California State Preservation Notice LawsLos Angeles Affordable Housing

Preservation Summit

May 10, 2011

Overview of State Notice Laws

Basic understanding of regulatory framework

Ability to find the answer to any question (handouts)

Q & A table later todayNot legal advice - consult your

attorney!!!

Roadmap to Notice LawsRefers to California Government

Code §§ 65863.10, 65863.11 and 65863.13

.10 = notice to affected tenants &

affected public entities.11 = notice to qualified entities.13 = exemption from .10

and .11 for sale with 30+ year regulatory agreement

Notice to Affected Tenants and Affected Public EntitiesCovered Properties = Assisted Housing

DevelopmentsAssisted Housing Developments =

multifamily rental housing developments, receiving assistance under:

◦ New Construction, Substantial Rehab, Mod Rehab, LMSA Any PROJECT-BASED Section 8

◦ Sections 221(d)(3) bmir, 236, 202◦ Section 42 of the IRC◦ Chapter 1138 of the Statutes of 1987

.10

Notice to Affected Tenants and Affected Public EntitiesCovered Properties = Assisted Housing

DevelopmentsAssisted Housing Developments = multifamily,

rental housing developments, receiving assistance under:

◦ And many, many other programs: Rent Supplement Rural housing programs Section 142(d) tax-exempt bonds, CDBG, HOME, McKinney-Vento HCD grants and loans Tax-increment financing Local housing trust funds Density bonuses And more… (see .10(a)(3)(A))

.10

Notice to Affected Tenants and Affected Public Entities

What triggers the notices (ETP):◦Expiration of Rental Restrictions:

Unless other recorded agreements for 50 percent

◦Termination: Owner’s decision not to extend or renew

participation in federal, state or local subsidy program

◦Prepayment: Federally insured/held mortgage with effect of

removing current rent or occupancy restrictions

.10

Notice to Affected Tenants and Affected Public Entities

What notices must be sent:◦Twelve-month notice to affected

tenants and affected public entities◦Six-month notice to affected tenants◦Six-month notice to affected public

entities

.10

Notice to Affected Tenants and Affected Public Entities

Contents of Twelve-Month Notice to Affected Tenants & Public Entities (8 items):

◦Statement of ET or P◦Whether owner intends to increase rents in

twelve months following ETP◦Anticipated date & name of program◦Affordability restrictions will be removed◦Owner may elect to remain in program◦Whether other assistance will be provided◦Six-month notice will be sent◦Notice of opportunity to submit purchase offer

.10

Notice to Affected Tenants and Affected Public Entities

Exception to twelve-month notice requirements:◦If owner provides copy of “federally

required” notice of termination or prepayment at least twelve months prior to proposed change

◦Does not satisfy six-month notice requirement or .11 notices

Example: ◦One year federal notice requirement for

project-based Section 8 opt-out (42 U.S.C. § 1437f(c)(8)(A)

.10

Notice to Affected Tenants and Affected Public Entities

Contents of Six-Month Notice to Tenants (6 items):◦Anticipated date of ETP◦Current rent and anticipated rent◦Statement of notice to public entities◦Owner may elect to remain in program◦Whether owner intends to participate in any replacement subsidy program◦Contact information for public entities and a legal services organization

.10

Notice to Affected Tenants and Affected Public Entities

Contents of Six-Month Notice to Public Entities (12 items):◦ All the same info in six-month tenant notice◦ Number of affected tenants◦ Number of units w/ assistance & type◦ Number of units w/o assistance◦ Number of bedrooms in assisted units◦ Ages and income of affected tenants◦ Brief description of owner plans

Attach copy of any federally required notice of TP provided six-months prior

Information based on “reasonably available” data from existing written tenant and project records

.10

Notice to Affected Tenants and Affected Public Entities

Two other notice requirements:◦Notice of “significant changes” to six-

month notice E.g. Change in anticipated date or new rent Notice to affected tenants and public entities Notice must be provided within seven business

days

◦Prospective Tenants Any notice issued to existing tenants at time of

eligibility interview

.10

Notice to Affected Tenants and Affected Public Entities

Final .10 Details:◦No additional info gathering

required; not liable to any party for providing notices

◦All notices sent by first-class mail◦Injunctive relief to any affected

tenant or public entity aggrieved of violation

◦Forms to be used on HCD website

.10

Roadmap to Notice Laws.10 = notice to affected tenants

& affected public entities

.11 = notice to qualified entities

.13 = exemption from .10 and .11 for 30+

year regulatory agreement

Notice to Qualified EntitiesCovered Properties =

SAME AS .10(…project-Based Section 8, subsidized

mortgage programs, LIHTC, TIF, Chapter 1138 of the Statutes of 1987, etc!)

.11

Notice to Qualified EntitiesWhat triggers the notice =

SAME AS .10(expiration, termination,

prepayment)

PLUS:◦Sale or disposition within 5 years of E or

eligibility for TP

.11

Notice to Qualified EntitiesWhat notice must be sent:

◦Notice of the opportunity to offer to purchase

◦Must be given prior to or concurrently with the twelve-month notice to affected tenants and public entities

.11

Notice to Qualified EntitiesWho can be a QE:

◦Tenant association of the development◦Local nonprofit organizations and public

agencies◦Regional or national nonprofit

organizations and regional or national public agencies

◦Profit-motivated organizations or individuals

.11

Notice to Qualified EntitiesRequirements to be a QE:

◦ Capable of managing the housing and related facilities for its remaining useful life

◦ Agree to obligate self and successors to maintain affordability for greater of 30 years or remaining term of existing assistance (.11(e)(2))

◦ Development shall be continuously occupied in approx. % as households that occupied development on date of notice or in use agreements, whichever more stringent

◦ Regulatory agreement must require renewal of subsidies

◦ Economic feasibility exception from rent and occupancy requirements for 1+ unit(s) (.11(f))

.11

Notice to Qualified EntitiesHow does owner contact QEs:

◦Contact HCD to obtain list of QEs HCD website has list of QEs that have

contacted it or that it has identified as interested in program

◦Send notice to QEs on HCD list◦Also send to any QE that directly

contacts ◦Notices sent by registered or certified

mail◦Also post notice in common area

.11

Notice to Qualified EntitiesContents of twelve-month notice to QEs:

◦All owners: Whether the owner intends to maintain the

current # of affordable units & level of affordability

Whether the owner has an interest in selling Whether the owner has executed

contract/agreement to continue/replace subsidy to maintain equal or greater number of units at equal or deeper level of affordability for at least five years

A statement about qualified entities opportunity to submit purchase offer

A statement that sent .10 twelve-month notice

.11

Notice to Qualified Entities Additional contents of twelve-month notice to QEs for

properties with > 25% of units subject to affordability restrictions:

◦ Statement that additional info will be made available within 15 business days of QE request:

Itemized lists of monthly operating expenses Capital improvements made within last two years Amount of project reserves Two most recent financial & physical inspection

reports filed with fed/state/local agency (if any) Most recent rent roll (rent paid + unit subsidy) Vacancy rate for last two years Terms of assumable financing, terms of subsidy

contract and proposed improvements in connection w/ sale (if any)

.11

Notice to Qualified EntitiesTimeline Framework:

◦ During first 180-day period from notice, owner can only accept offer from QE

◦ During next 180-day period, owner can accept offer from non-QE but must provide all QEs that submitted bona fide offer in first 180-day period option to buy on same terms and conditions

◦ QE has 30 days to submit matching offer◦ Owner exempt from notifying QES of pending sale if

purchaser complies with 30+ year restrictions (.11(e)(2))

No requirement to sell:◦ Some states do require sale (Illinois, Maine, Rhode

Island)

.11

Notice to Qualified EntitiesSection .11 does not apply to:

◦Eminent domain or publicly negotiated purchase

◦Forced sale pursuant to foreclosure◦Transfer by gift, devise, or operation

of law◦Sale to certain descendants◦Owner who certifies, under penalty

of perjury, the existence of a financial emergency

.11

Notice to Qualified EntitiesFinal .11 Details:

◦Prior to close of escrow in sale or disposition to non-QE entity, owner must certify compliance with .10 and .11 under penalty of perjury

◦Provisions of .11 may be enforced by any adversely affected QE by owner failure to comply

◦QE notices sent by certified mail

.11

Roadmap to Notice Laws.10 = notice to affected tenants

& affected public entities

.11 = notice to qualified entities

.13 = exemption from .10 and .11 for 30+

year regulatory agreement

Exemption from .10 & .11 for 30+ Year Regulatory Agreement No requirement to provide .10 & .11 notices if all

following conditions contained in a regulatory agreement that has been or will be recorded against property at close of escrow of sale:◦ No involuntary displacement of current low-income tenants◦ Fully accept, utilize all PB Sec 8 renewals◦ Accept all enhanced and regular vouchers◦ Good cause eviction for low-income tenants◦ Owner may consider applicant income as long as consider

other factors relevant to ability to pay◦ Restriction of rents and incomes of previously restricted units

to equal or greater level A few exceptions, see .13(a)(7) - (9).

Regulatory agreement = agreement with government agency for greater of term of existing fed/state/local assistance or 30 years.

.13

Roadmap to Notice Laws.10 = notice to affected tenants

& affected public entities

.11 = notice to qualified entities

.13 = exemption from .10 and .11 for 30+

year regulatory agreement

.10, .11 and .13Review of Notice Law Framework:

◦Twelve-month notice to affected tenants and public entities Not required if delivered other one-year federally

required notice of termination or prepayment

◦Six-month notice to tenants◦Six-month notice to affected public entities◦Twelve-month notice to QEs

First 180-day period, only accept QE offers Second 180-day period, provide QEs chance to

match

◦Exempt if new 30+ year regulatory agreement recorded at close of escrow

How to Find out More

Q & A Table HCD websiteAsk your attorney!!!

SB 454 (Lowenthal)Changed 4 things:

◦Removed sunset of Jan 1, 2011 – laws now permanent

◦Added information need to provide (covered)

◦Certain information no need to provide in QE notice if only 25% units restricted (covered)

◦Public entities/CHPC may share QE info with other prospective purchasers, no confidentiality agreement

California State Preservation Notice LawsLos Angeles Affordable Housing

Preservation Summit

May 10, 2011