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(continued)
(h) The sponsor shall compile an initial list of eligible households applying to occupy assisted units. Such a list will indicate whether such households are very low income households or other lower income households and after separating households into preferences pursuant to subdivision (b), shall place households in such groups in an order of priority determined by lot or another method approved by the Department. After initial tenancies, the priority shall be established in order of application, except that tenants entitled to preference shall receive preference over non-preference households.
(i) The sponsor may refuse to place an eligible household on the list required by subdivision (h) or remove such household from such list if the sponsor determines that such household has unreasonably provided false information in its application, or has, in the two years preceding the application, been evicted by a court of law on more than one occasion on grounds which were consistent with Section 7860(b), or in the case of cooperatives, on the grounds of unsuitability. The sponsor may not use status criteria including but not limited to source of income or marital status in determining eligibility. A potential tenant refused a rental unit or a place on a waiting list shall be notified in writing stating the reasons for such determination and the procedure for appeal of this decision pursuant to Section 7862.
(j) As assisted units become available, the sponsor shall offer them for occupancy by eligible households in accordance with the application date and with the requirement for occupancy by different income levels pursuant to the provisions of the regulatory agreement.
(k) Notwithstanding the provisions of this section, the Department may permit to be incorporated in a regulatory agreement such other tenant selection and occupancy standards as it considers necessary to ensure the fiscal integrity of the project, to ensure an adequate economic mix of income groups, or to require other reasonable standards where the nature or location of the rental housing development requires such standards.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50746, 50749, 50756 and 50766, Health and Safety Code.








s 7858. Lease and Occupancy Procedures.
(a) Each household selected to occupy a unit in the rental housing development shall enter into a lease with the sponsor of the rental housing development. Such a lease shall be a standard form approved by the Department, including but not limited to the following terms:
(1) a tenancy from year to year, with a provision allowing the tenant to terminate the tenancy on thirty (30) days written notice to the sponsor or, in the case of cooperatives, terms to be approved by the Department,

(2) termination provisions in compliance with Section 7860,
(3) provisions relating to the annual recertification of the income of the tenant in an assisted unit in accordance with this section,
(4) provisions relating to security, cleaning and other deposits in accordance with law, and in the case of cooperatives, the downpayment,
(5) provisions requiring notice of approved rent increases pursuant to Section 7864.
(b) In the case of cooperative ownership, the sponsor shall have provisions for downpayments in accordance with the following:
(1) Downpayments as applicable to very low income households shall not exceed 2.5 percent of the prorated development cost for the unit, plus the equity appreciation at a rate approved by the Department.
(2) Downpayments as applicable to other lower income households shall not exceed 3.5 percent of the prorated development cost for the unit, plus the equity appreciation at a rate approved by the Department.
(3) The required cash contribution to be paid by an eligible household toward the downpayment at or before occupancy shall not exceed ten percent (10%) of the household's income over the preceding twelve (12) months.
(4) The cooperative may issue the tenant a loan equal to the difference between the downpayment and the cash contribution. The terms for such loan shall be approved by the Department, but in no case shall the total payments made during the year exceed the greater of ten percent (10%) of the original loan amount or one month's carrying charge determined at the most recent income recertification.
(c) The sponsor may establish reasonable rules of conduct and occupancy which shall be in writing, and given to each tenant.
(d) With respect to tenants of assisted units, the tenant's income shall be recertified once each year in accordance with the following procedure:
(1) The sponsor shall notify the tenant in writing thirty (30) days in advance of the impending recertification, requiring the tenant to submit to the sponsor a declaration of income within 30 days in a form approved by the Department; and
(2) The sponsor shall verify the accuracy of the declaration, certify the tenant's income accordingly and notify the tenant in writing of the certification and any resultant changes in the tenant's rent and right to occupy an assisted unit pursuant to subsections (e), (f), (g) and (h), and the tenant's right to appeal such determinations pursuant to Section 7862.
(e) Where the tenant in an assisted unit was a very low income household and on recertification the tenant's income exceeds:
(1) fifty percent (50%) of the area median income adjusted for family size but not the upper limit for lower income households, the tenant's rent shall be set no higher than twenty-five percent (25%) of the tenant's income including an allowance for utility costs in accordance with section 7806,
(2) the upper limit for lower income households, the tenant
(A) shall from the date of recertification pay rent equal to twenty-five percent (25%) of the tenant's income including an allowance for utilities, and

(B) shall have a right of first refusal where provided for in the regulatory agreement for any appropriate-sized, non- assisted unit in the rental housing development which becomes vacant within six (6) months of the date of recertification or their own unit if an appropriate-sized, non-assisted unit becomes occupied by an eligible household within six months. Where more than one tenant has such a right of first refusal the priority of each tenant's right of refusal shall be determined by lot, and
(C) shall be required to vacate the assisted unit no later than six (6) months from the date of recertification if the tenant's continued residency would cause a reduction in the number of assisted units occupied by eligible households in the development.
(f) Where the tenant in an assisted unit was a lower income household but not a very low income household and on recertification the tenant's income:
(1) falls below fifty-one percent (51%) of the area median income adjusted for family size the tenant shall pay rent pursuant to Section 7806(c)(1). When a vacancy occurs in an assisted unit in the rental housing development occupied until such vacancy by a household, with an income equal to or less than fifty percent (50%) of the area median income adjusted for family size, the tenant's rent shall be reduced to the amount set forth in Section 7806(b).
(2) exceeds the upper limit for lower income households, the provisions of subdivision (d)(2) shall apply.
(g) In case of cooperatives where the tenant in an assisted unit was a very low income household and on recertification the tenant's income exceeds:
(1) fifty percent (50%) of the area median income adjusted for family size but not the upper limit for lower income households, the provisions of 7858(e)(1) shall apply.
(2) the upper limit for lower income households but not in excess of ninety percent (90%) of the area median income adjusted for family size, the tenant shall from the date of recertification pay carrying charges equal to thirty-five percent (35%) of the tenant's income including an allowance for utilities.
(3) ninety percent (90%) of the area median income, adjusted for family size, the tenant:

(A) shall from the date of recertification pay a carrying charge equal to thirty-five percent (35%) of the tenant's income including an allowance for utilities but not to exceed the carrying charges of a nonassisted unit.
(B) shall have a right of first refusal where provided for in the regulatory agreement for any appropriate-sized, nonassisted unit in the cooperative which becomes vacant within twelve months of the date of recertification or their own unit.
(C) shall after twelve months pay carrying charges equal to the carrying charges for a equivalent nonassisted unit.
(h) In the case of cooperatives where the tenant in an assisted unit was a lower income household and on recertification the tenant's income:
(1) falls below fifty-one percent (51%) of the area median income adjusted for family size, the provisions of Section 7858(f)(1) shall apply.
(2) exceeds the upper limit for lower income households but is less than ninety percent (90%) of the area median adjusted for family size, the provisions of Section 7858(g)(2) shall apply.

(3) exceeds ninety percent (90%) of area median adjusted for family size, the provisions of Section 7858(g)(3) shall apply.
(i) In the case of cooperatives where the income of an existing member occupying an assisted unit exceeds ninety percent of the median income, the next comparable available unit shall be deemed an assisted unit.
(j) Except as specifically set forth in this subchapter, leases and landlord-tenant relationships shall be subject to California law.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50746, 50749, 50756 and 50767, Health and Safety Code.








s 7860. Termination and Eviction.
(a) A tenancy in a unit in a rental housing development may be terminated without the termination being deemed an eviction under the following circumstances:
(1) death of the sole tenant of a unit,
(2) by the tenant at the expiration of a term of occupancy,

(3) by abandonment of the premises by the tenant, or
(4) with respect to a tenant of an assisted unit by a failure to maintain financial eligibility pursuant to Section 7858, providing the sponsor gives the tenant 60 days written notice of such termination.
Any termination of a tenancy other than those listed in this subdivision shall constitute an "eviction" and shall be effected only pursuant to the remaining provisions of the section.
(b) The sponsor shall not evict any tenant in violation of California law and only upon the following grounds: material noncompliance with the lease, material failure to carry out obligations under state law, or any other good cause which may include the refusal of a family to accept an approved modified lease. "Material noncompliance with the lease" includes one or more substantial violations of the lease or habitual minor violations of the lease which:
(1) disrupt the livability of a building,
(2) adversely affect the health or safety of any person or the right of any tenant to the quiet enjoyment of the leased premises and related facilities,

(3) interfere with the management of the building, or
(4) have an adverse financial effect on the building. Rent shall be due on the first day of the rental period but will not be late until the sixth day of that period. Non-payment of rent or any other financial obligation under the lease after a three-day notice to pay rent or quit will constitute material noncompliance with the lease, but payment during such a period will constitute a minor violation.
(c) Notice of termination or eviction shall be provided to the tenant pursuant to law, except that such notice shall contain in addition to other required information, a statement of the facts constituting cause for eviction and the right of a tenant to a hearing pursuant to Section 7862 if a request for hearing is provided within the time permitted by the eviction or termination notice. If a hearing is requested within 10 days after service of a three day notice to pay rent or quit, that notice shall be operative until three days after a final decision is rendered in the hearing. No hearing shall be required if an eviction is noticed pursuant to Section 1161(4) of the Code of Civil Procedure.
(d) The procedure for eviction shall be pursuant to law, except that hearings pursuant to Section 7862 may be interposed upon timely request by the tenant.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50746, 50749, 50756 and 50767, Health and Safety Code.








s 7862. Appeal and Grievance Procedures.
(a) Each sponsor shall submit, together with its affirmative marketing program, proposed appeal and grievance procedures for resolving complaints by the sponsor concerning the sponsor's tenants and by its present or prospective tenants concerning the sponsor or the sponsor's other tenants. The proposed procedures shall be reviewed by and be subject to the approval of the Department, which shall require such modifications as may be necessary and appropriate. The procedures shall include feasible informal and formal mechanisms for dispute resolution as are appropriate given the nature of the housing sponsor, the size and nature of the development, and the characteristics of the tenants (including English language fluency). Where appropriate, the procedure shall provide that unresolved grievances or additional appeals shall be directed to the responsible agency for review and recommendation. The Department shall be the final authority for purpose of interpretation of the requirements of the Program, upon a written request for interpretation.
(b) A written copy of the approved grievance and appeal procedures shall be given to each tenant at the time of admission and thereafter as changes are approved, and to each prospective tenant upon rejection.
(c) Any grievance, including a contractual dispute, of a sponsor with another sponsor or its responsible agency shall be addressed first with the executive officer of that agency. If the matter is not resolved to the satisfaction of the sponsor, it may be addressed in writing to the Director of the Department.
(d) At a minimum, the tenant appeal and grievance procedure must include the following:
(1) Oral or written request for informal hearing written a reasonable time after the basis for appeal or grievance arose;
(2) A prompt informal hearing and written decision to the tenant including the right to a formal hearing;
(3) Oral or written request for a formal hearing within a reasonable time after such request and before an impartial person jointly selected by the sponsor and tenant. If they cannot agree on such a person, each may appoint a representative who, together, shall appoint a third person who shall comprise the hearing panel.
(4) The hearing be held in a manner to ensure fairness and the provision of basic safeguards of due process after at least three days written notice to the parties. The decision shall be based solely on a preponderance of evidence presented at the hearing.
(5) If the tenant or sponsor fails to appear at the hearing, the hearing officer or panel may, in its discretion, either postpone the matter for no more than five days or make a determination that the absent party waived the right to the hearing.

(6) Within two weeks of the request for the hearing, the hearing officer or panel shall prepare a written decision to be sent to the sponsor, tenant, responsible agency and Department.
(e) If the hearing relates to an eviction or termination, in addition to the requirements of subdivision (d), the procedure must include a requirement that the housing sponsor must first make a showing of "good cause" for eviction and must thereafter sustain the burden of proof as to that issue.
(f) Neither utilization of nor participation in any of the dispute resolution procedures in this section shall constitute a waiver of, or affect in any manner whatsoever, any rights of the tenant, prospective tenant, or sponsor may have to a trial de novo or judicial review in any judicial proceedings which may thereafter be brought in the matter.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50746, 50749, 50756 and 50767, Health and Safety Code.








s 7864. Rent Increase Procedures.
(a) Base rents shall be adjusted within 60 days following adjustment of cost of living increases pursuant to Section 11453 of the Welfare and Institutions Code and publication of new area median incomes by the Department, and utility cost adjustments shall be made pursuant to Section 7806. A 30-day notice of utility allowance or base rent change shall be given to the tenant prior to the effective date of such an increase or decrease.
(b) Following completion of recertification of tenant income, a 30-day notice to the tenant of rent increase or decrease must be given prior to the effective date of such an adjustment.
(c) Prior to any change in the rent, the sponsor shall notify each tenant, in writing, of informal meetings with the sponsor to discuss the rent rate changes.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50749, 50759 and 50767, Health and Safety Code.








s 7866. Return on Investment.
(a) A sponsor which is not a nonprofit corporation or a governmental agency shall be entitled to distribute earnings in an annual amount not to exceed six percent (6%) of the sponsor's actual investment in a rental housing development.
(b) Notwithstanding subdivision (a), the Committee may authorize such sponsor to distribute earnings of an amount greater than six percent (6%) but not to exceed ten percent (10%) on a family rental housing development if it determines:
(1) that without the allowance of such greater rate of return the Department would not be able to comply with the requirements of Section 50736 of the Code, and
(2) that such greater rate of return is reasonable taking into account all the circumstances of the rental housing development.
(c) At a time to be determined by the Department, the responsible agency shall certify to the Department as to the amount of the sponsor's investment on which the allowable return will be calculated. Such amount shall include the sponsor's actual investment in the rental housing development, other than any unaccrued liabilities of the sponsor.
(d) The funds for return on investment may be distributed to owners only at the end of each fiscal year as determined in the regulatory agreement and after all project expenses have been paid, or funds set aside for their payment; all reserve requirements have been met; and excess annuity payments and rents have been recaptured. Any shortfall in return on investment may be made up from surplus project funds in future years.
(e) The provisions of this section do not apply to sponsor's return on investment under the rights of occupancy component.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Section 50746, Health and Safety Code.








s 7868. Maintenance and Management.
(a) With respect to all units in the rental housing development, the sponsor is responsible for all management functions (including selection of tenants, recertification of family incomes, evictions and other terminations of tenants, and collection of rent) and all repair and maintenance of capital items.
(b) The standard of care under this section shall require that the units and common areas be maintained as required by local health and building or housing codes, that this subchapter be fully complied with, that the security of the State's interest not be endangered, and that the objectives of the Program be met.
(c) With the approval of the responsible agency and the Department, the sponsor may contract with a private or public entity for the performance of the services or duties required in subdivision (a). However, such an arrangement does not relieve the sponsor of responsibility for proper performance of these duties.
(d) The sponsor shall develop a management plan to be approved by the responsible agency and the Department. The plan shall include the following:
(1) The role and responsibility of the sponsor and its delegations of authority to the managing agent.
(2) Personnel policy and staffing arrangements.
(3) Plans and procedures for publicizing and achieving early occupancy.
(4) Procedures for determining tenant eligibility and for certifying and recertifying incomes.

(5) Plans for carrying out an effective maintenance and repair program.
(6) Rent collection policies and procedures.
(7) Program for maintaining adequate accounting records and handling necessary forms and vouchers.
(8) Plans for tenant-management relations.
(9) Social service programs, if any.
(10) Management agreement.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50737, 50758, Health and Safety Code.








s 7870. Transfer, Foreclosure, Breach, or Termination of Assistance.
(a) If the sponsor intends to sell or convey the rental housing development, express, prior written approval of both the local finance entity and the Department is required and may be given provided that the following terms shall be incorporated:
(1) The successor in interest to the grantor agrees to assume the obligation of the grantor relating to the Program.

(2) The successor in interest is an eligible sponsor and demonstrates that it can successfully own and operate the rental housing development.
(b) If the payment of development assistance is accomplished by way of loan, a deed of trust securing said loan shall provide, among other things, that the responsible agency, upon default in payment or conditions of the loan by the sponsor under the terms of the deed of trust and in the responsible agency's discretion, either may declare all sums secured thereby immediately due and payable by executing and recording or causing to be executed and recorded a notice of default and election of sale or by commencing an appropriate foreclosure action. In addition, upon the occurrence of a default, the responsible agency may, in person, by agent or by receiver appointed by a court enter upon and take possession of the rental housing development, collect all rents, and perform any acts necessary to maintain or operate it, in such a manner as to not cause the default of a superior creditor or the cessation of any other subsidies.
(c) If the payment of development assistance is accomplished by way of grant, the responsible agency, at its discretion, may demand repayment of the grant less an amount equivalent to the value of prior use of the premises or seek enforcement by proceeding at law and/or in equity, at the option of the responsible agency, against any person or persons or entity violating or attempting to violate any covenant or condition of the regulatory agreement.
(d) Prior to taking any action under subdivisions (b) or (c), the responsible agency shall:
(1) provide the sponsor with 30 days notice of the breach or default, and seek and encourage correction or compliance,
(2) provide the Department 14 days written notice of the breach and then the intention to foreclose, default, or litigate, and
(3) obtain Department approval for the action intended, which approval shall not be unreasonably withheld.
(e) In the event of foreclosure or forced sale, the purchaser shall take title subject to these conditions and limitations.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50746, 50755 and 50765, Health and Safety Code.








s 7871. Committee Advice and Actions.
(a) Excepting subdivision (b) and Section 7878(d), projects processed under the authority of this article shall not be subject to the provisions of Subchapter 1 of Chapter 6.5, commencing with Section 6900. However, the Committee shall be constituted as set forth in Section 6902(c) and may provide advice to the Director with respect to the compliance of the application with program objectives and requirements. The Committee's advice may include a recommendation to approve, approve with conditions, or reject the application.
(b) In addition to the power of review and recommendation set forth in Section 7878(d), the Committee may recommend denial of any action or decision by the Director within 45 days of that decision or at the next Committee meeting at which time the matter can be properly included in the agenda, whichever comes first. Such actions or decisions which are properly within the scope of review shall include, but not be limited to:
(1) the preparation or dissemination of the allocation plan,
(2) the establishment of the return on investment of any sponsor,
(3) the terms of commitment or disbursement of funds to the Agency,
(4) the approval of and amendments to the Interagency Agreement or other agreements with the Agency affecting the operation of the Program.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Section 50737, Health and Safety Code.








s 7872. Site Selection.
Proposed development sites must be certified by the Agency as meeting the following criteria:
(a) The site and neighborhood must be suitable for the type of housing proposed.
(b) The site must be free from severe adverse environmental or social conditions, or such conditions must be mitigated when the housing is completed.
(c) The housing must be accessible to employment and to appropriate social, recreational, educational, commercial and health services that are typically found in market-rate residential neighborhoods.
(d) The project must not be built on a site that has occupied residential structures or has had such structures within the six months prior to application to the applicant.
(e) The project may not be built in an area identified as having special flood hazards unless the project is covered by flood insurance.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50737, 50737.5, Health and Safety Code.








s 7874. Development Standards and Costs.
(a) All rental housing developments shall conform to all State and local building codes, zoning ordinances, and general plan requirements.
(b) A project must not separate, segregate or otherwise physically distinguish assisted units from non-assisted units.
(c) Amenities in the development generally must be limited to those which are generally provided in unassisted housing of modest design in the area. All amenities will be subject to strict scrutiny. The use of energy-efficient construction techniques or materials, or more durable, high quality materials, to control or reduce maintenance, repair, or replacement costs will not be considered an excess amenity.
(d) The standards of this section shall be utilized by the Agency in applying priorities pursuant to Section 7876.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Section 50737, Health and Safety Code.








s 7876. Interagency Operating Agreement.
The Department and the Agency shall enter into an Interagency Operating Agreement which shall specify their respective obligations . The Interagency Operating Agreement shall include, but not be limited to, the following items:
(a) The Department shall establish an allocation plan which shall provide the Department with a mechanism for balancing the Program's requirements while providing flexibility to the Agency to seek to balance its overall production in order to meet its statutory requirements. The plan, prepared at regular intervals by the Department, shall establish allocations for the number, type, geographic distribution and other relevant criteria of assisted units to be submitted to the Department for approval within a specified period.
(b) In accordance with the allocation plan, the Agency shall, on a project-by-project basis, select projects after considering the program priorities and their consistency with other Program requirements and objectives.
(c) The Department and Agency shall specify the means by which the Department may enforce the breach of any Agreement between the Agency and a Sponsor.
(d) The Agency and Department shall agree to a method of resolving any differences of opinion as to the requirements, objectives, or intent of the Program.
(e) The Department shall agree to set aside forty percent (40%) of the moneys in the fund as of July 1, 1980, to assist rental housing developments financed by or through the Agency. Such funds shall be approved for expenditure by application approval within two (2) years after promulgation of the initial allocation plan; funds remaining at that time shall become available to local finance entities, housing authorities, or the Agency on an equal basis.
(f) Prior to any disbursement of funds to the Agency, the Agency and Department shall enter into a state contract for each development in accordance with Section 7882. The state contract shall be recorded or referenced in the office of the county recorder as set forth in Section 7882 (e).
(g) At the time of Department approval of an application, the Department shall transfer to the Agency a sum equivalent to 120% of the amount of assistance approved for a specific development, or such lesser amount as requested by the Agency. Within one year thereafter unless an extension is granted by the Department, the agency shall fund the loan for the development; if the loan is not funded within the approved term, the sum and all interest collected thereon shall be transferred to the Department.
(h) Upon receipt of the funds from the Department, the Agency shall establish an appropriate project account and, pending disbursements by the Agency, shall invest the funds in an interest-bearing account or security. Funds from the account shall not be disbursed for the development except as permitted by this subchapter, the Interagency Agreement, and the state contract.
(i) The Agency may apply to the Department for funds not to exceed an amount proportionate to its set-aside from the feasibility account and the management reserve account pursuant to the procedure set forth in Section 7878 except that the application shall contain only that information reasonably required by the Department and relevant to the specific application.
(j) The Agency and Department shall agree that any excess funds returned to or retained by the Agency shall be promptly returned to the Department for deposit in the Agency set-aside.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50739, 50740, Health and Safety Code.








s 7878. Application Procedure.
(a) Subject to the Program and the allocation plan, after the Agency has approved a site for a proposed project, it may apply to the Department requesting authority to set-aside moneys to assist the project.
(b) The application shall consist of:
(1) a description of the proposed project including the number and size of assisted units,

(2) a description of the amount and form of assistance requested and an assurance that the assisted units will be made affordable.
(3) a certification that the sponsor is capable of meeting all other responsibilities necessary to develop, construct, market, and manage the project in a manner consistent with the goals and requirements of the Program,
(4) a description of special construction techniques and energy efficiency characteristics, if any,
(5) certifications that the proposed project will be consistent with local planning requirements,
(6) certification that the project will be economically feasible,
(7) a certification that the project complies with the appropriate allocation plan, and
(8) an explanation of the extent to which the proposed project qualifies under the priorities of the Program.
(c) Upon submission of the application to the Department, the Department shall review the application and accept as correct any statement in the application unless the Department has substantial reason to question the completeness of the application or the correctness or completeness of any element in the application. When the Department so questions, it shall promptly notify the Agency, and the Agency may provide additional documentation to the application or in support of any element thereof. When the Agency provides such documentation, the Department will act in accordance with the Agency's judgment or evaluation and may not deny the application unless the Department determines that the application or any element thereof is not complete or is clearly not supported by the facts. If the Agency does not provide additional documentation, the Department shall take its action based upon the information and certifications already provided. In addition to the review set forth in this subdivision, the Department shall determine whether the proposed development complies with the local housing element or extension thereof; such a determination shall be required for approval.
(d) The agency shall submit each application according to a schedule established by the Department. Within 35 days after each such submission, the Director shall notify the Agency and Committee in writing that the application is:
(1) approved,
(2) approved only if specified deficiencies are corrected and the Department receives amendments to the application necessary to correct the deficiencies within a specified time, or
(3) not approved with a statement of the reasons for disapproval. The Director's decision shall be valid unless within 45 days or at the next Committee meeting at which the matter can be properly included in the agenda whichever occurs first, the Committee reviews and recommends denial of any decision on an application by the Director, excluding appeals. Such a recommendation shall be deemed to be a denial of the application.
(e) If the Agency is dissatisfied with the denial of its application, the reduction of the amount applied for, actions pursuant to Section 7871, or any conditions attached to the approval of its application, it may, within thirty days of the date of the decision, appeal in writing to the Director of the Department, stating and fully supporting the grounds of its appeal. (f) If the Agency appeals to the Director pursuant to subdivision (e) the Director shall:

(1) within twenty (20) days of the date of documented receipt of the appeal hold an open hearing at which the Agency, sponsor, program staff and any interested person may make oral or written submission as to the action the department should take with respect to the application, and
(2) within thirty (30) days of the date of documented receipt of the appeal notify in writing the Agency of the Director's determination of the appeal. The Director's determination of the appeal shall be final.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50737, 50745, Health and Safety Code.








s 7880. Financing.
(a) Projects assisted pursuant to the Interagency Operating Agreement shall utilize below market interest rate financing consistent with the objectives of the Program and acceptable to the Department. Such financing shall be on terms and conditions set forth or approved by the Agency and may be for construction loans and/or permanent mortgage loans.
(b) With respect to each project assisted pursuant to this Article, the Agency shall employ such methods, techniques, investigations, tests, analyses, studies and evaluations which in the Agency's judgment, are necessary to assure that the projects proposed for assistance meet the objectives and requirements of the Program, and are substantially consistent with the approved application.
(c) The Agency shall establish such accounts as it deems necessary to comply with the requirements of the Program.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Section 50737, Health and Safety Code.








s 7882. Contracts and Agreements.
All developments financed by the Agency shall be governed by contracts and agreements, including but not limited to:
(a) a state contract which shall contain, at a minimum, provisions which:
(1) describe how the assistance under the Program will be used to ensure that each assisted unit will remain available to or occupied by eligible households for a period of not less than thirty (30) years or the term of the below market interest financing, if any, whichever is greater,

(2) specify the amount, manner, terms, and timing of payments by the Department and the Agency under this contract and the Agency and sponsor under the regulatory agreement or assistance payments contract, as appropriate, so as to ensure the economic feasibility of the rental housing development and to protect the interests of the State,
(3) specify all terms and conditions of the application approval,
(4) specify the requirements for reporting in accordance with Section 7884,
(5) provide that the terms of such agreements, as they affect the assisted units shall be binding upon the successors in interest to the parties thereto,
(6) establish that the terms of repayment of excess funds and rental payments by the Agency to the Department, and
(7) establish the grounds upon which the Agency may reduce the number of assisted units in a rental housing development only if the assistance provided by the Department or Agency cannot provide adequate assistance to maintain the development's fiscal integrity. Any such reduction shall be reviewed no less often than annually as to its continued necessity.
(b) a Management Agreement,
(c) an Assistance Payments Contract which shall set forth terms, conditions, and requirements governing the payment, receipt and use of assistance payment moneys,
(d) a Regulatory Agreement which shall contain, at a minimum, provisions which:
(1) restrict availability and occupancy of assisted units to eligible households, at affordable rents,
(2) specify the number of units and assisted units in the rental housing development and the projected rents for those units, and the manner and conditions under which the ratio of assisted to non-assisted units may be changed,
(3) specify procedures for setting rents and calculating utility allowances consistent with this subchapter,

(4) require payment of prevailing wage rates and hiring of apprentices with respect to construction of the project,
(5) provide for return on investment pursuant to Section 7890,
(6) keep the regulatory agreement in effect so long as Agency financing for the housing development remains outstanding, or thirty (30) years, whichever is greater, and to adequately secure such an agreement,
(7) require that the sponsor agree to abide by the directive of the Agency regarding assistance payments where the project, in the Agency's judgment, can operate consistent with the Program with less or no assistance,
(8) require regular reports as required by the Agency,
(9) specify tenant selection and occupancy standards in accordance with the Program,
(10) specify the terms of occupancy agreements,
(11) require that copies of appropriate documents be available in the language(s) commonly used by residents of the area, and
(12) incorporate additional reasonable requirements of the Department or the Agency.
(e) The Department, after Committee approval, may require such additional contracts and agreements between the Department and Agency or the Agency and sponsors as it deems necessary to meet the purposes of the Program or the requirements of the Code.
(f) All agreements and contracts, other than the Interagency Operating Agreement, or one document referencing all other documents, shall be recorded in the office of the county recorder in the county in which the rental housing development to which they relate is located. When so recorded, they shall constitute a lien on the rental housing development in accordance with this subchapter for the performance of conditions, including the payment of any money, as specified herein. Recorded agreements shall be indexed in the grantor index to the name of the sponsor and in the grantee index to the State of California.
(g) Any amendment to any agreement or contract which has a material effect on the interests of the Department, must be approved in advance, by the Department. Any amendment to any document approved by the Department pursuant to this subchapter shall be reported at the time reports pursuant to Section 7884 are made.
(h) Prior to their use, any agreement, contract, or other document which effects the interest of the Department, must be approved in form and substance, by the Department. This requirement does not apply to approval of each individual document before execution or use, but only to general review, unless substantive changes or additions are made tot he contract at or before the time of execution. Copies of all loan closing documents shall be provided to the Department.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50739, 50745, 50746, 50749, Health and Safety Code.








s 7884. Reporting.
(a) The regulatory agreement between the sponsor and the Agency shall contain a requirement that the sponsor report to the Agency at least annually.
(b) The Interagency Operating Agreement shall contain a requirement that the Agency report annually to the Department in a form approved by the Department. Each report shall deal separately with each rental housing development for which the Agency is responsible and shall be submitted to the Department no later than October 31 in each year. The report shall contain such information as the Department may reasonably require, including but not limited to:
(1) the fiscal condition of the rental housing development, including an audited financial statement indicating surpluses or deficits in operating accounts and the amounts of any fiscal reserves,
(2) the substantial defects in physical condition of the rental housing development including a description of any major repair or maintenance work undertaken in the reporting year,
(3) the occupancy of the rental housing development indicating:
(A) the number and sizes of assisted units available to or occupied by eligible households,
(B) the distribution of incomes of eligible households,
(C) the ethnic groups to which the eligible households belong, and
(D) the number of eligible very low income and other lower income households on waiting lists for the assisted units,

(4) general management performance including tenant relations and other relevant information.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50743, 50746, Health and Safety Code.








s 7886. Tenant Selection and Occupancy Standards and Procedures.
With respect to the assisted units, except as otherwise required by the Program, the sponsor shall develop tenant selection and occupancy standards and procedures which comply with the requirements of Article 5 (commencing with Section 11401) of Chapter 2 of Part II of Title 25, California Administrative Code.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Sections 50746, 50749, Health and Safety Code.








s 7888. Rent Adjustment Procedures.
(a) With respect to the assisted units, tenant's incomes shall be recertified once each year for households in family projects and at least once every two years for households in elderly projects.
(b) If, upon recertification, there have been changes in the household income, the household's rent shall be re-established in accordance with Section 7806, or established at market rent, whichever is indicated.
(c) Base rents may be adjusted at any time following adjustment of cost of living increases pursuant to Section 11453 of the Welfare and Institutions Code and publication of new area median incomes by the Department, and utility cost adjustments shall be made pursuant to Section 7806. A 30-day notice of utility allowance or base rent change shall be given to the tenant prior to the effective date of such an increase or decrease.
(d) Following completion of recertification of tenant income, a 30-day notice to the tenant of rent increase or decrease must be given prior to the effective date of such an adjustment.
(e) Prior to any change in rent, the sponsor shall notify each tenant, in writing, of informal meetings with the sponsor to discuss the rent changes.
(f) Where rents in assisted units are established and charged pursuant to Section 7806(g), then rents shall be adjusted in accordance with the rules and regulations governing the Federal Section 8 program.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Section 50749, Health and Safety Code.








s 7890. Return on Investment.
(a) A sponsor which is not a nonprofit corporation or a governmental agency shall be entitled to distribute earnings in an annual amount not to exceed six percent (6%) of the sponsor's actual investment in a rental housing development, excluding unaccrued liabilities of the sponsor.
(b) Notwithstanding subdivision (a), the Committee may authorize the distribution of earnings of an amount greater than six percent (6%) but not to exceed ten percent (10%) on a family rental housing development if, at the request of the Agency, it determines:
(1) that without the allowance of such greater rate of return the agency would not be able to comply with the requirements of this subchapter, and
(2) that such greater rate of return is reasonable taking into account of the circumstances of the rental housing development.
(c) By a time to be determined by the Agency, the Agency shall report to the Department as to the amount of the sponsor's investment on which the allowable return will calculated. Such amount shall include the sponsor's actual investment in the rental housing development, other than any unaccrued liabilities of the sponsor.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Section 50746, Health and Safety Code.








s 7892. Transfer, Foreclosure, Breach, or Termination of Assistance.
(a) If the sponsor intends to sell or convey the rental housing development, express, prior written approval of the Agency is required and may be given provided that the following terms shall be incorporated:
(1) The successor in interest to the grantor agrees to assume the obligations of the grantor relating to the Program specified in the regulatory agreement.
(2) The successor in interest is an eligible sponsor and demonstrates that it can successfully own and operate the rental housing development.
(b) The Agency, at its discretion, may demand repayment of the grant or a lesser amount equivalent to the value of prior use of the premises or seek enforcement by proceedings at law and/or in equity, at the option of the Agency, against any person or persons or entity violating or attempting to violate any covenant or condition of the regulatory agreement.
(c) Prior to taking any action under subdivision (b) or (c), the Agency shall:
(1) provide the sponsor with 30 days written notice of the breach or default, and seek and encourage correction or compliance,
(2) provide the Department 24 hours notice of the breach and the intention to foreclose, default, or litigate, and
(3) consult with the Department regarding action intended.


Note: Authority cited: Section 50737, Health and Safety Code. Reference: Section 50746, Health and Safety Code.








s 7900. Scope and Authority.
(a) These regulations implement and interpret the Homeownership Assistance Program, Sections 50775 through 50779, inclusive, of the Health and Safety Code. They establish procedures for the allocation of financial assistance to eligible households to enable them to acquire ownership of housing which they would otherwise be unable to purchase. They also delegate authority from the Director of the Department of Housing and Community Development to a committee established pursuant to Title 25, California Administrative Code, Section 6902 (d) for the review and recommendation of financial assistance under the Program.
(b) The program is divided into four main components which delineate the different situations in which purchases will be assisted for eligible households. The four main components consist of:
(1) assistance to eligible households to purchase rental housing (including spaces in mobilehome parks) being converted to condominium or cooperative ownership;
(2) assistance to eligible households to purchase mobilehomes on permanent foundations and not located within mobilehome parks;
(3) assistance to nonprofit and stock cooperative corporations to purchase or develop mobilehome parks; and
(4) assistance to eligible households to purchase shares in a cooperative corporation which owns a mobilehome park.


Note: Authority cited: Sections 50406, 50775, 50776, 50777, and 50778, Health and Safety Code. Reference: Sections 50775, 50776, 50777, and 50778, Health and Safety Code.








s 7902. Definitions.
The following definitions shall govern the Program:
"Assisted property" means property which has been purchased with assistance under the Program.
"Code" means the California Health and Safety Code.
"Committee" means the Committee established pursuant to Title 25, California Administrative Code, Section 6902(d).
"Converted" means, with respect to a rental unit or housing development, a change in tenure from rental to condominium or cooperative ownership where a final public report has been issued by the California Department of Real Estate relating to such change in ownership. (continued)