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RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
Anzel Galvan LLP
595 Pacific Avenue, 4th Floor
San Francisco, CA 94133
Attention: Josh Anzel, Esq.
AMENDED AND RESTATED
REGULATORY AGREEMENT AND
DECLARATION OF RESTRICTIVE COVENANTS
By and Among
CITY OF SAN JOSE,
as Issuer
COMPUTERSHARE TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
and
LA MORAGA SAN JOSE L.P.,
A California Limited Partnership
________________________
Dated as of September 1, 2025
________________________
Relating to:
CITY OF SAN JOSE
MULTIFAMILY HOUSING REVENUE REFUNDING BONDS
(LA MORAGA APARTMENTS)
SERIES 2025C
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Amending and restating that certain Regulatory Agreement and Declaration of Restrictive Covenants, dated as of September 1, 2012, by and among the City of San Jos é, as issuer, Computershare Trust Company, National Association, as successor -in-interest to Wells Fargo Bank, National Association, as trustee, and La Moraga San Jose L.P, a California limited partnership.
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TABLE OF CONTENTS
Section 1. Definitions and Interpretation ...............................................................................2 Section 2. Representations, Covenants and Warranties of the Owner ...................................5 Section 3. Qualified Residential Rental Project .....................................................................6 Section 4. Very Low Income Tenants; Reporting Requirements ..........................................7 Section 5. Tax-Exempt Status of Bonds ................................................................................9 Section 6. Additional Requirements of the Act ...................................................................11 Section 7. Additional Requirements of the Issuer ...............................................................11 Section 8. Modification of Covenants .................................................................................14 Section 9. Indemnification; Other Payments .......................................................................15 Section 10. Consideration ......................................................................................................16 Section 11. Reliance...............................................................................................................16 Section 12. Sale or Transfer of the Project ............................................................................16 Section 13. Term ....................................................................................................................18 Section 14. Covenants to Run with the Land .........................................................................19 Section 15. Burden and Benefit .............................................................................................19 Section 16. Uniformity; Common Plan .................................................................................19 Section 17. Default; Enforcement ..........................................................................................19 Section 18. The Trustee .........................................................................................................23 Section 19. Recording and Filing...........................................................................................23 Section 20. Payment of Fees ..................................................................................................24 Section 21. Governing Law ...................................................................................................24 Section 22. Amendments; Waivers ........................................................................................24 Section 23. Notices ................................................................................................................25 Section 24. Severability .........................................................................................................25 Section 25. Multiple Counterparts .........................................................................................25 Section 26. Limitation on Liability ........................................................................................25 Section 27. Third-Party Beneficiary ......................................................................................26 Section 28. No Limitations on Actions of Issuer in Exercise of Its Governmental Powers ..26
EXHIBIT A DESCRIPTION OF REAL PROPERTY
EXHIBIT B FORM OF INCOME CERTIFICATION
EXHIBIT C FORM OF CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE
EXHIBIT D CDLAC RESOLUTION
EXHIBIT E FANNIE MAE RIDER
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AMENDED AND RESTATED
REGULATORY AGREEMENT AND
DECLARATION OF RESTRICTIVE COVENANTS
THIS AMENDED AND RESTATED REGULATORY AGREEMENT AND
DECLARATION OF RESTRICTIVE COVENANTS (as supplemented and amended from time to time, this “ Regulatory Agreement”) is made and entered into as of September 1, 2025, by and among the CITY OF SAN JOSE, CALIFORNIA, a municipal corporation and charter city organized and existing under its Charter and the laws of the State of California (together with any successor to its rights, duties and obligations, the “ Issuer”), COMPUTERSHARE TRUST COMPANY, NATIONAL ASSOCIATION , a national banking association organized and existing under the laws of the United States of America, as trustee (together with any successor thereto, the “ Trustee”) under the Indenture (as hereinafter defined), and LA MORAGA SAN JOSE L.P., a California limited partnership (together with any successor to its rights, duties and obligations hereunder and as lessee of the Project identified herein, the “Owner”).
W I T N E S S E T H:
WHEREAS, the Issuer previously issued its City of San José Multifamily Housing Revenue Bonds (La Moraga Apartments) Series 2012E, in the aggregate principal amount not to exceed $52,440,000 (the “Prior Bonds”), pursuant to Chapter 7 of Part 5 of Division 31 of the California Health and Safety Code, as amended (the “ Act”), and an Indenture of Trust, dated as of September 1, 2012, between the Issuer and the Trustee;
WHEREAS, the proceeds of the Prior Bonds were used by the Issuer to make a loan to the Owner (such loan, the “ Prior Loan ”) pursuant to a Loan Agreement, dated September 1, 2012, among the Issuer, the Owner, the U.S. Bank National Association, as Bondowner Representative, and U.S. Bank National Association, as lead arranger and sole book runner, in order to enable the Owner to finance the construction and development of a 275 -unit rental housing project known as La Moraga Apartments and located on the real property site described in Exhibit A hereto (as further described herein, the “Project”);
WHEREAS, the Issuer has determined to issue its City of San José Multifamily Housing Revenue Refunding Bonds (La Moraga Apartments) Series 2025C (the “Bonds”) pursuant to a Trust Indenture dated as of September 1, 2025 (the “ Indenture”), between the City and the Trustee, for the purpose of refinancing the Prior Loan and refunding the Prior Bonds;
WHEREAS, there has previously been recorded with respect to the Project a Regulatory Agreement and Declaration of Restrictive Covenants, dated as of September 1, 2012 (the “Original Regulatory Agreement ”), among the Issuer, Computershare Trust Company, National Association, as successor -in-interest to Wells Fargo Bank, National Association, in the capacity as trustee for the Prior Bonds (the “Prior Trustee”), and the Owner, recorded in the real property records of the County of Santa Clara on September 7, 2012, as document no. 21842452;
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WHEREAS, the Issuer, Trustee and Borrower have determined to enter into this Regulatory Agreement in order to amend and restate the Original Regulatory Agreement and so as to assure the Issuer and the owners of the Bonds that interest on the Bonds will be excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “ Code”), to satisfy the public purposes for which the Bonds are authorized to be issued under the Act, and to satisfy the purposes of the Issuer in determining to issue the Bonds, certain limits on the occupancy of units in the Project need to be established and certain other requirements need to be met;
NOW, THEREFORE, in consideration of the issuance of the Bonds by the Issuer and the mutual covenants and undertakings set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Issuer, the Trustee and the Owner hereby agree as follows:
Section 1. Definitions and Interpretation . Unless the context otherwise requires, the capitalized terms used herein shall have the respective meanings assigned to them in the recitals hereto, in this Section 1 or in Section 1. 1 of the Indenture.
“Adjusted Income ” means the adjusted income of a person (together with the adjusted income of all persons who intend to reside with such person in one residential unit) as calculated in the manner prescribed in the Code as of the 2012 Delivery Date.
“Administrator” means the Issuer or any administrator or program monitor appointed by the Issuer to administer this Regulatory Agreement, and any successor so appointed.
“Affordability Restriction” means the Affordability Restrictions Implementing Health & Safety Code Section 33413 (Rental), dated September 7, 2012, made by the Owner to the Issuer.
“Annual Monitoring Fee ” has the meaning given such term in Section 7(a) of this Regulatory Agreement.
“Area” means the San José Primary Metropolitan Statistical Area.
“CDLAC” means the California Debt Limit Allocation Committee or its successors.
“CDLAC Conditions” means Exhibit A to the CDLAC Resolution.
“CDLAC Resolution” means CDLAC Resolution No. 12 -58, adopted on July 18, 2012 , which is attached to this Regulatory Agreement as Exhibit D, as such resolution may be further modified or amended from time to time.
“Certificate of Continuing Program Compliance ” means the Certificate to be filed by the Owner with the Issuer, the Administrator (if other than the Issuer) and the Trustee pursuant to Section 4(f) hereof, which shall be substantially in the form attached as Exhibit C hereto or in such other comparable form as may be provided by the Issuer to the Owner.
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“Housing Act ” means the United States Housing Act of 1937, as amended, or its successor.
“HUD” means the United States Department of Housing and Urban Development.
“Income Certification” means a Verification of Income and an Occupancy Certificate in the form attached as Exhibit B hereto or in such other comparable form as may be provided by the Issuer to the Owner.
“Indenture” has the meaning given to such term in the recitals hereof.
“Lender” means the Loan Servicer or Credit Provider, as applicable , as defined in the Indenture.
“Mortgage” has the meaning given to the term “Security Instrument” in the Indenture.
“Prior Bonds” has the meaning given to such term in the recitals hereof.
“Project” means the 275-unit multifamily rental housing development to be known as La Moraga Apartments and located on the real property site described in Exhibit A hereto, and consisting of those facilities, including leased real property, structures, buildings, fixtures or equipment situated thereon, as may at any time exist, the development of which facilities is to be financed, in whole or in part, from the proceeds of the sale of the Bonds, and any real property, structures, buildings, fixtures or equipment acquired in substitution for, as a renewal or replacement of, or a modification or improvement to, all or any part of such facilities.
“Qualified Project Costs” means the costs paid with respect to the Project that meet each of the following requirements: (i) the Costs are properly chargeable to capital account (or would be so chargeable with a proper election by the Owner or but for a proper election by the Owner to deduct such Costs) in accordance with general Federal income tax principles and in accordance with United States Treasury Regulations §1.103 -8(a)(1), provided, however, that only such portion of interest accrued during rehabil itation or construction of the Project (in the case of rehabilitation, with respect to vacated units only) shall be eligible to be a Qualified Project Cost as bears the same ratio to all such interest as the Qualified Project Costs bear to all Project Costs; and provided further that interest accruing after the date of completion of the Project shall not be a Qualified Project Cost; and provided still further that if any portion of the Project is being constructed or rehabilitated by an Affiliate (whether a s a general contractor or a subcontractor), Qualified Project Costs shall include only (A) the actual out -of-pocket Costs incurred by such Affiliate in constructing or rehabilitating the Project (or any portion thereof), (B) any reasonable fees for supervisory services actually rendered by the Affiliate, and (C) any overhead expenses incurred by the Affiliate which are directly attributable to the work performed on the Project, and shall not include, for example, intercompany profits resulting from members of an affiliated group (within the meaning of Section 1504 of the Code) participating in the rehabilitation or construction of the Project or payments received by such Affiliate due to early completion of the Project (or any portion thereof); (ii) the Costs are paid with respect to a qualified residential rental project or projects within the meaning of Section 142(d) of the Code,
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(iii) the Costs are paid after the earlier of sixty (60) days prior to the date of a declaration of “official intent” to reimburse costs paid with respect to the Project (within the meaning of §1.150-2 of the United States Treasury Regulations) or the date of issue of the Bonds, and (iv) if the Project Costs were previously paid and are to be reimbursed with proceeds of the Bonds such costs were (A) costs of issuance of the Bonds, (B) preliminary capital expenditures (within the meaning of United States Treasury Regulations §1.150 -2(f)(2)) with respect to the Project (such as architectural, engineering and soil testing services) incurred before commencement of acquisition, construction or rehabilitation of the Project that do not exceed twenty percent (20%) of the issue price of the Bonds (as defined in United States Treasury Regulations §1.148 -1), or (C) were capital expenditures with respect to the Project that are reimbursed no later than eighteen (18) months after the later of the date the expenditure was paid or the date the Project is placed in service (but no later than three (3) years after the expenditure is paid).
“Qualified Project Period” means the period beginning on the first day on which at least 10% of the units in the Project are first occupied, and ending on the later of the following:
(A) the date fifteen (15) years after the date on which at least fifty percent (50%) of the units in the Project are first occupied;
(B) the first date on which no Tax -Exempt private activity bonds with respect to the Project are Outstanding; or
(C) the date on which any assistance provided with respect to the Project under Section 8 of the Housing Act terminates;
provided that, unless otherwise amended or modified in accordance with the terms hereof, the Qualified Project Period for purposes of this Regulatory Agreement shall be 55 years from the date on which at least fifty percent (50%) of the units in the Project were first occupied , as required by the CDLAC Conditions.
“Regulations” means the Income Tax Regulations of the Department of the Treasury applicable under the Code from time to time.
“Regulatory Agreement” means this Regulatory Agreement, as it may be supplemented and amended from time to time.
“State” means the State of California.
“Tax-Exempt” means with respect to interest on any obligations of a state or local government, including the Bonds, that such interest is excluded from gross income for federal income tax purposes; provided, however, that such interest may be includable as an item of tax preference or otherwise includable directly or indirectly for purposes of calculating other tax liabilities, including any alternative minimum tax under the Code.
“2012 Delivery Date” means the date the Prior Bonds were issued and delivered to the initial purchaser thereof.
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“2025 Delivery Date ” means the date the Bonds are issued and delivered to the initial purchaser thereof.
“Verification of Income” means a Verification of Income in the form attached as Exhibit B hereto or in such other comparable form as may be provided by the Issuer to the Owner.
“Very Low Income Tenant ” means any tenant (i) whose Adjusted Income does not exceed limits determined in a manner consistent with determinations of low income families under Section 8 of the Housing Act, provided that the percentage of median gross income that qualifies as low income shall not be greater than fifty percent (50%) of median gross income for the Area, with adjustments for family size, and (ii) whose income does not exceed the qualifying limits for low income families as established and amended from time to time pursuant to Section 8 of the Housing Act. If all the occupants of a unit are students (as defined under Section 151(e)(4) of the Code), no one of whom is entitled to file a joint return under Section 6013 of the Code, such occupants shall not qualify as Very Low Income Tenants. The determination of a tenant’s status as a Very Low Income Tenant shall be made by the Owner upon initial occupancy of a unit in the Project by such tenant, on the basis of an Income Certification executed by the tenant, and annually thereafter.
“Very Low Income Units ” means the units in the Project required to be rented, or held available for occupancy, by Very Low Income Tenants pursuant to Sections 4(a) and 6(a) of this Regulatory Agreement.
Unless the context clearly requires otherwise, as used in this Regulatory Agreement, words of any gender shall be construed to include each other gender when appropriate and words of the singular number shall be construed to include the plural number, and vice versa, when appropriate. This Regulatory Agreement and all the terms and provisions hereof shall be construed to effectuate the purposes set forth herein and to sustain the validity hereof.
The titles and headings of the sections of this Regulatory Agreement have been inserted for convenience of reference only, and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof or be considered or given any effect in construing this Regulatory Agreement or any provisions hereof or in ascertaining intent, if any question of intent shall arise.
The parties to this Regulatory Agreement acknowledge that each party and their respective counsel have participated in the drafting and revision of this Regulatory Agreement.
Accordingly, the parties agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Regulatory Agreement or any supplement or exhibit hereto.
Section 2. Representations, Covenants and Warranties of the Owner.
(a) The Owner hereby agrees to comply with the requirements of the Tax Certificate.
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(b) The Owner hereby represents and warrants to the Issuer and the Trustee that the Project is located entirely within the City of San José, California.
(c) The Owner acknowledges, represents and warrants to the Issuer and the Trustee that it understands the nature and structure of the transactions contemplated by this Regulatory Agreement; that it is familiar with the provisions of all of the documents and instruments relating to the Bonds to which it is a party or of which it is a beneficiary; that it understands the financial and legal risks inherent in such transactions; and that it has not relied on the Issuer for any guidance or expertise in analyzing the financial or other consequences of such financing transactions or otherwise relied on the Issuer in any manner except to issue the Bonds in order to provide funds to assist the Owner in constructing and equipping the Project.
Section 3. Qualified Residential Rental Project. The Owner hereby acknowledges and agrees with the Issuer and the Trustee that the Project is to be owned, managed and operated as a “qualified residential rental project” (within the meaning of Section 142(d) of the Code) for a term equal to the Qualified Project Period. To that end, and for the term of this Regulatory Agreement, the Owner hereby represents, covenants, warrants and agrees with the Issuer and the Trustee as follows:
(a) The Project will be acquired, constructed and operated for the purpose of providing multifamily residential rental property. The Owner will own, manage and operate the Project to provide multifamily residential rental property comprised of a building or structure or several interrelated buildings or structures, together with any functionally related and subordinate facilities, and no other facilities, in accordance with Section 142(d) of the Code, Section 1.103 - 8(b) of the Regulations and the provisions of the Act, and in accordance with such requirements as may be imposed thereby on the Project from time to time.
(b) All of the dwelling units in the Project will be similarly constructed units, and each dwelling unit in the Project will contain complete and separate facilities for living, sleeping, eating, cooking and sanitation for a single person or a family, including a sleeping area, bathing and sanitation facilities and cooking facilities equipped with a cooking range, refrigerator and sink.
(c) None of the dwelling units in the Project will at any time be utilized on a transient basis (and the parties hereto specifically acknowledge that a tenant’s periodic hosting of guests in such tenant’s leased unit is not “transient” for this purpose) or rented for a period of less than 30 consecutive days, or will ever be used as a hotel, motel, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, rest home or trailer court or park.
(d) No part of the Project will at any time during the Qualified Project Period be owned by a cooperative housing corporation, nor shall the Owner take any steps in connection with a conversion to such ownership or use, and the Owner will not take any steps in connection with a conversion of the Project to condominium ownership during the Qualified Project Period (except that the Owner may obtain final map approval and the Final Subdivision Public Report from the California Department of Real Estate and may file a condominium plan with the City).
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(e) All of the dwelling units in the Project (except for not more than three units set aside for resident managers or other administrative use) will be available for rental during the Qualified Project Period on a continuous, first -come first-served basis to members of the general public, and the Owner will not give preference to any particular class or group in renting the dwelling units in the Project, except to the extent that dwelling units are required to be leased or rented to Very Low Income Tenants hereunder or under the Affordability Restriction.
(f) The Project consists of a parcel or parcels that are contiguous except for the interposition of a road, street or stream, and all of the facilities of the Project comprise a single geographically and functionally integrated project for residential rental property, as evidenced by the ownership, management, accounting and operation of the Project.
(g) No dwelling unit in the Project shall be occupied by the Owner; however, if the Project contains five (5) or more dwelling units, this provision shall not be construed to prohibit occupancy of not more than three dwelling units by a resident managers or maintenance personnel any of whom may be the Owner.
Section 4. Very Low Income Tenants; Reporting Requirements . Pursuant to the requirements of the Code, the Owner hereby represents, warrants and covenants with the Issuer and the Trustee as follows:
(a) During the Qualified Project Period, no less than 20% of the total number of completed units in the Project shall at all times be rented to and occupied by Very Low Income Tenants. For the purposes of this paragraph (a), a vacant unit that was most recently occupied by a Very Low Income Tenant is treated as rented and occupied by a Very Low Income Tenant until reoccupied, other than for a temporary period of not more than 31 days, at which time the character of such unit shall be redetermined.
(b) No tenant qualifying as a Very Low Income Tenant upon initial occupancy shall be denied continued occupancy of a unit in the Project because, after admission, such tenant’s Adjusted Income increases to exceed the qualifying limit for Very Low Income Tenants.
However, should a Very Low Income Tenant’s Adjusted Income, as of the most recent determination thereof, exceed 140% of the applicable income limit for a Very Low Income Tenant of the same family size, such Very Low Income Tenant who has ceased to qualify shall be deemed to continue to be a Very Low Income Tenant for purposes of the occupancy requirement of Section 4(a) hereof until a new Very Low Income Tenant occupies the unit, as required by Section 7(g) of this Regulatory Agreement.
(c) For the Qualified Project Period, the Owner will obtain, complete and maintain on file Income Certifications for each Very Low Income Tenant, including (i) an Income Certification dated immediately prior to the initial occupancy of such Very Low Income Tenant in the Project, and (ii) thereafter, an annual Income Certification with respect to each Very Low Income Tenant. The Owner will provide such additional information as may be required in the future by the Code, the State or the Issuer, as the same may be amended from time to time, or in such other form and manner as may be required by applicable rules, rulings, policies, procedures, Regulations or other official statements now or hereafter promulgated, proposed or made by the
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Department of the Treasury or the Internal Revenue Service with respect to Tax -Exempt obligations. A copy of the most recent Income Certifications for Very Low Income Tenants commencing or continuing occupation of a Very Low Income Unit shall be attached to each report to be filed with the Issuer pursuant to paragraph (f) of this Section 4.
(d) The Owner shall make a good faith effort to verify that the income information provided by an applicant in a Verification of Income is accurate by taking one or more of the following steps as a part of the verification process: (1) obtain a pay stub for the most recent pay period, (2) obtain an income tax return for the most recent tax year, (3) obtain a credit report or conduct a similar type credit search, (4) obtain an income verification from the applicant’s current employer, (5) obtain an income verification from the Social Security Administration and/or the California Department of Social Services if the applicant receives assistance from either of such agencies, or (6) if the applicant is unemployed and does not have an income tax return, obtain another form of independent verification reasonably acceptable to the Issuer.
(e) The Owner will maintain complete and accurate records pertaining to the Very Low Income Units, and will permit any duly authorized representative of the Issuer, the Trustee, the Department of the Treasury or the Internal Revenue Service to inspect the books and records of the Owner pertaining to the Project at reasonable times and upon reasonable notice, including those records pertaining to the occupancy of the Very Low Income Units.
(f) The Owner will prepare and submit to the Issuer, the Administrator (if other than the Issuer) and the Trustee, at the end of each calendar year (or, at Issuer’s request, at the end of each calendar quarter) until the end of the Qualified Project Period, a Certificate of Continuing Program Compliance executed by the Owner. On or before each March 1 during the Qualified Project Period, the Owner will submit to the Issuer a draft of the completed Internal Revenue Code Form 8703 or such other annual certification as required by the Code with respect to the Project, which form shall be submitted to the Secretary of the Treasury on or before March 31 of each year (or such other date as may be required by the Code); provided that at any point when no Tax-Exempt private activity bonds are Outstanding with regards to the Project, but before the end of the Qualified Project Period, the Owner may submit to the Issuer (in the same manner specified above) such other annual certification as the Issuer may reasonably require.
(g) Within 30 days after the date on which 10% of the dwelling units in the Project are occupied, the Owner shall deliver to the Administrator and the Trustee a written notice specifying such date, and within 30 days after the date on which 50% of the dwelling units in the Project are occupied, the Owner shall deliver to the Administrator and the Trustee a written notice specifying such date and the beginning and ending dates of the Qualified Project Period.
The Owner shall cause a copy of such notice to be recorded in the Official Records of the County of Santa Clara, California.
(h) For the Qualified Project Period, all tenant leases or rental agreements shall be subordinate to this Regulatory Agreement and the Mortgage. All leases pertaining to Very Low Income Units shall contain clauses, among others, wherein each tenant who occupies a Very Low Income Unit: (i) certifies the accuracy of the statements made in the Verification of Income; (ii) agrees that the family income and other eligibility requirements shall be deemed
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substantial and material obligations of the tenancy of such tenant, that such tenant will comply promptly with all requests for information with respect thereto from the Owner, the Trustee, the Issuer or the Administrator on behalf of the Issuer, and that the failure to provide accurate information in the Verification of Income or refusal to comply with a request for information with respect thereto shall be deemed a violation of a substantial obligation of the tenancy of such tenant; (iii) acknowledges that the Owner has relied on the Verification of Income and supporting information supplied by the Very Low Income Tenant in determining qualification for occupancy of the Very Low Income Unit, and that any material misstatement in such certification (whether or not intentional) will be cause for immediate termination of such lease or rental agreement; and (iv) agrees that the tenant’s income is subject to annual certification in accordance with Section 4(c) and that if upon any such certification such tenant’s Adjusted Income exceeds the applicable income limit under Section 4(b), such tenant may cease to qualify as a Very Low Income Tenant and such tenant may be evicted.
Section 5. Tax-Exempt Status of Bonds. The Owner and the Issuer, as applicable, each hereby represents, warrants and agrees as follows:
(a) The Owner and the Issuer will not knowingly take or permit, or omit to take or cause to be taken, as is appropriate, any action that would adversely affect the Tax -Exempt nature of the interest on the Bonds and, if either of them should take or permit, or omit to take or cause to be taken, any such action, it will take all lawful actions necessary to rescind or correct such actions or omissions promptly upon obtaining knowledge thereof.
(b) The Owner and the Issuer will file of record such documents and take such other steps as are necessary, in the written opinion of Bond Counsel filed with the Issuer and the Trustee, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project, including, but not limited to, the execution and recordation of this Regulatory Agreement in the real property records of the County of Santa Clara, California.
(c) The Owner shall assure that the proceeds of the Bonds are used in a manner such that the Bonds will satisfy the requirements of section 142(d) of the Code relating to qualified residential rental projects.
(d) The Owner shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the Bonds to be "federally guaranteed" within the meaning of section 149(b) of the Code.
(e) The Owner shall take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Bonds.
(f) The Owner shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the
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date of issuance of the Bonds would have caused the Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code.
(g) The Owner shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the Bonds.
(h) The Bonds upon issuance and delivery shall be considered “private activity bonds” within the meaning of the Code with respect to which the California Debt Limit Allocation Committee has transferred a portion of the State of California’s private activity bond allocation and carryforward allocation (in each case within the meaning of section 146 of the Code) equal to the principal amount of the Bonds.
(i) The Owner covenants that, from the proceeds of the Bonds and investment earnings thereon, an amount not in excess of two percent (2%) of the proceeds of the Bonds, will be used for costs of issuance of the Bonds, all within the meaning of section 147(g)(1) of the Code. For this purpose, if the fees of the original purchaser of the Bonds are retained as a discount on the purchase of the Bonds, such retention shall be deemed to be an expenditure of proceeds of the Bonds for said fees.
(j) The Owner covenants that not less than 95 percent of the net proceeds of the Bonds (within the meaning of section 150(a)(3) of the Code) are paid for Qualified Project Costs.
(k) The Owner covenants that less than twenty -five percent (25%) of the proceeds of the Bonds shall be used, directly or indirectly, for the acquisition of land.
(l) The Owner covenants that no proceeds of the Bonds shall be used for the acquisition of any tangible property or an interest therein, other than land or an interest in land, unless the first use of such property is pursuant to such acquisition; provided, however, that this limitation shall not apply with respect to any building (and the equipment therefor) if rehabilitation expenditures (as defined in section 147(d)(3) of the Code) with respect to such building equal or exceed 15 percent of the portion of the cost of acquiring such building (and equipment) financed with Proceeds; and provided, further, that this limitation shall not apply with respect to any structure other than a building if rehabilitation expenditures with respect to such structure equal or exceed 100 percent of the portion of the cost of acquiring such structure financed with the proceeds of the Bonds.
(m) The Owner covenants that no proceeds of the Bonds shall be used directly or indirectly to provide any airplane, skybox or other private luxury box, health club facility, facility used for gambling or store the principal business of which is the sale of alcoholic beverages for consumption off premises, and no portion of the proceeds of the Bonds shall be used for an office unless (i) the office is located on the premises of the facilities constituting the Project and (ii) not more than a de minimis amount of the functions to be performed at such office is not related to the day-to-day operations of the Project.
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(n) [Reserved].
Section 6. Additional Requirements of the Act . The Owner hereby further agrees that it shall comply with each of the requirements of Section 52080 of the Act, including (but not limited to) the following:
(a) Not less than 20% of the total number of units in the Project shall be available for occupancy on a priority basis to Very Low Income Tenants. The units made available to meet this requirement shall be of comparable quality (including comparable amenities, furnishings and appliances) and offer a range of sizes and numbers of bedrooms comparable to the units that are available to other tenants in the Project.
(b) The rental payments for the Very Low Income Units paid by the tenants thereof (excluding any supplemental rental assistance from the State, the federal government or any other public agency to those tenants or on behalf of those units) shall not exceed 30% of an amount equal to 50% of the median adjusted gross income for the Area.
(c) The Owner shall accept as tenants, on the same basis as all other prospective tenants, low -income persons who are recipients of federal certificates or vouchers for rent subsidies pursuant to the existing program under Section 8 of the Housing Act. The Owner shall not permit any selection criteria to be applied to Section 8 certificate or voucher holders that are more burdensome than the criteria applied to all other prospective tenants.
(d) The units reserved for occupancy as required by subsection (a) of this Section shall remain available on a priority basis for occupancy at all times during the Qualified Project Period.
(e) During the three (3) years prior to the expiration of the Qualified Project Period, the Owner shall continue to make available to eligible households Very Low Income Units that have been vacated to the same extent that nonreserved units are made available to noneligible households.
(f) Following the expiration or termination of the Qualified Project Period, except in the event of foreclosure and redemption of the Bonds, deed in lieu of foreclosure, eminent domain, or action of a federal agency preventing enforcement, units reserved for occupancy as required by subsection (a) of this Section shall remain available to any eligible tenant occupying a reserved unit at the date of such expiration or termination, at the rent determined by subsection (b) of this Section, until the earliest of (1) the household’s income exceeds 140% of the maximum eligible income specified above, (2) the household voluntarily moves or is evicted for good cause (as defined in the Act), (3) 30 years after the date of the commencement of the Qualified Project Period, or (4) the Owner pays the relocation assistance and benefits to households as provided in Section 7264(b) of the California Government Code.
Section 7. Additional Requirements of the Issuer . In addition to the requirements set forth above and to the extent not prohibited thereby, the Owner hereby agrees to comply with each of the requirements of the Issuer set forth in this Section 7, as follows:
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(a) The Owner shall pay or cause to be paid to the Issuer on the 2025 Delivery Date, an initial issuance fee in an amount equal to $ 137,140; and on the 2012 Delivery Date and thereafter (as described below), without demand or notice, the Owner shall pay or cause to be paid to the Issuer (or other Administrator designated in writing by the Issuer) an annual monitoring fee (the “ Annual Monitoring Fee ”). For so long as the Qualified Project Period (in this instance only, without giving effect to the proviso contained in the definition thereof) is in effect, the City’s Annual Monitoring Fee shall be in an amount equal to $ 65,550, representing
0.125% of the maximum aggregate principal amount of the Bonds. After that period has ended and until the end of the Qualified Project Period, the Annual Monitoring Fee will be equal to $13,587, representing approximately 20.7% of 0.125% of the maximum aggregate principal amount of the Prior Bonds.
The amount of the Annual Monitoring Fee for any year will be measured in accordance with the previous paragraph on the 2012 Delivery Date (in the case of the initial year’s Annual Monitoring Fee) and on each September 1 thereafter. It will be payable in advance in equal semiannual installments (i) for the initial year’s Annual Monitoring Fee , on the 2012 Delivery Date and March 1, 2013, and (ii) for any other year’s Annual Monitoring Fee , on September 1 and the following March 1.
Under no circumstances shall the Annual Monitoring Fee exceed any limitation under Section 148 of the Code. The Annual Monitoring Fee shall be payable until the end of the Qualified Project Period. In the event that the principal of and the interest on the Bonds are paid in full and the Indenture is discharged prior to the termination of this Regulatory Agreement (other than by reason of the issuance of refunding bonds), the Owner shall pay to the Issuer, if so requested by the Issuer, an amount equal to the remaining Annual Monitoring Fees, at a present value to the date of payment (using a discount rate equal to the true interest cost of the Bonds).
Such payment shall be due to the Issuer at such time as the Bonds are paid in full and the Indenture is discharged.
(b) All tenant lists, applications and waiting lists relating to the Project shall at all times be kept separate and identifiable from any other business of the Owner and shall be maintained as required by the Issuer, in a reasonable condition for proper audit and subject to examination during business hours by representatives of the Issuer (including the Administrator).
(c) The Owner shall submit to the Issuer, within fifteen (15) days after receipt of a request therefor, any information, records or completed forms requested by the Issuer in order to comply with reporting requirements of the Internal Revenue Service or the State.
(d) The Owner shall not discriminate on the basis of race, creed, color, religion, sex, sexual orientation, marital status, national origin, ancestry or handicap in the lease, use or occupancy of the Project or in connection with the employment or application for employment of persons for the construction, operation or management of the Project, and will not discriminate on the basis of household size as long as the tenants meet the household size standards of Section 8 of the Housing Act. Further, the Owner shall not permit occupancy in any unit in the Project by more persons than is permissible under the Section 8 household size standards.
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(e) The Owner acknowledges that the Issuer may appoint an Administrator other than the Issuer to administer this Regulatory Agreement and to monitor performance by the Owner of the terms, provisions and requirements hereof. In such event, the Owner shall comply with any reasonable request by the Issuer to deliver to any such Administrator, in addition to or instead of the Issuer, any reports, notices or other documents required to be delivered pursuant hereto, and to make the Project and the books and records with respect thereto available for inspection by the Administrator as an agent of the Issuer.
(f) To the extent permitted by law and regulations ( including but not limited to applicable California Tax Credit Allocation Committee regulations and the requirements of Section 42 of the Code ), and subject to the limitations and restrictions set forth in any housing assistance payment contract for the Project under Section 8 of the Housing Act, the Owner will make the units reserved pursuant to Section 4(a) and Section 6(a) available on a priority basis to households comprised of persons whom (i) the Issuer has informed the Owner have been displaced by the Issuer or its political subdivisions from other developments located within the City of San José or (ii) are currently living or working in the City of San José or who can demonstrate they previously resided in the City of San José. The Owner shall not discriminate against tenant applicants on the basis of source of income (i.e., TANF or SSI), and the Owner shall consider a prospective tenant’s previous rent history of at least one year as evidence of such tenant’s ability to pay the applicable rent for the unit to be occupied (ability to pay shall be demonstrated if the tenant can show that the tenant has paid on time the same percentage or more of the tenant’s income for rent as the tenant would be required to pay for the rent applicable to the unit to be occupied); provided that such tenant paid the same percentage or more of such tenant’s income for rent as such tenant will be paying under the proposed lease. The Owner may consider such factors as it deems important when reviewing and approving a tenant’s application for occupancy and an existing tenant’s continued occupancy.
(g) If a Very Low Income Tenant’s Adjusted Income, as of the most recent determination thereof, exceeds 140% of the of the applicable income limit for a Very Low Income Tenant of the same family size, the tenancy of such Very Low Income Tenant shall, to the extent permitted by law, be terminated as soon as legally possible and the available unit shall within a reasonable time be rented to (or held vacant and available for immediate occupancy by) a Very Low Income Tenant.
(h) Each of the requirements of Sections 3, 4 and 6 hereof is hereby incorporated as a specific requirement of the Issuer, whether or not required by California or federal law, and shall be in force for the term of this Regulatory Agreement.
(i) In addition, the Owner shall comply with the conditions set forth in the CDLAC Conditions, as such conditions may be modified or amended from time to time, which conditions are incorporated herein by reference and made a part hereof. The Owner will prepare and submit to CDLAC, not later than each anniversary of the 2012 Delivery Date until the end of the Qualified Project Period, a Certification of Compliance, in substantially the form attached to the CDLAC Conditions, executed by an authorized represe ntative of the Owner. The Issuer and the
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Administrator shall have no obligation to monitor the Owner’s compliance with the CDLAC Conditions.
(j) The restrictions set forth the Affordability Restriction between the Owner and the Issuer.
(k) The Owner will pay the Issuer all of the amounts required by Section 7(a) hereof and Section 5.4 of the Financing Agreement and will indemnify the Issuer and the Trustee as provided in the Financing Agreement.
(l) The requirements of this Section 7 of this Regulatory Agreement shall be in effect for the term of this Regulatory Agreement; provided that any requirements of Section 7 of this Regulatory Agreement may be expressly waived by the Issuer, at its sole discretion (except Section 7(i) above, which may be expressly waived by CDLAC), in writing, but (i) no waiver by the Issuer of any requirement of this Section 7 shall, or shall be deemed to, extend to or affect any other provision of this Regulatory Agreement except to the extent the Issuer has received an opinion of Bond Counsel to the effect that any such other provision is not required by the Act and may be waived without adversely affecting the exclusion from gross income of interest on the Bonds for federal income tax purposes; and (ii) any requirement of this Section 7 shall be void and of no force and effect if the Issuer and the Owner receive a written opinion of Bond Counsel to the effect that compliance with any such requirement would cause interest on the Bonds to cease to be Tax -Exempt or to the effect that compliance with such requirement would be in conflict with the Act or any other applicable State or federal law.
Section 8. Modification of Covenants . The Owner, the Trustee and the Issuer hereby agree as follows:
(a) To the extent any amendments to the Act, the Regulations or the Code shall, in the written opinion of Bond Counsel filed with the Issuer, the Trustee and the Owner, retroactively impose requirements upon the ownership or operation of the Project more restrictive than those imposed by this Regulatory Agreement, and if such requirements are applicable to the Project, this Regulatory Agreement shall be deemed to be automatically amended to impose such additional or more restrictive requirements.
(b) To the extent that the Act, the Regulations or the Code, or any amendments thereto, shall, in the written opinion of Bond Counsel filed with the Issuer, the Trustee and the Owner, impose requirements upon the ownership or operation of the Project less restrictive than imposed by this Regulatory Agreement, this Regulatory Agreement may be amended or modified to provide such less restrictive requirements but only by written amendment signed by the Issuer, at its sole and absolute discretion, the Trustee and the Owner, and only upon receipt by the Issuer of the written opinion of Bond Counsel to the effect that such amendment will not adversely affect the Tax-Exempt status of interest on the Bonds or violate the requirements of the Act, and otherwise in accordance with Section 22 hereof.
(c) The Owner, the Issuer and, if applicable, the Trustee, shall execute, deliver and, if applicable, file of record any and all documents and instruments necessary to effectuate the
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intent of this Section 8, and each of the Owner and the Issuer hereby appoints the Trustee as their true and lawful attorneys -in-fact (jointly or individually) to execute, deliver and, if applicable, file of record on behalf of the Owner or the Issuer, as is applicable, any such document or instrument (in such form as may be approved in writing by Bond Counsel) if either the Owner or the Issuer defaults in the performance of its obligations under this subsection (c); provided, however, that unless directed in writing by the Issuer or the Owner, the Trustee shall not take any action under this subsection (c) without first notifying the Owner or the Issuer, or both of them, as is applicable, and the Lender, and without first providing the Owner or the Issuer, or both, as is applicable, an opportunity to comply with the requirements of this Section 8. Nothing in this subsection (c) shall be construed to allow the Trustee to execute an amendment to this Regulatory Agreement on behalf of the Issuer.
Section 9. Indemnification; Other Payments. The Owner hereby covenants and agrees that it shall indemnify and hold harmless the Issuer and the Trustee and their respective officers, members, directors, officials, employees and agents as set forth in the Financing Agreement.
In addition thereto, the Owner will pay upon demand all of the fees and expenses paid or incurred by the Trustee and/or the Issuer in enforcing the provisions of this Regulatory Agreement.
The provisions of this Section 9 shall survive the term of the Bonds and this Regulatory Agreement; provided, however, the provisions of this Section shall, in the case of the Trustee, survive the term of this Regulatory Agreement or the resignation or removal of the Trustee, but only as to claims arising from events occurring during the term of this Regulatory Agreement or the Trustee’s tenure as Trustee under the Indenture, and shall, in the case of the Issuer, survive the term of this Regulatory Agreement, but only as to claims arising from events occurring during the term of this Regulatory Agreement.
The Issuer agrees that no owner of the Project (including the Lender) subsequent to the Owner will be liable for, assume or take title to the Project subject to:
(a) any failure of any prior owner of the Project to perform or observe any representation or warranty, affirmative or negative covenant or other agreement or undertaking under this Regulatory Agreement; and
(b) the payment of any compensation or any accrued unpaid fees, costs, expenses or penalties otherwise owed by any prior owner of the Project under this Regulatory Agreement.
The Owner and each subsequent owner of the Project shall be responsible under this Regulatory Agreement for its own acts and omissions occurring during the period of its ownership of the Project. All such liability and obligations shall be and remain personal to such person even after such person ceases to be the owner of the Project.
Inasmuch as the covenants, reservations and restrictions of this Regulatory Agreement run with the land, the indemnification obligations of the Owner contained in this Regulatory Agreement will be deemed applicable to any successor in interest to the Owner, but, it is
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acknowledged and agreed, notwithstanding any other provision of this Regulatory Agreement to the contrary, that the Lender will not assume or take subject to any liability for the indemnification obligations of the Owner for acts or omissions of the Owner prior to any transfer of title to the Lender, whether by foreclosure, deed in lieu of foreclosure or comparable conversion of the Loan; the Owner shall remain liable under the indemnification provisions for its acts and omissions prior to any transfer of title to the Lender. The Lender shall indemnify the Issuer following acquisition of the Project by the Lender, by foreclosure, deed in lieu of foreclosure or comparable conversion of the Loan, during, and only during, any ensuing period that the Lender owns and operates the Project, provided that the Lender’s liability shall be strictly limited to acts and omissions of the Lender occurring during the period of ownership and operation of the Project by the Lender. The Owner shall remain liable under this Regulatory Agreement for its actions and omissions prior to any transfer of title to the Lender.
Section 10. Consideration. The Issuer has agreed to issue the Bonds to provide funds to lend to the Owner to finance the Project, all for the purpose, among others, of inducing the Owner to acquire and operate the Project. In consideration of the issuance of the Bonds by the Issuer, the Owner has entered into this Regulatory Agreement and has agreed to restrict the uses to which this Project can be put on the terms and conditions set forth herein.
Section 11. Reliance . The Issuer and the Owner hereby recognize and agree that the representations and covenants set forth herein may be relied upon by all persons interested in the legality and validity of the Bonds, in the exemption from California personal income taxation of interest on the Bonds and in the Tax -Exempt status of the interest on the Bonds. In performing their duties and obligations hereunder, the Issuer, the Administrator and the Trustee may rely upon statements and certificates of the Very Low Income Tenants, and upon audits of the books and records of the Owner pertaining to the Project. In addition, the Issuer and the Trustee may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Issuer or the Trustee hereunder in good faith and in conformity with such opinion. In determining whether any default or lack of compliance by the Owner exists under this Regulatory Agreement, the Trustee shall not be required to conduct any investigation into or review of the operations or records of the Owner and may rely solely on any written notice or certificate delivered to the Trustee by the Owner or the Issuer with respect to the occurrence or absence of a default unless it knows that the notice or certificate is erroneous or misleading.
Section 12. Sale or Transfer of the Project . For the Qualified Project Period, the Owner shall not, except as provided below, sell, transfer or otherwise voluntarily dispose of the Project, in whole or in part, without the prior written consent of the Issuer and the Trustee, which consent shall not be unreasonably withheld or delayed if the following conditions are satisfied:
(A) the Issuer and the Trustee have received evidence, reasonably acceptable to the Issuer and the Trustee, that (1) the Owner shall not be in default hereunder or under the Financing Agreement (which may be evidenced by a Certificate of Continuing Program Compliance) or the purchaser or assignee undertakes to cure any defaults of the Owner to the reasonable satisfaction of the Issuer; (2) the continued operation of the Project shall comply with the provisions of this Regulatory Agreement; (3) either (a) the purchaser or assignee or its property manager has at least three years’ experience in the ownership, operation and management of similar size rental
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housing projects, and at least one year’s experience in the ownership, operation and management of rental housing projects containing below -market-rate units, without any record of material violations of discrimination restrictions or other State or federal laws or regulations or local governmental requirements applicable to such projects, or (b) the purchaser or assignee agrees to retain a property management firm with the experience and record described in subclause (a) above, or (c) the transferring Owner or its management company will continue to manage the Project for at least one year following such transfer and during such period will provide training to the transferee and its manager in the responsibilities relating to the Very Low Income Units; and (4) the person or entity which is to acquire the Project does not have pending against it, and does not have a history of significant and material building code violations or complaints concerning the maintenance, upkeep, operation, and regulatory agreement compliance of any of its projects as identified by any local, State or federal regulatory agencies; (B) the execution by the purchaser or assignee of any document reasonably requested by the Issuer or the Trustee with respect to the assumption of the Owner’s obligations under this Regulatory Agreement and, if the Bonds are outstanding at the time of transfer, the Financing Agreement , including without limitation an instrument of assumption hereof and thereof, and delivery to the Issuer of an opinion of such purchaser or assignee’s counsel to the effect that each such document and this Regulatory Agreement are valid, binding and enforceable obligations of such purchaser or assignee, subject to bankruptcy and other standard limitations affecting creditor’s rights; (C) receipt by the Issuer of an opinion of Bond Counsel to the effect that any such sale, transfer or other disposition will not adversely affect the Tax -Exempt status of interest on the Bonds; and (D) receipt by the Issuer and Trustee of all fees and/or expenses then currently due and payable to the Issuer and Trustee.
The written consent of the Issuer to any transfer of the Project shall constitute conclusive evidence that the transfer is not in violation of this Section 12. Upon any sale or other transfer that complies with this Regulatory Agreement, the Owner shall be fully released from its obligations hereunder to the extent such obligations have been fully assumed in writing by the transferee of the Project. Except as otherwise provided herein, any transfer of the Project to any entity, whether or not affiliated with the Owner, shall be subject to the provisions of this Section 12, except as provided immediately below.
Interests in the Owner may be transferred without the consent of the Issuer or the Trustee.
The Owner acknowledges that a sale or exchange of 50% or more of the capital and profits interests in the Owner in any twelve -month period will be treated for federal tax purposes as a change in ownership of the Project at the time the 50% transfer occurs. The Owner further acknowledges that there is a possibility of some or all of the Bonds being reissued at various points in the financing, including any in connection with any remarketing, and that a change in ownership of the Project within six months of a reissuance or refunding of the Bonds will cause the interest paid on the reissued or refunding bonds not to be excluded from gross income for federal tax purposes.
Restrictions on sale or transfer of the Project or of any interest in the Owner, consents of the Issuer or the Trustee, transfer agreements, transferee criteria and requirements, opinion requirements, assumption fees, transfer fees, penalties and the like shall not apply to any transfer of title to the Project to the Lender or to a third party by foreclosure, deed in lieu of foreclosure
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or comparable conversion of the Loan or to any subsequent transfer by the Lender following foreclosure, deed -in-lieu of foreclosure or comparable conversion of the Loan. Except as provided in this Section 12, n o transfer of the Project shall operate to release the Owner from its obligations under this Regulatory Agreement. Nothing contained in this Regulatory Agreement shall affect any provision of the Mortgage or any of the other Loan Documents that requires the Owner to obtain the consent of the Lender as a precondition to sale, transfer or other disposition of, or any direct or indirect interest in, the Project or of any direct or indirect interest in the Owner, excluding transfers permitted by the Mortgage. No covenant obligating the Owner to obtain an agreement from any transferee to abide by all requirements and restrictions of this Regulatory Agreement shall apply to a transfer to the Lender upon foreclosure, deed -in-lieu of foreclosure or comparable conversion of the Loan by the Lender, or to any subsequent transfer by the Lender following foreclosure, deed-in-lieu of foreclosure or comparable conversion of the Loan. Any written consent to a sale or transfer obtained from the Issuer shall constitute conclusive evidence that the sale or transfer is not a violation of the transfer provisions of this Regulatory Agreement.
For the Qualified Project Period, the Owner shall not: (1) encumber any of the Project or grant commercial leases of any part thereof, or permit the conveyance, transfer or encumbrance of any part of the Project, except pursuant or subordinate to the provisions of this Regulatory Agreement and the Mortgage, and upon receipt by the Owner of an opinion of Bond Counsel to the effect that such action will not adversely affect the Tax -Exempt status of interest on the Bonds, or except upon a sale, transfer or other disposition of the Project in accordance with the terms of this Regulatory Agreement; (2) demolish any part of the Project or substantially subtract from any real or personal property of the Project, except to the extent that what is removed is replaced with comparable property; or (3) permit the use of the dwelling accommodations of the Project for any purpose except rental residences.
Section 13. Term . This Regulatory Agreement and all and several of the terms hereof shall become effective upon its execution and delivery, and shall remain in full force and effect for the period provided herein and shall terminate as to any provision not otherwise provided with a specific termination date and shall terminate in its entirety at the end of the Qualified Project Period, it being expressly agreed and understood that the provisions hereof are intended to survive the retirement of the Bonds and discharge of the Indenture and the Financing Agreement.
The terms of this Regulatory Agreement to the contrary notwithstanding, the requirements of this Regulatory Agreement shall terminate and be of no further force and effect (i) in the event of involuntary noncompliance with the provisions of this Regulatory Agreement caused by fire, seizure, requisition, change in a federal law or an action of a federal agency after the 2012 Delivery Date, which prevents the Issuer and the Trustee from enforcing such provisions, or condemnation or (ii) foreclosure, transfer of title by deed in lieu of foreclosure (whereby a third party shall take possession of the Project), or a similar event, but only if, in the case of either (i) or (ii), within a reasonable period, either the Bonds are retired or amounts received as a consequence of such event are used to provide a project that meets the requirements hereof; provided, however, that the preceding provisions of this sentence shall cease to apply and the restrictions contained herein shall be reinstated if, at any time subsequ ent to the termination
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of such provisions as the result of the foreclosure or the delivery of a deed in lieu of foreclosure or a similar event, the Owner or any related person (within the meaning of Section 1.103-10(e) of the Regulations) obtains an ownership interest in the Project for federal income tax purposes.
The Owner hereby agrees that, following any foreclosure, transfer of title by deed in lieu of foreclosure or similar event, neither the Owner nor any such related person as described above will obtain an ownership interest in the Project for federal tax purposes. Notwithstanding any other provision of this Regulatory Agreement, this Regulatory Agreement may be terminated upon agreement by the Issuer, the Trustee and the Owner, upon receipt by the Issuer and the Trustee of an opinion of Bond Counsel to the effect that such termination will not adversely affect the exclusion from gross income of interest on the Bonds for federal income tax purposes.
Upon the termination of the terms of this Regulatory Agreement, the parties hereto agree to execute, deliver and record appropriate instruments of release and discharge of the terms hereof; provided, however, that the execution and delivery of such instruments shall not be necessary or a prerequisite to the termination of this Regulatory Agreement in accordance with its terms.
Section 14. Covenants to Run with the Land . Notwithstanding Section 1461 of the California Civil Code, the Owner hereby subjects the Project to the covenants, reservations and restrictions set forth in this Regulatory Agreement. The Issuer and the Owner hereby declare their express intent that the covenants, reservations and restrictions set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon the Owner’s successors in title to the Project; provided, however, that on the termination of this Regulatory Agreement said covenants, reservations and restrictions shall expire without the necessity of further action. Each and every contract, deed or other instrument hereafter executed covering or conveying the Project or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations and restrictions, regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instruments.
Section 15. Burden and Benefit . The Issuer and the Owner hereby declare their understanding and intent that the burdens of the covenants set forth herein touch and concern the land in that the Owner’s legal interest in the Project is rendered less valuable thereby. The Issuer and the Owner hereby further declare their understanding and intent that the benefits of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by Very Low Income Tenants, the intended beneficiaries of such covenants, reservations and restrictions, and by furthering the public purposes for which the Bonds were issued.
Section 16. Uniformity; Common Plan . The covenants, reservations and restrictions hereof shall apply uniformly to the entire Project in order to establish and carry out a common plan for the use of the site on which the Project is located.
Section 17. Default; Enforcement . (a) If the Owner defaults in the performance or observance of any covenant, agreement or obligation of the Owner set forth in this Regulatory Agreement, and if such default remains uncured for a period of 60 days after written notice thereof shall have been given by the Issuer or the Trustee to the Owner and to the Owner’s limited partners at the addresses set forth in Section 11.06 of the Indenture, or for a period of 60 days from the date the Owner should, with reasonable diligence, have discovered suc h default,
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then the Issuer or the Trustee (as directed by the Issuer, subject to the provisions of the Indenture) acting on its own behalf or on behalf of the Issuer, shall declare an “Event of Default” to have occurred hereunder; provided, however, that if the default is of such a nature that it cannot be corrected within 60 days, such default shall not constitute an Event of Default hereunder so long as (i) the Owner or the Owner’s limited partner institutes corrective action within said 60 days and diligently pursues such action until the default is corrected, and (ii) in the opinion of Bond Counsel, the failure to cure said default within 60 days will not adversely affect the Tax-Exempt status of interest on the Bonds. The Issuer and the Trustee shall have the right to enforce the obligations of the Owner under this Regulatory Agreement within shorter periods of time than are otherwise provided herein if necessary to ensure compliance with the Act or the Code.
Notwithstanding anything to the contrary contained herein, Issuer and Trustee hereby agree that any cure of any default made or tendered by one or more of Owner’s limited partners shall be accepted or rejected on the same basis as if made or tendered by Owner.
(b) Following the declaration of an Event of Default hereunder, the Issuer or the Trustee, at the direction of the Issuer, subject to the provisions of the Indenture and paragraphs (f) and (h) of this Section 17, may take any one or more of the following steps, in addition to all other remedies provided by law or equity:
(i) by mandamus or other suit, action or proceeding at law or in equity, including injunctive relief, require the Owner to perform its obligations and covenants hereunder or enjoin any acts or things that may be unlawful or in violation of the rights of the Issuer or the Trustee hereunder;
(ii) have access to and inspect, examine and make copies of all of the books and records of the Owner pertaining to the Project;
(iii) require the Owner to pay to the Lender or, if there is no Lender, to the Issuer, an amount equal to the excess rent or other amounts received by the Owner for any units in the Project that were in violation of this Regulatory Agreement during the period such violation continued (which payment shall not reduce the amount due under the Loan);
(iv) declare a default under the Financing Agreement and proceed with any remedies provided therein; and
(v) take such other action at law or in equity as may appear necessary or desirable to enforce the obligations, covenants and agreements of the Owner hereunder.
The Owner hereby agrees that specific enforcement of the Owner’s agreements contained herein is the only means by which the Issuer may fully obtain the benefits of such agreements made by the Owner herein, and the Owner therefore agrees to the imposition of the remedy of specific performance against it in the case of any Event of Default by the Owner hereunder.
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(c) The Trustee shall have the right, in accordance with this Section and the provisions of the Indenture, without the consent or approval of the Issuer, to exercise any or all of the rights or remedies of the Issuer hereunder; provided that prior to taking any such action, that Trustee shall give the Issuer and the Lender written notice of its intended action. After the Indenture has been discharged, the Issuer may act on its own behalf to declare an “Event of Default” to have occurred and to take any one or more of the steps specified hereinabove to the same extent and with the same effect as if taken by the Trustee. The Trustee shall not be deemed to have knowledge of any default hereunder unless the Trustee shall have been specifically notified in writing of such default by the Issuer, the Administrator, the Lender or by the Owners of at least 25% of the Bonds outstanding.
(d) All reasonable fees, costs and expenses of the Trustee and the Issuer incurred in taking any action pursuant to this Section shall be the sole responsibility of the Owner.
(e) No breach or default under this Regulatory Agreement shall defeat or render invalid the lien of the Mortgage or any other mortgage or like encumbrance upon the Project or any portion thereof given in good faith and for value.
(f) Promptly upon determining that a violation of this Regulatory Agreement has occurred, the Issuer or the Trustee shall, by written notice, inform the Lender and (where the Trustee is the notifying party) the Issuer that such violation has occurred, the nature of the violation and that the violation has been cured or has not been cured, but is curable within a reasonable period of time, or is incurable; notwithstanding the occurrence of such violation, neither the Issuer nor the Trustee shall have, and each of them acknowledge that they shall not have, any right to cause or direct acceleration of the Loan, to enforce the Note or to foreclose on the Mortgage.
(g) Notwithstanding anything contained in this Regulatory Agreement to the contrary:
(i) The occurrence of an event of default under this Regulatory Agreement shall not (a) impair, defeat or render invalid the lien of the Mortgage or (b) under any circumstances whatsoever, be or be deemed to be a default under the Loan Documents, except as may be otherwise specified in the Loan Documents.
(ii) neither the Issuer nor the Trustee may, upon the occurrence of an event of default under this Regulatory Agreement, seek, in any manner, to (a) cause or direct acceleration of the Loan, (b) enforce the Note, (c) foreclose on the Mortgage, (d) cause the Trustee to redeem the Bonds or to declare the principal of the Bonds and the interest accrued on the Bonds to be immediately due and payable or (e) cause the Trustee to take any other action under any of the Loan Documents, any of the Bond Documents or any other documents which action would or could have the effect of achieving any one or more of the actions, events or results described in the preceding clauses (a) through (d); and
(h) [Reserved].
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The foregoing prohibitions and limitations are not intended to limit the rights of the Issuer or the Trustee to specifically enforce this Regulatory Agreement or to seek injunctive relief in order to provide for the operation of the Project in accordance with the requirements of the Code and State law. Accordingly, upon any default by the Owner, the Issuer or the Trustee may seek specific performance of this Regulatory Agreement or enjoin acts which may be in violation of this Regulatory Agreement or unlawful, but neither the Issuer nor the Trustee may seek any form of monetary recovery from the Owner, although the Issuer may seek to enforce a claim for indemnification, provided that no obligation of the Owner under this Regulatory Agreement, including, without limitation, any indemnification obligation, any other obligation for the payment of money, any claim and any judgment for monetary damages against the Owner, occasioned by breach or alleged breach by the Owner of its obligations under this Regulatory Agreement or otherwise, shall be secured by or in any manner constitute a lien on, or security interest in, the Project, whether in favor of the Issuer, the Trustee or any other person, and all such obligations shall be, and by this Regulatory Agreement are, subordinate in priority, in right to payment and in all other respects to the obligations, liens, rights (including without limitation the right to payment) and interests arising or created under the Loan Documents.
Accordingly, neither the Issuer nor the Trustee shall have the right to enforce any monetary obligation other than directly against the Owner, without recourse to the Project. In addition, any such enforcement must not cause the Owner to file a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Owner under any applicable liquidation, insolvency, bankruptcy, rehabilitation, composition, reorganization, conservation or other similar law in effect now or in the future.
The obligations of any owner under this Regulatory Agreement shall be personal to the person who was the owner at the time that an event, including, without limitation, any default or breach of this Regulatory Agreement, occurred or was alleged to have occurred, and such person shall remain liable for any and all such obligations, including damages occasioned by a default or breach, even after such person ceases to be the owner of the Project. Accordingly, no subsequent owner of the Project shall be liable or obligated for the obligation of any prior owner (including the Owner), including, but not limited to, any obligation for payment, indemnification or damages, for default or breach of this Regulatory Agreement or otherwise. The owner of the Project at the time the obligation was incurred, including any obligation arising out of a default or breach of this Regulatory Agreement, shall remain liable for any and all payments and damages occasioned by the owner even after such person ceases to be the owner of the Project, and no person seeking such payments or damages shall have recourse against the Project.
Subject to the provisions of the Financing Agreement, under no circumstances shall the Issuer or the Trustee:
(i) initiate or take any action which may have the effect, directly or indirectly, of impairing the ability of the Owner to timely pay the principal of, interest on, or other amounts due and payable under, the Loan;
(ii) interfere with or attempt to influence the exercise by the Lender of any of its rights under the Loan Documents, including, without limitation, the Lender’s remedial rights
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under the Loan Documents upon the occurrence of an event of default by the Owner under the Loan Documents; or
(iii) upon the occurrence of an event of default under the Loan Documents, take any action to accelerate or otherwise enforce payment or seek other remedies with respect to the Loan Documents.
Section 18. The Trustee . The Trustee shall act as specifically provided herein and in the Indenture and may exercise such additional powers as are reasonably incidental hereto and thereto. The Trustee shall have no duty to act with respect to enforcement of the Owner’s performance hereunder as described in Section 17 unless it shall have actual knowledge of any such default as provided in Section 17. The Trustee may act as the agent of and on behalf of the Issuer, and any act required to be performed by the Issuer as herein provided shall be deemed taken if such act is performed by the Trustee. In connection with any such performance, the Trustee is acting solely as Trustee under the Indenture and not in its individual capacity, and except as expressly provided herein, all provisions of the Indenture relating to the rights, privileges, powers and protections of the Trustee, including without limitation those set forth in Section 10 thereof, shall apply with equal force and effect to all actions taken (or omitted to be taken) by the Trustee in connection with this Regulatory Agreement. Neither the Trustee nor any of its officers, directors or employees shall be liable for any action taken or omitted to be taken by it hereunder or in connection herewith except for its or their own negligence or willful misconduct.
The Trustee shall not be responsible for the monitoring of the Owner’s compliance with the terms of this Regulatory Agreement.
After the date on which no Bonds remain Outstanding, as provided in the Indenture, the Trustee shall no longer have any rights, duties or responsibilities under this Regulatory Agreement and all references to the Trustee in this Regulatory Agreement shall be deemed references to the Issuer.
Section 19. Recording and Filing.
(a) The Owner shall cause this Regulatory Agreement and all amendments and supplements hereto and thereto, to be recorded and filed in the real property records of the County of Santa Clara, California, and in such other places as the Issuer or the Trustee may reasonably request. The Owner shall pay all fees and charges incurred in connection with any such recording.
(b) The Owner and the Issuer will file of record such other documents and take such other steps as are reasonably necessary, in the opinion of Bond Counsel, in order to insure that the requirements and restrictions of this Regulatory Agreement will be binding upon all owners of the Project.
(c) Except in the case of a foreclosure, deed in lieu of foreclosure or comparable involuntary conversion of the Loan, the Owner hereby covenants to include or reference the
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requirements and restrictions contained in this Regulatory Agreement in any documents executed and delivered in connection with a voluntary transfer of any interest in the Project to another person to the end that such transferee has notice of, and is bound by, such restrictions and to obtain the agreement from any transferee to abide by all requirements and restrictions of this Regulatory Agreement.
Section 20. Payment of Fees . Notwithstanding any prepayment of the Loan or the discharge of the Indenture, the Owner shall continue to pay to the Trustee reasonable compensation for any services rendered by it hereunder and reimbursement for all expenses reasonably incurred by it in connection therewith, and shall continue to pay (or, to the extent allowed under the Code, shall prepay) the Annual Monitoring Fee and related expenses as provided in Section 7(a) and Section 10 of this Regulatory Agreement.
The Lender shall not be liable for the payment of any compensation or any accrued unpaid fees, costs, expenses or penalties otherwise owed by the Owner or any subsequent owner of the Project prior to the date of acquisition of the Project by the Lender, whether such acquisition is by foreclosure, deed-in-lieu of foreclosure or comparable conversion of the Loan.
Section 21. Governing Law. This Regulatory Agreement shall be governed by the laws of the State applicable to contracts made and performed in the State, and any legal action brought hereunder must be instituted in a court located within the County of Santa Clara, California.
Section 22. Amendments; Waivers.
(a) Except as provided in Section 8(a) hereof, this Regulatory Agreement may be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County of Santa Clara, California, and only upon receipt by the Issuer of an opinion from Bond Counsel to the effect that such amendment will not adversely affect the Tax-Exempt status of interest on the Bonds and is not contrary to the provisions of the Act.
(b) Anything to the contrary contained herein notwithstanding, the Issuer, the Trustee and the Owner hereby agree to amend this Regulatory Agreement to the extent required, in the opinion of Bond Counsel, in order that interest on the Bonds remain Tax -Exempt. The parties requesting such amendment shall notify the other parties to this Regulatory Agreement of the proposed amendment, with a copy of such requested amendment to Bond Counsel and a request that Bond Counsel render to the Issuer an opinion as to the effect of such proposed amendment upon the Tax-Exempt status of interest on the Bonds. This provision shall not be subject to any provision of any other agreement requiring any party hereto to obtain the consent of any other person in order to amend this Regulatory Agreement.
(c) Any waiver of, or consent to, any condition under this Regulatory Agreement must be expressly made in writing.
(d) The Issuer shall not consent to any amendment, supplement to, or restatement of this Regulatory Agreement without the prior written consent of the Lender.
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Section 23. Notices. Any notice required to be given hereunder shall be made in writing and shall be given by personal delivery, overnight delivery, certified or registered mail, postage prepaid, return receipt requested, or by telecopy, in each case at the respective addresses specified in the Indenture, or at such other addresses as may be specified in writing by the parties hereto.
A copy of each notice sent by or to the Owner shall also be sent to the manager of the Project at such address as provided by the Owner to the Administrator and to the Lender at such address as set forth in the Indenture; but such copies shall not constitute a notice to the Owner, nor shall any failure to send such copies constitute a breach of this Regulatory Agreement or a failure of or defect in notice to the Owner. The Issuer, the Administrator, the Trustee, the Lender and the Owner may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. Notice shall be deemed given on the date evidenced by the postal or courier receipt or other written evidence of delivery or electronic transmission; provided that any telecopy or other electronic transmission received by any party after 4:00 p.m., local time of the receiving party, as evidenced by the time shown on such transmission, shall be deemed to have been received the following Business Day.
A copy of each notice of default provided to the Owner shall also be provided to the Owner’s investor limited partner at the address set forth in Section 11.06 of the Indenture.
Section 24. Severability . If any provision of this Regulatory Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining portions hereof shall not in any way be affected or impaired thereby.
Section 25. Multiple Counterparts . This Regulatory Agreement may be simultaneously executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original.
Section 26. Limitation on Liability. Notwithstanding any other provision or obligation to the contrary contained in this Regulatory Agreement, (i) the liability of the Owner under this Regulatory Agreement to any person or entity, including, but not limited to, the Trustee or the Issuer and their successors and assigns, is limited to the Owner’s interest in the Project, the Trust Estate, including the amounts held in the funds and accounts created under the Indenture, or any rights of the Owner under any guarantees relating to the Project, and such persons and entities shall look exclusively thereto, or to such other security as may from time to time be given for the payment of obligations arising out of this Regulatory Agreement or any other agreement securing the obligations of the Owner under this Regulatory Agreement; and (ii) from and after the date of this Regulatory Agreement, no deficiency or other personal judgment, nor any order or decree of specific performance (other than pertaining to this Regulatory Agreement, any agreement pert aining to any Project or any other agreement securing the Owner’s obligations under this Regulatory Agreement), shall be rendered against the Owner, the assets of the Owner (other than the Owner’s interest in the Project, this Regulatory Agreement, amounts held in the funds and accounts created under the Indenture, any rights of the Owner under the Indenture or any other documents relating to the Bonds or any rights of the Owner under any guarantees relating to the Project), its partners, members, successor s, transferees or assigns and each their
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respective officers, directors, employees, partners, agents, heirs and personal representatives, as the case may be, in any action or proceeding arising out of this Regulatory Agreement and the Indenture or any agreement securing the obligations of the Owner under this Regulatory Agreement, or any judgment, order or decree rendered pursuant to any such action or proceeding.
The obligations of the Owner and any subsequent owner of the Project shall not be secured by or constitute a lien on, or security interest in, the Project.
Section 27. Third -Party Beneficiary. CDLAC is intended to be and shall be a third - party beneficiary of this Regulatory Agreement. CDLAC shall have the right (but not the obligation) to enforce the CDLAC Conditions and to pursue an action for specific performance or other available remedy at law or in equity in accordance with Section 17 hereof; provided that any such action or remedy undertaken by CDLAC shall not materially adversely affect the interests and rights of the Issuer, the Lender or the Bondholders.
The parties to this Regulatory Agreement recognize and agree that the terms of this Regulatory Agreement and the enforcement of such terms are essential to the security of the Lender and are entered into for the benefit of various parties, including the Lender. The Lender shall accordingly have contractual rights in this Regulatory Agreement and shall be entitled (but not obligated) to enforce, separately or jointly with the Issuer and/or the Trustee, or to cause the Issuer or the Trustee to enforce, the terms of this Regulatory Agreement. In addition, the Owner and the Issuer intend that the Lender shall be a third -party beneficiary of this Regulatory Agreement.
Section 28. No Limitations on Actions of Issuer in Exercise of Its Governmental Powers. Nothing in this Regulatory Agreement is intended, nor shall it be construed, to in any way limit the actions of the Issuer in the exercise of its governmental powers, as contrasted with any contractual rights or powers. It is the express intention of the parties hereto that the Issuer shall retain the full right and ability to exercise its governmental powers with respect to the Owner, the Project, or the Lender and the transactions contemplated by this Regulatory Agreement to the same extent as if it were not a party to this Regulatory Agreement or the transactions contemplated thereby, and in no event shall the Issuer have any liability in contract arising under this Regulatory Agreement by virtue of any exercise of its governmental powers.
Section 29. Status of Prior Trustee . The Prior Trustee shall have no duties, responsibilities or rights under this Regulatory Agreement.
Section 30. Annual Reporting Covenant . No later than January 31 of each calendar year (commencing January 31, 2027), the Owner, on behalf of the Issuer, agrees to provide to the California Debt and Investment Advisory Commission, by any method approved by the California Debt and Investment Advisory Commission, with a copy to the Issuer, the annual report information required by Section 8855(k) (1) of the California Government Code. This covenant shall remain in effect until the later of the date (i) the Bonds has been fully repaid, or (ii) the proceeds of the Bonds have been fully spent.
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Section 31. Amendment and Restatement of Original Regulatory Agreement . The parties hereto hereby amend and restate the Original Regulatory Agreement in its entirety.
Section 32. Applicability of Fannie Mae Rider . So long as the Credit Facility remains outstanding and Fannie Mae is not in default in its payment obligations thereunder, the provisions of the Fannie Mae Rider attached hereto as Exhibit E shall apply and, during such period, the terms, provisions and conditions of this Regulatory Agreement shall be subject in all respects to the terms, conditions and provisions of Exhibit E.
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IN WITNESS WHEREOF, the Issuer, the Trustee and the Owner have executed this Regulatory Agreement by duly authorized representatives, all as of the date first above written.
CITY OF SAN JOSE
By:
Erik Soliván
Director of Housing
By:
Maria Öberg
Director of Finance
Approved as to form:
Jessica Holden
Deputy City Attorney
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COMPUTERSHARE TRUST COMPANY,
NATIONAL ASSOCIATION,
as Trustee
By:
Authorized Officer
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LA MORAGA SAN JOSE L.P.,
a California limited partnership
By: PH La Moraga Holdings, LLC,
a California limited liability company,
its Managing General Partner
By: Pacific Housing, Inc.,
a California nonprofit public benefit
corporation, its Sole Member and
Manager
By:
Mark A. Wiese,
President
By: Anton La Moraga, LLC,
a California limited liability company,
its Co-General Partner
By:
Steven L. Eggert,
Manager
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EXHIBIT A
DESCRIPTION OF REAL PROPERTY
RELATING TO THE PROJECT
ALL THAT REAL PROPERTY SITUATED IN THE CITY OF SAN JOSE, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
LOT 9, AS SHOWN ON THE MAP OF TRACT 9952, FILED DECEMBER 19, 2008 IN BOOK 829 OF MAPS, PAGES 15 -28, SANTA CLARA COUNTY RECORDS, AND AMENDED BY “CERTIFICATE OF CORRECTION” RECORDED OCTOBER 30, 2009 AS INSTRUMENT NO. 20485876 OF OFFICIAL RECORDS.
APN: 706-07-014
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EXHIBIT B
FORM OF INCOME CERTIFICATION
[Attached.]
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EXHIBIT D
CDLAC RESOLUTION
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EXHIBIT E
FANNIE MAE RIDER
THIS FANNIE MAE RIDER TO REGULATORY AGREEMENT (“Rider”) is attached to and forms a part of the Amended and Restated Regulatory Agreement (“Regulatory Agreement”), dated as of September 1, 2025, by and among LA MORAGA SAN JOSE L.P., a California limited partnership (“Borrower”), its successors and assigns, CITY OF SAN JOSE (“Issuer”) and COMPUTERSHARE TRUST, NATIONAL ASSOCIATION (“Trustee”), as Trustee.
1. Definitions. All capitalized terms used in this Rider have the meanings given to those terms in the Regulatory Agreement or the Indenture, as applicable.
2. Applicability. This Rider shall amend and supplement the Regulatory Agreement. In the event any provision of this Rider conflicts with the Regulatory Agreement, this Rider shall supersede the conflicting provision of the Regulatory Agreement. This Rider shall apply in spite of the fact that the covenants, reservations and restrictions of the Regulatory Agreement run with the land and may be deemed applicable to any successor in interest to the Borrower.
3. Obligations not Secured by the Mortgaged Property . The Regulatory Agreement shall not constitute a mortgage, equitable mortgage, deed of trust, deed to secure debt or other lien or security interest in the Mortgaged Property . None of the obligations of the Borrower or any subsequent owner of the Mortgaged Property under the Regulatory Agreement shall be secured by a lien on, or security interest in, the Mortgaged Property. All such obligations are expressly intended to be and shall remain unsecured obligations. The occurrence of an event of default under the Regulatory Agreement shall not impair, defeat or render invalid the lien of the Security Instrument.
4. Subordination. The terms, covenants and restrictions of the Regulatory Agreement, other than those set forth in Sections 3 through 7 and this Rider, are and shall at all times remain subject and subordinate, in all respects, to the liens, rights and interests created under the Loan Documents. Upon a conveyance or other transfer of title to the Mortgaged Property by foreclosure, deed in lieu of foreclosure or comparable conversion of the Loan, the Person who acquires title to the Mortgaged Property pursuant to such foreclosure, deed in lieu of foreclosure or comparable conversion of the Loan (unless such Person is the Borrower or a Person related to the Borrower within the meaning of Section 1.103 -10(e) of the Regulations, in which event the Regulatory Agreement shall remain in full force and effect in its entirety) shall acquire such title free and clear of the terms, covenants and restrictions of the Regulatory Agreement, other than those set forth in Sections 3 through 7 and this Rider and, from and after the date on which such Person acquires title to the Mortgaged Property, the terms, covenants and restrictions of the Regulatory Agreement, other than those set forth in Sections 3 through 7 and this Rider, shall automatically terminate and be of no force and effect; provided that Sections 3 through 7 and this Rider shall also terminate and be of no force or effect under the circumstances set forth in Section 13 of the Regulatory Agreement.
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5. Obligations Personal . The Issuer agrees that no owner of the Mortgaged Property (including Fannie Mae) subsequent to the Borrower will be liable for, assume or take title to the Mortgaged Property subject to:
(a) any failure of any prior owner of the Mortgaged Property to perform or observe any representation or warranty, affirmative or negative covenant or other agreement or undertaking under the Regulatory Agreement; and
(b) the payment of any indemnification, compensation or any accrued unpaid fees, costs, expenses or penalties otherwise owed by any prior owner of the Mortgaged Property under the Regulatory Agreement.
The Borrower and each subsequent owner of the Mortgaged Property shall be responsible under the Regulatory Agreement for its own acts and omissions occurring during the period of its ownership of the Mortgaged Property. All such liability and obligations shall be and remain personal to such person even after such person ceases to be the owner of the Mortgaged Property.
6. Sale or Transfer; or Incurrence of Additional Indebtedness
(a) Restrictions Not Applicable to Certain Transfers . All provisions of the Regulatory Agreement regarding the sale or transfer of the Mortgaged Property or of any interest in the Borrower, including any requirement, limitation or condition precedent for any of (i) the consent of the Issuer or the Trustee to such transfer, (ii) an agreement by any transferee to abide by the requirements and restrictions of the Regulatory Agreement, (iii) transferee criteria or other similar requirements, (iv) an opinion of legal counsel and (v) the payment of any assumption fee, transfer fee, penalty or other charges, shall not apply to any of the following:
(1) any transfer of title to the Mortgaged Property to Fannie Mae or to a third party by foreclosure, deed in lieu of foreclosure or comparable conversion of any lien on the Mortgaged Property or to any subsequent transfer by Fannie Mae (or a third party) following such foreclosure, deed in lieu of foreclosure or comparable conversion;
(2) any execution and delivery of a mortgage, deed of trust, deed to secure debt or other lien by the Borrower to secure any additional indebtedness of the Borrower which is originated by a lender for sale to Fannie Mae or guaranteed or otherwise credit enhanced by Fannie Mae; and
(3) provided that no Bonds are then Outstanding or all Bonds are to be simultaneously fully paid, redeemed or defeased, any execution and delivery of a mortgage, deed of trust, deed to secure debt or other lien by the Borrower to secure any indebtedness incurred by the Borrower which effectively refinances the Loan.
(b) Incurrence of Additional Indebtedness . All the provisions of the Regulatory Agreement relating to the incurrence of additional indebtedness, including but not limited to any
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requirement, limitation or condition precedent for the consent of the Issuer to such incurrence of additional indebtedness, will not apply to any “Supplemental Loan” or similar loan, originated by a Fannie Mae DUS lender and sold and/or assigned to Fannie Mae, which is secured by the Mortgaged Property and subordinate in priority of lien to the Loan.
(c) Fannie Mae Rights to Consent Not Impaired . Nothing contained in the Regulatory Agreement shall affect any provision of the Security Instrument or any other Loan Document which requires the Borrower to obtain the consent of Fannie Mae as a precondition to sale, transfer or other disposition of, or any direct or indirect interest in, the Mortgaged Property or of any direct or indirect interest in the Borrower, excluding transfers permitted by the Security Instrument.
(d) Conclusive Evidence. Any written consent to a sale or transfer obtained from the Issuer shall constitute conclusive evidence that the sale or transfer is not a violation of the transfer provisions of the Regulatory Agreement.
7. Damage, Destruction or Condemnation of the Mortgaged Property . In the event that the Mortgaged Property is damaged or destroyed or title to the property, or any part thereof, is taken through the exercise or the threat of the exercise of the power of eminent domain, the Borrower shall comply with all applicable requirements of the Security Instrument and the other Loan Documents.
8. Regulatory Agreement Default . Notwithstanding anything contained in the Regulatory Agreement to the contrary:
(a) The occurrence of an event of default under the Regulatory Agreement shall not impair, defeat or render invalid the lien of the Security Instrument.
(b) The occurrence of an event of default under the Regulatory Agreement shall not be or be deemed to be a default under the Loan Documents, except as may be otherwise specified in the Loan Documents.
The Issuer and the Trustee acknowledge and agree that none of the Issuer, the Trustee or any Person under their control shall exercise any remedies or direct any proceedings under this Regulatory Agreement without the prior written consent of Fannie Mae other than to enforce rights of specific performance or injunctive relief under the Regulatory Agreement.
9. Amendments. The Issuer shall not consent to any amendment, supplement to, or restatement of the Regulatory Agreement without the prior written consent of Fannie Mae.
10. Termination. The Regulatory Agreement may be terminated upon agreement by the Issuer, the Trustee, and the Borrower upon receipt of an opinion of a nationally recognized bond counsel acceptable to the Trustee that such termination will not adversely affect the exclusion of the interest on the Bonds from gross income for federal income purposes. So long as the Bonds have been redeemed or are redeemed within a reasonable period thereafter, the Regulatory Agreement shall terminate and be of no further fo rce or effect from and after the date of any transfer of title
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to the Mortgaged Property by foreclosure, deed in lieu of foreclosure or comparable conversion of any lien on the Mortgaged Property; provided, however, that the preceding provisions of this sentence shall cease to apply and the restrictions contained in the Regulatory Agreement shall be reinstated if, at any time subsequent to the termination of such provisions as the result of the foreclosure or the delivery of a deed in lieu of foreclosure or a similar event, the Borrower or any related person (within the meaning of Section 1.103 -10(e) of the Regulations) obtains an ownership interest in the Mortgaged Property for federal income tax purposes.
11. Third-Party Beneficiary . The parties to the Regulatory Agreement recognize and agree that the terms of the Regulatory Agreement and the enforcement of those terms are essential to the security of Fannie Mae and are entered into for the benefit of various parties, including Fannie Mae. Fannie Mae shall accordingly have contractual rights in the Regulatory Agreement and shall be entitled (but not obligated) to enforce, separately or jointly with the Issuer and/or the Trustee, or to cause the Issuer or the Trustee to enforce, the terms of the Regulatory Agreement. In addition, the Borrower and the Issuer intend that Fannie Mae be a third-party beneficiary of the Regulatory Agreement.
12. Copies of Notices under the Regulatory Agreement . Copies of all notices under the Regulatory Agreement shall be sent to the Loan Servicer at the address set forth below or to such other address as the Loan Servicer may from time to time designate:
Berkadia
5960 Berkshire Lane, Suite 1000
Dallas, TX 75225
Attention: Asset Management
E-Mail: ___________________
RE: City of San José Multifamily Housing Revenue
Refunding Bonds (La Moraga Apartments) Series
2025C/Berkadia
13. Notices. Any notice to be given to Fannie Mae shall be sent to Fannie Mae at the address set forth below or to such other address as Fannie Mae may from time to time designate:
Fannie Mae
1100 15th Street, NW
Drawer AM
Washington, DC 20005
Attention: Director, Multifamily Asset Management
Telephone: (301) 204-8008
Facsimile: (301) 280-2065
RE: City of San Jose Multifamily Housing Revenue Refunding Bonds (La Moraga Apartments) Series 2025C/ Berkadia
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with a copy to:
Fannie Mae
1100 15th Street, NW
Drawer AM
Washington, DC 20005
Attention: Vice President, Multifamily Operations
Telephone: (301) 204-8422
Facsimile: (202) 752-8369
RE: City of San Jose Multifamily Housing Revenue Refunding Bonds (La Moraga Apartments) Series 2025C/ Berkadia