HomeMy WebLinkAbout- - NSP Attachment 1 - 9/21/2010 (2)NEIGHBORHOOD STABILIZATION PROGRAM SUBRECIPIENT
CONTRACT SERVICES AND LOAN AGREEMENT
by and among
CITY OF FULLERTON,
a California municipal corporation,
CITY OF COSTA MESA,
a California municipal corporation,
CITY OF LA HABRA,
a California municipal corporation,
and
MHC NSP LLC,
a California limited liability company
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TABLE OF CONTENTS
Page
1. DEFINITIONS..................................................................................................................2
2. SELECTION AND ACQUISITION OF HOMES........................................................... 8
2.1
Selection of Homes...............................................................................................
8
2.2
Approval by City Party.........................................................................................
8
2.2.1 Initial Approval.........................................................................................
8
2.2.2 Preliminary Approval................................................................................
8
2.2.3 Final Approval..........................................................................................9
2.3
Allowable Acquisition Price; Appraisal...............................................................9
2.4
Acquisition Purchase Agreement........................................................................10
2.4.1 Timing to Enter into Acquisition Purchase Agreement ..........................10
2.4.2 Conditions in Acquisition Purchase Agreement.....................................11
2.4.3 Compliance with Acquisition Purchase Agreement...............................11
2.4.4 Good Faith Deposit.................................................................................11
2.5
Compliance with URA; Relocation....................................................................12
2.6
Purchase Expenses..............................................................................................12
2.7
Acquisition Closing Date....................................................................................12
2.8
Environmental Review........................................................................................12
2.9
Addendum...........................................................................................................13
2.10
Conduct During Holding Period.........................................................................13
3. REHABILITATION PROJECTS...................................................................................13
3.1 Scope of Work; NSP Rehabilitation Guidelines.................................................13
3.2 Development Approvals and Permits.................................................................13
3.3 Construction Bids; Contractors...........................................................................14
3.4 Schedule of Performance....................................................................................15
3.4.1 Commencement and Completion............................................................15
3.4.2 Force Majeure.........................................................................................15
3.5 Compliance with Laws and Regulations and NSP Requirements ......................15
3.6 Right of Access...................................................................................................16
3.7 Rehabilitation Guidelines....................................................................................16
3.8 Pre -construction Meeting....................................................................................16
3.9 Right to Take Over Work...................................................................................16
4. FINANCING THE ACQUISITION AND REHABILITATION OF HOMES..............17
4.1
NSP Loan for each Home...................................................................................17
4.2
Use of NSP Loan; Project Expenses...................................................................17
4.3
NSP Loan Funding Conditions...........................................................................18
4.4
Execution and Delivery of NSP Loan Documents.............................................19
4.5
Truth in Lending Statement................................................................................
20
4.6
Disbursement of NSP Loan for Project Expenses..............................................20
4.6.1 Purchase Expenses..................................................................................
20
4.6.2 Other Project Expenses...........................................................................20
4.7
Repayment of NSP Loan....................................................................................21
4.8
NSP Loan Secured by Deed of Trust..................................................................22
4.9
Return of NSP Loan Proceeds............................................................................
22
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TABLE OF CONTENTS
(continued)
Page
4.10 Other Financing..................................................................................................22
4.10.1 Participant's Efforts to Obtain Other Financing ..................................... 22
4.10.2 Approval of Other Financing Loan.........................................................23
4.10.3 Participant's Evidence of Financial Capability ....................................... 23
4.10.4 Right of City to Cure Mortgage or Deed of Trust Default .....................23
4.10.5 Subordination.......................................................................................... 24
5. PARTICIPANT'S SALE OF HOMES TO ELIGIBLE HOMEBUYERS .....................24
5.1
Market Homes.....................................................................................................24
5.2
Eligible Homebuyers..........................................................................................24
5.3
City's Verification of Eligible Homebuyer Status..............................................25
5.3.1 Evidence of Lawful Residency in United States.....................................26
5.4
Priority................................................................................................................ 26
5.5
Resale Price.........................................................................................................26
5.5.1 Permitted Resale Price............................................................................ 26
5.5.2 Reduction of Resale Price.......................................................................27
5.6
Homebuyer Outside Resale Date; Auction.........................................................27
5.7
Down Payment....................................................................................................27
5.8
Financing to be Obtained by Eligible Homebuyer; Loan Documents................27
5.8.1 City Homebuyer Loan.............................................................................27
5.8.2 City of CM Additional Funding.............................................................. 28
5.8.3 First Trust Deed Financing.....................................................................
28
5.9
Homebuyer Purchase Agreement.......................................................................
28
5.10
Conditions to Sale............................................................................................... 28
5.11
Coordination with City.......................................................................................28
5.12
Homebuyer Counseling and Other services........................................................29
5.13
Right of City Party to Acquire Home.................................................................29
6. HOME PROJECT BUDGET; REIMBURSEMENT OF PROJECT EXPENSES ......... 29
6.1 Home Project Budget..........................................................................................29
6.2 Project Expenses Defined...................................................................................30
6.3 Reimbursement of Project Expenses..................................................................31
6.3.1 Payment of Project Expenses for Homes that Participant Acquires . ...... 31
6.3.2 Payment of Project Expenses for Homes that Participant does not
Acquire.................................................................................................... 31
6.3.3 Other Financing Interest......................................................................... 32
6.4 Participant Responsible for Expenses that Exceed Budget ................................. 32
7. COMPENSATION.........................................................................................................32
7.1
Fee Summary......................................................................................................
32
7.2
Acquisition Fee...................................................................................................
32
7.3
Rehabilitation Fee...............................................................................................
34
7.4
Homebuyer Administration Fee
..........................................................................34
7.5
Disposition Fee...................................................................................................34
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TABLE OF CONTENTS
(continued)
Page
8. GENERAL PROVISIONS RELATING TO PARTICIPANT SERVICES...................35
8.1
Standard of Performance.....................................................................................35
8.2
Prohibition Against Assignment and Transfer....................................................35
8.3
Permits................................................................................................................35
8.4
Compliance with Laws.......................................................................................35
8.5
Independent Contractor.......................................................................................36
9. RECORDS AND REPORTS..........................................................................................36
9.1
Records...............................................................................................................36
9.1.1 Records to be Maintained.......................................................................
36
9.1.2 Retention.................................................................................................37
9.1.3 Location of Records................................................................................37
9.1.4 Access to Records...................................................................................37
9.1.5 Audits......................................................................................................37
9.2
Reports................................................................................................................37
9.2.1 Quarterly Reports....................................................................................37
9.2.2 Other Reports..........................................................................................38
10. INSURANCE
AND INDEMNITY................................................................................38
10.1
Insurance.............................................................................................................
38
10.2
Indemnification...................................................................................................
38
11. INTRA-CITY LOANS...................................................................................................38
12. PROGRAM INCOME....................................................................................................39
13. DEFAULTS AND REMEDIES.....................................................................................39
13.1 Defaults............................................................................................................... 39
13.2 Remedies.............................................................................................................40
13.3 Limitation on Damages for Participant's Rehabilitation Default and Resale
Default................................................................................................................. 40
13.4 Inaction Not a Waiver of Default........................................................................41
13.5 Rights and Remedies are Cumulative................................................................. 41
13.6 No Cross Defaults............................................................................................... 41
14. TERM; TERMINATION................................................................................................41
15. ENVIRONMENTAL CLEARANCE.............................................................................42
16. GENERAL PROVISIONS.............................................................................................43
16.1 Notices................................................................................................................43
16.2 Nonliability of City Officials and Employees....................................................43
16.3 Contract Administration......................................................................................43
16.4 Time of the Essence............................................................................................43
16.5 Entire Agreement, Waivers and Amendments....................................................43
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TABLE OF CONTENTS
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16.6
Applicable Law; Venue......................................................................................43
16.7
No Discrimination...............................................................................................43
16.8
Litigation Expenses.............................................................................................44
16.9
Severability.........................................................................................................44
16.10
Monitoring..........................................................................................................44
16.11
Condition to Release of Funds............................................................................
44
16.12
Binding on Heirs.................................................................................................
44
16.13
Covenants Run with the Land.............................................................................44
16.14
Further Assurances..............................................................................................45
16.15
Execution in Counterparts...................................................................................45
16.16
Exhibits...............................................................................................................45
EXHIBITS
Exhibit A Additional Legal Requirements
Exhibit B NSP Rehabilitation Guidelines
Exhibit C Insurance Requirements
Exhibit D Truth in Lending Statement
Exhibit E Promissory Note Secured by Deed of Trust
Exhibit F Deed of Trust
Exhibit G Memorandum
Exhibit H Seller's Occupancy Certification Under the Protecting Tenants at Foreclosure Act
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NEIGHBORHOOD STABILIZATION PROGRAM SUBRECIPIENT
CONTRACT SERVICES AND LOAN AGREEMENT
This NEIGHBORHOOD STABILIZATION PROGRAM SUBRECIPIENT
CONTRACT SERVICES AND LOAN AGREEMENT ("Agreement") is dated to be effective as
of November 10, 2009, and entered into by and among the CITY OF FULLERTON, a California
municipal corporation ("City Fullerton"), the CITY OF COSTA MESA, a California municipal
corporation ("City CM"), the CITY OF LA HABRA, a California municipal corporation ("City
LH"), and MHC NSP LLC, a California limited liability company ("Participant"). City
Fullerton, City CM, and City LH are collectively referred to herein as the "City Parties" and
individually as a "City Party.
RECITALS
A. Pursuant to the Housing and Economic Recovery Act of 2008 ("HERA"),
City Fullerton applied for and received on behalf of itself, City CM and City LH a tri-parry
allocation of funds in the collective amount of One Million Three Hundred Sixty -Nine Thousand
Eight Hundred Fifty -Four Dollars ($1,369,854) ("NSP Funds"). The NSP Funds were provided
under the Neighborhood Stabilization Program at Title III of Division B of the HERA ("NSP").
The purposes of the NSP are to provide emergency assistance for the redevelopment of
Abandoned and Foreclosed homes and residential properties for the benefit of persons and
families whose household income does not exceed 120% of the Orange County median income
adjusted for family size ("Middle Income Households") and thereby stabilize neighborhoods
impacted by such properties, and provide long-term affordability, and increase sustainability and
attractiveness of housing and neighborhoods. Funds received through the NSP may be used to
carry out five eligible uses, including financing mechanisms for Foreclosed homes and
residential properties; acquisitions and rehabilitations to sell, rent or redevelop Abandoned or
Foreclosed homes and residential properties; establishment of land banks for Foreclosed homes;
demolition of blighted structures; and redevelopment of demolished or vacant properties.
B. The City Parties entered into that certain Joint Agreement for Neighborhood
Stabilization Program Participation dated June 2, 2009 ("Joint Agreement"), pursuant to which
City Fullerton was designated as the lead agency of the City Parties in the administration of the
NPS Funds. On or about June 2, 2009, City Fullerton and City CM entered into that certain NSP
Subrecipient Agreement relating to City CM's use of a portion of the NSP Funds in the amount
of $303,749. On or about June 2, 2009, City Fullerton and City LH entered into that certain NSP
Subrecipient Agreement relating to City LH's use of a portion of the NSP Funds in the amount
of $457,482.
C. The City Parties desire to use the NSP Funds for the acquisition and rehabilitation
of homes that have been Abandoned or Foreclosed upon and for loans to eligible Middle Income
Households who will purchase the homes after the completion of the rehabilitation.
D. The City Parties desire to contract with a third party to acquire and rehabilitate the
homes and sell the homes to eligible Middle Income Households. The City Parties have selected
Participant as the party that will perform these services. The City Parties each will provide loans
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to Participant of NSP Funds for the costs to acquire and rehabilitate the homes, on the terms and
conditions set forth herein. Participant is a subrecipient of the NSP Funds and this Agreement
constitutes a Subrecipient Agreement.
AGREEMENT
Based upon the foregoing Recitals and for good and valuable consideration, the receipt
and sufficiency of which is acknowledged by all parties, City Fullerton, City CM, City LH and
Participant hereby agree as follows:
1. DEFINITIONS.
The following terms as used in this Agreement shall have the meanings given below
unless expressly provided to the contrary:
"Abandoned" shall refer to a Home that satisfies all of the following requirements: (i)
mortgage or tax foreclosure proceedings have been initiated for the property, and (ii) no
mortgage or tax payments have been made by the property owner for at least 90 days, and (iii)
the property has been vacant for at least 90 days and remains vacant.
"Acquisition Close of Escrow" or "Acquisition Closing" shall mean, as to each Home,
the consummation of the transactions contemplated by this Agreement to occur through the
Acquisition Escrow, including Participant's acquisition of such Home.
"Acquisition Closing Date" shall mean, as to each Home, the date the deed conveying fee
title to the Home to Participant is recorded in the Official Records of Orange County, California,
which shall be on or before the Acquisition Outside Closing Date for such Home.
"Acquisition Escrow" shall mean, as to each Home, the escrow to be opened with a third
party escrow company approved by the City Party for Participant's acquisition of such Home.
"Acquisition Purchase Agreement" shall mean each of the purchase agreements to be
entered into by Participant and the owner of a Home for Participant's acquisition of the Home.
The Acquisition Purchase Agreements shall be in such form as approved by the City Parties.
"Acquisition Outside Closing Date" shall mean, as to each Home, the outside date for the
Acquisition Close of Escrow for the Home. The Acquisition Outside Closing Date that is
approved by the City Party for a Home as part of the Final Loan Package for the Home pursuant
to Section 2.2.3 of this Agreement shall be the "Acquisition Outside Closing Date" for that
Home and it shall not be more than sixty (60) days after the execution of the Acquisition
Purchase Agreement unless agreed to in writing by the City Party in its sole discretion. The
Acquisition Outside Closing Date may be extended by mutual agreement of the City Party and
Participant, in which event, all references to the term "Acquisition Outside Closing Date" shall
be deemed to refer to the extended date.
"Affordable Housing Cost" shall mean the purchase price that would result in an annual
Monthly Housing Cost (as defined below) that does not exceed the maximum percentage of
income that can be devoted to housing cost by Middle Income Households under
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Health & Safety Code Section 50052.5, as may be amended, or any successor statute thereto, and
the implementing regulations in Title 25 of the California Code of Regulations. As of the date of
this Agreement, the Affordable Housing Cost for a Middle Income Household means a purchase
price that would result in an annual Monthly Housing Cost which is not less than 28% of the
annual Gross Income of the household and not more than the product of 35% times 110% of the
Median Income adjusted for family size appropriate for the Home. For purposes of calculating
the Affordable Housing Cost, "adjusted for family size appropriate for the Home" shall mean a
household of two (2) persons for a one -bedroom Home, a household of three (3) persons for a
two -bedroom Home, a household of four (4) persons for a three -bedroom Home, and a
household of five (5) persons for a four -bedroom Home.
"Agreement" shall mean this Neighborhood Stabilization Program Subrecipient Contract
Services and Loan Agreement among City Fullerton, City CM, City LH, and Participant,
including all exhibits and other documents attached hereto.
"Allowable Acquisition Price" shall mean the maximum allowable purchase price that
Participant may pay for a Home, as more fully explained in Section 2.3 of this Agreement.
"Appraisal" shall have the meaning ascribed in Section 2.3 of this Agreement.
"Approved Bid Amount" shall have the meaning ascribed in Section 3.3 of this
Agreement.
"Approved Contractor List" shall mean the list of contractors approved by the City
Parties for participation in the Rehabilitation Projects pursuant to Section 3.3.
"Carrying Costs and Miscellaneous Expenses" shall mean, as to each Home, the Project
Expenses for the Eligible Project Expense Items listed under the heading "Carrying Costs and
Miscellaneous Expenses" in Section 6.2 of this Agreement.
"City Deed of Trust" shall mean, as to each NSP Loan, the Deed of Trust that secures
Participant's payment obligations under the City Note for that NSP Loan, substantially in the
form attached hereto as Exhibit "F." A separate City Deed of Trust shall be executed for each
NSP Loan.
"City Note" shall mean, as to each NSP Loan, the Promissory Note Secured by Deed of
Trust setting forth the terms for Participant's repayment of the NSP loan, substantially in the
form attached hereto as Exhibit "E." A separate City Note shall be executed for each NSP Loan.
"City Parry" shall individually refer to City Fullerton, City CM, or City LH, and "City
Parties" shall collectively refer to City Fullerton, City CM, and City LH. All references to the
term "City Party," as they relate to a particular Home or NSP Loan, shall be deemed to refer to
the City Party in whose jurisdiction the Home is located or who issued the NSP Loan.
"City Parry Agreements" shall collectively refer to the Joint Use Agreement and the
Subrecipient Agreements referred to in Recital B of this Agreement.
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"Construction Contract" shall mean, as to each Rehabilitation Project, the written
agreement between Participant and a Contractor for the construction of the Rehabilitation
Project, in such form as approved by the City Party. Participant shall cause to be included in the
Construction Contract all provisions required under this Agreement, any applicable law,
including the applicable NSP Requirements, and any other requirements of the City Party. The
City Party does not by its approval of a Construction Contract assume any liability in connection
with the Construction Contract, nor does the City Party's approval relieve Participant of its
responsibility to ensure that all provisions required by law and this Agreement are included in
the Construction Contract.
"Contract Officer" shall mean the City Manager of a City Party or such person designated
by the City Manager to administer this Agreement on behalf of the City Party.
"Contactor" shall mean, as to each Rehabilitation Project, the contractor whose bid is
selected by the City Party pursuant to Section 3.3.
"Disposition Expenses" shall mean, as to each Home, the Project Expenses for the
Eligible Project Expense Items listed under the heading "Disposition Expenses" in Section 6.2 of
this Agreement.
"Eligible Homebuyer" shall mean the persons or household eligible to purchase a Home
after the completion of the Rehabilitation Project, as described in Section 5.2 of this Agreement.
"Eligible Project Expenses Items" shall mean the categories of expenses eligible to be
included in the Project Expenses, as set forth in Section 6.2 of this Agreement. The Eligible
Project Expense Items are comprised of the Purchase Expenses, the Predevelopment Expenses,
the Rehabilitation Expenses, the Carrying Costs and Miscellaneous Expenses, and the
Disposition Expenses.
"Environmental Completion Date" shall mean, as to each Home, the date the City Party
notifies Participant that the environmental review for the Home and the Rehabilitation Project
required under the National Environmental Policy Act and the related authorities at 24 CFR Part
58 (including the State Historical Preservation Office (SHPO)) and the California Environmental
Quality Act (CEQA) has been completed and that HUD or HCD, as applicable, has issued its
release of funds pursuant to Section 16.11 of this Agreement.
"Excusable Default" shall have the meaning ascribed in Section 2.4.4.
"Final Loan Package" shall have the meaning ascribed in Section 2.2.3 of this
Agreement.
"Financing Contingency" shall have the meaning ascribed in Section 4.30) of this
Agreement.
"Foreclosed" shall refer to a Home that satisfies both of the following conditions: (a) the
Home has been foreclosed upon; and (b) the Home has been vacant since at least ninety (90)
days prior to the commencement of discussions with the owner regarding the purchase of the
Home and the Home remains vacant. A Home "has been foreclosed upon" at the point that,
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under state or local law, the mortgage or tax foreclosure is complete; a Home is generally not
considered foreclosed until after the title for the property has been transferred from the former
homeowner under some type of foreclosure proceeding or transfer in lieu of foreclosure, in
accordance with state or local law.
"Funding Conditions" shall mean, as to each NSP Loan, the conditions set forth in
Section 4.3 of this Agreement that must be satisfied or waived by the City Parry prior to the
City Party providing the NSP Loan to Participant.
"Gross Income" shall have the meaning ascribed in Section 6914 of Title 25 of the
California Code of Regulations, or any successor statute thereto.
"HCD" shall mean the California Department of Housing and Community Development.
"Home" shall mean each of the Abandoned or Foreclosed single family detached homes,
condominiums and townhomes that is approved for inclusion in the NSP Program by a City
Party, as more fully explained in Section 2.2 of this Agreement. It is specifically understood that
multifamily rental apartments and manufactured homes are not included within the definition of
the term "Home" for purposes of this Agreement.
"Home Project Budget" shall have the meaning ascribed in Section 6.1 of this
Agreement.
"HUD" shall mean the United States Department of Housing and Urban Development.
"Initial Approval" shall have the meaning ascribed in Section 2.2.1 of this Agreement.
"Median Income" shall mean the Orange County area median income, adjusted for
family size, as established by the United States Department of Housing and Urban Development,
and as published periodically by the State of California Department of Housing and Community
Development.
"Memorandum" shall mean, as to each Home, the Memorandum of this Agreement,
substantially in the form attached hereto as Exhibit "G" that shall be recorded against the Home
on the Acquisition Closing Date and removed as an encumbrance to title upon the sale of the
Home to an Eligible Homebuyer or the City Party in accordance with the terms set forth herein.
"Middle Income Household" shall mean a person or family whose Gross Income does not
exceed 120% of the Median Income adjusted for family size; such term is also referred to in the
NSP Requirements as "LMMH" or "low-, moderate -,and middle income households." These
income limits are set by HUD and adjusted and promulgated annually as posted at
www.hud. gov/offices/cpd/affordablehousing/programs/home/limits/income/2009/ca.
"Monthly Housing Cost" shall include all of the following costs associated with a Home,
estimated or known as of the date of the proposed sale of the Home: (i) principal and interest
payments on a mortgage loan, and any loan insurance fees associated therewith not exceeding
the prevailing conventional home mortgage lending rates applied by any reputable institutional
home mortgage lender, or the lending rates of any government -subsidized or special mortgage
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program for which the Eligible Homebuyer qualifies and has obtained a first trust deed loan for
the acquisition of the Home; (ii) property taxes and assessments; (iii) fire and casualty insurance
covering replacement value of property improvements; (iv) property maintenance and repair; (v)
homeowner association dues; and (vi) a reasonable utility allowance. The Monthly Housing
Cost shall be an average of estimated costs for the next twelve (12) months.
"NSP Funds" shall mean the Neighborhood Stabilization Program funds referred to in
Recital A of this Agreement.
"NSP Loan" shall mean, as to each Home, the loan to be provided by a City Party to
Participant for the Project Expenses for the Home, as more fully explained in Section 4 of this
Agreement.
"NSP Maximum Resale Price" shall mean the cumulative costs of acquiring,
rehabilitating and redeveloping the Home, including direct costs to sell the Home pursuant to the
NSP Requirements, but excluding the cost of boarding up, upkeep of landscaping, and general
maintenance. The costs to be included in the NSP Maximum Resale Price shall be as approved
by the City Parry. Participant shall maintain complete and adequate records on each Home,
including purchase and sale amount, source and uses of funds for each action and item related to
each Home.
"NSP Program" shall mean the program established under this Agreement for the
acquisition, rehabilitation and resale of Homes.
"NSP Rehabilitation Guidelines" shall mean the NSP Single -Family Rehabilitation
Program Policies and Procedures and all attachments thereto, substantially in the form attached
hereto as Exhibit `B", as may be amended by each Contract Officer. An amendment to the NSP
Rehabilitation Guidelines made by a City Party shall be binding only as between Participant and
that City Party and shall not apply to any other City Party unless and until the other City Party
adopts the amendment in its sole discretion.
"NSP Requirements" shall mean the requirements of the Housing and Economic
Recovery Act of 2008 (Pub. L. 110-289) (HERA), including Title III of Division B of the
Housing and Economic Recovery Act of 2008 titled Emergency Assistance for Redevelopment
of Abandoned and Foreclosed Homes, as may be amended from time to time, and any existing or
future regulations or requirements imposed by HUD, HCD or any other government agency in
connection with the NSP. Unless stated otherwise in the HERA, the NSP Requirements also
include Title I of the Housing and Community Development Act of 1974 (42 U.S.C. § 5301
et seq.) as amended from time to time, and the implementing regulations set forth in 24 C.F.R.
§ 570 et seq. as amended from time to time. If any amendment to this Agreement is necessary to
comply with the NSP Requirements, the parties shall cooperate in good faith to negotiate the
terms of and enter into such amendment(s).
"Other Financing" shall mean Participant's own financing or an Other Financing Loan to
be used for the Project Expenses for a Home, if the amount of the NSP Loan for the Home is less
than the Project Expenses. The amount of the Other Financing for each Home, if such financing
is required, shall equal the difference between the total of the Project Expenses for the Home as
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set forth in the Home Project Budget and the NSP Loan to be provided by the City Party for the
Home. All references in this Agreement to "Other Financing" shall be deemed to refer only to
Other Financing that is approved by the City Party and Participant.
"Other Financing Interest" shall mean the amount of interest required to be paid by
Participant on an Other Financing Loan approved by the City Party.
"Other Financing Loan" shall mean Other Financing in the form of a loan approved by
the City Party and obtained by Participant for the Project Expenses from a reputable financial or
lending institution, governmental agency or other acceptable person or entity capable of
performing or causing to be performed Participant's obligations under this Agreement, on terms
reasonably acceptable to the City Party and Participant, as more fully explained in Section
4.10.2.
"Participant" shall mean MHC NSP LLC, a California limited liability company, having
its offices at 1500 South Grand Ave., Suite 100, Los Angeles, CA 90015.
"Participant Fees" shall mean the fees to be paid by a City Party to Participant for
Participant's services under this Agreement, as more fully explained in Section 7 of this
Agreement.
"Preliminary Loan Package" shall have the meaning ascribed in Section 2.2.2 of this
Agreement.
"Project Expenses" shall have the meaning ascribed in Section 6.2 of this Agreement.
"Purchase Expenses" shall mean, as to each Home, the Project Expenses for the Eligible
Project Expense Items listed under the heading "Purchase Expenses" in Section 6.2 of this
Agreement.
"Quarter" shall mean any of the three (3) month periods commencing July 1, October 1,
January 1, or April 1.
"Rehabilitation Expenses" shall mean, as to each Home, the Project Expenses for the
Eligible Project Expense Items listed under the heading "Rehabilitation Expenses" in Section 6.2
of this Agreement.
"Rehabilitation Project" shall mean the improvements to be made to a Home as described
in the Scope of Work for the Home, with all such improvements to be consistent with the
development and building plans and permits approved by the City Party. As to each Home if
Participant (or the City Party) determines that work to repair, correct, or rehabilitate a Home will
be required to meet all City code standards relating to any and all defects that constitute a threat
to human life, safety, and public welfare, then Participant shall allocate sufficient funds for such
rehabilitation to correct and repair of such defects and violations of code standards prior to and
as a condition to close of escrow for an Eligible Homebuyer's purchase of a Home. In the event
of any inconsistency between the description of the Rehabilitation Project in this Agreement and
the approved plans and permits, the approved plans and permits shall govern.
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"Resale Price" shall mean the sale price of a Home to be paid by an Eligible Homebuyer
to Participant pursuant to Section 5.5 of this Agreement.
"Scope of Work" shall have the meaning ascribed in Section 3.1 of this Agreement.
"Section 3" shall mean Section 3 of the Housing and Urban Development Act of 1968, as
amended, 12 U.S.C. § 1701u, and the implementing regulations.
"Website Fee" shall have the meaning ascribed in Section 6.2.
2. SELECTION AND ACOUISITION OF HOMES.
2.1 Selection of Homes. During the term of this Agreement and subject to the
provisions set forth herein, Participant shall exercise best efforts to locate Homes in each City
Parry's designated NSP target area to include in the NSP Program. The number of Homes to be
included in each City Party's NSP Program shall be determined by the City Party in consultation
with Participant and shall be based on available NSP Funds. Prior to commencing a search for a
Home to include in a City Parry's NSP Program, Participant shall confirm with the City Party
that the City Parry contemplates sufficient funds will be available for the inclusion of an
additional Home and shall obtain authorization from the City Parry to proceed with its search for
a Home(s).
2.2 Approval by Cites. The inclusion of a Home in a City Party's NSP Program
shall be subject to the prior approval of the City Party in whose jurisdiction the Home is located
in that City Parry's sole and absolute discretion. The procedures for obtaining a City Party's
approval shall be as set forth in this Section 2.2.
2.2.1 Initial Approval. Upon identifying a Home that Participant reasonably
believes will be appropriate to include in the NSP Program, Participant shall notify the City Party
of the address and location of the Home and shall provide such other information as may be
required by the City Party. Within three (3) business day of receipt of such information from
Participant, the City Party shall notify Participant of its approval or disapproval of Participant
proceeding to prepare a Preliminary Loan Package for the Home ("Initial Approval").
Participant shall not submit any Home to a City Party for Initial Approval that does not meet the
eligibility criteria under this Agreement, including without limitation the requirement that the
Home be Abandoned or Foreclosed.
2.2.2 PreliminM Approval. Prior to entering into an Acquisition Purchase
Agreement to purchase a Home or committing any NSP Funds to a Home, Participant shall
submit to the applicable City Party the following documents and information for a Home that has
received Initial Approval in accordance with Section 2.2.1 (collectively, the "Preliminary Loan
Package"): (i) photographs of the Home, (ii) an estimate of the as -is market value of the Home
based on the opinion of a California licensed real estate broker, (iii) the proposed purchase price,
(iv) the preliminary scope of work for rehabilitation that shall be prepared in coordination with
the City Party and shall be consistent with the NSP Rehabilitation Guidelines, (v) cost estimates
of items that will constitute the Project Expenses prepared in coordination with the City Parry,
(vi) an estimate of the resale value of the Home with backup information including comparable
sales data, (vii) information on the Other Financing to be obtained if such financing is required
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pursuant to Section 4.1 because the amount of the NSP Loan will be less than the Project
Expenses, including any subordination or other terms required as a basis for approval, (viii) the
proposed Acquisition Closing Date, (ix) a written statement from the seller of the Home that the
Home is vacant and has been vacant since at least ninety (90) days prior to the date discussions
with the owner regarding the purchase of the Home commenced; and (x) any other information
or documentation required by the City Party. The City Party shall approve or disapprove the
Preliminary Loan Package by delivery of written notice to Participant within five (5) business
days after receipt of a complete submittal. With regard to clause (vii) above, the terms of any
Other Financing, including an Other Financing Loan, that Participant submits with the
Preliminary Loan Package shall be deemed approved by Participant as submitted.
2.2.3 Final Approval. After the Appraisal for the Home is obtained and not later
than eight (8) business days prior to the Acquisition Close of Escrow for Participant's acquisition
of the Home, Participant shall submit to the City Party the following documents and information
for the Home that has received Preliminary Loan Package Approval in accordance with Section
2.2.2 (collectively, the "Final Loan Package"): (i) copies of the preliminary title report and title
exceptions, (ii) any final and completed environmental review documentation requested by the
City Party, (iii) the final scope of work that shall be prepared in coordination with the City Party
and shall be consistent with the NSP Rehabilitation Guidelines, (iv) the Home Project Budget
prepared in coordination with the City Party, with the costs of any items that are part of the
Approved Bid Amount to be in the amounts set forth in the Approved Bid Amount, (v) an
estimate of the after -rehabilitation value of the Home with comparable sales data, (vi) the
executed Acquisition Purchase Agreement that meets the requirements set forth in this
Agreement, (vii) the evidence of financial capability required under Section 4.1 if Other
Financing is required for the Home that meets the requirements of this Agreement and is
consistent with the terms approved by the City Party under the Preliminary Loan Package
approval, (viii) a certification from the owner of the Home substantially in the form attached
hereto as Exhibit "H", (ix) the results of any assessments and testing performed by Participant,
(x) the Acquisition Outside Closing Date that meets the requirements of this Agreement, (xi) the
Allowable Purchase Price based on the Appraisal obtained in accordance with Section 2.3,
together with a copy of the Appraisal, and (xii) any other information or documentation required
by the City Party. The City Party shall process the documentation required for any review
required under NEPA, CEQA, and SHPO and the results of any such review, together with any
assessments and testing performed by the City Party, shall be included for consideration as part
of the Final Loan Package. The City Party shall approve or disapprove each Final Loan Package
by delivery of written notice to Participant within seven (7) business days after receipt of a
complete submittal. If, after the City Party approves a Final Loan Package, Participant desires to
change any of the items that are the subject of the Final Loan Package due to unforeseen
circumstances, Participant shall have the right to submit to the City Party modifications to the
Final Loan Package and the City Party shall reasonably consider the requested modifications and
respond to Participant within seven (7) days after the submittal.
2.3 Allowable Acquisition Price; Appraisal. The purchase price to be paid by
Participant for each Home shall not exceed an amount equal to the appraised value of the Home,
taking into account the current condition of the Home, discounted by at least one percent (1 %)
("Allowable Acquisition Price"). Although the minimum required discount under the
NSP Requirements is 1 % of the appraised value, Participant shall diligently negotiate with the
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owners of the Homes to obtain greater discounts to obtain price reductions commensurate with
the avoided costs of holding, marketing and selling a Home. As used herein, the term "appraised
value" shall mean the value of the Home established through an appraisal made in conformity
with the appraisal requirements set forth in the following paragraph and completed within sixty
(60) days prior to the date the final offer is made for the Home ("Appraisal"); provided however,
Participant may make an initial offer on the Home subject to the completion of the Appraisal
within sixty (60) days of a final offer. Upon the approval of a Preliminary Loan Package by a
City Party and after the Environmental Completion Date, Participant shall cause an Appraisal of
the Home to be performed, at the City Party's cost, by a licensed appraiser selected by the City
Party.
The Appraisal must meet the definition of 49 CFR 24.2(a)(3) and the five (5) following
requirements of 49 CFR 24.103(a)(2) (and no review appraisal is required):
(a) an adequate description of the physical characteristics of the Home,
including items identified as personal property, a statement of the known and observed
encumbrances, if any, title information, location, zoning, present use, an analysis of
highest and best use, and at least a five-year sales history of the Home;
(b) all relevant and reliable approaches to value. If the appraiser will use
more than one approach, there shall be an analysis and reconciliation of approaches to
value used that is sufficient to support the appraiser's opinion of value;
(c) a description of comparable sales, including a description of all relevant
physical, legal, and economic factors such as parties to the transaction, source and
method of financing, and verification by a party involved in the transaction;
(d) a statement of the value of the Home to be acquired; and
(e) the effective date of valuation, date of appraisal, signature, and
certification of the appraiser.
2.4 Acquisition Purchase Agreement.
2.4.1 Timing to Enter into Acquisition Purchase Agreement. The City Party
shall indicate in its approval of a Preliminary Loan Package for a Home the date by which
Participant must enter into an Acquisition Purchase Agreement for the Home ("Deadline Date").
If the City Party fails to notify Participant of the Deadline Date, the Deadline Date for Homes
receiving Preliminary Loan Package approval in the year 2009 shall be December 30, 2009, the
Deadline Date for Homes receiving Preliminary Loan Package approval between December 31,
2009 and March 30, 2010, shall be March 30, 2010, and the Deadline Date for Homes receiving
Preliminary Loan Package approval between March 31, 2010 and June 30, 2010, shall be
June 30, 2010. Upon a City Party's approval of a Preliminary Loan Package, Participant shall
exercise diligent efforts to enter into an Acquisition Purchase Agreement with the owner of the
Home by the Deadline Date. If Participant fails to enter into an Acquisition Purchase Agreement
by the applicable Deadline Date for the Home, the City Party's approval of the inclusion of the
Home in the NSP Program shall be deemed withdrawn and Participant shall not enter into an
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Acquisition Purchase Agreement for the Home without the prior written approval of the City
Parry.
2.4.2 Conditions in Acquisition Purchase Agreement. Each Acquisition
Purchase Agreement shall be in such form as approved by the City Party and shall (a) state
specifically that it is contingent on the owner's approval of the Allowable Purchase Price if the
Appraisal has not been completed at the time the Acquisition Purchase Agreement is executed,
environmental review, and approval by the State Historical Preservation Office (SHPO), if
applicable; and (b) provide for the owner of the Property to remove all monetary liens and
encumbrances upon title to the Property upon the Acquisition Closing Date. In addition,
Participant shall exercise diligent efforts to cause to be included in each Acquisition Purchase
Agreement, contingencies on the City Party's approval of the Final Loan Package for the Home
and provision of the NSP Loan and on Participant securing Other Financing if required pursuant
to Section 4.1; provided, however, the foregoing contingencies shall not be a prerequisite to
Participant entering into an Acquisition Purchase Agreement. The City Parties recognize that if
such a financing contingency is not included in an Acquisition Purchase Agreement and
Participant does not close an Acquisition Escrow due to a failure to obtain financing, Participant
may be required to forfeit the Good Faith Deposit to the seller and the City Party may be
required to reimburse Participant for the Good Faith Deposit in accordance with Section 2.4.4.
2.4.3 Compliance with Acquisition Purchase Agreement. Participant shall
comply with each and every condition, responsibility, and obligation it may have pursuant to
each Acquisition Purchase Agreement in order to timely accomplish the Acquisition Close of
Escrow for the Home prior to the Acquisition Outside Closing Date or such earlier date as may
be set forth in the Acquisition Purchase Agreement. Participant shall not amend or modify an
Acquisition Purchase Agreement in any respect inconsistent with this Agreement without the
prior written consent of the affected City Parry, which consent the City Party may withhold in its
sole and absolute discretion. Participant shall not terminate an Acquisition Purchase Agreement
without the City Party's approval. In the event the seller under the Acquisition Purchase
Agreement fails to perform, Participant shall have the option of either (a) terminating the
inclusion of the Home in the NSP Program, in which case no Acquisition Fee shall be paid for
the Home, or (b) seeking legal recourse against the seller, at Participant's cost, for specific
performance and any other remedy available at law or equity and the Acquisition Outside
Closing Date for the Home shall be extended for the period that Participant pursues its legal
remedies.
2.4.4 Good Faith Deposit. The deposit that Participant is required to deliver
under each Acquisition Purchase Agreement for its performance thereunder shall not exceed the
sum of One Thousand Dollars ($1,000) unless such higher amount is approved by the City Party
in its sole discretion prior to the execution of the Acquisition Purchase Agreement, and shall be
applicable to the Allowable Acquisition Price ("Good Faith Deposit"). Unless otherwise
approved by the City Parry, the Acquisition Purchase Agreement shall state that the Good Faith
Deposit is refundable to Participant in the event the Acquisition Escrow fails to close for any
reason other than a default of Participant under the Acquisition Purchase Agreement. In the
event (a) City approves a Preliminary Loan Package for a Home and the Acquisition Purchase
Agreement for the Home terminates because a Final Loan Package is not approved for the Home
or City approves a Final Loan Package for the Home and Participant does not acquire the Home
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by the Acquisition Outside Closing Date; and (b) Participant is not entitled to a return of the
Good Faith Deposit under the Acquisition Purchase Agreement, the City Party shall reimburse
Participant for the Good Faith Deposit unless the reason a Final Loan Package is not approved
or, if a Final Loan Package is approved but Participant does not acquire the Home, the reason
Participant does not acquire the Home, is one of the reasons listed in the first or second
paragraphs of Section 7.2 of this Agreement other than an Excusable Default. If the reason is an
Excusable Default or a reason set forth in the preceding sentence, Participant shall be entitled to
a reimbursement of the Good Faith Deposit. As used herein, an "Excusable Default" shall mean
a default of Participant under the Acquisition Purchase Agreement in failing to acquire the Home
because the NSP Loan is not provided, unless the reason the NSP Loan is not provided is one of
the other reasons listed in the first or second paragraphs of Section 7.2.
2.5 Compliance with URA; Relocation. Participant shall comply with all applicable
requirements of the voluntary acquisition provisions of the Uniform Relocation Assistance and
Real Property Acquisition Act (URA), including providing all required notices and provision of
all required assistance and benefits. In the event Participant defaults on its obligation to submit
Homes that meet the requirement that Homes qualify as Abandoned and Foreclosed under NSP
Requirements and this Agreement (and remain vacant) and any former or present occupant is or
becomes eligible for relocation assistance and benefits as a result of the activities under this
Agreement, then Participant shall have the sole and exclusive responsibility to cause to be
provided and pay for relocation assistance and benefits to such occupants and shall pay all costs
to administer such relocation required to comply with all applicable federal and state laws, rules,
and regulations, and such costs are not reimbursable under this Agreement. Any relocation shall
be performed in accordance with a relocation plan approved by the City Party and each
relocation claim is subject to prior review and approval of the City Party. In the event, any City
Party incurs third party costs as a result of Participant's obligations related to relocation
hereunder, then Participant shall be solely responsible to pay or reimburse such City Party third
party costs therefor.
2.6 Purchase Expenses. The Purchase Expenses to be paid by Participant for a Home
shall be funded with the proceeds of the NSP Loan provided by the City Party and the Other
Financing if such financing is required pursuant to Section 4.1 of this Agreement.
2.7 Acquisition Closing Date. The Acquisition Close of Escrow for each Home shall
occur after the satisfaction of the Funding Conditions and no later than the Acquisition Outside
Closing Date. If Participant does not complete an Acquisition Close of Escrow to acquire a
Home on or before the Acquisition Outside Closing Date for the Home, the City Party shall have
no obligation to provide the NSP Loan for that Home and the Home shall not be included in the
NSP Program unless otherwise agreed in writing by the City Party. In such event, however,
Participant may be entitled to a direct reimbursement of its Project Expenses for the Home in
accordance with Section 6.3.2 of this Agreement.
2.8 Environmental Review. No later than three (3) business days after the later of (a)
the date of the City Party's approval of a Preliminary Loan Package for a Home, or (b)
Participant's submittal to the City Party of all information necessary to process the
environmental review required under NEPA, CEQA, and NHPA (which information shall be
delivered concurrently with the Preliminary Loan Package documents), the City Party shall
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commence to process and shall thereafter diligently pursue to completion the environmental
review required for the Home. In connection with the foregoing, any documentation required for
SHPO approval shall be submitted to the appropriate regulatory agency by the City Party within
the foregoing three (3) business day period.
2.9 Addendum. If, as to any Home, the City Party and Participant establish terms or
conditions for the Home or the Home's Rehabilitation Project that are different from the terms
set forth in this Agreement, the City Party and Participant shall enter into an Addendum to this
Agreement setting forth the modified terms and such Addendum shall be deemed incorporated
into this Agreement.
2.10 Conduct During HoldingPeriod. During the period that Participant holds title to a
Home, Participant (a) shall not enter into any mortgage or deed of trust for the Home except the
City Deed of Trust and the deed of trust securing an Other Financing Loan if such financing is
required pursuant to Section 4.1; (b) shall not permit any liens, easements or other encumbrances
to be recorded against the Home, or enter into any lease, occupancy, tenancy, or license
agreement or other agreements affecting said property; (c) shall not make any alteration to the
Home or the improvements thereon except in accordance with the Scope of Work, or commit,
suffer or permit any act upon the Home in violation of any law; (d) shall pay all property taxes,
assessments, and utilities for the Home and maintain a homeowner's policy of insurance;
(e) shall secure the Home to prevent vandalism; and (f) shall maintain the landscaping and other
improvements.
3. REHABILITATION PROJECTS.
3.1 Scope of Work; NSP Rehabilitation Guidelines. Participant shall coordinate with
the City Party to develop a scope of work for each Home that will at a minimum provide for the
rehabilitation of the Home to a decent, safe, marketable and habitable condition and will
incorporate the rehabilitation requirements set forth in the NSP Rehabilitation Guidelines
attached hereto as Exhibit `B." As more fully explained in the Rehabilitation Guidelines, if the
Home was constructed prior to 1978, the Scope of Work shall include all requirements of Title X
of the 1992 Housing and Community Development Act, 42 U.S.C. §4800, et seq. (Title X) and
the implementing regulations thereto that are aimed to take advantage of rehabilitation events as
a cost-effective opportunity to reduce lead based paint (LBP) in existing housing. The Scope of
Work also shall include such other improvements as required by the City Party and may include,
at the request of the City Party, improvements to increase the energy efficiency or conservation
of the Home or to provide a renewable energy source for the Home. The cost to construct the
Rehabilitation Improvements shall not exceed the sum of Seventy -Five Thousand Dollars
($75,000) without the prior written approval of the City Party's Contract Officer. The scope of
work that is approved by the City Party for a Home as part of the Final Loan Package for the
Home pursuant to Section 2.2.3 of this Agreement shall for purposes of this Agreement be the
"Scope of Work" for that Home. Participant shall develop each Rehabilitation Project in a
manner consistent with the applicable Scope of Work and in strict accordance with the plans
approved by the City Party.
3.2 Development Approvals and Permits. After receiving approval of a Preliminary
Loan Package for a Home and after the Environmental Completion Date and prior to the
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Acquisition Close of Escrow for the Home, Participant shall cause the final plans for the
Rehabilitation Project to be processed with the City Party and shall secure or cause to be secured
all permits and approvals which may be required by the City Parry or any other governmental
agency having jurisdiction over the Home and the Rehabilitation Project, including approval of
the final construction drawings.
3.3 Construction Bids; Contractors. No later than ten (10) days after the date of this
Agreement, the City Parties shall submit to Participant a list of contractors acceptable to the City
Parties ("Approved Contractor List"). The City Parties shall have the right from time to time
during the term of this Agreement to add and remove contractors from the Approved Contractor
List. Prior to submitting any bids as set forth herein, Participant shall recertify the contractors
whose bids Participant intends to submit to the City Party and shall obtain the City Parry's
approval of the recertification. A contractor shall be recertified by Participant submitting to the
City Party current and updated information on the contractor's business license, insurance and
any other matter required by the City Party, including the certification in appendix B of 24 CFR
Part 24 that neither the contractor nor its principals is presently debarred, suspended, proposed
for debarment, declared ineligible, or voluntarily excluded from participation in a City Party
project. The City Party shall notify Participant whether the contractor's recertification is
acceptable to the City Party prior to the submission of any bids. During the Acquisition Escrow
Period for each Home and at least seven (7) business days prior to the date Participant intends to
submit the Final Loan Package to the City Party, Participant shall submit to the City Party a
minimum of three (3) bona fide written construction contract bids for the Rehabilitation Project
for the Home from licensed contractors from the Approved Contractor List who have been
recertified by the City Party immediately prior to the submittal of the bids. The submittal of bids
shall include detailed back-up information as needed to enable the City Party to evaluate the
reasonableness of the bids. Participant shall not submit bids from any contractor that has not
indicated in its bid response that the form of the Construction Contract is acceptable to the
contractor and that the contractor is capable of complying with all conditions in the Construction
Contract and will enter into the Construction Contract if its bid is selected. Within seven (7)
business days after receipt of Participant's complete submittal made in compliance with all of the
requirements set forth herein, the City Party shall approve one of the bids; provided, however,
the City Party shall have no obligation to accept any bid if the amount of the bid, together with
all of the other expenses that constitute Rehabilitation Expenses for the Home, exceeds the sum
of Seventy -Five Thousand Dollars ($75,000). If all of the bids are disapproved as permitted
pursuant to the preceding sentence, Participant shall, within twenty (20) days after the date of the
disapproval, submit three (3) new bids to the City Party for review. The same procedures and
requirements shall apply to subsequent submittals and reviews until a bid is finally approved by
the City Party or the City Party determines in its reasonable discretion that it is unlikely a bid
will be submitted that is below the maximum threshold amount and the City Party notifies
Participant that the Home will not be included in the NSP Program. Once a bid is approved, the
approved bid ("Approved Bid Amount") shall be utilized for purposes of preparing the Home
Project Budget and calculating Participant's Rehabilitation Expenses that correspond to the items
in the bid, subject to additional costs incurred for change orders during the course of construction
(which are also subject to the reasonable approval of the City Party). The contractor whose bid
is selected shall be the "Contactor" for the Rehabilitation Project. Participant shall not submit
bids from any contractor which is debarred or suspended or otherwise excluded from
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participation in federal assistance programs pursuant to 24 CFR 85.35. Participant shall submit
the executed Construction Contract to the City Party prior to the Acquisition Closing Date.
3.4 Schedule of Performance.
3.4.1 Commencement and Completion. As to each Rehabilitation Project,
Participant shall commence work on the Home within twenty (20) days after the Acquisition
Closing Date for the Home and shall complete the Rehabilitation Project no later than ninety (90)
days after the Acquisition Closing Date. Once construction of a Rehabilitation Project is
commenced, it shall be continuously and diligently pursued to completion, and shall not be
abandoned or otherwise be stopped for more than five (5) consecutive business days, except for
an event of force majeure as defined in Section 3.4.2. During the course of construction,
Participant shall provide to the City Party monthly written reports on the progress of
construction and explanation of how any construction disputes have been resolved.
3.4.2 Force Majeure. Any prevention, delay or stoppage of a Rehabilitation
Project due to strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials
or reasonable substitutes therefor, governmental restrictions, regulations, or controls, judicial
orders, enemy or hostile governmental action, civil commotion, terrorist activities, fire or other
casualty, and other causes (except financial) beyond the reasonable control of the Participant (or
a City Party), shall excuse the performance by Participant (or a City Party) for a period equal to
the prevention, delay or stoppage; provided the affected party gives the other party notice within
fifteen (15) days of the event causing the prevention, delay or stoppage.
3.5 Compliance with Laws and Regulations and NSP Requirements. Participant shall
carry out the design, construction and operation of each Rehabilitation Project in conformity with
all applicable laws, regulations, and rules of governmental agencies having jurisdiction,
including without limitation, the NSP Requirements, the LBP Regulations, and the legal
requirements set forth in Exhibit "A" attached to this Agreement and the statutes referenced
therein, the City Party's zoning and development standards, building, plumbing, mechanical and
electrical codes, and all other provisions of the applicable City Municipal Code, and all federal
and state fair labor standards, including the payment of prevailing wages and compliance with
the Davis -Bacon Act, if applicable. Participant agrees to comply with and to cause any
contractors and/or subcontractors to comply with the requirements of Section 3 of the Housing
and Urban Development Act of 1968, as amended, 12 U.S.C. § 1701u, and the implementing
regulations, in connection with rehabilitation of each Home. Because the source of the NSP
Loan is funds received from HUD pursuant to the federal government's Neighborhood
Stabilization Program, Participant is required to comply with all applicable NSP Requirements.
In the case of any conflict between the NSP Requirements and this Agreement, the NSP
Requirements shall control; it being understood, however, that in order to be in compliance with
this Agreement and the NSP Requirements, Participant shall, to the extent possible, comply with
the most restrictive provisions in this Agreement and the NSP Requirements. Participant shall
indemnify, protect, defend and hold harmless each of the City Parties and their respective
officers, employees, contractors and agents, with counsel reasonably acceptable to the affected
City Party, from and against any and all loss, liability, damage, claim, cost, and/or expense that
results or arises in any way from the noncompliance by Participant of any applicable local, state
and/or federal law or requirement. The foregoing indemnity shall survive termination of this
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Agreement and shall continue after completion of the construction and development of the
Rehabilitation Projects for each of the Homes by Participant.
3.6 Right of Access. The City Party and its officers, elected and appointed officials,
employees, agents and representatives shall have the right of access to the Home, without
charges or fees, for the purposes of this Agreement, including but not limited to, the inspection
of the work being performed in constructing the Rehabilitation Project, so long as the
City Party's representatives comply with all safety rules and do not interfere with, delay or
interrupt Participant's construction activities. It is understood that a City Party does not by this
right of access assume any responsibility or liability for a negligent inspection or failure to
inspect. As lead agency, City Fullerton shall have the right of access to all Homes. The right of
access under this Section 3.6 may be exercised only after the City Party has provided prior notice
to Participant of the date and estimated time of its entry on the property, which notice may be
made by email or telephone. Participant shall secure City a right of access to each Home upon
the Home receiving Initial Approval so that the City Party can inspect the Home and perform any
tests and investigations as the City Party deems necessary or desirable.
3.7 Rehabilitation Guidelines. In addition to the terms and provisions of this
Agreement, the parties shall comply with the Rehabilitation Guidelines. In the event of any
inconsistency between the terms of this Agreement and the Rehabilitation Guidelines, this
Agreement shall prevail. Participant acknowledges that the Rehabilitation Guidelines provide
for the parties to follow and comply with additional procedures and requirements.
3.8 Pre -construction Meeting. Participant shall attend all pre -construction meeting(s)
or conference(s) as arranged by a City Party among the Contractor, the Participant, and City
Party staff relating to the commencement of the rehabilitation, compliance with the Section 3 (as
required and herein described), and other issues related to undertaking and completing the
rehabilitation in conformity with the Scope of Work and this Agreement and applicable local,
state, and federal laws.
3.9 Right to Take Over Work. If, subject to an event of force majeure as described in
Section 3.4.2, Participant fails to timely commence, proceed with, or complete any
Rehabilitation Project within the periods provided for herein, and such breach is not cured within
the notice and cure period set forth in Section 13.1, then the City Party shall have the right, but
not the obligation, upon delivery of written notice to Participant, to perform the uncompleted
Rehabilitation Project, or applicable portions thereof, specified in such notice. In such event, the
City Party shall have the right to modify Participant's construction plans as the City Party deems
reasonably advisable in order to complete the Rehabilitation Project, or applicable portions
thereof, over which the City Party has assumed control ("Takeover Work"). In such event,
Participant shall cooperate with the City Party to enable the City Party to expeditiously complete
such Takeover Work, including, without limitation, assigning to the City Party any of
Participant's rights with respect to (a) the construction plans and specifications for the
Rehabilitation Project, or applicable portions thereof, and each Construction Contract shall so
provide, (b) any and all governmental permits and approvals to perform the Rehabilitation
Project, and (c) the construction contracts applicable to the Rehabilitation Project, or applicable
portions thereof. Participant shall reimburse the City Party for the Takeover Work Costs within
ten (10) days after Participant receives from the City Party an invoice for such costs, together
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with such documentation as may be reasonably necessary to enable Participant to verify the
amount of such costs. If Participant does not timely pay such amounts invoiced by the City
Parry, the delinquent payment shall accrue interest at the rate of ten percent (10%) per annum or
the maximum legal rate, whichever is less, from the date payment was due until the date payment
is received by the City Party. As used herein, the term "Takeover Work Costs" shall mean all
reasonable and actual costs incurred by the City Party in performing the applicable Takeover
Work (a) to the extent the costs for any items exceeds the amount in the approved Home Project
Budget for that item, or are additional costs not included in the Home Project Budget, and (b) to
the extent the increased costs or additional costs are attributable to the default of Participant
under this Agreement. As to each Home, Participant's liability under this Agreement for
Takeover Work Costs, together with any other damages incurred by the City Party for the
Rehabilitation Default (as defined in Section 13.3), shall be subject to the damages limitation
described in the first sentence of Section 13.3 and shall be subject to the cumulative damages
limitation in the second paragraph of Section 13.3. In addition to the City Party's self-help rights
as provided herein, and subject to the limitation in the preceding sentence, the City Party shall
have all other rights and remedies available at law or equity.
As stated in the first sentence of this Section 3.9, the City Parry's right to take over a
Rehabilitation Project under this Section 3.9 does not apply if the delay is due to an event of
force majeure as defined in Section 3.4.2.
4. FINANCING THE ACOUISITION AND REHABILITATION OF HOMES.
4.1 NSP Loan for each Home. Subject to the terms and conditions set forth herein
and provided Participant is not in default of this Agreement, as to each Home a City Party
approves for inclusion in the NSP Program, the City Party shall provide to Participant a loan for
the Project Expenses, or portion thereof, for the Home (each, an "NSP Loan"). The amount of
the NSP Loan provided by the City Party for each Home shall be as determined by the City Party
in its sole and absolute discretion. Prior to submitting a Preliminary Loan Package, the City
Parry shall notify Participant, upon request by Participant, whether Other Financing will be
required for the Home. Other Financing will be required for a Home if the amount of the NSP
Loan that the City Party intends to provide is less than the estimated amount of the Project
Expenses for the Home. If Participant is required to seek Other Financing for a Home, the
provisions of Section 4.10 shall be applicable to the Home. Nothing herein shall preclude a City
Party from loaning additional NSP Funds to Participant during the period that Participant owns
the Home. In such event, the parties shall execute all documentation required by the City Party's
legal counsel to evidence the loan of the additional funds and the references in this Agreement to
the "NSP Loan" shall be deemed to include the loan of additional funds.
4.2 Use of NSP Loan; Project Expenses. Participant shall be permitted to use the
proceeds of each NSP Loan only for the Project Expenses described in the applicable Home
Project Budget that are actually and reasonably incurred by Participant, and for no other purpose.
The maximum amount of the NSP Loan proceeds that may be used for each of the Project
Expenses will be set forth in the Home Project Budget for the Home; provided, however, that the
Contract Officer shall have the authority in his or her sole and absolute discretion to reallocate
the amounts that may be used for each Project Expense if the actual amounts incurred by
Participant are different than the cost estimates set forth in the Home Project Budget. Participant
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shall not incur any Project Expenses for a Home prior to the Environmental Completion Date for
the Home and any expenses incurred prior to said date will not be eligible for reimbursement or
payment notwithstanding any other provision in this Agreement to the contrary.
4.3 NSP Loan Funding Conditions. Notwithstanding any other provision of this
Agreement to the contrary, as to each NSP Loan, the City Party shall have no obligation to
disburse any NSP Loan proceeds until such time that all of the following conditions (collectively
the "Funding Conditions") are satisfied or the City Party waives such conditions in its sole and
absolute discretion:
(a) Approval of Final Loan Package. The City Parry shall have approved the
Final Loan Package for the Home in accordance with Section 2.2.2 of this Agreement.
(b) Execution and Delivery of Documents. Participant shall have deposited
into the Acquisition Escrow the City Note, City Deed of Trust, Memorandum, and such
other documents and funds required to cause an Acquisition Close of Escrow pursuant to
Section 4.4 of this Agreement.
(c) Title Policy. First American Title Company or such other title company
selected by the City Party ("Title Company") is irrevocably committed to issue to the
City Party an ALTA lender's policy of title insurance ("Title Policy") with liability in the
amount of the NSP Loan showing fee title to the Home vested in Participant, insuring in
favor of the City Party the priority of the City Deed of Trust subject only to (i) the
standard printed exceptions and exclusions contained in the form of the title policy
commonly used by the Title Company; (ii) non -delinquent property taxes and
assessments; and (iii) such other matters as may be approved by the City Party in its sole
and absolute discretion. The premium for the Title Policy shall be a Project Expense.
(d) Insurance. Participant shall have provided the City Party the evidence of
insurance required pursuant to Section 10.1 of this Agreement.
(e) Permits and Approval of Plans. Participant shall have obtained approval
of its final building plans for the Rehabilitation Project and all approvals and permits
shall have been issued or be ready to be issued upon payment of fees and the Acquisition
Close of Escrow.
(f) Approval of Bid. A bid for the Rehabilitation Project shall have been
approved by the City Party pursuant to Section 3.3.
(g) Construction Contract. Participant shall have provided the City Party a
copy of the executed Construction Contract for the Rehabilitation Project certified by
Participant to be a true and correct copy thereof.
(h) Home Project Budget. The Home Project Budget for the Project Expenses
for the Home shall have been approved by the City Party.
(i) Close Escrow. The status of the Acquisition Escrow is in a condition that
the Acquisition Closing will occur concurrently with the release of the portion of the NSP
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Loan that is to be provided for the Purchase Expenses and Participant is not in default of
the Acquisition Purchase Agreement.
0) Financing Contingency. If Other Financing is required for the Home
because the amount of the Project Expenses in the Home Project Budget exceeds the NSP
Loan, Participant shall have obtained Other Financing on the terms set forth herein, the
City Party shall have approved Participant's evidence of financial capability to acquire
the Home and develop the Rehabilitation Project in accordance with Section 4.10.3 of
this Agreement, and any Other Financing Loans are ready to close concurrently with the
Acquisition Closing Date ("Financing Contingency").
(k) NSP Funds. The City Party shall have received sufficient NSP Funds to
fund the NSP Loan.
(1) No Default. Participant shall not be in material default of any of its
obligations set forth in this Agreement.
(m) Pre -construction Meeting. Participant shall have attended all required
pre -construction meeting(s) and conference(s) pursuant to Section 3.7.
As to each NSP Loan, the City Parry's obligation to provide any NSP Loan proceeds is
subject to the fulfillment by Participant or waiver by the City Party of each and all of the
Funding Conditions described in this Section 4.3, which are solely for the benefit of the
City Parry, and each of which, if it requires action by Participant, shall also be a covenant of
Participant, and any of which may be waived by the City Party's Contract Officer in his or her
sole and absolute discretion. If, within the applicable periods set forth herein, the City Party
shall disapprove of any of the items which are subject to the City Parry's approval (and such
items are not cured by Participant within any applicable time frames), or if any of the Funding
Conditions are not satisfied within the times provided for in this Agreement or by the
Acquisition Outside Closing Date for the Home if no other time is provided for in this
Agreement, the City Party shall have no obligation to provide the NSP Loan for that Home and
the Home shall not be included in the NSP Program unless otherwise agreed in writing by the
City Parry.
Although the City Party's provisions of an NSP Loan to Participant is contingent upon
the satisfaction of the Funding Conditions for the Home and the parties proceeding with the
acquisition and rehabilitation of the Home, the parties acknowledge that if the Funding
Conditions are not satisfied for a Home and the Home is not included in the NSP Program, an
NSP Loan will not be provided for the Home but Participant may nonetheless be entitled to a
direct reimbursement of its Project Expenses incurred for the Home in accordance with Section
6.2.3.
4.4 Execution and Delivery of NSP Loan Documents. As to each Home, no later than
three (3) business days prior to the scheduled Acquisition Closing Date for the Home, Participant
shall deposit into the Acquisition Escrow the following documents: (a) the City Note, executed
by Participant; (b) the City Deed of Trust, executed and acknowledged by Participant; (d) the
Memorandum, executed and acknowledged by Participant, and (d) all other documents and funds
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required to be delivered by Participant to acquire the Home and cause the Acquisition Closing.
Participant shall notify the City Party of the scheduled Acquisition Closing Date at least ten (10)
business days in advance. No later than one (1) business day prior to the scheduled Acquisition
Closing Date and provided the Funding Conditions are satisfied, the City Party shall deposit into
the Acquisition Escrow the portion of the NSP Loan that the City Party has agreed to provide for
the Purchase Expenses for the Home and the Memorandum, executed, attested, and
acknowledged by the City Party. The parties shall instruct the Acquisition Escrow agent at the
Acquisition Closing to: (a) record the grant deed conveying the Home to Participant followed by
the Memorandum and the City Deed of Trust; (b) upon recordation, deliver to the City Parry the
original recorded Memorandum and City Deed of Trust; (c) deliver to the City Party the signed
original City Note; (d) apply the amounts deposited into the Acquisition Escrow by the City
Party toward the Purchase Expenses (and return the excess to the City Party if the full amount is
not used); and (e) deliver to the City Party a conformed copy of the grant deed conveying fee
title to the Home to Participant.
4.5 Truth in Lending Statement. The City Party shall provide to Participant a truth in
lending disclosure statement substantially in the form attached hereto as Exhibit "D" for each
NSP Loan concurrently with the City Parry's approval of the Final Loan Package for the NSP
Loan.
4.6 Disbursement of NSP Loan for Project Expenses. As to each Home that
Participant acquires, the NSP Loan shall be disbursed to Participant as set forth in this
Section 4.6.
4.6.1 Purchase Expenses. The portion of the NSP Loan that is to be provided
for the Project Expenses that constitute Purchase Expenses shall be disbursed on behalf of
Participant upon the satisfaction of the Funding Conditions and concurrently with the
Acquisition Close of Escrow for the Home.
4.6.2 Other Project Expenses. The portion of the NSP Loan that is to be
provided for the Project Expenses other than the Purchase Expenses and the Other Financing
Interest ("Other Project Expenses") shall be disbursed as set forth in this Section 4.6.2. Provided
Participant is not in default of this Agreement, after the Acquisition Close of Escrow, the NSP
Loan shall be disbursed to Participant for the Other Project Expenses) no more frequently than
once each month as Other Project Expenses are incurred by Participant. No later than the fifth
(5th) day of each month, Participant shall submit to the City Parry a request for payment of NSP
Loan proceeds to reimburse Participant for the eligible Other Project Expenses incurred by
Participant for the previous month. The payment request shall include the total amount
requested and itemized statements and invoices, with such supporting information as the City
Party may reasonably require documenting that the costs for which Participant seeks payment
were made and incurred by Participant, which supporting information required by the City Party
may include without limitation, receipts, canceled checks, time records, billing statements, bank
statements, and contracts. The payment request shall be in such form as prescribed by the City
Parry. The City Party shall have the authority to calculate and approve the amount of
Participant's Other Project Expenses which shall not be unreasonably withheld provided the
conditions set forth herein are satisfied. Payment of the amount determined by the City Party to
be owing to Participant for eligible Other Project Expenses each month shall be made by the City
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Party within thirty (30) days after Participant's submission of its completed payment request;
provided, however, that in no event shall any proceeds be disbursed to Participant until after the
Funding Conditions are satisfied. If payment is requested for amounts owing to a third party
such as the Contractor under the Construction Contract, the City Party shall have the right to
disburse the NSP Loan payments directly to the third party. It is expressly understood that no
disbursements of the NSP Loan proceeds shall be made to Participant until after the satisfaction
of the Funding Conditions. In addition, a City Party's obligation to make periodic disbursements
of NSP Loan proceeds to Participant pursuant to this Section 4.6.2 shall be conditional and
contingent upon Participant's continuing satisfaction of all of its obligations under this
Agreement at the time payments become due and the continuing satisfaction of the Funding
Conditions.
In addition to the requirements in the preceding paragraph, the requirements of this
paragraph also shall apply to Other Project Expenses that constitute Rehabilitation Expenses.
The payment requests for the Rehabilitation Expenses shall include (i) certification from the
Contractor that the work for which a disbursement is sought has been completed and conforms to
the approved plans and permits; and (ii) appropriate conditional or unconditional lien releases
and waivers, including for mechanic's liens, materialmen's liens, stop notice claims, and
equitable lien claims, with said lien releases and waivers to be in a form reasonably required by
the City Party and in conformance with the requirements of California Civil Code Section 3262.
A 10% retention shall be withheld from each disbursement of NSP Loan proceeds for
Rehabilitation Expenses and shall be disbursed upon the completion of the Rehabilitation Project
and the satisfaction of the conditions in the preceding sentence as to the entire Rehabilitation
Project. Prior to each disbursement for Rehabilitation Expenses, the City Party shall have
inspected the rehabilitation work for which such disbursement is being requested and shall have
determined that such work has been completed substantially and reasonably in conformity with
the Scope of Work and this Agreement and the approved building plans. In the event Participant
desires to obtain an advance disbursement for rehabilitation activities scheduled to be undertaken
or rehabilitation activities not yet completed (e.g., as an advance payment or progress payment),
Participant shall present to the City Party a contract or other evidence that the contractor or other
party performing the work is entitled to an advance payment. Prior to and as a condition to final
payment for Rehabilitation Expenses and prior to the issuance of the Certificate of Occupancy
for the Home, Participant shall submit to the City Party all remaining Section 3 documentation.
Participant shall supply to the City Party certification satisfactory to HUD and the Contract
Officer as to compliance with the provisions of Section 3 before receiving the final disbursement
of NSP Loan funds for Rehabilitation Expenses of a Home.
The Project Expenses that constitute Other Financing Interest shall be reimbursed upon
the sale of the Home to the Eligible Homebuyer in accordance with Section 6.3.1(b).
4.7 Repayment of NSP Loan. Participant's obligation to repay each NSP
Loan shall be as set forth in the City Note for the NSP Loan. The City Note generally provides
for Participant to pay to the City Party, concurrently with the transfer of the Property to an
Eligible Homebuyer, an amount equal to the the Resale Price of the Property and for the balance
of the NSP Loan to be forgiven.
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City CM and City LH shall, upon receipt of the NSP Loan proceeds from Participant,
transfer said funds to City Fullerton. The repayment proceeds shall constitute "NSP Funds" for
purposes of this Agreement. It is contemplated that, so long as the amount of said funds is
sufficient to fund the acquisition and rehabilitation of additional Homes, the funds will continue
to be rolled over to new NSP Loans to be provided to Participant for that purpose; provided,
however, nothing herein shall preclude any City Parry from exercising its right to terminate this
Agreement as permitted under Section 14.
4.8 NSP Loan Secured by Deed of Trust. Participant's obligation to repay each
NSP Loan shall be secured by a City Deed of Trust recorded against the Home for which the
NSP Loan is provided. The City Deed of Trust also secures Participant's obligations under this
Agreement to convey the Home to the City Party if and when any such obligation is triggered.
The City Deed of Trust contains an acceleration clause which generally provides that, to the
extent permitted by law, in the event that Participant shall: (a) directly or indirectly, voluntarily
or involuntarily, sell, assign, transfer, dispose of, alienate, encumber, lease, or agree to sell,
assign, transfer, dispose of, alienate, encumber, or lease all or any portion of any interest in the
Home without the prior written consent of the City Party; or (b) refinance any lien or
encumbrance which has priority over the City Deed of Trust for a loan amount in excess of the
then outstanding sum secured by such lien or encumbrance or extend the term of any loan
secured by any such lien or further encumber the Home; or (c) default on any of its obligations
set forth in the City Note, City Deed of Trust or this Agreement or on any obligations under any
documents relating to any other financing that is secured by the Home and fail to cure the default
within any applicable cure period or within thirty (30) days of receipt of notice from the City
Parry if there is no cure period, then, or at any time thereafter, the City Party, at its option, may
declare the entire indebtedness evidenced by the City Deed of Trust to be immediately due and
payable and collectible then or thereafter as the City Party may elect, regardless of the date of
maturity.
4.9 Return of NSP Loan Proceeds. Upon the termination of this Agreement,
Participant shall transfer to the City Party any NSP Loan funds on hand for which Project
Expenses have not been incurred. In addition, if it is determined, as a result of an audit or
otherwise, that any of the disbursements of NSP Loan proceeds were improper or made for
expenditures not eligible for payment, Participant shall immediately repay to the City Party the
amounts of such disbursements. Pursuant to the City Party Agreements, City CM and City LH
shall transfer to City Fullerton such funds that each receives from Participant.
4.10 Other Financing. The provisions of this Section 4.10 shall be applicable to a
Home in the event Other Financing is required for the Home pursuant to Section 4.1.
4.10.1 Participant's Efforts to Obtain Other Financing. Upon notification from
the City Party that the NSP Loan will be less than the Project Expenses, Participant shall exercise
diligent efforts to obtain Other Financing to fund the gap. Participant shall submit to the City
Parry reports on the efforts undertaken by Participant to obtain Other Financing, including the
lenders contacted by Participant, the terms of any loans available to Participant, and the reasons
for Participant's rejection or disapproval of any Other Financing Loans (which disapproval shall
be subject to the terms of Section 4.10.2).
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4.10.2 Approval of Other Financing Loan. If the Other Financing is in the form
of a loan provided to Participant ("Other Financing Loan"), the Other Financing Loan shall be
subject to the reasonable approval of the City Party and Participant, which approval shall not be
unreasonably withheld so long as the Other Financing Loan is on commercially reasonable terms
with a rate of interest not to exceed prevailing conventional home mortgage lending rates applied
by any reputable institutional home mortgage lender. The approvals of the terms of an Other
Financing Loan by Participant and the City Party shall be made with the Preliminary Loan
Package.
4.10.3 Participant's Evidence of Financial Capability. Concurrently with
delivery of the Final Loan Package to the City Party, Participant shall submit to the City Party
evidence reasonably satisfactory to the City Party that Participant has the financial capability
necessary for the acquisition of the Home and development of the Rehabilitation Project
pursuant to this Agreement. Such evidence of financial capability shall include all of the
following:
(a) A copy of the commitment or commitments obtained by
Participant for all of the sources of funds for acquisition and construction financing for
the Home and Rehabilitation Project. All copies of commitments submitted by
Participant to the City Party shall be certified by Participant to be true and correct copies
thereof. Each commitment for financing shall be in such form and content acceptable to
the City Party as reasonably evidences a firm and enforceable commitment, with only
those conditions which are standard or typical for the lender involved for similar projects.
The terms for any Other Financing Loans obtained by Participant shall comply with the
requirements set forth in Section 4.10.2 of this Agreement.
(b) Copies of the loan documents for each funding source to be
obtained by Participant. Participant shall provide written certification to the City Party
that the loan documents submitted are correct copies of the actual loan documents to be
executed by Participant.
(c) If the total costs set forth in the Home Project Budget exceed the
amount of the NSP Loan to be provided by the City Parry and the financing commitments
received pursuant to subparagraph (a) above, a financial statement and/or other
documentation reasonably satisfactory to the City Parry sufficient to demonstrate that
Participant has adequate funds available and committed to cover such difference.
4.10.4 Right of City to Cure Mortgage or Deed of Trust Default. In the event of
a mortgage or deed of trust default or breach by Participant, Participant shall promptly deliver to
the City Parry a copy of any notice of default or breach received from any other lender and the
City Party may cure the default without acceleration of the subject loan following prior notice
thereof to Participant. In such event, Participant shall be liable for, and the City Parry shall be
entitled to reimbursement from Participant within ten (10) days of written demand, of all costs
and expenses associated with and attributable to the curing of the mortgage or deed of trust
default, including any default consisting of a breach of this Agreement by Participant, which are
incurred by the City Party. Any sums which become due to the City Party from Participant
under the provisions of this Section 4.10.4 shall constitute a lien on the Home, effective upon
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recordation by the City Party or the City Parry's authorized agent of a notice of lien ("Notice of
Lien") concerning nonpayment of any sum due hereunder. The Notice of Lien shall state
(i) the amount due, which amount shall include interest at the rate of the lesser of 10% or the
maximum amount allowed under law from the date due to the date paid, and shall also include
the cost of preparing and recording the Notice of Lien, (ii) the expenses of collection in
connection with any nonpayment, including without limitation reasonable attorneys' fees, (iii) a
description of the Home, (iv) the name and address of the City Party, (v) the name of
Participant, and (vi) in order for the lien to be enforced by nonjudicial foreclosure, the name and
address of the trustee authorized by the City Party to enforce the lien by sale. The lien
established pursuant to this section may be enforced by sale of the Home by the City Party, the
City Party's attorneys, any title insurance company authorized to do business in California, or
other persons authorized to conduct the sale as a trustee, after failure of Participant to pay any
sum due pursuant to this Agreement within 30 days after recordation of the Notice of Lien. The
sale shall be conducted in accordance with the provisions of the California Civil Code applicable
to the exercise of powers of sale in mortgages and deeds of trust, or in any other manner
permitted by law. The City Party, through its agents, shall have the power to bid on the Home at
the foreclosure sale, and to acquire and hold, lease, mortgage and convey the same. Suit to
recover a money judgment for any amounts due under this Agreement shall be maintainable
without foreclosing or waiving any lien securing the same, but this provision or any institution of
suit to recover a money judgment shall not constitute an affirmation of the adequacy of money
damages. Any recovery resulting from a suit at law or in equity initiated pursuant to this Section
shall include reasonable attorneys' fees as fixed by the court.
4.10.5 Subordination. The City Party's City Deed of Trust and this Agreement
shall be subordinate to the lien of any Other Financing Loan obtained by Participant and
approved by the City Party, on such terms as the Contract Officer and the City Party's legal
counsel determine are commercially reasonable and consistent with the purpose and effect of this
Agreement; provided, however, that this Agreement shall be superior to the lien of any Other
Financing Loan obtained by Participant from an affiliate or related party of Participant and, in
the event of a foreclosure under such lien, the party acquiring the Property shall be required to
comply with this Agreement and perform Participant's obligations hereunder.
5. PARTICIPANT'S SALE OF HOMES TO ELIGIBLE HOMEBUYERS.
5.1 Market Homes. Upon the Acquisition Closing Date for each Home, Participant
shall diligently market the sale of the Home to Eligible Homebuyers pursuant to a marketing
program approved by the City Party and shall exercise diligent efforts to sell and convey the
Home to an Eligible Homebuyer as expeditiously as possible following the completion of the
Rehabilitation Project.
5.2 Eligible HomebUers. Participant shall sell each rehabilitated Home to an
Eligible Homebuyer as expeditiously as possible following the completion of the Home's
Rehabilitation Project. An "Eligible Homebuyer" is a homebuyer who meets all of the following
requirements and eligibility has been verified by the City Party:
(a) Maximum Income. The potential homebuyer qualifies as a Middle Income
Household.
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(b) Residency. All persons comprising the Middle Income Household are
qualified residents who lawfully reside in the United States.
(c) First Time Homebuyers. Each adult person who is a member of the
Middle Income Household shall qualify as a first time homebuyer. A first time
homebuyer means a buyer who has not owned a home during the three-year period prior
to the purchase of the Home, except that the following individual or individuals may not
be excluded from consideration as a first time homebuyer under this definition:
(i) a displaced homemaker who, while a homemaker, owned a home
with his or her spouse or resided in a home owned by the spouse. A displaced
homemaker is an adult who has not, within the preceding two years, worked on a
full-time basis as a member of the labor force for a consecutive twelve-month
period and who has been unemployed or underemployed, experienced difficulty
in obtaining or upgrading employment and worked primarily without
remuneration to care for his or her home and family;
(ii) a single parent who, while married, owned a home with his or her
spouse or resided in a home owned by the spouse. A single parent is an
individual who is unmarried or legally separated from a spouse and has one or
more minor children for whom the individual has custody or joint custody or is
pregnant; or
(iii) an individual or individuals who owns or owned, as a principal
residence during the three-year period before the purchase of the Home, a
dwelling unit whose structure is: (x) not permanently affixed to a permanent
foundation in accordance with local or state regulations; or (y) not in compliance
with state, local, or model building codes and cannot be brought into compliance
with such codes for less than the cost of constructing a permanent structure.
(d) Household Size. The household size of the buyer does not exceed two
persons per bedroom, plus one person (e.g., for a three bedroom Home the maximum
number of persons in the household can be seven persons).
5.3 City's Verification of Eligible Homebuyer Status. Participant shall be responsible
for the initial determination of a buyer's Eligible Homebuyer status and shall provide
information to the City Party to enable the City Party to verify that the proposed buyer is an
Eligible Homebuyer. In order to verify the buyer's status as an Eligible Homebuyer, Participant
shall submit to the City Party adequate information evidencing the income of the proposed buyer
and the buyer's status as an Eligible Homebuyer, including evidence that the buyer lawfully
resides in the United States. Said information shall include original or true copies of pay stubs,
income tax records or other financial documents in order that the City Party may determine and
verify the household income of the proposed buyer and qualification as Middle Income
Household. In addition, Participant shall submit to the City Party affidavits of first time
homebuyer status certified by the buyer as true and correct. The City Party may request
additional information reasonably required to verify the proposed buyer's Eligible Homebuyer
status. Participant shall complete or cause to be completed any applications, verification
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documents or other forms that may be provided by a City Party for Participant or the proposed
buyers to complete. If the City Party is unable to verify the buyer's Eligible Homebuyer status,
then the buyer shall not be eligible to purchase the Home and Participant shall select another
applicant for approval of Eligible Homebuyer status.
5.3.1 Evidence of Lawful Residency in United States. In furtherance of Section
5.3 above, the City Parties inform Participant (and Participant shall be aware when selecting
prospective buyers of the Homes) that the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996, 8 U.S.C. §1601 et seq. (and the implementing guidelines in 8 CFR
104), in particular Section 1621 provides that an alien who is not a qualified alien, nor a
non-immigrant, nor an alien paroled into the U.S. for less than one year, is not eligible for any
state or local public benefit. "State and local public benefits" means any grant, contract, loan,
professional license or commercial license provided by an agency of a state or local government
or by their appropriated funds; and any retirement, welfare, health, disability, public or assisted
housing, post -secondary education, food assistance, unemployment benefit, or any similar
benefit for which payments or assistance are provided to an individual, household, or family
eligibility unit by an agency of a state or local government or their appropriated funds.
Participant acknowledges and agrees that no selected homebuyer shall be an unlawful resident in
the United States.
5.4 Priority. Eligible Homebuyers who either (a) currently work and have worked in
the jurisdiction of the City Party for the ninety (90) day period preceding the sale of the Home to
the homebuyer, or (b) currently live and have lived in the jurisdiction of the City Party for the
ninety (90) day period preceding the sale of the Home to the homebuyer shall be given
preference in purchasing a Home pursuant to a process to be established by the City Parties and
Participant within thirty (30) days after the date of this Agreement.
5.5 Resale Price.
5.5.1 Permitted Resale Price. The parties acknowledge that the NSP
Requirements prohibit any profit from being made on the sale of the Homes. The sale price of a
Home to be paid by an Eligible Homebuyer to Participant ("Resale Price") shall be the lesser of
(a) the NSP Maximum Resale Price, or (b) the value of the Home after completion of the
Rehabilitation Project, or (c) such other amount as determined by the City Party. With respect to
clause (b) of the preceding sentence, the value shall be based upon any of the foregoing, at the
election of the City Party: (i) an appraisal procured by the City Party, (ii) the appraisal
conducted on behalf of the Eligible Homebuyer's first trust deed lender for the Home, or (iii) the
opinion of a real estate agent or broker. The Resale Price shall be established by the parties upon
the completion of the Rehabilitation Project. The Resale Price may be reduced from time to time
in accordance with the provisions of Section 5.5.2. Participant shall cause the Resale Price
proceeds to be paid to the City Party out of the escrow for the sale of the Home upon the
conveyance of the Home to the Eligible Homebuyer and such payment shall constitute
Participant's repayment of the NSP Loan pursuant to Section 4.7. If Other Financing was
obtained for the Project Expenses for the Home, for the ease of administration and as provided in
Section 6.3.1(b), the parties may elect to offset against Participant's obligation to pay the Resale
Price proceeds to the City Party under this Section the amount payable by the City Party to
Participant under Section 6.3.1(b) of this Agreement.
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5.5.2 Reduction of Resale Price. The City Party shall have the right at any time
and from time to time to reduce the Resale Price. Participant shall promptly reduce the Resale
Price upon receipt of notification from the City Parry. In addition, if Participant believes after
the establishment of the Resale Price that the market conditions warrant a reduction in the Resale
Price, Participant shall have the right to request the City Party reduce the Resale Price and the
City Party shall reasonably consider the request. If requested by the City Party, Participant shall
provide to the City Party a broker's opinion or other evidence of the value of the Home to
substantiate Participant's request to reduce the Resale Price.
5.6 Homebuyer Outside Resale Date; Auction. If, after and despite its exercise of
diligent efforts, Participant does not enter into a purchase agreement for a Home with an Eligible
Homebuyer by the date that is the later of (a) six (6) months after the Acquisition Closing Date
for the Home, or (b) thirty (30) days after the completion of the Rehabilitation Project for the
Home, Participant shall, at the election of Participant or at the request of the City Party, auction
the sale of the Home pursuant to procedures reasonably approved by the City Party. The parties
permitted to bid at the auction and purchase the Home shall be Eligible Homebuyers or the City
Party. No later than thirty (30) days after the date of this Agreement, Participant shall submit to
the City Parties proposed procedures for the auction sales. Participant and the City Parties shall
exercise reasonable efforts to finalize the procedures within sixty (60) days after the date of this
Agreement.
5.7 Down Pam. Eligible Homebuyers shall be required to contribute a down
payment of not less than five percent (5%) of the Affordable Housing Cost of the Home.
5.8 Financing to be Obtained by Eligible Homebuyer; Loan Documents.
5.8.1 City Homebuyer Loan. The City Party shall provide to the Eligible
Homebuyer who purchases a Home a loan of funds equal to the difference between the Resale
Price and the sum of the Affordable Housing Cost of the Home and the Eligible Homebuyer's
down payment ("Homebuyer Loan"). The form of the loan documents to be entered into by the
City Party and each Eligible Homebuyer for a Homebuyer Loan shall be prepared by the City
Party and it is anticipated such documents will include without limitation a loan agreement, a
promissory note, a subordinate deed of trust, a request for notice of default, a regulatory
agreement or conditions, covenants and restrictions (CCRs), a buyer disclosure statement, a truth
in lending statement, and a notice of right to cancel (collectively, the "Homebuyer Loan
Documents"). Pursuant to the NSP Requirements, the affordability requirements for the Home
shall, at a minimum, adhere to the affordability provisions under the Home Investment
Partnerships Act at Title II of the Cranston -Gonzalez National Affordable Housing Act, as
amended (42 U.S.C. § 12741, et seq.), and the implementing regulations (24 C.F.R. § 92, et seq).
It is contemplated that the Homebuyer Loan will have the following terms: (a) 0% interest with
a term of forty-five (45) years; (b) payments deferred during the initial thirty (30) year period of
the term of the Homebuyer Loan (unless a default or the Home is sold); (c) equal monthly
installment payments made during the last fifteen (15) years of the forty-five (45) year term, with
the Homebuyer Loan paid in full in the forty-fifth year; (d) equity share payable during the term
of the loan, with the amount payable in the initial thirty (30) year period to be in the same
proportion that the Homebuyer Loan bears to the Resale Price, and with such amount reduced
each year commencing in the thirty first year of the term of the Homebuyer Loan by an amount
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equal to l/15 of the original equity share. Notwithstanding the foregoing, if equity sharing is not
permitted under the NSP Requirements, it is contemplated that the Homebuyer Loan will be a
simple interest deferred payment loan, with payment due in full upon the sale of the Home to the
extent net proceeds are available to repay the Eligible Homebuyer's investment and the NSP
Loan. The Contract Officers, together with their respective legal counsel, shall have the
authority to prepare, establish the terms of, and execute the Homebuyer Loan Documents
consistent with the NSP Requirements. Subject to Section 5.8.2, the source of the Homebuyer
Loans shall be NSP Funds.
5.8.2 City of CM Additional Funding. City CM advises Participant that as an
additional funding source (in addition to NSP Funds from City CM) that the Costa Mesa
Redevelopment Agency, City of Costa Mesa, California, a public body corporate and politic and
a community redevelopment agency existing and operating pursuant to California Health &
Safety Code §33000, et seq. ("Agency") has approved an allocation of funds from the Agency's
Low and Moderate Income Housing Fund in an amount up to $321,316 that may be used for its
Homebuyer Loans. The Agency's Executive Director shall have the authority to approve and
execute the Agency's Homebuyer Loan Documents in a form approved by the Agency's legal
counsel. Monies, if any, provided by the Agency to this Agreement and implementation shall be
treated as program income under the NSP Requirements; provided however, in all cases such
monies be expended also in compliance with California Health & Safety Code §33000, et seq.
("CRL") and to the extent there is a conflict between the NSP Requirements and the CRL, the
most restrictive provisions shall govern.
5.8.3 First Trust Deed Financing. The Eligible Homebuyers shall be required to
obtain from a private institutional lender or government agency a conventional fixed-rate, level -
payment, fully amortizing thirty (30) year mortgage loan for the first trust deed financing for the
acquisition of the Home on such terms as approved by the City Party. Principal and interest
payments on the loan shall not exceed the prevailing conventional home mortgage lending rates
applied by any reputable institutional home mortgage lender, or the lending rates of any
government -subsidized or special mortgage program for which the Eligible Homebuyer qualifies
and has obtained a first trust deed loan for the acquisition of the Home.
5.9 Homebuyer Purchase Agreement. Upon entering into a purchase agreement with
an Eligible Homebuyer for the sale of a Home, Participant shall provide to the City Party a copy
of the executed purchase agreement setting forth the Resale Price. The escrow period shall be no
longer than necessary to satisfy the conditions required to close the escrow and convey the Home
to the Eligible Homebuyer.
5.10 Conditions to Sale. Participant shall not transfer title to a Home until such time
that the Rehabilitation Project is completed as determined by the City Party, the City Party has
verified the prospective buyer's status as an Eligible Homebuyer, the City Party has approved the
terms of the Eligible Homebuyer's first trust deed financing, the Homebuyer Loan Documents
have been executed, and all other conditions to the closing that may be required by the City Party
have been satisfied.
5.11 Coordination with City. Participant shall keep the City Parties informed of the
closing date for the transfer of Homes to Eligible Homebuyers so that each City Party can
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coordinate the disbursement of its Homebuyer Loans to the Eligible Homebuyers, if applicable,
and the execution and delivery of the Homebuyer Loan Documents. Further, Participant shall
otherwise keep each and all of the City Parties informed of the status of the marketing and sale of
the Homes.
5.12 Homebuyer Counseling and Other services. Participant shall ensure that each
Homebuyer receives and completes at least eight (8) hours of homebuyer counseling from a
HUD -approved homebuyer counseling agency. Participant shall coordinate the provision of
these housing counseling services. Participant shall provide reasonable accommodations to
persons with disabilities, including but not limited to accessible format of information and
accessible location(s). Participant shall arrange for translation services for non-English speaking
persons as needed.
5.13 Right of City Party to Acquire Home. Notwithstanding any other provision set
forth in this Agreement, the City Parry shall have the right at any time after the Acquisition
Closing Date to itself acquire the Home. If the City Party acquires the Home, the City Party
shall not be required to pay any purchase price to Participant for the Home. Although the City
Party shall not be required to pay a purchase price for the Home, if Other Financing was obtained
for the Home, the City Party shall be required to make the payment under Section 6.3.1(b) to
reimburse Participant for the Home's Project Expenses that were funded with the Other
Financing (whether the source of such Other Financing is Participant's own funds or an Other
Financing Loan), together with any Other Financing Interest applicable to the Home, provided
Participant provides to the City Party evidence reasonably satisfactory to the City Party that the
Project Costs funded by the Other Financing and any Other Financing Interest were incurred and
provided Participant is not in default of this Agreement. If the City Party acquires the Home
pursuant to this Section, the NSP Loan for the Home shall be forgiven upon Participant's transfer
of title to the Home free and clear of all monetary liens and encumbrances and rights of
possession and any other exceptions placed on title during the period of Participant's ownership
of the Home. In the event Participant is in default of this Agreement, subject to Section 13.3,
the City Party's acquisition of a Home shall not preclude the City Party from exercising all rights
and remedies available at law or equity for the default.
6. HOME PROJECT BUDGET; REIMBURSEMENT OF PROJECT EXPENSES.
6.1 Home Project Budget. The "Home Project Budget" shall mean, as to each Home,
a line item budget of the Project Expenses for the Home. The budget that is approved by a City
Party as part of the Final Loan Package for a Home pursuant to Section 2.2.3 of this Agreement
shall be the Home Project Budget for that Home. The cost estimates in the Home Project Budget
for the Project Expenses that are included within the Approved Bid Amount shall reflect the
amounts set forth in the Approved Bid Amount and shall include a cost breakdown for each item
in the Approved Bid Amount. The Home Project Budget may not be changed without the prior
written approval of the City Party. The Home Project Budget approved with the Final Loan
Package shall include six (6) months of Carrying Costs and Miscellaneous Expenses for the
Home (i.e., utilities, maintenance, taxes). If Participant owns a Home for longer than six (6)
months, the parties shall revise the Home Project Budget to include the carrying costs to be
incurred during the extended period. If the Home Project Budget is revised as permitted herein,
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all references herein to the "Home Project Budget" shall be deemed to refer to the revised Home
Project Budget.
6.2 Project Expenses Defined. The "Project Expenses" shall mean, as to each Home,
the actual and reasonable expenses for the Eligible Project Expense Items incurred by Participant
after the Environmental Completion Date for the Home and after the Home has received Initial
Approval, not to exceed the amounts set forth in the Home Project Budget. It is expressly
understood that Project Expenses do not include (a) any direct or indirect costs, fees, charges, or
profits allocated to Participant's own internal administrative, payroll, or overhead expenses or to
any person or entity affiliated with Participant, with the exception of the Website Fee, (b) the
direct or indirect costs of Participant's inspector, (c) any expenses incurred prior to the
Environmental Completion Date for the Home, or (d) expenses for a Home that does not receive
Initial Approval. If a City Party does not receive sufficient NSP Funds from HUD or HCD or if
its NSP Funds are withdrawn, then the City Party shall notify promptly Participant of such lack
of funding and no costs incurred from the date of notice thereof will be or become Project
Expenses. As used herein, the term "Eligible Project Expense Items" shall mean the following:
Purchase Expenses
Allowable Acquisition Price
Good Faith Deposit, which shall be applicable to the Allowable Acquisition Price if the Home is
acquired
Escrow and closing costs for the purchase of the Home
Premium for the City Party's lender's title insurance policy
Premium for Participant's owner's title insurance policy
Rehabilitation Expenses
Permits and plan check fees
Architecture and design fees
Asbestos/LBP/Mold/Structural/etc studies/surveys
Amounts paid to the Contractor for the construction of the Rehabilitation Project based on the
Approved Bid Amount
Carrying Costs and Miscellaneous Expenses
Broker's price opinion
Utilities
Landscape maintenance
Security
Insurance (other than Participant's liability insurance)
Homebuyer counseling as required by the NSP Program
Loan fees if an Other Financing Loan is obtained
Other Financing Interest (see Section 6.2.4 for payment procedures)
Termite report
Property taxes
Disposition Expenses
Third parry advertising costs to market the Home (i.e., newspaper ads)
Website Fee, if applicable (as defined below)
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Escrow and closing costs for sale of Home to Eligible Homebuyer
Broker's commission for sale of Home to Eligible Homebuyer
If Participant creates a new website for advertising Homes in the NSP Program,
Participant may include as a Disposition Expense a fee for each Home that is included on the
website in the amount not to exceed $300.00 ("Website Fee").
6.3 Reimbursement of Project t Expenses. The provisions for a City Party's payment
of the Project Expenses shall be as set forth in this Section 6.3. The Project Expenses are
separate from the Participant Fees described in Section 7 of this Agreement.
6.3.1 Payment of Project Expenses for Homes that Participant Acquires.
(a) Project Expenses Funded Through NSP Loan. As to each Home
that Participant acquires pursuant to this Agreement, subject to Section 6.3.3, the City
Party's reimbursement of Participant's Project Expenses shall be made in the form of the
City Party's provision of an NSP Loan for the Home on the Acquisition Closing Date in
accordance with the requirements of Section 4 of this Agreement and the NSP Loan shall
be disbursed for the Project Expenses as set forth in Section 4.6.
(b) Reimbursement of Other Financing Interest and Project Expenses
Funded with Other Financing. If the amount of the NSP Loan provided by the City Party
for a Home is less than the estimated amount of Participant's Project Expenses for the
Home and Participant obtains Other Financing for the Project Expenses for the Home
pursuant to Sections 4.1 and 4.10, upon the sale of the Home to an Eligible Homebuyer,
the City Party shall reimburse Participant for the Project Expenses that are funded with
the Other Financing (whether the source of such Other Financing is Participant's own
funds or an Other Financing Loan), together with any Other Financing Interest. For the
ease of administration, Participant may elect to offset against the Resale Price proceeds
payable to the City Parry under Section 5.5.1 the amount payable by the City Party to
Participant under this subparagraph (b).
6.3.2 Payment of Project Expenses for Homes that Participant does not Acquire.
As to each Home that receives Initial Approval in accordance with Section 2.2.1 but that
Participant does not acquire, an NSP Loan will not be provided by the City Party for the Home,
but the City Party will nonetheless reimburse Participant for the Project Expenses incurred by
Participant for the Home prior to the date it is determined that the Home will not be included in
the NSP Program, provided Participant has complied with all provisions of this Agreement and is
not in default of this Agreement and provided further that the failure to acquire the Home is not a
result of Participant failing to comply with any requirements under this Agreement or the
Acquisition Purchase Agreement (other than an Excusable Default). No later than thirty (30)
days after it is determined that such a Home will not be included in the NSP Program, Participant
shall submit to the City Party a payment request for Project Expenses for the Home. The
payment request shall include the total amount requested and itemized statements and invoices,
with legible and complete supporting information provided by Participant to the City Party in
order to document the reasonable costs incurred by Participant and for which Participant seeks
payment or reimbursement. The supporting information required by the City Party may include
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without limitation, originals or complete and legible copies of receipts, canceled checks, time
records, billing statements, bank statements, and contracts. Payment of the amount determined
by the City Parry to be owing to Participant for eligible Project Expenses under this Section shall
be made by the City Party within thirty (30) days after Participant's submission of a complete
payment request. Participant acknowledges that no reimbursement payments will be made for
each and any Home that did not receive Initial Approval or for any Project Expenses incurred
prior to the Environmental Completion Date. Notwithstanding the foregoing, the terms for the
reimbursement of the Good Faith Deposit shall be governed by the provisions of Section 2.4.4 of
this Agreement rather than this Section.
6.3.3 Other Financing Interest. Although the Other Financing Interest shall
constitute a Project Expense reimbursable to Participant, notwithstanding any other provision in
this Agreement to the contrary, the reimbursement of Other Financing Interest shall not be made
monthly but instead shall be made in accordance with the procedures set forth in Section
6.3.1(b).
6.4 Participant Responsible for Expenses that Exceed Budget. If any of the Project
Expenses exceed the amounts set forth in the Home Project Budget approved by the City Party,
Participant shall be responsible for such additional amounts and such amounts shall not be
eligible for payment or reimbursement under this Agreement and shall not constitute Project
Expenses.
7. COMPENSATION.
7.1 Fee Summary. Provided Participant is not in default of this Agreement at the time
payment is due, the City Party shall pay to Participant out of NSP Fund proceeds certain fees for
each Home included in the City Party's NSP Program upon the completion of certain milestones
for the Home, as summarized in the chart below and as described in greater detail in Sections
7.2-7.5 (collectively, the "Participant Fees"):
PARTICIPANT FEE
AMOUNT
PAYMENT TIMING
Acquisition Fee
$8,500 per Home
Acquisition Closing Date
Rehabilitation Fee
19% of Rehabilitation
Expenses
Monthly during rehabilitation
Homebuyer Administration
Fee
$3,000 per Home
Close of sale to Eligible
Homebu er
Disposition Fee
8% of Disposition/
Carry Costs
Close of Sale to Eligible
Homebu er
7.2 Acquisition Fee. As to any Home that receives Preliminary Loan Package
Approval but does not receive Final Loan Package approval, the City Party shall pay to
Participant an acquisition fee for the Home in the amount of Eight Thousand Five Hundred
Dollars ($8,500) ("Acquisition Fee") so long as the reason the Home did not receive Final Loan
Package approval is not a result of any of the following: (a) the Rehabilitation Expenses in the
Home Project Budget as approved by the City Party exceed the sum of $75,000; (b) the total of
the Rehabilitation Expenses, Carrying Costs and Miscellaneous Expenses and Disposition
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Expenses, in the amounts set forth in the Home Project Budget approved by the City Party,
exceed the sum of $90,000; (c) the Financing Contingency is not satisfied; (d) the Acquisition
Purchase Agreement has terminated because the seller of the Home does not agree to the
Allowable Acquisition Price; (e) Participant failing to enter into an Acquisition Purchase
Agreement with the owner of the Home by the Deadline Date for the Home in accordance with
Section 2.4.1, (f) Participant failing to comply with the terms of this Agreement or the
Acquisition Purchase Agreement, including without limitation the requirement that all
documents and information required to be submitted by Participant are timely submitted in final
and complete form and in compliance with the requirements of this Agreement, including the
documents and information required for the Final Loan Package; or (g) there exists any condition
on title to the Home that will prevent the Eligible Homebuyer from obtaining first mortgage
financing for the Home or that is substantially inconsistent with the use of the Home under this
Agreement; (h) the failure of the Environmental Completion Date to occur in such time as to
allow the conditions dependent on such event to be satisfied within the times required under this
Agreement, notwithstanding the City Party's compliance with its submittal requirements under
Section 2.8 of this Agreement; or (i) the Home is no longer included in the NSP Program
pursuant to the last sentence of Section 2.4.3. Payment of the Acquisition Fee under this
paragraph shall be made within five (5) business days after disapproval of the Final Loan
Package for the Home or after it is determined that the Home will not proceed to consideration of
a Final Loan Package.
As to any Home that receives Final Loan Package approval but that is not acquired by
Participant by the Outside Acquisition Closing Date for the Home, the City Party shall be
required to pay to Participant the Acquisition Fee for the Home so long as the reason for
Participant not acquiring the Home is not the fault of Participant or a result of any of the
following: (a) any of the events described in the preceding paragraph; or (b) if Other Financing
was approved as part of the Preliminary Loan Package, Participant's failure to obtain the Other
Financing; or (c) Participant's unilateral and arbitrary decision not to acquire the Home.
As to each Home that receives Final Loan Package approval and that Participant acquires
in accordance with this Agreement, upon the Acquisition Closing Date for the Home and
provided the Funding Conditions are satisfied, the City Party shall pay to Participant the
Acquisition Fee through the Acquisition Escrow.
Notwithstanding the foregoing or any other provision in this Agreement to the contrary,
Participant acknowledges that no Acquisition Fee can be or shall be paid for a Home for which
an Environmental Completion Date did not occur.
The services to be provided by Participant for the Acquisition Fee include the following:
• Identify and negotiate the purchase of Homes that meet the definition of
Vacant and Foreclosed. Homes must be located in the City's designated
NSP target areas as approved by HCD.
• Prepare and submit a Preliminary Loan Package to the City Party for
preliminary approval and secure commitment of City funds for
acquisition. The Preliminary Loan Package shall include the information
in Section 2.2.2.
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Ensure compliance with NEPA environmental clearance requirements.
Provide a Final Loan Package to the City Parry. The Final Loan Package
shall include the information in Section 2.2.3.
7.3 Rehabilitation Fee. Following the Acquisition Closing Date for a Home that is
included in the NSP Program, the City Parry shall pay to Participant a Rehabilitation Fee in the
amount of 19% of the Rehabilitation Expenses incurred by Participant for the Home. Payments
shall be made once each month concurrently with the City Parry's monthly disbursements of
NSP Loan proceeds pursuant to Section 4.6.2 of this Agreement and shall be equal to 19% of the
portion of the NSP Loan disbursed to Participant for Rehabilitation Expenses in that month. The
services to be provided by Participant for the Rehabilitation Fee include the following:
• Develop the Scope of Work for the Home.
• Provide construction management and oversight. The City retains the
right to reasonably disapprove each and all change orders.
• Select construction contractors through a procurement process that meets
all HUD and HCD requirements for the NSP program.
• Ensure compliance with all legal requirements, including Davis Bacon
and/or prevailing wage requirements, as applicable.
• Manage and maintain Homes from date of acquisition to date of resale,
including but not limited to lawn/landscape care, securing the property,
and payment of all taxes, insurance, utilities.
7.4 Homebuyer Administration Fee. Upon the closing of the sale of a Home to an
Eligible Homebuyer in accordance with the requirements of this Agreement, the City Party shall
pay to Participant a fee for the Home in the amount of Three Thousand Dollars ($3,000)
("Homebuyer Administration Fee"). The Homebuyer Administration Fee shall be paid through
the escrow for the sale of the Home to the Eligible Homebuyer. The services to be provided by
Participant for the Homebuyer Administration Fee include the following:
• Review affordability program guidelines for consistency with NSP
program requirements.
• Provide underwriting and income qualification services consistent with
this Agreement.
• Attend loan advisory committee meetings with the City Parry and present
underwriting criteria.
• Coordinate the provision of the Homebuyer Loans and the execution of
the Homebuyer Loan Documents.
7.5 Disposition Fee. Upon the closing of the sale of a Home to an Eligible
Homebuyer in accordance with the requirements of this Agreement, the City Party shall pay to
Participant a fee for the Home in the amount of eight percent (8%) of the sum of the Project
Expenses that constitute Disposition Expenses ("Disposition Fee"). The Disposition Fee shall be
paid through the escrow for the sale of the Home to the Eligible Homebuyer. The services to be
provided by Participant for the Disposition Fee include the following:
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• Execute sales and listing agreements.
• Review purchase offers, including eligibility/contingencies, and receive
City Party approval of sale.
• Manage escrow/title process, ensure satisfaction of conditions to closing
toward completion of timely closing for each Home.
• Market and resell homes to Eligible Homebuyers who have received a
minimum of eight (8) hours of homebuyer counseling from a HUD -
certified housing counseling agency.
• Provide reasonable accommodations to persons with disabilities including
but not limited to accessible format of information and accessible
location(s).
• Arrange for translation services for non-English speaking persons as
reasonably required and necessary.
• In a format approved by the City Party, provide monthly status reports
regarding the number of Homes acquired, the status of Homes undergoing
rehabilitation, demographic information on homebuyers purchasing
Homes, program cash flow and other data required by the City, HCD or
HUD.
8. GENERAL PROVISIONS RELATING TO PARTICIPANT SERVICES.
8.1 Standard of Performance. As a material inducement to the City Parties entering
into this Agreement, Participant represents and warrants that Participant (and its sole member of
the Participant entity) is a qualified provider of first-class work and services and Participant is
experienced in performing the work and services contemplated herein and, in light of such status
and experience, Participant covenants that it shall follow the highest professional standards in
performing the work and services required hereunder.
8.2 Prohibition Against Assignment and Transfer. The qualifications and identity of
Participant (i.e., the sole member of the Participant entity) are of particular concern to the City
Parties. In reliance of Participant's qualifications and identity that the City Parties have entered
into this Agreement. Accordingly, Participant shall not, whether voluntarily, involuntarily, or by
operation of law, undergo any change in ownership or membership or assign, transfer or convey
all or any part of this Agreement or any rights hereunder or in any Home or in any Rehabilitation
Project.
8.3 Permits. Participant shall obtain at its sole cost and expense all licenses, permits
and approvals as may be required by applicable Federal, State or local laws for the performance
of the work and services required under this Agreement.
8.4 Compliance with Laws. Participant shall provide all work and services rendered
hereunder and perform all obligations under this Agreement in accordance with all applicable
ordinances, resolutions, statutes, rules, and regulations of the applicable City Party and any
applicable Federal, State or local governmental agency having jurisdiction. Each and every
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provision required by law to be included in this Agreement shall be deemed to be included, and
this Agreement shall be read and enforced as though they were included. Participant shall keep
itself fully informed of and in compliance with all local, state and federal laws, rules and
regulations in any manner affecting the performance under this Agreement; in particular, but
without limitation, Participant acknowledges and agrees that it shall be, and shall cause its
employees, contractors and agents, to be, and remain fully knowledgeable and apprised of the
NSP Requirements and related laws and regulations and notices referenced therein as well as all
updates and amendments thereto. If Participant performs any work knowing it to be contrary to
such laws, rules and regulations and without giving written notice to the City Parties, Participant
shall be solely responsible for all costs arising therefrom.
8.5 Independent Contractor. Neither the City Parties nor any of their respective
officers, employees or agents shall have any control over the manner, mode or means by which
Participant or its members, agents or employees perform the services required herein except as
set forth herein. Participant shall perform all services required herein as an independent
contractor of the City Parties and shall remain at all times as to the City Parties a wholly
independent contractor with only such obligations as are consistent with that role. Participant
shall not at any time or in any manner represent that it or any of its members, agents or
employees are agents or employees of any City Party.
9. RECORDS AND REPORTS.
9.1 Records.
9.1.1 Records to be Maintained. Participant shall keep and maintain records
providing a full description of the activities undertaken pursuant to this Agreement, including the
acquisition of the Homes and the development of the Rehabilitation Projects and participation in
the NSP Program, records demonstrating the eligibility of the activities constituting the Project
Expenses, records demonstrating compliance with the NSP Requirements, data demonstrating
client eligibility for services provided including the name, income level, family size of each
client and other information for determining eligibility and a record of the services provided to
each client, and such other records as may be reasonably required by the City Party to enable the
City Parry to evaluate the acquisition of the Homes, the development of the Rehabilitation
Projects, the operation of the NSP Program and Participant's compliance with the NSP
Requirements, and to identify and account for the use of the NSP Loan proceeds and
expenditures of Project Expenses and all costs pertaining to this Agreement, and to enable the
City Party to comply with the City Parry's record keeping and reporting requirements under the
NSP Requirements, including without limitation the records specified in 24 C.F.R. 570.493 and
24 C.F.R. 570.506 as they pertain to the activities under this Agreement. Books and records
pertaining to the Project Expenses shall be kept and prepared in accordance with generally
accepted accounting principles. Nothing in the foregoing shall authorize or allow the disclosure
by Participant or any City Party to any third party of personal identifying information, such as
names, income, employment, legal status, etc., of a household, prospective buyer, or other person
receiving NSP Funds or otherwise participating in this Agreement or the implementation thereof
by Participant or a City Party to the extent non -disclosure is protected and/or prohibited by URA
and other applicable Federal and State laws and regulations.
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9.1.2 Retention. The books and records required to be maintained by
Participant under this Agreement shall be retained for a period of five (5) years following the
date this Agreement has terminated as to all parties; provided, however, in the event any
litigation, audit, negotiation, or other action involving the books and records is commenced prior
to the expiration of the five (5) year retention period, Participant shall retain the books and
records until completion of the action and resolution of all issues which arise from it.
9.1.3 Location of Records. The books and records required to be maintained by
Participant shall be kept at the office of Participant located at the address set forth on the
signature page or another reasonably accessible location in Orange County, California. Further,
to the extent such records include confidential and/or non-disclosable information pursuant to
applicable Federal and State laws and regulations, Participant shall take all reasonable and
necessary steps and precautions to keep such information and records confidential and non -
disclosed to third parties without legal authorization to so disclose or produce.
9.1.4 Access to Records. The City Parties, HUD, HCD and/or their
representatives shall have full and free access to, and the right to examine, inspect, and audit, all
books and records of Participant pertaining to this Agreement at all times during normal business
hours.
9.1.5 Audits. Participant shall perform all audits of its books and records
required by the NSP Requirements, a City Parry, HUD or HCD and a copy of such audits shall
be forwarded to the City Parties within thirty (30) days after completion. Participant shall be
subject to all audit and review requirements imposed on any City Parry in connection with this
Agreement and shall, at its sole cost and expense, cause such audits and reviews to be timely
performed.
9.2 Reports.
9.2.1 Quarterlyports. No later than five (5) days after the end of each
Quarter, Participant shall submit to the City Party the following quarterly reports in a form
provided by or otherwise approved by the Contract Officer:
(a) Performance Reports. A report on the status of the acquisition of
Homes, the Rehabilitation Project improvements and a summary of the NSP Program
activities undertaken by Participant under this Agreement for the previous Quarter
("Performance Report"). The Performance Report shall, at a minimum, describe the
status of the acquisition of Homes and the development of Rehabilitation Projects, costs
incurred, funds remaining, a narrative explanation of problems, delays, or adverse
conditions that impaired the ability of Participant to meet any obligations if any were not
met, favorable developments which enabled Participant to satisfy obligations and meet
objectives sooner or at less cost than anticipated or producing more beneficial results that
planned, a description of the NSP Program activities, and any additional pertinent
information related to contract performance.
(b) Client Characteristics. A report on the number of clients served
through the NSP Program in the previous Quarter and on the characteristics of those
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clients with respect to gender, race/ethnicity, age, and family income, and any other basis
for determining eligibility for participation in the NSP Program.
(c) Program Income. A report on the program income generated for
the Quarter, if any, as more fully explained in Section 12 of this Agreement.
9.2.2 Other Reports. In addition to the reports referenced in Section 9.2.1,
Participant shall, at such times and in such forms as required by a City Party, prepare and submit
to the Contract Officer, such other reports concerning the activities under this Agreement, the
costs and obligations incurred or to be incurred in connection therewith, and any other matters
covered by this Agreement and compliance with NSP Requirements, as the City Parry may
require from time to time. Participant acknowledges that as of the date of this Agreement, HUD
and HCD have not provided definitive guidance on its reporting requirements for the NSP and
that the requirements may be different from those set forth in this Agreement. In connection
therewith, Participant shall provide to the City Parry all records and reports as may be required
by the City Party to enable the City Party to comply with its record keeping and reporting
requirements under the NSP or as otherwise required by HUD or HCD.
10. INSURANCE AND INDEMNITY.
10.1 Insurance. No later than five (5) days after the date of this Agreement, Participant
shall furnish or cause to be furnished to the City Parties evidence reasonably satisfactory to each
City's Contract Officer that Participant has obtained the insurance required in Exhibit "C" to this
Agreement; provided, however, that the property insurance required for each Home shall be
provided prior to the Acquisition Close of Escrow for the Home. Nothing in this Section 10.1 or
Exhibit "C" shall in any way limit Participant's indemnity obligations set forth in this
Agreement.
10.2 Indemnification. Participant shall indemnify, defend, and hold harmless each
City Party and their respective officers, elected and appointed officials, employees,
representatives and agents (collectively, the "Indemnitee") from and against any and all claims,
causes of action, liabilities, and damages arising out of any acts or omissions of Participant or
Participant's members, officers, employees, contractors, clients, invitees, and agents, in the
performance under this Agreement, except to the extent of such loss as may be caused by the
sole negligence or willful misconduct of an Indemnitee.
11. INTRA-CITY LOANS.
In the event that the number of Homes located or approved by a City Party for inclusion
in the NSP Program is insufficient to meet the deadlines for the City Party to use its NSP Funds
(25% by December 30, 2009, 75% by March 30, 2010, and 100% by June 30, 2010), the City
Parry may allocate its NSP Funds, or portion thereof, to one of the other City Parties in the form
of a loan to be used by the deadline dates. In addition to the foregoing, any City Party shall have
the authority through its Contract Officer to loan or grant to any other City Parry the NSP Funds
that are part of the first City Party's allocation as the Contract Officer of that first City Party may
deem necessary or desirable. The terms of any such loan or grant shall be as approved by the
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Contract Officers of the affected City Parties and their legal counsel and the Contract Officers
shall have the authority to execute the documents required to implement such transactions.
12. PROGRAM INCOME.
Participant shall submit to each City Party quarterly reports as set forth in Section 9.2 on
all program income as defined 24 C.F.R. 570.500(a) generated by activities carried out with NSP
Funds, if any. Upon receipt of program income, Participant shall return the program income to
the City Party. Any program income that is received by City CM or City LH shall be transferred
to City Fullerton as the lead agency in accordance with the City Parry Agreements.
13. DEFAULTS AND REMEDIES.
13.1 Defaults. The occurrence of any of the following shall constitute a default of this
Agreement:
(a) the failure or delay by either party to perform any term or provision of this
Agreement if such failure is not cured, corrected or remedied within the time period set
forth in this Agreement; or
(b) if no specific time period is set forth herein:
(i) the failure to commence to cure the default within fifteen (15) days
after the nonperforming parry's receipt of written notice from the
other party specifying the nature of the default; or
(ii) the failure of a nonperforming party to diligently proceed to
prosecute a cure, correction or remedy once commenced; or
(iii) the failure of a nonperforming party to complete a cure, correction
or remedy to completion within thirty (30) days after the
nonperforming party's receipt of written notice from the other
party specifying the nature of the default, or for defaults that
cannot reasonably be cured, corrected, or remedied within such
thirty (30) day time period, the failure of such parry to complete
the cure within an additional thirty (30) days following the
conclusion of such thirty (30) day period (for a total of sixty (60).
A party claiming a default shall give written notice of default to the other party
specifying the default complained of. Except as otherwise expressly provided in this Agreement
or as required to protect against further damages, the injured party may not institute proceedings
against the party in default until the time for cure, correction, or remedy of a default has expired.
The City Parties will provide written notice of any default of Participant under this Agreement to
any lender of Other Financing requesting notice and will recognize any cure of any default of
Participant tendered by any such lender with the same effect as if the same were tendered by
Participant.
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13.2 Remedies. In addition to any other rights or remedies available at law or in
equity, upon a default of Participant, a City Party may: (a) temporarily withhold disbursement of
NSP Loan proceeds, Participant Fees and any other funding under this Agreement pending
correction of the default by Participant; (b) refuse to advance all or any part of the NSP Loan,
Participant Fees and any other funding under this Agreement and reallocate said funds to another
activity; (c) wholly or partially suspend or terminate the award of the NSP Loan, Participant Fees
and any other funding under this Agreement; (d) wholly or partially suspend or terminate this
Agreement; (e) withhold further awards for the Homes; (f) require Participant to repay the NSP
Loan funds; (g) exercise its right to take over a Rehabilitation Project pursuant to Section 3.9;
and/or (h) institute legal action to cure, correct, or remedy any default, recover actual but not
consequential damages for any default (subject to the limitations in Section 3.3), or to obtain any
other remedy consistent with the purposes of this Agreement.
In addition to any other rights or remedies available at law or in equity, upon a default of
a City Party, Participant may: (a) wholly or partially suspend or terminate this Agreement as to
the City Party in default; and (b) institute legal action against the City Party in default to cure,
correct, or remedy any default, to recover actual but not consequential damages for any default,
or to obtain any other remedy consistent with the purposes of this Agreement. In the event
Participant exercises its remedy in clause (a) of the preceding sentence to terminate this
Agreement as to the City Party in default, subject to the following sentence, any Homes owned
by Participant at the time of default by Participant shall be conveyed to the City Party and all of
the terms and provisions of Section 5.13 shall be applicable. If, however, the City Parry does not
have sufficient NSP Funds to make the payments to Participant referred to in Section 5.13 and
Participant is not in default, Participant shall have the right to sell the Home to an Eligible
Homebuyer at the Resale Price instead of to the City Party and the Resale Price proceeds shall be
used first to pay Participant the payments required under Section 5.13 with any balance paid to
the City Party. If Participant terminates this Agreement, Participant's obligation to the City
Parry shall not end until all close-out requirements are completed. Activities during this close-
out period shall include, but are not limited to: making final payments, disposing of program
assets (including the return of all unused materials, equipment, unspent cash advances, program
income balances, and accounts receivable to Participant), and determining the custodianship of
records. Not withstanding the foregoing, the terms of this Agreement shall remain in effect
during any period that Participant has control over NSP Funds, including program income.
13.3 Limitation on Damages for Participant's Rehabilitation Default and Resale
Default. As to each Home, Participant's liability for damages to the City Party upon its default
for any failure to timely commence, proceed with, or complete the Rehabilitation Project for the
Home within the periods provided for in this Agreement (subject to force majeure extensions as
described in Section 3.4.2) (each a "Rehabilitation Default") shall not exceed an amount equal to
150% of the sum of the Rehabilitation Expenses for the Rehabilitation Project as set forth in the
Home Project Budget for the Home inclusive of all amounts attributable to change orders for the
Rehabilitation Project. As to each Home, in the event the Rehabilitation Project for the Home is
timely completed and Participant either (a) fails to exercise diligent efforts to sell the Home to an
Eligible Homebuyer or otherwise commits a default under Section 5.1 of this Agreement, or (b)
if Section 5.6 is applicable, fails to auction sale or cause the auction sale of the Home (each a
"Resale Default"), then Participant's liability for damages to the City Party for such Resale
Default shall not exceed an amount equal to 10% of the Resale Price of the Home; provided
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however, Participant acknowledges and agrees that each and any Resale Default is limited to a
default that arises out of the inaction of Participant (Le., failure to convey the Home to an
Eligible Homebuyer) and a Resale Default does not include Participant's affirmative actions (i.e.,
conveyance of the Home to a party that is not an Eligible Homebuyer) and a Resale Default does
not include any failure of Participant to convey the Home to the City Party if such conveyance is
required.
In addition to the per Home damages limitation for any Rehabilitation Default or any
Resale Default of this Section 13.3 (together, "Covered Defaults"), Participant's total liability for
damages to the City Parties for Covered Defaults shall not exceed the cumulative sum of Five
Hundred Thousand Dollars ($500,000). The foregoing $500,000 limitation is the cumulative
amount the City Parties may recover for damages for Covered Defaults under this Agreement
and does not apply to each City Party individually.
The damages limitations under this Section 13.3 do not include litigation expenses
referred to in Section 16.8 and do not apply to any other obligations or to defaults that are not
Covered Defaults, whether or not such other obligations or defaults are related to any Covered
Default. For example, if Participant fails to complete a Rehabilitation Project because of costs it
incurs in connection with a third party claim for personal injuries occurring in the Home,
Participant's liability to the City Party for costs incurred by the City Party to complete the
Rehabilitation Project would be subject to the damages limitations in this Section 13.3, but
Participant's obligation to indemnify the City Party against the third party claims would not be
subject to the damages limitations.
13.4 Inaction Not a Waiver of Default. Any failures or delays by any party in asserting
any of its rights and remedies as to any default shall not operate as a waiver of any default or of
any such rights or remedies, or deprive any such party of its right to institute and maintain any
actions or proceedings which it may deem necessary to protect, assert or enforce any such rights
or remedies.
13.5 Rights and Remedies are Cumulative. The rights and remedies of the parties are
cumulative, and the exercise by any party of one or more of such rights or remedies shall not
preclude the exercise by it, at the same or different times, of any other rights or remedies for the
same default or any other default by the other party.
13.6 No Cross Defaults. In no event shall a breach or default under this Agreement by
a City Party constitute a breach of or default under this Agreement of any other City Party and in
no event shall the City Parties be jointly or severally liable for the obligations of liabilities of one
another. In no event shall a breach or default under this Agreement by Participant as to a
particular City Party(ies) constitute a breach or default as to the other City Party(ies) to the extent
the default does not pertain to the other City Party(ies).
14. TERM; TERMINATION.
As between each City Party and Participant, the term of this Agreement shall continue
until the earlier of (a) the date the City Party no longer has sufficient NSP Funds for the
acquisition and rehabilitation of additional Homes under the NSP Program, or (b) the date the
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City Parry notifies Participant that the City Party is terminating this Agreement which may occur
prior to the event in clause (a). In connection with clause (b) of the preceding sentence,
Participant acknowledges that a City Party may at any time, for any reason, with or without
cause, suspend or terminate this Agreement or any portion hereof as it relates to that City Party
and Participant, by serving written notice upon Participant. Upon receipt of said notice,
Participant shall immediately cease all work under this Agreement as it relates to the City Party
providing the notice, unless the notice provides otherwise. In the event this Agreement is
suspended or terminated pursuant to this Section 14 and the reason for the termination is an
uncured default by Participant, the affected City Party shall be entitled to receive a return of the
Participant Fees paid to Participant, or portion thereof, that relates to the services for which
Participant is in default. In the event this Agreement is terminated and Participant is not in
default, subject to Section 15, Participant shall be entitled to a reimbursement of Project
Expenses incurred prior to the date of termination in accordance with the terms of this
Agreement and for the Participant Fees that would have been payable as of the date of
termination if this Agreement had not terminated. Notwithstanding any other provision of this
Agreement to the contrary, a City Party's termination of this Agreement shall not preclude or
prejudice any other remedy to which the City Party may be entitled in law or in equity.
Upon the termination of this Agreement by a City Party, the terminating City Party shall
notify the other City Parties of the termination. The termination of this Agreement by a City
Party shall not affect the terms of this Agreement (a) as they relate to the other City Parties and
Participant, or (b) as they relate to the terminating City Party and the other City Parties.
If, at the time this Agreement is terminated, Participant holds title to a Home within the
terminating City Party's jurisdiction, the City Party may elect, in addition to any other remedies
of the City Party hereunder, to either acquire the Home from Participant (in which case the
transfer of the Home shall be in accordance with the terms and provisions of Section 5.13) or
require that Participant continue to perform its obligations under this Agreement as to the Home
(i.e., complete rehabilitation and sell the Home to an Eligible Homebuyer), in which case this
Agreement shall survive for that purpose.
In addition to the foregoing, if for any reason, the NSP Funds required by a City Party to
fund the Project Expenses are not received by the City Party or are withdrawn from the City
Party, the City Party may unilaterally terminate or modify the terms of this Agreement to reflect
the loss of funding; provided, however, such a modification or termination by a City Parry shall
not affect the terms of this Agreement as they relate to any other City Party and Participant. If a
reduction in funding is required, the affected City Party will provide Participant with modified
Home Project Budget(s), as needed. Notwithstanding the foregoing, Participant will be
reimbursed for Project Expenses incurred, and Participant Fees required to be paid under this
Agreement, as of the date the reduction in funding is made.
15. ENVIRONMENTAL CLEARANCE.
Participant expressly acknowledges and agrees that notwithstanding any other provision
in this Agreement to the contrary, Participant shall not receive any funds from any City Party
under this Agreement, including without limitation, any NSP Loan funds, reimbursement for
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Project Costs, or Participant Fees, to the extent incurred prior to the Environmental Completion
Date for the applicable Home.
16. GENERAL PROVISIONS.
16.1 Notices. All notices required to be delivered under this Agreement to a City Party
or Participant shall be delivered to the respective parties at the address and to the person set forth
next to the party's signature to this Agreement or to such other person or address as the parties
may hereafter designate by written notice to the other parties.
16.2 Nonliability of City Officials and Employ. No member, officer, elected or
appointed official, employee, agent, or representative of any City Party shall be personally liable
to Participant or any other City Party in the event of any default or breach by the City Party or
for any amount which may become due or on any obligations under this Agreement.
16.3 Contract Administration. Each City Party shall maintain authority of this
Agreement and the authority to administer, oversee, and implement this Agreement through its
Contract Officer. The Contract Officer shall have the authority to make approvals, issue
interpretations, execute documents, waive provisions, and/or enter into amendments of this
Agreement or agreements necessary to implement this Agreement on behalf of its City Party so
long as such actions do not add to the costs incurred or to be incurred by the City Parry as
specified herein. Notwithstanding the foregoing, the Contract Officer may take any decision to
be made under this Agreement or proposed modification of this Agreement to its City Council
for approval.
16.4 Time of the Essence. Time is of the essence in the performance of this
Agreement.
16.5 Entire Agreement, Waivers and Amendments. This Agreement and its exhibits
and the City Agreement contain the entire agreement among the parties relating to the subject
matter hereof, and supersedes all negotiations and previous agreements between the parties with
respect to the subject matter hereof. All waivers of the provisions of this Agreement must be in
writing and signed by the appropriate authorities of the party to be charged. Any amendment or
modification to this Agreement must be in writing and executed by the affected City Party(ies)
and Participant.
16.6 Applicable Law; Venue. The internal laws of the State of California shall govern
the interpretation and enforcement of this Agreement without regard to conflict of interest
principles. All legal actions must be instituted and maintained in the Superior Court of the
County of Orange, State of California, or in any other appropriate court in that County.
16.7 No Discrimination. Participant covenants that, by and for itself, its heirs,
executors, assigns, and all persons claiming under or through them, that in the performance of
this Agreement there shall be no discrimination against or segregation of, any person or group of
persons on account of any impermissible classification including, but not limited to, race, color,
creed, religion, sex, marital status, sexual orientation, national origin, or ancestry.
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16.8 Litigation Expenses. If any party to this Agreement is required to initiate or
defend litigation in any way connected with this Agreement, the prevailing party in such
litigation, in addition to any other relief which may be granted, whether legal or equitable, shall
be entitled to reasonable attorneys' fees from the losing party. Attorneys' fees shall include
attorney's fees on any appeal, and a party entitled to attorneys' fees shall be entitled to all other
reasonable costs for investigating such action, retaining expert witnesses, taking depositions and
discovery, and all other necessary costs incurred with respect to such litigation.
16.9 Severability. If any term, provision, covenant, or condition of this Agreement is
held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of
this Agreement shall not be affected thereby to the extent such remaining provisions are not
rendered impractical to perform taking into consideration the purposes of this Agreement.
16.10 Monitoring. The City Parties shall have the right to monitor and evaluate
Participant's performance under this Agreement to determine compliance with this Agreement
and the NSP Requirements. Participant shall cooperate with the City Parties and shall make
available to the City Parties all information, documents, and records reasonably requested by the
City Parties and shall provide the City Parties the reasonable right of access to the Homes for
purposes of this Agreement and evaluating Participant's performance hereunder.
16.11 Condition to Release of Funds. Notwithstanding any provision of this
Agreement, the City Parties and Participant agree and acknowledge that this Agreement does not
constitute a commitment of federal funds, and that such commitment of funds may occur only
upon satisfactory completion of environmental review and receipt by the City Parties, as
applicable, of a release of funds from HCD or HUD, as applicable. The City Parties and
Participant are further prohibited from undertaking or committing any federal funds to physical
or choice -limiting actions, including property acquisition, demolition, movement, rehabilitation,
conversion, repair or construction prior to the environmental clearance; City Parties and
Participant understand that the violation of this provision may result in the denial of any federal
funds under this Agreement.
16.12 Binding on Heirs. This Agreement shall be binding upon the parties hereto and
their respective heirs, representatives, transferees, successors, and assigns.
16.13 Covenants Run with the Land. Upon Participant's acquisition of each Home, the
Home shall be held, sold, conveyed, hypothecated, encumbered, used, occupied and improved
subject to the covenants, conditions, and restrictions set forth herein. The covenants, conditions,
restrictions, reservations, equitable servitudes, liens and charges set forth in this Agreement shall
run with the Homes and shall be binding upon Participant and all persons having any right, title
or interest in the Homes, or any part thereof, their heirs, and successive owners and assigns, shall
inure to the benefit of the City Party and its successors and assigns, and may be enforced by the
City Party and its successors and assigns. The covenants established in this Agreement shall,
without regard to technical classification and designation, be binding for the benefit and in favor
of the City Party and its successors and assigns, and the parties hereto expressly agree that this
Agreement and the covenants herein shall run in favor of the City Party, without regard to
whether the City Party is or remains an owner of any land or interest therein to which such
covenants relate. However, all such covenants and restrictions shall be deemed to run in favor of
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all real property owned by the City Parry which real property shall be deemed the benefited
property of such covenants and this Agreement shall create equitable servitudes and covenants
appurtenant to all real property owned by the City Party and running with the Home in
accordance with the provisions of Civil Code Section 1468. Furthermore, all of the covenants,
conditions, and restrictions contained herein shall also constitute easements in gross running in
favor of the City Party. The City Party is deemed the beneficiary of the terms and provisions of
this Agreement and of the covenants running with the land, for and in its own right and for the
purposes of protecting the interests of the community and other parties, public or private, in
whose favor and for whose benefit this Agreement and the covenants running with the land have
been provided. Participant hereby declares its understanding and intent that the burden of the
covenants set forth herein touch and concern the land and that the Participant's interest in the
Home is rendered less valuable thereby. Participant hereby further declares its understanding
and intent that the benefit of such covenants touch and concern the land by enhancing and
increasing the enjoyment and use of the Home by the residents of the City Party and by
furthering the health, safety, and welfare of the residents of the City Party. In connection with
the foregoing, a Memorandum shall be recorded against each Home upon the Acquisition
Closing Date for the Home. The Memorandum shall be removed as an encumbrance upon title
to the Home upon the sale of the Home to the Eligible Homebuyer in accordance with this
Agreement and the payment of the Resale Price proceeds to the City Party pursuant to Section
5.5.1.
16.14 Further Assurances. The City Parties and Participant to execute and deliver to the
other party(ies), upon demand, such further documents, instruments and conveyances, and shall
take such further actions as are necessary or desirable to effectuate this Agreement.
16.15 Execution in Counterparts. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement binding on all parties hereto,
notwithstanding that all parties are not signatories to the original or the same counterpart.
16.16 Exhibits. This Agreement incorporates by reference the following eight (8)
Exhibits attached hereto:
Exhibit A
Additional Legal Requirements
Exhibit B
NSP Rehabilitation Guidelines
Exhibit C
Insurance Requirements
Exhibit D
Truth in Lending Statement
Exhibit E
Promissory Note Secured by Deed of Trust
Exhibit F
Deed of Trust
Exhibit G
Memorandum
Exhibit H
Seller's Occupancy Certification Under the Protecting Tenants at
Foreclosure Act
[signatures on next page]
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IN WITNESS WHEREOF, City Fullerton, City CM, City LH and Participant have
entered into this Agreement to be effective as of the date set forth above.
Address:
City of Fullerton
303 W. Commonwealth Ave.
Fullerton, CA 92832
Attn: Housing Programs Supervisor
ATTEST:
City Clerk
APPROVED AS TO FORM:
RUTAN & TUCKER, LLP
Special Counsel
Address:
City of Costa Mesa
77 Fair Drive
Costa Mesa, CA 92628-1200
Attn: Neighborhood Improvement Manager
ATTEST:
City Clerk
APPROVED AS TO FORM:
STRADLING YOCCA CARLSON & RAUTH
Special Counsel
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"CITY FULLERTON"
CITY OF FULLERTON, a California
municipal corporation
an
Its:
"CITY CM"
CITY OF COSTA MESA, a California
municipal corporation
51
Its:
Address:
City of La Habra
201 E. La Habra Ave.
La Habra, CA 90631
Attn: Housing Specialist
ATTEST:
City Clerk
APPROVED AS TO FORM:
City Attorney
Address:
MHC NSP, LLC
1500 South Grand Ave., Ste. 100
Los Angeles, CA 90015
Attn: Ben Phillips, Vice President
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"CITY LH"
CITY OF LA HABRA, a California
municipal corporation
Its:
"PARTICIPANT"
MHC NSP LLC,
a California limited liability company
By: Mercy Housing California,
a California nonprofit public benefit
corporation
Its: Sole Member
By:
Its:
By:
Its:
EXHIBIT "A"
ADDITIONAL LEGAL REQUIREMENTS
In addition to the requirements set forth in other provisions of the Agreement, Participant
shall comply with the following regulations and requirements insofar as they are applicable to
the performance of the Agreement.'
1. Equal Opportunity and Nondiscrimination.
a. Participant shall comply with Title VI of the Civil Rights Act of 1964, as
amended, which provides in part that no person shall, on the grounds of race, color, or national
origin be excluded from participation in, be denied the benefits of, or be subjected to
discrimination under any program or activity receiving federal financial assistance.
b. Participant shall comply with Section 104 (B) and Section 109 of Title I of
the Housing and Community Development Act of 1974, as amended, which provides in part that
no person shall on the grounds of race, color, or national origin, or sex be excluded from
participation in, be denied the benefits of, or be subjected to discrimination under any program or
activity receiving funds under this Title.
C. Participant shall comply with Executive Order 11246, as amended by
Executive Orders 11375 and 12086, and all rules and regulations pursuant thereto, which among
other things prohibits discrimination on the grounds of race, creed, color, sex or national origin
in employment under federally assisted contracts.
d. Participant shall comply with Executive Order 11063, as amended by
Executive Order 12259, which requires equal opportunity in housing and related facilities.
e. Participant shall comply with Section 504 of the Rehabilitation Act of
1973, and implementing regulations, which provides in part that handicapped individuals may
not be excluded from participation in, be denied the benefits of or be subjected to discrimination
under any program or activity receiving federal financial assistance.
f. EEO/AA Statement. Participant shall, in all solicitations or
advertisements for employees placed by or on behalf of Participant, state that it is an Equal
Opportunity or Affirmative Action Employer.
g. Minority/Women Business Enterprise. To the extent permitted by law,
Participant will use its best efforts to afford minority and women -owned business enterprises the
maximum practicable opportunity to participate in the performance of the Agreement. As used in
the Agreement, the term "minority and female business enterprise" means a business at least
fifty-one percent (51 %) owned and controlled by minority group members or women. For the
' This exhibit is a list and summary of certain legal requirements and shall not be construed
as a complete list of all Participant requirements. In the event of any conflict between this
summary and the requirements imposed by applicable laws, regulations, and requirements, the
applicable laws, regulations, and requirements shall apply.
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purpose of this definition, "minority group members" are Afro-Americans, Spanish-speaking,
Spanish surname or Spanish -heritage Americans, Asian -Americans, and American Indians.
Participant may rely on written representations by businesses regarding their status as minority
and female business enterprises in lieu of an independent investigation.
h. Participant shall comply with Section 3 of the Housing and Community
Development Act of 1968.
i. Participant shall comply with Title VIII of the Civil Rights Act of 1968 as
amended, the Americans with Disabilities Act of 1990, and the Age Discrimination Act of 1975.
j. Participant shall comply with the non-discrimination in employment and
contracting opportunities laws, regulations, and executive orders referenced in 2 CFR 570.607,
as revised by Executive Order 13279. Participant shall not discriminate against any employee or
applicant for employment because of race, color, creed, religion, ancestry, national origin, sex,
disability or other handicap, age, marital status, or status with regard to public assistance.
Participant shall take affirmative action to insure that all employment practices are free from
such discrimination. Such employment practices include but are not limited to the following:
hiring, upgrading, demotion, transfer, recruitment or recruitment advertising, layoff, termination,
rates of pay or other forms of compensation and selection for training, including apprenticeship.
Participant shall post in conspicuous places, available to employees and applicants for
employment, notices to be provided by the City Party setting forth the provisions of this
nondiscrimination clause.
2. Uniform Administrative Requirements. Participant shall comply with the uniform
administrative requirements described in 24 C.F.R. § 570.502.
3. Other Program Requirements. Participant shall carry out each activity under the
Agreement in accordance with all applicable federal laws and regulations described in Subpart K
of 24 C.F.R. § 570 except for a City Parry's environmental responsibilities under 24 C.F.R.
§ 570.604 and a City Party's responsibility for initiating the review process under the provisions
of 24 C.F.R. Part 52.
4. Religious Organizations. If Participant is a religious organization as defined by
the NSP Requirements, Participant shall comply with all conditions prescribed by HUD for the
use of NSP funds by religious organizations, including the First Amendment of the United States
Constitution regarding church/state principles and the applicable constitutional prohibitions set
forth in 24 C.F.R. § 2000). Participant agrees that funds provided under the Agreement will not
be utilized for inherently religious activities prohibited by 24 CFR 570.200(J), such as worship,
religious instruction or proselytization.
5. Reversion of Assets. Upon the expiration or sooner termination of the Agreement,
Participant shall transfer to the City Party (a) any and all NSP Funds and program income on
hand, and (b) any accounts receivable attributable to the use of NSP Funds or program income.
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6. Environmental.
a. Limitation on Activities Pending Clearance. In accordance with 24 C.F.R.
§ 58.22 entitled "Limitations on activities pending clearance," neither a recipient nor any
participant in the development process, including public or private nonprofit or for -profit entities,
or any of their contractors, may commit HUD assistance under a program listed in 24 C.F.R.
§ 58.l(b) on an activity or project until HUD or the state has approved the recipient's Request for
Release of Funds (RROF) and the related certifications have been approved. Neither a recipient
nor any participant in the development process may commit non -HUD funds or undertake an
activity or project that would have an adverse environmental impact or limit the choice of
reasonable alternatives. Upon completion of environmental review or receipt of environmental
clearance, the City Party shall issue a Notice to Proceed signifying the environmental
requirements under this section have been met. HUD funds shall not be utilized until the City
Party has issued a Notice to Proceed. The environmental review or violation of the provisions
may result in approval, modification of cancellation of the NSP Loans. If a project or activity is
exempt under 24 C.F.R. § 58.34, or is categorically excluded (except in extraordinary
circumstances) under 24 C.F.R. § 58.35(b), no RROF is required and the recipient may
undertake the activity immediately after the City Party has documented its determination that
each activity or project is exempt and meets the conditions specified for such exemption under
this section by issuing a Notice to Proceed.
b. Air and Water. Participant shall comply with the following regulations
insofar as they apply to the performance of the Agreement: Clean Air Act, 42 U.S.C. 7401,
et seq., Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251, et seq., as amended,
1318 relating to inspection, monitoring, entry, reports, and information, as well as other
requirements specified in said Section 114 and Section 308, and all regulations and guidelines
issued thereunder; and the U.S. Environmental Protection Agency regulations pursuant to
40 C.F.R. Part 50, as amended.
C. Flood Disaster Protection. In accordance with the requirements of the
Flood Disaster Protection Act of 1973 (42 U.S.C. § 4001), Participant shall assure that for
activities located in an area identified by FEMA as having special flood hazards, flood insurance
under the National Flood Insurance Program is obtained and maintained as a condition of
financial assistance for acquisition or construction purposes (including rehabilitation).
d. Lead -Based Paint. Participant shall comply with the LBP Regulations
referenced in 24 C.F.R. § 570.608, including 24 C.F.R. Part 35, et seq.
e. Historic Preservation. Participant shall comply with the historic
preservation requirements set forth in the National Historic Preservation Act of 1966, as
amended (16 U.S.C. § 470) and the procedures set forth in 36 C.F.R. Part 800, Advisory Council
on Historic Preservation Procedures for Protection of Historic Properties, insofar as they apply to
the performance of this Agreement. In general, this requires concurrence from the State Historic
Preservation Officer for all rehabilitation and demolition of historic properties that are fifty years
old or older or that are included on a federal, state, or local historic property list.
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7. Conflict of Interest. Participant will comply with the provisions of the applicable
HUD requirements of 24 C.F.R. § 570.611 regarding the avoidance of conflict of interest.
8. Labor Standards. When applicable, Participant shall comply with the provisions
of 24 C.F.R. § 570.603 and related requirements and shall include in all applicable construction
contracts the provisions of federal law imposing labor standards on federally assisted contracts.
9. Records and Reports. Participant shall provide to the City Parties all records and
reports relating to the activities under the Agreement that may be reasonably requested by the
City Parties in order to enable them to perform their record keeping and reporting obligations
pursuant to the NSP Requirements.
10. Federal Procurement. Participant shall procure all construction contracts for
rehabilitation activities in compliance with federal procurement regulations (24 CFR, part 85.36).
Participant shall document and provide to the City Parry evidence of proper federal procurement
processes. Such documentation shall include without limitation copies of bidding documents
containing all required clauses and provisions, contracts containing all required clauses and
provisions, detailed inspection and progress reports, and adequate accounting of progress payments.
11. Construction Documents. Bidding documents and construction contracts for
rehabilitation activities must include all legally required contract clauses and provisions.
12. Section 3. Participant shall comply with and cause its contractors to comply with
the requirements of Section 3 of the Housing and Urban Development Act of 1968 (12 U.S.C.
§ 1701u), the HUD regulations issued pursuant thereto at 24 C.F.R, Part 135, and any applicable
rules and orders of HUD issued thereunder. The Section 3 clause, set forth in 24 C.F.R § 135.38
provides:
i. The work to be performed under this contract is subject to the
requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended,
12 U.S.C. § 170lu (Section 3). The purpose of Section 3 is to ensure that employment and other
economic opportunities generated by HUD assistance or HUD -assisted projects covered by
Section 3, shall, to the greatest extent feasible, be directed to low- and very low-income persons,
particularly persons who are recipients of HUD assistance for housing.
ii. The parties to this contract agree to comply with HUD's
regulations in 24 C.F.R. Part 135, which implement Section 3. As evidenced by their execution
of this contract, the parties to this contract certify that they are under no contractual or other
impediment that would prevent them from complying with the Part 135 regulations.
iii. The contractor agrees to send to each labor organization or
representative of workers with which the contractor has a collective bargaining agreement or
other understanding if any, a notice advising the labor organization or workers' representative of
the contractor's commitments under this Section 3 clause, and will post copies of the notice in
conspicuous places at the work site where both employees and applicants for training and
employment positions can see the notice. The notice shall describe the Section 3 preference,
shall set forth minimum number and job titles subject to hire, availability of apprenticeship and
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training positions, the qualifications for each; and the name and location of the person(s) taking
applications for each of the positions; and the anticipated date the work shall begin.
iv. The contractor agrees to include this Section 3 clause in every
subcontract subject to compliance with regulations in 24 C.F.R. Part 135, and agrees to take
appropriate action, as provided in an applicable provision of the subcontract or in this Section 3
clause, upon a finding that the subcontractor is in violation of the regulations in 24 C.F.R.
Part 135. The contractor will not subcontract with any subcontractor where the contractor has
notice or knowledge that the subcontractor has been found in violation of the regulations in
24 C.F.R. Part 135.
V. The contractor will certify that any vacant employment positions,
including training positions, that are filled (1) after the contractor is selected but before the
contract is executed, and (2) with persons other than those to whom the regulations of 24 C.F.R.
Part 135 require employment opportunities to be directed, were not filled to circumvent the
contractor's obligations under 24 C.F.R. Part 135.
vi. Noncompliance with HUD's regulations in 24 C.F.R Part 135 may
result in sanctions, termination of this contract for default, and debarment or suspension from
future HUD assisted contracts.
Participant shall abide by the Section 3 clause set forth above and will also cause this
Section 3 clause to be inserted in all contracts entered into with third parties for the rehabilitation
of the Homes.
13. Anti -Lobbying Certification. By its execution of the Agreement, Participant
hereby certifies that:
i. No Federal appropriated funds have been paid or will be paid, by
or on behalf of it, to any person for influencing or attempting to influence an officer or employee
of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress in connection with the awarding of any Federal contract, the making of any
Federal grant, the making of any Federal loan, the entering into of any cooperative agreement,
and the extension, continuation, renewal, amendment, or modification of any Federal contract,
grant, loan, or cooperative agreement.
ii. If any funds other than Federal appropriated funds have been paid
or will be paid to any person for influencing or attempting to influence an officer or employee of
any agency, a Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress in connection with this Federal contract, grant, loan, or cooperative
agreement, it will complete and submit Standard Form-LLL, "Disclosure Form to Report
Lobbying," in accordance with its instructions.
iii. It will require that the language of this certification be included in
the award documents for all subawards at all tiers (including subcontracts, subgrants, and
contracts under grants, loans, and cooperative agreements) and that all subrecipients shall certify
and disclose accordingly.
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This certification is a material representation of fact upon which reliance was placed
when this transaction was made or entered into. This certification is a prerequisite for making or
entering into this transaction imposed by section 1352, title 31, U.S.C. Any person who fails to
file the required certification shall be subject to a civil penalty of not less than $10,000 and not
more than $100,000 for each such failure.
At the request of any City Party, Participant shall execute a separate document that
contains the certifications set forth above.
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EXHIBIT "B"
NSP REHABILITATION GUIDELINES
NEIGHBORHOOD STABILIZATION PROGRAM (NSP)
SINGLE-FAMILY REHABILITATION PROGRAM
POLICIES AND PROCEDURES
I. PROGRAM DESCRIPTION
The Cities of Costa Mesa, Fullerton, and La Habra ("City"), as an approved recipient of
Neighborhood Stabilization Program (NSP) funds by the State of California Department of Housing
and Community Development (HCD), and MHC NSP LLC, a California limited liability company
("Participant"), have entered into that certain Neighborhood Stabilization Program Subrecipient
Contract Services and Loan Agreement dated November 10, 2009 ("NSP Agreement"), establishing
a Single Family Rehabilitation Program ("Program"). All terms not otherwise defined herein shall
have the meaning ascribed in the NSP Agreement. In the event of any conflict between the provisions
of the NSP Agreement and these Policies and Procedures, the NSP Agreement shall control.
The primary objectives of the Program are to correct nonconforming uses, remedy code violations,
and generally repair and improve deteriorating properties in an effort to provide decent housing and a
suitable living environment for persons and families of low-, moderate, and middle -income (LMMI).
The subject properties must meet Program eligibility criteria, including without limitation financial
feasibility evaluation relating to implementation of the Residential Lead -Based Paint Hazard
Reduction Act of 1992 at 19 U.S.C. 4852d and the implementing regulations at 24 CFR Part 35
("LBP Regs").
II. NOTIFICATION OF AND EVALUATION FOR LBP AND LBP HAZARDS
A. LBP Evaluation of Subiect Property. Assuming receipt of a complete project
proposal from Participant for a property and the City's approval of a Preliminary Loan Package for
the property, the City, as a part of this Program, will cause to be conducted and pay for a LBP
evaluation of the subject property in accordance with the LBP Regs.
1. Evaluation. LBP evaluation shall be conducted by a qualified inspector
under contract with the Participant in conformity with the LBP Regs. The LBP requirements for
rehabilitation work under Subpart J of the LBP Regs differ based on the level of funding provided for
the rehabilitation of the subject property. Assessment for LBP for a proposed federally funded
rehabilitation project will include: (1) visual inspection on all properties constructed prior to 1978 to
identify defective paint surfaces; (2) for rehabilitation costs estimated at $5000 or less, the painted
surfaces that will be disturbed during rehabilitation must be tested for LBP, unless a surface is
assumed to contain LBP; (3) for rehabilitation costs estimated between $5000 to $25,000, the
housing unit requires LBP hazard evaluation, including: (i) paint testing: for surfaces to be disturbed
by the rehabilitation for LBP; and (ii) risk assessment: an assessment of a dwelling to check for the
presence of LBP hazards, including visual assessment of dust, soil, and paint with a written report of
the results, or (iii) assumption of presence of LBP and/or LBP hazards and directly proceeding with
standard treatment of LBP and LBP hazards; and (4) for rehabilitation costs estimated to exceed
$25,000, the housing unit requires a higher level of LBP hazard evaluation, including: (i) paint
testing: for surfaces to be disturbed by the rehabilitation for LBP, and (ii) risk assessment of dwelling
to check for the presence of LBP hazards, including visual assessment of dust, soil, and paint with a
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written report of the results, or (iii) assumption of presence of LBP and/or LBP hazards and directly
proceeding with full abatement of all painted surfaces disturbed during rehabilitation that are
presumed to have LBP and all presumed LBP hazards.
(a) The results of the LBP evaluation and estimated costs of standard
treatment options and/or abatement through clearance will be a part of the evaluation caused to be
conducted by the City to the subject property and said results will be a factor in the assessment by the
City staff of financial feasibility of funding the treatment through clearance of the LBP and LBP
hazards from the property and proceeding with all other rehabilitation improvements under the
Program.
(b) Participant will be provided any required HUD approved disclosure
form(s) relating to the results of the evaluation.
B. Discretion to Proceed with LBP Treatment and/or Rehabilitation Expressly
Reserved to City. The City expressly reserves all reasonable discretion to review the results of the
LBP evaluation and recommended course of treatment (by paint repair, LBP hazard reduction, and/or
abatement through clearance) and decide whether the cost of treatment through clearance, using safe
work practices, of LBP and/or LBP hazards from the subject property in conjunction with the costs of
the rehabilitation improvements requested by Participant are financially feasible for Program
funding.
If, prior to Final Loan Package approval for a property, the City in the exercise of its sole
discretion determines the costs of treatment through clearance using safe work practices of LBP and
LBP hazards plus the costs of the requested rehabilitation improvements to the property are not
financially feasible, then the Participant will be denied and no other loan or grant will be available or
provided to the property under the Program. If the City in the exercise of its sole discretion
determines the costs of treatment through clearance using safe work practices of LBP and LBP
hazards plus the costs of the requested rehabilitation improvements are financially feasible, then the
rehabilitation will be further considered in accordance with the terms set forth in the NSP
Agreement.
III. TREATMENT THROUGH CLEARANCE OF LBP AND LBP HAZARDS
A. Election to Proceed with Treatment through Clearance. Pursuant to the
discretion reserved to the City, as set forth in Section II above, the results of the evaluation of the
subject property for LBP and LBP hazards and estimated costs of treatment through clearance of
LBP and LBP hazards from the subject property will be reviewed by City staff and a determination
made whether to proceed with treatment through clearance and with the rehabilitation improvements.
B. Property Eligibility for Rehabilitation Improvements. Real property will be
evaluated and must meet each of the minimum requirements set forth below to be considered eligible
property.
1. Location. All assisted properties must be located in the City of Costa Mesa,
Fullerton, or La Habra and must meet all other eligibility requirements in the NSP Agreement.
2. LBP Evaluation. A LBP evaluation in conformity with the LBP Regs shall
have been conducted on the subject property.
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3. LBP Treatment Throuzh Clearance, Using Safe Work Practice. As set
forth in Section II above and this Section III, if after the LBP evaluation it has been determined by
the City, through its staff and agents, that there are no LBP hazards or LBP that require treatment
through clearance, using safe work practices, or that LBP hazards exist at the subject property and it
is financially feasible to cause LBP treatment through clearance, using safe work practices, of the
subject property, then provided the property is approved for inclusion in the NSP Program, the City
will provide a loan for the treatment through clearance, using safe work practices, in accordance with
and subject to all of the terms set forth in the NSP Agreement. All LBP treatment through clearance,
using safe work practices, shall be conducted in conformity with the applicable LBP Regs and shall
be completed prior to commencement of any eligible rehabilitation improvements that are a part of
the Work Write -Up for the subject property.
(a) Treatment.
(i) For rehabilitation work to the subject property of less than
$5,000, LBP treatment option is paint repair by repair of surfaces that are to be disturbed by
rehabilitation in a safe manner.
(ii) For rehabilitation work to the subject property between
$5,000 and $25,000, LBP treatment option is lead hazard reduction work. Any LBP or LBP hazards
found during the risk assessment must be controlled using interim controls or abatement methods.
Standard treatments must be performed when no evaluation is conducted and the presence of LBP
hazards is assumed.
(iii) For rehabilitation work to the subject property in excess of
$25,000, LBP treatment option is abatement. Any LBP hazards or LBP found in units and any
common areas, as applicable, must be controlled using full abatement methods. LBP hazards on
exterior surfaces that are not disturbed during rehabilitation must be controlled using either interim
controls or abatement.
(b) Safe Work Practices. Rehabilitation work that disturbs surfaces
known or assumed to contain LBP or LBP hazards must be performed using safe work practices.
(i) Safe work practices are not required for work that disturbs
surfaces below the de minimis levels set forth in the LBP Regs.
(ii) The LBP Regs include a list of prohibited methods of
treatment and exclusions from safe work practices.
(iii) The LBP Regs include additional safety precautions for
occupant protection, worksite preparation, and cleanup activities.
(c) Clearance. Once LBP hazard and LBP treatment work is complete
using safe work practices, a clearance examination must be performed by a certified professional to
ensure that not LBP or LBP hazards remain.
(i) Clearance is required for all categories of rehabilitation
activities.
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(1) For rehabilitation assistance less than $5000,
clearance is required only for the worksite.
(2) For rehabilitation assistance greater than $5000,
clearance is required for the housing unit, common areas, if any, and exterior areas where
rehabilitation work occurred.
(ii) Clearance involves a visual assessment and dust testing after
cleanup of treatment activities is complete. A clearance report must be prepared by a certified
professional.
(iii) If abatement is the treatment method conducted, an abatement
report is required in place of a clearance report prepared by a certified professional.
4. Condition. The property must be in need of repairs to (i) correct existing
nonconforming development standards, (ii) correct existing nonconforming local and/or state code
requirements, (iii) correct existing local and/or state code violations, (iv) protect the structural
integrity of the property, (v) promote neighborhood safety, (vi) improve energy efficiency,
(vii) refurbish exterior and/or interior improvements, or (viii) aid the mobility of the physically
disabled and/or elderly. All eligible repairs must meet the Building and Property Rehabilitation
Standards adopted by the City and available for review and/or copying at the Housing Rehabilitation
offices in City Hall. After LBP notice, evaluation, treatment through clearance, using safe work
practices pursuant to the LBP Regs and these Program Policies and Procedures, as applicable,
Program funds must first be expended to correct such code violations with the balance available to
finance exterior improvements approved as part of the Rehabilitation Project, in such amounts as
approved in the Home Project Budget.
C. Eligible Improvements. In addition to LBP evaluation and treatment through and
clearance, if such occur, eligible improvements to the property shall include only those physically
attached to the property and be permanent in nature. All rehabilitation work must be completed by
pre -approved, licensed, and insured contractors selected in accordance with Program procedures and
the attached Construction Standards.
1. Subject to the requirements set forth in the NSP Agreement concerning the
permissible expenditure of Program funds, improvements eligible to be considered for inclusion in
the Rehabilitation Project include, but are not limited to, the following:
(a) LBP hazards and LBP and the evaluation and treatment through
clearance, using safe work practices, thereof pursuant to applicable LBP Regs.
(b) Correction of existing or incipient health and safety code violations.
(c) Repairs, restoration or replacement of building components and
mechanical structural systems, such as heating systems, plumbing systems, septic tanks, electrical
wiring and service, and built-in residential appliances.
(d) Structural and foundation repairs and qualified building additions or
alterations to increase the health, safety, and livability of existing structures, such as porches,
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stairways, closets, cabinets, bathrooms, kitchens and entrances. Garage requirements will have to
meet the individual cities' requirements and will be reviewed on a case by case basis.
(e) Exterior work to help preserve or protect structures, such as painting,
roofing, siding, and property enhancements, such as landscaping, sidewalks, and fences. Defensible
fencing improvements may be required as a condition of loan approval.
(f) Interior work to make a structure more livable, such as painting,
plastering, new flooring, and tile work.
(g) Fumigation and treatment of termites and pest control.
(h) Energy and water conservation improvements and devises such as
tankless water heaters, insulation, window caulking and energy efficiency appliances.
(i) Access improvements, special safety features, and, any modifications
or additions to aid the physically disabled and the elderly.
0) Limited landscaping work, including the construction of walls and
fences and walkways and drives, but only when related to other rehabilitation work and in
accordance with defensible fencing concepts. Landscape work must include the installation of an
automatic irrigation system.
(k) Room additions may be allowed on a case by case basis only when
deemed necessary to increase marketability. Approval from City staff must be received before
acquisition. -
Ineligible improvements include, without limitation, improvements that are
(i) cosmetic in nature and/or accessory use improvements, including, but not limited to, greenhouses;
barbecue pits and outdoor fireplaces; bathhouses, swimming pools, saunas and hot tubs; valances,
cornice boards and drapes and indoor or outdoor home furnishings, unless City and Participant
determined that such improvements are required to increase the marketability of the home at resale;
and (ii) any improvements not approved by the Housing Rehabilitation staff and not included in the
Scope of Work developed in accordance with the NSP Agreement.
D. Eligible Costs. Program proceeds may be used only for eligible costs which shall
include the following to the extent they constitute Project Expenses and are included in the approved
Home Project Budget for the Home:
1. The actual reasonable costs of LBP evaluation, treatment through clearance,
using safe work practices, as applicable, and the actual reasonable costs of the materials and services
necessary to complete the rehabilitation work approved by the Housing Rehabilitation staff as set
forth in the Work Write -Up.
2. Building permit, inspection, and other related fees necessary for the
completion of the approved LBP work and the rehabilitation work.
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E. Ineligible Costs. Specific costs not eligible for payment from Program assistance
include, but are not limited to, the following:
1. Work, improvements, or repairs undertaken by persons who are not properly
licensed and certified for LBP evaluation and/or LBP or LBP hazards treatment through clearance,
using safe work practices, pursuant to the LBP Regs.
2. Free-standing appliances other than stoves and energy saving appliances,
unless the need is justified, as determined by the Housing Rehabilitation staff.
3. Purchase, installation, or repair of home furnishings.
4. Compensation/reimbursement for ineligible improvements or any work not
within the Scope of Work or Change Orders approved in accordance with Program procedures.
7. Work performed by a contractor under a separate contract .
IV. TERMS AND CONDITIONS OF PROGRAM ASSISTANCE
A. Compliance with Program Policies and Procedures. Throughout the applicable
term of Program assistance, Program participants shall comply with all Program requirements and
procedures as set forth in these Policies and Procedures, and as required by the Housing
Rehabilitation staff, and as set forth in the NSP Agreement and related attachments.
V. PROGRAM PROCEDURES
A. Property Inspection/Work Write -Up. After Participant has identified an eligible
property, staff shall schedule an appointment with the Participant at the subject property to inspect
the premises, and to arrange for LBP evaluation as soon as reasonably practicable following the
Initial Approval of a property. Inspection may include any tests deemed necessary and appropriate
by the staff inspector, including, without limitation, LBP evaluation, treatment through clearance,
using safe work practices, pursuant to the LBP Regs. The Participant or Participant's designee must
accompany staff during the initial inspection. As a part of the initial inspection staff will document
existing code violations, incipient code violations, and other Participant requested improvements on a
Preliminary Work Write -Up. Failure by staff to identify any existing or incipient code violations
shall not in any way relieve the Participant of liability to correct such violations in accordance with
applicable state and/or local codes. Following the inspection, Participant will (i) itemize eligible and
ineligible improvements, (ii) prioritize eligible work and prepare a preliminary estimate of such work
to be completed, and (iii) assess whether the deficiencies can be corrected within the maximum
dollar limitation of the Program assistance.
B. After the LBP evaluation has been conducted, if such occurs, and after the evaluation
of the financial feasibility of completion of treatment through clearance, using safe work practices, of
LBP hazards and LBP, if any, a second meeting will be scheduled by staff with the Participant to
review and complete the final Work Write -Up. The Participant must sign the Work Write -Up and,
from the time that the Work Write Up is approved as part of the Final Loan Package, no changes or
additions to the Work Write -Up will be accepted, except as permitted in the City's sole discretion.
The Participant will be provided a copy of the final Work Write -Up with Bid Proposal describing the
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(i) scope of work, (ii) construction method, (iii) quantity of materials, and (iv) property location.
This form will be used during the contractor selection process.
C. Contractor Selection.
1. Preliminary Requirements. After LBP notice and LBP evaluation, if such
occurs, Participant shall be responsible for selecting a qualified general contractor in accordance with
applicable federal requirements and the procedures set forth herein. A minimum of three (3) bids
will be sent out. Qualified contractors, including all subcontractors performing work on the property,
for both the LBP treatment through clearance and for the rehabilitation improvements, must have a
current California state contractor's license and City business license and submit evidence of
workers' compensation insurance and general liability insurance in amounts deemed adequate by the
Housing Rehabilitation staff. The selected general contractor or the selected subcontractor(s)
completing the LBP treatment through clearance shall meet all certification and qualifications set
forth in the LBP Regs and California Administrative Code, Title 17, for certified LBP contractors.
The selected general contractor must add the City (of Costa Mesa, Fullerton, or La Habra, as
appropriate) as additional insured/loss payee under its general liability policy. The contractor(s) or
subcontractor(s) conducting the LBP treatment through clearance shall also meet all insurance and
indemnification requirements established by the City's risk manager for such work and substantially
in the form set forth in the Owner/Contractor agreement for the LBP and rehabilitation
improvements. No agreements, written or otherwise, with a contractor, or any other vendor, will be
binding for Program funding unless they are first approved by the Housing Rehabilitation staff.
If rehabilitation work involves a significant alteration of the existing structure(s),
Participant may be required under state and local codes to apply for and obtain approval from the
Building and Planning Division of the City (of Costa Mesa, Fullerton, or La Habra, as appropriate).
Such approval will require submittal of a preliminary site plan or drawing of the proposed
improvements to the property in order to determine compliance with applicable code requirements.
Upon approval of the proposed improvements by the Building and Planning Division, Participant
may proceed with contractor selection. However, for any rehabilitation work for which a building
permit or other permit is required under applicable state and/or local codes, the Participant is solely
responsible and obligated to obtain or cause to be obtained any and all permits and approvals
necessary to commence and undertake the work of rehabilitation prior to a contractor commencing
work and prior to disbursement of Program funds.
2. Bid Solicitation. Staff shall maintain a list of contractors interested in
bidding on rehabilitation work under the Program. Participant shall prepare and distribute an
invitation to bid to all such interested contractors and to any contractors identified by the property
owner (minimum three). The invitation to bid shall include the property address, Work Write -Up,
Bid Proposal form specifying a required contingency, and Contractor Information form, together
with the date and time of a mandatory job walk-through. Only those contractors attending the
mandatory job walk-through and submitting a completed Bid Proposal, including the specified
contingency, and Contractor Information form by the specified bid deadline shall be eligible.
Following the bid deadline, staff shall meet with the Participant to review the Bid Proposals and
Contractor Information forms. The selection of a Bid Proposal shall be as set forth in the NSP
Agreement.
The Bid Proposals shall be reviewed by the Housing Rehabilitation staff for
determination of cost reasonableness and compliance with Program requirements. Upon approval of
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the contractor documentation by the Housing Rehabilitation staff, the Participant and contractor may
sign the Construction Agreement. The Construction Agreement must be City -approved. The
requirements for selecting a bid hereunder shall be in addition to those set forth in the NSP
Agreement.
3. Scope of Work Limitation. Participant shall not contract independently with
the selected contractor to concurrently perform additional work on the property beyond the scope of
the final Work Write -Up until a Notice of Completion is issued by staff and acknowledged by the
Participant evidencing satisfactory completion of the improvements identified in the final Work
Write -Up and Construction Contract and final inspection has been obtained and approved for all
outstanding building or other permits for the work. Until such Notice of Completion is issued and
final inspection has been approved for the permits, Participant shall not contract independently with
any other contractor to undertake any other improvements or work on the property during the term
the selected contractor is doing work.
D. Contract Management and Disbursement of Program Funds.
1. Pre -Construction Conference. A pre -construction conference between the
Housing Rehabilitation staff, the Participant, and the contractor will be held after final bids are
received, but before work commences, will include terms of contract management and disbursement
of Program funds. Every item on the scope of work should be read and discussed to ensure that the
Participant and contractor each fully understand the scope of work and work schedule, inspection and
permit requirements, and City payment schedule, so that all parties will be aware of the time line and
order of progression to completion. The meeting will include, if necessary, discussion of pre- LBP
treatment through clearance and the use of safe work practices. Work shall not commence until the
Housing Rehabilitation staff has issued a Notice to Proceed.
2. Change Order Procedures. Change orders are discouraged and will be
reviewed carefully by the Housing Rehabilitation staff. Change orders will be considered for
approval only where required by job conditions or as reasonably requested by the Participant with a
statement of explanation. All change order requests must be in writing, including detailed scope of
work and price, and agreed to by the -Participant, contractor, and Housing Rehabilitation staff before
the additional work is commenced. Work completed without such approval shall not be compensated
with Program assistance.
3. Funds Disbursement. Program funds shall be disbursed in progress
payments.
(a) Funds for LBP treatment through clearance, using safe work
practices, shall be disbursed in progress payments or in a single lump sum, as solely determined by
the City staff, upon satisfactory completion of the LBP treatment through clearance, using safe work
practices, in conformity with the LBP Regs.
(i) Program funds will not be disbursed for LBP treatment
through clearance, using safe work practices, without all necessary permits and required inspections,
including without limitation, building permits, or which does not meet the approval or standards of
the LBP Regs, Building and Planning Division, applicable state and local codes, applicable permits,
and the Program. The Housing Rehabilitation staff will visit the job site and verify that (i) the work
included for payment is satisfactorily completed and within the scope of eligible work as outlined for
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LBP treatment through clearance, using safe work practices, and (ii) all necessary inspections by the
Building Division or other responsible department or entity have been satisfactorily accomplished.
Upon such determinations, the Housing Rehabilitation staff will process payment to Participant
through a Payment Authorization Form, which includes the amount of disbursement, name and
address of property owner and LBP contractor, and a description of the LBP treatment through
clearance work completed, using safe work practices.
(b) Funds for rehabilitation improvements included within the Work
Write -Up shall be disbursed monthly upon satisfactory completion of the work, inspection and
approval by the Housing Rehabilitation staff and the Participant, and submittal of lien waivers from
all material suppliers and subcontractors as to the completed work, in accordance with the
requirements set forth below.
(i) The Participant or contractor, as designee, is responsible for
submitting a Payment Authorization Form and contacting the Housing Rehabilitation staff to arrange
a job site inspection and for payment. The Participant or contractor, as designee, is also responsible
to call for permit inspections. Program funds will not be disbursed for work completed without all
necessary permits and required inspections, including without limitation, building permits, or which
does not meet the approval or standards of the Building and Planning Division, applicable state and
local codes, applicable permits, and the NSP Single Family Rehabilitation Program.
(ii) The Housing Rehabilitation staff will visit the job site and
verify that (A) the work included for payment is satisfactorily completed and within the scope of
eligible work as outlined in the Work Write -Up, and (B) all necessary inspections by the Building
Division or other responsible department or entity have been satisfactorily accomplished. Upon such
determinations, the Housing Rehabilitation staff will process a Payment Authorization Form, which
includes the amount of disbursement, property address, and a description of the work completed.
The Participant, contractor, and Housing Rehabilitation staff will be required to sign the Payment
Authorization Form before it can be processed.
(1) For disbursement of Program proceeds, all checks
shall be made payable jointly to the Participant.
4. Final Inspection. The Housing Rehabilitation staff, Participant, and
contractor shall make a final inspection of the completed work of improvements set forth in the Work
Write -Up together. When the improvements are completed and all permits have been signed off with
final inspections the job is considered complete, except for a one-year guarantee on labor and
materials which is a required provision of the Rehabilitation Contract. The Housing Rehabilitation
staff will issue a Notice of Completion upon satisfactory completion of the work and final permits.
All material suppliers and subcontractors will be required to execute and deliver to the property
owner lien release(s) or lien waiver(s) with a copy to the Housing Rehabilitation staff prior to release
of the 10% Retention for the rehabilitation work.
5. Retention Amount. The City will retain from each monthly payment of the
Program assistance, ten percent (10%) of the proceeds until thirty-five (35) days from the date the
Housing Rehabilitation staff determines that the work has been completed in a satisfactory manner
and a Notice of Completion is recorded. The retention amount shall be disbursed at that time,
provided all building and other required permits have been finaled and no mechanic's liens or stop
notices have been filed in connection with the rehabilitation work.
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E. Conflict Resolution.
1. Property Owner/Contractor Disputes. In the event of any dispute between
the Participant and the contractor concerning the contracted work, either one, or both, shall submit in
writing the fact and nature of such dispute(s) to the Housing Rehabilitation staff. Within thirty (30)
days of such notice, the contractor and the owner shall either resolve the dispute or shall seek a
resolution of the dispute pursuant to binding arbitration in accordance with the provisions of the
Construction Contract to be approved by the City.
2. Prog-ram Concerns. Complaints concerning the NSP Single Family
Rehabilitation Program must be in writing and addressed to the Housing Rehabilitation staff. The
Housing Rehabilitation staff will contact the complainant and attempt to resolve the problem. A
written response will be made within thirty (30) days of receipt of a written complaint. If the
complainant is not satisfied after the written response, a complaint may be filed with the City's
Project Manager who will schedule a meeting with the Housing Rehabilitation Coordinator. A
written response by the City's Project Manager will be made within fifteen (15) working days of the
receipt of the complaint.
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Exhibit "1" to NSP Policies and Procedures
CONSTRUCTION STANDARDS
NEIGHBORHOOD STABILIZATION PROGRAM
A. Contractors must show verification of worker's compensation; liability insurance; current
California State Contractor's License; and current City Business License prior to the
signing of the contract.
B. Payment Schedules:
1. 10% retention held on all contracts for lien clearance.
2. Retention to be held until 35 days after the Notice of Completion is filed and
recorded with the County Recorder's Office.
3. Copy of properly filed Notice of Completion to be submitted to establish start of
lien period.
4. Included with Requests for Progress Payments will be material and lien releases.
Lien releases to be complete or payment cannot be made.
C. Payment Method:
1. In Progress Payments (draws)
a. Draws are authorized upon 100% completion on specific bid items.
Contractors must submit Requests for Progress Payments, which are
signed and dated by the contractor and the Participant, to the City before
5:00 on Friday and payments will be made monthly.
b. Required City inspections must be passed and signed on permit cards prior
to the release of the draw.
D. Specifications: GENERAL CONSTRUCTION SPECIFICATIONS
All work is to comply with current codes and standard practices accepted by all participating
cities and Development Services Department.
All permits are to be taken out PRIOR to commencing work. A complete subcontractor list is to
be submitted prior to the final inspection. All subcontractors must have current City Business
Licenses.
All work is to be performed in a workmanlike manner.
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All debris created or required in construction shall be the responsibility of the prime contractor
and removed at his expense to disposal site.
All trades (subcontractors) are to coordinate and schedule work with other trades
(subcontractors) to avoid rework situations.
Work shall be scheduled (as far as possible) in the following sequence: Roofing, external
structural, internal structural, plumbing, electrical, wall finishing, paint, floor covering, garage,
paving.
All structural lumber and materials are to be construction grade — no utility graded materials will
be acceptable. Workmanship and installation to be acceptable to City standards.
Whenever possible energy efficient (green) practices must be used.
Also work shall be covered by the current Building Code adopted by the participating cities.
These are:
2007 California Building Code
2007 California Plumbing Code
2007 California Mechanical Code
2007 California Electrical Code
2008 Title 24 Residential Energy Code Standards
All materials are to be new. Use only the brands specified in the approved Scope of Work.
Substitutions must be pre -approved in writing.
Allowable improvements for all participating cities are as follows:
ROOFING:
Repair - Check with inspector as to extent of repair. Any wood replacement that
is visible from the ground shall be considered as part of the contract.
Any wood not visible from the ground which the inspector requires to be
replaced may be billed as an extra. This price must be stated before the
signing of the contract. Painting of new wood, such as eves or facia,
shall not be the responsibility of the contractor.
Replace - 1. Remove old roofing material completely.
2. Renail sheathing as necessary.
3. Replace any sheathing with dry rot, broken boards, etc.
4. Call for and pass sheathing inspection prior to installing new roofing.
5. Provide necessary temporary weather protection during construction
(visqueen, etc.)
6. Install new roof jacks to all vents, pipes, etc., penetrating sheathing;
also new gravel guard or edging.
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7. a. Shingles Pitched (4" and 12" or more) — type C, 300 lbs., thick
butt, self-sealing tabs; one layer #15 felt underlayment — lapping
per manufacturer's recommendations. Minimum 30 year
composition shingle roof (Approved brands are Elk, GAF and
Certainteed).
b. Hot mop — min. 3 layers #15 felt, full lap, with 400 lbs., crushed
rock per square.
c. Other types of roofing — to comply with Chapter 15 of the 2007
C.B.C.
DRYWALL:
1. All drywall to be 1/2", unless otherwise specified (firewalls 5/8" type `X', etc.).
2. All joints to be taped and cemented in workmanlike manner.
3. Kitchen and baths to be prepared for paint unless otherwise specified.
4. Balance of house — walls and ceilings — prepared for paint unless otherwise
specified.
5. Inspection required (drywall nailing).
CONCRETE:
1. Concrete mixture to be standard transit mix (2500 PSI) or equal.
2. Concrete thickness to be nominal 3-1/2".
3. All surfaces to be finished in a workmanlike manner.
4. Walks to be troweled smooth, edged, and scored at 4' intervals.
PAINT:
Lead Base Paint (prohibited)
Contractor shall undertake the rehab work in compliance with the applicable requirements of
HUD lead base paint regulations, 24 CFR Part 35. In particular the public body shall if the house
was constructed before 1950 provide all owners, tenants and other occupants with the
notifications set out at Appendix 1 to 24 CFR Part 35; and the contractor:
A. Shall eliminate any lead base paint hazards and provide the appropriate
notification as required by 24 CFR Part 35.24 and
B. Shall not use lead paint in structures for which the rehabilitation assistance is
provided.
1. All surfaces to be properly prepared to receive paint including scraping, wire brushing, or
sanding as necessary.
2. Coats — (100% coverage)
Exterior — minimum 2 (prime, finish)
Interior wall and trim — minimum 2 (prime, finish)
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3. Kitchen, baths, trim and fascias to be smooth, washable enamel.
4. Other walls to be textured: ceilings may be acoustic (unless otherwise specified).
5. All surfaces to be trimmed and cut and coverage to be uniform so as to provide a
workmanlike and aesthetic finish.
EXTERIOR LANDSCAPE AND HARDSCAPE IMPROVEMENTS:
1. Wood or blockwall fencing replacement: All fencing will adhere to HOA
standards if applicable.
2. Tree and or debris removal.
3. Sod installation which includes all soil prep. Sprinklers will be mandatory for all
sod installations. Head to head coverage is mandatory for sprinkler systems.
Marathon brand sod or equal will only be used. Drought tolerant landscaping is
strongly encouraged. The purchase and installation of trees may be included, but
will need prior City approval.
4. Replacement concrete is allowed for existing asphalt or compromised/cracked
concrete driveways, walkways, or patios. Generally, no new concrete will be
allowed to be poured without direct authorization from the Housing Rehabilitation
staff. No coloring or stamping will be allowed.
5. Brick work will be allowed only to repair/replace compromised planters or
walkways.
6. All necessary drains or concrete work necessary to remove standing or flooding
waters away from property.
OTHER EXTERIOR IMPORVEMENTS:
1. Exterior painting of the main house and any permitted auxiliary structures is
allowed.
2. Termite or element damaged wood replacement.
3. Vinyl windows and sliding doors.
4. Replacement of existing shutters only. New shutters will not be added to the
home.
5. Stucco repair or replacement if determined to be necessary by rehab coordinator.
No texture -coating will be allowed.
6. Replacement of all deteriorated exterior doors and associated screen doors.
7. Rain gutters and any and all improvements to alleviate drainage problems
8. Addition of exterior drain lines for relocation of washer and dryer to exterior patio
areas specific to freedom home tracts may be allowed. Note: Planning Division
of each jurisdiction to verify that the installation of the washer and dryer will
be permitted on the exterior.
9. Patio covers will be allowed if existing unsafe structure currently exists and/or
added to the property for better rain dispersal or to cut down on overall
landscaping. If cover is to be removed and replaced allumawood brand covers
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will strongly be encouraged to discourage the need for future painting or termite
infestation.
INTERIOR IMPROVEMENTS:
1. Removal and replacement of all deteriorated flooring with standard materials
which include: Carpeting, laminate wood flooring, ceramic or porcelain tile, and
all vinyl flooring products. Natural stone will not be allowed as a flooring
alternative. This applies to both bathroom and kitchen flooring.
2. Interior painting which includes all necessary prep work including wall paper
removal.
3. Replacement/Repair of all deteriorated interior room doors including closet doors
and all applicable hardware including any necessary rated doors and self closing
hinges.
4. Deteriorated trim molding replacement.
KITCHEN IMPROVEMENTS:
1. Removal and replacement of deteriorated cabinets. Modular cabinets will be
allowed similar to Kraft maid brand or equal. No custom cabinet design. Islands
will only be allowed if electricity is already present.
2. Replacement of countertop surfaces. Allowable materials will be laminate, tile or
prefabricated granite tops. Slab granite chosen from a yard will not be approved
unless cost analysis is completed showing similar cost to prefabricated granite.
Standard six-inch back splash will be allowed. Areas near heating/cooking
sources will require noncombustible material to be installed to the top of the
cabinet.
3. All fixed appliance including cooktops, ovens, freestanding ranges, over -the -
range microwaves, range hoods and dishwashers. All appliances should be
Energy Star rated. Prices and brands must be approved housing rehabilitation
staff.
4. The installation of all lighting fixtures to ensure compliance with title 24 energy
codes and/or occupancy sensors for permitted areas.
5. Faucets, sinks, garbage disposals, and any plumbing requirements to ensure the
health, safety, and sanitation of the occupants. Modification to drain piping for
the purpose of moving the sink to another location will not be allowed.
BATHROOM IMPROVEMENTS:
I. Removal and replacement of bathtub/shower surround and all associated
deteriorated material tile/tub etc.
2. Replacement surround material can either be solid acrylic (Swanstone brand or
equal), fiberglass or tile (porcelain or ceramic).
3. Bathtub will either be cast iron or Americast material. Hydro jets will not be
allowed. Shower pan can either be tile as listed above, plastic, or acrylic. Special
consideration will be taken if home is specifically being rehabbed for ADA
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compliance or a buyer who needs special accommodations, for example zero
entry or door access bathtubs. The Housing Rehabilitation 504 coordinators will
be consulted in these instances.
4. Vanity replacement including countertops. Countertop material to be cultured
marble, tile (ceramic or porcelain), or prefabricated granite tops. Slab granite
chosen from a yard will not be approved Slab granite chosen from a yard will not
be approved unless cost analysis is completed showing similar cost to
prefabricated granite. Standard six inch back splash will be allowed.
5. Faucets, sinks, toilets (Kohler or equal), shower/tub valves (American Standard or
equal) and any plumbing requirements to ensure the health, safety, and sanitation
of the occupants including ADA compliant plumbing fixtures. Modification to
drain piping for the purpose of moving the sink to another location will not be
allowed.
ELECTRICAL IMPROVEMENTS:
1. Replacement of existing service to a minimum 100 amp service.
2. Repair of aluminum wiring with applicable pigtails or UL listed aluminum
devices. Note: check with each jurisdiction to verify if aluminum conductors are
permitted.
3. New electrical circuits will only be added to eliminate electrical hazards or to
bring current kitchen and bathroom deficiencies up to code.
4. Repair all unpermitted electrical work that exists on property.
PLUMBING IMPROVEMENTS:
1. Repair and replacement of main exterior drain line.
2. Repair and replacement of water heaters. Tank -less water heaters will be installed
when possible.
3. Sprinkler system installations.
4. Repair and replacement of main shut off valve.
5. Hydrojet/snake all drain lines.
6. Copper re -pipe to replace existing galvanized piping.
HVAC IMPROVEMENTS:
1. Repair or removal and replacement of existing wall or forced air heating unit(s).
Installation will include new electronic thermostat.
2. Where wall units are installed, the program will allow for a complete forced air
unit installation in the attic if space allows. Installation would include all duct
work to adequately heat property.
3. Ducting replacement/repair will be allowed if evidence is shown that damage has
occurred including duct sealing.
4. Air conditioning units will only be considered for installation/replacement if one
currently exists at the property.
GENERAL HARDWARE:
1. Door hardware:
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Exterior — all doors are to be keyed alike and installed to securely latch,
including jamb plate. All deadbolts shall be single cylinder.
Interior — installed to latch securely, including jamb plate.
2. Thresholds — aluminum with neopreme strip.
3. Door stops — spring type.
4. Sash balances — installed and adjusted properly including window travel in frame
(spring load replacements allowable).
5. Rescreens — aluminum frames with fiberglass screening. Adjust frames and
hinges to seat properly (including doors).
PARTICIPANT
CONTRACTOR
DATE
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EXHIBIT "C"
INSURANCE REQUIREMENTS
1. Insurance. Participant and its successors and assigns shall procure and keep in
full force and effect or cause to be procured and kept in full force and effect for the mutual
benefit of Participant and the City Parties, the insurance policies required by this Agreement with
respect to the Homes and the rehabilitation, ownership, use, and operation of the Homes by or on
behalf of Participant and the performance of any construction work thereon. The insurance
limits are subject to such increases in amount as a City Party may reasonably require from time
to time but not more frequently than every 24 months; provided, that the percentage increase in
coverage shall not be required to exceed the percentage increase in the Consumer Price Index
published by the United States Department of Labor, Bureau of Labor Statistics, for Urban Wage
Earners and Clerical Workers, Los Angeles -Long Beach -Anaheim Average, All Items (1984 =
100) (the "Index"), from and after the date of this Agreement, or if said Index is discontinued,
such official index as may then be in existence and which is most nearly equivalent to said Index.
In no event shall the limits of any policy be considered as limiting the liability of Participant
hereunder or limiting the indemnity obligation set forth in the Agreement.
2 Scope and Limits of Insurance: The insurance policies required to be maintained
by Participant pursuant to this Agreement are as follows:
a. Comprehensive General Liability Insurance including premises -
operations, products/completed operations, broad form property damage, blanket contractual
liability, independent contractors, personal injury in a form at least as broad as ISO Form #CG
001 ED. 11/88, with a limit of not less than Two Million Dollars ($2,000,000) combined single
limits, per occurrence and aggregate.
b. Business Automobile Liability Insurance including coverage for owned,
hired and non -owned automobiles in a form at least as broad as ISO Form #CA 000 T ED. 6/92,
with a limit of not less than Two Million Dollars ($2,000,000), combined single limits, per
occurrence and aggregate..
C. Workers' Compensation Insurance as required by the State of California
and Employer' Liability Insurance with limits of not less than Two Million Dollars ($2,000,000)
each accident.
d. All Risk Property Insurance for each Home with a minimum limit equal to
the full actual replacement cost of the improved Home, as approved by the City Party, as the
same may change from time to time, and with no coinsurance penalty provision.
e. Builder's Risk Insurance shall be maintained during construction of the
Homes written on a completed value basis in an amount equal to the full replacement cost of the
improvements with coverage available on the so-called non -reporting "all risk" form of policy.
3. Deductibles and Self -Insured Retentions. Any deductible or self -insured retention
must be declared to and approved by the City Parties.
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4. Additional Insurance Provisions. The insurance policies required to be carried by
Participant pursuant to this Agreement shall contain or be endorsed to contain the following
provisions:
a. Commercial General Liability and Business Automobile Liability. The
City Parties and their elected and appointed boards, officials, officers, agents employees and
volunteers are to be covered as additional insureds with respect to liability arising out of work or
operations performed by or on behalf of Participant, including materials, parts or equipment
furnished in connection with such work or operations; or with respect to liability arising out of
automobiles owned, leased, hired or borrowed by or on behalf of Participant; or with respect to
liability arising out of Participant's operation, ownership, maintenance, occupancy, or use of the
Homes. Coverage shall not extend to any indemnity coverage for the active negligence of the
additional insured in any case where an agreement to indemnify the additional insured would be
invalid under Civil Code Section 2782(b). The coverage shall contain no special limitations on
the scope of its protection afforded to any City Party or their respective officers, employees and
volunteers. This insurance shall be primary insurance with respect to each City Parry and their
respective officers, employees and volunteers and shall apply separately to each insured against
whom a suit is brought or a claim is made. Any insurance or self-insurance maintained by a City
Party or its officers, employees and volunteers shall be in excess of this insurance and shall not
contribute with it.
b. All Risk Property and Builder's Risk. The City Parties shall be named as
loss payees.
C. Workers' Compensation/Employers' Liability Insurance. A waiver by the
insurer of any right to subrogation against the City Parties and their respective officers,
employees and volunteers.
d. All Insurance Policies. Each insurance policy required by this Agreement
shall be endorsed to state that coverage shall not be cancelled, reduced or materially altered in a
manner adverse to the insured without first giving the City Parties a minimum of thirty (30)
days' prior written notice by certified mail, return receipt requested.
5. Acceptability of Insurers. All policies of insurance required to be carried by
Participant shall be written by responsible and solvent insurance companies with a "Best" rating
of not less than B+, Class X. Workers' compensation insurance may be placed with the
California State Compensation Insurance Fund. All insurers shall be licensed by or hold
admitted status in the State of California. At the sole discretion of each City Party, insurance
provided by non -admitted or surplus carriers with a Best's rating of no less than A- Class X may
be accepted if Participant evidences the requisite need to the sole satisfaction of the City Party.
6. Verification of Coverage. Participant shall furnish the City Parties with
certificates of insurance which bear original signatures of authorized agents and which reflect
insurers' names and addresses, policy numbers, coverage, limits, deductibles, and self -insured
retentions. In addition, Participant shall provide the City Parties with certified copies of all
policy endorsements required under this Agreement. All certificates and endorsements must be
received and approved by the City Parties within five (5) days of the date of this Agreement. The
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City Parties reserve the right to require at any time complete, certified copies of any or all
required insurance policies and endorsements.
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EXHIBIT "D"
TRUTH IN LENDING STATEMENT
""ESTIMATES: The Finance Charge, Total of Payments and Payment Schedule are estimates.
(Street Address)
, CA_
(Zip Code)
ACCELERATION: Full payment of the outstanding loan balance is due upon sale, transfer, assignment,
disposition, alienation, encumbrance, hypothecation or lease of the property without
the prior written consent of the City; the refinance of any lien or encumbrance which
has priority over the City's deed of trust for a loan amount in excess of an amount
equal to the then outstanding sum secured by such lien or encumbrance or the
extension of the term of any loan secured by any such lien, or upon default of the
loan documents.
ASSUMPTION: Someone buying the property cannot assume the loan.
LATE CHARGES: If your payment is late, you will be charged interest at the rate of 10% of the overdue
payment.
PREPAYMENT: If you prepay the loan in full or in part, you will not have to pay a penalty.
See your contract documents for any additional information regarding non-payment, default, and
required repayment in full before scheduled date.
Signature of Owner —
Signature of Owner —
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Date -
Date -
EXHIBIT "E"
PROMISSORY NOTE SECURED BY DEED OF TRUST
, 20 ("Note Date")
FOR VALUE RECEIVED, the undersigned, MHC NSP LLC, a California limited
liability company ("Borrower"), promises to pay to the CITY OF , a California
municipal corporation ("City"), so much principal as may be advanced and outstanding in
accordance with the terms of this Promissory Note Secured by Deed of Trust ("Note"), not
exceeding Dollars ($), plus such other costs, charges,
and fees which may be owing from time to time, all subject to the terms, conditions, and
provisions hereinafter set forth in this Note.
Reference is made to the following:
(a) The Neighborhood Stabilization Program Subrecipient Contract Services
and Loan Agreement, with all exhibits thereto, by and among City, Borrower, and certain
other cities, dated November 10, 2009, as may be amended from time to time ("NSP
Agreement"), which sets forth terms and conditions for the acquisition and rehabilitation
of that certain real property located at in the City of
, County of Orange, State of California, more particularly described in
the legal description attached as Exhibit 1 to the Deed of Trust referred to below
("Property"). All terms not otherwise defined herein shall have the meaning given in the
NSP Agreement.
(b) The Deed of Trust securing this Note, executed by Borrower in favor of
City, which is to be recorded against the Property on or about the date hereof, as may be
amended from time to time.
1. Loan Amount. The principal amount of City's loan to Borrower ("City Loan") is
Dollars ($ ). The City Loan shall be
disbursed to Borrower in accordance with the terms set forth in the NSP Agreement. No interest
shall accrue on the City Loan.
2. Terms of Repayment. Concurrently with the transfer of the Property to an
Eligible Homebuyer following the completion of the Rehabilitation Project and in compliance
with all requirements of the NSP Agreement, Borrower shall pay to City an amount equal to the
Resale Price of the Property. The balance of the City Loan shall be forgiven.
Notwithstanding the foregoing, the entire outstanding City Loan balance shall be due and
payable if City shall have accelerated the obligations hereunder pursuant to Section 4 of this
Note. If Borrower fails to timely pay the amount of the City Loan owing hereunder, interest at
the rate of ten percent (10%) per annum simple interest or the maximum legal rate then
applicable, whichever is less, shall accrue on the City Loan due dating from the day when
payment was due. Borrower shall have the right to prepay all or any portion of this Note at any
time without penalty.
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3. Default. Borrower shall be deemed in default of this Note in the event
(i) Borrower fails to timely make a required payment within ten (10) days following the due date
of any payment due hereunder, or (ii) Borrower is in default of any of the other terms of this
Note and such default is not cured within thirty (30) days after Borrower's receipt of written
notice from City specifying the event constituting the default, or (iii) Borrower is in default of
the NSP Agreement or the Deed of Trust or on any obligations under any documents relating to
any other financing that is secured by the Property, and fails to timely cure such default under the
terms of the applicable agreement, or within thirty (30) days of receipt of notice from City if
there is no cure period, it being understood and agreed by Borrower that a default of any of the
foregoing agreements shall be a default of this Note. In the event Borrower is in default of this
Note, City may declare the City Loan and all other amounts payable hereunder immediately due
and payable.
4. Acceleration Upon Sale, Lease, Encumbrance, Refinance. To the extent
permitted by applicable law, in addition to City's acceleration rights under Section 3, if Borrower
shall (i) directly or indirectly, voluntarily or involuntarily, sell, assign, transfer, dispose of,
alienate, encumber, lease, or agree to sell, assign, transfer, dispose of, alienate, encumber, lease
all or any portion of any interest in the Property without the prior written consent of City; or
(ii) refinance any lien or encumbrance which has priority over the Deed of Trust for a loan
amount in excess of the then outstanding sum secured by such lien or encumbrance or extend the
term of any loan secured by any such lien or further encumber the Property, then, or at any time
thereafter, City, at its option, may declare the entire indebtedness evidenced hereby immediately
due and payable.
5. Collection Costs; Litigation. If this Note is not paid when due, whether at
maturity or by acceleration, Borrower promises to pay all costs of collection, including, but not
limited to, reasonable attorneys' fees and all expenses incurred in connection with the protection
or realization of the collateral securing the payment hereof or enforcement of any guarantee,
incurred by City on account of such collection, whether or not suit is filed hereon. In any
litigation between the parties arising out of this Note, the Superior Court of the State of
California in and for the County of Orange shall have exclusive jurisdiction.
6. Waiver of Presentment. To the extent permitted by law, Borrower and all
endorsers, guarantors, and persons liable or to become liable on this Note waive presentment,
protest, and demand, notice of protest, demand, and dishonor and nonpayment of this Note and
any and all other notices or matters of a like nature, and consent to any and all renewals and
extensions near the time of payment hereof and agree further that at any time and from time to
time without notice, the terms of payment herein may be modified or the security described in
any documents securing this Note released in whole or in part or increased, changed, or
exchanged by agreement between City and any owner of the premises affected by said
documents securing this Note, without in any way affecting the liability of any party to this Note
or any persons liable or to become liable with respect to any indebtedness evidenced hereby.
7. No Waiver by City. No waiver of any breach, default, or failure of condition
under the terms of this Note or the Deed of Trust or the obligations secured thereby shall be
implied from any failure of City to take, or any delay be implied from any failure by City in
538/036753-0120
1038791.10 a12/03/09 E-2
taking action with respect to such breach, default, or failure from any prior waiver of any similar
or unrelated breach, default, or failure.
8. Not Assignable. This Note shall not be assignable or assumable without the
express written consent of City, which may be given or withheld in City's sole and absolute
discretion.
9. Severability; Governing Law; Amendment. The unenforceability or invalidity
of any provision or provisions of this Note as to any persons or circumstances shall not render
that provision or those provisions unenforceable or invalid as to any other provisions or
circumstances, and all provisions hereof, in all other respects, shall remain valid and enforceable.
This Note has been executed and delivered by Borrower in the State of California and is to be
governed and construed in accordance with the laws thereof. Neither this Note nor any term
hereof may be waived, amended, discharged, modified, changed, or terminated orally; nor shall
any waiver of any provision hereof be effective except by an instrument in writing signed by
Borrower and City.
10. Joint and Several Obligations. If the Borrower under this Note is comprised of
one or more persons or entities, the obligations and liabilities of the Borrower hereunder shall be
joint and several.
11. Nonrecourse Obligation. Borrower shall not have any personal liability under
this Note to pay the indebtedness evidenced under this Note, and any judgment, decree or order
for the payment of money obtained in any action to enforce the obligation of Borrower to pay the
City Loan shall be enforceable against Borrower only to the extent of Borrower's interest in the
Property.
[signatures on next page]
538/036753-0120
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IN WITNESS WHEREOF, Borrower has executed this Note as of the Note Date.
MHC NSP LLC,
a California limited liability company
By: Mercy Housing California,
a California nonprofit public benefit
corporation
Its: Sole Member
By:
Its:
By:
Its:
538/036753-0120
1038791.10 a12/03/09 E-4
EXHIBIT "F"
DEED OF TRUST
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of
,CA
Attn:
(SPACE ABOVE FOR RECORDER'S USE)
This Deed of Trust is recorded at the request and for the
benefit of the City of and is exempt from the
payment of a recording fee pursuant to Government Code
Section 27383.
DEED OF TRUST
(This Deed of Trust Contains an Acceleration Clause)
This DEED OF TRUST ("Deed of Trust") is made as of the day of
, 20_, by and among MHC NSP, LLC, a California limited liability company,
"Trustor"), whose address is 1500 South Grand Ave., Ste. 100, Los Angeles, CA 90015,
First American Title Insurance Company ("Trustee"), whose address is
, and the City of a California municipal
corporation ("City" or "Beneficiary"), whose address is , CA
1. Grant in Trust. For the purposes and upon the terms and conditions in this Deed
of Trust, Trustor grants, transfers, and assigns to Trustee, in trust, with power of sale and right of
entry and possession, the following property and any interest therein (collectively, the "Trust
Estate"): (a) Trustor's fee interest in and to that certain real property in the City of
, County of Orange, State of California, described in Exhibit "l" attached
hereto and incorporated herein by reference ("Real Property"); (b) all buildings and other
improvements and structures now or hereafter located on the Real Property (collectively, the
"Improvements" and together with the Real Property shall sometimes be referred to as the
"Property"); (c) all existing and future leases, subleases, subtenancies, licenses, agreements and
concessions relating to the use, occupancy or enjoyment of all or any part of the Property,
together with any and all guaranties and other agreements relating to or made in connection with
any of the foregoing; and (d) all rents, issues, income, revenues, royalties, profits, proceeds and
earnings now or hereafter payable with respect to or otherwise derived from the ownership, use,
management, operation, leasing or occupancy of the Property, including, without limitation, cash
or security deposited under any lease to secure the performance by the lessee of its obligations
thereunder.
2. Obligations Secured. Trustor makes this grant and assignment for the purpose of
securing the following obligations: (a) payment of the sum of $ ("Loan")
according to the terms of a promissory note or notes of even date herewith made to Trustor,
538/036753-0120
1038791.10 a12/03/09 F-1
payable to order of City, and modifications, extensions or renewals thereof ("Note"); and
(b) payment of additional sums and interest thereon which may hereafter be loaned to Trustor, or
its successors or assigns, when evidenced by a promissory note or notes reciting that they are
secured by this Deed of Trust; and (c) any obligation of Trustor under that certain Neighborhood
Stabilization Program Subrecipient Contracted Services and Loan Agreement among Trustor,
Beneficiary, and certain other cities dated November 10, 2009 ("NSP Agreement"), to convey
the Property to City. Any capitalized terms contained in this Deed of Trust which are not
defined herein shall have the meaning given in the NSP Agreement, unless expressly provided to
the contrary.
3. Acceleration of Loan Upon Sale, Encumbrance, Refinance, or Default.
To the extent permitted by applicable law, if Trustor shall: (i) directly or indirectly, voluntarily
or involuntarily, sell, assign, transfer, dispose of, alienate, encumber, lease, or agree to sell,
assign, transfer, dispose of, alienate, encumber, or lease all or any portion of any interest in the
Property without Beneficiary's prior written consent; or (ii) refinance any lien or encumbrance
which has priority over this Deed of Trust for a loan amount in excess of the then outstanding
sum secured by such lien or encumbrance or extend the term of any loan secured by any such
lien or further encumber the Property; or (iii) default on any of its obligations set forth in the
Loan Documents or on any obligations under any documents relating to any other financing that
is secured by the Property and fail to cure the default within any applicable cure period or within
thirty (30) days of receipt of notice from Beneficiary if there is no cure period, then, or at any
time thereafter, Beneficiary, at its option, may declare the entire indebtedness evidenced by the
Note secured by this Deed of Trust immediately due and payable and collectible then or
thereafter as City may elect, regardless of the date of maturity. This term "Loan Documents"
shall mean this Deed of Trust, the Note, and the NSP Agreement, as such agreements may be
amended from time to time.
4. Incorporation of Fictitious Deed of Trust. To protect the security of this Deed
of Trust, and with respect to the Property, Trustor expressly makes each and all of the
agreements, and adopts and agrees to perform and be bound by each and all of the terms and
provisions set forth in subdivision A, and it is mutually agreed that each and all of the terms and
provisions set forth in subdivision B of the fictitious deed of trust recorded in Orange County on
August 17, 1964, and in all other counties on August 18, 1964, in the book and at the page of
Official Records in the office of the county recorder of the county where said property is located,
noted below opposite the name of such county, namely:
COUNTY
BOOK
PAGE
COUNTY
BOOK
PAGE
COUNTY
BOOK
PAGE
COUNTY
BOOK
PAGE
Alameda
1288
556
Kings
858
713
Placer
1028
379
Sierra
38
187
Alpine
3
130-31
Lake
437
110
Plumas
166
1307
Siskiyou
506
762
Amador
133
438
Lassen
192
367
Riverside
3778
347
Solano
1287
621
Butte
1330
513
Los Angeles
T-3878
874
Sacramento
5039
124
Sonoma
2067
427
Calaveras
185
338
Madera
911
136
San Benito
300
405
Stanislaus
1970
56
Colusa
323
391
Marin
1849
122
Orange
6213
768
Sutter
655
585
Contra Costa
4684
1
Mariposa
90
453
San Francisco
A-804
596
Tehama
457
183
Del Norte
101
549
Mendocino
667
99
San Joaquin
2855
283
Trinity
108
595
El Dorado
704
635
Merced
1660
753
San Luis Obispo
1311
137
Tulare
2530
108
Fresno
5052
623
Modoc
191
93
San Mateo
4778
175
Tuolumne
177
160
Glenn
469
76
Mono
69
302
Santa Barbara
2065
881
Ventura
2607
237
Humboldt
801
83
Monterey
357
239
Santa Clara
6626
664
Yolo
769
16
Imperial
1189
701
Napa
704
742
Santa Cruz
1638
607
Yuba
398
693
Inyo
165
672
Nevada
363
94
Shasta
800
633
538/036753-0120
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Kern 3756 690 Orange 7182 18 San Diego SERIES 5 Book 1964, Page 149774
shall inure to and bind the parties hereto, with respect to the Site. Said agreements, terms and
provisions contained in said subdivision A and B (identical in all counties, and printed on pages
4 and 5 hereof) are by the within reference thereto, incorporated herein and made a part of this
Deed of Trust for all purposes as fully as if set forth at length herein, and City may charge for a
statement regarding the obligation secured hereby, provided the charge therefore does not exceed
the maximum allowed by law.
[signatures on next page]
538/036753-0120
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IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the date and
year first written above.
MHC NSP LLC,
a California limited liability company
By: Mercy Housing California,
a California nonprofit public benefit
corporation
Its: Sole Member
By:
Its:
By:
Its:
538/036753-0120
1038791.10 a12/03/09 F-4
State of California
County of
On , before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
State of California
County of
(Seal)
On , before me, ,
(insert name and title of the officer)
Notary Public, personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
538/036753-0120
1038791.10 a12/03/09 F'5
(Seal)
DO NOT RECORD
The following is a copy of Subdivisions A and B of the fictitious Deed of Trust recorded in each county in
California as stated in the foregoing Deed of Trust and incorporated by reference in said Deed of Trust as being a
part thereof as if set forth at length therein.
A. To protect the security of this Deed of Trust, Trustor agrees:
1) To keep said property in good condition and repair, not to remove or demolish any building thereon; to
complete or restore promptly and in a good and workmanlike manner any building which may be constructed,
damaged or destroyed thereon and to pay when due all claims for labor performed and materials furnished therefor,
to comply with all laws affecting said property or requiring any alterations or improvements to be made thereon; not
to commit or permit waste thereof, not to commit, suffer or permit any act upon said property in violation of law; to
cultivate, irrigate, fertilize, fumigate, prune and do all other acts which from the character or use of said property
may be reasonably necessary, the specific enumerations herein not excluding the general.
2) To provide, maintain and deliver to Beneficiary fire insurance satisfactory to and with loss payable to
Beneficiary. The amount collected under any fire or other insurance policy may be applied by Beneficiary upon any
indebtedness secured hereby and in such order as Beneficiary may determine, or at the option of Beneficiary the
entire amount so collected or any part thereof may be released to Trustor. Such application or release shall not cure
or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice.
3) To appear in and defend any action or proceeding purporting to affect the security hereof or the rights or
powers of Beneficiary or Trustee; and to pay all costs and expenses, including cost of evidence of title and
attorney's fees in a reasonable sum, in any such action or proceeding in which Beneficiary or Trustee may appear,
and in any suit brought by Beneficiary to foreclose this Deed.
4) To pay: at least ten days before delinquency all taxes and assessments affecting said property, including
assessments on appurtenant water stock; when due, all encumbrances, charges and liens, with interest, on said
property or any part thereof, which appear to be prior or superior hereto; all costs, fees and expenses of this Trust.
Should Trustor fail to make any payment or to do any act as herein provided, then Beneficiary of Trustee,
but without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from
any obligation hereof, may: make or do the same is such manner and to such extent as either may deem necessary to
protect the security hereof, Beneficiary or Trustee being authorized to enter upon said property for such purposes;
appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of
Beneficiary or Trustee; pay, purchase, contest or compromise any encumbrance, charge or lien which in the
judgment of either appears to be prior or superior hereto; and, in exercising any such powers, pay necessary
expenses, employ counsel and pay his reasonable fees.
5) To pay immediately and without demand all sums so expended by Beneficiary or Trustee, with interest
from the date of expenditure at the amount allowed by law in effect at the date hereof, and to pay for any statement
provided for by law in effect at the date hereof regarding the obligation secured hereby any amount demanded by the
Beneficiary not to exceed the maximum allowed by law at the time when said statement is demanded.
B. It is mutually agreed:
1) That any award in connection with any condemnation for public use of or injury to said property or any
part thereof is hereby assigned and shall be paid to Beneficiary who may apply or release such moneys received by
him in the same manner and with the same effect as above provided for disposition of proceeds of fire or other
insurance.
2) That by accepting payment of any sum secured hereby after its due date, Beneficiary does not waive his
right either to require prompt payment when due of all other sums so secured or to declare default for failure so to
pay.
3) That at any time or from time to time, without liability therefor and without notice, upon written request
of Beneficiary and presentation of this Deed and said note for endorsement, and without affecting the personal
liability of any person for payment of the indebtedness secured hereby, Trustee may: reconvey any part of said
property; consent to the making of any map or plat thereof, join in granting any easement thereon, or join in any
extension agreement or any agreement subordinating the lien or charge hereof.
4) That upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon
surrender of this Deed and said note to Trustee for cancellation and retention or other disposition as Trustee in its
sole discretion may choose and upon payment of its fees, Trustee shall reconvey, without warranty, the property
538/036753-0120
1038791.10 a12/03/09 F-6
then held hereunder. The recitals in such reconveyance of any matters or facts shall be conclusive proof of the
truthfulness thereof. The Grantee in such reconveyance may be described as "the person or persons legally entitled
thereto."
5) That as additional security, Trustor hereby gives to and confers upon Beneficiary the right, power and
authority, during the continuance of these Trusts, to collect the rents, issues and profits of said property, reserving
unto Trustor the right, prior to any default by Trustor in payment of any indebtedness secured hereby or in the
performance of any agreement hereunder, to collect and retain such rents, issues and profits as they become due and
payable. Upon any such default, Beneficiary may at any time without notice, either in person, by agent, or be a
receiver to be appointed by a court, and without regard to the adequacy of any security for the indebtedness hereby
secured, enter upon and take possession of said property or any part thereof, in his own name sue for or otherwise
collect such rents, issues, and profits, including those past due and unpaid, and apply the same, less costs and
expenses of operation and collection, including reasonable attorney's fees, upon any indebtedness secured hereby,
and in such order as Beneficiary may determine. The entering upon and taking possession of said property, the
collecting of such rents, issues and profits and the application thereof as aforesaid, shall not cure or waive any
default or notice of default hereunder or invalidate any act done pursuant to such notice.
6) That upon default by Trustor in payment of any indebtedness secured hereby or in the performance of
any agreement hereunder, Beneficiary may declare all sums secured hereby immediately due and payable by
delivery to Trustee of written declaration of default and demand for sale and of written notice of default and of
election to cause to be sold said property, which notice Trustee shall cause to be filed for record. Beneficiary also
shall deposit with Trustee this Deed, said note and all documents evidencing expenditures secured hereby.
After the lapse of such time as may then be required by law following the recordation of said notice of
default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell
said property at the time and place fixed by it in said notice of sale, either as a whole or in separate parcels, and in
such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States,
payable at time of sale. Trustee may postpone sale of all or any portion of said property by public announcement at
such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the
time fixed by the preceding postponement. Trustee shall deliver to such purchaser its deed conveying the property
so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts
shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee, or Beneficiary as
hereinafter defined, may purchase at such sale.
After deducting all costs, fees and expenses of Trustee and of this Trust, including cost of evidence of title
in connection with sale, Trustee shall apply the proceeds of sale to payment of. all sums expended under the terms
hereof, not then repaid, with accrued interest at the amount allowed by law in effect at the date hereof, all other sums
then secured hereby; and the remainder, if any, to the person or persons legally entitled thereto.
7) Beneficiary, or any successor in ownership of any indebtedness secured hereby, may from time to time,
by instrument in writing, substitute a successor or successors to any Trustee named herein or acting hereunder,
which instrument, executed by the Beneficiary and duly acknowledged and recorded in the office of the recorder of
the county or counties where said property is situated shall be conclusive proof of proper substitution of such
successor Trustee or Trustees, who shall, without conveyance from the Trustee predecessor, succeed to all its title,
estate, rights, powers and duties. Said instrument must contain the name of the original Trustor, Trustee and
Beneficiary hereunder, the book and page where this Deed is recorded and the name and address of the new Trustee.
8) That this Deed applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees,
devisees, administrators, executors, successors and assigns. The term Beneficiary shall mean the owner and holder,
including pledgees, of the note secured hereby, whether or not named as Beneficiary herein. In this Deed, whenever
the context so requires, the masculine gender includes the feminine and/or neuter, and the singular number includes
the plural.
9) That Trustee accepts this Trust when this Deed, duly executed and acknowledged, is made a public
record as provided by law. Trustee is not obligated to notify any party hereto of pending sale under any other Deed
of Trust or of any action or proceeding in which Trustor, Beneficiary or Trustee shall be a party unless brought by
Trustee.
538/036753-0120
1038791.10 a12/03/09 F-7
DO NOT RECORD
REQUEST FOR FULL RECONVEYANCE
TO FIRST AMERICAN TITLE INSURANCE COMPANY, TRUSTEE:
The undersigned is the legal owner and holder of the note or notes and of all indebtedness secured by the
foregoing Deed of Trust. Said note or notes, together with all other indebtedness secured by said Deed of Trust,
have been fully paid and satisfied; and you are hereby requested and directed, on payment to you of any sums owing
to you under the terms of said Deed of Trust, to cancel said note or notes above mentioned, an all other evidences of
indebtedness secured by said Deed of Trust delivered to you herewith, together with the said Deed of Trust, and to
reconvey, without warranty, to the parties designated by the terms of said Deed of Trust, all the estate now held by
you under the same.
Dated
Please mail Deed of Trust,
Note and Reconveyance to
Do not lose or destroy this Deed of Trust OR THE NOTE which it secures. Both must be delivered to the
Trustee for cancellation before reconveyance will be made.
538/036753-0120
1038791.10 a12/03/09 F-8
EXHIBIT "I" TO DEED OF TRUST
LEGAL DESCRIPTION OF PROPERTY
All that certain property located in the City of , County of Orange, State
of California, described as follows:
538/036753-0120
1038791.10 a12/03/09 -9-
EXHIBIT "G"
MEMORANDUM
RECORDED AT THE REQUEST OF
AND WHEN RECORDED RETURN TO:
Attn:
City of
California
(Space Above Line for Recorder's Use)
This Memorandum of Neighborhood Stabilization Program
Subrecipient Contract Services and Loan Agreement is
recorded at the request and for the benefit of the City of
and is exempt from the payment of a recording
fee pursuant to Government Code Section 27383.
MEMORANDUM OF NEIGHBORHOOD STABILIZATION PROGRAM
SUBRECIPIENT CONTRACT SERVICES AND LOAN AGREEMENT
This MEMORANDUM OF NEIGHBORHOOD STABILIZATION PROGRAM
SUBRECIPIENT CONTRACT SERVICES AND LOAN AGREEMENT ("Memorandum") is
entered into this day of , 20_, by and between the CITY OF
, a California municipal corporation ("City"), and MHC NSP LLC, a
California limited liability company ("Participant").
This Memorandum is made with reference to the following:
1. Participant and City and certain other cities entered into that certain
Neighborhood Stabilization Program Subrecipient Contract Services and Loan Agreement
dated November 10, 2009 ("NSP Agreement"), pursuant to which City contracted with
Participant to acquire and rehabilitate certain Homes that have been Abandoned or Foreclosed
upon and to convey the Homes to eligible Middle Income Households after the completion of
the rehabilitation. All terms not otherwise defined herein shall have the meaning given to them
in the NSP Agreement.
2. The NSP Agreement was entered into pursuant to the Housing and Economic
Recovery Act of 2008 ("HERA") and the Neighborhood Stabilization Program at Title III of
Division B of the HERA ("NSP").
3. On or about the date of the recordation of this Memorandum, Participant
acquired that certain real property located at in the City of , County of
Orange, State of California, more particularly described in the legal description attached hereto
as Exhibit "1" ("Property"). The Property constitutes a "Home" under the NSP Agreement.
538/036753-0120
1038791.10 a12/03/09 G-1-
4. Pursuant to the NSP Agreement, City provided a loan of NSP funds to
Participant for the acquisition and rehabilitation of the Home.
5. The NSP Agreement provides for Participant and City to enter into this
Memorandum and to record the same in the Official Records of the County of Orange to
provide notice to all persons of the existence of said NSP Agreement.
6. This Memorandum is not intended as a full description of the terms and
conditions of the NSP Agreement. This Memorandum shall not replace, alter, or modify any
term or condition set forth in the NSP Agreement, nor shall it be used to interpret the terms and
conditions of the NSP Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum as of the
date set forth above.
"CITY"
CITY OF ,
a California municipal corporation
By:
Its:
ATTEST:
City Clerk
"PARTICIPANT"
MHC NSP LLC,
a California limited liability company
By: Mercy Housing California,
a California nonprofit public benefit
corporation
Its: Sole Member
By:
Its:
By:
Its:
538/036753-0120
1038791.10 a12/03/09 G-2-
State of California
County of
On
before me,
(insert name and title of the officer)
Notary Public, personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
State of California
County of
On , before me,
(Seal)
(insert name and title of the officer)
Notary Public, personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
538/036753-0120
1038791.10 a12/03/09 G-3-
State of California
County of
On
before me,
(insert name and title of the officer)
Notary Public, personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature
(Seal)
538/036753-0120
1038791.10 a12/03/09 G-4-
EXHIBIT "I"
TO MEMORANDUM OF NEIGHBORHOOD STABILIZATION PROGRAM
SUBRECIPIENT CONTRACT SERVICES AND LOAN AGREEMENT
LEGAL DESCRIPTION OF PROPERTY
That certain real property located in the City of , County of Orange, State of
California, legally described as follows:
538/036753-0120
1038791.10 a12/03/09 -5-
EXHIBIT "H"
SELLER'S OCCUPANCY CERTIFICATION UNDER
THE PROTECTING TENANTS AT FORECLOSURE ACT
(FOR VACANT PROPERTY ONLY)
[To be completed and signed by the seller of the property.]
Address of Property ("Property")
City, State Zip
The undersigned, Seller of the Property certifies to
(Buyer) that
1. Seller has complied with the provisions of the Protecting Tenants at Foreclosure Act, Title VII of
the Helping Families Save Their Homes Act of 2009 ("PTFA") in connection with the Property, including
any requirements of the giving of notice to vacate ("Notice") as required pursuant to PTFA to any bona
fide tenant of the Property if any such tenant was in possession of the Property prior to Seller's notice of
foreclosure; and
2. The Property will be delivered vacant, unoccupied and without any party in possession or with a
right to possession to the Property.
The Seller also certifies and agrees that it has not now and will not after the date hereof allow any person,
including the former owner, to occupy the Property under a lease or any other agreement for possession of
the Property either oral or written.
Signature of Seller
Date:
By:
Its:
538/036753-0120
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TEXT BELOW SHOWN FOR REFERENCE BUT SHOULD BE DELETED FOR
THE FINAL CERTIFICATION FORM
NOTES TO SELLER'S OCCUPANCY CERTIFICATION UNDER
THE PROTECTING TENANTS AT FORECLOSURE ACT
A bona fide tenant is a tenant under a bona fide lease. A "bona fide" lease is
considered a bona fide lease only if -
a) the mortgagor (or the child, spouse, or parent of the mortgagor) under the
contract (lease) is not the tenant;
b) the lease or tenancy was the result of an arms -length transaction; and
c) the lease or tenancy requires the receipt of rent that is not substantially less
than fair market rent for the property or the unit's rent is reduced or
subsidized due to a Federal, State, or local subsidy. PTFA Section 702(b)
(Note the Bridge Notice provides for a slightly different definition at 1
(a))•
2. Generally, the PTFA requires that the initial successor in interest (typically the Seller)
provide a 90-day notice to vacate to a bona fide tenant of the foreclosed property
acquired by the successor in interest. If the tenant has an existing bona fide lease, the
tenant may occupy the premises until the remaining term of the lease or 90 days after
receipt of the 90-day notice, whichever is longer. However, the successor in interest may
terminate the tenant's lease (even a lease for a greater remaining term than 90 days) if the
successor in interest sells the unit to a purchaser who will occupy the unit as a primary
residence, and the successor in interest provides 90-day notice to the tenant. PTFA
Section 702 (a) (2).
Notice given under the PTFA is notice given as required by state law.
4. The effective date of the requirements of PTFA are May 20, 2009, however the original
requirements for protection of tenants was found in the so called Stimulus Bill ("ARRA")
which had an effective date of February 17, 2009.
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