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AFFORDABLE HOUSING AND LOAN AGREEMENT
(HOME Funds)
by and between
CITY OF FULLERTON,
a California municipal corporation,
and
________________________, LP
a California limited partnership
TABLE OF CONTENTS
Page
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1. DEFINITIONS ............................................................................................................... 2
2. CITY HOME LOAN...................................................................................................... 10
2.1 Amount and Source of City HOME Loan .......................................................... 10
2.2 Permissible Use of City HOME Loan; Eligible Loan Expenses ......................... 10
2.3 City HOME Loan Funding Conditions ............................................................... 10
2.4 Disbursement of City HOME Loan .................................................................... 12
2.5 City HOME Loan Disbursed Prior to Bank Loan Funds .................................... 12
2.6 Repayment of City HOME Loan; City HOME Loan Deed of Trust .................... 12
2.7 Execution and Delivery of Documents .............................................................. 12
3. DEVELOPMENT OF THE PROJECT ......................................................................... 13
3.1 Scope of Development ..................................................................................... 13
3.2 Development Approvals and Permits ............................................................... 13
3.3 Construction Contract ....................................................................................... 13
3.4 Third-Party Contracts ....................................................................................... 13
3.5 No Debarred, Suspended, or Ineligible Parties................................................. 14
3.6 Construction Meeting ........................................................................................ 14
3.7 Schedule of Performance ................................................................................. 14
3.8 Rights of Inspection .......................................................................................... 15
3.9 Insurance .......................................................................................................... 15
3.10 Financing the Project ........................................................................................ 16
4. USE OF THE PROPERTY; PROGRAM ACTIVITIES ................................................. 17
4.1 General ............................................................................................................. 17
4.2 Program Activities ............................................................................................. 18
4.3 Management..................................................................................................... 18
4.4 Drug Free Covenant ......................................................................................... 18
4.5 Program Defaults .............................................................................................. 18
4.6 Occupants of Housing Facilities ....................................................................... 19
4.7 Monitoring ......................................................................................................... 19
4.8 Compliance with Laws and Regulations and HOME Requirements ................. 19
4.9 Program Income ............................................................................................... 20
4.10 Relocation ........................................................................................................ 20
4.11 Indemnification ................................................................................................. 20
4.12 Extended Use Agreement ................................................................................ 20
5. RECORDS AND REPORTS ....................................................................................... 21
5.1 Records ............................................................................................................ 21
5.2 Reports ............................................................................................................. 22
6. TERMINATION ........................................................................................................... 22
6.1 Termination....................................................................................................... 22
6.2 Obligations Survive Termination ....................................................................... 23 Page
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7. DEFAULTS AND REMEDIES ..................................................................................... 23
7.1 Defaults-General .............................................................................................. 23
7.2 Remedies Upon Default ................................................................................... 24
7.3 Institution of Legal Actions and Venue ............................................................. 25
7.4 Applicable Law ................................................................................................. 26
7.5 Rights and Remedies are Cumulative .............................................................. 26
7.6 Attorney’s Fees ................................................................................................. 26
8. REPRESENTATIONS AND WARRANTIES OF DEVELOPER ................................... 26
9. GENERAL PROVISIONS ............................................................................................ 27
9.1 Notices, Demands, and Communications Between the Parties ........................ 27
9.2 Nonliability of City Officials and Employees ...................................................... 28
9.3 Enforced Delay; Extension of Times of Performance ....................................... 28
9.4 Inspection of Books and Records ..................................................................... 29
9.5 Interpretation .................................................................................................... 29
9.6 Entire Agreement, Waivers and Amendments .................................................. 29
9.7 Severability ....................................................................................................... 29
9.8 Restriction on Transfer of Developer’s Rights and Obligations ........................ 30
9.9 Prohibition Against Assignment and Transfer by City ....................................... 31
9.10 Third-Party Beneficiaries .................................................................................. 31
9.11 Authority to Execute Agreement ....................................................................... 31
9.12 Contract Administration and Approvals ............................................................ 31
9.13 Covenants to Run with the Land ....................................................................... 31
9.14 Time of the Essence ......................................................................................... 32
9.15 Counterparts ..................................................................................................... 32
9.16 Attachments...................................................................................................... 32
ATTACHMENTS
1 Legal Description of Property
2 Schedule of Performance
3 Summary of Legal Requirements
4 Project Budget
5 City HOME Loan Note
6 City HOME Loan Deed of Trust
7 City HOME Regulatory Agreement
8 HOME Unit Mix
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AFFORDABLE HOUSING AND LOAN AGREEMENT
(HOME Investment Partnerships Program)
This AFFORDABLE HOUSING AND LOAN AGREEMENT ( “Agreement”) is entered into this __ day of ______________, ___, by and between the CITY OF FULLERTON, a California municipal corporation (the “City”), and ____________________________, LP, a California limited partnership (“Developer”).
R E C I T A L S
A. City participates in the HOME Investment Partnership Act program administered by the United States Department of Housing and Urban Development (“HUD”) under Title II of the Cranston -Gonzalez National Affordable Housing Act, as amended (42 U.S.C. § 12741, et seq.), and the implementing regulations (24 C.F.R. § 92, et seq.).
B. Pursuant to the HOME Investment Partnership Act (“HOME”) program, the City receives funds from HUD ( “HOME Funds ”) to be used for the development of affordable housing projects. As part of the City ’s annual HOME funding process, City approved an allocation of HOME Funds to Developer in the amount of the “City HOME Loan” (as defined in Recital F below).
C. On or about __________________, 2023, City entered into with Developer that certain Affordable Housing and Property Disposition Agreement (the “AHPDA”), pursuant to which, among other things, City agreed to (i) sell to Developer that certain real property comprising approximately two and four hundred ninety -six thousandths (2.96) “net” acres of land area located in the City of Fullerton, California located at 1600 W. Commonwealth Avenue (“Property”), (ii) take back a note, in the form of seller carryback financing, for the purchase price of the Property (such financing, the “ AHPDA Land Loan”), and (iii) provide to Developer a cash loan in the amount of up to Seven Hundred Seventeen Thousand Seven Hundred Thirty -Seven Dollars and Ni nety-Nine Cents ($717,737.99) (the “AHPDA Bond Loan””), and Developer agreed to develop and operate on the Property an affordable rental housing development, consisting of sixty-five (65) residential dwelling units, with sixty-four (64) of such units restricted for rental and occupancy by income -eligible households at rents affordable to such households, and related amenities and improvements (the “Project”).
D. Developer has secured financing commitments for the Project , including an award of low income housing tax credits and commitments for construction and permanent loans.
E. City desires to assist with certain costs attributable to the Project by (a) providing financial assistance to Developer in the form of a loan of HOME Funds in an amount not to exceed One Million Dollars ($1,000,000) (“City HOME Loan”), on the terms set forth in this Agreement.
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F. The Project will be subject to certain affordability covenants requiring that the sixty-four (64) affordable housing units be rented to income eligible households at an affordable rent.
G. The development and operation of the Project on the Property pursuant to this Agreement, and the fulfillment generally of this Agreement, are in the vital and best interests of the City and the welfare of its residents, and in accordance with the public purposes and provisions of applicable federal, state, and local laws and requirements.
A G R E M E N T
Based upon the foregoing Recitals, which are a substantive part of and incorporated into this Agreement, and for good and valuable consideration, the receipt and sufficiency of which is acknowledged by both parties, City and Developer hereby agree as follows:
1. DEFINITIONS.
In addition to any capitalized words and terms as defined throu ghout this Agreement, the following terms as used in this Agreement shall have the meanings given below unless expressly provided to the contrary:
“Agreement” shall mean this Affordable Housing and Loan Agreement between City and Developer, including all e xhibits and other documents attached hereto. This Agreement also constitutes the written agreement required under 24 C.F.R. §§ 92.504(b) and 92.504(c)(3) to be entered into by an owner/developer for disbursements of HOME Funds.
“AHPDA” shall have the meaning set forth in Recital C above, as may be amended from time to time.
“AHPDA Bond Loan” shall have the meaning set forth in Recital C above. “AHPDA Bond Loan Deed of Trust” shall mean a deed of trust to be executed by Developer on or about the same date hereof and recorded against the Property pursuant to the terms of the AHPDA, to secure Developer’s payment obligations under the AHPDA Bond Loan Note.
“AHPDA Bond Loan Note” shall mean a promissory note to be executed by Developer on or about the same date hereof in favor of City to evidence Develop er’s obligation to repay the AHPDA Bond Loan.
AHPDA Land Loan” shall have the meaning set forth in Recital C above. “AHPDA Land Loan Deed of Trust” shall mean a deed of trust to be executed by Developer on or about the same date hereof and recorded against the Property pursuant to the terms of the AHPDA, to secure Developer’s payment obligations under the AHPDA Land Loan Note.
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“AHPDA Land Loan Note” shall mean a promissory note to be executed by Developer on or about the same date hereof in favor of City to evidence Develop er’s obligation to repay the AHPDA Land Loan.
“AHPDA Regulatory Agreement ” shall mean a r egulatory agreement to be entered into by and betwe en City and Developer on or about the same date hereof pursuant to the AHPDA and recorded against the Property. “AMI” shall mean the median family income (adjusted for family size) for the Orange County area as established by the U.S. Department of Housing and Urban Development (“HUD”).
“Bank Loan Funds ” shall mean the construction loan amount not to exceed __________________________ Dollars ($_________), as specified in the Construction Disbursement Agreement, dated on or about the same date here of, by and between Developer and Construction Lender, and the permanent loan amou nt in the estimated amount of ______________________ Dollars ($_________).
“Bank Loan Deed of Trust ” shall mean a recorded deed(s) of trust securing the loan(s) of the Bank Loan Funds.
“Bank Loan Subordination Agreement ” shall mean a subordination agreement dated on or about the same date hereof among Developer, Construction Lender, and City.
“Business Day” shall mean every day of the week for which City Hall for the City of Fullerton is open to the public.
“City” shall mean the City of Fullerton, a municipal corporation organized under the laws of the State of California and having its offices at 303 W. Commonwealth Avenue, Fullerton, CA 92832.
“City HOME Loan” shall have the meaning set forth in Recital E above. “City HOME Loan Deed of Trust ” shall mean a Deed of Trust With Assignment of Rents (City HOME Loan) substantially in the form attached hereto as Attachment No. 6 which secures, among other things, Developer ’s payment obligations under the City HOME Loan Note.
“City HOME Loan Note ” shall mean a Promissory Note (City HOME Loan Note) Secured by City HOME Loan Deed of Trust, substantially in the form attached hereto as Attachment No. 5 which sets for the terms for Developer ’s repayment of the City HOME Loan to City.
“City HOME Regulatory Agreement” shall mean a Regulatory Agreement and Declaration of Covenants and Restrictions (City HOME Funds) to be entered into between City and Developer, substantially in the form attached hereto as Attachment No. 7, which agreement will be recorded against the Property on or about the same date hereof, at the
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closing of the Construction Escrow , and will memorialize and implement certain affordability restrictions imposed under the land use controls applicable to the Property in connection with the City HOME Loan.
“City HOME Loan Title Policy” shall have the meaning set forth in Section 2.3 of this Agreement.
“Construction Completion Date” shall mean the date that all units in the Project have received all required occupancy permits and City has verified that all improvements required to be constructed in connection with the Project have been completed in accordance with this Agreement.
“Construction Escrow” shall mean the escrow opened with the Escrow Holder prior to the Effective Date for the closing of the construction financing for the Project , which will occur on or about the Effective Date.
“Construction Lender” shall mean the first trust deed lender that provides the Construction Loan to Developer. If the Project is financed through issuance of tax-exempt bonds, then Construction Lender shall be understood to mean the institution or institutions that hold such tax-exempt bonds through the construction period (e.g., until the Conversion Date). The Construction Lender may or may not also be the Take -Out Lender. The Construction Lender shall be an Institutional Lender. “Construction Loan ” shall mean the construct ion loan for the Project, in an amount to be approved by City. If the Project is financed through issuance of tax-exempt bonds, then Construction Loan shall be understood to mean the proceeds of such tax- exempt bonds.
“Contract Officer” shall mean the Community Development Director of the City or such other person as may be designated by the City Manager of City to administer this Agreement.
“Conversion Date” shall have the meaning set forth in the documents securing the Construction Loan, or, if such term is not defined therein, shall mean the date the Construction Loan converts from a construction loan to a permanent loan. “Developer” shall mean ________________, LP, a California limited partnership, having its offices at 11150 West Olympic Blvd, Suite 620, Los Angeles, CA 90064. The term “Developer” includes any legally permissible assignee or successor to the rights, powers, and responsibilities of Developer hereunder, in accordance with this Agreement. “Developer Pe rsonnel” shall mean any employee, volunteer, contractor, subcontractor, or agent of Developer or any other person under Developer’s supervision and direction, including the contractors and subcontractors constructing the Project.
Developer is responsible for the full compliance of all Developer Personnel with this Agreement, including without limitation all labor standards applicable to the Project.
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“Developer Representative ” shall mean an employee of Developer who is designated by Developer to represent Developer in the administration of this Agreement.
As of the Effective Date, Kasey Burke or George Russo is the Developer Representative.
Developer may change the Developer Representative by designating a different employee of Developer and delivering written notice thereof to City. “Effective Date” shall mean the date this Agreement is executed by both parties hereto, which date shall be inserted in the preamble to this Agreement. “Eligible HOME Loan Expenses” shall mean the development costs approved by City and consistent with HOME Requirements, and attributable to the one (1) HOME Units.
“Eligible HOME Unit Tenant” shall mean a tenant of one of the HOME Units within the Project whose household income as of the commencement date of his or her occupancy does not exceed the income limit and any other eligibility requirements permitted for the particular Residential Unit pursuant to the City HOME Regulatory Agreement, and thereafter meets all applicable income limits and other eligibility requirements.
“Escrow Holder” shall mean Fidelity National Title, with its offices located at 555 S Flower Street, Suite 4420 , Los Angeles, CA 90071 , o r another escrow company mutually acceptable to City and Developer.
“Extended Use Agreement ” shall have the meaning set forth in Section 4.12 of this Agreement.
“Funding Conditions” shall mean the conditions set forth in Section 2.3 of this Agreement that must be satisfied prior to City providing any disbursement of the City HOME Loan to Developer.
“Governmental Requirements” shall mean all laws, ordinances, statutes, codes, rules, regulations, requirements, orders and decrees, of the United States, the State of California, the City of Fullerton, and of any other pol itical subdivision, agency or instrumentality exercising jurisdiction over City, Developer, the Property, and/or the Project, including common law.
“Hazardous Materials” shall mean any substance, material, or waste which is or becomes regulated by any loca l governmental authority, the State of California, or the United States Government, including, but not limited to, any material or substance which is (i) defined as a “hazardous waste”, “acutely hazardous waste”, “extremely hazardous waste”, or “restricted hazardous waste” under Section 25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter
6.5 (Hazardous Waste Control Law), (ii) defined as a “hazardous substance ” under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a “hazardous material”, “hazardous substance”, or “hazardous waste” under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials
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Release Response Plans and Inventory), (iv) defined as a “hazardous substance” under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) polychlorinated biphenyls, (viii) listed under Article 9 or defined as “hazardous” or “extremely hazardous ” pursuant to Article 11 of Title 22 of the California Code of Regulations, Chapter 20, (ix) designated as “hazardous substances” pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317), (x) defined as a “hazardous waste” pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq. (42 U.S.C. Section 6903), (xi) defined as “hazardous substances” pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., (xii) methyl -tertiary butyl ether, (xiii) perchlorate or (xiv) any other substance, whether in the form of a solid, liquid, gas or any other form whatsoever, which by any governmental requirements either requires special handling in its use, transportation, generation, collection, storage, handling, treatment or disposal, or is defined as “hazardous” or harmful to the environment. For purposes hereof, “Hazardous Materials” excludes materials and substances in quantities as are commonly used in the construction and operation of an apartment complex, provided that such materials and substances are used in accordance with all applicable laws. “Hazardous Materials Contamination ” shall mean the contamination (whether presently existing or hereafter occurring) of the improvements, facilities, soil, groundwater, air or other elements on, in or of the Property 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 at any time emanating from the Property.
“Hold Back Amount” shall have the meaning in Section 2.4 of this Agreement. “HOME Affordable Rent ” shall mean, for each HOME Unit , rent that does not exceed the rent limits set forth in the HOME Requirements including 24 C.F.R. §92.252.
The allowable rent under the HOME Requirements is summarized below:
High H OME Rent Limitations . With respect one (1) of the one - bedroom HOME Units, the two (2) tw o-bedroom HOME Units, and the one (1) three - bedroom HOME Units, t he HOME Requirements establish maximum rent limits (High HOME Rents) at the lesser of (i) the fair market rent for existing housing for comparable units in the area as established by HUD under 24 C.F.R. § 888.111, or (ii) a rent that does not exceed thirty percent (30%) of the adjusted income of a household whose annual income equals sixty-five percent (65%) of the median income for the Orange County area, as determined by HUD, with adjustments for the number of bedrooms in the HOME Unit.
The HOME rent limits provided by HUD will include average occupancy per unit and adjusted income assumptions.
(b) Low HOME & Additional HOME Rent Limitations . With respect to one (1) of the one -bedroom HOME Units, and any affordable units occupied by Eligible HOME Unit Tenants whose income does not exceed fifty percent (50%) of the median
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income, the HOME Requirements also require that such units meet one of the following rent requirements:
(i) The rent does not exceed the lesser of (X) the rent calculated under subparagraph (a) above, or (Y) an amount equal to thirty percent (30%) of the annual income of a household whose income equals fifty percent (50%) of the Median Income, with adjustments for smaller and larger households. HUD provides the HOME rent limits which include average occupancy per unit and adjusted income assumptions. (ii) The rent does not exceed thirty percent (30%) of the household’s adjusted income. If the HOME Unit receives federal or state project-based rental subsidy and the Eligible HOME Unit Tenant pays as a contribution toward rent not more than thirty percent (30%) of the household’s adjusted income, then the maximum rent (i.e., tenant contribution plus project -based rental subsidy) is the rent allowable under the federal or state project-based rental subsidy program.
If the Eligible HOME Unit Tenant is paying utilities and services, the rent may not exceed the maximum rent minus the monthly allowance established by the Orange County Housing Authority for utilities and services. The HOME Affordable Rent for 20__ is set forth in the HOME Unit Mix.
“HOME Funds” shall mean the funds allocated to City by HUD under the HOME Investment Partnership Act at Title II of the Cranston-Gonzales National Affordable Housing Act.
“HOME Requirements ” shall mean the requirements of the HOME Investment Partnership Act, as amended (42 U.S.C. § 12741, et seq .), and the implementing regulations (24 C.F.R. § 92, et seq .), and the legal re quirements summarized or referenced in Attachment No. 3 attached hereto and incorporated herein by this reference.
“HOME Unit Mix ” shall mean the household income levels permitted for each HOME Unit, as set forth in Attachment No. 8, which is attached hereto and incorporated herein by this reference.
“HOME Units” shall mean five (5) units in the Project comprised of the HOME Unit Mix. In accordance with 24 C.F.R. § 92.252(j), the HOME Units shall be permitted to float among all of the Residential Units in the Project (other than the one (1) unrestricted manager’s unit) so long as the HOME Units are comprised of the bedroom mix set fo rth in the HOME Unit Mix and each substituted HOME Unit is comparable in terms of size and features to the originally designated HOME Unit. No later than thirty (30) days after unit numbers (address numbers) have been assigned by Developer to the Project or the Construction Completion Date, whichever is later, Developer shall deliver to City the unit numbers (addresses) that comprise the initial five (5) HOME Units, in a format mutually agreed upon by City and Developer. Developer shall promptly deliver t o City a written
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update of the unit numbers (addresses) that comprise the five (5) HOME Units if Developer changes any unit number (address) of a HOME Unit at any time during the term of this Agreement.
“HUD” shall mean the United States Department of Housing and Urban Development.
“Institutional Lender” shall mean any of the following institutions having assets or deposits in the aggregate of not less than One Hundred Million Dollars ($100,000,000):
a California chartered bank; a bank created and operated under and pursuant to the laws of the United States of America; an “incorporated admitted insurer” (as that term is used in Section 1100.1 of the California Insurance Code); a “foreign (other state) bank” (as that term is defined in Section 1700(1) of the California Financial Code); a federal savings and loan association (Cal. Fin. Code Section 8600); a commercial finance lender (within the meaning of Sections 2600 et seq. of the California Financial Code); a “foreign (other nation) bank ” provided it is licensed to maintain an office in California, is licensed or otherwise authorized by another state to maintain an agency or branch office in that state, or maintains a federal agency or federal branch in any sta te (Section 1716 of the California Financial Code); a bank holding company or a subsidiary of a bank holding company which is not a bank (Section 3707 of the California Financial Code); a trust company, savings and loan association, insurance company, investment banker; college or university; pension or retirement fund or system, either governmental or private, or any pension or retirement fund or system of which any of the foregoing shall be trustee, provided the same be organized under the laws of the Uni ted States or of any state thereof; and a Real Estate Investment Trust, as defined in Section 856 of the Internal Revenue Code of 1986, as amended, provided such trust is listed on either the American Stock Exchange or the New York Stock Exchange. _____________ and ________________ are each hereby deemed to be an Institutional Lender. “Investor” shall have the meaning set forth in Section 7.2 of this Agreement. “Median Income ” shall mean the Orange County Area Median Income, as determined by HUD pursuant to the HOME Requirements. Upon request by Developer, City shall provide to Developer the amount of the Area Median Income. “Occupants” shall have the meaning set forth in Section 4.6 of this Agreement. “Performance Report” shall have the meaning set forth in Section 5.2.1 of this agreement.
“Permitted Encumbrances” shall have the meaning ascribed in Section 3.10.2 of this Agreement.
“Program” shall mean the affordable rental housing program to be operated on the Property and all obligations and activities that constitute the Program Activities. “Program Activities” shall mean the tasks, activities, and operations set forth in this Agreement and the City HOME Regulatory Agreement, all activities assisted with the
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City HOME Loan, and all other obligations under this Agreement and the HOME Requirements that Developer is required to perform.
“Program Default ” shall have the meaning set forth in Section 4.5 of this Agreement.
“Project” shall mean the construction on the Property of an affordable rental housing complex with sixty-five (65) units, with sixty-four (64) of such units restricted for rental to and occupancy by income -eligible tenants at a rent affordable to such tenants, related interior and exterior improvements and amenities appropriate and/or necessary for the development . The Project, including the Project improvements and amenities, shall be completed within the timeframes established in the Schedule of Performance attached hereto and incorporated herein as Attachment No. 2. “Project Budget ” shall mean the costs estimates for the Project set forth in Attachment No. 4 to this Agreement, which is incorporated herein by this reference. The Project Budget may not be materially changed without the prior written approval of City’s Contract Officer (a material change is a change that causes the total Project costs, or any line item in the Project Budget, to increase or decrease by more than ten percent (10%) from what is shown in the Project Budget).
“Property” shall mean that certain real property located in the City of Fullerton, more particularly described in the legal description attached hereto as Attachment No. 1 and incorporated herein by this reference.
“Quarter” shall mean any of the three (3) month periods during a fiscal year commencing July 1, October 1, January 1, or April 1.
“Residential Unit(s) ” shall mean the sixty-five (65) residential units to be developed on the Property.
“Schedule of Performance” shall mean that certain Schedule of Performance attached hereto as Attachment No. 2 and incorporated herein by this reference, setting forth the dates and/or time periods by which certain obligations set forth in this Agreement must be performed.
“Special Legal Counsel ” shall mean Rutan & Tucker, or other special legal counsel selected by City.
“Take-Out Lender” shall mean the lending institution that makes the Take -Out Loan. If the Project is financed through issuance of tax-exempt bonds, then Take -Out Lender shall be understood to mean the institution that holds or institutions that hold such tax-exempt bonds from and after the construction period (e.g., from and after the Conversion Date) . The Take -Out Lender may or may not also be the Construction Lender. The Take-Out Lender shall be an Institutional Lender. “Take-Out Loan (s)” shall mean one or more loans providing the permanent financing to be obtained by Developer in order to take out the Construction Loan. If the
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Project is financed through issuance of tax-exempt bonds, then one Take-Out Loan shall be understood to be financed with the proceeds of such tax-exempt bonds. “Third-Party Contracts” shall have the meaning set forth in Section 3.4 of this Agreement.
“Title Company” shall have the meaning set forth in Section 2.3 of this Agreement.
2. CITY HOME LOAN.
2.1 Amount and Source of City HOME Loan . Subject to the terms and conditions set forth herein, City shall provide Developer financial assist ance for the Eligible HOME Loan Expenses in the form of a loan not to exceed the sum of One Million Dollars ($1,000,000). The source of the City HOME Loan is HOME Funds.
2.2 Permissible Use of City HOME Loan; Eligible Loan Expenses. Pursuant to all of the terms and conditions of this Agreement, Developer shall be permitted to use the City HOME Loan proceeds only for the Eligible HOME Loan Expenses that are actually and reasonably incurred by Developer and approved by City, and for no other purpose.
2.3 City HOME Loan Funding Conditions. Notwithstanding any other provision of this Agreement to the contrary, City shall have no obligation to disburse any of the City HOME Loan proceeds to Developer unless all of the following conditions (collectively the “Funding Conditions”) are satisfied, or waived by City in its sole discretion:
Execution and Delivery of Documents . Developer shall have executed and delivered to City the documents referred to in Section 2.7 of this Agreement.
City Title Policy . Fidelity National Title or such other title company approved by the City ( “Title Company”) is irrevocably committed to issue to City an ALTA lender’s policy of title insurance ( “City HOME Loan Title Policy ”), with liability in the amount of the City HOME Loan, show ing the fee interest in the Property vested in Developer, insuring in favor of City the City HOME Loan Deed of Trust, subject only to (i) the standard printed exceptions and exclusions contained in the form of the Title Policy commonly used by Title Company; (ii) non- delinquent property taxes and assessments; (iii) the AH PDA Regulatory Agreement, the City HOME Regulatory Agreement, (if applicable) the tax-exempt bond regulatory agreement, the Bank Loan Deed of Trust, the AHPDA Land Loan Deed of Trust, the City HOME Loan Deed of Trust, the AHPDA Bond Loan Deed of Trust, and the Bank Loan Subordination Agreement, and (iv) such other matters as may be approved by City in its reasonable discretion. Developer shall pay the premium for the City HOME Loan Title Policy.
Insurance. Developer shall have provided to City evidence of the insurance required under Section 3.9 of this Agreement.
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Plans and Permits . Developer shall have obtained the grading permits for the Project or such permits shall be ready to be issued upon the payment of fees and all other development approvals shall have been issued except for building permits.
Evidence of Finan cial Capability . City shall have approved Developer’s evidence of financi al capability in accordance with Section 3.1 0.3 of this Agreement, and the financing specific to the construction of the Project shall close and be available to Developer.
Other Agreements. There is, or with the passage of time, shall be no default by the Developer un der the City HOME Loan Note, City HOME Loan Deed of Trust, City HOME Regulatory Agreement, AHPDA, the AHPDA Bond Loan Note, the AHPDA Land Loan Note, the AH PDA Bond Loan Deed of Trust the AHPDA Land Loan Deed of Trust,, or the AHPDA Regulatory Agreement.
Clearance. If applicable, in accordance with 24 CFR § 58.22 entitled “Limitations on activities pending clearance, ” the Request for Release of Funds and related certifications have been approved for the Project or City has determined an exemption is applicable.
Approval of Third-Party Contracts. City shall have approved any Third-Party Contracts entered into before commencement of construction that City elects to review.
No Default. There shall be no event of default under this Agreement, and there shall be no event which, with the passage of time or the giving of notice, would constitute a default, and all representations and warranties of Developer in this Agreement remain true and correct in all material respects.
HUD Approvals. City has received all approvals required from HUD for the disbursement of the City HOME Loan.
City acknowledges and agrees that as of the Effective Date, the Funding Conditions set forth in clauses (a), (c), (d), (e), (g), (h) and (j) have been satisfied. In the event that any of the Funding Conditions are not satisfied within thirty (30) days after an anticipated disbursement date of City Home Loan funds, as set forth in Section 2.4 below, or such later deadline as may be mutually a pproved in writing by City and Developer in the sole and absolute discretion of each of them, City may terminate this Agreement by delivering written notice to Developer.
2.4 Disbursement of City HOME Loan . Portions of the City HOME Loan shall be disbursed to Developer within thirty ( 30) days after City approval of each f ully documented draw request requesting a disbursement of City HOME funds and evidencing Eligible HOME Loan Expenses paid by Developer . Notwithstanding the foregoing, however, City shall retain the sum of One Hundred Thousand Dollars ($100,000) (“Hold Back Amount”). Subject to the final sentence in this Section 2.4, Developer shall not request disbursement from the City for the Hold Back Amount until Developer provides
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City with such project completion information as is required by 24 CFR 92.502(d)(1). If it is determined, as a result of an audit or otherwise, that any disbursement(s) of City HOME Loan proceeds w as improper or made for expenditures not eligible for payment, Developer shall immediately repay to City the amounts of such disbursements.
Notwithstanding the foregoing but subject to the requirements of 24 CFR
92.504(c)(3)(viii), which prohibits City from disbursing any portion of the City HOME Loan until the funds are needed to p ay for eligible costs , City may, in its sole and absolute discretion, elect to disburse some or all of the Hold -Back Amount prior to the time the Project has been completed if the prior disbursement of City HOME Loan proceeds is approaching twelve (12) months.
2.5 City HOME Loan Disbursed Prior to Bank Loan Funds . Subject to the requirements of 24 CFR 92.504(c)(3)(viii), which prohibits City from disbursing any portion of the City HOME Loan until the funds are needed to pay for eligible costs , City shall not require hereunder that any Bank Loan Funds be disbursed until such time as all of the City HOME Loan proceeds (except for the Hold Ba ck Amount) have been disbursed for the Project. Nothing herein is intended to preclude the concurrent disbursement of th e Bank Loan Funds and the City HOME Loan . Further, Developer acknowledges and agrees that no portion of the City HOME Loan will be disbursed at the closing of the Construction Escrow.
2.6 Repayment of City HOME Loan; City HOME Loan Deed of Trust .
Developer’s obligation to repay the City HOME Loan shall be as set forth in the City HOME Loan Note. The City HOME Loan Note generally provides for Developer to pay to City a percentage of the cash flow generated from the Property. Developer’s obligation to repay the City HOME Loan will be secured by the City HOME Loan Deed of Trust. The City HOME Loan Deed of Trust contains an acceleration clause entitling City to declare the entire indebtedness evidenced thereby to be immediately due and payable and collectible, regardless of the date of maturity, on the terms and conditions more specifically set forth in the City HOME Loan Deed of Trust.
2.7 Execution and Delivery of Documents . On or before the Effective Date, (i) Developer has delivered to City the City HOME Loan Note, executed by Developer, and deposited into the Construction Escrow : (a) the City HOME Loan Deed of Trust, executed and acknowledged by Developer , and (b) the City HOME Regulatory Agreement, executed and acknowledged by Developer ; and (ii) City has executed and acknowledged and deposited into the Construction Escrow the City HOME Regulatory Agreement. City and Developer hereby instruct Escrow Holder to record the City HOME Regulatory Agreement, and the City HOME Loan Deed of Trust in the Official Records of Orange County, California.
3. DEVELOPMENT OF THE PROJECT.
3.1 Scope of Development . Developer shall develop the Project on the Property in accordance with the plans and drawings approved by City. If Developer desires to make any substantial changes in the construction plans after their approval by City, Developer shall submit or cause to be submitted the proposed change to City for
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approval. If the construction plans, as modified by the proposed change, conform to the requirements of this Section 3.1, the approved land use entitlements for the Project, the Scope of Development attached to the AHPDA, and all Governmental Requirements, City shall approve the proposed change, and shall notify Developer in writing within fifteen (15) business days after submission to City. For purposes of this Section 3.1, a “substantial change” change is a change that (a) requires review by the City Building Department or other City department pursuant to standard City procedures, or (b) constitutes a material c hange in the architectural design, structural design, quality, or configuration of the improvements, or (c) would modify the number of residential units in the Project or materially change the exterior appearance of the Project, or (d) would result in an increase in the cost of construction in excess of One Hundred Thousand Dollars ($100,000) individually and in excess of Three Hundred Fifty Thousand Dollars ($350,000) in aggregate .. Developer shall be responsible for all construction and installation and for obtaining all necessary permits and approvals.
3.2 Development Approvals and Permits . Prior to commencement of the grading of the Property, Developer shall, at its own expense, secure or cause to be secured the grading permit from City and all permits, licenses and approvals which may be required by any governmental agency having jurisdi ction over the Property and the Project other than building permits. Prior to commencement of development of any other improvements to the Property, Developer shall have obtained, at its own expense, approval of the final plans for the Project and the building permits for the Project.
3.3 Construction Contract. Developer acknowledges that the requirements of Section 3.4 of this Agreement shall apply to the construction contracts and subcontracts for the Project and Developer shall ensure compliance with all such provisions and requirements. If applicable to the Project and not exempt from HOME Requirements, Developer shall cause the inclusion of the applicable classification and wage rate determination for the Project in the construction contract for the Pr oject which, if authorized by law, may be satisfied by Developer incorporating by reference said classification and wage rate determination.
3.4 Third-Party Contracts. If Developer enters into any agreements ( “Third- Party Contracts”) with contractor(s) for th e construction of the Project ( “Other Contracting Party ”), such Third-Party Contract shall be subject to the reasonable approval of City and must be consistent with the terms of this Agreement. Developer shall include in all Third-Party Contracts the foll owing minimum requirements:
(a) provisions for the Other Contracting Party to comply with all terms of this Agreement to the extent applicable to the work or services provided by the Other Contracting Party, and all applicable legal requirements, includin g the HOME Requirements; (b) provisions for the Other Contracting Party to cooperate with City and make available to City all information, documents, and records reasonably requested by City in connection with the activities under this Agreement; and (c) provisions for City to be granted the right of access to the Property for purposes of this Agreement and evaluating Developer ’s performance hereunder. If Developer believes that any of the HOME Requirements are not applicable to a Third-Party Contract, it is Developer’s responsibility to provide to City evidence that the requirement is not applicable; however, it is ultimately Developer ’s
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responsibility to include all legal requirements in its Third-Party Contracts and City shall have no liability for Developer ’s failure to comply with this obligation. In connection therewith, any statement made by City to Developer as to the non -applicability of a particular legal requirement shall be provided as an accommodation to Developer and as a statement of City ’s opinion but shall not be relied upon by Developer or excuse Developer from Developer’s responsibility to include all applicable legal requirements in its Third-Party Contracts or to comply with such requirements. Developer acknowledges that City’s approval of a Third-Party Contract shall in no way constitute an assumption by City of any responsibility whatsoever for the construction of the Project or performance of any activity that is the subject of the Third-Party Contract, or Developer ’s or the Other Contracting Party’s compliance with applicable laws, statutes, ordinances, codes, rules and regulations, or Developer’s compliance with this Agreement. In connection therewith, City assumes no responsibility or liability for any act or omission of any Other Contracting Party and in no way guarantees any of the work to be done or materials to be supplied or services to be performed. Developer shall comply with all terms of Third-Party Contracts.
3.5 No Debarred, Suspended, or Ineligible Parties. Developer shall not employ, engage the services of, or award any contractors to any party that is debarred, suspended, or otherwise ineligible to participate in a project that is receiving HOME Funds pursuant to the HOME Requirements. Developer shall provide to City such certifications as required by City demonstrating compliance with this Section.
3.6 Construction Meeting . Developer shall attend and cause the general contractor(s) for the Project to attend any construction meetings or conferences arranged by City among the general contractor, Developer, and City, including pre -construction meetings, relating to undertaking and completing the Project in conform ance with this Agreement and applicable local, state, and federal laws. The requirements in this section may be satisfied by a regular monthly meeting arranged by Developer and attended by Developer and the respective representatives of the contractor(s) and City, as may be needed.
3.7 Schedule of Performance.
Subject to the force majeure provisions of Section 9.3 of this Agreement, Developer shall commence, prosecute, and complete construction of the Project within the times set forth in the Schedule of Performance. Construction shall be continuously and diligently pursued to completion and shall not be abandoned for more than ten (10) consecutive Business Days, except when due to causes beyond the control and without the fault of Developer, as set forth in Section 9.3 of this Agreement. The Schedule of Performance is subject to revision from time to time as may be mutually agreed upon in writing between Developer and City ; provided, however, that p ursuant to the HOME four -year project completion deadline at 24 CFR 92.205(e)(2), the timeframe for Developer ’s completion of construction of the Project may not be extended to a date that is more than four years following the Effective Date without first securing a one-year extension from HUD. Notwithstanding anything to the contrary in this Agreement, if Developer fails to complete the Project within such four year period (or if such
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four year period is extended by HUD within such extended period) and such failure results in a requirement that all City HOME Loan funds must be repaid to HUD, Developer shall be solely responsible for such repayment with respect to all amounts of the City HOME Loan that have been disbursed to Developer. During the course of construction, Developer shall, if requested by City, provid e to City monthly written reports on the progress of construction.
Developer shall commence or cause the commencement of the construction of the Project no later than the timeframes shown in Attachment No. 2, the Schedule of Performance.
3.8 Rights of Inspection. Representatives of the City shall have a reasonable right of access to the Property during normal business hours and upon reasonable prior written notice for the purposes of this Agreement, including, but not limited to, the inspection of the work being performed. Developer shall cooperate with, and shall cause the contractor and any subcontractor to cooperate with, City in connection with its inspection and access rights. It is understood that City does not by this Section 3.8 assume any res ponsibility or liability for a negligent inspection or failure to inspect. All inspections by City or on behalf of City, approvals of payment requests by City and other actions by City in connection therewith are not to be construed as a representation by City that there has been compliance with any permits or plans and specifications, legal requirements, or that the Project is free of defects in materials or workmanship. Any inspections or determinations made by City or lien waivers, receipts, or other agreements, documents, and instruments obtained by City are made or obtained solely for City’s own benefit and not in any way for the benefit or protection of Developer. City has no obligation to Developer to ensure compliance by the contractor or any other person in carrying out such construction. No such inspections or review will limit any of the rights and remedies of City pursuant to this Agreement.
3.9 Insurance. Developer shall procure and maintain, at its sole cost and expense, in a form and content satisfactory to City, during the entire term of this Agreement including any extension thereof, the following policies of insurance:
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(a) Commercial General Liability Insurance covering bodily injury, property damage, personal injury and advertising injury written on a per -occurrence and not a claims-made basis containing the following minimum limits: (i) general aggregate limit of Five Million Dollars ($5,000,000); (ii) products -completed operations aggregate limit of Three Million Dolla rs ($3,000,000); (iii) personal and advertising injury limit of Three Million Dollars ($3,000,000); and (iv) each occurrence limit of Three Million Dollars ($3,000,000). Said policy shall include the following coverages: (i) blanket contractual liability; (ii) products and completed operations; (iii) independent contractors; (iv) Owner’s broad form property damage; (v) severability of interest; (vi) cross liability; and (vii) property damage liability arising out of the so -called “XCU” hazards (explosion, collapse and underground hazards). The policy shall be endorsed to have the general aggregate apply to this Project only.
(b) A policy of 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 City and 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 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) combined single limit for all damages arising from each accident or occupational disease.
(c) A policy of comprehensive automobile liability insurance written on a per - occurrence basis in an amount not less than Two Million Dollars ($2,000,000) combined single limit covering all owned, non-owned, leased and hired vehicles used in connection with the work.
All of the above policies of insurance shall be primary insurance and except for the Worker’s Compensation Insurance shall name the City, its officers, officials, members, employees, agents and representatives as additional insureds or, with respect to the builder’s risk policy, as a loss payee. Said policies shall be satisfactory only if issued by companies qualified to do business in California and rated A:VII or better i n the most recent edition of the Best Rating Guide. The insurer shall waive all rights of subrogation and contribution it may have against the City, its officers, employees and agents and their respective insurers. All of said policies of insurance shall provide that said insurance may not be amended or canceled without providing thirty (30) days prior written notice by registered mail to City. In the event any of said policies of insurance are canceled, Developer shall, prior to the cancellation date, s ubmit new evidence of insurance in conformance with this Section 3.9 to the Contract Officer. The foregoing obligations shall remain in effect until the completion of the Project, at which time Developer shall maintain the insurance set forth in the City HOME Regulatory Agreement.
Developer agrees that the provisions of this Section 3.9 shall not be construed as limiting in any way the extent to which Developer may be held responsible for the payment of damages to any persons or property resulting from D eveloper’s activities or the activities of any person or persons for which Developer is otherwise responsible. Prior to the Effective Date Developer has provided evidence of the above -required insurance
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(such as Certificates of Insurance of appropriate in surance binders) and obtain ed approval thereof from the Contract Officer.
3.10 Financing the Project.
3.10.1 Developer Responsible for Cost of Development . Except to the extent City has specifically agreed to provide the City HOME Loan pursuant to Section 2 of this Agreement, and has agreed to provide the AHPDA Bond Loan and APHDA Land Loan pursuant to the AHPDA, Developer shall be responsible for all costs of developing the Project, including but not limited to: predevelopment costs incurred for items such as planning, design, engineering, and environmental remediation; all development and building fees; the cost incurred to demolish and clear any and all existing improvements, furnishings, fixtures, and equipment from the Property requiring remova l; relocation expenses payable to existing occupants of the Property; costs for insurance and bonds (as required); costs for financing; all on -site construction costs; legal fees and any necessary public improvements not already provided to the Property under the Project.
3.10.2 Permitted Encumbrances. Developer may mortgage or encumber the Property in order to finance the development and operation of the Project, provided that the terms of any such loan and loan documents are reasonably approved by City (any such approved loans, “Permitted Encumbrances”). The deeds of trust that secure the Bank Loan Funds, the AHPDA Bond Loan, and the AHPDA Land Loan all constitute Permitted Encumbrances.
3.10.3 Evidence of Financial Capability. As a condition to City entering into this Agreement, Developer shall have submitted to City evidence reasonably satisfactory to City that Developer has the financial capability necessary to develop the Project pursuant to this Agreement and the Project Budget. Such evidence of financial capability shall have included the following:
(a) a copy of the commitment or loan agreement obtained by Developer for each source of funds to assist in financing the construction of the Project. All copies of commitments submitted by Developer to City shall be certified by Developer to be true and correct copies thereof. Each commitment for financing shall be in such form and content acceptable to City as reasonably evidences a firm and enforceable commitment, with only those conditions which are standard or typical for the lender involved for similar projects;
(b) if the total costs set forth in the Project Budget exceed the amount of financing commitments received pursuant to subparagraph (a) above, a financial statement and/ or other documentation reasonably satisfactory to City sufficient to demonstrate that Developer has adequate funds available and committed to cover such difference; and (c) a copy of the guaranteed maximum price or stipulated sum construction contract between Developer and its general contractor for all
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of the improvements required to be constructed by Developer hereunder, certified by Developer to be a true and correct copy thereof.
3.10.4 Subordination. The City Manager and the Community Development Director or their respective designees each shall have the authority on behalf of City to enter into subordination agreements, intercreditor agreements, and other similar agreements; provided, however, that nothing herein shall obligate City to subordinate its financing except that City shall subordinate the City HOME Loan Deed of Trust to (i) the priority lien(s) (deeds of trust) securing the Bank Loan Funds , and (ii) the priority lien(s) (deeds of trust) securing the Take-Out Loans by subordination agreements approved in form by City in its reasonable discretion.
4. USE OF THE PROPERTY; PROGRAM ACTIVITIES.
4.1 General. Developer and its successors and assigns shall use, operate, and maintain the Property as a rental housing project in accordance with the provisions of this Agreement and the City HOME Regulatory Agreement , consistent with the HOME Requirements. The City HOME Regulatory Agreement contains provisions requiring the HOME Units on the Property to be maintained as affordable rental units for a period of twenty (20) years from the Construction Completion Date.
4.2 Program Activities. Developer shall operate the Program and perform all Program Activities in a competent, professional, and high quality manner and to the satisfaction of City in its reasonable discretion and in accordance with this Agreement. In addition, Developer shal l operate the Program and perform the Program Activities in compliance with the HOME Requirements and the legal requirements set forth in Attachment No. 3, the Summary of Legal Requirements for HOME Funds attached to this Agreement and the statutes referenced therein. In addition, Developer shall operate the Program and perform the Program Activities in compliance with Attachment No. 7, the City HOME Regulatory Agreement and the requirements specified therein. In addition to the reports referred to in Section 5.2, Developer shall, if requested by City, provide to City quarterly written reports on the progress of any Program Service. Developer shall cause the Program Activities to be performed by Developer or Developer Personnel under Developer’s direct supervision and shall ensure that all Developer Personnel engaged in the Program Activities are fully qualified and authorized and permitted under applicable law to operate the Program. Developer shall secure, at its sole cost and expense, any and all licenses, permits and approvals that may be required by law for the performance of the Program Activities. Developer shall be responsible for all costs related to the Program.
4.3 Management. If any manager or supervisor of the Program engages in any of the conduct described in Section 4.5 or knowingly allows such conduct to occur at the Property or by Developer Personnel, or knowingly allows illegal activity to occur at the Property, City shall have the right to require that Developer immediately replace such manager or supervisor for the Program.
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4.4 Drug Free Covenant. Developer shall use commercially reasonable efforts to maintain a drug free environment on the Property. Developer covenants to City that Developer shall use commercially reasonable efforts pursuant to Section 4.6 of this Agreement to ensure that all persons residing on the Property shall not unla wfully manufacture, distribute, dispense, possess, or use controlled substances as defined in 21 United States Code section 812 and California Health and Safety Code section 11007, or successor statutes, and as prohibited by City law.
4.5 Program Defaults. If Developer shall or permit Developer Personnel to:
(a) engage in any act injuring, abusing, mistreating, or endangering any employee or client of the Program or other persons receiving services under the Program, including any tenants or occu pants of the Project as reasonably determined by City; or
(b) fail to use commercially reasonable efforts in violation of Section 4.4 above; or
(c) engage in any act or transgression that, in the reasonable judgment of City, may reflect adversely upon th e City or its funding programs or upon Developer, tend to bring the Program into public disrepute, contempt, scandal, or ridicule, or tend to shock, insult or offend the community or public morals or decency, then
Developer and City agree to meet and confe r within ten (10) days of the request of City to determine a resolution reasonably acceptable to City, and Developer agrees to thereafter promptly implement the resolution. The failure of Developer to implement the resolution shall constitute a default under this Agreement (“Program Default”).
4.6 Occupants of Housing Facilities. To the extent permitted by applicable law, Developer shall include in its occupancy or lease agreements with the persons residing in the facility ( “Occupants”) a requirement that the occurrence of any illegal activity by the Occupant, or by Occupant ’s guests at the Property, shall be grounds for immediate termination of the Occupant’s right to reside within the housing facility and City shall have the right to require that Developer enforce such provision.
4.7 Monitoring. City shall monitor and evaluate Developer’s performance under this Agreement to determine compliance with this Agreement and the HOME Requirements. Developer shall reasonably cooperate with City and shall make available to City all information, documents, and records reasonably requested by City and shall provide City the reasonable right of access to the Property and the HOME Units during normal business hours for the purpose of assuring compliance w ith this Agreement and evaluating Developer’s performance hereunder.
4.8 Compliance with Laws and Regulations and HOME Requirements .
Developer shall carry out the design, construction and operation of the Project, and operate the Program, in conformity with all applicable laws, regulations, and rules of governmental agencies having jurisdiction, including without limitation, the HOME
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Requirements and the legal requirements set forth in Attachment No. 3 attached to this Agreement and the statutes referenced th erein, the City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisio ns of the City Municipal Code, and, if applicable to the Project, all federal and state fair labor standards and prevailing wage re quirements. Because the source of the City HOME Loan is funds received from HUD pursuant to the federal government’s HOME program, Developer is required to comply with all applicable HOME Requirements. In the case of any conflict between the HOME Require ments and this Agreement, the HOME Requirements shall control; it being understood, however, that in order to be in compliance with this Agreement and the HOME Requirements, Developer shall, to the extent possible, comply with the most restrictive provisio ns in this Agreement and the HOME Requirements. Each and every provision required by law to be included in this Agreement shall be deemed to be included, and this Agreement shall be read and enforced as though all such provisions were included. Developer acknowledges and agrees that it shall be and remain, and shall cause the Developer Personnel to be and remain, fully knowledgeable and apprised of all local, state and federal laws, rules and regulations in any manner affecting the performance under this Agreement, including the HOME Requirements. Developer shall indemnify, protect, defend and hold harmless City and its officials, officers, employees, and agents, with counsel reasonably acceptable to City, from and against any and all loss, liability, dam age, claim, cost, expense and/or “increased costs” (including reasonable attorneys ’ fees, court and litigation costs, and fees of expert witnesses) that results or arises in any way from any of the following:
(a) the noncompliance by Developer or Developer Personnel of any applicable local, state and/or federal law, including, without limitation, any applicable federal and/or state labor laws (including, without limitation, if applicable, the requirement to pay state or federal prevailing wages and hire ap prentices); (b) the implementation of Section 1781 of the California Labor Code, as the same may be amended from time to time, or any other similar law, by Developer or Developer Personnel; and/or (c) failure by Developer or Developer Personnel to provide any required disclosure or identification as required by Labor Code Section 1781, as the same may be amended from time to time, or any other similar law. The foregoing indemnity shall survive termination of this Agreement.
4.9 Program Income. Developer shall submit to City annual reports as set forth in Section 5.2 on all program income as defined 24 C.F.R. 92.503(a) generated by activities carried out with HOME Funds, if any. The program income shall, at City ’s election, (a) be returned to City or (b) retained by Developer and utilized for the Project expenses set forth in the Project Budget or such other activities approved in writing by City, in which case all provisions of this Agreement shall apply to the activities funded by the program income. Upon the completion of the Project or the earlier termination of this Agreement, all unused program income shall be returned to City at the election of City.
4.10 Relocation. City shall not be responsible for relocating any occupants from the Property to the extent any occupants are located on the Property. If relocation is required, Developer shall have the sole and exclusive responsibility for providing relocation assistance and paying all relocation costs required to comply with all applicable federal and state l aws, rules, and regulations. Developer shall indemnify, defend, and hold City harmless from and against any claims, liabilities, damages, or losses made
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against it by tenants or occupants of the Property, including without limitation claims for relocation assistance, inverse condemnation, and claims otherwise arising from any act or omission of Developer pursuant to this Section 4.10.
4.11 Indemnification. Developer shall indemnify, defend, and hold harmless City and its officers, officials, employees, represe ntatives and agents (collectively, the “Indemnitee”) from and against any and all claims, causes of action, liabilities, and damages arising out of any acts or omissions of Developer or Developer ’s officers, employees, contractors, and agents, in the perfo rmance under this Agreement and the agreements attached hereto and/or with respect to the Property including the construction of the Project thereon. The Indemnitee shall promptly notify Developer of the filing of any such action and cooperate with Develo per in the defense thereof (at no cost to Indemnitee).
4.12 Extended Use Agreement . City acknowledges that Developer and the California Tax Credit Allocation Committee have or intend to enter into an extended use agreement pursuant to Section 42(h) of the Internal Revenue Code ( “Extended Use Agreement”) which will be recorded against the Property. City acknowledges that, in the event of a foreclosure of its interest under the City HOME Loan Deed of Trust or delivery by Developer of a deed in lieu thereof (collectively, a “Foreclosure”), pursuant to Sections 42(h)(6)(E)(ii) of the Internal Revenue Code, for a period of three (3) years from the date of Foreclosure, with respect to any unit that had been regulated by the Extended Use Agreement, (i) none of the eligible tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause), (ii) nor may the rent of any such eligible tenant be increased except as otherwise permitted under Section 42 of the Internal Revenue Code.
5. RECORDS AND REPORTS.
5.1 Records.
5.1.1 Records to be M aintained. Developer shall keep and maintain records providing a full description of the Program Activities undertaken, records demonstrating that the Program Activities meet th e HOME Requirements, records demonstrating the eligibility of the activities constituting the Eligible HOME Loan Expenses, and such other records as may be reasonably required by City to enable City to evaluate Developer ’s compliance with the HOME Requirem ents, to identify and account for the use of the City HOME Loan proceeds and expenditures of Eligible HOME Loan Expenses and all costs pertaining to this Agreement, and to enable City to comply with City’s recordkeeping and reporting requirements under th e HOME Requirements.
Books and records pertaining to the Eligible HOME Loan Expenses shall be kept and prepared in accordance with generally accepted accounting principles.
5.1.2 Retention. The books and records required to be maintained by Developer under this Agreement shall be retained for a period of five (5) years following the date that all units in the Project have received all required occupancy permits from the City; provided, however, in the event any litigation, audit, negotiation, or other action
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involving the books and records is commenced prior to the expiration of the five (5) year retention period, Developer shall retain the books and records until completion of the action and resolution of all issues which arise from it.
5.1.3 Location of Records . The books and records required to be maintained by Developer shall be kept at the Property or at the office of Developer or such other location in Orange County, California, approved by City.
5.1.4 Access to Records. City and HUD and/or their representatives shall have full and free access to, and the right to examine, inspect, and audit, all books and records of Developer pertaining to this Agreement at all times during normal business hours upon forty-eight (48) hours prior written notice to Developer.
5.1.5 Audits. Developer shall perform all audits of its books and records required by HUD, the HOME Requirements or reasonably required by City and a copy of such audits shall be forwarded to the City within thirty (30) days after c ompletion.
Developer shall be subject to all audit and review requirements imposed on City in connection with this Agreement and shall, at its sole cost and expense, cause such audits and reviews to be timely performed.
5.2 Reports.
5.2.1 Reports During an d Post -Construction. No later than fifteen (15) days after the end of each Quarter prior to the Construction Completion Date , and no later than thirty (30) days after the end of each calendar year after the Construction Completion Date , Developer shall submit to City , for the duration of the term of this Agreement, the following reports on forms approved by the Contract Officer:
(a) Performance Reports . A report on the summary of the Program Activities and activities undertaken by Developer under this Agreement for the previous Quarter or calendar ye ar, as applicable (“Performance Report”). The Performance Report shall, at a minimum, describe the status of each Program Activity required to be performed and met during that Quarter or calendar year (as applicable), progress towards completing the other Program Activities, costs incurred, funds remaining, a narrative explanation of problems, delays, or adverse conditions which impaired the ability of Developer to meet any obligations if any were not met, favorable developments which enabled Developer to satisfy obligations and meet objectives sooner or at less cost than anticipated or producing more beneficial results than planned, and any additional pertinent information related to contract performance.
(b) Program Income. A report on the program income generated for the Quarter or calendar year (as applicable) , if any, as mor e fully explained in Section 4.9 of this Agreement, which shall include a description of the expenditures of program income and a progress report for the
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activities funded by the program income if Developer is permitted to retain program income.
5.2.2 Other Reports. In addition to the reports referenced in Section 5.2.1, Developer shall, at such times and in such forms as reasonably required by City, prepare and submit to the Contract Officer, such other reports concerning the performance of the Program Activities, the costs and obligat ions incurred or to be incurred in connection therewith, and any other matters covered by this Agreement and compliance with applicable HOME Requirements, as City may reasonably require from time to time.
6. TERMINATION.
6.1 Termination. In addition to any othe r termination provision set forth in this Agreement, this Agreement may be terminated by City as follows:
(i) Default. If a default shall occur under this Agreement that is not cured within an applicable notice and cure period (other than a default of City), City may terminate this Agreement in whole or in part.
(ii) Failure to Receive Environmental Clearance . In accordance with 24 CFR § 58.22 entitled “Limitations on activities pending clearance,” HUD or the state does not approve the Request for Release of Fund s (RROF) and related certifications for the Project and the Project is not otherwise exempt such that no RROF is required.
6.2 Obligations Survive Termination. Notwithstanding the expiration or earlier termination of this Agreement, Developer’s obligations to City shall not terminate until all closeout requirements are completed. In addition, the following obligations of Developer shall survive the termination of this Agreement: (a) Developer’s indemnity obligations; (b) the obligation to cause audits to be performed relating to Developer ’s activities and costs under this Agreement; (c) the obligation to repay to City the City HOME Loan proceeds improperly disbursed to Developer or disbursed or used for ineligible expenditures; and (d) any other obligations w hich cannot by their nature be performed until after the expiration of the Agreement. No termination under this Agreement shall release either party then in default from liability for such default.
7. DEFAULTS AND REMEDIES.
7.1 Defaults-General. The occurrence of any of the following shall be deemed a default under this Agreement:
(a) The failure or delay by either party to perform any term or provision of this Agreement if such failure is not cured, corrected or remedied within any specific time period set forth in this Agreement.
(b) If no other specific time period is set forth herein, the failure to cure a monetary default under this Agreement (other than any monetary defaults specifically listed in any of the other subparagraphs of this Section 7.1) within t en
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(10) days after the nonperforming party ’s receipt of written notice from the other party specifying the nature of the default.
(c) If no other specific time period is set forth herein, the failure to cure a non -monetary default under this Agreement (oth er than any non -monetary defaults specifically listed in any of the other subparagraphs of this Section 7.1) within thirty (30) days after the nonperforming party’s receipt of written notice from the other party specifying the nature of the default; provided, however, that if the failure cannot be corrected within such period, it shall not constitute a default if the failure is correctable without material adverse e ffect on the Property, and if corrective action is instituted by Developer within such period and diligently pursued until the failure is corrected, and provided further that any such failure is cured within ninety (90) days of receipt of notice of such failure. (d) Subject to Section 9.3, Developer does not proceed with the commencement, construction and completion of the Project as herein provided. (e) Subject to Section 9.3, work ceases on the Project for ten (10) consecutive Business Days.
(f) The occurrence of a Program Default.
(g) Subject to the notice and cure provisions in Subsection (c) above, any of the warranties or representations made by Developer herein are or become false, incorrect or misleading in any material respect. (h) Developer commits any act of bankruptcy or if any relief under the federal Bankruptcy Act is sought by or against Developer, or if a receiver is appointed to take charge of the assets or affairs of Developer, or if Developer should make an assignment for the benefit o f creditors, or if Developer should become insolvent, or upon any liquidation or termination of Developer; provided, however, that if any such proceeding is brought involuntarily against Developer, Developer shall have ninety (90) days to obtain the dismissal of such proceeding. (i) The filing of a notice of judgment lien against Developer, or the recording of any abstract of judgment against Developer, or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, ag ainst the assets of Developer, or the entry of a judgment, order or decree against Developer, any or all of which would have a material and adverse effect upon Developer’s ability to perform under this Agreement, unless the same is dismissed within ninety (90) days.
(j) There is a default by Developer of the City HOME Loan Note, City HOME Loan Deed of Trust, City HOME Regulatory Agreement, AHPDA, AHPDA Bond Loan Note, AHPDA Land Loan Note, AHPDA Bond Loan Deed of Trust, AHPDA Land Loan Deed of Trust, or AH PDA Regulatory Agreement, after expiration of any notice and cure periods in the applicable agreement(s).
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(k) Developer shall default in the payment or performance of any obligation, or any defined event of default, under the terms of any contract or instrument pursuant to which Developer has incurred any debt or other liability to City, or any other person or entity that has an interest secured by a lien recorded against the Property, which default is not cured within any gra ce and cure period expressly provided in such contract or instrument.
The party in default shall provide to the other party immediate written notice of the occurrence of any event that would constitute a default hereunder.
7.2 Remedies Upon Default . In additi on to any other rights or remedies available at law or in equity, upon a default under this Agreement (other than a default of City) that is not cured within any applicable notice and cure periods herein, City may take one or more of the following actions:
(i) Wholly or partially suspend or terminate this Agreement. (ii) Withhold further awards for the Project, including further disbursements of the City HOME Loan.
(iii) Require Developer to repay the City HOME Loan funds. (iv) Institute legal action to cure, correct, or remed y any default, to recover damages for any default, or to obtain any other remedy consistent with the purposes of this Agreement.
In addition to the foregoing, City shall have the right to withhold disbursements of City HOME Loan proceeds during such period as may be necessary to determine whether a default has occurred and during any cure period. Upon the occurrence of an event which, with the passage of time or the giving of notice, would constitute a default under this Agreement (other than a default of City), City may temporarily withhold disbursements of City HOME Loan proceeds pending correction of the default by Developer.
In addition to Developer’s cure rights hereunder, _____________________, or its successors and assigns pursuant to this Agreement (“Investor”), for so long as Investor is a limited partner investor in Developer, shall have ten (10) days after receipt of a default notice from City to cure a monetary default of this Agreement and thirty (30) days after receipt of a default notice to cure any non -monetary default under this Agreement; provided however, if the non -monetary default is incapable of being cured within thirty (30) days, Investor shall have an additional ninety (90) days to cure such default provided it has commenced to cure the default within such thirty (30) day period and is diligently proceeding to cure such default through the end of such period. City shall provide a copy of any written notice of default to the Investor at the Investor’s mailing address set forth in Section 9.1. City shall accept any cure made by Investor as if made by Developer, but failure by City in timely delivering a default notice to Investor shall not be a default or breach by City under this Agreement.
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Except as otherwise expressly provided in this Agreement, any failure or delay by a party in giving a notice of default or in asserting any of its rights and remedies as to any default shall not constitute a waiver of any default, nor shall it change the time of default, nor shall it depr ive 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.
7.3 Institution of Legal Actions and Venue . In addition to any other rights or remedies an d subject to the restrictions set forth in this Agreement, either party may institute an action at law or equity to seek specific performance of the terms of this Agreement, or to cure, correct or remedy any default, to recover damages for any default (subject to the restriction on Developer’s rights to recover monetary damages against City set forth in the final clause of this sentence), or to obtain any other remedy consistent with the purpose of this Agreement; provided, however, that notwithstanding any thing in the foregoing to the contrary, in no event shall Developer be entitled to obtain monetary damages of any kind from City, including but not limited to damages for economic loss, lost profits, or any other economic or consequential damages of any ki nd. Such legal actions must be instituted in the Superior Court of the State of California in and for the County of Orange, California, in any other appropriate court within the County of Orange, California, or in the United States District Court for the Central District of California.
7.4 Applicable Law. The internal laws of the State of California without regard to conflict of law principles shall govern the interpretation and enforcement of this Agreement.
7.5 Rights and Remedies are Cumulative . Except as o therwise 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 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 the other party.
7.6 Attorney’s Fees. If either party to this Agreement is required to initiate or defend litigation in any way connected with this Agreement, the prevailing party in such litigation, in addition to any other relief which may be granted, whether legal or equitable, shall be entitled to reasonable attorney ’s fees from the losing party. If any party to this Agreement is required to initiate or defend litigation with a Third-Party because of the violation of any term or provision of this Agreement by the other party, then the party so litigating shall be enti tled to reasonable attorney ’s fees from the other party to this Agreement. Attorney’s fees shall include attorney ’s fees on any appeal, and in addition a party entitled to attorney ’s fees shall be entitled to all other reasonable costs for investigating such action, retaining expert witnesses, taking depositions and discovery, and all other necessary costs incurred with respect to such litigation.
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8. REPRESENTATIONS AND WARRANTIES OF DEVELOPER.
Developer makes the following representations and warranties as of the date of this Agreement and agrees that such representations and warranties shall survive and continue thereafter:
(a) Authorization and Validation . The execution, delivery and performance by Developer of this Agreement (i) are within the powers of Developer and upon its execution will constitute a legal, valid and binding obligation of Developer enforceable in accordance with its terms, and (ii) to Developer ’s knowledge will not violate any provisions of law, any order of any court or other agency of government, or any indenture, agreement or any other instrument to which Developer is a party or by which Developer, or any of its property, is bound, or be in conflict with, result in any breach of or constitute (with due notice and/or lapse of time) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of its property or assets, except as contemplated by the provisions of this Agreement.
(b) Correct Information. To Developer’s knowledge, all reports, papers, data and information given to City with respect to Developer and this Agreement, including the Property and Program are accurate and correct in all material respects and complete insofar as completeness may be necessary to give City a true and accurate knowledge of the subject matters thereof, and there has been no change in such information.
(c) Defaults. Developer is not a party to any agreement or instrument that will interfere with its performance under this Agreement, and is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions set forth in any agreement or instrument to which it is a party would have a n adverse effect on its ability to perform its obligations under this Agreement.
(d) Pending Litigation . There is not now pending, or to Developer ’s knowledge threatened, against or affecting Developer any claim, investigation, action, suit or proceeding at law, or in equity, or before any court or administrative agency which, if adversely determined, would impair or affect the Property or Developer.
(e) Compliance. Developer has examined and is familiar with all conditions, restrictions, reservations and ordinances affecting the Property and Project.
9. GENERAL PROVISIONS.
9.1 Notices, Demands, and Communications Between the Parties . Formal notices, demands, and communications between City and Developer shall be given either by (a) personal service, (b) delivery by reputable document delivery service such as
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Federal Express that provides a receipt showing date and time of delivery, or (c) mailing in the United States mail, certified or first class mail, postage prepaid, addressed to::
To City:
City of Fullerton
303 W. Commonwealth Avenue
Fullerton, CA 92832
Attention: Community Development Director
With a copy to: Rutan & Tucker, LLP
18575 Jamboree Road, 9th Floor
Fullerton, CA 92612
Phone No.: 714-641-5100
Attention: Allison LeMoine-Bui, Esq.
To Developer:
________________________, LP
c/o Meta Development, LLC
11150 West Olympic Blvd, Suite 620
Los Angeles, CA 90064
Attention: Christopher Maffris,
Executive Vice President
With a copy to (only
during such time as
there is a limited
partner of Developer):
_______________________
_______________________
Attention: ______________
With a copy to:
Bocarsly Emden Cowan Esmail & Arndt LLP
633 West Fifth Street, 58th Floor
Los Angeles, CA 90071
Attention: Nicole Deddens
Notices personally delivered or delivered by document delivery service shall be deemed effective upon receipt. Notices mailed shall be deemed effective on the second Business Day following deposit in the United States mail. Such written notices, demands, and communications shall be sent in the same manner to such other addresses as any Party may from time to time designate in writing.
9.2 Nonliability of City Officials and Employees. No member, official, employee, or contractor of City shall be personally liable to Developer in the event of any default or breach by City or for any amount which may become due to Developer or on any obligations under the terms of this Agreement.
9.3 Enforced Delay; Extension of Times of Performance . Time is of the essence in the performance of each of the parties’ respective obligations set forth in this Agreement. In addition to specific provisions of this Agreement, and except as expressly set forth in this Section 9.3, performance by either party hereunder shall not be deemed
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to be in default and such party shall be entitled to an extension of time to perform its obligations hereunder where delays in performance are due to causes beyond the control and without the fault of such party, including as applicable: war; insurrection; strikes; lockouts; riots; floods; earthquakes; fires; casualties; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inabili ty to secure necessary labor, materials or tools; delays of any contractor, subcontractor or supplies that are not caused by Developer; acts of the other party; acts or the failure to act of City or any other public or governmental agency or entity that are not caused by Developer; or other causes beyond the reasonable control of the party. Notwithstanding the foregoing, Developer ’s inability to secure satisfactory financing, interest rates, and market and economic conditions shall not entitle Developer to an extension of time to perform. An extension of time for any cause permitted under this Section 9.3 shall be limited to the period of the enforced delay, which period 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 of knowledge of the commencement of the cause. If no written notice is sent within thirty (30) days, for purposes of measuring the extension period for performance of the ob ligation in question, the period of the enforced delay shall commence to run from the date written notice is sent to the other party. Times of performance under this Agreement may be extended by mutual written agreement of City and Developer.
9.4 Inspection of Books and Records. City shall have the right at all reasonable times to inspect the books and records of Developer pertaining to the Property and the Project as pertinent to the purposes of this Agreement.
9.5 Interpretation. The terms of this Agreement sh all be construed in accordance with the meaning of the language used and shall not be construed for or against any party by reason of the authorship of this Agreement or any other rule of construction which might otherwise apply. The section headings are for purposes of convenience only, and shall not be construed to limit or extend the meaning of this Agreement.
9.6 Entire Agreement, Waivers and Amendments . This Agreement integrates all of the terms and conditions mentioned herein, or incidental hereto, and supersedes all negotiations and previous agreements between the parties with respect to the City HOME Loan. All waivers of the provisions of this Agreement must be in writing and signed by the appropriate authorities of the party to be charged, and all am endments and modifications hereto must be in writing and signed by the appropriate authorities of City and Developer. The City hereby authorizes the City Manager or Director of Community Development for the City of Fullerton or either of their designee, to the extent allowed by federal, state or local law, to approve or consent to any matter requiring City approval or consent as provided in this Agreement, and to perform and carry out any activities, including but not limited to, the execution of any additional agreements, addenda or amendments to effectuate the purpose of this Agreement and the intent of the parties hereto.
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9.7 Severability. If any term, provision, covenant, or condition of this Agreement is held by a court of compe tent jurisdiction to be invalid, void, or unenforceable, the remainder of this Agreement shall not be affected thereby to the extent such remaining provisions are not rendered impractical to perform taking into consideration the purposes of this Agreement. In the event that all or any portion of this Agreement is found to be unenforceable, this Agreement or that portion which is found to be unenforceable shall be deemed to be a statement of intention by the parties; and the parties further agree that in su ch event, and to the maximum extent permitted by law, they shall take all steps necessary to comply with such procedures or requirements as may be necessary in order to make valid this Agreement or that portion which is found to be unenforceable.
9.8 Restriction on Transfer of Developer ’s Rights and Obligations . Developer shall not sell, assign, transfer, mortgage, lease, hypo thecate, or convey (any of the foregoing, a “Transfer”) the Property, or any part thereof or any of Developer ’s rights or obligations hereunder without the City ’s prior written consent, which consent may be granted or withheld in the City ’s reasonable discretion except for the following transfers (“Permitted Transfers”), which shall not require the consent of City:
(a) Permitted Encumbrances;
(b) a conveyance of the Property resulting from the foreclosure of a Permitted Encumbrance (or a deed-in-lieu of such a foreclosure);
(c) Developer’s assignment or transfer of this Agreement and the Property to a general partner of Developer or to one or more of the members of said general partner; (d) the lease of the Residential Units consistent with the City HOME Regulatory Agreement;
(e) during the time in which Developer is in the form of a limited partnersh ip, the transfer and sale of limited partnership interests by the Investor to an affiliate of the Investor;
(e) during the time in which Developer is in the form of a limited partnership, in the event that any general partner of Developer is removed by the limited partner thereof for cause following default under the partnership agreement, the transfer of the general partner interest to an affiliate of the limited partner if the replacement general partner is a 501(c)(3) tax exempt nonprofit corporation selected by the limited partner (other than an affiliate of the limited partner) approved by City, in its reasonable discretion, so long as such successor nonprofit corporation has the same or substantially sim ilar experience, assets and access to capital and private funding as Developer did at the Effective Date of this Agreement; and
(h) the transfer of the Project from Developer to one of the general partners the Developer or an affiliate of one or both of the general partners of the Developer at the end of the tax credit compliance period for the Project.
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Developer acknowledges that the identity of Developer is of particular concern to the City, and it is because of Developer ’s identity that the City has ente red into this Agreement with Developer. Except for pursuant to any Permitted Transfer, no voluntary or involuntary successor in interest of Developer shall acquire any rights or powers under this Agreement.
Developer shall deliver written notice to City re questing approval of any assignment or transfer requiring City approval hereunder. In considering whether it will grant approval to any assignment by Developer of the Property and this Agreement or any portion thereof, City shall consider factors such as the financial strength and capability of the proposed transferee to perform Developer ’s obligations hereunder and the proposed assignee ’s experience and expertise in the planning, financing, development, and operation of similar projects.
No assignment, ex cluding assignments for Permitted Encumbrances, shall be effective as to City unless and until the proposed assignee and Developer execute and deliver to City an assignment and assumption agreement in form reasonably satisfactory to the Contract Officer and the Special Legal Counsel.
9.9 Prohibition Against Assignment and Transfer by City. The City shall not voluntarily assign or transfer its interest in all or any part of this Agreement (which by definition includes all attachments hereto) without Developer ’s prior written approval, which shall not be unreasonably withheld.
9.10 Third-Party Beneficiaries. No person or entity other than Developer and the City and the permitted successors and assigns of each of them, shall be authorized to enforce the provisions of this Agreement.
9.11 Authority to Execute Agreement. The persons executing this Agreement on behalf of each party represents and warrants to the other party that by proper action such persons have been duly authorized to execute and deliver this Agreement.
9.12 Contract Administration and Approvals . The Contract Officer shall be the person designated by City to administer this Agreement on behalf of City and such administrative authority shall include but not be limited to the right to approve extensions of time on behalf of City and to issue waivers, and the Developer Representative shall be the person designated by Developer to administer this Agreement on behalf of Developer.
The City Manager and the Community Development Director (or their respect ive authorized representatives) each shall have the authority to consent to any matter requiring City approval or consent as provided in this Agreement, and to perform and carry out any activities concerning the City HOME Loan, including but not limited to , the execution of any additional agreements, addenda or amendments so long as such actions do not substantially add to the costs of City as specified herein.
9.13 Covenants to Run with the Land . This Agreement shall be binding on Developer’s successors in in terest in the Property until the later of (i) the date the City HOME Regulatory Agreement has expired and, (ii) the City HOME Loan, and all interest
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thereon, has been fully repaid pursuant to the terms of the City HOME Loan Note ; provided, however, that no twithstanding the foregoing, all indemnification obligations of Developer hereunder and all applicable HOME Requirements shall survive in accordance with their terms.
This Agreement is designed to create equitable servitudes and covenants running with the Property, in favor of City. The covenants, conditions, restrictions, reservations, equitable servitudes, liens and charges set forth herein shall be binding upon all persons having any right, title or interest in the Property, or any part thereof, their heirs, successive owners and assigns; shall inure to the benefit of City and its successors and assigns, shall be binding upon Developer, its successors and assigns and successors in interest; and may be enforced by City and its successors and assigns. Developer hereby declares its understanding and intent that the burden of the covenants set forth herein touch and concern the land. Developer hereby further declares its understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Property for purposes of affordable housing. City shall have the right to designate real property as benefited by the covenants contained herein during the term of this Agreement. In amplification and not in restriction of the provisions set forth hereinabove, it is intended and agreed that City shall be deemed a beneficiary of the agreements and covenants provided herein both for and in its own right and also for the purposes of protecting the inte rests of the community. All covenants without regard to technical classification or designation shall be binding for the benefit of City and such covenants shall run in favor of City for the entire period during which such covenants shall be in force and effect, without regard to whether City is or remains an owner of any land or interest therein to which such covenants relate.
9.14 Time of the Essence . Time is of the essence in the performance of this Agreement.
9.15 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and such counterparts shall constitute one and the same instrument.
9.16 Attachments. This Agreement contains eight (8) Attachments, attached hereto and made a part hereof by this refer ence. Said Attachments are identified as follows:
1 Legal Description of Property
2 Schedule of Performance
3 Summary of Legal Requirements
4 Project Budget
5 City HOME Loan Note
6 City HOME Loan Deed of Trust
7 City HOME Regulatory Agreement
8 HOME Unit Mix
[Signatures on next page]
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Signature Page to Affordable Housing and Loan
Agreement (HOME Funds)
IN WITNESS WHEREOF, City has entered into this Agreement as of the date set forth above.
DATED: _________________________
“CITY”
CITY OF FULLERTON, a California
municipal corporation
By: _____________________________
Eric Levitt, City Manger
ATTEST:
Lucinda Williams, MMC, City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
Allison LeMoine-Bui
Special Counsel
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Signature Page to Affordable Housing and Loan
Agreement (HOME Funds)
IN WITNESS WHEREOF, Developer entered into this Agreement as of the date set forth above.
DEVELOPER:
[Signature block to be inserted]
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ATTACHMENT 1
-1-
ATTACHMENT NO. 1
LEGAL DESCRIPTION OF PROPERTY
[To be inserted]
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ATTACHMENT 2
-1-
ATTACHMENT NO. 2
SCHEDULE OF PERFORMANCE
ITEM OF PERFORMANCE TIME FOR PERFORMANCE
1. Developer submits to City evidence of
general liability insurance meeting the
requirements of Section 3.9 (§ 3.9).
Prior to and as a condition to City
entering into this Agreement.
2. Developer submits evidence of financial
capability to develop the Project to City
(§ 3.10.3).
Prior to and as a condition to City
entering into this Agreement.
3. Developer executes and delivers to City the
City HOME Loan Note, and deposits into
the Construction Escrow the City HOME
Loan Deed of Trust, and City HOME
Regulatory Agreement (§ 2.6).
Prior to and as a condition to City
entering into this Agreement.
5. City executes City HOME Regulatory
Agreement and causes City HOME
Regulatory Agreement and City HOME
Loan Deed of Trust to be recorded (§ 2.6).
Prior to or concurrently with City’s
execution of this Agreement.
Recording shall occur concurrently
with the close of the Construction
Escrow.
6. Developer obtains building permit and
commences construction of the Project.
Within thirty (30) days after
execution of this Agreement and
the City HOME Regulatory
Agreement.
7. Developer completes construction of the
Project (§ 3.7).
Within twenty-four (24) months
after Developer commences
construction.
8. Developer causes affordable housing
Program to be operated on the Property.
For a period of 20 years from
Construction Completion Date and
in accordance with the City HOME
Regulatory Agreement.
It is understood that the foregoing Schedule is subject to all of the terms and conditions of the text of the Agreement. The summary of the items of performance in this Schedule is not intended to supersede or modify the more complete description in the text; in the event of any conflict or inconsistency between this Schedule and the text of the Agreement, the text shall govern. Times of performance under this Agreement may be extended by mutual written agreement of City and Developer ; provided, however,
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ATTACHMENT 2
-2-
that p ursuant to the HOME four -year project completion deadline at 24 CFR
92.205(e)(2), the timeframe for Developer ’s completion of construction of the Project may not be extended to a date that is more than four years following the Effective Date without first securing a one-year extension from HUD. Notwithstanding anything to the contrary in this Agreement, if Developer fails to complete the Project within such four year period (or if such four year period is extended by HUD within such extended period) and such failure results in a requirement that all City HOME Loan funds must be repaid to HUD, Developer shall be solely responsi ble for such repayment with respect to all amounts of the City HOME Loan that have been disbursed to Developer.
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ATTACHMENT 3
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ATTACHMENT NO. 3
SUMMARY OF LEGAL REQUIREMENTS FOR HOME FUNDS
In addition to the requirements set forth in other provisions of the Agreement, Developer shall comply, and shall cause all Developer Personnel to comply, with the following regulations and requirements.1
1. Use of the HOME Funds . The City HOME Loan shall be used only for eligible costs (see, e.g., 24 C.F.R. § 92.206, 92.214, 92.300(c), and 92.301), and any development work shall be completed within the times referred to in the Affordable Housing and Loan Agreement between City and Developer.
2. Affordability. The HOME Units shall meet the affordab ility requirements of the HOME Requirements (24 C.F.R. § 92.252) or this Agreement and the City HOME Regulatory Agreement, whichever is more restrictive. If the HOME Units do not meet the affordability requirements of the HOME Requirements for the specifi ed time period, Developer shall repay the City HOME Loan to City promptly upon demand by City. In such event, Developer shall not be released from the affordability and other covenants and restrictions set forth in this Agreement and the City HOME Regulatory Agreement, which shall continue to apply independent of the HOME Requirements.
3. Equal Opportunity and Nondiscrimination.
a. Title VI of the Civil Rights Act of 1964, as amended, including Public Law 88-352 implemented in 24 CFR Part 1 . This law provides in part that no person shall, on the grounds of race, color, or national origin be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving federal financial assistance. In regard to the sale or lease of the Property, Developer shall cause or require a covenant running with the land to be inserted in the deed and leases prohibiting discrimination under this Title, and providing that City and the United States are beneficiaries of and entitled to enforce such covenants.
Developer shall enforce such covenant and shall not itself so discriminate. b. Fair Housing Act, Title VIII of the Civil Rights Act of 1968, as amended, including Public Law 90-234. The Fair Housing Act provides in part that there shall be no discrimination in housing practices on the basis of race, color, religion, sex, and national origin. The Fair Housing Act was amended in 1988 to provide protections from discrimination in any aspect of the sale or rental of housing for families with children
1 This exhibit is a list and summary of some of the applicable legal requirements and is not a complete list of all Developer requirements. The description set forth next to a statute or regulation is a summary of certain provisions in the statute or regulation and is in no way intended to be a complete description or summary of the statute or regulation. In the event of any conflict between this summary and the requirements imposed by applicable laws, regulations, and requirements, the applicable laws, regulations, and requirements shall apply.
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ATTACHMENT 3
-2-
and persons with disabilities. The Fair Housing Act also establishes requirements for the design and construction of new rental or for -sale multi -family housing to ensure a minimum level of accessibility for persons with disabilities. c. Section 109 of Title I of the Housing and Community
Development Act of 1974, as amended, including 42 U.S.C. 5301 et. Seq., 42 U.S.C. 6101 et. Seq., and 29 U.S.C. 794. This law provides in part that no person on the grounds of race, color, national origin, sex, or religion shall be excluded from participation in, be denied the benefits of, or otherwise be subject to discrimination under any activity funded in whole or part with funds under this Title.
d. Section 104(b) of Title I of the Housing and Community Development Act of 1974, as amended, including 42 U.S.C. 5301 et. Seq. This law provides in part that any grant under Section 106 shall be made only if the grantee certifies to the satisfaction of the Secretary of HUD that the grantee will, among other things, affirmatively further fair housing.
e. Executive Order 11246, as amended . This order includes a requirement that grantees and subrecipients and their contractors and subcontractors not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin.
f. Executive Order 11063, as amended, including 24 CFR Part 107.
This order and its implementing regulati ons include requirements that all actions necessary be taken to prevent discrimination because of race, color, religion, sex, or national origin in the use, occupancy, sale, leasing, rental, or other disposition of property assisted with Federal loans, advances, grants, or contributions. g. Section 504 of the Rehabilitation Act of 1973, as amended . This Act specifies in part that no otherwise qualified individual shall solely by reason of his or her disability or handicap be excluded from participation (including employment), denied program benefits, or subjected to discrimination under any program or activity receiving Federal assistance. Developer must ensure that its programs are accessible to and usable by persons with disabilities.
h. The Americans with Disabilities Act (ADA) of 1990, as amended.
This Act prohibits discrimination on the basis of disability in employment by state and local governments and in places of public accommodation and commercial facilities. The ADA also requires that facilities t hat are newly constructed or altered, by, on behalf of, or for use of a public entity, be designed and constructed in a manner that makes the facility readily accessible to and usable by persons with disabilities. The Act defines the range of conditions that qualify as disabilities and the reasonable accommodations that must be made to assure equality of opportunity, full participation, independent living, and economic self-sufficiency for persons with disabilities. i. The Age Discrimination Act of 1975, a s amended . This law provides in part that no person shall be excluded from participation in, be denied program
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ATTACHMENT 3
-3-
benefits, or subjected to discrimination on the basis of age under any program or activity receiving federal assistance.
j. EEO/AA Statement. Developer shall, in all solicitations or advertisements for employees placed by or on behalf of Developer, state that it is an Equal Opportunity or Affirmative Action employer.
k. Minority/Women Business Enterprise. Developer will use its best efforts to afford small businesses and minority and women -owned business enterprises the maximum practicable opportunity to participate in the performance of the Agreement.
As used in the Agreement, the term “small business” means a business that meets the criteria set forth in Section 3(a) of the Small Business Act, as amended (15 U.S.C. 632), and “minority and women-owned business enterprise” means a business at least fifty- one percent (51%) owned and controlled by minority group members or women. For the purpose of this definition, “minority group members ” are Afro -Americans, Spanish - speaking, Spanish surnamed or Spanish -heritage Americans, Asian -Americans, and American Indians. Developer may rely on written representations by businesses regarding their status as minority and female business enterprises in lieu of an independent investigation.
l. Nondiscrimination. Developer shall comply with the federal requirements and nondiscrimination provisions in 24 C.F.R. § 92.350, which include requirements on nondiscrimination and equal opportunity, disclosure requirements, debarred, suspended or ineligible contractors, and maintaining a drug-free workplace.
4. Environmental.
a. Air and Water. Developer shall comply with the following regulations insofar as they apply to the performance of the Agreement: Clean Air Act, 42 U.S.C. 7401, et seq.; Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251, et seq., as amended, 1318 relating to inspection, monitoring, entry, reports, and information, as well as other requirements specified in said Section 114 and Section 308, and all regulations and guidelines issued thereunder; and the U.S. Environmental Protection City regulations pursuant to 40 CFR Part 50, as amended.
b. Flood Disaster Protection Act of 1973 . Developer shall assure that for activities located in an area identified by FEMA as having special flood hazards, flood insurance under the National Flood Insurance Program is obtained and maintained. c. Lead-Based Paint. Developer shall comply with the Lead -Based Paint Regulations referenced in 24 C.F.R. 92.355, including 24 C.F.R. Part 35, et. Al. d. Historic Preservation . Developer shall comply with the historic preservation requirements set forth in the National Historic Preservation Act of 1966, as amended (16 U.S.C. 470) and the procedures set forth in 36 C.F.R. Part 800, Advisory Council on Historic Preservation Proce dures for Protection of Historic Properties and related laws and Executive Orders, insofar as they apply to the performance of this Agreement. In general, this requires concurrence from the State Historic Preservation
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Officer for all rehabilitation and demolition of historic properties that are fifty years old or older or that are included on a federal, state, or local historic property list. e. Limitation on Activities Pending Clearance . In accordance with 24 C.F.R. § 58.22 entitled “Limitations on activities pending clearance,” neither a recipient nor any participant in the development process, including public or private nonprofit or for-profit entities, or any of their contractors, may commit HUD assistance under a program listed in 24 C.F.R. § 58.1(b) on an activity or project until HUD or the state has approved the recipient ’s Request for Release of Funds (RROF) and the related certifications have been approved. Neither a recipient nor any participant in the development process may commit non-HUD funds or undertake an activity or project that would have an adverse environmental impact or limit the choice of reasonable alternatives. Upon completion of environmental review or receipt of environmental clearance, City shall notify Developer. HUD funds s hall not be utilized before this requirement is satisfied. The environmental review or violation of the provisions may result in approval, modification of cancellation of the City HOME Loan. If a project or activity is exempt under 24 C.F.R. § 58.34, or is categorically excluded (except in extraordinary circumstances) under 24 C.F.R. § 58.35(b), no RROF is required and the recipient may undertake the activity immediately after the City has documented its determination that each activity or project is exe mpt and meets the conditions specified for such exemption under this section by issuing a Notice to Proceed.
5. Uniform Administrative Requirements . If applicable, Developer shall comply with applicable uniform administrative requirements as described in 24 C.F.R. §§ 92.505.
6. Other Program Requirements . Developer shall carry out each activity under the Agreement in accordance with all applicable federal laws and regulations described in Subpart H of 24 C.F.R. § 92 except for City’s responsibility for initiating the environmental review process under the provisions of 24 C.F.R. Part 58.
7. Relocation. City shall not be responsible for relocating any occupants from the Site in connection with the Program or Project. If required, Participant shall have the sole and exclusive responsibility for providing relocation assistance and paying all relocation costs required to comply with all applicable federal and state laws, rules, and regulations, including the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, 42 U.S.C. § 4601 et seq., as amended, and implementing regulations, and HUD Handbook 1378. Participant shall indemnify, defend, and hold City harmless from and against any claims, liabilities, damages, or losses made against it by tenants or occupants of the Site, including without limitation claims for relocation assistance, inverse condemnation, and claims otherwise arising from any act or omission of Participant pursuant to the provision of relocation assistance.
8. Project Requirements . Developer shall comply with all project requirements set forth in 24 C.F.R. §§ 92.250 -92.258, as applicable in accordance with the type of project assisted.
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9. Property Standards. Developer shall perform any construction work and maintain the HOME Units in compliance with the property standards in 24 C.F.R. § 92.251 and the lead-based paint requirements in 24 C.F.R. § 92 Part 35, Subparts A, B, J, K, M and R, as applicable.
10. Records and Reports . Developer shall provide to City all records and reports relating to the Program Activities that may be reasonably requested by City in order to enable it to perform its recordkeeping and reporting obligations pursuant to the HOME Requirements, including 24 C.F.R. §§ 92.508 and 92.509.
11. Conflict of Interest. Developer will comply with 2 C.F.R. Part 200 and 24 C.F.R. 84.42, 85.36 and 92.356, as applicable, regarding the avoidance of conflict of interest, which provisions include (but are not limited to) the following:
i. Developer shall maintain a written code or standards of conduct that shall govern the performance of its officers, employees or agents engaged in the award and administration of contracts supported by Federal funds. ii. No employee, officer or agent of the Developer shall participate in the selection, or in the award, or administration of, a contract supported by Federal funds if a conflict of interest, real or apparent, would be involved. iii. No covered persons who exercise or have exercised any functions or responsibilities with respect to HOME-assisted activities, or who are in a position to participate in a decision -making process or gain inside information with regard to such activities, may obtain a financial interest in any contract, or have a financial interest in any contract, subcontract, or agreement with respect to the HOME - assisted activity, or with respect to the proceeds from the HOME-assisted activity, either for themselves or those with whom they have business or immediate family ties, during their tenure or for a period of one (1) year thereafter. For purposes of this paragraph, a “covered person ” includes any person who is an employee, agent, consultant, officer, or elec ted or appointed official of the Grantee, the Developer, or any designated public agency.
12. Affirmative Marketing. If the City HOME Loan will be used for housing containing 5 or more assisted units, Developer shall establish for City ’s review and approval a plan and procedures to affirmatively market the units. The objective of the plan shall be to provide information and attract eligible persons from all racial, ethnic and general groups in the housing market area to the available housing. In connect ion therewith, Developer shall perform those affirmative marketing responsibilities set forth in 24 C.F.R. § 92.351(a) and the marketing plan shall include the following:
a. methods for informing the public, owners, and potential tenants about federal fair housing loans and the City’s affirmative marketing policy; b. requirements and practices Developer must adhere to in order to carry out the affirmative marketing procedures and requirements;
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c. procedures to be used by Developer to inform and solicit applications from persons in the housing market area that are not likely to apply for the housing without special outreach;
d. records that will be kept describing actions taken by Developer to affirmatively market units and records to assess the results of those actions; and e. a description of how Developer will assess the success of affirmative marketing actions and what corrective actions will be taken where affirmative marketing requirements are not met.
13. Displacement. Consistent with the other goals and objectives of Subpart H of 24 C.F.R. § 92, Developer shall take all reasonable steps to minimize the displacement of persons (families, individuals, businesses, nonprofit organizations, and farms) as a result of the Program Activities.
14. Debarment and Suspension . As required in 24 C.F.R. § 92.357, Developer shall comply with all debarment and suspension certifications.
15. Enforcement of Agreement. In addition to the other provisions set forth in the Agreement, City shall have the authority to enforce Developer ’s obligation to comply with the HOME Requirements.
16. Return of HOME Funds . U pon the completion of the Project or earlier termination of the Agreement, Developer shall transfer to City any HOME funds on hand for which Eligible Loan Expenses have not been incurred and any accounts receivable attributable to the use of HOME funds . In addition to the foregoing, in the event the Eligible Loan Expenses for which any disbursement of City HOME Loan f unds are disbursed are not incurred by Developer within thirty (30) days after City’s disbursement, or such longer time as City approves in its sole discretion, City shall have the right to require that Developer immediately return the City HOME Loan proceeds to City.
17. Monitoring. Not less than once per year, City shall review Developer ’s activities and operations under the Agreement and Developer ’s compliance with the HOME Requirements. Such review may include an on-site inspection of the HOME Units (including unit interiors). If such an on -site inspection of the HOME Units is to be undertaken, City shall coordinate such inspection with Developer. The monitoring required pursuant to this paragraph shall be in compliance with the requirements of 2 4 C.F.R. § 92.504.
18. Tenant Participation Plan . Developer shall provide to City for approval the form of the lease agreement to be used for the rental units, which lease must be fair and provide for a grievance procedure. In addition, Developer shall p rovide to City for approval a plan that provides for tenant participation in management decisions. (24 C.F.R § 92.303.)
19. Anti-Lobbying Certification . By its execution of the Agreement, Developer hereby certifies that:
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i. No Federal appropriated funds have been paid or will be paid, by or on behalf of it, to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment, or modification of any Federal contract, grant, loan, or cooperative agreement.
ii. If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congre ss, an officer or employee of Congress, or an employee of a Member of Congress in connection with this Federal contract, grant, loan, or cooperative agreement, it will complete and submit Standard Form-LLL, “Disclosure Form to Report Lobbying,” in accordance with its instructions.
iii. It will require that the language of this certification be included in the award documents for all subawards at all tiers (including subcontracts, subgrants, and contracts under grants, loans, and cooperative agreements) and that all subrecipients shall certify and disclose accordingly.
This certification is a material representation of fact upon which reliance was placed when this transaction was made or entered into. This certification is a prerequisite for making or entering into this transaction imposed by section 1352, title 31, U.S.C. Any person who fails to file the required certification shall be subject to a civil penalty of not less than $10,000 and not more than $100,000 for each such failure. At the request of City, Developer shall execute a separate document that contains the certifications set forth above.
20. Drug-Free Workplace Requirements. Developer shall comply with and be subject to the requirements of the federal drug -free workplace requirements, which include the following actions be taken :
i. Publishing a statement notifying employees that the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance is prohibited in the grantee’s workplace and specifying the actions that will be taken against employees for violation of such prohibition.
ii. Establishing an ongoing drug -free awareness program to inform employees about: (a) the dangers of drug abuse in the work place; (b) the grantee’s policy of maintaining a drug-free workplace; (c) any available drug counseling, rehabilitation, and employee assistance programs; and (d) the penalties that may be imposed upon employees for drug abuse violations occurring in the workplace.
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iii. Making it a requirement that each employee to be engaged in the performance of the grant be given a copy of the statement required by paragraph (i).
iv. Notifying the employee in the statement required by paragraph (i) that, as a condition of employment under the grant, the employee will: (a) abide by the terms of the statement; and (b) notify the employer in writing of his or her conviction for a violation of a criminal drug statute occurring in the workplace no later than five calendar days after such conviction.
v. Notifying the agency in writing, within ten calendar days after receiving notice under sub -paragraph (iv)(b) from an employee or otherwise receiving actual notice of such conviction. Employers of convicted employees must provide notice, including position title, to every grant officer or other designee on whose grant activity the convicted employee was working, unless the Federal agency has designated a central point for the receipt of such notices. Notice shall include the identification number(s) of each affected grant. vi. Taking one of the following actions, within 30 calendar days of receiving notice under subparagraph (iv)(b), with respect to any employee who is so convicted: (a) taking appropriate personnel action against such an employee, up to and including termination, consistent with the requirements of the Rehabilitation Act of 1973, as amended; or (b) requiring such employee to participate satisfactorily in a drug abuse assistance or rehabilitation program approved for such purposes by a Federal, State or local healt h, law enforcement, or other appropriate agency.
vii. Making a good faith effort to continue to maintain a drug -free workplace through implementation of paragraphs (i), (ii), (iii), (iv), (v), and (vi).
21. Broadband Infrastructure. Any new construction o r substantial rehabilitation, as substantial rehabilitation is defined by 24 C.F.R. 5.100, of a building with more than 4 rental units, for which HOME funds are first obligated by the City on or after April 19, 2017, shall include installation of broadband infrastructure, as this term is also defined in 24 C .F.R. 5.100, except where the City determines and, in accordance with § 92.508(a)(3)(iv), documents the determination that:
The location of the new construction makes installation of broadband infrastructure infeasible; or
The cost of installing the infrastructure would result in a fundamental alteration in the nature of its program or activity or in an undue financial burden.
22. Procurement. If applicable, Developer shall comply with the procurement standards under 2 C.F.R. §§ 200.317-200.326. Developer shall comply with all existing and future City policies concerning the purchase of equipment.
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23. Section 3 of the Housing and Community Development Act of 1968 .
Participant shall comply with and cause its contractors and subcontractors to comply with the requirements of Section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C. § 1701u), the HUD regulations issued pursuant thereto at 24 C.F.R, Part 75, and any applicable rules and orders of HUD issued thereunder. 24 C.F.R, Part 75 specifies that employment and other economic opportunities generated by certain HUD financial assistance shall, to the greatest extent feasible, and consistent with existing Federal, State and local laws and regulations, be directed to low - and very low -income persons, particularly those who are recipients of government assistance for housing, and to business concerns which provide economic opportunities to low- and very low-income persons. The following benchmarks for the proportion of work hours by Section 3 workers and Targeted Section 3 workers, as defined at 24 C.F.R. Part 75.21:
Twenty-five (25) percent or more of the total number of labor hours worked by all workers on a Section 3 project are Section 3 workers; and Five (5) percent or more of the total number of labor hours worked by all workers on a Section 3 project are Targeted Section 3 workers.
It is the responsibility of contractors and subcontractors to implement efforts t o achieve Section 3 compliance. Any contractor that does not meet the Section 3 benchmarks shall demonstrate in writing why meeting the benchmarks were not feasible.
24. Violence Against Women Act Requirements. The Violence Against Women Act (VAWA) requirements set forth in 24 C.F.R. Part 5, Subpart L, apply to all HOME assisted rental housing . For the HOME program, the “covered housing provider,” as this term is used in HUD ’s regulations in 24 CFR part 5, subpart L, refers to: (i) The housing owner for the purposes of 24 CFR 5.2005(d)(1), (d)(3), and (d)(4) and § 5.2009(a); and (ii) The participating jurisdiction and the owner for purposes of 24 CFR
5.2005(d)(2), 5.2005(e), and 5.2007, except as otherwise provided in paragraph (g) of this section. Developer shall cause to include appropriate VAWA lease term/addendum in its leases wi th tenants of HOME Units. For HOME -funded projects, the following requirement shall apply in place of the requirements at 24 CFR 5.2009(b): If a family living in a HOME Unit separates under 24 CFR 5.2009(a), the remaining tenant(s) may remain in the HOME Unit.
* * *
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ATTACHMENT NO. 4
PROJECT BUDGET
[Attached]
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ATTACHMENT NO. 5
CITY HOME LOAN NOTE
[Attached]
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PROMISSORY NOTE (CITY HOME LOAN) SECURED BY
DEED OF TRUST
$1,000,000 _________________, ____
FOR VALUE RECEIVED, the undersigned, __________________________, LP, a California limited partnership ( “Borrower”), promises to pay to the CITY OF FULLERTON, a California municipal corporation (“City”), the sum of One Million Dollars ($1,000,000) or so much thereof as may be disbursed hereunder (“Note Amount”), plus accrued interest on the unpaid principal, plus such other costs, charges, and fees which may be owing from time to time, all subject to the terms, conditions, and provisions set forth in this Promissory Note (City HOME Loan) Secured by Deed of Trus t ( “Note”).
Except as otherwise provided herein, a ll terms not otherwise defined herein shall have the meaning ascribed in Exhibit “A” to this Note.
Reference is made to the following documents (collectively, together with this Note, the “City HOME Loan Documents”):
(1) The Affordable Housing and Loan Agreement between Borrower and City dated on or about the date hereof, which sets forth the terms and conditions for City’s agreement to provide the “City HOME Loan” (as that term is defined in Section 1 below) to Borrower (“City HOME Loan Agreement”). (2) The Regulatory Agreement and Declaration of Covenants and Restrictions (City HOME Funds) between Borrower and City dated on or about the date hereof, and recorded against the real property to be developed by Borrower pursuant to the City HOME Loan Agreement ( “Property”), in the Official Records of Orange County, California, as may be amended from time to time (“City HOME Regulatory Agreement”).
(3) The City HOME Loan Deed of Trust with Assignment of Rents (HOME Loan) that shall be executed by Borrower for the benefit of City securing the City HOME Loan, and recorded in the Official Records of Orange County, California, as more particularly set forth in the Loan Agreement (“City HOME Loan Deed of Trust”).
1. Loan Amount. The principal amount of the City’s loan to Borrower is One Million Dollars ($1,000,000) (“City HOME Loan ”), which shall accrue simple interest at the rate of three percent (3.0%) per annum commencing on the date of this Note. The City HOME Loan shall be disbursed to Borrower in accordance with the City HOME Loan Agreement, when costs are incurred for “Eligible HOME Loan Expenses” (as that term is defined in the City HOME Loan Agreement).
2. Term of Note; Repayment of Loan Amount . Except as provided below, the entire City HOME Loan and accrued interest thereon shall be due and payable in a single lump-sum payment on the date that is fifty-five (55) years after all units in the rental affordable housing development Borrower is constructing and operating on the Property
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pursuant to the City HOME Loan Agreement and City HOME Regulatory Agreement (“Project”) have received all required occupancy permits from the City, but in no event later than the date that is fifty-seven (57) years after the date of this Note. There shall be no penalty to Borrower for any prepayment of the City HOME Loan.
Commencing as of the date all amounts due to City under the “AHPDA Land Loan Note” and “AHPDA Bond Loan Note” (as those terms are defined in the City HOME Loan Agreement have been fully repaid (such date, the “Note Repayment Commencement Date ”), the Note Amount shall be paid by the Borrower ’s annual payment to City of fifty percent (50%) of the Project Cash Flow from operation of the Project ( “City’s Share ”), as determined by a Project Cash Flow calculation from the operation of the Project the preceding calendar year ; provided, however, that said fifty percent (50%) shall be divided proportionately with any other lenders with loans payable from Residual Receipts or net cash flow , if any such loans are obtained by Developer .
Annual Project Cash Flow payments shall be made by the Borrower by cashier ’s check and shall be delivered on or before May 1 st for each year during the term of this Note commencing on the Note Repayment Commencement Date and continuing until the Note Amount and all unpaid interest thereon has been repaid in full. Additionally, following the Note Repayment Commencement Date, the Note Amount shall be paid by any or all of the following: (i) seventy-five percent (75%) of the Refinancing Net Proceeds immediately upon any refinancing of the loans secured by the Property (or any part thereof), subject to any required pro rata split with other public agency lenders, to the extent applicable, (ii) seventy-five percent ( 75%) of th e Transfer Net Proceeds immediately upon any transfer in whole or in part of the Project, subject to any required pro rata split with other public agency lenders, to the extent applicable, and (iii) any Cost Savings, pursuant to Section 9.19 of the “AHPDA” (as that term is defined in the City HOME Loan Agreement).
Borrower acknowledges that City ’s Share has been determined based on the collective principal amount of the City HOME Loan amount and the amount of the “AHPDA Bond Loan” and “AHPDA Land Loan” (as those terms are defined in the City HOME Loan Agreement) and one hundred percent (100%) of City ’s Share shall be allocated to repayment of the AHPDA Land Loan until the AHPDA Land Loan has been fully repaid, at which time, one hundred percent (100%) of City’s Share shall be allocated to repayment of the AHPDA Bond Loan until the AHPDA Bond Loan has been fully repaid, at which time one hundred percent (100%) of City’s Share shall be allocated to repayment of this Note.
3. Records. For the purposes of ascertaining the amount of Project Cash Flow, Borrower shall prepare and keep or cause to be prepared and kept on the Property or at Borrower’s principal place of business (or at such other location approved by Cit y, which approval shall not be unreasonably withheld) for a period of not less than twenty - four (24) months following the end of each calendar year, adequate records for the computation of Gross Income and Operating Expenses.
4. Reports. Commencing in the calendar year after the end of the tax credit compliance period for the Project under Internal Revenue Code Section 42(i)(1), Borrower shall submit to City on or before August 1 of each calendar year, together with the remittance of the payment due, if any, a written audit report prepared and certified by an
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independent professional accountant of Borrower ’s choosing, and acknowledged and signed by Borrower (or if Borrower is a corporation or a partnership, by a duly authorized corporate officer or genera l partner of Borrower) to be true and correct, showing in reasonable, accurate detail the amount of Project Cash Flow for the immediately preceding calendar year. The reports and certificates referred to herein shall be in such form and style and contain such details and breakdown as City may deem reasonably acceptable. The acceptance by City of payments shall be without prejudice to City’s right to an examination of the books and records of Borrower in order to verify the amount of Project Cash Flow. If B orrower fails to prepare and deliver promptly any required audit report, City shall have the right, at Borrower’s expense, to make an audit of all books and records of Borrower, including its respective bank accounts, which in any way pertain to or show Project Cash Flow, and to prepare the report or reports which Borrower has failed to prepare and deliver. Borrower shall give City access to such books and records at all reasonable times for purposes of preparing any such report.
5. Audit. From time to time and at any time, City or City’s representative may examine any records required to be maintained under Section 3 during regular business hours upon not less than seventy -two (72) hours written notice for the purpose of investigating and verifying the accuracy of any statement of Project Cash Flow. City may from time to time and at any time, upon reasonable notice, cause an audit of Borrower ’s books and records to be made by a person or persons of City ’s selection and, if any statements of Project Cash Flow made to City shall be found to be inaccurate, one party shall pay to the other on demand such sums as may be necessary to settle in full the actual payment that should have been paid to City for the calendar years covered by such inaccurate statement o r statements. If said audit shall disclose an inaccuracy which resulted in an underpayment to City greater than two and one-half percent (2.5%) for the applicable period, then Borrower shall immediately pay to City the cost of such audit; otherwise, the cost of such audit shall be paid by City.
6. Default. Borrower shall be deemed in default of this Note in the event (i) Borrower fails to timely make a required payment within ten (10) days following the due date of any payment due hereunder, or (ii) Borrower is in default of any of the other terms of this Note and such default is not cured within thirty (30) days after Borrower ’s receipt of written notice from City specifying the event constituting the default or, for defaults that cannot be cured within s uch thirty (30) day period, the cure of such default is not commenced within thirty (30) days after Borrower’s receipt of the written notice of default from City and thereafter diligently prosecuted to completion within an additional sixty (60) days following the conclusion of such thirty (30) days period (for a total of ninety (90) days), or (iii) Borrower is in default of the City HOME Loan Agreement, the City HOME Regulatory Agreement, the City HOME Loan Deed of Trust, the AHPDA, the AH PDA Bond Loan Note, the AHPDA Land Loan Note, the “AHPDA Bond Loan Deed of Trust,” the ”AHPDA Land Loan Deed of Trust,” or the “AHPDA Regulatory Agreement” (as those terms are defined in the City HOME Loan Agreement) and fails to timely cure such default under the terms of the applicable agreement, it being understood and agreed by Borrower that a default of any of the foregoing agreements (beyond any applicable cure period) shall be a default of this Note. In the event Borrower is in default under this Note (and
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after expiration of the cure periods described in the preceding sentence), City may declare the City HOME Loan immediately due and payable.
In addition to Borrower ’s cure rights hereunder, _____________________, or its successors and assigns permitted pursuant to the City HOME Loan Agreement and City HOME Regulatory Agreement (“Investor”), for so long as Investor is a limited partner investor in Borrower, shall have ten (10) days after receipt of a default notice from City to cure a monetary default of this Note and thirty (30) days after receipt of a default notice to cure any non-monetary default under this Note; provided however, if the non-monetary default is incapable of being cured within thirty (30) days, Investor shall have an additional ninety (90) days to cure such default provided it has commenced to cure the default and is diligently proceeding to cure such default through the end of such period. City shall provide a copy of any written notice of default at the Investor’s mailing address as set forth in Section 15. City shall accept any cure made by Investor as if made by Borrower, but failure by City in timely delivering a default notice to Investor shall not be a default or breach by City under this Note.
7. Additional Terms; Place of Payment, Etc.
(i) Payment of the City HOME Loan shall be made in lawful money of the United States to City at the address set forth below in this Note or at such other address as City or the holder of this Note may direct pursuant to written notice delivered to Borrower.
(ii) If Borrower fails to timely make a required payment within ten (10) days following the due date of such payment, interest at the rate of ten percent (10%) per annum or the maximum legal rate then applicable, whichever is less, shall accrue on the outstanding amount due commencing from the date payment was due. (iii) Borrower agrees to pay the following costs, expenses, and reasonable attorney ’s fees paid or incurred by City, or adjudged by the court, in the collection of amounts in default or other costs incurred as a result of a default by Borrower:
(i) reasonable costs of collection, including costs and exp enses and attorney’s fees paid or incurred in connection with the collection or enforcement of this Note, whether or not suit is filed, and (ii) costs of suit and such sums as the court may adjudge as reasonable attorney’s fees in any action to enforce payment of this Note or any part of it if City prevails in such suit.
8. Assignment. With the exception of “Permitted Transfers” under the City HOME Loan Agreement, this Note shall not be assignable or assumable without the prior, express, written consent of City which may be given or withheld in City’s sole and absolute discretion.
9. Waiver of Presentment. Notwithstanding any other provision herein to the contrary, to the extent permitted by law, Borrower hereby waives the following: (i) notice of default or delinquency except defaults or delinquencies of which City has actual notice, (ii) notice of acceleration, (iii) notice of nonpayment, (iv) notice of costs, expenses and
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losses and interest thereon, (v) notice of interest on interest and late charges, (vi) diligence in taking any action to collect any sums owing under this Note or in proceeding against any of the rights and presentment for payment, demand, protest, and notices of dishonor and/or protest; (vii) the benefits of all waivable exem ptions; and (viii) all defenses and pleas on the grounds of any extension or extensions of the time of payment or of any due date under this Note, in whole or in part, whether before or after maturity and with or without notice.
10. Acceleration Upon Sale, Lease, Encumbrance, or Refinance . To the extent permitted by applicable law, if:
(a) Borrower shall directly or indirectly, voluntarily or involuntarily, or by operation of law or otherwise, including transfers by devise, foreclosure (or deed in lieu of foreclosure) on another deed of trust other than the City HOME Loan Deed of Trust, sell, assign, transfer, dispose of, alienate, encumber, lease, or agree to sell, assign, transfer, dispose of, alienate, encumber, or lease all or any portion of the Property (excluding the lease of the units on the Property in accordance with the City HOME Loan Agreement and City HOME Regulatory Agreement, the lien of the “Permitted Encumbrances” (as that term is defined in the City HOME Loan Agreement), a transfer that is permitted under the City HOME Loan Agreement or the City HOME Regulatory Agreement without City approval provided an assignment and assumption agreement in a form approved by City is executed, and any other assignment, transfer, or encumbrance approved in writing by City’s “Contract Officer” (as that term is defined in the City HOME Loan Agreement)); (b) Borrower shall refinance any lien or encumbrance on terms not reasonably approved by City or, unless otherwise approved in writing by City’s Contract Officer, for a loan amount which when combined with all of the other security financing encumbering the Property exceeds: (i) prior to the completion of construction of the Project, ninety percent (90%) of the appraised as-completed value of the Property plus the value of tax credits allocated to the Project pursuant to a Low Income Housing Tax Credit Program approved by the California Tax Credit Allocation Committee, and (ii) after the completion of construction of the Project, ninety percent (90%) of the appraised value of the Property plus the value of tax credits allocated to the Project pursuant to a Low Income Housing Tax Credit Program approved by the California Tax Credit Allocation Committee, with said values evidenced by an appraisal or other evidence acceptable to City; (c) Borrower shall refinance any lien or encumbrance and use the proceeds for any purpose other than the construction and operation of the Project on the Property; and (d) any default shall occur under the City HOME Loa n Agreement, City HOME Loan Deed of Trust, City HOME Regulatory Agreement, AHPDA, AHPDA Bond Loan Note, AHPDA Land Loan Note, AHPDA Bond Loan Deed of Trust, AHPDA Land Loan Deed of Trust, or AHPDA Regulatory Agreement (other than a default of City), or Borrower shall be in default under any documents relating to any other financing that is secured by the Property, and any such default is not cured under the terms of the applicable agreement if there is a cure period;
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Then, City may, (i) by written notice to Borrower, declare the entire unpaid principal balance of this Note, together with all accrued interest thereon and all sums due hereunder, immediately due and payable regardless of any prior forbearance, (ii) exercise any and all rights and remedies available to it under applicable law, and (iii) exercise any and all rights and remedies available to City under this Note and the other City HOME Loan Documents, including without limitation the right to pursue foreclosure under the Deed of Trust.
11. Collection Costs; Litigation. If this Note is not paid when due, whether at maturity or by acceleration, Borrower promises to pay all costs of collection, including, but not limited to, reasonable attorneys’ fees and all expenses incurred in connection with the protection or realization of the collateral securing the payment hereof or enforcement of any guarantee, incurred by City on account of such collection, whether or not suit is filed hereon. In any litigation between the parties arising out of this Note, the Superior Court of the State of California in and for the County of Orange shall have exclusive jurisdiction.
The prevailing party in any litigation between the parties arising out of or connected to this Note, in addition to whatever other relief to which the prevailing party is entitled, shall also be entitled to reasonable attorney’s fees, including fees and costs for discovery, and any fees and costs for appeal.
12. No Waiver by City. No waiver of any breach, default, or failure of condition under the terms of this Note or the City HOME Loan Deed of Trust or the obligations secured thereby shall be implied from any failure of City to take, or any delay be implied from any failure by City in taking, action with respect to such breach, default, or failure from any prior waiver of any similar or unrelated breach, default, or failure.
13. Severability; Governing Law; Amendment . The unenforceability or invalidity of any provision or provi sions of this Note as to any persons or circumstances shall not render that provision or those provisions unenforceable or invalid as to any other provisions or circumstances, and all provisions hereof, in all other respects, shall remain valid and enforce able. This Note has been executed and delivered by Borrower in the State of California and is to be governed and construed in accordance with the laws thereof without regard to conflict of law principles. Neither this Note nor any term hereof may be waived, amended, discharged, modified, changed, or terminated orally; nor shall any waiver of any provision hereof be effective except by an instrument in writing signed by Borrower and City.
14. Time of the Essence. Time is of the essence in this Note.
15. Notices. Formal notices, demands, and communications between City and Borrower shall be given either by (a) personal service, (b) delivery by reputable document delivery service such as Federal Express that provides a receipt showing date and time of delivery, or (c) mailing in the United States mail, certified or first class mail, postage prepaid, addressed to:
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To City:
City of Fullerton
303 W. Commonwealth Avenue
Fullerton, CA 92832
Attention: Community Development Director
With a copy to: Rutan & Tucker, LLP
18575 Jamboree Road, 9th Floor
Fullerton, CA 92612
Phone No.: 714-641-5100
Attention: Allison LeMoine-Bui, Esq.
To Developer:
_____________________, LP
c/o Meta Development, LLC
11150 West Olympic Blvd, Suite 620
Los Angeles, CA 90064
Attention: Christopher Maffris,
Executive Vice President
With a copy as long as
a limited partner of
Developer to:
_____________________
_____________________
Attention:
With a copy to:
Bocarsly Emden Cowan Esmail & Arndt LLP
633 West Fifth Street, 58th Floor
Los Angeles, CA 90071
Attention: Nicole Deddens
Notices personally delivered or delivered by document delivery service shall be deemed effective upon receipt. Notices mailed shall be deemed effective on the second business day following deposit in the United States mail. Such written notices, demands, and communications shall be sent in the same manner to such other addresses as any Party may from time to time designate in writing.
16. Nonrecourse Obligation. Borrower shall not have any personal liability under this Note or any of the other City HOME Loan Documents to pay the indebtedness evidenced under this Note, and any judgment, decree or order for the payment of money obtained in any action to enforce the obligation of Borrower to pay the City HOME Loan shall be enforceable against Borrower only to th e extent of Borrower ’s interest in the Property. The foregoing shall not apply to the extent Borrower no longer retains an interest in the Property. Nothing contained in this Section 16 shall in any manner or way constitute or be deemed a release of the debt evidenced by this Note or otherwise affect or impair the enforceability against Borrower of the liens, deeds of trust, assignments, rights and security interests created by the City HOME Loan Deed of Trust or any other instrument or agreement evidencing, securing or related to the indebtedness evidenced
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by this Note. Nothing in this Section 16 shall: (a) preclude City from foreclosing the lien of the City HOME Loan Deed of Trust or from enforcing any of its rights or remedies in law or in equity agai nst Borrower or its assets except as stated in this Section 16; (b) impair, in any manner, any right, remedy or recourse City may have against any party executing a guaranty or indemnity or any obligor of a performance or payment bond furnished under the City HOME Loan Documents pursuant to such performance or payment bond; (c) impair, in any manner, any right, remedy or recourse City may have against Borrower for fraud, bad faith waste or an intentional or knowing breach of any of the representations and warranties contained in any of the City HOME Loan Documents; (d) impair, in any manner, any right, remedy or recourse City may have against Borrower for indemnification under any of the City HOME Loan Documents; (e) impair, in any manner, any right, remedy or recourse City may have against Borrower for Borrower ’s failure to procure or maintain policies of insurance required by City to the extent of any loss proceeds which would have been generated by an uninsured loss which Borrower was required to insure he reunder; or (f) impair, in any manner, any right, remedy or recourse City may have against Borrower for any prohibited sale, transfer, conveyance or encumbrance in breach of any of the City HOME Loan Documents. [signature on next page]
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IN WITNESS WHEREOF, Borrower has executed this Note as of the date set forth above.
BORROWER:
[signature block to be inserted]
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EXHIBIT A TO PROMISSORY NOTE
DEFINITIONS APPLICABLE TO PROMISSORY NOTE
“Assessments” shall mean any and all special assessments, levies and charges on the Property made by any governmental entity, political subdivision, maintenance district, and any like entity, and homeowner association payments applicable to the Property and payable by Borrower.
“Gross Income” shall mean all amounts received by Borrower from third parties for the use or occupancy of the Project or any portion thereof, and for services provided thereon, whether or not denominated rent, including without limi tation, rent, cost reimbursements, parking charges and amounts received by, payable to, or payable to the order of Borrower, but excluding security deposits.
“Index” shall mean the Consumer Price Index—Urban Consumers (Los Angeles- Long Beach-Anaheim CA, area; Base 1982-84 = 100), as published by the United States Department of Labor, Bureau of Labor Statistics or any successor index or agency reasonably acceptable to the parties.
“Operating Expenses” shall mean, subject to the limitations set forth below, a ll expenses paid by Borrower in connection with the Project, whether ordinary or extraordinary, except expenses reimbursed by insurance, to the extent so reimbursed, and federal and state taxes on net income. The term Operating Expenses shall include , without limitation, (I) all insurance premiums, including, without limitation, premiums for fire, extended coverage, earthquake and flood insurance, liability insurance, boiler and machinery insurance and business interruption and loss of rents insurance and any other insurance required by any mortgagee or any limited partner of Borrower; (II) all Taxes and Assessments; (III) all costs and expenses of ownership, operation, management, maintenance and repair of the Project (including walkways, parking areas and landscaped areas), including, but not limited to, the following costs by way of illustration: (A) utility expenses (including heating, ventilating, and air conditioning); (B) labor costs, costs of materials, and contractors’ fees incurred in the management, maintenance, repair and/or operation of the Project; (C) maintenance, repair and component replacement of mechanical, plumbing, heating and air conditioning systems and elevators (whether considered an operating or capitalized expense); (D) property management fees not to exceed not to exceed ___ percent ( __%) of Gross Income per year; (E) accounting; (F) janitorial; (G) security; (H) supplies; (I) materials and equipment; (J) social services provided to tenants to the extent not paid by tenants or ot her sources; and (K) waste disposal; (IV) debt service on (A) indebtedness secured by a senior position mortgage or deed of trust (other than the indebtedness payable from Project Cash Flow) in accordance with the original loan documents consented to by Ci ty evidencing such indebtedness or any refinancing of such indebtedness consented to by City; (B) any loan consented to by City to the extent the proceeds are used to restore, repair (and, if necessary, reconfigure) the improvements on the Property to the extent the proceeds of Borrower’s portion of an award from a partial taking are insufficient or unavailable for such work provided City has
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approved the amount and terms of such loan in the exercise of their reasonable discretion; and (C) any deed of trust or mortgage securing a loan the proceeds of which are used to repair, restore, maintain, improve or alter the improvements on the Property, if (i) such maintenance, repair, improvement or alterations is required or permitted by the terms of the Agreement and (ii) has approved the amount and terms of such loan in the exercise of its reasonable discretion ; (V) payments into operating and replacement reserves otherwise required by a mortgagee or limited partner in Borrower and approved as an Operating Expense by City in its reasonable discretion; (VI) payments on any deferred developer fee, approved by City in its reasonable discretion; and (VII) payment of an asset management fee to the limited partner of Borrower not to exceed $ _________ per calendar year es calating at __% annually; and (VIII) payments of a partnership management fee paid to the managing general partner of Borrower not to exceed $________ per calendar year escalating at __% annually.
Notwithstanding anything to the contrary in the foregoing, Operating Expenses shall not exceed the reasonable cost thereof as measured by fees paid to third parties rendering similar services, Operating Expenses shall not include any items paid from any of the reserves described in subsection (V) above, and Opera ting Expenses shall not include debt service on the indebtedness evidenced by the Subordinate Financing. Legal and accounting fees shall only be included in Operating Expenses to the extent directly related to the operation, maintenance, improvement or leasing of the Project, drafting and negotiating leases and construction contracts, calculating tenant reimbursements, prosecuting unlawful detainer actions, preparation of tax returns, accounting reports and audits, reports and studies required by any governmental agency, and appeals in respect of taxes, assessments, or income and franchise taxes; provided, however, that costs associated with appeals of real property taxes and assessments shall be included in Operating Expenses only if City has approved Borr ower’s undertaking the applicable appeal in writing in advance (such approval not to unreasonably withheld, conditioned or delayed).
“Project Cash Flow” shall mean, with respect to any calendar year, the amount of Gross Income for such calendar year red uced by the Operating Expenses for such calendar year, determined on a basis consistent with prior periods in accordance with the cash method of accounting, and otherwise in accordance with generally accepted business and accounting principles; provided, h owever that for purposes of calculating Project Cash Flow, the term “Operating Expenses” may not include the amount of any Taxes for which Borrower is or was entitled to an exemption under Sections 214(g) or 236 of the California Revenue and Taxation Code, and such exemption was not obtained due to a failure on the part of said Borrower or successor to use commercially reasonable efforts to obtain the exemption.
“Subordinate Financing ” shall mean any financing from any funding source, public or private, secured by a deed of trust that is subordinate to the City HOME Loan Deed of Trust.
“Taxes” shall mean real and personal property taxes, fees, assessments and charges, water and sewer rates and charges, and other similar governmental charges
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and impositions, whether general or special, ordinary or extraordinary, which may be levied, assessed, charged or imposed, or may become a lien or charge upon the Property or any part or parts thereof, or upon Borrower ’s interest in the Property, Borrower ’s ownership rights in the improvements and fixtures on the Property. [End of Exhibit A]
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ATTACHMENT NO. 6
CITY HOME LOAN DEED OF TRUST WITH ASSIGNMENT OF RENTS
[Attached]
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RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Fullerton
Community Development Department
303 W. Commonwealth Avenue
Fullerton, CA 92832
Attn: Director of Community Development
(Space Above For Recorder’s Use)
This Deed of Trust with Assignment of Rents is
recorded at the request and for the benefit of the
City of Fullerton and is exempt from the payment of
a recording fee pursuant to Government Code
Section 27383.
CITY HOME LOAN DEED OF TRUST WITH ASSIGNMENT OF RENTS
(HOME Loan)
This DEED OF TRUST WITH ASSIGNMENT OF RENTS ( “Deed of Trust ”) is made this ___ day of __________________, among ____________________, LP, a California l imited partnership ( “Trustor”), FIDELITY NATIONAL TITLE COMPANY , a California corporation (“Trustee”), and the CITY OF FULLERTON, a California municipal corporation (“Beneficiary”).
Trustor grants, transfers and assigns to Trustee in t rust, upon the trusts, covenants, conditions and agreements and for the uses and purpose s hereinafter contained, with power of sale, and right of entry and possession, all of its title and interest in that real property (the “Property”) in the City of Fullerton, County of Orange, State of California, described in Exhibit A attached hereto and incorporated herein by this reference.
Together with Beneficiary’s interest in all buildings, structures and improvements of every nature whatsoever now or hereafter situated on the Property; and Together with the rents, issues and profits thereof; and to gether 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
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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 Property which are necessary to the completion and comfortable use and occupancy of such building or buildi ngs 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, 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 th e Property 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 ( l) payment of indebtedness of Trustor to the Beneficiary in the prin cipal sum of One Million Dollars ($1,000,000) (the “City HOME Loan”), evidenced by a promissory note of even date herewith between Trustor and Beneficiary (the “City HOME Loan Note ”), together with all sums due thereunder including interest and other charg es; and (2) the performance of each agreement of Trustor in this Deed of Trust and the City HOME Loan Note. Said City HOME Loan Note and all of its terms are incorporated herein by reference and this conveyance shall secure any and all extensions, amendmen ts, modifications or renewals thereof however evidenced, and additional advances of the City HOME Loan 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 HOME Loan Note 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 rental housing;
3. That the City HOME Loan Note is incorporated herein and made a part of this Deed of Trust. Upon default under the City HOME Loan Note or this Deed of Trust, Beneficiary, at its option, may declare the whole of the in debtedness 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 default exists hereunder, to collect such rents, profits, and income;
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5. That upon 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 Property insured against loss by fire and such other hazards, casual ties 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 Senior Loan Deed of Trust 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 this Trust;
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 b uilding 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 Trust or 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 Truste e, 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 purporting 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
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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. 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 Trustee, under permission given under this Deed of Trust, with interest from date of expenditure at the rate specified in the City HOME Loan Note;
13. That the City HOME Loan advanced hereunder is to be use d in the development of the Property; and upon the failure of Trustor to keep and perform such covenants, the principal sum and all arrears of interest, and other charges provided for in the City HOME Loan Note shall, at the option of Beneficiary, become d ue 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 except as 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 Section 2954, Article 2, Chapter 2, Title 14, Division 3 of the California Civil Code.
IT IS MUTUALLY AGREED THAT:
17. Subject to the additional cure rights in Section 6 of the City HOME Loan Note, 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 t o Paragraph 36 hereof: Beneficiary, after due notice to Trustor or any subsequent owner, is hereby invested with full and complete authority to ente r 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
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(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 payable on demand;
18. In the event of any fire or oth er casualty to the Project or eminent domain proceedings resulting in condemnation of the Project or any part thereof: Trustor shall have the right 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 HOME 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 HOME 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 HOME Loan in a manner that provides adequate security for repayment of the remaining balance of the City HOME 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 Senior Loan Deed of Trust described in paragraph 29;
19. Upon default by Trustor in making any payments provided for herein or in the City HOME Loan Note secured hereby, and if such defa ult is not made good within ten (10) days after notice from Beneficiary, or if Trustor shall fail to perform any covenant or agreement in this Deed of Trust within thirty (30) days after written demand therefor by Beneficiary (or, in the event that more than thirty (30) days is reasonably required to cure such default, should Trustor fail to promptly commence such cure, and diligently prosecute same to completion), Beneficiary may declare all sums secured hereby immediately due and payable by delivery to Tr ustee of written declaration of default and demand for sale, and of written notice of default and of election to cause 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 HOME Loan Note and all documents evidencing expenditures secured hereby;
20. 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 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 Property 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 purchas er its deed conveying 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 conclusive proof of the truthfulness thereof.
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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 accrued interest at the rate specified in the City HOME 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 all title, powers, and duties confer red 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 HOME Loan Note to Trustee for cancellation and rete ntion 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 lega lly 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, administrator s, executors, successors, and assigns. The term “Beneficiary” shall include not only the original Beneficiary hereunder but also any future owner and holder , including pledgees, of the City HOME Loan Note secured hereby. In this Deed of Trust, whenever 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 Trust or of any action or proceeding in which Trustor, Beneficiary, or T rustee shall be a party unless brought by Trustee;
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27. The undersigned Trustor requests that copies of any notice of default and of any notice of sale hereunder be mailed to it at ________________, LP, c/o Meta Development, LLC, 11150 West Olympic Blvd, Suite 620, Los Angeles, CA 90064 , Attention: Christopher Maffris.
28. Trustor agrees at any time and from time to time upon 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 a nd 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. As more particularly provided in the City HOME Loan Note, 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 insuff icient to repay in full the City HOME Loan, the Beneficiary approves such sale and the purchaser assumes the balance of the City HOME Loan in accordance with the terms of the City HOME Loan Note; or (ii) in the case of a refinancing in which the refinancin g proceeds are insufficient to repay in full the City HOME Loan, the Beneficiary approves such refinancing and 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 without the prior written consent of Beneficiary (other than a transfer resulting from a foreclosure, or conveyance by deed in lieu of foreclosure, by the holder of the Senior Loan Deed of Trust), Benefic iary 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 o r successive transactions. Beneficiary may grant or deny such consent in its sole 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.
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
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affecting all or a portion of the Property, or the lease of all or substantially all of the Property. “Transfer” shall not include the leasing of individual residential units on the Property or “Permitted Transfers” as defined in the Affordable Housing and Loan Agreement between Trustor and Beneficiary dated on or about the date hereof, which sets forth the terms and conditions for City HOME Loan (“City HOME Loan Agreement”). d. The term “Sale” means any transfer, assignment, conveyance or lease (other than to a tenant for occupancy} of the Property an d/or the improvements thereon, or any portion thereof, or any interest therein by the Trustor, and (if Trustor is a partnership) includes any transfer, assignment or sale of any partnership interest in the Trustor by an individual or entity which is a general or limited partner in the Trustor, or any interest by any individual or entity which holds an interest in any such general or limited partner in the Trustor, which brings the cumulative total of all such direct and indirect transfers, assignments and sales during the term of this Deed of Trust to more than thirty -five percent (35%) of the ownership interests in the Trustor, and any such transfer, assignment or sale of a direct or indirect partnership interest thereafter. 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. Notwithstanding the above, Sale does not include any Permitted Transfers as defined in the City HOME Loan Agreement, sale or transfer of limited partner interests related to the syndication of Low Income Housing Tax Credits, or by the Trustor’s limited partner (the “Tax Credit Partner”), the removal of Trustor ’s general partner by the Tax Credit Partner and its replacement with an affiliate of Tax Credit Partner, nor does it include the purchase of the Property by a general partner of Trustor or its affiliate pursuant to an option and right of first refusal agreement executed concurrently with execution of Trustor’s agreement of limited partnership upon admission of the Tax Credit Partner.
Notwithstanding anything to the contrary contained in this Deed of Trust or in the City HOME Loan Note, prior to declaring any default or taking any remedy permitted under this Deed of Trust, the City HOME Loan Note or applicable law based upon an alleged default, the Tax Credit Partner shall have a period of not less than thirty (30) days to cure such alleged default; provided, however, if in order to cure such default reasonably believes that it must remove a general partner of Trustor, or all of them, pursuant to th e Amended and Restated Agreement of Limited Partnership of Trust or dated as of ____________________, Tax Credit Partner shall so notify Beneficiary and so long as Tax Credit Partner is reasonably and diligently attempting to remove the general partner or general partners, Tax Credit Partner shall have until the date thirty (30) days after the effective date of the removal of the general partner or general partners to cure such default.
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30. Trustor shall permit Beneficiary and its agents or representatives, to inspect the Property at any and all reasonable times, with or without advance notice. Inspections shall be conducted so as not to interfere with the tenants’ use and enjoyment of the Property.
31. [Intentionally Omitted].
32. For purposes of this Deed of Trust, “Hazardous Materials ” mean and include any hazardous, toxic or dangerous waste, substance or material including, without limitation, flammable explosives, radioactive materials, asbestos, hazardous wastes, toxic substances and any materials or substances defined as hazardous materials, hazardous substances or toxic substances in (or for purposes of) th e Comprehensive Environmental Response, Compensation and Liability Act of 1380 ( “CERCLA”), as amended (42 U.S.C. §9601, seq.), the Hazardous Materials Transportation Act (49 U.S.C. §1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.) and those substances defined as hazardous wastes in §25117 of the California Health and Safety Code or as hazardous substances in §25316 of the California Health and Safety Code or in any regulations promulgated under either such law, any so -called “Superfund” or “Superlien” law, or any other federal, state or local statute, law. Ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect. Hazardous Materials shall not include any materials commonly used in the construction, maintenance and/or operation of a multifamily residential development, provided such materials are used and stored in a manner which complies with applicable law.
33. In addition to the general and specific representations. Covenants and warranties set forth in the Deed of Trust or otherwise, Trustor represents, covenants and warrants, with respect to Hazardous Materials, as follows:
a. Except as otherwise disclosed to Beneficiary in writing, n either Trustor nor, to the best knowledge of Trustor, any other person, has ever caused or permitted any Hazardous Materials to be manufactured, placed, held, located or disposed of on, under or at the Property or any part thereof, and neither the Property nor any part thereat or any propert y adjacent thereto, has ever been used {whether by the Trustor or, to the best knowledge of the Trustor, by any other person) as a manufacturing site, dump site or storage site (whether permanent or temporary) for any Hazardous Materials;
b. Trustor hereby agrees to indemnify Beneficiary, its officers, employees, contractors and agents, and hold Beneficiary, its officers, employees, contractors and agents harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses and claims o f any and every kind whatsoever paid, incurred or suffered by, or asserted against Beneficiary, its officers, employees, contractors or agents for, with respect to, or as a direct or indirect result of, the presence or use, generation, storage, release, th reatened release or disposal of
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Hazardous Materials on or under the Property or the escape, seepage, leakage, spillage, discharge, emission or release of any Hazardous Materials from the Property (including, without limitation, any losses, liabilities, dam ages, injuries, costs, expenses or claims asserted or arising under CERCLA, any so-called “Superfund” or “Superlien” law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or impos ing liability or standards of conduct concerning any Hazardous Materials)(collectively, “Claims”), caused by Trustor, except to the extent such Claims are the result of Beneficiary’s gross negligence or willful misconduct. c. Trustor has not received any noti ce of (i) the happening of any event involving the use, spillage, discharge or cleanup of any Hazardous Materials (“Hazardous Discharge”) affecting Trustor or the Property or (ii) any complaint, order, citation or notice with regard to air emissions, water discharges, noise emissions or any other environmental, health or safety matter affecting Trustor or the Property ( “Environmental Complaint”) from any person or entity, including, without limitation, the United States Environmental Protection Agency ( “EPA”). If Trustor receives any such notice after the date hereof, then Trustor will give, within seven (7) business days thereafter, oral and written notice of same to Beneficiary.
d. Without limitation of Beneficiary ’s rights under this Deed of Trust, 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 Env ironmental Complaint upon its receipt of any notice from any person or entity, including without limitation, the EPA, asserting the existence of any Hazardous Materials or an Environmental 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, could 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 Trustor upon demand together with interest thereon at a rate equal to the highest rate payable under the City HOME 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 HOME Loan Note, in accordance with the provisions set forth in the City HOME Loan Note;
b. A violation of the terms, conditions or covenants of the City HOME Loan
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Note or this Deed of Trust; or
c. A default under the Senior Loan Deed of Trust to which the lien of this Deed of Trust is subordinate.
35. Subject to the extensions of time set forth in paragraph 36 , and subject to the further provisions of this paragraph 35 and of paragraph 37, 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, specifying the default complained of by the Beneficiary. De lay 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 deemed by the Beneficiary to 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 shall 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; quarantine restrictions; freight embargoes; lack of t ransportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor, materials or tools; delays of any contractor or supplier; acts of the other party; acts or failure to act of the Beneficiary, or any other public or governmental agency or entity (except that any act or failure to act of Beneficiary shall not excuse performance by Beneficiary); 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 delay 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 HOME 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 prio r to exercise of remedies by Beneficiary under the City HOME Loan Note and this Deed of Trust.
38. If a non-monetary event of default occurs under the terms of the City HOME Loan Note or this Deed of Trust, prior to exercising any remedies 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 pri or to exercise of remedies by the Beneficiary under the City HOME 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 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 sh all Beneficiary be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) days after the first notice of default is given.
39. Upon the occurrence of an Event of Default as described in paragraph 34.
Trustor shall be obligated to repay the City HOME Loan and, subject to the nonrecourse provision of the City HOME Loan Note, Beneficiary may seek to enforce payment of any and all amounts due by Trustor pursuant to the terms of the City HOME Loan Note.
40. 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.
41. Beneficiary acknowledges that Trustor and the California Tax Credit Allocation Committee (“Credit Agency”) intend to enter into an extended use agreement, which constitutes the extended low -income housing commitment described in Section 42(h)(6){B) of the Internal Revenue Code, as amended (the “Code”). As of the date hereof Code Section 42(h)(6)(E)(ii) does not permit the eviction or termination of tenancy (other than for good cause) of an existing tenant of any low -income unit or any increase in the gross rent with respect to such unit not otherwise permitted under Code Section 42 for a period of three (3) years after the date the building is acquired b y foreclosure or by instrument in lieu of foreclosure. In the event the extended use agreement required by the Credit Agency is recorded against the Property, Beneficiary agrees to comply with the provisions set forth in Code Section 42(h)(6)(E)(ii).
42. Except as provided in paragraph 3 1, 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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[Signature page to follow]
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Trustor has caused this Deed of Trust to be executed as of the date set forth above.
BORROWER:
[To be inserted]
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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 ______________________ )
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 execu ted 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 la ws 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 PROPERTY
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ATTACHMENT NO. 7
CITY HOME REGULATORY AGREEMENT
[Attached]
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RECORDED AT THE REQUEST OF
AND WHEN RECORDED RETURN TO:
City of Fullerton
Community Development Department
303 W. Commonwealth Avenue
Fullerton, CA 92832
Attn: Director of Community Development
(Space Above For Recorder’s Use)
This Regulatory Agreement and Declaration of
Covenants and Restrictions is recorded at the
request and for the benefit of the City of Fullerton
and is exempt from the payment of a recording fee
pursuant to Government Code Section 27383.
REGULATORY AGREEMENT AND
DECLARATION OF COVENANTS AND RESTRICTIONS
(City HOME Funds)
This REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND RESTRICTIONS (“Agreement”) is entered into as of this __ day of ________________ (“Regulatory Agreement Effective Date”), by and between the CITY OF FULLERTON, a California municipal corporation ( “City”), and _________________, LP, a California limited partnership ( “Developer”) (hereinafter, City and De veloper are sometimes collectively referred to as “Parties” and individually referred to as a “Party”).
R E C I T A L S
A. Developer owns fee title to that certain real property in the City of Fullerton, County of Orange, State of California, more particularly described in Exhibit “A” attached hereto and incorporated herein by this reference (“Property”).
B. City and Developer are parties to that certain Affordable Housing and Loan Agreement (HOME Funds) dated on or about the same date hereof (“City HOME Loan Agreement”), which provides for Developer to develop and thereafter operate a sixty-five (65) unit residential rental project with sixty-four (64) of such residential units income restricted and related improvements ( “Project”) on the Property. The City HOME Loan Agreement further provides for City to loan to De veloper an amount not to exceed the sum of One Million Dollars ($1,000,000) (“City HOME Loan”) to assist Developer with the development costs of the Project units referred to herein as the “HOME Units”. The City HOME Loan Agreement is a public record available for inspection at City Hall, 303 W.
Commonwealth Avenue, Fullerton, CA 92832 . Capitalized terms used herein and not otherwise defined shall have the same meaning as set forth in the City HOME Loan Agreement.
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C. The source of the funds for the City HOME Loan is funds received by City from the United States Department of Housing and Urban Development ( “HUD”) under the HOME Investment Partnership Act at Title II of the Cranston -Gonzalez National Affordable Housing Act, as amended (42 U.S.C. § 12741, et seq.), and the implementing regulations (24 C.F.R. § 92, et seq.).
D. City and De veloper desire to enter into this Agreement to place c ertain covenants and restrictions on Developer development, use and operation of the Property, including the imposition of affordability covenants requiring that the HOME Units be rented to households of certain income levels at affordable rent.
E. It is the intent of the City and De veloper that the Property shall be subject to this Agreement and that the terms hereof shall be binding on the De veloper and its successors in interest in the Property for so long as this Agreement shall remain in effect.
A G R E M E N T
Based upon the foregoing Recitals, which are hereby incorporate d by this reference, and for good and valuable consideration, the receipt and sufficiency of which is acknowledged, the Parties hereby agree as follows:
1. Definitions. The following terms shall have the meanings in this Agreement given below unless expressly provided to the contrary:
“Affordability Term ” shall have the meaning ascribed in Section 3 of this Agreement.
“Agreement” shall mean this Regulatory Agreement and Declaration of Covenants and Restrictions by and between City and Developer.
“Capital Replacement Reserve” shall have the meaning ascribed in Section 11.1 of this Agreement.
“City” shall mean the City of Fullerton, a municipal corporation, organized under the laws of the State of California and having its offices at 303 W. Commonwealth Avenue, Fullerton, CA 92832.
“City HOME Loan” shall mean the loan to be provided by City to Developer in the amount not to exceed the sum of One Million Dollars ($1,000,000) for certain costs attributable to the HOME Units.
“City HOME Loan Agreement ” shall mean the certain Affordable Housing and Loan Agreement between City and Developer, referenced in Recital B of this Agreement, including all exhibits and other documents atta ched thereto, as may be amended from time to time.
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“City HOME Loan Note ” shall mean that certain Promissory Note (City HOME Loan) Secured by Deed of Trust, evidencing De veloper’s obligation to repay the City HOME Loan.
“Construction Completion Date” shall mean the date that all units in the Project have received all required occupancy permits and City has verified that all improvements required to be constructed in connection with the Project have been completed in accordance with the City HOME Loan Agreement.
“Contract Officer ” shall mean City Manager or such other person as may be designated by the City Manager to administer this Agreement. “CPI Adjustment ” shall have the meaning ascribed in Section 16.1 of this Agreement.
“Developer” shall mean ____________________________, LP, a California limited partnership, having its offices at 11150 West Olympic Blvd, Suite 620 , Los Angeles, CA 90064. The term “Developer” includes any legally permissible assignee or successor to the rights, powers, and responsibilities of Developer hereunder, in accordance with this Agreement.
“Developer Personnel ” shall mean any employee, volunteer, contractor, subcontractor, or agent of Developer or any other person under Developer’s supervision and direction, including the contractors and subcontractors constructing the Project.
Developer is responsible for the full compliance of all Developer Personnel with this Agreement, including without limitation all labor standards applicable to the Project. “Developer Representative ” shall mean an employee of Developer who is designated by Developer to represent Developer in the administration of this Agreement.
As of the Effective Date, Kasey Burke or George Russo is the Developer Representative.
Developer may change the Developer Representative by designating a different employee of Developer and delivering written notice thereof to City. “Eligible HOME Unit Tenant” shall mean a tenant of one of the HOME Units within the Project whose household income as of the commencement date of his or her occupancy does not exceed the income limit and any other eligibility requirements permitted for the particular Residential Unit pursuant to any applicable regulation or agreement, and thereafter meets all income limits and other eligibility requirements. “GAAP” shall mean generally accepted accounting principles. “HOME Funds” shall mean the funds allocated to City by HUD under the HOME Investment Partnership Act at Title II of the Cranston -Gonzales National Affordable Housing Act.
“HOME Affordable Rent ” shall mean the rent limits set forth in the HOME Requirements including 24 C.F.R. §92.252, which are summarized in Section 4.6 of this Agreement.
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“HOME Requirements” shall collectively refer to the requirements of the HOME Investment Partnership Act, as amended (42 U.S.C. § 12741, et seq .), and the implementing regulations (24 C.F.R. § 92, et seq .), and the legal requirements summarized or referenced in Attachment No. 3 to the City HOME Loan Agreement which is incorporated herein by this reference.
“HOME Unit Mix ” shall mean the household income levels permitted for each HOME Unit, as set forth in the HOME Unit Mix.
“HOME Units” shall mean five (5) units in the Project comprised of the HOME Unit Mix. In accordance with 24 C.F.R. § 92.252(j), the HOME Units shall be permitted to float among all of the Residential Units in the Project (other than the one (1) unrestricted manager’s unit) so long as the HOME Units are comprised of the bedroom mix set forth in the HOME Unit Mix and each substituted HOME Unit is comparable in terms of size and features to the originally designated HOME Unit. No later than thirty (30) days after unit numbers (address numbers) have been assigned by Developer to the Project or the Construction Completion Date, whichever is later, Developer shall deliver to City the unit numbers (addresses) of the units that comprise the initial five (5) HOME Units, along with the rents prop osed by Developer to comply with the HOME Affordable Rent, and utility allowance, all in a format mutually agreed upon by City and Developer. City shall review and approve Developer’s submission pursuant to Section 4.6(e) . Developer shall promptly deliver to City a written update of the unit numbers (addresses) that comprise the five (5) HOME Units if Developer changes any unit number (address) of a HOME Unit at any time during the term of this Agreement.
“Index” shall mean the Consumer Price Index—Urban Consumers (Los Angeles- Long Beach-Anaheim CA, area; Base 1982-84 = 100), as published by the United States Department of Labor, Bureau of Labor Statistics or any successor index or agency reasonably acceptable to the parties.
“Investor” shall have the meaning ascribed in Section 19.1 of this Agreement. “Median Income ” shall mean the Orange County Area Median Income, as periodically published by the HUD pursuant to the HOME Requirements, or successor regulation. Upon request by Developer, City shall provide to Developer the amount of the Median Income.
“Operating Expenses” shall have the meaning ascribed in Section 11.2 of this Agreement.
“Operating Reserve Account” shall have the meaning ascribed in Section 11.2 of this Agreement.
“Program” shall mean the affordable rental housing program to be operated on the Property and all obligations and activities that constitute the Program Activities.
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“Program Activities” shall mean the tasks, activities, and operations set forth in this Agreement, all activities assisted with the City HOME Loan, and all other obligations under this Agreement that Developer is required to perform. “Program Default ” shall have the meaning ascribed in Section 6.4 of this Agreement.
“Project” shall mean the construction on the Site of an affordable rental housing complex with sixty-five (65) units, with sixty-four (64) of such units restricted for rental to and occupancy by income -eligible tenants at a rent affordable to such tenants, related interior and exterior improvements and amenities appropriate and/or necessary for the development.
“Property” shall mean that certain real property located in the City of Fullerton, more particularly described in the legal description attached hereto as Exhibit “A” and incorporated herein by this reference
“Property Manager ” shall have the meaning ascribed in Section 9.1 of this Agreement.
“Property Management Plan” shall have the meaning ascribed in Section 9.3 of this Agreement.
“Regulatory Agreement Effective Date ” is defined in the Preamble of this Agreement.
“Residential Unit(s) ” shall mean the sixty -five (65) residential units to be developed on the Property.
“Target Balance ” shall have the meaning ascribed in Section 11.2 of this Agreement.
“TCAC” shall mean the California Tax Credit Allocation Committee or successor state agency responsible for the administration of the federal and state Low -Income Housing Tax Credit Program authorized pursuant to Section 42 of the Internal Revenue Code.
“TCAC Requirements” shall mean all federal, state, and local laws, regulations, and policies governing the administration of the federal and state Low -Income Housing Tax Credit Program authorized pursuant to Section 42 of the Internal Revenue Code.
2. Development of the Project . Developer shall commence and complete development of the Project on the Property within the times and subject to the terms and conditions set forth in the City HOME Loan Agreement.
3. Term. The covenants set forth in this Agreement shall commence on the Regulatory Agreement Effective Date a nd shall remain in effect until the date that is twenty (20) years following the Construction Completion Date (“Affordability Term”).
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4. Use; Affordability Covenants. Developer hereby covenants and agrees that the Property shall be managed and operated in accordance with the provisions set forth in this Section 4.
4.1 General. Developer shall devote the Property for use as an affordable residential rental complex with the HOME Units to be rented to and occupied or held available for occupancy only by Eligible HOME Unit Tenants at HOME Affordable Rent in compliance with the HOME Unit Mix. Developer shall not permit the Residential Units to be utilized on a transient basis, or as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, trailer court or park, day care facilities, or non-residential uses.
4.2. Occupancy by Eligible HOME Unit Tenants. The lease for each HOME Unit shall provide that it is to be used as the principal residence of the Eligible HOME Unit Tenant and for no other purpose. The lease shall further provide that an Eligible HOME Unit Tenant shall not lease or sublease its HOM E Unit or its right of occupancy. Developer shall institute a program to ensure that the HOME Units remain occupied by the Eligible HOME Unit Tenants.
4.3 Occupancy Limits . The number of persons permitted to occupy each HOME Unit shall not exceed the occ upancy permitted pursuant to the general requirements of the United States Department of Housing and Urban Development, which as of the date of this Agreement is two (2) persons per bedroom, plus one (1) person (e.g., for a two (2) bedroom unit the maximum number of persons residing in the unit can be five (5) persons). The lease for each HOME Unit shall include a provision limiting the number of persons permitted to occupy each HOME Unit in accordance with the preceding sentence and Developer shall enforce such occupancy restrictions. In addition, the minimum household size to lease a HOME Unit shall be one (1) person per bedroom.
4.4 Determination of Eligible HOME Unit Tenant Status. Immediately prior to an Eligible HOME Unit Tenant ’s occupancy of a HOM E Unit, Developer shall obtain an Income Computation and Certification Form in a form approved by City (which may be the form used in connection with the regulatory agreement for low income housing tax credits, or other form approved by the Contract Officer) from each such Eligible HOME Unit Tenant dated immediately prior to the date of initial occupancy of the HOME Unit by such Eligible HOME Unit Tenant. In addition, Developer shall provide such further information as may be reasonably required by City fo r purposes of verifying a tenant ’s status as an Eligible HOME Unit Tenant, provided the same is reasonably available to Developer without unreasonable expense in connection with obtaining the same.
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: (a) obtain three (3) pay stubs for the most recent pay periods; (b) obtain a written verification of income and employment from the applicant ’s current employer; (c) 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 agencie s; (d) if an applicant is unemployed or did not file a tax return for the previous calendar year, obtain other evidence and/or
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verification of such applicant ’s total income received during the calendar year from any source, taxable or nontaxable; and (e) such other information as may be requested by the City to verify an applicant ’s income. Developer shall maintain in its records each Income Computation and Certification Form obtained pursuant to this Section and Section 4.5 for a minimum period of five (5) years.
4.5 Recertification. Within sixty (60) days prior to the first anniversary date of the occupancy of a HOME Unit by an Eligible HOME Unit Tenant, and on each anniversary date thereafter, or if preferred by Developer and approved in writing by City, within sixty (60) days prior to January 1 of each year, Developer shall recertify the income of such Eligible HOME Unit Tenant by obtaining a completed Income Computation and Certification Form based upon the current incom e of each occupant of the HOME Unit.
Subject to Section 5.2 during the Affordability Term, in the event the recertification demonstrates that such household’s income exceeds one hundred forty percent (140%) of the income at which such household originally qualified, such household will no longer qualify as an Eligible HOME Unit Tenant at that original income level. If the occupant ’s income falls within one of the other income categories of Eligible HOME Unit Tenants, the rent shall be increased to the HOME Affordable Rent applicable to the new income category, provided a HOME Unit reserved for the new income category exists and is permitted pursuant to Developer’s agreement with any Third-Party as may be in effect as described in the definition of “HOME Unit Mix” set forth in Section 1 of this Agreement.
To the extent permitted by applicable law, including the requirements of Section 42 of the United States Internal Revenue Code, if the income exceeds the income permitted for Eligible HOME Unit Tenant stat us, the occupants ’ lease shall not be renewed and said occupants shall be required to vacate the unit within one hundred eighty (180) days after the recertification. Otherwise, the next available Residential Unit will be leased to an Eligible HOME Unit Te nant at an income level that will cause the Project to be in compliance with the HOME Unit Mix as quickly as possible.
4.6 HOME Affordable Rent. The rent for each HOME Unit shall not exceed the rent limits set forth in the HOME Requirements including 24 C .F.R. §92.252.
The allowable rent under the HOME Requirements is summarized below:
(a) High HOME Rent Limitations. With respect one (1) of the one- bedroom HOME Units, the two (2) two -bedroom HOME Units, and the one (1) three - bedroom HOME Units, the HOME Requirements establish maximum rent limits (High HOME Rents) at the lesser of (i) the fair market rent for existing housing for comparable units in the area as established by HUD under 24 C.F.R. § 888.111, or (ii) a rent that does not exceed thirty pe rcent (30%) of the adjusted income of a household whose annual income equals sixty-five percent (65%) of the median income for the Orange County area, as determined by HUD, with adjustments for the number of bedrooms in the HOME Unit.
The HOME rent limits provided by HUD will include average occupancy per unit and adjusted income assumptions.
(b) Low HOME & Additional HOME Rent Limitations . With respect to one (1) of the one -bedroom HOME Units, and any affordable units occupied by Eligible HOME Unit Tenants whose income does not exceed fifty percent (50%) of the
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median income, the HOME Requirements also require that such units meet one of the following rent requirements:
(i) The rent does not exceed the lesser of (X) the rent calculated under subparagraph (a) above, or (Y) an amount equal to thirty percent (30%) of the annual income of a household whose income equals fifty percent (50%) of the Median Income, with adjustments for smaller and larger households. HUD provides the HOME rent limits which include a verage occupancy per unit and adjusted income assumptions.
(ii) The rent does not exceed thirty percent ( 30%) of the household’s adjusted income. If the HOME Unit receives federal or state project -based rental subsidy and the Eligible HOME Unit Tenant pays as a contribution toward rent not more than thirty percent ( 30%) of the household’s adjusted income, then the maximum rent (i.e., tenant contribution plus project -based rental subsidy) is the rent allowable under the federal or state project-based rental subsidy program.
(c) Utility Allowance. City shall submit a waiver request to HUD prior to initial occupancy, pursuant to 24 C.F.R. 92.252(d)(1) to confirm the use of the Orange County Housing Authority Utility Allowance Schedule in lieu of the HUD Utility Model. If the Eligible HOME Unit Tenant is paying utilities and services, the rent may not exceed the maximum rent minus the monthly allowance established by the Orange County Housing Authority for utilities and services.
(d) Rental Charges In Excess of HOME Requirements . It shall constitute a default of the Developer to charge or accept rent amounts in excess of the HOME Affordable Rent. In the event that Developer charges or receives such higher rental amounts, in addition to any other remedy City shall have, Developer shall be required to refund to the Eligible HOME Unit Tenant the entire amount of rent received in excess of the amount permitted pursuant to this Agreement , plus interest at the rate of ten percent (10%) per annum or the maximum legal rate then applicable, whichever is less; provided if Developer, after commercially reasonable efforts, is unable to locate such Eligible HOME Unit Tenant, Developer shall pay all of such excess amounts to City . (e) City Approval of Initial Rent Schedule and Utility Allowances. Prior to initial occupancy of HOME Units, Developer shall submit to City a schedule of the proposed gross rents for the H OME Units and the proposed Utility Allowance Schedule.
City shall review and approve the rents proposed by Developer for HOME Units, subject to the maximum rent limitations in this Section 4.6, and shall ensure that the rents do not exceed the maximum rent minus the monthly allowance for utilities and services.
4.7 Leasing HOME Units. The HOME Units shall be available for rental on a continuous basis and Developer shall not give preference to any particular class or group in renting HOME Units, except to the extent that the HOME Units are required to
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be rented to Eligible HOME Unit Tenants. Developer shall market the HOME Units to the residents of the City of Fullerton on a nonexclusive basis.
The initial lease-up of the HOME Units shall be done pursuant to a lottery system. Prior to commencing any marketing activities for the HOME Units, Developer shall submit to City for City’s review and approval Developer’s proposed marketing plan, and procedures for conducting the lottery. A representative of City shall attend the lottery.
Notwithstanding anything in this Agreement to the contrary, none of Developer, Meta Housing Corporation, Meta Development, LLC, and their respective officials, director s, and employees, and the immediate family members of their respective officials, directors, and employees shall be eligible to participate in the lottery for the initial lease -up of the HOME Units. As used herein, the term “immediate family member ” shall mean and include a parent or step -parent, grandparent or step -grandparent, sibling or step -sibling and child or step-child.
Following the initial lease-up of the HOME Units, Developer shall maintain a waiting list of persons interested in renting a HOME Unit. Subject to Section 4.3 above, at such time as a HOME Unit becomes available for rental, Developer shall rent such HOME Unit to the first person on the waiting list that qualifies as an Eligible HOME Unit Tenant to rent the HOME Unit. Developer shall use commercially reasonable efforts to lease HOME Units that become available as quickly as possible.
4.8 Rental Agreement . The form of the lease agreement between Developer and each of the Eligible HOME Unit Tenants shall comply with Section 5.3 of this Agreement.
5. HOME Requirements. The covenants set forth in this Section 5 shall be applicable during the Affordability Term and shall apply notwithstanding any other provision herein to the contrary.
5.1 Compliance with HOME Requirements. Developer shall operate the Project in accordance with, and shall comply with, all applicable HOME Requirements.
Developer, at its expense, shall submit to the appropriate entities any and all reports requested by City that are required to be submitted pursuant to the HOME Requirements.
In the case of any conflict between the HOME Requirements and this Agreement, the HOME Requirements shall control; it being understood, however, that in order to be in compliance with this Agreement and the HOME Requirements, Developer shall, to the extent possible, comply with the most restrictive provisions in this Agreement and the applicable HOME Requirements.
5.2 Recertification. In accordance with 24 C.F.R. §92.252(i), in the event a recertificat ion demonstrates that a household ’s income exceeds the income allowed for Eligible HOME Unit Tenant status, such household will no longer qualify as an Eligible HOME Unit Tenant and will be required to pay as rent an amount equal to the lesser of the amoun t payable by the tenant under State or local law or 30% of the household’s adjusted income, except that if the HOME Unit has been allocated low income housing tax credits by a housing credit agency pursuant to Section 42 of the
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Internal Revenue Code of 1986 (26 U.S.C. 42), the tenant must pay rent governed by Section 42 of the Internal Revenue Code.
5.3 Lease. The form of the lease between Developer and each Eligible HOME Unit Tenant shall be approved by City prior to the rental or leasing of any of the HOME Units, which approval shall not be unreasonably withheld, conditioned or delayed so long as the lease is consistent with this Agreement and the HOME Requirements.
Once approved, no changes shall be made to the form of the lease without City ’s prior written approval, which approval shall not be unreasonably withheld, conditi oned or delayed so long as the lease is consistent with this Agreement and the HOME Requirements. The lease between Developer and the Eligible HOME Unit Tenants shall comply with 24 C.F.R. § 92.253 and may not contain any of the following provisions: (i) an agreement by the tenant to be sued, to admit guilt, or to a judgment in favor of Developer in a lawsuit brought in connection with the lease; (ii) an agreement by the tenant that Developer may seize or sell personal property of household members withou t notice to the tenant and a court decision on the rights of the parties (this provision does not apply to disposition of personal property of a tenant who has vacated his/her unit); (iii) an agreement by the tenant not to hold Developer or Developer’s agents legally responsible for any action or failure to act, whether intentional or negligent; (vi) an agreement of the tenant that Developer may institute a lawsuit without notice to the tenant; (v) an agreement by the tenant that Developer may evict the ten ant or household members without instituting a civil court proceeding in which the tenant has the opportunity to present a defense, or before a court decision on the rights of the parties; (vi) an agreement by the tenant to waive any right to a trial by ju ry; (vii) an agreement by the tenant to waive the tenant ’s right to appeal or to otherwise challenge in court a court decision in connection with the lease; and (viii) an agreement by the tenant to pay attorneys’ fees or other legal costs even if the tenan t wins in a court proceeding by Developer against the tenant (the tenant may, however be obligated to pay costs if the tenant loses).
In addition, the form of the lease between Developer and each Eligible HOME Unit Tenant shall obligate the Eligible HOME Unit Tenant to comply with the provisions set forth in Section 4 of this Agreement that are applicable to the Eligible HOME Unit Tenants and an Eligible HOME Unit Tenant who violates such requirements shall be in default under the rental agreement. Each lease agreement with an Eligible HOME Unit Tenant shall include a provision to the effect that the Developer has relied on the information provided by the Eligible HOME Unit Tenant on the Income Computation and Certification Form and all other supporting information supplied by the Eligible HOME Unit Tenant in determining qualification for occupancy of the applicable HOME Unit, and that any material misstatement in such certification (wheth er or not intentional) will be cause for immediate termination of such lease agreement. In addition, each lease agreement shall contain a provision that failure to cooperate with the annual recertification process may disqualify the Eligible HOME Unit Ten ant as such and will be cause for immediate termination of such lease agreement.
5.4 Monitoring. City shall monitor and evaluate Developer’s performance under this Agreement to determine compliance with this Agreement and the
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HOME Requirements. Developer shall cooperate with City and shall make available to City all information, documents, and records reasonably requested by City and shall provide City the reasonable right of access to the Property and the HOME Units during normal business hours for the purpose of assuring compliance with this Agreement and evaluating Developer’s performance hereunder.
5.5 Records to be Maintained . Developer shall keep and maintain records providing a full description of the activities undertaken pursuant to this Agreement demonstrating that the activities meet the HOME Requirements, and such other records as may be reasonably required by City to enable City to evaluate Developer’s compliance with the HOME Requirements and to enable City to comply with City’s recordkeeping and reporting requirements under the HOME Requirements. The books and records required to be maintained by Developer shall be kept at a location in Orange County, California.
City and HUD and/or their representatives shall have full and free access to, and the right to examine, inspect, and audit, all books and records of Developer pertaining to this Agreement at all times during normal business hours upon 48 hours prior written notice to Developer.
5.6 Audits. Developer shall perform all audits of its books and records required by HUD or the HOME Requirements or reasonably required by City and a copy of such audits shall be forwarded to the City within thirty (30) days after completion.
Developer shall be subject to all audit and review requiremen ts imposed on City in connection with this Agreement and shall, at its sole cost and expense, cause such audits and reviews to be timely performed.
6. Operation of Program.
6.1 Standard of Performance. Developer shall operate or cause to be operated the Program, and perform or cause to be performed all Program Activities, in a competent, professional, and first class manner and to the satisfaction of City in its reasonable discretion and in accordance with this A greement and in compliance with all applicable laws including the HOME Requirements. Developer shall, if requested by City, provide to City monthly written reports on the progress of any Program Service.
Developer shall cause the Program Activities to be performed by Developer or Developer Personnel under Developer’s direct supervision, and shall ensure that all Developer Personnel engaged in the Program Activities are fully qualified and authorized and permitted under applicable law to operate the Progra m. Developer shall secure, at its sole cost and expense, any and all licenses, permits and approvals that may be required by law for the performance of the Program Activities. Developer shall be responsible for all costs related to the Program.
6.2 Management. If any manager or supervisor of the Program engages in any of the conduct described in Section 6.4 that results in a Program Default or knowingly allows such conduct to occur at the Property or by Developer Personnel, or knowingly allows illegal activity to occur at the Property, City shall have the right to require that Developer immediately replace such manager or supervisor of the Program.
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6.3 Drug Free Covenant. Developer shall use commercially reasonable efforts to maintain a drug free environment on the Property. Developer covenants to City that Developer shall use commercially reasonable efforts pursuant to Section 6.5 of this Agreement to ensure that all persons residing on the Property shall not unlawfully manufacture, distribute, dispense , possess, or use controlled substances as defined in 21 United States Code section 812 and California Health and Safety Code section 11007, or successor statutes, and as prohibited by applicable law.
6.4 Program Defaults . If Developer shall or permit Developer Personnel to:
(a) engage in any act injuring, abusing, mistreating, or endangering any employee or client of the Program or other persons receiving services under the Program, including any tenants or occupants of the Project as reasonably determined by City; or
(b) fail to use commercially reasonable efforts in violation of Section 6.3 above; or
(c) engage in any act or transgression that, in the reasonable judgment of City, may cause embarrassment to the City, reflect adverse ly upon the City or its funding programs or upon Developer, tend to bring the Program into public disrepute, contempt, scandal, or ridicule, or tend to shock, insult or offend the community or public morals or decency, then
Developer and City agree to meet and confer within ten (10) days of the request of City to determine a resolution reasonably acceptable to City and Developer agrees to thereafter promptly implement the resolution. The failure of Developer to implement the resolution shall constitute a default under this Agreement (“Program Default”).
6.5 Occupants of Housing Facilities . To the extent permitted by applicable law, Developer shall include in its occupancy or lease agreements with the Eligible HOME Unit Tenants a requirement that the occurr ence of any illegal activity by the tenant or by the tenant ’s guests at the Property, shall be grounds for immediate termination of the tenant ’s right to reside within the HOME Unit and City shall have the right to require that Developer enforce such provision.
7. No Discrimination. Developer shall not discriminate against, or segregate, any person or group of persons on account of race, color, creed, national origin, ancestry, sex, sexual orientation, marital status, or religion in the sale, lease, subl ease, transfer, use, occupancy, tenure, or enjoyment of the Property, nor shall the Developer for itself or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the s election, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the Property.
8. Maintenance of Property . For the entire Affordability Term, Developer shall maintain or cause to be maintained the Property and all improvements on the Property in a good condition and repair (and, as to landscaping, in a healthy condition)
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and in accordance with all applicable laws, rules, ordinances, orders, and regulatio ns of all federal, state, county, municipal, and other governmental agencies and bodies having or claiming jurisdiction. City places prime importance on quality maintenance to protect its investment and to ensure that affordable housing projects are not a llowed to deteriorate due to substandard maintenance. In addition, Developer shall keep the Property free from all graffiti and any accumulation of debris or waste material. Developer shall make all repairs and replacements necessary to keep the improvements in first class condition and repair and shall promptly eliminate all graffiti 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 8, and such default continues for a period of fifteen (15) days after written notice from City or such longer period of time as is reasonably necessary to correct the condition (with respect to landscaping, graffiti, debris, waste material, and general maintenance) or thirty (30) days after written notice from City or such longer period of time as is reasonably necessary to correct the condition (with respect to building improvements), then City in addition to whatever other remedy it may have at law or in equity, shall have the right to enter upon the Property and perform or cause to be performed all such acts and work necessary to cure the default. Pursuant to such right of entry, City shall be permitted (but not required) to enter upon the Property and perform all acts and work necessary to protect, maintain, and preserve the improvements and landscaped areas on the Property, and to charge a fee to Developer 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 ten percent (10%) administrative charge, which amount shall be promptly paid by Developer to City upon demand.
9. Management.
9.1 Property Manager. Developer shall manage or cause the Project, and all appurtenances thereto, to be managed in accordance with this Agreement and in a prudent and business -like manner, consistent with good property management standards for other comparable high quality, well -managed affordable rental housing projects in the City of Fullerton. Developer may contract with a property management company or individual property manager to operate and maintain the Project in accordance with the terms of this Section 9.1 (“Property Manager”); provided, however, the selection a nd hiring of the Property Manager (and each successor or assignee) is and shall be subject to the prior written approval of City in its reasonable discretion.
Developer shall conduct due diligence and background evaluation of any potential Third- Party property manager or property management company to evaluate experience, references, credit worthiness, and related qualifications as a property manager. Any proposed property manager shall have significant and relevant prior experience with affordable housing projects and properties comparable to the Project, and the references and credit record of such property manager/company shall be investigated (or caused to be investigated) by Developer prior to submitting the name and qualifications of such proposed property manager to City for review and approval. A complete and true copy of the results of such background evaluation shall be provided to City. Approval of a Property Manager by City shall not be unreasonably delayed but shall be in its sole reasonable discretion, and City shall use good faith efforts to respond as promptly as
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practicable in order to facilitate effective and ongoing property management of the Project by one qualified Property Manager. The replacement of the Property Manager by Developer and/or the selection by Developer of any new or different Property Manager shall also be subject to the foregoing requirements. City hereby approves _______________, as the initial Property Manager.
9.2 On-Site Residential Manager. The Property Manager, or an employee or agent of Property Manager or its sub-management agent, shall reside full- time in a Residential Unit located within the Project, and said Residential Unit shall be the Property Manager’s only residence.
9.3 Property Management Plan. Prior to the completion of the Project, Developer shall prepare and submit to City for review and approval, which approval shall not be unreasonably withheld, a management plan which shall include a detailed plan and strategy for long term marketing, operation, maintenance, repair and security of the Project, and the method of selection of tenants, rules and regulations for tenants, and other rental policies for the Project ( “Property Management Plan ”). The ongoing management and operation of the Project shall be in compliance with the approved Property Management Plan. Developer and its Property Manager may from time to time submit to City amendments to the Property Management Plan, the implementation of which shall be subject to the prior written approval of City, which approval shall not be unreasonably withheld.
9.4 Gross Mismanagement. In the event of “Gross Mismanagement” (as that term is defined below) of the Project, City shall have and retain the authority to direct and require any condition(s), acts, or inactions of Gross Mismanagement to cease and/or be corrected immediately, and further to direct and require the immediate removal of the Property Manager. For purposes of this Agreement, the term “Gross Mismanagement” shall mean management of the Project in a manner which violates the terms and/or intention of this Agreement to operate a high quality affordable housing complex, and shall include, but is not limited to, any one or more of the following occurring twice within a three hundred sixty-five (365) day period:
(a) Leasing to tenants who exceed the prescribed income levels with the knowledge that the tenants do not income qualify;
(b) Allowing the tenants to exceed the prescribed occupancy levels without taking immediate action to stop such overcrowding upon learning of the violation;
(c) Underfunding required reserve accounts to the extent sufficient cash flow is available;
(d) The failure to timely maintain the Project in accordance with the Property Management Plan and this Agreement, which is not corrected within the periods specified in Section 19;
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(e) Fraud or embezzlement of Project funds, including without limitation funds in the reserve accounts;
(f) Failing to comply with reasonable recommendations of the Fullerton Police Department or other local law enforcement agency(ies) with jurisdiction over the Project, in maintaining a crime -free environment within the Project upon learning of the violation;
(g) Failing to reasonably cooperate w ith City, including its code enforcement division, or other local health and safety enforcement agency(ies) with jurisdiction over the Project, in maintaining a decent, safe, and sanitary environment within the Project, upon learning of the violation; and (h) Spending funds from the Capital Replacement Reserve account for items that are not defined eligible as costs, including eligible capital and/or replacement costs, under the standards imposed by generally accepted accounting principles (“GAAP”) (and/or, as applicable, generally accepted auditing principles).
Notwithstanding the requirements of the Property Manager to correct any condition of Gross Mismanagement as described above, Developer is obligated and shall use its best efforts to correct any defec ts in property management or operations at the earliest feasible time and, if necessary, to replace the Property Manager, as provided above.
Developer shall include provisions of the foregoing requirements and requirements of this Agreement within any con tract between Developer and its Property Manager for the Property.
10. Code Enforcement. Developer acknowledges and agrees that City and its employees and authorized agents shall have the right to conduct code compliance and/or code enforcement inspection s of the Project and the individual Residential Units, both exterior and interior, at reasonable times and upon reasonable notice to Developer and/or an individual tenant. If such notice is provided by City or its representative(s) to Developer, then Developer (or its Property Manager) shall promptly and directly advise any affected tenant of such upcoming inspection and cause access to the area(s) and/or Residential Units of the Project to be made available and open for inspection. Developer shall include express advisement of such inspection rights within the lease agreements for each Residential Unit of the Project in order for each and every tenant and tenant household to be aware of this inspection right.
11. Reserves.
11.1 Capital Reserve Requirements. Commencing upon the date that the construction financing for the Project is converted to permanent financing, Developer shall annually set aside into a separate interest -bearing trust account an amount of the higher of (i) Two Hundred Fifty Dollars ( $250.00) per Residential Unit (e.g., $16,250), increasing annually by three percent (3%), but capped at Three Hundred Fifty Dollars ($350) per Residential Unit (or such increased amount as reasonably agreed upon by
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City and Developer from time to time), or (ii) the minimum amount for capital reserves per Residential Unit required by the TCAC Requirements (“Capital Replacement Reserve”).
Funds in the Capital Replacement Reserve shall be used only for capital repairs, improvements and replacements to the Project, including fixtures and equipment, which are normally capitalized under GAAP. The non -availability of funds in the Capital Replacement Reserve does not in any manner relieve or lessen Developer’s obligation to undertake any an d all necessary capital repairs, improvements, or replacements and to continue to maintain the Project in the manner prescribed herein. Not less than once per year, Developer, at its expense, shall submit to City an accounting for the Capital Replacement Reserve. Capital improvements and repairs to, and replacements of the Project shall include only those items with a long life in excess of one year, including without limitation the following: carpet and drapery replacement; appliance replacement; exterior painting, including exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs and showers, toilets, lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; sewer line replacement; water line replacement; gas line replacement; and lighting fixture replacement. Any capital replacement reserve requirements of an y other lenders or parties shall not increase the Capital Replacement Reserve funding requirements under this Section.
11.2 Operating Reserve. Developer shall establish an interest bearing account to be known as the “Operating Reserve Account .” Commencing upon the closing of the permanent financing for the Project, Developer shall deposit into the Operating Reserve Account an amount equal to pay both three (3) months ’ of Operating Expenses and three (3) months ’ of debt service for the Property ( “Target Balance ”).
Funds in the Operating Reserve Account shall be invested in an interest bearing account and any earnings shall become and remain a part of the Operating Reserve Account.
Developer may draw upon the fu nds in the Operating Reserve Account only when the amount of HOME Affordable Rent received by Developer is insufficient to pay Operating Expenses. If for any reason the amount in the Operating Reserve Account falls below an amount equal to fifty percent ( 50%) of the Target Balance amount, Developer shall deposit Project Cash Flow in the Operating Reserve Account until the Target Balance is restored. In the event of a failure by Developer to pay Operating Expenses or in the event of a default by Developer under the City HOME Loan Agreement or this Agreement that would provide for the acceleration of the City HOME Loan, then City may, after delivery of notice to Developer and the expiration of any applicable cure periods, apply the funds in the Operating Res erve Account to the City HOME Loan or use such funds for the continued operation of the Project. Nothing in this Section 11.2 shall modify or be deemed to modify any payment obligation of Developer pursuant to the City HOME Loan Agreement or any attachments thereto entered into by and between Developer and City. “Operating Expenses” shall have the meaning ascribed to that term in the City HOME Loan Note evidencing the City HOME Loan. Upon the Project achieving an annual debt service coverage ratio of one and twenty-five hundredths (1.25) or greater for three (3) consecutive years after permanent loan funding for the Project, this Operating Reserve requirement is released.
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12. Records. Developer shall maintain complete and accurate records pertaining to the HOME Units for a period of five (5) years (unless a longer period of time is expressly set forth herein), and shall permit any duly authorized representative of City to inspect the books and records of Developer pertaining to the HOME Units.
13. Right to Inspect. City shall have the right to inspect the Property and the Residential Units for purposes of assuring compliance with this Agreement during normal business hours on not less than seventy-two (72) hours written notice.
14. Relocation. Developer shall be responsible for providing any relocation benefits or assistance and paying relocation costs to any tenants or occupants who may be displaced from the Property if such benefits or assistance are required to be provided by a public agency, such as the City, under any applicable federal, state, or local laws, rules or regulations. Developer shall indemnify, defend, and hold harmless City from and against any and all claims, liabilities, dam ages or losses arising out of any claims for relocation benefits or assistance that may be asserted by any tenants or occupants of the Project.
15. Indemnification. Developer shall defend, indemnify and hold harmless City and its officers, officials, agen ts, employees, representatives, and volunteers from and against any loss, damage, costs, expenses, liability, claim, or judgment relating in any manner to the Property and the operation of the rental project thereon or Developer’s performance under this Agreement, except to the extent caused by the gross negligence or willful misconduct of City.
16. Insurance. Upon completion of the Project and for the term of this Agreement, Developer 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 City, of insurance policies meeting the minimum requirements set forth in this Section 16.
16.1. Types of Insurance P olicies. The insurance policies to be maintained by Developer upon completion of the Project and for the duration of the term of this Agreement are as follows:
16.2 Types of Insurance and Minimum Limits.
(a) Workers’ Compensation Insurance in the minimum statutorily required coverage amounts. This insurance coverage shall be required unless Developer has no employees and certifies to this fact by initialing here . (b) Automobile Liability Insurance for each of Developer’s vehicles used in the performance of this Regulatory Agreement, including owned, non -owned (e.g. owned by Developer’s employees), leased or hired vehicles, in the minimum amount of $1,000,000 combined single limit per occurrence for bodily injury and property damage. This insurance coverage is required unless Developer does not drive a vehicle in conjunction with any part of the performance of this Regulatory Agreement and Developer and City both certify to this fact by initialing here / .
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(c) Comprehensive or Commercial General Liability Insurance coverage at least as broad as the most recent ISO Form CG 00 01 with a minimum limit of $3,000,000 per occurrence, and $5,000,000 in the aggregate, including coverage for: (a) products and completed operations, (b) bodily and personal injury, (c) broad form property damage, (d) contractual liability, and (e) cross-liability. (d) Builder’s Risk (course of construction) insurance coverage in an amount equal to the full cost of the hard construction co sts of the Project. Such insurance shall 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. 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. City shall be a loss payee under such policy or policies and such insurance shall contai n a replacement cost endorsement. Notwithstanding anything to the contrary in this Section 16.2, however, Developer’s requirement to maintain the insurance required by this paragraph shall terminate on the date City issues a final Certificate of Occupancy for the Project. (e) Insurance against fire, extended coverage, vandalism, and malicious mischief, and such other additional perils, hazards, and risks as now are or may be included in the standard “all risk ” form in general use in Orange County, California, with the standard form fire insurance coverage in an amount equal to full actual replacement cost thereof, as the same may change from time to time.
The above insurance policy or policies shall include coverage for earthquakes to the extent required by an y Project lender or Investor. City shall be a loss payee under such policy or policies and such insurance shall contain a replacement cost endorsement. Notwithstanding anything to the contrary in this Section 16.2, however, Developer ’s requirement to mai ntain the insurance required by this paragraph shall not commence until the date City issues a final Certificate of Occupancy for the Project.
(f) Business interruption 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 and/or extra expense loss during such period. Notwithstanding anything to the contrary in this Section 16.2, however, Developer ’s requirement to maintain the insurance required by this paragraph shall not commence until the date City issues a final Certificate of Occupancy for the Project.
(g) Boiler and machinery insurance in the aggregate amount of the full replacement value of the equipment typically covered by such insurance.
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Notwithstanding anything to the contrary in this Section 16.2, however, Developer’s requirement to maintain the insurance required by this paragraph shall not commence until the date City i ssues a final Certificate of Occupancy for the Project.
16.3 Other Insurance Provisions
(a) All policies of Comprehensive or Commercial General Liability Insurance shall be endorsed to cover the City of Fullerton, and the City’s officials, officers, members, employees, agents and volunteers as additional insureds with respect to liability arising out of the work or operations and activities performed by or on behalf of Developer, including materials, parts or equipment furnished in connection with such work or operations. Endorsements shall be at least as broad as ISO Form CG 20 10 11 85, or both CG 20 10 10 01 and CG 20 37 10 01, covering both ongoing operations and products and completed operations. (b) All required policies shall be endorsed to contain the following clause:
“This insurance shall not be canceled until after thirty (30) days’ prior written notice (10 days for nonpayment of premium) has been given to:
City of Fullerton
303 W. Commonwealth Avenue
Fullerton, CA 92832
Attn: Community Development Director
Should Developer fail to obtain such an endorsement to any policy required hereunder, Developer shall be responsible to provide at least thirty (30) days’ notice (10 days for nonpayment of premium) of cancellation of such policy to the City as a material term of this Agreement.
(c) Developer agrees to provide its insurance broker(s) with a full copy of these insurance provisions and provide City on or before the Date of Regulatory Agreement with Certificates of Insurance and endorsements for all required coverages. However, failure to obtain the required documents prior to the work beginning shall not waive the Developer ’s obligation to provide them. All Certificates of Insurance and endorsements shall be delivered or sent to:
City of Fullerton
303 W. Commonwealth Avenue
Fullerton, CA 92832
Attn: Community Development Director
(d) Developer hereby grants to City a waiver of any right of subrogation which any insurer of said Developer may acquire against City by virtue of the
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payment of any loss under such insurance ; provided, however, any right of subrogation in favor of City is subject and subordinate to the rights of any senior lender. Developer agrees to obtain any endorsement that may be necessary to affect this waiver of subrogation, but this provision applies regardless of whether or not the City has received a waiver of subrogation endorsement from the insurer.
16.4 Developer’s Continuing Indemnification Obligations . Developer agrees that the provisions of this Section 16.4 shall not be construed as limiting in any way City’s right to indemnification or t he 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.
16.5 Remedies for Defa ults 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, obtain such insurance and invoice Developer for the amount of said premium. 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 mai ntain insurance or secure appropriate endorsements.
17. Repair of Damage. If any improvements on the Property shall be totally or partially destroyed or rendered wholly or partly uninhabitable by fire or other casualty, Developer shall promptly proceed t o obtain insurance proceeds, and, provided the insurance proceeds are sufficient to restore the Property and the insurance proceeds are made available therefor by the senior secured lenders and the other terms and conditions to the release of such proceeds set forth in the mortgage in favor of the senior secured lender are satisfied in full , take all steps necessary to begin reconstruction and, immediately upon receipt of insurance proceeds, to promptly and diligently commence the repair or replacement of the improvements to substantially the same condition as the improvements are required to be maintained in pursuant to this Agreement, and Developer shall complete the same as soon as possible thereafter so that the Project can continue to be operated and oc cupied as an affordable housing project in accordance with this Agreement. In no event shall the repair, replacement, or restoration period exceed two (2) years from the date of the destruction subject to events of force majeure unless City, in its sole and absolute discretion, approves a longer period of time. City shall reasonably cooperate with Developer, at no expense to City, in an effort to obtain any governmental permits required for such repair, replacement, or restoration.
18. Reserved.
19. Defaults and Remedies.
19.1 Defaults. Failure or delay by any Party to perform any term or provision of this Agreement which is not cured within thirty (30) days after receipt of notice from the other Party specifying the default (or such other period spe cifically provided
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herein) constitutes a default under this Agreement; provided, however, if such default is of the nature requiring more than thirty (30) days to cure, the defaulting Party shall avoid default hereunder by commencing to cure within such th irty (30) day period, and thereafter diligently pursuing such cure to completion within an additional sixty (60) days following the conclusion of such thirty (30) day period (for a total of ninety (90) days) .
Except as required to protect against further damages, the injured Party may not institute proceedings against the Party in default until the time for cure has expired. Failure or delay in giving such notice shall not constitute a waiver of any default, nor shall it change the time of default.
In addition to Developer’s cure rights hereunder,
___________________________, or its successors and assigns pursuant to this Agreement (“Investor”), for so long as Investor is a limited partner investor in Developer, shall have ten (10) days after receipt of a default notice from City to cure a monetary default of this Agreement and thirty (30) days after receipt of a default notice to cure any non-monetary default under this Agreement; provided however, if the no n-monetary default is incapable of being cured within thirty (30) days, Investor shall have an additional ninety (90) days to cure such default provided it has commenced to cure the default and is diligently proceeding to cure such default through the end of such period. City shall provide a copy of any written notice of default to the Investor at the mailing address set forth in Section 20.9 . City shall accept any cure made by Investor as if made by Developer, but failure by City in timely delivering a d efault notice to Investor shall not be a default or breach by City under this Agreement.
19.2 Institution of Legal Actions . In addition to any other rights or remedies, any Party may institute legal action to cure, correct, or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purposes of this Agreement ; provided, however, that notwithstanding anything in the foregoing to the contrary, in no event shall Developer be entitled to obtain monetary damages of any kind from City, including but not limited to damages for economic loss, lost profits, or any other economic or consequential damages of any kind . Such legal actions must be instituted and maintained in the Superior Court of the County of Orange, State of California, or in any other appropriate court in that county.
19.3 Rights and Remedies are Cumulative. The rights and remedies of the Parties are cumulative, and the exercise by either 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 the other Party.
20. Miscellaneous.
20.1 Entire Agreement, Waivers, and Amendments . This Agreement contains the entire agreement between the Parties relating to the subject matter hereof, and supersedes all negotiations and previous agreements between the Parties with respect to all or part of the subject matter hereof, with the except ion of the City HOME Loan Agreement and all executed versions of the agreements attached to those agreements. All waivers of the provisions of this Agreement must be in writing and signed
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by the appropriate authorities of the Party to be charged. A waive r of the breach of the covenants, conditions or obligations under this Agreement by either Party shall not be construed as a waiver of any succeeding breach of the same or other covenants, conditions or obligations of this Agreement. Any amendment or modi fication to this Agreement must be in writing and executed by the appropriate authorities of City and Developer.
20.2 Attorney’s Fees and Costs . If either Party to this Agreement commences an action against the other Party to this Agreement arising out of or in connection with this Agreement, the prevailing Party shall be entitled to recover reasonable attorney’s fees, expert witness fees, costs of investigation, and costs of suit from the losing Party.
20.3 Prohibition Against Assignment and Transfer by Developer.
The qualifications and identity of Developer are of particular concern to City. It is because of those qualifications and identity that City has provided financial assistance to Developer and entered into this Agreement with Developer. Accor dingly, except as expressly set forth herein, Developer shall not, whether voluntarily, involuntarily, or by operation of law, undergo any significant change in ownership or assign all or any part of this Agreement or any rights hereunder or in the Propert y or in the Project without the City’s prior written approval. As used herein, the term “significant change in ownership” shall mean any change by virtue of which any member of Meta Development, LLC or any affiliated entity does not continue to be the managing member of the general partner of Developer.
Notwithstanding the foregoing paragraph, the following shall not require City approval (except as specifically provided below) for the purpose of this Section 20.3 (the “Permitted Transfers”):
(a) “Permitted Encumbrances ” (as defined in the City HOME Loan Agreement);
(b) a conveyance of the Property resulting from the foreclosure of a Permitted Encumbrance (or a deed-in-lieu of such a foreclosure); (c) Developer’s the assignment of this Agreement and the transfer of the Property to any general partner of Developer or to one or more of the members of the general partners of Developer;
(d) the lease of the Residential Units consistent with this Agreement; (e) during the time in which Developer is in the form of a limited partnership, the transfer and sale of limited partnership interests by the Investor to an affiliate of the Investor n Developer;
(f) during the time in which Developer is in the form of a limited partnership, in the event that any general partner of Developer is removed by the limited partner thereof for cause following default under the partnership agreement,
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the transfer of the general partner interest to an affiliate of the limited partner, or if the replacement general partner is a 501(c)(3) tax exempt nonprofit corporation selected by the limited partner (other than an affiliate of the limited partner) approved by City, in its reasonable discretion, so long as the successor nonprofit corporation has the same or substantially similar experience, assets and access to capital and private funding as Developer did at the Regulatory Agreement Effective Date of this Agreement; and
(h) the transfer of the Project from Developer to one of the general partners of the Developer or an affiliate of the general partners of the Developer at the end of the tax credit compliance period for the Project.
As used in this Section, the term “affiliate” shall mean any “person,” directly or indirectly, “controlling” or “controlled” by or under common “control” with Developer, whether by direct or indirect ownership of equity interests, by contract or otherwise, where “person” means any association, corporation, governmental entity or agency, individual, joint venture, joint -stock company, limited liability company, partnership, trust, unincorporated organization, or other entity of any kind, “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether by ownership of equity interests, by contract or otherwise, and “controlling” and “controlled” means exercising or having control..
Developer shall deliver written notice to City requesting approval of any assignment or transfer requiring City approval hereunder. In considering whether it will grant approval to any assignment by Developer of its interest in the Property and this Agreement or any portion thereof, Developer shall consider factors such as the financial strength and capability of the proposed transferee to perform Developer’s obligations hereunder and the proposed assignee ’s experience and expertise in the planning, financing, development, and operation of similar projects.
No assignment, excluding assignments for Permitted Encumbrances, shall be effective as to City unless and until the proposed assignee and Developer execute and deliver to City an assignment and assumption agreement in form reasonably satisfactory to the Contract Officer and legal counsel for City.
20.4 Prohibition Against Assignment and Transfer by City . The City shall not voluntarily assign or transfer its interest in all or any part of this Agreement (which by definition includes all attachments hereto) without Developer’s prior written approval, which shall not be unreasonably withheld.
20.5 Compliance with Laws and Regulations . Developer shall carry out the design, construction and operation of the Project, a nd operate the Program, in conformity with all applicable laws, regulations, and rules of governmental agencies having jurisdiction, including without limitation, the legal requirements set forth in Attachment No. 3 to the City HOME Loan Agreement and the statutes referenced therein.
Each and every provision required by law to be included in this Agreement shall be deemed to be included, and this Agreement shall be read and enforced as though all such
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provisions were included. Developer acknowledges and a grees that it shall be and remain, and shall cause the Developer Personnel to be and remain, fully knowledgeable and apprised of all local, state and federal laws, rules and regulations in any manner affecting the performance under this Agreement, includin g the HOME Requirements.
Developer shall indemnify, protect, defend and hold harmless City and its officials, officers, employees, and agents, with counsel reasonably acceptable to City, from and against any and all loss, liability, damage, claim, cost, a nd/or expense (including reasonable attorneys’ fees, court and litigation costs, and fees of expert witnesses) that results or arises in any way from any of the following the noncompliance by Developer or Developer Personnel of any applicable local, state and/or federal law.
20.6 Interpretation; Governing Law . This Agreement shall be construed according to its fair meaning and as if prepared by both of the Parties hereto.
This Agreement shall be interpreted in accordance with the internal laws of the State of California, without regard to conflict of law principles.
20.7 Severability. If any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Agreement, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision(s) had never been contained herein.
20.8. Third-Party Beneficiaries. No person or entity other than City and Developer and the permitted successors and assigns of each of them, shall be authorized to enforce the provisions of this Agreement.
20.9. Notices. Formal notices, demands, and communications between City and Developer shall be given either by (a) personal service, (b) delivery by reputable document delivery service such as Federal Express that provides a receipt showing date and time of delivery, or (c) mailing in the United States mail, certified or first class mail, postage prepaid, addressed to:
To City:
City of Fullerton
303 W. Commonwealth Avenue
Fullerton, CA 92832
Attn: Community Development Director
With a copy to: Rutan & Tucker, LLP
18575 Jamboree Road, 9th Floor
Fullerton, CA 92612
Phone No.: 714-641-5100
Attention: Allison LeMoine-Bui, Esq.
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To Developer:
_______________________, LP
c/o Meta Development, LLC
11150 West Olympic Blvd, Suite 620
Los Angeles, CA 90064
Attention: Christopher Maffris
With a copy as long as
a limited partner of
Developer to
_______________________
_______________________
Attention:
With a copy to:
Bocarsly Emden Cowan Esmail & Arndt LLP
633 West Fifth Street, 58th Floor
Los Angeles, CA 90071
Attention: Nicole Deddens
Notices personally delivered or delivered by document delivery service shall be deemed effective upon receipt. Notices mailed shall be deemed effective on the second business day following deposit in the United States mail. Such written notices, demands, and communications shall be sent in the same manner to such other addresses as any Party may from time to time designate in writing.
20.10 Covenants Run with the Land . This Agreement shall be binding on Developer’s successors in interest in the Property until th e expiration of the Affordability Term. This Agreement is designed to create equitable servitudes and covenants running with the Property, in favor of City. The covenants, conditions, restrictions, reservations, equitable servitudes, liens and charges set forth herein shall be binding upon all persons having any right, title or interest in the Property, or any part thereof, their heirs, successive owners and assigns; shall inure to the benefit of City and its successors and assigns, shall be binding upon Developer, its successors and assigns and successors in interest; and may be enforced by Developer and its successors and assigns. Developer hereby declares its understanding and intent that the burden of the covenants set forth herein touch and concern the land. Developer hereby further declares its understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Property for purposes of affordable housing. City shall have th e right to designate real property as benefited by the covenants contained herein during the term of this Agreement. In amplification and not in restriction of the provisions set forth hereinabove, it is intended and agreed that City shall be deemed a ben eficiary of the agreements and covenants provided herein both for and in its own right and also for the purposes of protecting the interests of the community. All covenants without regard to technical classification or designation shall be binding for the benefit of City and such covenants shall run in favor of City for the entire period during which such covenants shall be in force and effect, without regard to whether City is or remains an owner of any land or interest therein to which such covenants relate.
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20.11 Compliance with Other Agreements . The parties acknowledge that other affordable housing regulatory agreements (including, without limitation, th at certain Affordable Housing Regulatory Agreement entered into by and between City and Developer on or about the same date hereof and recorded against substantially concurrently herewith against the Property, which imposes income restrictions on the tenants of the Residential Units and limit s the amount of rent that may be charged .
Developer shall comply with the most restrictive terms of such agreements. Developer acknowledges that in order to effectuate the foregoing the actual rent paid by Eligible HOME Unit Tenants to Developer may be less than the HOME Affordable Rent amounts set forth in this Agreement.
20.12 Execution in Counterparts . This Agreement may be executed in two or more counterparts, each of which when so executed and delivered shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument.
[signatures on next page]
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Signature Page to Regulatory Agreement and
Declaration of Covenants and Restrictions
(City HOME Funds)
IN WITNESS WHEREOF, City and Developer have caused this instrument to be executed on their behalf by their respective officers or agents herein duly authorized as of the date set forth above.
DATED: ______________________
“CITY”
CITY OF FULLERTON, a California
municipal corporation
By: _____________________________
Eric Levitt, City Manger
ATTEST:
_______________________________
Lucinda Williams, MMC, City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
______________________________
Allison LeMoine-Bui
Special Counsel
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Signature Page to Regulatory Agreement and
Declaration of Covenants and Restrictions
(City HOME Funds)
BORROWER:
[To be inserted]
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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 ______________________ )
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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A Notary Public or other officer completing this certifi cate 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 ______________________ )
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 an d 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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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 ______________________ )
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 an d 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 PROPERTY
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ATTACHMENT 8
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ATTACHMENT 8
HOME UNIT MIX