Section 7005 - Uses of Funds(a) Predevelopment Loans may be made for required expenses which are incurred in the process of, and prior to, securing Construction or Permanent Financing for production, conversion, Preservation or rehabilitation of Assisted Housing, including Mobilehome Parks, which are recoverable from Construction or Permanent Financing once it is obtained. Loans may be made for purposes that include, but are not limited to:(1) Costs associated with the purchase of land, including existing structures such as mobilehome parks; options to buy land or existing structures; and extensions of the time periods of options to buy land or existing structures.(2) Fees for professional services, including but not limited to:(B) Architectural fees for reasonable architectural costs in connection with the preparation of an application for Construction or Permanent Financing;(C) Engineering fees connected with the preparation of an application for Construction or Permanent Financing;(D) Legal fees incurred in connection with the preparation of an application for Construction or Permanent Financing, obtaining local government approvals, site purchase, a loan closing, or for representation in litigation affecting a Predevelopment Loan Program-assisted project.(3) Permit or application fees;(5) Costs of site preparation, related water or sewer development, or on-site material expenses;(6) Repayment of a predevelopment loan obtained from another source and utilized by the Applicant in connection with the proposed housing development;(8) Other expenses recoverable from the Construction or Permanent Financing.(b) Land purchased partially with Predevelopment Loan funds may be used for purposes other than Assisted Housing, for example, the development of non-Assisted Housing or commercial or agricultural uses. In such cases, the amount of the Predevelopment Loan may not exceed the cost for authorized purposes attributable to that portion of the land which will be used for Assisted Housing for Persons of Low Income.(c) The Department may make Predevelopment Loans for land purchase to Eligible Sponsors even if the Eligible Sponsor is not able at the time the Predevelopment Loan is made to proceed with the development of Assisted Housing on the purchased site.(d) The Department may make Predevelopment Loans for the development of Mobilehome Parks and Manufactured Housing subdivisions.(e) Predevelopment Loans may not be made for Construction Financing or for the administrative expenses of the Applicant.(f) The following limitations on eligible expenses shall apply:(1) No more than 20% of the total monies appropriated to the Fund, or a lower limit which the Department may set in a Notice of Funding Availability (NOFA), shall be committed to any single Borrower at any time. If the Applicant is a Limited Liability Corporation or limited partnership, all Predevelopment Loan commitments to the general partner or general partners shall be counted when determining whether this limit has been reached.(2) The aggregate amount loaned for purposes other than for an option to purchase land or existing structures, the purchase of real property or existing structures, or physical site development shall not exceed $100,000.(3) The amount loaned for the purchase or refinance of real property shall not exceed its fair market value. Fair market value shall be determined by an appraisal based on comparable sales or by any other appraisal method or evidence of value approved by the Department. The Borrower shall pay the cost of an appraisal, but the cost may be financed through a Predevelopment Loan.(4) Predevelopment Loans or special account disbursements for purchase option payments, purchase option extensions or escrow deposits shall not exceed 10% of the purchase price.(5) Except for loans for option payments or escrow deposits of $1,000 or less, the option or escrow agreement shall provide for the return of the option Payment or escrow deposit if: (A) The seller is unable to deliver clear title to the land or is unable to convey the land for any other reason, or(B) The purchase price exceeds fair market value.(6) If the Predevelopment Loan for an option payment or escrow deposit exceeds $15,000, the option or escrow agreement shall provide for the return of the payment or deposit if a Construction or Permanent Financing commitment cannot be obtained.(7) Options and escrow agreements shall be assigned to the Department as security.(8) Predevelopment Loans may be made for land purchase only if the Department finds that development of the site for affordable housing is feasible.(9) Predevelopment Loans for engineering fees shall not exceed 50% of a housing development's total engineering costs or $10,000, whichever is greater. The Department may increase this limit if the housing development includes the construction of water and sewer lines or facilities. Disbursement of engineering fees shall be staged in accordance with the completion of engineering work.(10) Disbursement of architectural fees shall be staged in accordance with the completion of architectural work.(11) Predevelopment Loans for legal fees shall not exceed $5,000. Loan funds shall not be disbursed unless the legal fees are itemized. Predevelopment Loans shall not be made for legal fees incurred in the formation of Eligible Sponsors.(12) Predevelopment Loans for consultant fees shall not exceed 1% of the housing project's development costs, and shall only be made if the tasks of the consultant are enumerated in an agreement between the Applicant and the consultant which is approved by the Department. Payments to a consultant shall be staged in accordance with the completion of various tasks.(13) Predevelopment Loans for bonding, permits, deposits and application fees may be made to the extent that there is a need to pay for such fees prior to obtaining Construction or Permanent Financing.(14) Predevelopment Loans for site preparation, on-site material expenses and related water or sewer development may be made only if the Applicant has made a reasonable effort to obtain funds for these purposes from alternative sources.(15) Limitations on other loan purposes pursuant to subdivision (a)(8) of this section may be established by the Director. The Director may waive any requirement of this section not otherwise required by law if it is determined that the waiver would not adversely affect the purposes of the Fund or that the requirement would impose an intolerable burden on the Borrower.Cal. Code Regs. Tit. 25, § 7005
1. Renumbering and amendment of Section 7004 (e)-(f) to Section 7005 filed 1-5-82; effective thirtieth day thereafter (Register 82, No. 2). For history of former section, see Register 78, No. 14.
2. Editorial correction of subsections (a), (d) and (g) (Register 82, No. 9).
3. Amendment of subsections (a), (b), (d) and (i) filed 10-4-84; effective thirtieth day thereafter (Register 84, No. 40).
4. Amendment filed 8-13-85; effective thirtieth day thereafter (Register 85, No. 33).
5. Repealer and new section filed 9-19-2003; operative 10-19-2003 (Register 2003, No. 38).
6. Amendment of subsection (f)(15) filed 11-1-2004; operative 12-1-2004 (Register 2004, No. 45). Note: Authority cited: Sections 50402 and 50406, Health and Safety Code. Reference: Sections 50530, 50530.5, 50531 and 50532, Health and Safety Code.
1. Renumbering and amendment of Section 7004 (e)-(f) to Section 7005 filed 1-5-82; effective thirtieth day thereafter (Register 82, No. 2). For history of former section, see Register 78, No. 14.
2. Editorial correction of subsections (a), (d) and (g) (Register 82, No. 9).
3. Amendment of subsections (a), (b), (d) and (i) filed 10-4-84; effective thirtieth day thereafter (Register 84, No. 40).
4. Amendment filed 8-13-85; effective thirtieth day thereafter (Register 85, No. 33).
5. Repealer and new section filed 9-19-2003; operative 10-19-2003 (Register 2003, No. 38).
6. Amendment of subsection (f)(15) filed 11-1-2004; operative 12-1-2004 (Register 2004, No. 45).