrictions, and subject only to the Permitted Exceptions (the “ City Title Policy ”). Notwithstanding the foregoing, however, City shall be responsible for the cost of any endorsements and for the additional cost of extended coverage, if requested by City. In addition, Developer shall pay for and City shall obtain from the Title Company a n ALTA lender’s policy of title insurance together with such endorsements as may be reasonably requested by City with liability in the amount of the City Note insuring the validity and priority of the City Deed of Trust, and subject only to the Permitted Exceptions ( the “City Title Policy ”). Notwithstanding the foregoing, however, City shall be responsible for the cost of any endorsements and for the additional cost of extended coverage, if requested by City.

2.4 Subordination
City agrees to subordinate the City Deed of Trust to the deed of trust or other mortgage security instrument securing the Construction Loan and to the deed of trust or other mortgage security instrument securing the Take-Out Loan.

Further, subject to the requirements of this Agreement, City agrees to subordinate the City Regulatory Agreement and Notice of Affordability Restrictions to the deed of trust or other mortgage security instrument securing the Construction Loan and to the deed of trust or other mortgage security instrument securing the Take- Out Loan and any refinancing of the Take -Out Loan pursuant to a written subordination agreement approved by City’ s legal counsel (such approval not to be unreasonably withheld, conditioned or delayed) (the “Subordination Agreement”). The City Regulatory Agreement and Notice of Affordability Restrictions may only be subordinated to a deed of trust or other mortgage security instrument securing the Construction Loan or Take-Out Loan or refinancing of the Take -Out Loan, pursuant to this Agreement, if and only if the affordability covenants and related preservation thereof in Articles 1, 2 (other than the obligation in Section 2.1 to construct the Project), 3 (other than Sections 3.13 and 3.14), 12 and 13 of the City Regulatory Agreement have priority over any such deed of trust or other mortgage security instrument and shall remain binding and run with the land for the “Term” of the City Regulatory Agreement in the event of foreclosure or deed in lieu of foreclosure or any other action taken pursuant to such deed of trust or other mortgage security instrument. The Subordination Agreement shall expressly provide for all of the matters described in this Section 2.4.

2.5 C
ity to Pay No Broker’ s Fees
City hereby represents and warrants that no third party broker has acted on its behalf with the ground lease of the Site , and further represents and warrants that it has no knowledge either constructive or actual whether Developer has engaged the services of a third party broker for the ground lease of the Site . In addition to any other indemnities provided in this Agreement, Developer and City shall indemnify, protect, defend and hold harmless the other and their respective officials, officers, directors, attorneys, employees, consultants, agents and representatives, from and against any and all claims, liabilities, suits, losses, costs, expenses and damages, including but not limited to attorneys’ fees and costs, arising directly or indirectly out of any claims for loss or damages brought by any third party claiming a commission or any fee 315

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whatsoever by acting on behalf of such party as a broker or agent in connection with the ground lease of the Site. The provisions of this Section shall survive the Close of Escrow.

2.6 Cost Savings Obligation
Subject to the requirements of TCAC and other lenders providing loans to the Project that have been approved by City, (such approval not to be unreasonably withheld, conditioned or delayed), Developer hereby agrees to provide and pay to City a “Cost Savings” payment for the Project in an amount to be determined based on the “Audit” (as those terms are described in subparagraph (a) below) to be conducted upon completion of construction of the Project. (a) Audit to Determine Cost Savings Amount. The actual amount of Cost Savings to be paid to City shall be determined after the Audit, as hereafter described, and the amount of such Cost Savings shall be equal to the amount by which the total sources of permanent financing for the Project (which financing includes, but is not limited to, the City Loan, the Take- Out Loan, the equity contributed by the Qualified Tax Credit Investor, any upward adjusted equity payments, if any, made to the Developer by the Qualified Tax Credit Investor, and any other funding obtained for the Project (if applicable) (“ Permanent Financing”) exceed the costs of development incurred for the Project (which costs include, but are not limited to, the hard and soft costs incurred by Developer to perform predevelopment activities and construct the Project, developer fees, capitalized reserves, and the amount spent to repay the principal balance of the Construction Loan to the principal balance of the Take -Out Loan) (“ Costs of Development ”).

Within sixty (60) days following the completion of lease-up of the Project, Developer shall cause its certified public accountant(s) to perform a cost certification of the costs of development of the Project in accordance with the requirements of the Tax Credits and generally accepted accounting principles (“GAAP”) and generally accepted auditing standards (herein referred to as “Audit ”).

If the Audit determines that the Permanent Financing exceeds Developer’s total Costs of Development of the Project , such excess shall be considered the “Cost Savings” for the Project. (b) Portion of Cost Savings Payment as Payment of Principal on City Loan.

Subject to the requirements of TCAC and other lenders providing loans to the Project that have been approved by City (such approval not to be unreasonably withheld, conditioned or delayed), fifty percent (50%) of the Cost Savings for the Project, once determined by the Audit pursuant to Section 2.6(a) above and subject to subs ection 2.6(c) below, shall be due and paid by Developer to City and allocated and credited as a principal payment on the City Loan, as and when paid. The remaining 50% of Cost Savings may be used to pay unpaid or deferred expenses, including any Deferred Developer Fee, or may otherwise be used to pay down principal owed on any other source of funding for the Project.
(c) Timing of Payment of Cost Savings. Fifty percent (50%) of the Cost Savings for the Project shall become due and payable by Developer to City upon the later of (i) sixty (60) days after receipt by Developer of the final Tax Credit equity, (ii) closing of the Take- Out Loan and (iii) completion of construction of the Project, as evidenced by City’s issuance of a Release of Construction Covenants.
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3. DEVELOPMENT OF THE SITE

3.1 Scope of Development
a. Development Obligation. The Project shall be comprised of the construction of an affordable rental housing development containing not less than sixty (60) and up to seventy (70) apartment dwelling units (the “ Units”), which includes one management unit, and shall include all of the onsite private amenities and improvements appropriate and/or necessary for the development, as described and set forth in the Project Entitlements and all public improvements required pursuant to the Project Entitlements, all in accordance with the Project Entitlements and any other approved plans and permits, and as set forth in this Agreement, the Scope of Development, and City Regulatory Agreement.
b. P
arcel Map . As of the Effective Date, the Site comprises a portion of the City Property, and does not constitute a separate legal parcel. Prior to the Effective Date, Developer submitted an application for a parcel map that, if approved, will establish the Site as a separate legal parcel. Nothing in this paragraph does or shall be deemed to be a discretionary or ministerial approval by the City of a parcel map or any adjustment of the boundary lines of the City Property, which may only be approved in accordance with the procedures and standards under applicable laws.

3.2 C
hanges to Construction Plans
If Developer desires to make any material changes in the construction plans for the Project after the approval thereof by City, Developer shall submit the proposed changes to City for approval, pursuant to Costa Mesa Municipal Code section 13 -56(b). Any proposed changes that are treated as minor amendments under the Costa Mesa Municipal Code and the requirements of this Agreement, including, without limitation, the Scope of Development, shall be considered at the planning division level . City shall approve or disapprove any such change within ten (10) business days of Developer’s written request. Failure of City to respond to any such request within said ten (10) business day period shall be deemed to constitute approval of the change . Major amendments shall be considered by the Zoning Administrator pursuant to Costa Mesa Municipal Code section 13-56(b).

3.3 Cost of Development
With the exception of the financial assistance set forth in the City Loan and included in the City Note, and any other financial assistance approved by the City Council in its sole and absolute discretion following the Effective Date, all costs for planning, designing, and constructing the Project, including but not limited to all development and building fees, Site remediation (if any), grading and preparation costs, off -site and on -site construction and improvement costs shall be borne exclusively by Developer. Developer shall also bear all costs related to discharging the duties of Developer set forth in this Agreement.

3.4 Construction Contract; Construction Schedule
Prior to commencing construction of the Project, Developer shall provide to City a copy of a stipulated sum-based construction contract or guaranteed maximum price construction contract 317

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between Developer and its general contractor for all of the improvements required to be constructed by Developer hereunder, certified by Developer to be a true and correct copy thereof.

The construction contract or design-build contract for the Project shall be competitively bid; unless the general contractor is an affiliate of the Developer, in which event the construction contract shall be guaranteed maximum price construction contract in compliance with TCAC Regulation 10327(c)(1).

Developer shall obtain building permits, and commence and complete construction of the Project by the respective times established therefor in the Schedule of Performance.

3.5 Indemnity; Insurance Requirements
a. Developer shall indemnify, defend, with attorneys (i) selected by City, or (ii) at City ’s election, selected by Developer and reasonably acceptable to the City, and hold harmless City and City’s officials, officers, members, employees, agents, and representatives, and all entities, boards, commissions, and bodies related to any of them (all of the foregoing, collectively, the “Released/Indemnified Parties”) from all claims or suits for, and damages to, property and injuries to persons, including accidental death (including expert witness fees, attorney’s fees, and costs), which may be caused by any of the activities of Developer or any of Developer’s affiliates, successors, assigns, and successors-in-interest in and to this Agreement, the Site and the Project (collectively, the “Developer Entities”) under this Agreement. b. Commencing on the Closing Date and continuing throughout the term of the City Regulatory Agreement, Developer shall procure and maintain, at its sole cost and expense, in a form and content reasonably satisfactory to the City Manager, the following policies of insurance:
(i) Commercial General Liability Insurance on a per occurrence basis with limits not less than Three Million Dollars ($3,000,000) per occurrence. Any general aggregate limit shall apply to this Project only. Such insurance shall be endorsed to designate the Released/Indemnified Parties as additional insureds, including for the completed operations exposure, and shall be primary and not contribute with any insurance or self -insurance maintained by City. The foregoing limit may be obtained with a combination of Commercial General Liability and Umbrella Liability policies. (ii) To the extent Developer has any employees, w orker’s compensation insurance in such amount as will fully comply with the laws of the State of California and which shall indemnify, insure, and provide legal defense for Developer against any loss, claim or damage arising from any injuries or occupational dis eases occurring to any worker employed by or any persons retained by Developer in the course of carrying out the work or services contemplated in this Agreement, and Employers Liability Insurance in an amount not less than One Million Dollars ($1,000,000) per occurrence for bodily injury or disease. The workers ’ compensation policy shall be endorsed to waive the insurer ’s right of subrogation against the Released/Indemnified Parties.
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(iii) To the extent Developer has any employees, b usiness Automobile insurance in an amount not less than Three Million Dollars ($3,000,000) per accident covering all owned, hired, and non- owned vehicles used in connection with the development of the Project. The foregoing limit may be obtained with a combination of Business Automobile and Umbrella Liability policies.
c. Commencing on the Closing Date and continuing until City issues a Release of Construction Covenants for the Project, Developer shall procure and maintain, at its sole cost and expense, in a form and content reasonably satisfactory to the City Manager, “ All Risks” Builder’s Risk (course of construction) insurance coverage on a replacement cost basis in an amount equal to the full cost of the hard construction costs of the Project. Such insurance shall contain no coinsurance provision, and cover, at a minimum: all work, materials, and equipment to be incorporated into the Project; the Project during construction; the completed Project until such time as City issues a final certificate of occupancy for the Project, and storage, transportation, and equipment breakdown risks. Such insurance shall include coverage for flood, ordinance or law, temporary offsite storage, debris removal, pollutant cleanup and removal, preservation of property, landscaping, shrubs and plants and full collapse during construction. S uch insurance shall protect/insure the interests of Developer/owner and all of Developer ’s contractor(s), and subcontractors, as each of their interests may appear. There shall be no exclusion for “ design error.” City shall be a loss payee under such policy or policies. d. Developer shall cause any general contractor with whom it has contracted for the performance of work on the Site to secure, prior to commencing any activities hereunder and maintain insurance that satisfies all of the requirements of Section 3.5(b) and (f). e. Commencing on the date City issues a Release of Construction Covenants, and continuing throughout the term of the City Regulatory Agreement, Developer shall procure and maintain, at its sole cost and expense, in a form and content satisfactory to City Manager, the following types of insurance:
(i) “All Risks” property insurance on a replacement cost basis in an amount equal to full replacement cost thereof, as the same may change from time to time. The above insurance policy or policies shall contain no coinsurance provision. City shall be a loss payee under such policy or policies.
(ii) Business interruption, rental value, and extra expense insurance to protect Developer and City covering loss of revenues and/or extra expense incurred by reason of the total or partial suspension or delay of, or interruption in, the operation of the Projec t caused by loss or damage to, or destruction of, any part of the insurable real property structures or equipment as a result of the perils insured against under the all risk physical damage insurance, covering a period of suspension, delay or interruption of at least twelve (12) months, in an amount not less than the amount required to cover such business interruption, rental value, and/or extra expense loss during such period.
(iii) Boiler and machinery insurance in the aggregate amount of the full replacement value of the equipment typically covered by such insurance. 319

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f. The following additional requirements shall apply to all of the above policies of insurance:
(i) All of said policies of insurance except workers
compensation shall provide that said insurance may not be amended or canceled without providing thirty (30) days’ prior written notice (ten (10) days for non-payment of premium) to City. In the event any of said policies of insurance are canceled, Developer shall, prior to the cancellation date, submit new evidence of insurance in conformance with this Section to the City Manager. Not later than the Effective Date, Developer shall provide the City Manager with Certificates of Insurance and required endorsements evidencing the above insurance coverages.
(ii) The policies of insurance required by this Agreement shall be satisfactory only if issued by companies with an AM Best rating not less than “A-”, VII or otherwise approved by City.
(iii) Self-insurance retentions must be declared to and approved by the City Manager.
g. Developer agrees that the provisions of this Section shall not be construed as limiting in any way City’s right to indemnification or the extent to which Developer may be held responsible for the payment of damages to any persons or property resulting from Developer’s activities or the activities of any person or persons for which Developer is otherwise responsible.

3.6 Remedies for Defaults Re: Insurance.

In addition to any other remedies City may have, if Developer commits a default hereunder by failing to provide or maintain any insurance policies or policy endorsements to the extent and within the time herein required, City may at its sole option, and after delivery of written notice to Developer and expiration of a fifteen (15) day cure period, obtain such insurance and charge Developer for the amount of the premium for such insurance; provided, however, that if the City Manager reasonably determines that Developer, the Site, and/or Project will be uninsured or under- insured in the absence of any such insurance required hereunder, then City need not provide for any cure period in its notice of default to Developer, but may instead obtain such insurance immediately upon its provision of such notice. Exercise of the remedy set forth herein, however, is an alternative to other remedies City may have and is not the exclusive remedy for Developer’s failure to maintain insurance or secure appropriate endorsements.

3.7 City and Other Governmental Agency Permits
Before commencement of construction or development of any buildings, structures or other works of improvement upon the Site or in connection with any off -site improvement, Developer shall, at its own expense, secure or cause to be secured any and all permits which may be required by City or any other governmental agency affected by such construction, development or work. It is understood that Developer’s obligation is to pay all necessary fees and to timely submit to City final drawings with final correct ions to obtain building permits; City will, without obligation to incur liability or expense therefor, use its reasonable efforts to expedite issuance of building 320

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permits and certificates of occupancy for construction that meet the requirements of the Costa Mesa Municipal Code.

3.8 Rights of Access
For purposes of assuring compliance with this Agreement, representatives of City shall have the right of access to the Site without charges or fees, upon reasonable advance notice of not less than forty-eight (48) hours and at normal business hours during the period of this Agreement for the purposes of this Agreement, including, but not limited to, the inspection of the work being performed in constructing the Project, so long as they comply with all safety rules. Such representatives of City shall be those who are so identified in writing by the City Manager. City shall hold Developer harmless from any bodily injury or related damages and indemnify Developer and Developer Entities for all claims or suits for, and damages to, property and injuries to persons, including accidental death (including expert witness fees, and a ttorneys’ fees, and costs) arising out of by the activities of City as referred to in this Section 3.8 , except to the extent caused by Developer or its agents.

3.9 Local, State and Federal Laws
Developer shall carry out the construction of the Project in conformity with all applicable laws, regulations, and rules of the governmental agencies having jurisdiction, including without limitation the City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the Costa Mesa Municipal Code, and all applicable disabled and handicapped access requirements, including without limitation the Americans With Disabilities Act, 42 U.S.C. s ection 12101, et seq., Government Code s ection 4450, et seq. , Government Code s ection 11135, et seq. , the Unruh Civil Rights Act, Civil Code s ection 51, et seq., and the California Building Standards Code, Health and Safety Code s ection 18900, et seq., and all federal, state, and local labor laws and regulations, including, without limitation, if applicable, the requirements to pay prevailing wages under federal law (the Davis Bacon Act, 40 U.S.C. section 3141, et seq., and the regulations promulgated thereunder set forth at 29 CFR Part 1 (collectively, “Davis Bacon”)) and California law (Labor Code section 1720, et seq.). The Parties acknowledge that a financing structure utilizing certain federal and/or state funding sources and financing scenarios may trigger compliance with applicable state and federal prevailing wage laws and regulations.

Developer shall be solely responsible, expressly or impliedly, and legally and financially, for determining and effectuating compliance with all applicable federal, state and local public works requirements, prevailing wage laws, and labor laws and standards, and City makes no representation, either legally and/or financially, as to the applicability or non- applicability of any federal, state and local laws to the Project, either onsite or offsite. Developer expressly, knowingly and voluntarily acknowledges and agrees that City has not previously represented to Developer or to any representative, agent or affiliate of Developer, or its contractor or any subcontractor(s) for the construction or development of the Project, in writing or otherwise, in a call for bids or otherwise, that the work and construction undertaken pursuant to this Agreement is (or is not) a “public work,” as defined in section 1720 of the Labor Code or under Davis Bacon. 321

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Developer knowingly and voluntarily agrees that Developer shall have the obligation to provide any and all disclosures or identifications as required by, if applicable, Labor Code section 1781 and/or by Davis Bacon, as the same may be amended from time to time, or any other similar law or regulation. In addition to any other Developer indemnifications of City set forth in this Agreement, Developer shall indemnify, protect, pay for, defend (with legal counsel reasonably acceptable to City) and hold harmless the Released/Indemnified Parties from and against any and all loss, liability, damage, claim, cost, expense and/or “ increased costs ” (including reasonable attorney’s fees, court and litigation costs, and fees of expert witnesses) which, in connection with the development, construction (as defined by applicable law) and/or operation of the Project, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (i) the noncompl iance by Developer with any applicable local, state and/or federal law or regulation, including, without limitation, any applicable federal and/or state labor laws or regulations (including, without limitation, if applicable, the requirement to pay state and/or federal prevailing wages); (ii) the implementation of section 1781 of the Labor Code and/or of Davis Bacon, as the same may be amended from time to time, or any other similar law or regulation; and/or (iii) failure by Developer to provide any required disclosure or identification as required by, if applicable, Labor Code section 1781 and/or by Davis Bacon, as the same may be amended from time to time, or any other similar law or regulation. It is agreed by the Parties that, in connection with the development and construction (as defined by applicable law or regulation) of the Project, including, without limitation, any and all public works (as defined by applicable law or regulation), Developer shall bear all risks of payment or non- payment of prevail ing wages under applicable federal, state and local law or regulation and/or the implementation of Labor Code s ection 1781 and/or by Davis Bacon, as the same may be amended from time to time, and/or any other similar law or regulation. “ Increased costs,” as used in this Section 3.9, shall have the meaning ascribed to it in Labor Code s ection 1781, as the same may be amended from time to time. The foregoing indemnity shall survive termination of this Agreement and shall continue after completion of the construction and development of the Project by Developer.

3.10 Anti-Discrimination
Developer for itself and its successors and assigns, agrees, that in the construction of the Project on the Site or other performance under this Agreement, Developer shall not discriminate against any employee or applicant for employment on any basis listed in subdivision (a) or (d) of section 12955 of the Government Code, as those bases are defined in sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of section 12955 and section 12955.2 of the Government Code.

3.11 Taxes and Assessments
Developer shall pay prior to delinquency all real estate taxes and assessments on the Site so long as Developer retains a leasehold interest therein. Developer shall remove or have removed any levy or attachment made on the Site or any part thereof, or assure the satisfaction thereof within a reasonable time but in any event prior to any sale or transfer of Developer’s leasehold interest thereof. Notwithstanding the above, Developer shall have the right to contest the validity or amounts of and to apply for any applicable exemption from any tax, assessment, or encumbrance 322

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available to Developer in respect thereto, and nothing herein shall limit the remedies available to the Developer in respect thereto.

3.12 Right of City to Satisfy Other Liens on the Site After Title Passes After Developer has had written notice and has failed after a reasonable time to challenge, cure, or satisfy any liens or encumbrances on the Site which are not otherwise permitted under this Agreement, City shall have the right but no obligation to satisfy any such liens or encumbrances.

Notwithstanding the above, Developer shall have the right to contest the validity or amounts of any tax, assessment, or encumbrance available to Developer in respect thereto.

3.13 Release of Construction Covenants
Within fifteen (15) business days after written request by Developer, and upon Developer’s satisfactory completion of the Project, as evidenced by City’s issuance of a certificate of occupancy (excluding any temporary certificate of occupancy issued by City), City shall issue to Developer a Release of Construction Covenants as long as Developer is not in default under this Agreement or any documents related hereto. The Release of Construction Covenants shall be, and shall so state, a conclusive determination of satisfactory completion of construction of the Project. After the date Developer is entitled to issuance of the Release of Construction Covenants, and notwithstanding any other provision of this Agreement to the contrary, any party then owning or thereafter purchasing, leasing or otherwise acquiring any interest in the Site shall not (because of any such ownership, purchase, lease, or acquisition) incur any obligation or liability under this Agreement, except that such party shall be bound by the covenants herein that survive the issuance of the Release of Construction Covenants and the covenants set forth in the City Regulatory Agreement.

The Release of Construction Covenants is not a notice of completion as referred to in California Civil Code section 3093.

If City refuses or fails to furnish a Release of Construction Covenants after written request from Developer, City shall, within fifteen (15) days after the written request, provide Developer a written statement of the specific reasons City refused or failed to furnish a Release of Construction Covenants. The statement shall also contain City ’s opinion of the action Developer must take to obtain a Release of Construction Covenants. If City refuses or fails to furnish the Release of Construction Covenants for the reason that specific minor non- life safety items or materials are not available or landscaping or other punch-list items are not complete and the cost thereof is less than two percent (2%) of the hard costs, as set forth in the Project Budget, City shall issue the Release of Construction Covenants upon the posting by Developer with City of a cash deposit, bond, or irrevocable letter of credit (in a form acceptable to City), at Developer ’s option, in an amount representing one hundred percent (100%) of the fair value of the work not yet completed.

3.14 Limitation on Encumbrances, Including Mechanic’s Liens Except as otherwise permitted by this Agreement, Developer shall not mortgage the leasehold interest in the Site or any portion thereof or any interest therein, any other mortgages or conveyances for financing that encumber the Site or any portion thereof, without the prior written approval of the City Manager, which approval shall not be unreasonably withheld. 323

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In explanation and not limitation of the foregoing paragraph, Developer shall take all actions reasonably necessary to remove any mechanic’s liens or other similar encumbrances (including design professional liens) against the Site, or any part thereof, by reason of work, labor, services, or materials supplied or claimed to have been supplied to Developer or anyone holding the Site, or any part thereof, through or under Developer. Upon request by the City, Developer shall provide to City updated information from Developer’s title insurer. City hereby reserves all rights to post notices of non- responsibility and any other notices as may be appropriate upon a filing of a mechanic’s lien. Developer shall indemnify, protect, defend and hold harmless City, and City’s officials, officers, attorneys, employees, consultants, agents and representatives, with legal counsel reasonably acceptable to City, from and against any and all claims, liabilities, suits, losses, costs, expenses and damages, including but not limited to attorneys’ fees and costs, arising directly or indirectly out of any claims for loss or damages by reason of a mechanic’s lien or work, labor, services, or materials supplied or claimed to have been supplied to Developer or anyone holding the Site, or any part thereof, through or under Developer.

3.15 Holder Not Obligated to Construct Improvements
The holder of any mortgage, deed of trust or other security interest authorized by this Agreement shall in no way be obligated by the provisions of this Agreement to construct or complete the Project or to guarantee such construction or completion, nor shall any covenant or any other provision in the City Regulatory Agreement be construed so to obligate such holder.

Nothing in this Agreement shall be deemed to construe, permit or authorize any such holder to devote the Site to any uses or to construct any improvements thereon other than those uses or improvements provided for in this Agreement.

3.16 Notice of Default to Mortgage, Deed of Trust or Other Security Interest Holders; Right to Cure
Whenever City shall deliver any notice or demand to Developer with respect to any breach or default by Developer in completion of construction of the Project, City shall at the same time deliver a copy of such notice or demand to each holder of record of any mortgage, deed of trust or other security interest authorized by this Agreement who has previously made a written request to City therefor. Each such holder shall (insofar as the rights of City are concerned) have the right, at its option, within sixty (60) days after the receipt of the notice, to cure or remedy or commence to cure or remedy any such default and to add the cost thereof to the security interest debt and the lien on its security interest. In the event there is more than one such holder, the right to cure or remedy a breach or default of Developer under this Section 3.16 shall be exercised by the holder first in priority or as the holders may otherwise agree among themselves, but there shall be only one exercise of such right to cure and remedy a breach or default of Developer under this Section

3.16. Nothing contained in this Agreement shall be deemed to permit or authorize such holder to undertake or continue the construction or completion of the Project (beyond the extent necessary to conserve or protect the improvements or construction already made) without first having expressly assumed Developer’s obligations to City by written agreement satisfactory to City. The holder in that event must agree to complete, in the manner provided in this Agreement, the construction to which the lien or title of such holder relates and submit evidence satisfactory to City that it has the qualifications and financial responsibility necessary to perform such 324

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obligations. Any such holder properly completing such improvements shall be entitled, upon written request made to City, to a Release of Construction Covenants from City.

3.17 Failure of Holder to Complete Improvements
In any case where, sixty (60) days after an uncured default by Developer in completion of construction under this Agreement, the holder of any mortgage, deed of trust or other security interest creating a lien or encumbrance upon the Site has not exercised the option to construct, or if it has exercised the option, has not proceeded diligently with construction, City may purchase the mortgage, deed of trust or other security interest by payment to the holder all amounts owing with respect to the secured obligation, including all accrued and unpaid interest. If Developer’s leasehold interest in the Site has vested in the holder, City, if it so desires, shall be entitled to a conveyance of the Site from the holder to City upon payment to the holder of an amount equal to the sum of the following:

1. The unpaid mortgage, deed of trust or other security interest debt at the time title became vested in the holder (less all appropriate credits, including those resulting from collection and application of rentals and other income received during foreclosure proceedings);

2. All expenses with respect to foreclosure, including reasonable attorneys ’ fees and trustee’s fees;

3. The net expenses, if any (exclusive of general overhead), incurred by the holder as a direct result of the subsequent management of the Site or part thereof;

4. The costs of any authorized improvements made by such holder; and

5. An amount equivalent to the interest that would have accrued on the aggregate of the amounts in Subparagraphs 1-4 had all such amounts become part of the mortgage or deed of trust debt and such debt had continued in existence to the date of payment by City.

3.18 Right of City to Cure Mortgage, Deed of Trust or Other Security Interest Default In the event of a default or breach by Developer of a mortgage, deed of trust or other security interest with respect to the Site prior to the completion of the Project, and the holder has not exercised its option to complete the construction, City may cure the default prior to completion of any foreclosure. In such event, City shall be entitled to reimbursement from Developer of all costs and expenses incurred by City in curing the default. City shall also be entitled to a lien upon the Site to the extent of such costs and disbursements. Any such lien shall be subject to mortgages, deeds of trust or other security interests executed for the sole purpose of obtaining funds to acquire and develop the Site as authorized herein.

3.19 Hazardous Materials

3.19.1 Indemnity
From and after the Close of Escrow, Developer agrees to defend, with (i) attorneys selected by City, or (ii) at City’s election, selected by Developer and reasonably acceptable to the 325

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City, indemnify, protect and hold harmless the Released/Indemnified Parties from, regarding and against any and all liabilities, obligations, orders, decrees, judgments, liens, demands, actions, “Environmental Response Actions” (as defined in Section 3.19.2 below), claims, losses, damages, fines, penalties, expenses, “Environmental Response Costs” (as defined in Section 3.19.2 below) or costs of any kind or nature whatsoever, together with fees (including, without limitation, reasonable attorneys’ fees and experts’ and consultants’ fees), occurring during and/or caused by Developer’s use and occupancy of the Site, and resulting from or in connection with the actual or claimed generation, storage, handling, transportation, use, presence, placement, migration and/or release of Hazardous Materials at, on, in, beneath or from the Site, including Hazardous Materials which first came to be located on the Site after the Close of Escrow , except to the extent caused by the gross active negligence or willful misconduct of Released/Indemnified Parties. Developer’s defense, indemnification, protection and hold harmless obligations herein shall include, without limitation, the duty to notify the applicable governmental authority and/or respond to any governmental inquiry, investigation, claim or demand regarding the Hazardous Materials, at Developer’s sole cost. Notwithstanding the foregoing or anything to the contrary contained herein, Developer’s obligations pursuant to this Section 3.19.1 shall not extend to any Environmental Response Actions and/or Environmental Response Costs caused by the gross active negligence or willful misconduct of the Released/Indemnified Parties or relating to Hazardous Materials at, beneath or from the Site which first became located on the Site prior to the Close of Escrow, except if the introduction or occurrence of those Hazardous Materials resulted from Developer exercising a right of entry under this Agreement, or to the extent that such release of Hazardous Materials or toxic substances, or materials and/or waste therefrom were exacerbated or caused by Developer’s activities during its occupancy of the Premises.

3.19.2 Definitions
a. As used in this Agreement, the term “ Environmental Response Actions” means any and all activities, data compilations, preparation of studies or reports, interaction with environmental regulatory agencies, obligations and undertakings associated with environmental investigations, removal activities, remediation activities o r responses to inquiries and notice letters, as may be sought, initiated or required in connection with any local, state or federal governmental or private party claims, including any claims by Developer. b. As used in this Agreement, the term “ Environmental Response Costs” means any and all costs associated with Environmental Response Actions including, without limitation, any and all fines, penalties and damages. c. As used in this Agreement, the term “Hazardous Materials” means any substance, material or waste which is : (1) defined as a “ hazardous waste, ” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” or “restricted hazardous waste” under any provision of California or federal law; (2) regulated under California or federal law, including, without limitation, petroleum, asbestos, polychlorinated biphenyls, and/or radioactive materials; or (3) determined by a California, federal or local governmental authority to be capable of posing a risk of injury to health, safety or property or risk to the environment. 326

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3.20 Materiality
Developer acknowledges and agrees that the defense, indemnification, protection and hold harmless obligations of Developer for the benefit of City set forth in this Agreement are a material element of the consideration to City for the performance of its obligations under this Agreement, and that City would not have entered this Agreement unless Developer ’s obligations were as provided for herein.

4. USE OF THE SITE

4.1 Uses In Accordance with City Regulatory Agreement
Developer covenants and agrees for itself, its successors, its assigns, and every successor in interest to the Site or any part thereof that Developer and such successors and assignees, shall devote the Site to the uses specified in the City Regulatory Agreement, and this Agreement for the periods of time specified therein and herein. The City Regulatory Agreement shall run with the land.

4.2 Nondiscrimination
Developer covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of any person, or group of persons on any basis listed in subdivision (a) or (d) of s ection 12955 of the Government Code, as those bases are defined in sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of s ection 12955, and section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, or any part thereof, nor shall Developer, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Site, or any part thereof. The foregoing covenants shall run with the land.

Developer agrees for itself and any successor in interest that Developer shall refrain from restricting the rental, sale, or lease of any portion of the Site, or contracts relating to the Site, on the basis of race, color, creed, religion, sex, gender identity, gender expression, sexual orientation marital status, national origin, ancestry, familial status, source of income, disability, veteran or military status, or genetic information of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses:

1. In deeds: “The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of section 12955 of the Government Code, as those bases are defined in s ections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of section 12955, and section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or 327

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occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed.

The foregoing covenants shall run with the land.”

2. In leases: “The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: “That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of section 12955 of the Government Code, as those bases are defined in s ections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of section 12955, and s ection 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or pe rmit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased. The foregoing covenants shall run with the land.”

3. I
n contracts pertaining to the Site: “ There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of s ection 12955 of the Government Code, as those bases are defined in s ections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of s ection 12955, and s ection 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land.”
The covenants established in this Agreement shall, without regard to technical classification and designation, be binding for the benefit and in favor of City and City’s successors and assigns, and any successor in interest to the Site, together with any property acquired by Developer pursuant to this Agreement, or any part thereof. The covenants against discrimination shall remain in effect in perpetuity.

4.3 Effect of Violation of the Terms and Provisions of this Agreement After Completion of Construction
City is deemed the beneficiary of the terms and provisions of this Agreement and of the covenants running with the land, for and in its own rights and for the purposes of protecting the interests of the community and other parties, public or private, in whose favor and for whose benefit this Agreement and the covenants running with the land have been provided. This Agreement and the covenants shall run in favor of City, without regard to whether City has been, remains or is an owner of any land or interest therein in the Site. City shall have the right, if this Agreement or covenants are breached, to exercise all rights and remedies, and to maintain any actions or suits at law or in equity or other property proceedings to enforce the curing of such breaches to which it or any other beneficiaries of this Agreement and covenants may be entitled. 328

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4.4 Maintenance of the Site
Developer shall maintain the Project on the Site in conformity with the Costa Mesa Municipal Code and the requirements of the City Regulatory Agreement, and shall keep the Site free from any graffiti and from any accumulation of debris or waste materials.

Developer shall maintain the driveways, parking area and parking spaces on the Site in a safe condition, free of potholes and hazards. Developer shall also maintain the landscaping required to be planted under the Scope of Development in a healthy and attractive condition. If, at any time, Developer fails to maintain the Site or any portion thereof, and said condition is not corrected as soon as reasonably possible after written notice from City, City may enter the Site or applicable portion thereof to perform the necessary maintenance thereon and Developer shall pay such costs as are reasonably incurred for such maintenance plus a fifteen percent (15%) administrative fee. This covenant shall run with the land and shall remain in effect for the term of the City Regulatory Agreement.

5. DEFAULTS AND REMEDIES

5.1 Defaults – General
Subject to the extensions of time set forth in Section 6.3, failure or delay by either Party to perform any term or provision of this Agreement constitutes a default under this Agreement. If either Party defaults with regard to any of the provisions of this Agreement, the non-defaulting Party shall serve written notice of such default upon the defaulting Party. If a specific default is identified elsewhere in this Agreement and a specific cure provisions in provided with that specific default, those provisions shall govern; otherwise, if the default is not cured by the defaulting Party within thirty (30) days after service of the notice of default (or within such other period as is set forth herein), the non-defaulting Party shall be entitled to pursue whatever remedies to which such Party is entitled under this Agreement; provided however that if the default cannot reasonably be cured within such thirty ( 30) day period, the defaulting Party shall have such additional time to cure as is reasonable under the circumstances, as long as the defaulting Party commences to cure within such thirty (30) day period and diligently prosecutes such cure to completion.

5.2 Legal Actions

5.2.1 Specific Performance
The non-defaulting Party, upon expiration of applicable notice and cure periods, shall be permitted, but not obligated, to commence an action for specific performance of the terms of this Agreement, or to cure, correct or remedy any default hereunder or to obtain any other legal or equitable remedy consistent with the purpose of this Agreement. In this regard, Developer specifically acknowledges that City is entering into this Agreement for the purpose of assisting in the redevelopment of the Site and the provision of affordable housing and not for the purpose of enabling Developer to speculate in land. Each party shall also have the right to pursue damages for the other’s defaults but in no event shall either party be liable for lost profits, consequential or punitive damages. The foregoing sentence shall not affect the right of either party to receive attorney’s fees pursuant to Section 5.2.2 below.
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5.2.2 Institution of Legal Actions; Attorney’s Fees
Any legal actions must be instituted in the Superior Court of the County of Orange, State of California, or in the Federal District Court that serves the County of Orange as part of its jurisdiction. In the event of any litigation between the Parties hereto, the prevailing Party shall be entitled to receive, in addition to the relief granted, its reasonable attorney’ s fees and costs and such other costs incurred in investigating the action and prosecuting the same, including costs for expert witnesses, costs on appeal, and for discovery.

5.2.3 Applicable Law
The internal laws of the State of California shall govern the interpretation and enforcement of this Agreement, without regard to conflict of law principles.

5.2.4 Acceptance of Service of Process
In the event that any legal action is commenced by Developer against City, service of process on City shall be made by personal service upon the City Clerk or in such other manner as may be provided by law.

In the event that any legal action is commenced by City against Developer, service of process on Developer shall be made by personal service upon any officer or director of Developer and shall be valid whether made within or without the State of California or in such other manner as may be provided by law.

5.3 Rights and Remedies Are Cumulative
Except as otherwise expressly stated in this Agreement, the rights and remedies of the Parties are cumulative, and the exercise by either Party of one or more of such rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other Party.

5.4 Inaction Not a Waiver of Default
Any failures or delays by either Party in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies, or deprive either such Party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies.

5.5 Termination by City
In the event that prior to the Close of Escrow:
a. Developer (or any successor in interest) assigns or attempts to assign this Agreement or any rights therein or in the Site in violation of this Agreement; or b. There is a change in the ownership of the Developer contrary to the provisions of Section 1.5 hereof; or
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c. Developer does not submit certificates of insurance, the documents required to be submitted pursuant to this Agreement, construction plans, or drawings and related documents as required by this Agreement, in the manner and by the dates respectively provided in this Agreement therefor, or is otherwise in material default hereof, and such default or failure is not cured within thirty (30) days, or for those defaults which cannot reasonably be cured within thirty (30) days, commenced to be cured within said thirty (30) day period and thereafter diligently prosecuted to completion, after the date of written demand therefor by City; or d. Developer fails to satisfy any or all of City Disposition Conditions by the Outside Closing Date;
then, at the option of City, upon such written notice thereof to Developer as may be set forth above, this Agreement shall be terminated, and thereafter neither Party shall have any further rights or liability against the other under this Agreement, except as otherwise expressly provided for in this Agreement.

5.6 City’s Option to Acquire Plans
If this Agreement is terminated by City pursuant to the terms hereof, then at the option of City, which may be exercised in City’ s sole and absolute discretion, Developer shall deliver to City all plans, blueprints, drawings, sketches, specifications, tentative or final subdivision maps, landscape plans, utilities plans, soils reports, noise studies, environmental assessment reports , grading plans and any other materials relating to the construction of the Project on the Site (the “Plans”), together with copies of all of the Plans, as have been prepared for the development of the Site to date of the termination. City ’s acquisition or use of the Plans or any of them shall be without any representation or warranty by Developer as to the accuracy or completeness of any such Plans, and City shall assume all risks in the use of the Plans. Notwithstanding anything herein to the contrary, (i) in the event City terminates this Agreement as a result of a default by Developer hereunder, City’s acquisition of the Plans shall be at no cost to City , and (ii) in the event City terminates this Agreement for any reason other than a default by Developer hereunder, City shall be required to pay to Developer the reasonable costs incurred by Developer in preparing the Plans.

6. GENERAL PROVISIONS

6.1 Notices, Demands and Communications Between Parties Written notices, demands and communications between City and Developer shall be sufficiently given if (i) delivered by hand, (ii) delivered by reputable same -day or overnight messenger service that provides a receipt showing date and time of delivery, or (iii) dispatched by registered or certified mail, postage prepaid, return receipt requested, to the principal offices of City and Developer at the addresses specified in Section 1.3.1 and 1.3.2, respectively. Such written notices, demands and communications may be sent in the same manner to such other addresses as either Party may from time to time designate by mail as provided in this Section 6.1.

Any written notice, demand, or communication shall be deemed received immediately if delivered by hand or delivered by messenger in accordance with the preceding paragraph, and shall be deemed received on the third (3rd) day from the date it is postmarked if delivered by registered or certified mail in accordance with the preceding paragraph. 331

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6.2 Conflicts of Interest
No member, officer, official, or employee of City shall have any personal interest, direct or indirect, in this Agreement, nor shall any member, official or employee participate in any decision relating to the Agreement which affects his or her personal interests or the interests of any corporation, partnership or association in which he or she is directly or indirectly interested.

6.3 Enforced Delay; Extension of Times of Performance
In addition to specific provisions of this Agreement, performance by either Party hereunder shall not be deemed to be in default, and all performance and other dates specified in this Agreement shall be extended, where delays or defaults are due to: war; insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor; subcontractor or supplier; or any other causes beyond the control or without the default of the Party claiming an extension of time to perform.

Notwithstanding anything to the contrary in this Agreement, an extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the Party claiming such extension is sent to the other Party within thirty (30) days after the commencement of the cause. Times of performance under this Agreement may also be extended in writing by the mutual agreement of City and Developer.

The City Manager shall also have the authority on behalf of City to administratively approve extensions of time not to exceed a cumulative total of six (6) months.

Notwithstanding the foregoing portion of this Section 6.3, Developer is not entitled pursuant to this Section 6.3 to an extension of time to perform because of past, present, or future difficulty in obtaining suitable construction financing for the development of the Site, or because of economic or market conditions.

6.4 Non-Liability of Officials and Employees of City
No member, official or employee of City shall be personally liable to Developer, or any successor in interest, in the event of any default or breach by City, or for any amount which may become due to Developer or its successors, or on any obligations under the terms of this Agreement.

6.5 Interpretation; Entire Agreement, Waivers; Attachments The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against either Party by reason of the authorship of this Agreement or any other rule of construction that might otherwise apply.

This Agreement integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all negotiations or previous agreements between the Parties or their predecessors in interest with respect to all or any part of the subject matter hereof. 332

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All waivers of the provisions of this Agreement must be in writing by the appropriate authorities of City and Developer, and all amendments hereto must be in writing by the appropriate authorities of City and Developer. Except as otherwise expressly provided, in any circumstance where under this Agreement either Party is required to approve or disapprove any matter, approval shall not be unreasonably withheld.

The exhibits and attachments to this Agreement are incorporated herein and made a part hereof.

6.6 Time of Essence
Time is of the essence in the performance of this Agreement.

6.7 Maintenance of Books and Records
Developer shall prepare and maintain all books, records, and reports necessary to substantiate Developer’s compliance with the terms of this Agreement.

6.8 Right to Inspect
City shall have the right, upon not less than forty-eight (48) hours’ notice, at all reasonable times during business hours, to inspect the books and records of Developer pertinent to the purposes of this Agreement.

6.9 Binding Effect of Agreement
This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto, their legal representatives, successors, and assigns. This Agreement shall likewise be binding upon and obligate the Site and the successors in interest, owner or owners thereof, and all of the tenants, lessees, sublessees, and occupants of such Site.

6.10 Severability
Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law. If, however, any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

6.11 Counterparts
This Agreement may be executed in counterparts, each of which, when this Agreement shall have been signed by both of the Parties hereto, shall be deemed to be an original, and such counterparts shall constitute one and the same instrument. 333

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6.12 Amendments to this Agreement
Developer and City agree to mutually consider reasonable requests for amendments to this Agreement which may be made by either of the Parties hereto, the Qualified Tax Credit Investor, the Construction Lender or the Take-Out Lender, provided such requests are consistent with this Agreement and would not substantially alter the basic business terms included herein. The City Manager shall have the authority to approve, on behalf of City, amendments to this Agreement that would not substantially alter the basic business terms or substantially increase the cost or risk of this Agreement to City. All other amendments shall require the action of the Costa Mesa City Council. All amendments, including those authorized to be approved by the City Manager, shall be in writing and shall be signed by authorized representatives of City and Developer. The City Manager shall have the authority, on behalf of City, to approve extensions of time in Developer’s performance under this Agreement, including, but not limited to, times of performance set forth in the Schedule of Performance, for a cumulative period of up to six (6) months.

6.13 Submission of Documents to the City for Approval.

Whenever this Agreement requires the Developer to submit plans, drawings or other documents to the City for approval, and there is no time specified herein for such approval, the Developer may submit a letter requiring approval or rejection by the City wit hin sixty (60) days after submission.

6.14 Consents by City Manager.

Except when this Agreement or applicable law requires action by the City Council or other City governing board or commission, the City Manager shall have the authority to approve or grant, on behalf of the City, any approval, consent or waiver required under this Agreement by the City (and make any determination to be made by City under this Agreement). Nothing in this section shall prevent the City Manager from referring an approval, consent or waiver to the City Council or other legislative body of the City that otherwise may be acted upon by the City Manager under this Agreement.

6.15 Limited Recourse Obligations.

The obligations of Developer under this Agreement are a limited obligation of the Developer and no member, officer, partner or employee of Developer shall have any personal liability for the obligations of Developer contained in this Agreement. [End of Agreement – Signature page follows] 334

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IN WITNESS WHEREOF, City and Developer have signed this Agreement on the respective dates set forth below.

Dated:

CITY OF COSTA MESA,
a California municipal corporation
By: __________________________________
Lori Ann Farrell Harrison, City Manager
ATTEST:
___________________________________
City Clerk

APPROVED AS TO FORM:

JONES MAYER

Counsel to the City of Costa Mesa

Dated:

JHC-ACQUISITIONS LLC, a California limited
liability company,

By: Jamboree Housing Corporation, a
California nonprofit public benefit
corporation, Manager

By: _____________________________
Michael Massie, Executive Vice
President and Chief Development
Officer

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ATTACHMENT NO. 1

SITE MAP
[See attached documents]

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ATTACHMENT NO. 2

LEGAL DESCRIPTION
[To be inserted prior to Close of Escrow]

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ATTACHMENT NO. 3

SCOPE OF DEVELOPMENT

The name of the Project is Costa Mesa Senior.

The Project will consist of up to 70 apartments, approximately 133 parking stalls, and common area amenities.

The Site is approximately 1.50 acres of the existing Costa Mesa Senior Center.

The apartment mix is to consist of up to sixty-eight 1-bedroom and one (1) 2-bedroom units available at Affordable Rent, and one (1) 2-bedroom Management Unit. Unit sizes will vary with one-bedroom units averaging approximately 566 SF, and 2- bedroom units averaging approximately 855 SF. The Project will have a total of four floors and will be serviced by an elevator. The building maximum height will be 57'-6" feet.

Site amenities will include onsite management, onsite supportive services coordinator, laundry facilities, library, fitness room, pet spa, and flexible community room to facilitate classes and supportive programs.

The Project will comply with California Building Standards, and the City’s building code.

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ATTACHMENT NO. 4

SCHEDULE OF PERFORMANCE

ACTIVITY TIME FRAME

1. Developer submits application for 9%
Tax Credits. (Section 2.1.2)
Deadline established by TCAC, up to four
rounds.

2. Developer provides Annual Financial
Statement. (Section 2.1.4)
Within 5 days of Effective Date.

3. Developer provides City notification
of reservation of 9% Tax Credit.
(Section 2.1.4)
Promptly upon receipt by Developer, not more
than 2 business days after receipt.

4. Opening of Escrow. (Section 2.2.2.a) Within 2 days after Developer has obtained a reservation of 9% Tax Credits from TCAC.

5. Developer submits preliminary
applications to City for all Project
Entitlements defined in Section 1.4.

Upon Opening of Escrow.

6. PTR obtained, Documents to
Developer. (Sections 2. 2.3.a, 2.2.4.a,

2.2.5.a)
Within 10 business days after Opening of
Escrow.

7. Developer submits any supplemental
or corrected applications to City for all
Project Entitlements defined in Section

1.4 Within 30 days after Opening of Escrow.

8. Developer approves/disapproves title
conditions in PTR. (Section 2.2.3.a)
Within 30 days after delivery of PTR.

9. City responds to Developer’s
approval/disapproval of title
conditions in PTR. (Section 2.2.3.a)
Within 10 business days of Developer notice.

10. Developer responds to City response to
Developer’s approval/disapproval of
title conditions in PTR. (Section

2.2.3.a)
Within 10 days of City response.

11. Due Diligence Period ends. (Section

2.2.4.a)
60 days after delivery of Documents.
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ACTIVITY TIME FRAME

12. Developer obtains financing and
delivers City evidence of financing
Project. (Section 2.2.6)
Prior to Closing Date.

13. Developer obtains Project
Entitlements and permits for grading
and building the Project. (Section

2.2.7)
Prior to Closing Date.

14. Delivery to Escrow City Ground
Lease, Memorandum of Ground
Lease, City Easement Agreement, City
Note, City Deed of Trust, City
Regulatory Agreement, and Notice of
Affordability Restrictions. (Section

2.2.11)
No later than noon 2 days prior to anticipated
Closing Date.

15. Close of Escrow/ Closing Date
(Sections 2.2.2.c and 2.2.12)
2 business days after all Closing Conditions are
met or waived.

16. Issuance of title insurance for
Developer and City. (Sections 2.2.3,

2.3)
Closing Date.

17. Developer commences construction
for the Project.

Within 194 days after receiving a preliminary
reservation letter from TCAC for 9% Tax
Credits.

18. Developer submits to City person or
entity proposed as the Property
Manager (City Regulatory Agreement,
Section 5.2)
No later than one hundred 180 days prior to
issuance of certificate of occupancy by City.

19. Developer submits for City’s review
and approval, marketing and
management plans for the Project.
(City Regulatory Agreement, Sections

5.1, 5.2)
No later than 90 days prior to issuance of
certificate of occupancy by City.

20. Developer completes construction of
the Project, obtains a certificate of
occupancy from City, and requests
City issuance of Release of
Within 3 years after Developer commences
construction.
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ACTIVITY TIME FRAME
Construction Covenants. (Section

3.13)

21. City issues a Release of Construction
Covenants for the improvements or
provides Developer with a written
explanation why a Release of
Construction Covenants shall not be
issued. (Section 3.13)
Within 15 business days after City receipt of
written request from Developer for Release of
Construction Covenants pursuant to Section

3.13 of the Agreement.

22. Developer submits to City an
accounting of the Capital Replacement
Reserve. (City Regulatory Agreement,
Section 5.8)
On or before Decem ber 1 of each year after
completion of construction of the Project for
term of the City Regulatory Agreement.

23. Developer submits annual report
pursuant to Health and Safety Code
Section 33418 to City. (City
Regulatory Agreement, Section 3.7)
Not later than December 1 of each year for
term of the City Regulatory Agreement.

It is understood that the foregoing Schedule is subject to all of the terms and conditions of the text of the Agreement including, without limitation, Section 6.3. The summary of items of performance in the Schedule is not intended to supersede or modify any more complete description in the text; in the event of any conflict or inconsistency between this Schedule and text of the Agreement, the text of the Agreement shall govern.

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ATTACHMENT NO. 5

CITY NOTE
[SEE FOLLOWING DOCUMENT]

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PROMISSORY NOTE

Loan Amount: $700,000_________________ _____________________ Costa Mesa, California
FOR VALUE RECEIVED, ________________________________LP, a California limited partnership (“Borrower”) promises to pay to the CITY OF COSTA MESA, a California municipal corporation (“City”), the principal sum of Seven Hundred Thousand Dollars ($700,000) (the “City Loan ”), or so much of such principal as may be disbursed pursuant hereto and in accordance with that certain Affordable Housing / Disposition and Development Agreement between the City and Borrower and dated for identification purposes only as of __________, 2025 (the “Agreement ”), plus interest on the outstanding principal balance, in accordance with the terms and conditions set forth herein. This Note evidences the obligation of Borrower to City for the repayment of certain funds (the “ City Loan”) loaned to Borrower by City pursuant to the Agreement, in connection with the acquisition and development of real property located at [TBD] W. 19
th Street, in the City of Costa Mesa ( the “Site ”) and the construction thereon of affordable apartment units (the “Project”). All capitalized terms unless otherwise defined herein shall have the same meaning as set forth in the Agreement, which is incorporated herein by this reference.

Reference is also made to the following additional agreements and documents, of even date herewith, involving City and Borrower and/or pertaining to the Site:
(i) Leasehold Deed of Trust with Assignment of Rents by and between Borrower as Trustor, City as beneficiary, and First American Title Insurance Company as Trustee, and recorded in the Office of the Orange County Recorder (“City Deed of Trust”). The City Deed of Trust secures repayment of this Note and performance of monetary repayment obligations under the Agreement.
(ii) Regulatory Agreement and Declaration of Covenants and Restrictions, by and between Borrower and City, for the benefit of City, and recorded in the Office of the Orange County Recorder (“City Regulatory Agreement”). (iii) Easement Agreement in favor of City for a ccess, utilities, drainage and parking (“City Easement Agreement”).

1. Definitions.
“Affiliate” shall mean any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with Borrower which, if Borrower is a partnership or limited liability company, shall include each of the const ituent members or general partners, respectively, thereof. The term “control” as used in the immediately preceding sentence means, with respect to a person that is a corporation, the right to the exercise, directly or indirectly, of more than 50% of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person.
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“Annual Financial Statement” shall mean the financial statements prepared by Borrower for each calendar year during the period from the date one hundred percent (100%) of the Units in the Project have been leased and are occupied until the Maturity Date, including a balance sheet, income statement, statement of retained earnings, statement of cash flows, and footnotes thereto, prepared in accordance with generally accepted accounting principles consistently applied, as audited by an independent certified public accountant.
“Applicable Percentage” shall mean fifty percent (50%). “Approved Budget ” shall have the meaning ascribed in Section 3.14 of the City Regulatory Agreement.
“Assignment” shall mean any voluntary assignment permitted pursuant to the terms of the Agreement.
“Capital Improvements” shall mean all work and improvements with respect to the Site for which costs and expenses may be capitalized in accordance with GAAP. “City Loan Documents ” shall mean, collectively, the Agreement, this Note, the City Regulatory Agreement, and the City Deed of Trust.
“City Manager ” shall mean the individual duly appointed to the position of the City Manager of the City of Costa Mesa, or his or her authorized designee. “CPI” shall mean the Consumer Price Index published by the United States Department of Labor, Bureau of Labor Statistics, for All Urban Consumers, Los Angeles -Long Beach-Anaheim Area, All Items (1982-84=100), or, if said index is discontinued, such official index as may then be in existence and which is most nearly equivalent to said index. “Debt Service” shall mean scheduled debt service (including impounds, expenses, and other amounts payable) on the Senior Loan.
“Deferred Developer Fee” shall mean the portion of the Developer Fee, if any, to be paid from Net Operating Income. The Deferred Developer Fee is anticipated to be approximately [One Million Three Hundred Ninety-Nine Thousand Four Hundred Forty Dollars ($1,399,440]. “Developer Fee ” shall mean the fee to be paid to the Developer for constructing the Project, in the amount of [Two Million Eight Hundred Thousand Dollars ($2,800,000)]. “Fiscal Year” shall mean the fiscal year of Borrower, which is the calendar year. “GAAP” shall mean generally accepted accounting principles as in effect from time to time, consistently applied.
“Maturity Date” shall mean the date the Term expires.
“Net Operating Income” shall mean, for the applicable period of time, (i) the amount, if any, by which Operating Income for such period exceeds Operating Expenses paid by Borrower 344

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during such period; and, provided there is such an excess, less (ii) Deferred Developer Fee, until such fee is paid in full, and provided that there is any remaining amount, less (iii) the Partnership Asset Management Fee.
“Net Proceeds” shall mean (a) the proceeds received, directly or indirectly, by Borrower or any Affiliate or constituent member or partner, or majority shareholder, of Borrower (i) as a result of an Assignment, including, without limitation, cash, the amount of any monetary lien or encumbrance assumed or taken subject to by the assignee, the fair market value of any non- cash consideration, including the present value of any promissory-note received as part of the proceeds of such Assignment (such present va lue to be determined based upon a discount rate reasonably satisfactory to City), (ii) consisting of the entire condemnation award or compensation payable to Borrower or any Affiliate or constituent member or partner, or majority shareholder, of Borrower in connection with a condemnation or taking in eminent domain of any part of the Site or the Project or any interest therein, or (iii) consisting of all casualty insurance proceeds or awards payable to Borrower or any Affiliate or constituent member or part ner or majority shareholder of Borrower in connection with any damage to or destruction of the Site or the Project or any part thereof; less (b) the sum of (i) the actual, documented and reasonable expenses of effecting such Assignment, including title ins urance premiums, documentary transfer taxes, and reasonable attorneys’ fees, in each case actually paid in connection with the Assignment (provided that no deduction shall be allowed for payments to an affiliate of the person or entity making the Assignment which are in excess of the amount that would be paid for the same or equivalent services in an arms’ length transaction between unrelated parties acting reasonably), (ii) the costs incurred by Borrower to repair or rebuild the Project in the event of any damages, destruction, or condemnation of all or any portion of the Project, or any necessary repairs or capital improvements to the Project, (iii) payment of any Deferred Developer Fee, (iv) capital improvement reserves for the Project, (v) amounts requir ed to be reserved by a Senior Lender and (vi) the amount of any proceeds of the Assignment, casualty or condemnation paid (excluding voluntary payments) towards the then- outstanding balance of the Senior Loan and/or any Project financing being refinanced or to acquire or redeem the interest of Borrower’s limited partner. “Net Refinancing Proceeds” shall mean the gross face amount of any Project financing obtained in connection with such Refinancing, after: (a) payment of the actual, documented and reasonable expenses of such Refinancing, including escrow fees, title policy expenses, legal expenses, survey fees, recording fees, commissions, or other usual and reasonable expenses of any such Refinancing (provided, that no deduction shall be allowed for payments in connection with such Refinancing which are in excess of the amounts that would be paid for the same or equivalent services in an arms’ length transaction between unrelated parties acting reasonably); (b) payment of the loan being repaid by such Refinancing; (c) deduction of amounts repaid (excluding voluntary payments) in connection with the Refinancing towards amounts outstanding under the Senior Loan; ( d) payment of any Deferred Developer Fee; ( e) repayment of any completion or operating deficit loans; (f) any portion of such proceeds that are required to be paid to another soft lender, provided the loan made by such soft lender is contemplated in the Project Budget, (g) amounts reserved for any repairs or capital improvements to the Project, ( h) amounts required to be reserved by the Refinancing lender and ( i) amounts paid to acquire or redeem the interest of Borrower’s limited partner.
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“Operating Expenses” shall mean, for the applicable period of time, all costs and expenses reasonably incurred by Borrower in the ordinary course of the management, ownership, and/or operation of the Site by Borrower, including the payment of Debt Service, the funding of reasonable reserves including reserves required by any lender or the tax credit investor, and the payment of the following fees, paid annually: (a) the Social Services Fee; (b) a property management fee in the amount of [Nine Hundred Dollars ($900.00)] per Unit per year, increasing by 3% per annum following the first year of operation, and the monitoring payment required to be paid pursuant to Section 3.15 of the City Regulatory Agreement and any monitoring payment required to be paid to any other Project lenders ; (c) any tax benefit payments payable out of net cash flow to Borrower’s limited partner(s); (d) amounts expended to restore the Project after a casualty or condemnation, and (e) repayments of any completion or operating deficit loa ns advanced by a partner or member of Borrower or their Affiliates. Operating Expenses shall not include depreciation or any expenses for Capital Improvements, except for Capital Improvements allowed in the Approved Budget, approved by any lender providing a Senior Loan, or approved, with such approval not to be unreasonably withheld or delayed, by the City Manager. Operating Expenses shall be calculated on a cash basis.
“Operating Income” shall mean, for the applicable period of time, all proceeds received by Borrower from the operation of the Site and from any and all sources resulting from or attributable to the operation of the Site, including, without limitation, all rentals, laundry income received by Borrower, forfeited security deposits, and all expense reimbursements paid to Borrower by tenants of the Site. Operating Income shall be calculated on a cash basis. Operating Income excludes insurance proceeds, condem nation proceeds, loan proceeds and/or capital contributions.
“Partnership Asset Management Fee” shall mean (i) the Limited Partner Asset Management Fee of [Five Thousand Dollars ($5,000)] per year, payable for fifteen (15) years, and increased by three percent (3%) each year following the first year of operation, and (ii) the Managing General Partner Fee of [ Twenty Thousand Dollars ($20,000)] per year, and increased by three percent (3%) each year following the first year of operation. After fifteen (15) years of operation, no Limited Partner Asset Management Fee shall be paid, except in connection with a resyndication.
“Project Budget” shall mean the budget attached to the Agreement as Attachment No. 9. “Refinancing” shall mean creation or substantial modification of any of the existing financing on the Site. The term “Refinancing” shall not include the creation of the Construction Loan, the Take-Out Loan or any other Project financing, the proceeds of which are used solely for initial development of the Project.
“Release of Construction Covenants ” shall mean the document which evidences the Borrower’s satisfactory completion of the Project in accordance with the Agreement. “Senior Loan ” shall mean the Construction Loan and the Take -Out Loan and any Refinancing thereof.
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“Senior Loan Documents” shall mean any and all agreements and documents related to a Senior Loan.

1.1 “Social Services Fee” shall mean a minimum of [ Two Thousand Two Hundred Three Dollars ($2,203)] per unit per year, increasing annually by three percent (3%) , which are to be set aside and used exclusively for the Social Services to be provided to the residents of the Project.
“Term” shall mean the period commencing on the execution hereof, and terminating on the fifty-fifth (55th) anniversary of the first date on which all of the Units restricted for rental to and occupancy by Eligible Tenants have been leased to and are occupied by Eligible Tenants.

2. Interest and Repayment.

2.1 Basic Interest Rate. Except as provided in section 2.5 below, the disbursed and unpaid principal balance of the City Loan shall bear interest at the simple rate of three percent (3%) per year (the “Basic Interest Rate”). As used herei n, the term “disbursed” shall mean and refer to the time when the fees which are the subject of the loan would have been due and payable from Borrower to City, pursuant to the Agreement.

2.2 P
ayment Dates and Amounts.
(a) Principal and Interest Payments. Payments on this Note shall be payable annually on Decem ber 1 of each year during the Term, in an amount equal to the Applicable Percentage multiplied by the Net Operating Income for the calendar year immediately preceding such annual payment date. In the event that there is no Net Operating Income available for payment of principal and interest for any calendar year, then interest shall continue to accrue on the City Loan during such year. On or before each Decem ber 1 during the Term, regardless as to whether any payment of principal and interest is remitted, Borrower shall provide City with an accounting documenting the calculation of Net Operating Income for the previous calendar year. (b) P
ayments Due in the Event of Refinancing of Senior Loans or Transfer of Project. If Borrower undertakes a Refinancing during the Term as permitted by the Agreement, the Applicable Percentage of any Net Refinancing Proceeds of that Refinancing shall be payable to City no later than the recording of the Refinancing and applied to the outstanding balance of the City Loan. If Borrower causes an Assignment, or otherwise transfers all or part of the Project as provided in Section 1.5 of the Agreement, or any casualty or condemnation occurs to the Project in either case during the Term, the Applicable Percentage of any Net Proceeds of that transfer, casualty, or condemnation shall be payable to City no later than the date of close of escrow or other consummation of the transfer, or upon payment to or receipt by Borrower in the event of a casualty or condemnation, and applied to the outstanding principal and interest due on the City Loan. (c) I
nterest First. All payments shall be applied first to accrued interest and thereafter to principal.

2.3 F inancial Statements . On the Decem ber 1 following Borrower’s commencement of construction of the Project, and on each December 1 thereafter throughout the Term, Borrower shall submit to City its Annual Financial Statement for the preceding year. Net Operating Income 347

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shall be calculated by Borrower for each year beginning in the first year any of the Units are rented to and occupied by Eligible Tenants (and certified by an authorized officer of Borrower) and reported by Borrower to City annually for each calendar year no later than Decem ber 1st of the following calendar year on forms specified and provided by City from time to time. All calculations and records shall be based upon Borrower’s Annual Financial Statement and shall be subject to audit by City. In connection with any audit, Borrower shall provide to City for inspection and copying any records, receipts, account books, ledgers, checks, or other documents or other evidence reasonably requested by City for the purpose of verifying Borrower’s calculation of Net Operating Income, and shall promptly pay to City any further amount due but not paid as a result of any miscalculation by Borrower. Costs of any such audit shall be borne by Borrower if a miscalculation has led to any payment shortfall of more than ten percent (10%) to City; provided, however, that if such miscalculation was a result of Borrower’s gross negligence or willful misconduct, the costs of such audit shall be borne by Borrower, regardless of the amount of the shortfall. City shall promptly pay Borrower any overpayments made by Borrower as shown by such audit.

2.4 Maturity Date. The outstanding principal balance of the City Loan amount, together with any outstanding interest due thereon and any other sums payable under this Note, shall be due and payable in full on the date the Term terminates (the “ Maturity Date”). Notwithstanding anything to the contrary in this Note, Borrower may prepay all or any portion of the outstanding balance due hereunder without penalty.

2.5 D
efault Rate. Any amounts (including but not limited to amounts of principal and interest on the City Loan) which Borrower does not pay within ten (10) days following written notice that such amount is due under the terms of this Note, shall bear interest at the rate of the lesser of ten percent (10%) or the maximum rate allowed per law per annum (“Default Rate ”), simple interest, from the date which is ten (10) days after such notice until the date paid.

3. A
cceleration .

The entire outstanding principal balance of this Note, together with any outstanding interest and other amounts payable hereunder, shall, at the election of City and upon notice to Borrower thereof, become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Borrower, if, notwithstanding the payment terms set forth in Section 2 above, an “Event of Default” occurs as set forth in Section 10 below.

4. Prepayment; Application of Payments.

At any time after the Borrower has received any credit from City for any permit, inspection or impact fee or had permits issued without payment of fees, as part of the City Loan, Borrower may prepay all or a portion of the unpaid principal amount of the City Loan and accrued interest and any other sums outstanding without penalty. All payments, including any prepayments or funds received upon acceleration pursuant to Section 3 above, shall be applied first toward any outstanding costs of collection or other amounts (excluding City Loan principal or interest thereon) due under this Note or the Agreement, then toward outstanding interest accrued at the Default Rate, if any, then toward outstanding interest accrued at the Basic Interest Rate, if any, and finally toward the remaining principal balance under the Note.
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5. Security and Source of Payment.

Borrower’s obligations under this Note and monetary repayment obligations under the Agreement shall be secured by the City Deed of Trust.

The City Loan shall constitute a nonrecourse obligation of Borrower, and neither Borrower nor any partner, member, or shareholder thereof shall have any personal liability for repayment.

However, nothing contained in the foregoing limitation of liability shall (a) limit or impair the enforcement against all such security for this Note of all the rights and remedies of the City, or (b) be deemed in any way to impair the right of the City to assert the unpaid principal amount of this Note as a demand for money within the meaning and intendment of s ection 431.70 of the California Code of Civil Procedure or any successor provision thereto. The foregoing limitation of liability is intended to ap ply only to the obligation for the repayment of the principal of, and payment of interest on this Note; nothing contained herein is intended to relieve the Borrower and, if Borrower is a partnership, limited liability company, or corporation, any general partner, member, or shareholder of Borrower of liability for damages caused to City as a result of (i) fraud or willful misrepresentation of a material fact; (ii) the failure to pay when due taxes, assessments or other charges which may create liens on the real property described in the City Loan documents that are payable or applicable prior to any foreclosure under the Deed of Trust (to the full extent of such taxes, assessments or other charges); (iii) the retention of any rental income or other income arising with respect to the Project collected by Borrower after an Event of Default to the full extent of the rental income or other income retained and collected by Borrower after the giving of any such notice, and not used to pay Operating Expenses; (iv) the intentional or knowing misapplication of any proceeds under any insurance policies or awards resulting from condemnation or the exercise of the power of eminent domain or by reason of damage, loss or destruction to any portion of the Project; and (v) intentional and material breach of any environmental covenant or representation made by the Borrower relating to the Project.

6. Obligation of Borrower Unconditional.

The obligation of Borrower to repay the City Loan and all accrued interest thereon shall be absolute and unconditional, and until such time as all of the outstanding principal of and interest on this Note shall have been fully paid, Borrower agrees that it: (a) will use the funds solely for the purposes set forth herein and in the Agreement; and (b) will not terminate or suspend any payment or obligations under this Note, the Agreement, or any other document executed hereunder or in connection herewith for any cause, including without limitation, any acts or circumstances that may constitute failure of consideration, commercial frustration of purpose, or any duty, liability or obligation arising out of or in connection with this Note, the Agreement or any document executed hereunder or in connection herewith.

7. Purpose of City Loan.

The City Loan proceeds shall be used by Borrower as provided in the Agreement and for such other uses previously approved in writing by City. In no event shall Borrower use or otherwise invest the proceeds of the City Loan except as expressly provided in this Note and/or in the Agreement.
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8. Covenants of Borrower.

As additional consideration for the making of the City Loan by City, Borrower covenants as follows:

8.1 Compliance with Agreement, City Regulatory Agreement, and City Deed of Trust.

Borrower shall comply with all of its obligations under the Agreement, City Regulatory Agreement and the City Deed of Trust. Any amounts payable by Borrower under the Agreement, City Regulatory Agreement, or the City Deed of Trust (other than amounts also payable hereunder) shall be deemed added to the principal amount of the City Loan repayable hereunder.

8.2 O
ther Loans . Borrower shall comply with all monetary and non- monetary covenants associated with any loan secured by an interest in the Site or the Project. Borrower shall provide to City a copy of any notice of default within five business days after receiving any notice of a default or alleged default of such covenants by Borrower, and Borrower shall promptly cure any such default and cooperate in permitting City, to the extent City in its sole discretion elects to do so, to cure or assist in curing the default. Any cost or expenditure incurred by City in providing or assisting in such a cure shall be deemed added to the outstanding principal amount of the City Loan.

8.3 P
ayment of Deferred Developer Fee and Partnership Asset Management Fee.

Borrower shall not utilize Operating Income to pay the Deferred Developer Fee or to make any payments of the Partnership Asset Management Fee unless and until Operating Income exceeds Operating Expenses.

9. A
ssignment of this Note.

This Note shall be assignable by Borrower only in strict compliance with Section 1.5 of the Agreement. Notwithstanding anything which may be or appear to be herein to the contrary, no purported Assignment of this Note and/or the City Loan shall be effective if such Assignment would violate the terms, conditions and restrictions of any applicable ordinances, laws, or regulations. City’s consent to such Assignment shall be expressly conditioned upon (a) the assignee’s execution of such documents as reasonably required by City including, without limitation, any and all documents reasonably deemed necessary by City to provide for said assignee’s assumption of all of the obligations of Borrower hereunder, under the City Regulatory Agreement, under the City Deed of Trust, and under the City Loan Documents, (b) City’s approval of the financial and credit worthiness of such proposed assignee (such approval not to be unreasonably withheld, conditioned or delayed), and (c) Borrower’s or assignee’s payment of all City costs, including reasonable legal fees and costs of staff time incurred in evaluating any Assignment.

10. Events of Default and Remedies.

10.1 Borrower Events of Default. The occurrence of any of the following shall, after the giving of any notice and expiration of any applicable cure period as described herein, constitute an event of default by Borrower hereunder (“Event of Default”):
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(a) The failure of Borrower to pay or perform any monetary covenant or obligation under the terms of this Note without curing such failure within ten (10) days after receipt of written notice of such default from City (or from any party authorized by City to deliver such notice as identified by City in writing to Borrower);
(b) The failure of Borrower to perform any non- monetary covenant or obligation under this Note without curing such failure within thirty (30) days after receipt of written notice of such default from City (or from any party authorized by City to deliver such notice as identified by City in writing to Borrower) specifying the nature of the event or deficiency giving rise to the default and the action required to cure such deficiency. Provided, however, that if any default with respect to a non-monetary obligation is such that it cannot reasonably be cured within a thirty (30) day period, it shall be deemed cured if Borrower commences the cure within said thirty (30) day period and diligently prosecutes such cure to completion thereafter.

Notwithstanding anything herein to the contrary, the herein described notice requirements and cure periods shall not apply to any Event of Default described in Sections 10.1(e) or 10.1(f) below; (c) The failure of Borrower to perform any monetary repayment obligation under the Agreement, City Deed of Trust or City Regulatory Agreement, unless the default is cured within the applicable cure period (if any);
(d) The knowing or intentional falsity when made of any representation of a material fact or material breach of any representation or warranty made by Borrower under the terms of this Note, the Agreement, the City Regulatory Agreement or the City Deed of Trust; (e) Borrower shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of its property, (ii) fail to pay or admit in writing its inability to pay its debts generally as they become due, (iii) make a gener al assignment for the benefit of creditors, (iv) be adjudicated bankrupt or insolvent or (v) commence a voluntary petition that is not withdrawn within ten (10) days of the filing thereof or answer seeking an arrangement with creditors or an order for reli ef or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy or insolvency proceeding;
(f) If without the application, approval or consent of Borrower, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, in respect of Borrower, for an order for relief or an adjudication in bankruptcy, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of Borrower or of all or any substantial part of Borrower’s assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by Borrower, in good faith, the same shall (i) result in the entry of an order for relief or any such adjudication or appointment, or (ii) continue undismissed, or pending and unstayed, for any period of ninety (90) consecutive days; (g) Voluntary cessation of the operation of the Project for a continuous period of more than thirty (30) days or the involuntary cessation of the operation of the Project for a continuous period of more than sixty (60) days other than a s the result of a casualty or condemnation; or
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(h) An Assignment or other transfer in violation of Section 1.5 of the Agreement.

10.2 City Remedies. Upon the occurrence and during the continuance of an Event of Default hereunder, City may, in its sole discretion, take any one or more of the following actions:
(a) By notice to Borrower and the Qualified Tax Credit Investor, except in the case of an Event of Default by Borrower under Section 10.1(e) or Section 10.1(f) in which event no notice pursuant to this Note shall be required, declare the entire then unpaid principal balance of the City Loan immediately due and payable, and the same shall become due and payable without further demand, protest or further notice of any kind, all of which are expressly waived. Upon such declaration, outstanding principal and (to the extent permitted by law) interest and any other sums outstanding in connection with the City Loan shall thereafter bear interest at the Default Rate, payable from the date of such declaration until paid in full; (b) Subject to the nonrecourse provisions of Section 5 above, take any and all actions and do any and all things which are allowed, permitted or provided by law, in equity or by statute, in the sole discretion of City, to collect the amounts then due and thereafter to become due hereunder, to exercise its rights under the City Deed of Trust, and to enforce performance and observance of any obligation, agreement or covenant of the Borrower under this Note, the Agreement or under any other document executed in connection herewith; (c) Subject to the nonrecourse provision of Section 5 above, upon the occurrence of an Event of Default which is occasioned by Borrower’s failure to pay money, City may, but shall not be obligated to, make such payment. If such payment is made by City, Borrower shall deposit with City, upon written demand therefor, such sum plus interest at the Default Rate.

In either case, the Event of Default with respect to which any such payment has been made by City shall not be deemed cured until such repayment (as the case may be) has been made by Borrower.

Until repaid, such amounts shall have the security afforded the amounts evidenced by this Note; or
(d) Subject to the nonrecourse provisions of Section 5 above, upon the occurrence of an Event of Default described in Section 10.1(e) or 10.1(f) hereof, City shall be entitled and empowered by intervention in such proceedings or otherwise to file and prove a claim for the whole amount owing and unpaid on the City Loan and, in the case of commencement of any judicial proceedings, to file such proof of claim and other papers or documents as may be necessary or advisable in the judgment of City and its counsel to protect the interests of City and to collect and receive any monies or other property in satisfaction of its claim.

10.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to City is intended to be exclusive of any other available remedy or remedies, but each such remedy shall be cumulative and shall be in addition to every other remedy given under this Note or now existing at law or in equity or by statute; and may be exercised in such number, at such times and in such order as City may determine in its sole discretion. No delay or omission to exercise any right or power upon the occurrence of any Event of Default hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient by City. In order to entitle City to exercise 352

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any right or remedy reserved to it under this Note, no notice shall be required except as expressly provided herein.

11. Agreement to Pay Attorneys’ Fees and Expenses.

In the event that City brings any action or files any proceeding in connection with the enforcement of its rights under this Note or the City Deed of Trust, as a consequence of any breach by Borrower of its obligations hereunder or thereunder, the prevailing party in such action or proceeding shall be entitled to have its reasonable attorneys’ fees and out -of-pocket expenditures paid by the losing party. The attorneys’ fees so recovered shall include fees for prosecuting or defending any appeal and shall be awarded for any supplemental proceedings until the final judgment is satisfied in full. In addition to the foregoing award of attorneys’ fees, the prevailing party in any lawsuit on this Note or the City Deed of Trust shall also be entitled to its reasona ble attorneys’ fees incurred in any post judgment proceedings to collect or enforce the judgment. In addition to the foregoing, Borrower agrees to pay or reimburse City, upon demand by City, for all costs incurred by City in connection with enforcement of this Note or the City Deed of Trust, including without limitation, reasonable attorneys’ fees and costs, if there shall be filed by or against Borrower any proceedings under any federal or state bankruptcy or insolvency laws, whether City is a creditor in such proceedings or otherwise.

12. Notices.

All notices, demands, requests, elections, approvals, disapprovals, consents or other communications given under this Note shall be in writing and shall be given by personal delivery, first class mail certified or registered, return receipt requested, or r eputable overnight delivery service that provides a receipt with the time and date of delivery and addressed as follows:

To City
City of Costa Mesa
77 Fair Drive
Cosa Mesa, California 92626
Attn: City Manager
With a copy to: Jones Mayer
3777 N. Harbor Blvd.

Fullerton, CA 92835
Attn: Kimberly Hall Barlow
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To Borrower: During Construction:
___________________________
c/o Jamboree Housing Corporation
17701 Cowan Ave., Suite 200
Irvine, CA 92614
Attn: Executive Vice President and
Chief Development Officer
Following completion of construction:
___________________________
c/o Jamboree Housing Corporation
17701 Cowan Ave., Suite 200
Irvine, CA 92614
Attn: Asset Management
With a copy to: Rutan & Tucker, LLP
18575 Jamboree Road, 9
th Floor
Irvine, CA 92612
Attn: Patrick McCalla, Esq.

Any Notice shall be deemed received immediately if delivered by hand or by overnight courier, and shall be deemed received on the third day from the date it is postmarked if delivered by registered or certified mail.

13. Severability.

The invalidity or unenforceability of any one or more provisions of this Note will in no way affect any other provisions.

14. Interpretation.

Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa, and each gender will include any other gender. The captions of the paragraphs of this Note are for convenience only and do not define or limit any terms or provisions. Time is of the essence in the performance of this Note by Borrower. Borrower has been represented by counsel in the negotiation of this Note, and it shall not be interpreted in favor of or against any party on account of relative responsibilities in drafting. Notwithstanding any other provision of this Note, nothing in this Section 14 or elsewhere in this Note shall be deemed to require Borrower to pay interest in an amount in excess of any applicable usury law or other legal limitation on interest, and the terms of this Note shall be interpreted to require in each instance the lesser of (a) the amount stated in this Note, and (b) the maximum applicable legal limit.

15. No Waiver; Consents.

Any waiver by City must be in writing and will not be construed as a continuing waiver.

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of Borrower. Consent by City to any act or omission by Borrower will not be construed to be a consent to any other or subsequent act or omission or to waive the requirements for City’s consent to be obtained in any future or other instance.

16. Governing Law.

This Note shall be governed by the internal laws of the State of California without regard to conflict of law principles.

17. Representations and Warranties of Borrower.

Borrower hereby warrants and represents to City that:

17.1 Organization and Standing. Borrower is a California legal entity as described in the Agreement, duly organized, qualified to operate in California and validly existing and in good standing under all applicable laws, and has all requisite power and authority to enter into and perform its obligations under this Note, the Agreement, the City Deed of Trust, the City Regulatory Agreement and all other documents executed in connection herewith.

17.2 E
nforceability . This Note and all other instruments to be executed by Borrower in connection with the City Loan constitute the legal, valid and binding obligation of Borrower, without joinder of any other party.

17.3 A
uthorization and Consents. The execution, delivery and performance of this Note and all other instruments to be executed in connection herewith is consistent with the operating agreement, partnership agreement and any articles and bylaws governing Borrower and have been duly authorized by all necessary action of Borrower’s members, partners, directors, officers and shareholders.

17.4 D
ue and Valid Execution. This Note and all other instruments to be executed in connection herewith, will, as of the date of their execution, have been duly and validly executed by Borrower.

17.5 L
icenses . Borrower will obtain and maintain all material licenses, permits, consents and approvals required by all applicable governmental authorities to own and operate the Project.

17.6 L itigation and Compliance. To the best of Borrower’s knowledge, there are no lawsuits, other proceedings or investigations pending or affecting the business or the properties of Borrower (other than those as have been previously disclosed in writing to City) which could materially impair its ability to perform its obligations under this Note, nor is Borrower in violation of any laws or ordinances which could materially impair Borrower’s ability to perform its obligations under this Note.

17.7 D
efault . To Borrower’s current actual knowledge, there are no facts now in existence which would, with the giving of notice or the lapse of time, or both, constitute an “Event of Default” hereunder, as described in Section 10.
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17.8 No Violations. To the best of Borrower’s knowledge, the execution and delivery of this Note, the Agreement and all other documents executed or given thereunder, and the performances hereunder and thereunder by Borrower, as applicable, will not constitute a breach of or default under any instrument or agreement to which Borrower may be a party nor, to the best of Borrower’s knowledge, will the same constitute a breach of or violate any law or governmental regulation.

18. A
pprovals.

Any review or approval of any matter by City or any City official or employee under this Note or pursuant to the Agreement shall be solely for the benefit of City, and neither Borrower nor any other person shall rely upon such review or approval as an indication of the wisdom, soundness, safety, appropriateness, or presence or absence of any matter. Without limiting the generality of the foregoing, Borrower and not City shall be solely responsible for assuring compliance with laws, the suitability of the Site for the Project, the adequacy of the plans, and the safety of the Project construction site, the completed Project, and the operation thereof.

19. Waiver.

Subject to Section 5, Borrower agrees that it will still be liable for repayment of this Note, even if the holder hereof does not follow the procedures of presentment, protest, demand, diligence, notice of dishonor and of nonpayment, which requirements are hereby waived. Failure of City or other holder hereof to exercise any right or remedy hereunder shall not constitute a waiver of any future or other default. No acceptance of a past due installment or indulgence granted from time to time shall be construe d to be a waiver of, or to preclude the exercise of, the right to insist upon prompt payment thereafter or to impose late charges retroactively or prospectively, or to waive or preclude the exercise of, the right to insist upon prompt payment thereafter or to impose late charges retroactively or prospectively, or to waive or preclude the exercise of any other rights which City may have.

IN WITNESS WHEREOF, Borrower has executed this Note as of the date and year first above written.

Dated:______________________

________________________ LP, a California limited
partnership,

By: __________________LLC, a
California limited liability company,
Managing General Partner
By: Jamboree Housing Corporation, a
California nonprofit public benefit
corporation, Manager
By:
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Name:__________________________
Title:___________________________
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ATTACHMENT NO. 6

CITY DEED OF TRUST
[SEE FOLLOWING DOCUMENT]

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RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:

City of Costa Mesa
77 Fair Drive
Costa Mesa, CA 92626
Attn: City Manager
______________________________________________________________________________ [Free Recording Requested
Government Code Sections 6103 and 27383]

LEASEHOLD DEED OF TRUST WITH ASSIGNMENT OF RENTS
This LEASEHOLD DEED OF TRUST, dated as of ____________, ____ for identification purposes only, is made by and among _______________________________ LP, a California limited partnership (“ Trustor”), FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation (“ Trustee”), and CITY OF COSTA MESA, a California municipal corporation (“Beneficiary”).

Trustor grants, transfers and assigns to Trustee in trust, upon the trusts, covenants, conditions and agreements and for the uses and purposes hereinafter contained, with power of sale, and right of entry and possession, all of its title and interest in that real property located at [TBD] W. 19
th Street (APN [TBD]), in the City of Costa Mesa, County of Orange, State of California, as more particularly described in the legal description in Exhibit A attached hereto and incorporated herein by this reference (collectively, the “Site”).

Together with Trustor’s interest in all buildings, structures and improvements of every nature whatsoever now or hereafter situated on the Site; and Together with the rents, issues and profits thereof; and together with all buildings and improvements of every kind and description now or hereafter erected or placed thereon, and all fixtures, including but not limited to all gas and electric fixtures, engines and machinery, radiators, heaters, furnaces, heating equipment, laundry equipment, steam and hot -water boilers, stoves, ranges, elevators and motors, bathtubs, sinks, water closets, basins, pipes, faucets and other plumbing and heating fixtures, mantles, cabinets, refrigerating plant and refrigerators, whether mechanical or otherwise, cooking apparatus and appurtenances, and all shades, awnings, screens, blinds and other furnishings, it being hereby agreed that all such fixtures and furnishings shall to the extent permitted by law be deemed to be permanently affixed to and a part of the realty; and Together with all building materials and equipment now or hereafter delivered to said premises and intended to be installed therein; and
Together with all plans, drawings, specifications, and articles of personal property now or hereafter attached to or used in and about the building or buildings now erected or hereafter to be erected on the Site which are necessary to the completion and co mfortable use and occupancy of such building or buildings for the purposes for which they were or are to be erected, including all other goods and chattels and personal property as are ever used or furnished in operating a building, 359

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or the activities conducted therein, similar to the one herein described and referred to, and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are, or shall be attached to said building or buildings in any manner.

To have and to hold the property hereinbefore described (including the Site and all appurtenances), all such property being referred to collectively herein as the “Property, ” to Trustee, its successors and assigns forever.

FOR THE PURPOSE of securing (1) payment of indebtedness of Trustor to the Beneficiary in the principal sum of Seven Hundred Thousand Dollars ($700,000) (the “City Loan”), evidenced by a promissory note dated on or about the same date hereof between Trustor and Beneficiary (the “City Loan Note ”), together with all sums due thereunder including interest and other charges; (2) the performance of each agreement of Trustor in this Deed of Trust and the City Loan Note, (3) monetary repayment obligations of Trustor in that certain Affordable Housing / Disposition and Development Agreement dated on or about __________________, 2025 (the “AH/DDA”), and (4) monetary repayment obligations of Trustor in that certain Regulatory Agreement and Declaration of Covenants and Restrictions entered into by and between Trustor and Beneficiary on or about the same date hereof (the “City Regulatory Agreement” and, collectively, the “City Loan Documents”). Said City Loan Note and all of its terms are incorporated herein by reference and this conveyance shall secure any and all extensions, amendments, modifications or renewals thereof however evidenced, and additional advances of the City Loan or other loan by City evidenced by any note reciting that it is secured hereby.

AND TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR COVENANTS AND AGREES:

1. That it will pay the City Loan Note (s) at the time and in the manner provided therein;

2. That it will not permit or suffer the use of any of the Property for any purpose other than the use for which the same was intended at the time this Deed of Trust was executed, namely, as affordable senior rental housing;

3. That the City Loan Note is incorporated herein and made a part of this Deed of Trust. Upon default under the City Loan Note or this Deed of Trust, Beneficiary, at its option, may declare the whole of the indebtedness secured hereby to be due and payable;

4. That all rents, profits and income from the Property covered by this Deed of Trust are hereby assigned to Beneficiary for the purpose of discharging the debt hereby secured.

Permission is hereby given to Trustor so long as no Event of Default exists hereunder, to collect such rents, profits and income;

5. That upon an Event of Default hereunder, Beneficiary shall be entitled to the appointment of a receiver by any court having jurisdiction, without notice, to take possession and protect the Property described herein and operate same and collect the rents, profits and income therefrom;

6. That Trustor will keep the improvements now existing or hereafter erected on the 360

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Property insured against loss by fire and such other hazards, casualties and contingencies as may be required in writing from time to time by Beneficiary, and all such insurance shall be evidenced by standard fire and extended coverage insurance policy or policies, in the amount of the replacement value of the improvements. Such policies shall be endorsed with a standard mortgage clause with loss payable to Beneficiary subordinate to the rights and interest of the beneficiary of the deed of trust securing t he Senior Loan, as described in paragraph 31, below) and certificates thereof together with copies of original policies shall be deposited with Beneficiary;

7. To pay, before delinquency, any taxes and assessments affecting said Property when due, all encumbrances, charges and liens, with interest, on said Property or any part thereof which appear to be prior or superior hereto, all costs, fees and expenses of t his Trust unless exemption is obtained therefrom;

8. To keep said Property in good condition and repair, not to remove or demolish any buildings thereon, to complete or restore promptly and in good and workmanlike manner any building which may be constructed, damaged, or destroyed thereon and to pay when due all claims for labor performed and materials furnished therefor (unless contested in good faith if Trus tor provides security satisfactory to Beneficiary that any amounts found to be due will be paid and no sale of the Property or other impairment of the security hereunder will occur); to comply with all laws affecting said Property or requiring any alterations or improvements to be made thereon; not to commit or permit waste thereof; not to commit, suffer or permit any act upon said Property in violation of law and/or covenants, conditions and/or restrictions affecting said Property; not to permit or suffer any alteration of or addition to the buildings or improvements hereafter constructed in or upon said Property without the consent of Beneficiary;

9. To appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee, and to pay all costs and expenses, including cost of evidence of title and attorneys’ fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear;

10. Should Trustor fail to make any payment or do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof.

Beneficiary or Trustee, being authorized to enter upon said Property for such purposes, may commence, appear in and/or defend any action or proceeding pur porting to affect the security hereof or the rights or powers of Beneficiary or Trustee; may pay, purchase, contest or compromise any encumbrance, charge, or lien which in the judgment of either appears to be prior or superior hereto; and, in exercising any such powers, may pay necessary expenses, employ counsel, and pay counsel’s reasonable fees;

11. Beneficiary shall have the right to pay fire and other property insurance premiums when due should Trustor fail to make any required premium payments following Beneficiary’s written notice to Trustor and expiration of a ten (10) day cure period. All such payments made by Beneficiary shall be added to the principal sum secured hereby;

12. To pay immediately and without demand all sums so expended by Beneficiary or 361

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Trustee, under permission given under this Deed of Trust, with interest from date of expenditure at the rate specified in the City Loan Note;

13. That the City Loan advanced hereunder is to be used in the development of the Property; and upon the failure of Trustor to keep and perform such covenants following written notice and expiration of the applicable cure period (provided; however, that if the failure by Trustor is the type of failure for which the City Loan Note expressly states that a notice requirement and cure period shall not apply, then no notice and cure shall be required under this Deed of Trust), the principal sum and all arrears of interest, and other charges provided for in the City Loan Note shall, at the option of Beneficiary, become due and payable, anything contained herein to the contrary notwithstanding;

14. Trustor further covenants that it will not voluntarily create, suffer or permit to be created against the Property, subject to this Deed of Trust, any lien or liens (other than the lien of a deed of trust recorded prior in time and right to this Deed of T rust and/or the lien of a deed of trust to which Trustor has expressly agreed to subordinate the lien of this Deed of Trust) except as permitted in the AH/DDA or otherwise authorized by Beneficiary, and further that it will keep and maintain the Property free from the claims of all persons supplying labor or materials which will enter into the construction of any and all buildings now being erected or to be erected on the Property;

15. That any and all improvements made or about to be made upon the Property, and all plans and specifications, comply with all applicable municipal ordinances and regulations and all other regulations made or promulgated, now or hereafter, by lawful authority, and that the same will upon completion comply with all such municipal ordinances and regulations and with the rules of the applicable fire rating or inspection organization, bureau, association or office;

16. Trustor herein agrees to pay to Beneficiary or to the authorized loan servicing representative of Beneficiary a charge not to exceed that permitted by law for providing a statement regarding the obligation secured by this Deed of Trust as provided by s ection 2954, Article 2, Chapter 2, Title 14, Division 3 of the California Civil Code.

IT IS MUTUALLY AGREED THAT:

17. Subject to any notice and cure rights under the AH/DDA and this Deed of Trust and the right of any Senior Lender, if the construction of any improvements as herein referred to shall not be carried on with reasonable diligence, or shall be discontinued at any time for any reason other than events of Force Majeure pursuant to Paragraph 36 hereof, Beneficiary, after due notice to Trustor or any subsequent owner, and subject to the rights of any Senior Lender, is hereby invested with full and complete authority to enter upon the Property, employ watchmen to protect such improvements from depredation or injury and to preserve and protect the personal property therein, and to continue any and all outstanding contracts for the erection and completion of said building or buildings, to make and enter into any contracts and obligations wherever necessary, either in its own name or in the name of Trustor, and to pay and discharge all debts, obligations and liabilities incurred thereby. All such sums so advanced by Beneficiary (exclusive of advances of the principal of the indebtedness secured hereby) shall be added to the principal of the indebtedness secured hereby and shall be secured by this Deed of Trust and shall be due and 362

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payable on demand;

18. Subject to the rights of any Senior Lender, in the event of any fire or other casualty to the Project or eminent domain proceedings resulting in condemnation of the Project or any part thereof, Trustor shall have the right (but not the obligation) to rebuild the Project, and to use all available insurance or condemnation proceeds therefor, provided that (a) such proceeds are sufficient to rebuild the Project in a manner that provides adequate security to Beneficiary for repayment of the City Loan or if such proceeds are insufficient then Trustor shall have funded any deficiency, (b) Beneficiary 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 default then exists under the City Loan Note or this Deed of Trust. If the casualty or condemnation affects only part of the Project and total rebuilding is infeasible, then proceeds may be used for partial rebuilding and partial repayment of the City Loan in a manner that provides adequate security for repayment of the remaining balance of the City Loan. The rights of the Beneficiary to any insurance proceeds or condemnation awards pursuant to this paragraph 18 are and shall be subject to the prior right to any insurance proceeds or condemnation awards of the beneficiary of the deed of trust securing the Senior Loan, as described in paragraph 31;

19. Upon default by Trustor in making any payments provided for herein or in the City Loan Note secured hereby, and if such default is not made good within the applicable notice and cure period contained in this Deed of Trust, or if Trustor shall fail to perf orm any covenant or agreement in this Deed of Trust within notice and cure period contained in this Deed of Trust, Beneficiary may declare all sums secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale, and of written notice of default and of election to cause Trustor’s leasehold interest in the Property to be sold, which notice Trustee shall cause to be duly filed for record and Beneficiary may foreclose this Deed of Trust.

Beneficiary shall also deposit with Trustee this Deed of Trust, the City Loan Note and all documents evidencing expenditures secured hereby;

20. Subject to the rights of any Senior Lender, after the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell Trustor’s interest in said Property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine at public auction to the highest bidder for cash in lawful money of the United States, payable at time of sale. Trustee may postpone sale of all or any portion of said interest by public announcement at the time and place of sale, and from time to time thereafter may postpone the sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to the purchaser its deed conveying Trustor’s interest in the property so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclus ive proof of the truthfulness thereof.

Any person, including Trustor, Trustee or Beneficiary, may purchase at the sale. Trustee shall apply the proceeds of sale to payment of (1) the expenses of such sale, together with the reasonable expenses of this trust including therein reasonable Trustee’s fees or attorneys’ fees for conducting the sale, and the actual cost of publishing, recording, mailing and posting notice of the sale; (2) the cost of any search and/or other evidence of title procured in connection with such sale and revenue stamps on Trustee’s deed; (3) all sums expended under the terms hereof, not then repaid, with 363

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accrued interest at the rate specified in the City Loan Note; (4) all other sums then secured hereby; and (5) the remainder, if any, to the person or persons legally entitled thereto;

21. Beneficiary may from time to time substitute a successor or successors to any Trustee named herein or acting hereunder to execute this Deed of Trust. Upon such appointment, and without conveyance to the successor trustee, the latter shall be vested with a ll title, powers, and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written instrument executed by Beneficiary, containing reference to this Deed of Trust and its place of record, which, when duly recorded in the proper office of the county or counties in which the property is situated, shall be conclusive proof of proper appointment of the successor trustee;

22. The pleading of any statute of limitations as a defense to any and all obligations secured by this Deed of Trust is hereby waived to the full extent permissible by law;

23. Upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust and the City Loan Note to Trustee for cancellation and retention and upon payment of its fees, Trustee shall reconvey, without warranty, the property then held hereunder. The recitals in such reconveyance of any matters of fact shall be conclusive proof of the truthfulness thereof. The grantee in such reconveyance may be described as “the person or persons legally entitled thereto”;

24. The trust created hereby is irrevocable by Trustor;

25. This Deed of Trust applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors, and assigns. The term “Beneficiary” shall include not only the original Beneficiary hereunder but also any successor to Beneficiary’s rights, powers, and responsibilities, and any future owner and holder including pledgees, of the City Loan Note secured hereby. In this Deed of Trust, whene ver the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. All obligations of each Trustor hereunder are joint and several;

26. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law, Trustee is not obligated to notify any party hereto of pending sale under this Deed of Trus t or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee;

27. The undersigned Trustor requests that copies of any notice of default and of any notice of sale hereunder be mailed to it at:

Prior to completion of construction:
________________________________
c/o Jamboree Housing Corporation
17701 Cowan Ave., Suite 200
Irvine, CA 92614
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Attn: Executive Vice President and
Chief Development Officer
Following completion of construction:
_______________________________
c/o Jamboree Housing Corporation
17701 Cowan Ave., Suite 200
Irvine, CA 92614
Attn: Asset Management

With a copy to the limited partner of Trustor:
_____________________________
_____________________________
_____________________________

28. Trustor agrees, at any time after receipt of a written request from Beneficiary, to furnish to Beneficiary a detailed statement in writing of income, rents, profits, and operating expenses of the premises, and the names of the occupants and tenants in possession, together with the expiration dates of their leases and full information regarding all rental and occupancy agreements, and the rents provided for by such leases and rental and occupancy agreements, and such other information regarding the Property and their use as may be requested by Beneficiary.

29. The full principal amount outstanding plus accrued but unpaid interest thereon, shall be due and payable on the earlier to occur of the following:
(a) Sale, transfer, assignment or refinancing of the Property as provided further in this paragraph 29; unless: (i) in the case of a sale in which the sale proceeds are insufficient to repay in full the City Loan, the purchaser assumes the balance of the City Loan in accordance with the terms of the City Loan Note; or (ii) in the case of a refinancing in which the refinanc ing proceeds are insufficient to repay in full the City Loan, the Borrower remains obligated pursuant to the terms of the Note.
(b) In order to induce Beneficiary to make the loan evidenced hereby, Trustor agrees that in the event of any transfer of the Property which is not permitted pursuant to the AH/DDA without the prior written consent of Beneficiary (other than a transfer result ing from a foreclosure, or conveyance by deed in lieu of foreclosure, by the holder of the deed of trust securing the Senior Loan), Beneficiary shall have the absolute right at its option, without prior demand or notice, to declare all sums secured hereby immediately due and payable. Consent to one such transaction shall not be deemed to be a waiver of the right to require consent to future or successive transactions. Beneficiary may grant or deny such consent in its reasonable discretion and, if consent should be given, any such transfer shall be subject to this paragraph 29, and any such transferee shall assume all obligations hereunder and agree to be bound by all provisions contained herein. Such assumption shall not, however, release Trustor from any liability thereunder without the prior written consent of Beneficiary.
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(c) As used herein, “transfer” includes the sale, agreement to sell, transfer or conveyance of the Property, or any portion thereof or interest therein, whether voluntary, involuntary, by operation of law or otherwise, the execution of any installment land sale contract or similar instrument affecting all or a portion of the Property, or the lease of all or substantially all of the Pr operty. “Transfer” shall not include the leasing of individual residential units on the Property, for the avoidance of doubt, or any transfers of the limited partnership interests in Trustor or any replacement of a general partner of Trustor by its limited partner that does not require approval by the Beneficiary pursuant to Section 1.5 of the AH/DDA. (d) The term “sale” means any transfer, assignment, conveyance or lease (other than to a tenant for occupancy) of the Property and/or the improvements thereon, or any portion thereof, or any interest therein by the Trustor, but excludes any purchase option agreement given to Trustor’s general partner(s). Sale includes a sale in condemnation or under threat thereof. Sale does not include dedications and grants of easements to public and private utility companies of the kind customary in real estate development. Sale shall also not include any transfers of the limited partnership interests in Trustor or any replacement of a general partner of Trustor by its limited partner pursuant to Section 1.5 of the AH/DDA or any other transfer permitted in Section 1.5 of the AH/DDA.

Notwithstanding anything to the contrary contained in this Deed of Trust or in the City Loan Note, prior to declaring any default or taking any remedy permitted under this Deed of Trust, the City Loan Note or applicable law based upon an alleged default, ___________________ [TO BE INSERTED PRIOR TO RECORDING] (the “ Investor”) shall have a period of not less than sixty (60) days to cure such alleged default; provided, however, if in order to cure such default the Investor reasonably believes that it must rem ove a general partner of Trustor, or all of them, pursuant to authority granted under the agreement that sets forth the terms of Trustor’s limited partnership (the “Partnership Agreement”), and consistent with Section 1.5 of the AH/DDA, the Investor shall so notify Beneficiary and so long as the Investor is reasonably and diligently attempting to remove the general partner or general partners, the Investor shall have until the date that is thirty (30) days after the effective date of the removal of the gene ral partner or general partners to cure such default.

30. Trustor shall permit Beneficiary and its agents or representatives to inspect the Property at any and all reasonable times, with forty- eight (48) hours advance notice. Inspections shall be conducted so as not to interfere with the tenants’ use and enjoyment of the Property.

31. It is hereby expressly agreed and acknowledged by Trustor and Beneficiary that this Deed of Trust is a second and subordinate deed of trust, and that the City Loan secured hereby, and the City Loan Note are subject and subordinate only to the deed of trus t securing a loan to Trustor in original principal amount of approximately _____________________________, in which ____________________________________ [TO BE INSERTED PRIOR TO RECORDING] (“ Senior Lender”) is the Beneficiary, including any loan that refinances the balance of said loan or an assignment of said loan (collectively referred to as the “Senior Loan”).

32. For purposes of this Deed of Trust, “Hazardous Materials” means any substance, material or waste which is: (1) defined as a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” or “restricted hazardous waste” under any provision of 366

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California or federal law; (2) regulated under California or federal law, including, without limitation, petroleum, asbestos, polychlorinated biphenyls, and/or radioactive materials; or (3) determined by a California, federal or local governmental authority to be capable of posing a risk of injury to health, safety or property or risk to the environment.

33. In addition to the general and specific representations, covenants and warranties set forth in this Deed of Trust or otherwise, Trustor represents, covenants and warrants, with respect to Hazardous Materials, as follows:
(a) Trustor agrees to defend, indemnify, protect and hold harmless Beneficiary from, regarding and against any and all liabilities, obligations, orders, decrees, judgments, liens, demands, actions, “Environmental Response Actions” (as defined below), claims, losses, damages, fines, penalties, expenses, “Environmental Response Costs” (as defined below) or costs of any kind or nature whatsoever, together with fees (including, without limitation, reasonable attorneys’ fees and experts’ and consultants’ fees), occurring during and/or caused by Trustor’s use and occupancy of the Property, and resulting from or in connection with the actual or claimed generation, storage, handling, transportation, use, presence, placement, migration and/or release of Hazardous Materi als at, on, in, beneath or from the Property, including Hazardous Materials which first came to be located on the Property after the date Trustor acquired leasehold title to the Property, except to the extent caused by the gross active negligence or willfu l misconduct of Beneficiary. Trustor’s defense, indemnification, protection and hold harmless obligations herein shall include, without limitation, the duty to notify the applicable governmental authority and/or respond to any governmental inquiry, invest igation, claim or demand regarding Hazardous Materials, at Trustor’s sole cost. The term “ Environmental Response Actions” means any and all activities, data compilations, preparation of studies or reports, interaction with environmental regulatory agencies, obligations and undertakings associated with environmental investigations, removal activities, remediation activities or responses to inquiries and notice letters, as may be sought, initiated or required in connection with any local, state or federal governmental or private party claims, including any claims by Trustor. The term “Environmental Response Costs” means any and all costs associated with Environmental Response Actions including, without limitation, any and all fees, fines, penalties and damages.
(b) [INTENTIONALLY OMITTED]
(c) Without limitation of Beneficiary’s rights under this Deed of Trust, after the expiration of any applicable notice and cure period, subject to the rights of any Senior Lender, Beneficiary shall have the right, but not the obligation, to enter onto the Property or to take such other actions as it deems necessary or advisable to clean up, remove, resolve or minimize the impact of, or otherwise deal with, any such Hazardous Materials or any complaint, order, citation or notice with regard to air emissions, wa ter discharges, noise emissions or any other environmental, health or safety matter affecting Trustor or the Property upon its receipt of any notice from any governmental agency with jurisdiction, asserting the existence of any Hazardous Materials or an En vironmental Complaint on or pertaining to the Property which, if true, could result in an order, suit or other action against Trustor affecting any part of the Property by any governmental agency or otherwise which, in the sole opinion of Beneficiary, coul d jeopardize its security under this Deed of Trust. All reasonable costs and expenses incurred by Beneficiary in the exercise of any such rights shall be secured by this Deed of Trust and shall be payable by 367

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Trustor upon demand together with interest thereon at a rate equal to the highest rate payable under the City Loan Note secured hereby.

34. The following shall be an “Event of Default:”
(a) Failure of Trustor to pay, when due, principal and interest and any other sums or charges on the City Loan Note, in accordance with the provisions set forth in the City Loan Note and such failure is not cured within ten (10) days after receipt of written notice from Beneficiary; or
(b) A violation of the terms, conditions or covenants of the City Loan Note, this Deed of Trust, or of the monetary repayment obligations in the AH/DDA or City Regulatory Agreement after the expiration of any applicable cure period.

35. Subject to the extensions of time set forth in paragraph 36, and subject to the further provisions of this paragraph 35 and of paragraphs 37 and 38, failure or delay by the Trustor to perform any term or provision of this Deed of Trust constitutes a default under this Deed of Trust.

The Trustor must immediately commence to cure, correct, or remedy such failure or delay and shall complete such cure, correction or remedy with reasonable diligence. (a) The Beneficiary shall give written notice of default to the Trustor with a copy to the limited partners of Trustor for which Beneficiary has been supplied with address for notice, specifying the default complained of by the Beneficiary. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default. (b) The Trustor shall not be in default so long as it endeavors to complete such cure, correction or remedy with reasonable diligence, provided such cure, correction or remedy is completed within thirty (30) days after receipt of written notice (or such additional time as may be reasonably necessary to correct the cause).
(c) Any failures or delays by the Beneficiary in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by the Beneficiary in asserting any of its rights and remedies s hall not deprive the Beneficiary of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert, or enforce any such rights or remedies.

36. Notwithstanding specific provisions of this Deed of Trust, performance hereunder shall not be deemed to be in default where delays or defaults are due to: war; insurrection; strikes; lock-outs; riots; floods; earthquakes; fires; casualties; acts of God or other deities; acts of the public enemy; epidemics; pandemics, quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor or supplier; or any other causes beyond the reasonable control or without the fault of the party claiming an extension of time to perform.

An extension of time for any such cause shall be for the period of the enforced del ay and shall commence to run from the time the party claiming such extension gives notice to the other party, provided notice by the party claiming such extension is given within thirty (30) days after the commencement of the cause. Times of performance under this Deed of Trust may also be extended in writing by the Beneficiary and Trustor.
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37. If a monetary event of default occurs under the terms of the City Loan Note or this Deed of Trust, prior to exercising any remedies thereunder Beneficiary shall give Trustor written notice of such default. Trustor shall have a period of ten (10) days after such notice is given within which to cure the default prior to exercise of remedies by Beneficiary under the City Loan Note and this Deed of Trust.

38. If a non-monetary event of default occurs under the terms of the City Loan Note or this Deed of Trust, prior to exercising any remedies hereunder or thereunder, Beneficiary shall give Trustor notice of such default. If the default is reasonably capable of being cured within thirty (30) days, Trustor shall have such period to effect a cure prior to exercise of remedies by the Beneficiary under the City Loan Note and this Deed of Trust. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and Trustor (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as reasonably possible, then Trustor shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by Beneficiary. In no event shall Beneficiary be precluded from exercising remedies if its security becomes materially jeopardized by any failure to cure a default.

39. Beneficiary shall provide those limited partners of Trustor for which Beneficiary has been supplied with address for notice with a copy of any written notice provided to Trustor under the terms of the City Loan Documents. In the event of a monetary event of default, Trustor’s limited partners shall have a period of ten (10) days after receipt of such notice, or such longer period of time as may be set forth in the City Loan Documents, to cure the default prior to exercise of any remedy by Beneficiary. In the event a non-monetary event of default occurs under any City Loan Document, Trustor’s limited partners shall have a period of thirty (30) days after receipt of such notice, or such longer period of time as may be set forth in the City Loan Documents, to cure the default prior to exercise of any remedy by Beneficiary. Notwithstanding anything to the contrary contained in the City Loan Documents, Beneficiary hereby agrees that any cure of any default made or tendered by Trustor’s limited partners shall be deemed to be a cure by Trustor and shall be accepted or rejected on the same basis as if such cure were made or tendered by Trustor.

40. Subject to paragraph 36, Trustor, upon the occurrence of an Event of Default as described in paragraph 34 that has not been cured within the applicable cure period set forth in paragraph 37 or 38, shall be obligated to repay the City Loan and, subject to the nonrecourse provision of the City Loan Note, Beneficiary may seek to enforce payment of any and all amounts due by Trustor pursuant to the terms of the City Loan Note.

41. All expenses (including reasonable attorneys’ fees and costs and allowances) incurred in connection with an action to foreclose, or the exercise of any other remedy provided by this Deed of Trust, including the curing of any Event of Default, shall be the responsibility of Trustor.

42. Except as provided in paragraph 31, each successor owner of an interest in the Property, other than through foreclosure, deed in lieu of foreclosure or an owner who takes an interest in the Property after a foreclosure has occurred, shall take its interest subject to this Deed of Trust.
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43. Notwithstanding anything to the contrary herein, Beneficiary agrees that this Deed of Trust is and shall be subordinate to any extended low -income housing commitment (as such term is defined in s ection 42(h)(6)(B) of the Internal Revenue Code) (the “ Extended Use Agreement”) recorded against the Property; provided that such Extended Use Agreement, by its terms, will terminate upon foreclosure or upon a transfer of the Property by instrument in lieu of foreclosure in accordance with and subject to the terms of section 42(h)(6)(E) including the “3- year” rule pursuant to section 42(h)(6)(E)(ii).

44. Beneficiary agrees to subordinate this Deed of Trust to any deed of trust evidencing a loan which is used, in whole or in part, to refinance the Construction Loan, the Take -Out Loan or any subsequent loan used to refinance said refinancing loan (each a “ Refinancing Loan ”) provided that the original principal amount of any such Refinancing Loan shall not be more than the greater of (a) the lesser of (i) eighty percent (80%) of the fair market value of the Project as determined by the lender of such Refinancing Loan; and (ii) the amount which results in a debt service coverage ratio for the Refinancing Loan that is equal to or greater than 1.15:1 as determined by the lender for such Refinancing Loan; and (b) the amount necessary to cause reconveyance of the loan being refinanced, including payment of (1) all costs [i.e., escrow, legal, title, etc.] of the refinance, (2) any deferred developer fee, ( 3) any completion operating deficit loans, (4) any proceeds that are required to be paid to another soft lender, provided the loan made by such soft lender is contemplated in the Project Budget, ( 3) amounts reserved for any repairs or capital improvements to the Project, (4) amounts required to be reserved by the refinancing lender and (5) amounts paid to acquire or redeem the interest of Borrower’s limited partner; and provided further that nothing herein shall be deemed to subordinate or affect the affordability covenants of the AH/DDA or the City Regulatory Agreement. Any deed of trust securing any Refinancing Loa n shall hereinafter be referred to as the “Refinancing Deed of Trust”. Beneficiary hereby agrees to subordinate this Deed of Trust to any Refinancing Deed of Trust, and understands that in reliance upon and in consideration of this subordination, specific loans and advances are being and will be made, and, in connection therewith, specific monetary and other obligations are being and will be entered into, which would not have been made or entered into but for reliance upon this Section. Beneficiary will, at any time upon sixty (60) days written request from Trustor, execute a further specific subordination agreement reasonably required by the lender of the Refinancing Loan subordinating this Deed of Trust to any Refinancing Deed of Trust. Any such specifi c subordination agreement shall be deemed reasonable if it is substantially similar to the form of subordination agreement executed by Beneficiary in connection with the Construction Loan or the Take-Out Loan.
[End of document – Signature page follows]

_________________________________ LP, a
California limited partnership,

By: _______________ LLC, a
California limited liability company,
Managing General Partner
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Dated: ______________________

By: Jamboree Housing Corporation, a
California nonprofit public benefit
corporation, Manager
By:

Name:__________________________
Title:___________________________

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A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

State of California )
County of Orange )
On _________________________, before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who 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.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature (Seal)

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EXHIBIT “A”

LEGAL DESCRIPTION OF THE PROPERTY

[To be inserted]

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ATTACHMENT NO. 7

CITY REGULATORY AGREEMENT AND

DECLARATION OF COVENANTS AND RESTRICTIONS
[SEE FOLLOWING DOCUMENT]

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RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:

City of Costa Mesa
77 Fair Drive
Cosa Mesa, California 92626
Attn: City Manager

(Space Above This Line for Recorder’s Office Use Only)
(Exempt from Recording Fee per Gov. Code § 27383)

REGULATORY AGREEMENT AND

DECLARATION OF COVENANTS AND RESTRICTIONS
This REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND RESTRICTIONS (“Agreement”) is made and entered into this ____ day of _______________ (“Effective Date ”), by and between the CITY OF COSTA MESA, a California municipal corporation ( “City”) and __________________________ LP, a California limited partnership (“Developer”).

R E C I T A L S:

A. Developer is the owner of a leasehold interest in that certain real property located at [TBD] W. 19th Street (APN _____________), in the City of Costa Mesa, County of Orange, State of California, as more particularly described in the legal description in Exhibit “A” attached hereto and incorporated herein by this reference (collectively, the “Site”).

B. Pursuant to an Affordable Housing / Disposition and Development Agreement entered into by and between City and Developer, dated _______________, 2025 (the “AH/DDA”), City has agreed to provide financial assistance to Developer in the form of (i) a $1 per year lease of the Site, and (ii) a deferral of permit and development impact fees in an amount up to Seven Hundred Thousand Dollars ($700,000) (the “City Loan”), and Developer has agreed to construct on the Site an affordable rental apartment complex consisting of not less than sixty (60) but up to seventy (70) units (the “Project”). The AH/DDA requires Developer to enter into this Agreement, which provides, among other requirements, that with the exception of the one (1) “ Management Unit,” all of the apartment units within the Project be rented to and occupied by “Eligible Tenants” (as those terms are defined in Article 1.0 below).

C. Reference is also made to the following documents, of even date herewith:
(i) Promissory Note, by Developer as “Borrower” in favor of the City as lender (“City Note”). The City Note evidences the City Loan.
(ii) Leasehold Deed of Trust with Assignment of Rents, by and between Developer as “Trustor” and City as beneficiary, and recorded against Developer’s leasehold interest in the Site in the Official Records of the County of Orange (“City Deed of Trust”). The 375

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City Deed of Trust secures (a) repayment of the City Note, and (b) performance of Developer’s obligations hereunder.

The AH/DDA, the City Note and the City Deed of Trust are referred to herein collectively as the “City Agreements.”
D. To assist Developer with financing the Project, Developer has applied for and been awarded an allocation of 9% low income housing tax credits from the Tax Credit Allocation Committee (the “TCAC”) pursuant to section 42 of the Internal Revenue Code and/or California Revenue and Taxation Code, s ections 17057.5, 17058, 23610.4, 23610.5 and California Health and Safety Code section 50199, et seq. (the “Tax Credits”). As a condition to obtaining the Tax Credits, Developer will be required to enter into a regulatory agreement with TCAC (the “ Tax Credit Regulatory Agreement”), with such agreement to be recorded in the Official Records of the County of Orange.

E. Pursuant to the City Agreements , Developer has agreed to develop the Project on the Site and thereafter maintain the Project with no fewer than sixty (60) but up to seventy (70) units, with all units in the Project except for the one (1) Management Unit, restricted to rental to and occupancy by Eligible Tenants.

F. City and Developer now desire to place restrictions upon the use and operation of the Site, in order to ensure that the Site shall be operated continuously, for a period of ninety-nine (99) years, as an affordable rental apartment complex in accordance with the terms hereof.

AGREEMENT:

NOW, THEREFORE, the Developer and City declare, covenant and agree, by and for themselves, their heirs, executors, administrators, successors and assigns, and all persons claiming under or through them, that, commencing upon the Effective Date and continuing throughout the Term, as follows:

1.0 DEFINITIONS.

Unless specifically defined in this Agreement or by a reference to another one of the City Agreements, capitalized terms in this Agreement shall have the same meanings ascribed in the AH/DDA.

1.1 30% Low Income Household. As used in this Agreement, the term “ 30% Low Income Household” shall mean those households whose household income does not exceed thirty percent (30%) of the Orange County Median Income, as determined in accordance with section 42(g) of the IRC, as published from time to time by TCAC.

1.2 A
ffiliate . As used in this Agreement, the term “Affiliate” shall mean any person or entity directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with the subject entity which, if the subject entity is a partnership or limited liability company, shall includ e each of the constituent members or general partners, respectively, thereof. The term “control” as used in the immediately preceding sentence means, with respect to a person that is a corporation, the right to the exercise, directly or indirectly, of 376

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more than 50% of the voting rights attributable to the shares of the controlled corporation, and, with respect to a person that is not a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled person.

1.3 Affordable Rent. As used in this Agreement, the term “ Affordable Rent” shall mean the amount of monthly rent, including a reasonable utility allowance, that does not exceed the maximum allowable rent to be charged Developer and paid by 30% Low Income Households or Low Income Households, as the case may be, occupying the Units as determined in accordance with section 42(g)(2) of the IRC, and as published from time to time by TCAC.

1.4 A
pproved Budget. As used in this Agreement, the term “ Approved Budget” has the meaning ascribed in Section 3.14 of this Agreement.

1.5 C apital Improvements . As used in this Agreement, the term “ Capital Improvements” means all work and improvements with respect to the Site for which costs and expenses may be capitalized in accordance with generally accepted accounting principles as in effect from time to time, consistently applied.

1.6 C
ity . As used in this Agreement, the term “ City” means the City of Costa Mesa, a California municipal corporation.

1.7 C ity Manager . As used in this Agreement, the term “ City Manager” shall mean the individual duly appointed to the position of City Manager of the City, or his or her authorized designee. Whenever an administrative action is required by City to implement the terms of this Agreement, the City Manager, or his or her authorized designee, shall have authority to act on behalf of City, except with respect to matters reserved for City Council determination.

1.8 C
onstruction Loan. As used in this Agreement, the term “ Construction Loan” shall mean the construction loan for the Project, which shall be in the approximate amount of [Thirty-Four Million Five Hundred Fifty Dollars ($34,550.000)].

1.9 CP I . As used in this Agreement, the term “CPI” means the Consumer Price Index published by the United States Department of Labor, Bureau of Labor Statistics, for All Urban Consumers, Los Angeles-Long Beach-Anaheim Area, All Items (1982-84=100), or, if the CPI is discontinued, such official index as may then be in existence and which is most nearly equivalent to the CPI.

1.10 D
ensity Bonus Laws. As used in this Agreement, the term “ Density Bonus Laws” shall be the State density bonus law, California Government Code section 65915, et seq., and the City density bonus ordinance, Costa Mesa Municipal Code section 13-152, et seq. , as those sections may be amended from time to time. If there is an irreconcilable contradiction in requirements or limits in the S tate or City density bonus laws, the S tate density bonus law shall control; provided, however, that the preceding clause is to be narrowly construed and to the greatest extent possible all provisions in the S tate and City density bonus laws shall be given operation and effect.
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1.11 Eligible Tenant. As used in this Agreement, the term “ Eligible Tenant” shall mean a household that qualifies as (i) a Senior Household and (ii) a 30% Low Income Household or a Low Income Household, as applicable to this Agreement.

1.12 F oreclosure Event. As used in this Agreement, the term “ Foreclosure Event” shall mean a foreclosure or deed in lieu of foreclosure or any other action taken pursuant to the deed of trust or other mortgage security instrument securing the Construction Loan, the Take-Out Loan or any Refinancing Loan.

1.13 IR C . As used in this Agreement, the term “ IRC” shall mean the United States Internal Revenue Code of 1986, as amended.

1.14 J amboree. As used in this Agreement, the term “Jamboree” shall mean Jamboree Housing Corporation.

1.15 L ow Income Household. As used in this Agreement, the term “ Low Income Household” shall mean those households whose household income does not exceed sixty percent (60%) of the Orange County Median Income, as determined in accordance with section 42(g) of the IRC, as published from time to time by TCAC.

1.16 M anagement Unit . As used in this Agreement, the term “ Management Unit ” shall have the meaning ascribed in Section 2.6 hereof.

1.17 O perating Expenses. As used in this Agreement, the term “Operating Expenses” shall have the meaning ascribed in the City Note.

1.18 O perating Income . As used in this Agreement, the term “ Operating Income” shall have the meaning ascribed in the City Note.

1.19 O range County Median Income. As used in this Agreement, the term “ Orange County Median Income” shall mean the median household income for the County of Orange, adjusted for family size, to be determined in accordance with s ection 42(g) of the IRC, as published from time to time by TCAC.

1.20 P artnership Agreement . As used in this Agreement, the term “ Partnership Agreement” shall mean the agreement that sets forth the terms of Developer’s limited partnership, as such agreement may be amended from time to time. The Partnership Agreement shall not include provisions which conflict with payments owing to the City pursuant to the City Note.

1.21 Q ualified Tax Credit Investor. As used in this Agreement, the term “ Qualified Tax Credit Investor” shall mean a person or entity who (i) is an experienced limited partner and investor in multifamily housing developments receiving low income housing tax credits issued by the State of California or the United States federal government and (ii) has obtained or is contractually obligated to obtain a limited partnership or limited liability company membership interest in Developer whereby it will receive ninety percent (90%) or more of the Tax Credits generated in connection with the Project. City shall have the right to reasonable prior approval of any person or entity proposed by Developer as the Qualified Tax Credit Investor and of the 378

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terms and conditions of the Partnership Agreement. City shall diligently review any documents and/or proposals submitted by Developer with respect to the proposed Qualified Tax Credit Investor and Partnership Agreement.

1.22 Refinancing Loan. As used in this Agreement, the term “Refinancing Loan” shall have the meaning ascribed in Section 27 hereof.

1.23 R eleased/Indemnified Parties . As used in this Agreement, the term “Released/Indemnified Parties” as it relates to any indemnification or release and waiver of claims for the benefit of the City means, City and City’s officials, officers, members, employees, agents, volunteers, and representatives, and all entities, boards, commissions, and bodies related to any of them. For purposes of this Agreement, the term “volunteers” shall mean persons who are not paid employees of City but are subject to a screening process similar to that used for paid employees.

1.24 R
estricted Unit Mix . As used in this Agreement, the term “Restricted Unit Mix” shall mean the following mix:
a. Up to Thirty- Five (35) of the one- bedroom Units ar e restricted to Low Income Households; and
b. Up to Thirty- Three (33) of the one- bedroom Unit s, and one (1) two- bedroom Unit are restricted to 30% Low Income Households.

1.25 Senior Household. As used in this Agreement, the term “Senior Household” shall mean a household in which at least one member of the household is fifty-five (55) years of age or older and each other resident in the same dwelling unit is a “ qualified permanent resident,” a “permitted health care resident, ” (as those terms are defined in California Civil Code sections

51.3(b), or a person under 55 years of age whose occupancy is permitted under California Civil Code section 51.3(b)(2).

1.26 “Social Services Fee” shall mean a minimum of approximately Two Thousand Two Hundred Three Dollars ($2,203) per Unit per year, increasing annually by three percent (3%), which are to be set aside and used exclusively for the Social Services to be provided to the residents of the Project.

1.27 Tax Credit Program. As used in this Agreement, the term “Tax Credit Program” shall mean the low -income housing tax credit program authorized pursuant to s ection 42 of the IRC, California Health and Safety Code sections 50199.6-50199.19, Revenue and Taxation Code sections 17057.5, 17058, 23610.4, 23610.5, and applicable federal and State regulations.

1.28 T ax Credits . As used in this Agreement, the term “ Tax Credits” shall mean the low income housing tax credits granted by TCAC for the Project pursuant to s ection 42 of the IRC and/or California Revenue and Taxation Code, s ections 17057.5, 17058, 23610.4, 23610.5 and California Health and Safety Code section 50199, et seq.

1.29 T ax Credit Regulatory Agreement. As used in this Agreement, the term “ Tax Credit Regulatory Agreement” shall have the meaning ascribed in Recital D of this Agreement. 379

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1.30 TCAC. As used in this Agreement, “TCAC” shall mean the California Tax Credit Allocation Committee.

1.31 T erm . As used in this Agreement, the term “Term” shall mean a period of ninety nine (99) years, commencing on the date all of the Units have been rented to and are occupied by Eligible Tenants (except the Management Unit).

1.32 Un it . As used in this Agreement, the term “Unit” or “unit” shall mean a rental apartment dwelling unit on the Site. The Units are comprised of between Fifty Eight (58) and Sixty-Eight (68) one -bedroom Units and one (1) two -bedroom Unit (not including the two (2) bedroom Management Unit).

2.0 R ESIDENTIAL RENTAL PROPERTY .

2.1 Construction of the Project on the Site. Developer shall construct the Project on the Site in accordance with the AH/DDA, including the Schedule of Performance set forth therein, for the purpose of providing the Units described herein and therein. Commencing on the Effective Date and continuing until expiration of the Term, the Project shall be owned, managed, and operated as a rental apartment project, with each of the Units except the Management Unit rented to and occupied by Eligible Tenants at Affordable Rent, as provided in this Agreement.

2.2 F
acilities . All of the Units in the Project shall contain facilities for living, sleeping, eating, cooking and sanitation in accordance with this Agreement, the AH/DDA, and all of the permits and approvals for the Project.

2.3 R
esidential Use. Without the City ’s prior written consent, which consent may be given or withheld in its sole and absolute discretion, none of the Units in the Project will at any time be utilized on a transient basis or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, medical treatment facility, sanitarium, sober living home, or trailer court or park, nor shall the Units be used as a place of business except as may otherwise be allowed by applicable law.

2.4 C
onversion of Units. No part of the Project will at any time be owned by a cooperative housing corporation, nor shall the Developer take any steps in connection with the conversion to such ownership or uses to condominiums, or to any other form of ownership, without the prior written approval of City which approval may be given or withheld in its sole and absolute discretion.

2.5 N
o Preference. All of the Units will be available for rental in accordance with the terms of this Agreement, and the Developer shall not give preference to any particular class or group of Eligible Tenants in renting the Units in the Project, except as provided in Section 3.4 below.

2.6 R
esident Manager and Staff Unit . Notwithstanding anything to the contrary in this Agreement, one (1) of the two-bedroom units at the Project may be occupied by on -site management (the “Management Unit”).
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2.7 Liability of Developer. Developer and any manager it employs shall not incur any liability under this Agreement as a result of fraud or intentional misrepresentation by a tenant.

3.0 O CCUPANCY OF RESTRICTED UNITS BY ELIGIBLE TENANTS .

Developer hereby represents, warrants, and covenants as follows:

3.1 Occupancy Levels. Except as expressly provided herein, throughout the term of this Agreement, the Units shall be continuously occupied or held vacant and available for occupancy at Affordable Rent for Eligible Tenants in accordance with the Restricted Unit Mix.

Maximum occupancy for each Unit shall be two (2) persons for each bedroom in the Unit plus one (1) additional person; and minimum occupancy for each Unit shall be no less than one (1) person per bedroom in the Unit.

3.2 O
ccupancy By Eligible Tenant. A Unit occupied by an Eligible Tenant who qualified as an Eligible Tenant at the commencement of the occupancy shall be treated as occupied by an Eligible Tenant throughout their tenancy. A Unit previously occupied by an Eligible Tenant and then vacated shall be considered occupied by an Eligible Tenant until the Unit is reoccupied, provided Developer uses its best efforts to re -lease the vacant Unit to an Eligible Tenant in compliance with the Restricted Unit Mix. Any vacat ed Unit shall be held vacant until re -leased to an Eligible Tenant. Developer shall take the following actions, as necessary, to locate Eligible Tenants for the Project: (i) notification to the City of the available Unit; and (ii) advertisement of the available Unit in a newspaper of general circulation in the City.

3.3 I
ncome Computation and Certification . Immediately prior to an Eligible Tenant’s occupancy of a Unit, Developer shall obtain an Income Computation and Certification Form in the form attached hereto and incorporated herein as Exhibit “B”, or on a similar form required by TCAC (the “ TCAC Income Certification Form ”) if the TCAC Income Certification Form requires inclusion of the same information as required in Exhibit “B” , from each such Eligible Tenant dated no more than ninety (90) days prior to the date of initial occupancy in the Project by such Eligible Tenant. In addition, Developer shall provide such further information as may be reasonably required in the future by the City for purposes of verifying a tenant ’s status as an Eligible Tenant. Developer shall use good faith efforts to verify that the income provided by an applicant is accurate by taking the following steps as a part of the verification process: (i) obtain three (3) pay stubs for the most recent pay periods; (ii) obtain a written verification of income and employment from the applicant’s current employer; (iii) obtain an income verification form from the Social Security Administration, California Department of Social Services, and/or California Employment Development Department if the applicant receives assistance from any of said agencies; (iv) if an applicant is unemployed or did not file a tax return for the previous calendar year, obtain other evidence and/or verification of such applicant ’s total income receiv ed during the calendar year from any source, taxable or nontaxable, or such other information as is satisfactory to the City. Developer shall maintain in its records each Income Computation and Certification Form obtained pursuant to this section for a minimum of five (5) years.

3.4 R
ental Priority . Subject to (i) the requirements of any funding obtained by Developer to operate and/or develop the Project that has been approved by City, including the Tax Credit Program, and (ii) any applicable Federal, State or local law (including, without 381

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limitation, fair housing laws), during the term of this Agreement, Developer shall use its commercially reasonable efforts to lease the Units to credit -worthy Eligible Tenants in the following order of priority: (a) who have been or will be displaced by a City activity, or an activity of any other public agency with jurisdiction in all or any portion of the City of Costa Mesa; or (b) who live and/or work in the City of Costa Mesa. Developer shall, and City may, maintain a list (the “Housing List”) of persons who have notified Developer and/or City of their desire to rent a Unit in the Project who qualify as a Senior Household and who have incomes which would qualify them as an Eligible Tenant, and Developer shall offer to rent Units on the above - referenced priority basis; provided, however, that Developer shall not be required to prequalify persons on the Housing List. Should multiple tenants be equally eligible (as to income, credit history, and other nondiscriminatory criteria) and qualified to rent a Unit, Developer shall rent available Units to Eligible Tenants on a first-come, first-served basis. For purposes of this Section

3.4 an Eligible Tenant shall be deemed to live in the City of Costa Mesa if their current residence is located within the City (e.g., street address to be provided), or if they are currently homeless in Costa Mesa as demonstrated by records of the City, or a local social services organization, and an Eligible Tenant shall be deemed to work in the City of Costa Mesa if they work in the City for at least twenty (20) hours per week.

3.5 Recertification. Within sixty (60) days prior to the first anniversary date of the occupancy of a Unit by an Eligible Tenant, and on each anniversary date thereafter, Developer shall recertify the income of such Eligible Tenant by obtaining a completed Income Recertification Form, in the form attached hereto and incorporated herein as Exhibit “C”, or on a similar form required by TCAC (the “ TCAC Income Recertification Form ”) if the TCAC Income Recertification Form requires inclusion of the same information as required in Exhibit “C”, based upon the current income of each known occupant of the Unit; provided, however, that if Developer obtains the Tax Credits, and the TCAC Regulatory Agreement requires Developer to obtain a recertification form which requires inclusion of the same information as required in Exhibit “C”, then Developer shall not be deemed to be in default hereunder if during the term of the TCAC Regulatory Agreement Developer obtains from each Eligible Tenant the TCAC recertification form.

3.6 D
etermination of Affordable Rent. All Units shall be rented at an Affordable Rent.

3.6.1 Rent Schedule and Utility Allowance . Developer shall submit to the City Manager for review and approval the Affordable Rents proposed by Developer for all of the Units.

In determining the Affordable Rents, Developer shall utilize the maximum monthly allowances for utilities and services that is published by the County of Orange. City shall approve such proposal if it complies with the terms of this Agreement. The maximum monthly rent must be recalculated by Developer and submitted to the City annually. City shall be deemed to approve any proposed rent schedule if (a) the proposed rents constitute an Affordable Rent and (b) City fails to respond within ten (10) business days following Developer’s submittal.

3.6.2 A
djustment of Rent . Rent may change as changes in the applicable gross rent amounts, the income adjustments, or the monthly allowance for utilities and services warrant.

Any increase in rents is subject to the provisions of outstanding leases. Developer must provide the City and all households occupying the Units not less than thirty (30) days prior written notice before implementing any rent increase.
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3.7 Loss or Reduction of Rental Subsidy; Effect of Foreclosure.

3.7.1 It is anticipated that the Property will be supported by Project-Based Section 8 rental subsidy payments (the “Rental Subsidy”). If, during the Term, (a)(1) any change in federal law or regulations occurs, (2) any action (or inaction) by Congress or any federal or State agency occurs, or (3) any other circumstances exist which results in a reduction, termination, or nonrenewal of the Rental Subsidy through no fault of Developer, such that the Rental Subsidy as it exists as of the Effective Date is no longer available (or available in a lesser amount) (any of the foregoing, a “Rental Subsidy Event”), or (b) a Foreclosure Event occurs, Developer may request approval of City to (i) allow Low Income Households to occupy the Units originally restricted for occupancy by 30% Low Income Households (the “30% Units”), and (ii) increase the rent on one or more of the 30% Units, to rents that are affordable to Low Income Households, as outlined herein.

3.7.2 The income limit and rent increases described in subsections (i) and (ii) in Section 3.7.1 above are subject to the following requirements: concurrently with the request, Developer shall provide City with (a) evidence of the anticipated reduction, termination, or nonrenewal of the Rental Subsidy (applicable only on the occurrence of a Rental Subsidy Event), (b) a management plan for the Project for the City’s approval (such approval not to be unreasonably withheld of delayed), showing the impact of the loss or reduction of the Rental Subsidy (applicable only on the occurrence of a Rental Subsidy Event), (c) a proposed operating budget reflecting the rent increases (the “Operating Budget ”), and (d) a description of Developer’s efforts to obtain alternate sources of rental subsidies (applicable only on the occurrence of a Rental Subsidy Event), and, if the foregoing requirements (as applicable) are completed to City’s reasonable satisfaction, subject to the limitations set forth in the immediately succeeding se ntence, City shall use good faith diligent efforts to identify other locations within the City that would replace some or all of the 30% Units for purposes of maintaining compliance with City’s Housing Element and applicable State law, and if such units are available, shall approve Developer’s request to increase the income limits and rent restrictions applicable to the 30% Units. The number of 30% Units subject to the rent increase and the amount of the proposed increase may not be greater than (i) the number or amount required to ensure that the Project generates sufficient income to cover its operating costs, required deposits to replacement reserves, and debt service payments on approved financing as shown on the Operating Budget (together, the “Minimum Liabilities”), and (ii) such amount as is necessary for the Project to maintain a debt service coverage ratio of at least 1.15 to

1.00 (the “ Debt Service Coverage Ratio ”). As used herein, “Debt Service Coverage Ratio” means, for any period, the ratio of (x) net operating income for such period to (y) all principal and interest payments due and payable during such period, regardless of whether the Project is generating sufficient cash flow.

3.7.3 Upon a Rental Subsidy Event, Developer hereby agrees to use good faith commercially reasonable efforts to obtain alternative sources of rental subsidies and shall provide City with quarterly progress reports on efforts to obtain alternative sources of rental subsidies that would allow the rents to be reduced. Upon receipt of any alternative rental subsidies, Developer shall reduce the rents as much as possible with the goal of reverting the rents to their original levels as set forth herein to the extent that the alternative rental subsidies provide sufficient income to cover the Minimum Liabilities of the Project as shown on the Operating Budget and to maintain a Debt Service Coverage Ratio of 1:15 to 1.00.
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3.7.4 The following additional requirements apply with respect to any rent increases made pursuant to the terms of this Section 3.7:
(i) Developer shall provide tenants with at least sixty (60) days’ prior written notice of any such rent increase and shall notify each tenant that if they have received a tenant-based voucher from the Orange County Housing Authority or any other governmental entity they may use such voucher to pay the rent for their Unit; and (ii) No later than sixty (60) days prior to the proposed implementation of any such rent increase, Developer shall submit to the City a schedule of any proposed rent increase for approval by City (such approval not to be unreasonably withheld or delayed). City will disapprove a rent increase if it does not comply with the restrictions set forth herein.

3.8 Certification of Continuing Program Compliance. During the term of this Agreement, on or before each December 1 following the Effective Date, Developer shall annually advise the City of the occupancy of the Project during the preceding calendar year by delivering a Certification of Continuing Program Compliance in the form attached hereto and incorporated herein as Exhibit “E” , stating (i) the Units of the Project which have been rented to and are occupied by Eligible Tenants and (ii) that to the knowledge of Developer either (a) no unremedied default has occurred under this Agreement, or (b) a default has occurred, in which event said certification shall describe the nature of the default and set forth the measures being taken by the Developer to remedy such default.

3.9 M
aintenance of Records. Developer shall maintain complete and accurate records pertaining to the Units, and shall permit any duly authorized representative of the City, upon forty-eight (48) hours prior notice and during business hours, to inspect the books and records of Developer pertaining to the Project including, but not limited to, those records pertaining to the occupancy of the Units.

3.10 R
eliance on Tenant Representations. Each tenant lease shall contain a provision to the effect that Developer has relied on the income certification and supporting information supplied by the tenant in determining qualification for occupancy of the Unit, and that any material misstatement in such certification (whether or not intentional) will be cause for immediate termination of such lease. Each such lease shall also include a lease rider substantially in the form attached hereto and incorporated herein as Exhibit “D” and shall state that occupation of the Unit is subject to the income restrictions described in this Agreement.

3.11 R emedy For Violation of Rental Requirements.

3.11.1 It shall constitute a default for Developer to charge or accept for any Unit rent amounts in excess of the amount provided for in Section 3.6 of this Agreement. In the event that Developer charges or receives such higher rental amounts, Developer shall be required to reimburse the tenant that occupied said Unit at the time the excess rent was received for the entire amount of such excess rent received, provided that such tenant can be found following reasonable inquiry, and to pay to such tenant interest on said excess amount, at the rate of six percent (6%) per annum, for the period commencing on the date the first excess rent was received from said 384

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tenant and ending on the date reimbursement is made to the tenant. For purposes of this Section

3.11, “reasonable inquiry” shall include Developer’s review of information provided by the tenant as part of the tenant ’s application and forwarding information provided by the tenant, and Developer’s reasonable attempts to contact the tenant and any other persons listed in either of such documents. If, after such reasonable inquiry, Developer is unable to locate the tenant, Developer shall pay all of such amounts otherwise to be paid to the tenant to the City.

3.11.2 Except as otherwise provided in this Agreement, it shall constitute a default for Developer to knowingly (or without investigation as required herein) initially rent any Unit to a tenant who is not an Eligible Tenant. In the event Developer violates this Section, in addition to any other equitable remedy City shall have for such default, Developer, for each separate violation, shall be required to pay to City an amount equal to (i) the total rent Developer received from such ineligible tenant, in excess of the total rent Developer was entitled to receive for renting that Unit, plus (ii) any relocation expenses incurred by City as a result of Developer having rented to such ineligible person. The terms of this Section shall not apply if Developer rents to a n ineligible person as a result of such person’s fraud or misrepresentation.

3.11.3 It shall constitute a default for Developer to knowingly (or without investigation as required herein) rent a Unit in violation of the leasing preference requirements of Section 3.4 of this Agreement. In the event Developer violates this Section, in addit ion to any other equitable remedy City shall have for such default, Developer, for each separate violation, shall be required to pay City an amount equal to one (1) month of rental charges.

THE PARTIES HERETO AGREE THAT THE AMOUNTS SET FORTH IN THIS SECTION 3.1 1 (THE “DAMAGE AMOUNTS ”) CONSTITUTE A REASONABLE

APPROXIMATION OF THE ACTUAL DAMAGES THAT CITY WOULD SUFFER DUE TO THE DEFAULTS BY DEVELOPER SET FORTH IN SECTIONS 3.1 1.1 THROUGH 3.1 1.3,

CONSIDERING ALL OF THE CIRCUMSTANCES EXISTING ON THE EFFECTIVE DATE

OF THIS AGREEMENT, INCLUDING THE RELATIONSHIP OF THE DAMAGE AMOUNTS TO THE RANGE OF HARM TO CITY AND ACCOMPLISHMENT OF CITY’S PURPOSE OF

ASSISTING IN THE PROVISION OF AFFORDABLE HOUSING TO ELIGIBLE TENANTS

THAT REASONABLY COULD BE ANTICIPATED AND THE ANTICIPATION THAT PROOF OF ACTUAL DAMAGES WOULD BE COSTLY OR INCONVENIENT. THE AMOUNTS SET FORTH IN THIS SECTION 3.1 1 SHALL BE THE SOLE M ONETARY DAMAGES REMEDY FOR THE DEFAULTS SET FORTH IN THIS SECTION 3.1 1 BUT NOTHING IN THIS SECTION 3.11 SHALL BE INTERPRETED TO LIMIT CITY’S REMEDY

FOR SUCH DEFAULT TO SUCH A DAMAGES REMEDY AND IN THAT REGARD AND

SUBJECT TO THE TERMS OF THE FOLLOWING PARAGRAPH CITY MAY DECLARE A

DEFAULT UNDER THE TERMS OF THIS AGREEMENT, THE CITY NOTE OR ANY OTHER OF THE CITY AGREEMENTS . IN PLACING ITS INITIALS AT THE PLACES

PROVIDED HEREINBELOW, EACH PARTY SPECIFICALLY CONFIRMS THE

ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT THAT EACH

PARTY HAS BEEN REPRESENTED BY COUNSEL WHO HAS EXPLAINED THE

CONSEQUENCES OF THE LIQUIDATED DAMAGES PROVISION AT OR PRIOR TO THE TIME EACH EXECUTED THIS AGREEMENT.
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DEVELOPER’S INITIALS:
________________________
CITY’S INITIALS:
________________________
Notwithstanding anything to the contrary in this Agreement, City shall have no right to accelerate repayment of the City Loan or commence foreclosure proceedings for any of the defaults described in this Section 3.11 until City has provided notice and an opportunity to cure pursuant to Article 10 and declared an “Event of Default” pursuant to the provisions of said Article 10.

3.12 Tax Credit Regulatory Agreement. Notwithstanding anything contained in this Agreement to the contrary, if and when the Site is subject to the requirements of the Tax Credit Program and there is a conflict between the requirements of the Tax Credit Program and the provisions set forth in this Agreement, then the provisions of the Tax Credit Program shall prevail except that the more restrictive rent (i.e ., “Affordable Rent” as defined under this Agreement) shall apply and control. Except as provided in thi s Section, the fact that this Agreement and the Tax Credit Program provide for greater, lesser or different obligations or requirements shall not be deemed a conflict unless the applicable provisions are inconsistent and could not be simultaneously enforced or performed.

3.13 A
nnual Statements . On each December 1 following the Effective Date, Developer shall deliver to City (i) financial statements of Developer, including a profit and loss statement, and a consolidated statement of changes in financial position of the Project as at the close of and for the immediately preceding fiscal year, all in reasonable detail, certified by an officer or partner of Developer, and (ii) an annual operating statement showing all Operating Income and Operating Expenses, and any other amounts t aken into consideration in computing Net Operating Income pursuant to the City Note, certified by an operating officer or manager of the Developer as true and complete and in a format reasonably acceptable to the City Manager.

3.14 A
pproved Budget . As soon as available and in any event not later than November 1st of each calendar year beginning with the year in which the Project is completed, Developer shall provide City with a detailed projection of Operating Income and budgets of estimated Operating Expenses for the immediately succeeding calendar year (the “Proposed Budget”) and a detailed cash flow projection for such year. City shall review each Proposed Budget and shall provide any objections thereto to Developer within thirty (30) calendar days following receipt. If City fails to provide objections to a Proposed Budget (or to request additional information pursuant to the following sentence) within such thirty (30) calendar day period, such Proposed Budget shall be deemed approved. During such thirty (30) calendar day period City shall have the right to request additional detail, information and assumptions used in the preparation of the Proposed Budget , and in such event City shall have a period of fifteen (15) business days following receipt of such additional information to review and provide objections to the additional information and Proposed Budget, and in the event City fails to provide objections during such fifteen (15) calendar day period, the Proposed Budget shall be deemed approved. Any Proposed Budget that is expressly approved by City or is deemed approved by City pursuant to the term s of this Section 3.14 shall be referred as an “Approved Budget .” Developer shall use its commercially reasonable efforts to operate the Site during such calendar year within the Approved Budget.
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3.15 Annual Monitoring Payment. On or before May 1 of each year after Developer’s completion of the Project, Developer shall pay to City an annual payment in the amount of Fifty Dollars ($50.00) per Unit, increased annually by the CPI (but not to exceed 3% per annum), to reimburse City for the costs City incurs in monitoring Developer’s compliance with the terms of the Ground Lease, the AH/DDA and this Agreement, including but not limited to, the provision of annual budgets, the social services provided, the parking management plan and other City conditions of approval; provided, however, that if Developer compl etes the Project between January 1 and April 30, Developer ’s first such reimbursement payment shall not be due and payable until the subsequent May 1. For example, if Developer completes the Project on March 10, 2027, the first reimbursement payment will be due on May 1, 2028.

4.0 M AINTENANCE .

4.1 Maintenance Obligation. Developer agrees to and shall maintain all interior and exterior improvements on the Site , including landscaping, driveways, walkways and parking spaces, in a good and safe condition and repair (and, as to landscaping, in a healthy condition) consistent with other similar , well operated affordable housing developments in Costa Mesa , California and in accordance with all of the permits and approvals for the Project, and all other applicable laws, rules, ordinances, orders, and regulations of all federal, state, county, municipal, and other governmental agencies and bodies having jurisdiction and all their respective departments, bureaus, and officials. City places prime importance on quality maintenance to protect its investment and to ensure that all City -assisted affordable housing projects within the City are not allowed to deteriorate due to below -average maintenance. Normal wear and tear of the Site improvements will be acceptable to City assuming Developer agrees to perform all necessary Site improvements to assure the Site is maintained in good condition. Maintenance requirements for the Site shall include that: (a) no improperly maintained landscaping shall be visible from public rights -of-way, including (i) no trees, shrubbery, lawns, and other plant life dying from lack of water or other necessary maintenance, (ii) no trees, hedges, or shrubbery grown uncontrolled without proper pruning, ( iii) no vegetation so overgrown as to be likely to harbor rats or vermin, and ( iv) no dead, decayed, or diseased trees, weeds, and/or other vegetation; (b) no yard areas shall be left unmaintained, including (i) no broken or discarded furniture, appliances, or other household equipment stored in yard areas for periods exceeding one (1) week, (ii) no packing boxes, lumber, trash, dirt, or other debris stored in yards for periods exceeding one (1) week in areas visible from public property or neighboring properties, (iii) no unscreened trash cans, bins, or containers stored for unreasonable periods in areas visible from public property or neighboring properties, (iv) no vehicles parked or stored in areas other than approved parking areas; and (v) no required exterior lighting to be inoperable or extinguished; (c) no buildings on the Site may be left in an unmaintained condition, including (i) no violations of state law, Uniform Codes, or City ordinances, (ii) no condition that constitutes an unsightly appearance that constitutes a private or public nuisance, (iii) no broken windows or chipped, cracked, or peeling paint, (iv) no conditions constituting hazards, such as potholes or cracks in the parking area, (v) no conditions inviting trespassers or malicious mischief, and (v i) no graffiti or accumulation of waste or debris. Developer shall make all repairs and replacements necessary to keep the Site improvements in good condition and repair and shall promptly eliminate all graffiti, correct and repair any broken or damaged concrete or asphalt, and replace dead and diseased plants and landscaping with comparable approved materials. In the event that Developer breaches any of the covenants contained in this Section and Developer does not commence to cure such breach 387

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within five (5) business days after written notice from City (with respect to graffiti, debris, waste material, landscaping, and general maintenance) or thirty (30) days after written notice from City (with respect to building improvements), and after commencing the cure to diligently prosecute such cure to completion, then City, in addition to whatever other remedy it may have at law or in equity, shall have the right, but not the obligation, to enter upon the Site and perform all acts and work necessary to protect, maintain, and preserve the improvements and landscaped areas on the Site, and to attach a lien on the Site as provided in Section 4.2 below, or to assess the Site, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by City and/or costs of such cure, including a fifteen percent (15%) administrative charge, which amount shall be promptly paid by Developer to City upon thirty (30) days’ written notice.

4.2 Lien. If the costs incurred pursuant to Section 4.1 are not reimbursed within thirty (30) days after Developer ’s receipt of notice thereof the same shall be deemed delinquent, and the amount thereof shall bear interest thereafter at a rate of six percent (6%) per annum until paid.

Any and all delinquent amounts, together with said interest, costs and reasonable attorney’s fees, shall, upon recordation of a notice of lien against the Property in the Official Records of the County of Orange, California in accordance with applicable law, be a lien and charge, with power of sale, upon the property interests of Developer, and the rents, issues and profits of such property.

The priority of such lien shall date from the date of recordation. City may bring an action at law against Developer to pay any such sums or foreclose the lien against Developer ’s property interests. Any such lien may be enforced by sale by the City following recordation of a Notice of Default of Sale given in the manner and time required by law as in the case of a deed of trust; such sale to be conducted in accordance with the provisions of s ection 2924, et seq. , of the California Civil Code, applicable to the exercise of powers of sale in mortgages and deeds of trust, or in any other manner permitted by law. No lien recorded by City pursuant to this Section

4.2 shall defeat or render invalid the lien of any senior mortgage or deed of trust.

5.0 M
ANAGEMENT .

5.1 Marketing Plan . Prior to the City ’s issuance of a Release of Construction Covenants for the Project, Developer shall submit for the approval of the City Manager, which approval shall not unreasonably be withheld, a plan for marketing the rental of the Units (the “Marketing Plan”). The Marketing Plan shall include affirmative marketing procedures and requirements. The Marketing Plan shall include a plan for publicizing the availability of the Units within the City in a manner which gives notice to residents of the City, such as notices in any City sponsored newsletter, newspaper advertising in local newspapers and notices in City offices and community centers.

5.2 L
ong Term Management of the Project. Prior to, and as a condition of, the City’ s issuance of a Release of Construction Covenants for the Project, Developer shall submit for the reasonable approval of the City Manager a “ Management Plan” which sets forth in detail the identity and the duties of the person or entity proposed to be retained by Developer to operate and manage the Project (the “Property Manager”), tenant selection criteria, the tenant selection and income certification process, a security system and crime prevention program, the procedures for determining Rent and for the collection of rent, occupancy limits, and the procedures for monitoring of occupancy levels, the procedures for eviction of tenants, the rules and regulations 388

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of the Project and manner of enforcement, the initial standard lease form, and other matters relevant to the management of the Project. Developer may from time to time submit amendments and modifications to the Management Plan for the reasonable approval of the City Manager. The management of the Project shall be in compliance with the Management Plan. City hereby approves Quality Management Group as the initial Property Manager.

5.3 Social Services. Developer shall provide a variety of social services at the Project; such social services are subject to the approval of the City Manager, in his or her reasonable discretion. Developer shall use its commercially reasonable efforts to create a comprehensive social service program that is targeted to the needs of the residents of the Project which may include adult education services and the availability of a bona fide services coordinator or social worker to the tenants. A list of the social services that initially will be provided is attached hereto and incorporated herein as Exhibit “F”. Any substantive change in the scope, amount, or type of supportive services to be provided at the Site shall be subject to prior reasonable approval of City.

City shall respond to any such changes within thirty (30) days after submittal to City by Developer. City’s failure to so respond shall be deemed City approval.

5.4 C
oordination with Costa Mesa Senior Center . Developer agrees to coordinate with the Costa Mesa Senior Center (the “Center”) regarding the use of community space within the Project for special senior events held by the Center, such as, but not limited to, bingo nights.

5.5 P
arking Access and Management Plan. Prior to, and as a condition of, the City’s issuance of a Release of Construction Covenants for the Project, Developer shall submit for the reasonable approval of the City Manager a “Parking Management Plan” which sets forth and implements the parking measures recommended in that certain Parking Demand Analysis prepared by on August 21 , 2024, by Linscott, Law & Greenspan, Engineers as LLC Reference No. 2.24.4822.1 for the Project (the “ Parking Manage ment Plan ”). Developer shall be responsible to enforce the Parking Management Plan. Among other provisions, the Parking Management and/or the City Easement Agreement shall set forth the requirements for public access to the Site for pedestrian and vehicular ingress, egress, and parking at no charge, and shall prohibit installation of any physical barrier that would separate the uncovered surface parking spaces on the Site from the adjacent City property on which the Costa Mesa Senior Center is located.

5.6 G
ross Mismanagement; Requirement to Replace Property Manager . In the event of “Gross Mismanagement” (as that term is defined below) of the Project, City shall have the authority to require that such Gross Mismanagement cease immediately . City shall provide written notice to Developer of the event(s) of Gross Mismanagement occurring and Developer shall have ten (10) business days after receipt of such notice to commence to cure, correct, or remedy the event(s) of Gross Mismanagement identified in the City’s notice and to notify the City Manager of the steps taken to effect such cure, correction, or remedy, and upon commencing such cure, correction, or remedy to thereafter diligently prosecute such cure, correction, or remedy to completion. If Developer fails to timely commence to cure and to thereafter diligently proceed to complete such cure, then subject to the approval of the senior lender and tax credit investor, City shall have the right to require the immediate replacement of the Property Manager. For purposes of this Agreement the term “Gross Mismanagement” shall mean management of the Project in a manner which materially violates the terms and/or intention of this Agreement to operate an 389

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affordable rental housing complex of the highest standard, and shall include, but is not limited to, the following:

5.6.1 Knowingly leasing a Unit to an ineligible tenant or tenants whose income exceeds the prescribed levels;

5.6.2 Knowingly allowing the tenants to exceed permitted occupancy levels (e.g., two (2) persons per bedroom plus one (1)) without taking immediate steps to stop such overcrowding;

5.6.3 Knowingly allowing a tenant to sublease his or her Unit;

5.6.4 Failing to timely maintain the Project and the Site in the manner required by this Agreement;

5.6.5 Failing to timely submit the reports as required by this Agreement (provided Developer shall have ten (10) business days after receipt of such notice to commence to cure, correct, or remedy);

5.6.6 Fraud in connection with any document or representation relating to this Agreement or embezzlement of Project monies; and

5.6.7 Failing to reasonably cooperate with law enforcement in its attempts to maintain a crime-free environment on the Site.

5.7 Lease Approval. The initial form lease agreement to be used by Developer for the rental of any of the Units (“Lease Agreement”), and any changes to such form Lease Agreement regarding the provisions required by this Agreement, including, but not limited to, the provisions required by Section 3.10 , to be included in the form Lease Agreement, shall be reasonably approved in advance by the City Manager prior to the initial use of the lease form and prior to the first use of the changed form. City shall provide its approval, conditional approval or disapproval within thirty (30) days after Developer’s submittal to City of any of the foregoing.

5.8 C
apital Replacement Reserve. Commencing on the date Developer ’s construction loan converts to a permanent loan, Developer shall, or shall cause the Property Manager to, annually set aside a minimum of Three Hundred Dollars ($300) per Unit per year (for example, for 70 units, the annual amount would be Twenty -One Thousand Dollars ($ 21,000) or such increased amount required by TCAC, the Tax Credit Regulatory Agreement, or a lender providing financing approved pursuant to the AH/DDA or by the City Manager, into a capital replacement reserve account (the “ Capital Replacement Reserve” ). Funds in the Capital Replacement Reserve shall be used for Capital Improvements.

As Capital Improvements become necessary, the Capital Replacement Reserve shall be the first source of payment therefor to the extent permitted by all applicable lenders and the tax credit investor (unless insurance proceeds are available).

Funds in the Capital Replacement Reserve account may be distributed to Developer (or others) only upon the prior written approval of the City Manager, which approval may be given 390

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or withheld in the City Manager ’s reasonable discretion. On or before each Dec ember 1 st, commencing on the first December 1st after Developer’s completion of construction of the Project, Developer shall submit to City, for the immediately preceding year, a reconciliation that sets forth (i) Developer ’s planned expenditures for Capital Improvements, as reflected in the Approved Budget for said year, (ii) Developer ’s actual expenditures for Capital Improvements during said year, and (iii) the balance in the Capital Replacement Reserve Account.

The non-availability of funds in the Capital Replacement Reserve does not in any manner relieve Developer of the obligation to undertake necessary capital repairs and improvements and to continue to maintain the Site in the manner prescribed in this Agreement.

6.0 COMPLIANCE WITH LAWS; ENVIRONMENTAL MATTERS.

6.1 Compliance With Laws . Developer shall comply with (i) all ordinances, regulations and standards of the City, any regional governmental entity with jurisdiction over the Project and/or Site, the State of California, and the federal government applicable to the Project and/or Site; (ii) all rules and regulations of any assessment district of the City with jurisdiction over the Project and/or Site; and (iii) all applicable labor standards of California law and federal law; and (iv) the requirements of California law and federal law with respect to the employment of undocumented workers or illegal aliens.

6.2 I
ndemnity . Developer agrees to defend, with attorneys (i) selected by City, or (ii) at City’s election, selected by Developer and reasonably acceptable to City , indemnify, protect and hold harmless the City, in its own capacity, and all of the City’s officers, officials, members, employees, agents, volunteers and representatives from, regarding and against any and all liabilities, obligations, orders, decrees, judgments, liens, demands, actions, “Environmental Response Actions ” (as defined below), claims, losses, damages, fines, penalties, expenses, “Environmental Response Costs” (as defined below) or costs of any kind or nature whatsoever, together with fees (including, without limitation, reasonable attorneys ’ fees and experts ’ and consultants’ fees), first occurring during and/or caused by Developer’s use and occupancy of the Site, and resulting from or in connection with the actual or claimed generation, storage, handling, transportation, use, presence, placement, migration and/or release of Hazardous Materials at, on, in, beneath or from the Site, including Hazardous Materials which first came to be located on the Site after the date Developer acquired leasehold title to the Site , except to the extent caused by the gross active negligence or willful misconduct of City. Developer’s defense, indemnification, protection and hold harmless obligations herein shall include, without limitation, the duty to notify the applicable governmental authority and/or respond to any governmental inquiry, investigation, claim or demand regarding Hazardous Materials at Developer’s sole cost. For the purposes of this Agreement, unless the context otherwise specifies or requires, the following terms shall have the meanings herein specified:

The term “Hazardous Materials” shall mean any substance, material or waste which is:
(1) defined as a “hazardous waste, ” “ hazardous material, ” “ hazardous substance, ” “ extremely hazardous waste,” or “restricted hazardous waste ” under any provision of California or federal law; (2) or is regulated under California or federal law, including, without limitation, petroleum, asbestos, polychlorinated biphenyls, and radioactive materials; (3) or is determined by a California, 391

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federal or local governmental authority to be capable of posing a risk of injury to health, safety or property or a risk to the environment.

The term “ Environmental Response Actions ” shall mean any and all activities, data compilations, preparation of studies or reports, interaction with environmental regulatory agencies, obligations and undertakings associated with environmental investigations, removal activities, remediation activities or responses to inquiries and notice letters, as may be sought, initiated or required in connection with any local, state or federal governmental or private party claims, including any claims by Developer.

The term “Environmental Response Costs” shall mean any and all costs associated with Environmental Response Actions including, without limitation, any and all fees, fines, penalties and damages.

The term “Hazardous Materials Contamination ” shall mean the contamination first occurring on the S ite after the date Developer acquired leasehold title to the Site or of the improvements, facilities, soil, groundwater, air or other elements on, in or of the Site by Hazardous Materials, or the contamination of the buildings, facilities, soil, groundwater, air or other elements on, in or of any other property as a result of Hazardous Materials first occurring on the S ite after the date Developer acquired leasehold title to the S ite, except to the extent that such release of Hazardous Materials or toxic substances, or materials and/or waste therefrom were exacerbated or caused by Developer’s activities during its occupancy of the Premises.

The term “ Governmental Requirements” shall mean all past, present and future laws, ordinances, statutes, codes, rules, regulations, orders and decrees of the United States, the State of California, the County of Orange, the City of Costa Mesa , or any other political subdivision in which the Site is located, and any other state, county, city, political subdivision, agency, instrumentality or other entity exercising jurisdiction over the Site.

6.3 Duty to Prevent Hazardous Material Contamination. Developer shall take commercially reasonable action to prevent the release of any Hazardous Materials into structures or into the environment in violation of applicable Governmental Requirements. Such precautions shall include compliance with all applicable Governmental Requirements with respect to Hazardous Materials. In addition, Developer shall install and utilize such equipment and implement and adhere to such procedures as are consistent with the standards generally applied by apartment complexes in Orange County, California as respects the disclosure, storage, use, removal, and disposal of Hazardous Materials.

6.4 O
bligation of Developer to Remediate Premises . Notwithstanding the obligation of Developer to indemnify the Indemnified Parties pursuant to Section 6.2, Developer shall, at its sole cost and expense, promptly take (i) all actions required by any applicable federal, state, regional, or local governmental agency or political subdivision with jurisdiction over the Site or any applicable Governmental Requirements and (ii) all actions necessary to make full use of the Site for the purposes contemplated by this Agreement and the AH/DDA, which requirements or necessity arise from the presence upon, about or beneath the Site of any Hazardous Materials or Hazardous Materials Contamination in violation of applicable Governmental Requirements .

Such actions shall include, but not be limited to, the investigation of the environmental condition 392

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of the Site, the preparation of any feasibility studies or reports and the performance of any cleanup, remedial, removal or restoration work.

6.5 Environmental Inquiries. Developer, when it has received any notices of violation, notices to comply, citations, inquiries, clean- up or abatement orders, or cease and desist orders related to Hazardous Materials or Hazardous Materials Contamination from a governmental agency with jurisdiction over the Site, or when Developer is required to report to any governmental agency any violation or potential violation of any applicable Governmental Requirement pertaining to Hazardous Materials or Hazardous Material s Contamination, shall concurrently notify the City Manager and provide to him/her a copy or copies, of the environmental permits, disclosures, applications, entitlements or inquiries relating to the Site, the notices of violation, notices to comply, citations, inquiries, clean- up or abatement orders, cease and desist orders, reports filed pursuant to self -reporting requirements, and reports filed or applications made pursuant to any applicable Governmental Requirement relating to Hazardous Materials and un derground tanks, and Developer shall report to the City Manager, as soon as possible after each incident, any unusual, potentially important incidents.

In the event of a responsible release of any Hazardous Materials into the environment in violation of applicable laws, Developer shall, as soon as possible after it becomes aware of the release, furnish to the City Manager a copy of any and all final reports relating thereto and copies of all correspondence with governmental agencies relating to the release. Upon request of the City Manager, Developer shall furnish to the City Manager a copy or copies of any and all other environmental entitlements or inquiries relating to or affecting the Site including, but not limited to, all permit applications, permits and reports including, without limitation, those reports and other matters which may be characterized as confidential.

7.0 INSURANCE.

7.1 Duty to Procure Insurance . Developer, for the term of this Agreement, shall procure and keep in full force and effect or cause to be procured and kept in full force and effect for the mutual benefit of Developer and City, and shall provide City evidence reasonably acceptable to the City Manager, insurance policies meeting the minimum requirements set forth below:
a. Commencing on the Effective Date and continuing throughout the term of this Agreement, the Developer shall procure and maintain, at its sole cost and expense, in a form and content satisfactory to the City Manager, the following policies of insurance:
(i) Commercial General Liability Insurance on a per occurrence basis with limits not less than Three Million Dollars ($3,000,000) per occurrence. Any general aggregate limit shall apply to this Project only. Such insurance shall be endorsed to designate the City, its officials, officers, members, employees, representatives, and agents as additional insureds, including for the completed operations exposure, and shall be primary and not contribute with any insurance or self -insurance maintained by the City.

The foregoing limit may be obtained in a combination of Commercial General Liability and Umbrella Liability policies.
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(ii) To the extent Developer has any employees, Worker ’s compensation insurance in such amount as will fully comply with the laws of the State of California and which shall indemnify, insure, and provide legal defense for the Developer against any loss, claim or damage arising from any injuries or occupational diseases occurring to any worker employed by or any persons retained by the Developer in the course of carrying out the work or services contemplated in this Agreement, and Employers Liability Insurance in an amount not less than One Million Dollars ($1,000,000) per occurrence for bodily injury or disease. The workers ’ compensation policy shall be endorsed to waive the insurer’s right of subrogation against the City, its officials, officers, members, employees, representatives, and agents.
(iii) To the extent Developer has any employees, business Automobile insurance in an amount not less than Three Million Dollars ($3,000,000) per accident covering all owned, hired, and non- owned vehicles used in connection with the development of the Project. The foregoing limit may be obtained in a combination of Commercial General Liability and Umbrella Liability policies. b. Commencing on the Effective Date and continuing until the City issues a Release of Construction Covenants for the Project, the Developer shall procure and maintain, at its sole cost and expense, in a form and content reasonably satisfactory to the City Manager, “All Risks” Builder’s Risk (course of construction) insurance coverage on a replacement cost basis in an amount equal to the full cost of the hard construction costs of the Project. Such insurance shall contain no coinsurance provision, and cover, a t a minimum: all work, materials, and equipment to be incorporated into the Project; the Project during construction; the completed Project until such time as the City issues a final certificate of occupancy for the Project, and storage, transportation, and equipment breakdown risks. Such insurance shall include coverage for flood, ordinance or law, temporary or offsite storage, debris removal, pollutant cleanup and removal, preservation of property, landscaping, shrubs and plants and full collapse during construction.

Such insurance shall protect/insure the interests of Developer/owner and all of Developer ’s contractor(s), and subcontractors, as each of their interests may appear. If such insurance includes an exclusion for “ design error, ” such exclusion shall only be for the object or portion which failed. The City shall be a loss payee under such policy or policies. c. Developer shall cause any general contractor with whom it has contracted for the performance of work on the Site to secure, prior to commencing any activities hereunder and maintain insurance that satisfies all of the requirements of Section 7.1(a) and (e). d. Commencing on the date City issues a Release of Construction Covenants, and continuing throughout the term of this Agreement, Developer shall procure and maintain, at its sole cost and expense, in a form and content satisfactory to City Manager, the follow ing types of insurance:
(i) “All Risks ” property insurance on a replacement cost basis in an amount equal to full replacement cost thereof, as the same may change from time to time. The above insurance policy or policies shall contain no coinsurance provision. City shall be a loss payee under such policy or policies.
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(ii) Business interruption, rental value, and extra expense insurance to protect Developer and City covering loss of revenues and/or extra expense incurred by reason of the total or partial suspension or delay of, or interruption in, the operation of the Project caused by loss or damage to, or destruction of, any part of the insurable real property structures or equipment as a result of the perils insured against under the all risk physical damage insurance, covering a period of suspension, delay or interruption of at least twelve (12) months, in an amount not less than the amount required to cover such business interruption, rental value, and/or extra expense loss during such period. (iii) Boiler and machinery insurance in the aggregate amount of the full replacement value of the equipment typically covered by such insurance. e. The following additional requirements shall apply to all of the above policies of insurance:
(i) All of said policies of insurance except workers’ compensation shall provide that said insurance may not be amended or cancelled without providing thirty (30) days’ prior written notice (ten (10) days for nonpayment of premium) to the City. In the event any of said policies of insurance are cancelled, the Developer shall, prior to the cancellation date, submit new evidence of insurance in conformance with this Section to the City Manager. Not later than the Effective Date, the Developer shall provide the City Manager with Certificates of Insurance and required endorsements evidencing the above insurance coverages.
(ii) The policies of insurance required by this Agreement shall be satisfactory only if issued by companies with an A.M. Best rating not less than “A-” , VII or otherwise approved by City.
(iii) Self-insurance retentions must be declared to and approved by the City Manager.
f. City shall have the right, upon six ty ( 60) days’ notice to Developer, to increase the required amount of General Liability and Auto Liability coverage during the term of this City Regulatory Agreement ; provided, however, that (i) any such increased limits shall be commercially reasonable for multifamily senior housing developments in Southern California that are similar in size and amenities to the Project, (ii) any such limits shall not render the operation of the Project pursuant to the requirements of t his Agreement financially infeasible , as demonstrated by Developer, and (iii) such increases shall occur no more often than every five (5) years.
g. Developer agrees that the provisions of this Section shall not be construed as limiting in any way the City’s right to indemnification or the extent to which the Developer may be held responsible for the payment of damages to any persons or property resulting from the Developer’s activities or the activities of any person or persons for which the Developer is otherwise responsible.

7.2 Remedies for Defaults Regarding Insurance.
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In addition to any other remedies the City may have, if Developer commits a default hereunder by failing to provide or maintain any insurance policies or policy endorsements to the extent and within the time herein required, the City may at its sole option , and after delivery of written notice to Developer and expiration of a fifteen (15) day cure period, obtain such insurance and charge Developer for the amount of the premium for such insurance; provided, however, that if City Manager reasonably determines that the Developer, Site, and/or Project will be uninsured or under-insured in the absence of such insurance, then City need not provide for any cure period in its notice of default to Developer, but may instead obtain such insurance immediately upon its provision of such notice. Exercise of the remedy set forth herein, however, is an alternative to other remedies the City may have and is not the exclusive remedy for Developer ’s failure to maintain insurance or secure appropriate endorsements.

8.0 OBLIGATION TO REPAIR.

8.1 Obligation to Repair and Restore Damage Due to Casualty Covered by Insurance.

Subject to Section 8.3 below and the rights of any Senior Lender, if the Project shall be totally or partially destroyed or rendered wholly or partly uninhabitable by fire or other casualty required to be insured against by Developer, Developer shall promptly proceed to obtain insurance proceeds and take all steps necessary to begin reconstruction and, immediately upon receipt of insurance proceeds and to the extent of such proceeds, to promptly and diligently commence the repair or replacement of the Project to substantially the same condition in which the Project is required to be maintained pursuant to this Agreement, and Developer shall complete the same as soon as possible there after so that the Project can continue to be operated and occupied as an affordable housing project in accordance with this Agreement. Subject to extensions of time for “Enforced Delay” events (as defined in Section 22 of this Agreement) occurring after the casualty event, in no event shall the repair, replacement, or restoration period ex ceed twenty-four (24) months from the date Developer obtains insurance proceeds, unless the City Manager approves a longer period of time which approval will not be unreasonably withheld. City shall cooperate with Developer, at no expense to City, in obtaining any governmental permits required for the repair, replacement, or restoration and, upon issuance of such permits City shall promptly release control of any insurance proceeds within City’s control.

If Developer fails to obtain insurance as required by this Agreement (and City has not procured such insurance and charged Developer for the cost), Developer shall be obligated to reconstruct and repair any partial or total damage to the Project and improvements located on the site in accordance with this Section 8.1, if the fire or other casualty would have been covered by the insurance required to be obtained by Developer pursuant to this Agreement.

8.2 Continued Operations. During any period of repair, Developer shall continue, or cause the continuation of, the operation of the apartment complex and parking on the Site to the extent reasonably practicable from the standpoint of prudent business management.

8.3 D
amage or Destruction Due to Cause Not Required to be Covered by Insurance .

If the improvements comprising the Project are completely destroyed or substantially damaged by a casualty against which Developer is not required to (and has not) insured, then Subject to the rights of any Senior Lender, Developer shall not be required to repair, replace, or restore such improvements and may elect not to do so by providing City with written notice of election not to 396

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repair, replace, or restore within one hundred twenty (120) days after such substantial damage or destruction. In such event, (i) Developer shall remove all debris from the Site and cause any liens on Developer’s leasehold interest in the property, including that of Senior Lender, to be paid in full and/or removed from title on the Site, and (ii) upon removal of any such liens on Developer’s leasehold interest in the Site, the Ground Lease and the City Agreements, including this Agreement shall automatically terminate and City shall cooperate to remove the Memorandum of Ground Lease and the City Agreements, including this Agreement, from title. As used in this Section 8.3, “substantial damage” shall mean damage or destruction which is thirty -five percent (35%) or more of the replacement cost of the improvements comprising the Project. In the event Developer does not timely elect not to repair, replace, or restore the improvements as set forth in the first sentence of this Section 8.3, Developer shall be conclusively deemed to have waived its right not to repair, replace, or restore the improvements and thereafter Developer shall promptly commence and complete the repair, replacement, or restoration of the damaged or destroyed improvements in accordance with Section 8.1 above and continue operation of the apartment complex and parking on the Site during the period of repair (if practicable) in accordance with Section 8.2 above.

9.0 LIMITATION ON TRANSFERS.

The qualifications and identity of the Developer are of particular concern to the City. It is because of these qualifications and identity that the City is entering into the AH/DDA and this Agreement with the Developer. Consequently, no person, whether a voluntary or involuntary successor of Developer, shall acquire any rights or powers under this Agreement nor shall the Developer assign all or any part of this Agreement or the Site without the prior written approval of the City. A voluntary or involuntary sale or transfer of any interest in the Developer or the Site during the term of this Agreement shall be deemed to constitute an assignment or transfer for the purposes of this Article 9, and the written approval of the City shall be required prior to e ffecting such an assignment or transfer. Any purported transfer, voluntarily or by operation of law, except with the prior written consent of the City, shall be null and void. During the term of this Agreement the Developer shall not, except as permitted by this Agreement, assign or attempt to assign this Agreement or any rights or duties herein, nor make any total or partial sale, transfer, conveyance, or assignment of the whole or any part of the Site or any of the improvements thereon.

Notwithstanding any other provision of this Agreement to the contrary, City approval of an assignment of this Agreement or transfer of Developer’s leasehold interest in the Site, or any interest therein, shall not be required in connection with:
a. the conveyance or dedication of any portion of the Site to the City, or other appropriate governmental agency, including public utilities, where the granting of such conveyance or easement permits or facilitates the development of the Project on the Site or is otherwise required to provide public access to the City’s property and for parking; or b. any assignment of the limited partner interests in Developer to an Affiliate of Developer or Jamboree;
c. the transfer of the Project or Site to Jamboree, an entity controlled by Jamboree, a nonprofit corporation in which a majority of the board of directors are members of 397

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the board of directors of Jamboree (any of the foregoing a “ Jamboree Affiliate Entity ”), or a partnership or limited liability company in which a Jamboree Affiliate Entity is a general partner or managing member;
d. any mortgage, deed of trust, or other form of conveyance required for any reasonable method of financing the development of the Project on the Site that is contemplated in the Project Budget attached to the AH/DDA or has otherwise been approved by the City Manager, including all direct and indirect costs related thereto , and any refinancing of any such mortgage, deed of trust, or other form of conveyance provided such refinancing does not result in a loan to value ratio in excess of 80% or a debt coverage ratio less than 1.15 to 1; e. transfers of limited partnership interests resulting from the death or mental or physical incapacity of an individual;
f. transfers of limited partnership interests in trust for the benefit of a spouse, children, grandchildren, or other family member, or for charitable purposes; g. the admissions of the Qualified Tax Credit Investor to Developer as a limited partner thereof;
h. the transfer by the Qualified Tax Credit Investor of its limited partnership interests to an entity that has the same general partner or managing member as the Qualified Tax Credit Investor or an Affiliate thereof.

Notwithstanding anything in this Article 9 to the contrary, any transfer or assignment by Developer or any successor in interest to Developer not requiring the approval by City shall be effective when made but shall not be deemed to relieve Developer or any successor party from the obligation to timely complete development of the Project unless and until the transferor and transferee execute and deliver to City an assignment and assumption agreement in a form and with content reasonably acceptable to City ’s legal counsel. Any transfer or assignment by Developer or any successor in interest to Developer requiring the approval by City pursuant to this Article 9 shall not be effective and shall not be deemed to relieve Developer or any successor party from the obligation to timely complete development of the Project unless and until the transferor and transferee execute and deliver to the City an assignment and assumption agreement in a form and with content reasonably acceptable to City’s legal counsel.

This Article 9 shall not be applicable to the leasing of individual Units to Eligible Tenants in accordance with this Agreement, and no assignment and assumption agreement shall be required in connection therewith.

10.0 EVENTS OF DEFAULT BY DEVELOPER.

Subject to extensions of time pursuant to the terms of Section 22, the occurrence of one or more of any of the following events shall constitute an “Event of Default” by Developer hereunder if Developer shall have not cured, corrected, or remedied such failure within, unless a shorter or longer cure period is provided for specific defaults elsewhere in this Agreement, thirty (30) days following the service on Developer of a written notice from City specifying the failure complained of, or if it is not reasonably practicable to cure or remedy such failure within such thirty (30) day 398

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period (which impracticality shall not apply to monetary defaults), within such longer period as shall be reasonable under the circumstances provided that Developer has commenced to cure within the same thirty (30) day period and has diligently prosecuted such cure to completion:

10.1 Developer abandons or surrenders the Site for more than thirty (30) days; or

10.2 Developer is in default of any of the covenants, terms or provisions of this Agreement; or

10.3 Developer voluntarily files or has involuntarily filed against it any petition under any bankruptcy or insolvency act or law and the same has not been dismissed within one hundred twenty (120) days thereafter; or

10.4 Developer is adjudicated a bankrupt; or

10.5 Developer makes a general assignment for the benefit of creditors in violation of the terms of this Agreement, the Ground Lease, or any of the City Agreements.

Notwithstanding anything herein to the contrary, whenever the City shall deliver any notice or demand to the Developer with respect to any breach or default by the Developer of the terms hereunder, the City shall at the same time deliver a copy of such notice or demand to the Qualified Tax Credit Investor. The Qualified Tax Credit Investor (insofar as the rights of the City are concerned) shall have the right, at its option, within thirty (30) days after the receipt of the notice (or such longer period of time as may be reasonably required provided the cure is commenced within such thirty (30) day period and thereafter diligently prosecuted to completion), to cure or remedy or commence to cure or remedy any such default. Such cure period shall run concurrently with the Developer’s cure period described in this Article 10.0.

11.0 REMEDIES OF CITY.

In the event Developer defaults in the performance or observance of any covenant, agreement or obligation of Developer pursuant to this Agreement, and if such default remains uncured for a period of thirty (30) days after written notice thereof shall have been given by City (or such lesser period as may apply under Section 4.1), or, in the event said default cannot reasonably be cured within said time period, Developer has failed to commence to cure such default within the applicable time period and diligen tly prosecute said cure to completion, then City may declare an “Event of Default” to have occurred hereunder, and, at its option, may take one or more of the following steps:

11.1 With respect to (i) the physical condition of the Site, or (ii) Developer ’s Gross Mismanagement of the Project, enter the Site and correct or cause to be corrected said default and charge the costs thereof (including costs incurred by City in enforcing this provision) to the account of Developer, which charge shall be due and payable within thirty (30) days after presentation by City of a statement of all or part of said costs, and if such bill is not timely paid then pursue the remedies set forth in Section 4.2;

11.2 Correct or cause to be corrected said default and pay the costs thereof (including costs incurred by City in enforcing this provision) from the proceeds of any insurance; 399

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11.3 Exercise its right to maintain any and all actions or proceedings at law or suits in equity to compel Developer to correct or cause to be corrected said default;

11.4 Terminate this Agreement by written notice to Developer and seek repayment of any remaining principal and accrued interest then owing on the City Note, or other loans or Notes secured by the City Trust Deed, subject to the nonrecourse provisions set forth therein; Except as otherwise expressly stated in this Agreement, the rights and remedies of the parties are cumulative, and the exercise by any party of one or more of its rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by another party.

12.0 NONDISCRIMINATION.

Developer covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of any person, or group of persons on any basis listed in subdivision (a) or (d) of s ection 12955 of the Government Code, as those bases are defined in sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of s ection 12955, and section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, or any part thereof, nor shall Developer, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Site, or any part thereof. The foregoing covenants shall run with the land.

Developer agrees for itself and any successor in interest that Developer shall refrain from restricting the rental, sale, or lease of any portion of the Site, or contracts relating to the Site, on the basis of race, color, creed, religion, sex, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, veteran or military status, or genetic information of any person. All such deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses:
(i) In deeds : “ The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of s ection 12955 of the Government Code, as those bases are defined in s ections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of s ection 12955, and section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practi ces of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land.” (ii) I
n leases : “ The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following 400

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conditions: “That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of s ection 12955 of the Government Code, as those bases are defined in s ections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of s ection 12955, and section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination o r segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased. The foregoing covenants shall run with the land.” (iii) In contracts : “ There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of s ection 12955 of the Government Code, as those bases are defined in s ections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of s ection 12955, and section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed.

The foregoing covenants shall run with the land.”
The covenants established in this Agreement shall, without regard to technical classification and designation, be binding for the benefit and in favor of the City, its successors and assigns, the City and any successor in interest to the Site, together with any property acquired by the Developer pursuant to this Agreement, or any part thereof. The covenants against discrimination shall remain in effect in perpetuity.

13.0 COVENANTS TO RUN WITH THE LAND.

Developer hereby subjects the Site to the covenants, reservations, and restrictions set forth in this Agreement. City and Developer hereby declare their express intent that all such covenants, reservations, and restrictions shall be deemed covenants running with the land, and shall pass to and be binding upon the Developer’s successors in interest to the Site; provided, however, that on the termination of this Agreement said covenants, reservations and restrictions shall automatically expire. All covenants established in this Agreement shall, without regard to technical classification or designation, be binding for the benefit of the City, and such covenants shall run in favor of the City for the entire term of this Agreement, without regard to whether the City is or remains an owner of any land or interest therein to which such covenants relate. Each and every contract, deed or other instrument hereafter executed covering or conveying the Site or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations, and restrictions, regardless of whether such covenants, reservations, and restrictions are set forth in such contract, deed or other instrument.

City and Developer hereby declare their understanding and intent that the burden of the covenants set forth herein touch and concern the land in that Developer’s legal interest in the Site is rendered less valuable thereby. City and Developer further hereby declare their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and 401

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increasing the enjoyment and use of the Project by Eligible Tenants, the intended beneficiaries of such covenants, reservations, and restrictions, and by furthering the public purposes for which the City was formed.

Developer, in exchange for the City entering into the City Agreements , and pursuant to the requirements of applicable laws governing the Project, including the Density Bonus Laws, hereby agrees to hold, sell, and convey Developer’s interest in the Site subject to the terms of this Agreement. Developer also grants to the City the right and power to enforce the terms of this Agreement against the Developer and all persons having any right, title or interest in the Site or any part thereof, their heirs, successive owners and assigns.

The covenants set forth in this Agreement shall remain in effect until expiration of the Term or earlier termination pursuant to the following paragraph.

Notwithstanding anything to the contrary in this Agreement, this Agreement shall automatically terminate, and the Term shall automatically end, if before the end of the Term either of the following occurs, (i) that certain Ground Lease entered into between Developer and City on or about the same date hereof (the “Ground Lease”), a memorandum of which is being recorded substantially concurrently herewith in the Official Records of Orange County, expires, or (ii) City terminates the Ground Lease and a new ground lease is not entered into substantially concurrently with said termination. Notwithstanding such automatic termination of this Agreement in the foregoing circumstances, however, each of City and Developer agrees to execute and record a document formally terminating this Agreement if necessary to clear this Agreement from title.

14.0 INDEMNIFICATION.

Developer agrees for itself and its successors and assigns to indemnify, defend, and hold harmless the Released/ Indemnified Parties, with defense counsel (i) selected by City, or (ii) at City’s election, selected by Developer and reasonably acceptable to City, from and against any loss, liability, claim, or judgment relating in any manner to the Project excepting only any such loss, liability, claim, or judgment arising out of the intentional wrongdoing or gross active negligence of any of the Released/Indemnified Parties.

15.0 UTILITIES AND TAXES.

Developer shall remain fully obligated for the payment of (i) real and personal property taxes and assessments in connection with the Site (subject to any exemptions available to Developer in connection therewith), and (ii) all charges for all utilities se rving the Site for which the tenants of the Units are not responsible.

16.0 ATTORNEYS’ FEES.

In the event that a party to this Agreement brings an action against the other party hereto by reason of the breach of any condition, covenant, representation or warranty in this Agreement, or otherwise arising out of this Agreement, the prevailing party in such action shall be entitled to recover from the other party its reasonable attorney’s fees and costs, including expert witness fees.

Attorney’s fees shall include attorney ’s fees on any appeal, and in addition a party entitled to 402

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attorney’s fees shall be entitled to all other reasonable costs for investigating such action, including the conducting of discovery.

17.0 AMENDMENTS.

The Developer and the City agree to mutually consider reasonable requests for amendments to this Agreement which may be made by either of the parties hereto, or lending institutions, provided such requests are consistent with this Agreement and would not substantially alter the basic business terms included herein. The City Manager shall have the authority to approve, on behalf of the City, amendments to this Agreement that would not substantially alter the basic business terms or substantially increase the risk or cost to the City. All other amendments shall require the action of the City Council. All amendments, including those authorized to be approved by the City Manager, shall be in writing and shall be signed by authorized representatives of City and Developer.

18.0 NOTICE.

Formal notices, demands, and communications between City and Developer shall be sufficiently given if (i) personally delivered, (ii) delivered by a reputable same -day or overnight courier services that provides a receipt showing date and time of delivery, or (iii) delivered by United States mail, registered or certified, postage prepaid, return receipt requested. Delivery shall be made to the following addresses:

If to City:

City of Costa Mesa
77 Fair Drive
Cosa Mesa, California 92626
Attn: City Manager
With a copy to: Jones Mayer
3777 N. Harbor Blvd.

Fullerton, CA 92835
Attn: Kimberly Hall Barlow
If to Developer: Prior to completion of construction:
________________________________ LP
c/o Jamboree Housing Corporation
17701 Cowan Ave., Suite 200
Irvine, CA 92614
Attn: Executive Vice President and Chief
Development Officer
Following completion of construction:
________________________________ LP
c/o Jamboree Housing Corporation
17701 Cowan Ave., Suite 200
Irvine, CA 92614
Attn: Asset Manager
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With a copy to: _________________________
_________________________
_________________________
and
Rutan & Tucker, LLP
18575 Jamboree Road, 9
th Floor
Irvine, CA 92612
Attn: Patrick McCalla, Esq.

Notices that are personally delivered, delivered by messenger/courier shall be deemed effective upon receipt. Notices delivered by mail shall be deemed effective upon the earlier of actual receipt by the addressee thereof or the expiration of forty- eight (48) hours after depositing in the United States Postal System in the manner described in this Section. Such written notices, demands, and communications may be sent in the same manner to such other addresses as a party may from time to time designate by mail.