Section 8315 - Subordination Policy(a) The Department may execute and cause to be recorded a subordination agreement subordinating the Department's lien so long as the subordination does not increase the Department's risk beyond that contemplated in the Program loan or grant commitment, as may be amended from time to time, and so long as the subordination would further the interest of the Program. However, and except for Projects assisted by the U.S. Department of Housing and Urban Development under the Section 811 or Section 202 programs, the Department shall not enter into a subordination agreement or other agreement that contains any of the following:(1) Any limitation of, or condition on, the Department's exercise of its remedies including, but not limited to issuing a notice of default based on a breach under the Department's loan documents, including a default based solely on a breach of the senior lienholder's documents.(2) An agreement that the senior lienholder's acceptance of a deed in lieu of foreclosure would result in the senior lienholder taking title to the Rental Housing Development free and clear of the Department's lien(s).(3) An agreement permitting any modification or supplement of the senior lienholder's lien without the prior written consent of the Department except an agreement that permits a senior lienholder to make advances to: (i) cure a default under a lien with a higher priority than the Department's lien;(ii) pay delinquent taxes on the security property;(iii) pay delinquent hazard or liability insurance premiums for the security property; or(iv) to protect the health and safety of the tenants.(4) An agreement that would require the Department to undertake additional obligations to any party.(b) The Department's lien(s) shall not be subordinated to the liens of a local governmental entity unless either:(1) the total local governmental assistance to the Project is more than twice the amount of the Department's total assistance to the Project (including both loans and grants); or(2) the total local governmental assistance to the Project is more than the Department's total assistance to the Project (including both loans and grants) and the local government entity manages a portfolio of their own loans that includes over 10,000 rental units with rent and occupancy restrictions.(c) As used in this section: (1) "Department's lien" means a deed of trust, regulatory agreement, or other agreement securing payment or performance under an award of Program funds that has been recorded in the office of the recorder of the county in which the Rental Housing Development is located.(2) "Lien of a local government entity" means a recorded deed of trust, regulatory agreement, reversion, or other recorded agreement securing payment or performance, or a covenant running with the land that affects the maintenance, use, operation, or occupancy of the Rental Housing Development. Except that covenants in favor of a community redevelopment agency or successor agency regarding the use, maintenance, operation, or transferability of a Rental Housing Development including rent limitations or income restrictions on tenants, or prohibiting discrimination, shall not constitute liens subject to the requirements of this section.(3) "Total local government assistance" means the sum of the original principal amounts of loans and grants made by the local government entity plus other direct project costs paid for by the local governmental entity and approved by the Department including, but not limited to, costs of site preparation, demolition, environmental remediation, and land acquisition. The value of assistance in the form of land write-downs or donations shall be limited to the cost paid by the public agency to acquire the land, less any sales proceeds paid to the agency; or in the case of a leasehold, the cost paid by the public agency less the present value of projected lease payments.(d) The Department's lien(s) shall not be subordinated to the liens of a lender affiliated with an entity that has an ownership interest in the Project unless a covenant, regulatory agreement, or similar instrument is recorded senior to the lender's documents that includes the provisions specified in Section 8310(f).Cal. Code Regs. Tit. 25, § 8315
1. New section filed 9-29-2003; operative 9-29-2003 pursuant to Government Code section 11343.4 (Register 2003, No. 40).
2. Amendment of subsections (b) and (c)(2) and new subsection (c)(3) filed 6-11-2010; operative 7-11-2010 (Register 2010, No. 24).
3. Editorial correction of subsection (b) (Register 2010, No. 29).
4. Amendment of subsections (a)(1) and (b), new subsections (b)(1)-(2), amendment of subsections (c)(2)-(3), new subsection (d) and amendment of NOTE filed 11-8-2017; operative 11-15-2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 45). Note: Authority cited: Sections 50406(n), 50517.5(a)(1), 50517.5(a)(3), 50675.1(d), 50675.11 and 50896.3(b), Health and Safety Code. Reference: Sections 50517.5(d)(4)(D), 50675(e), 50675.1(b), 50675.6(d), 50896, 50896.1 and 50896.3, Health and Safety Code.
1. New section filed 9-29-2003; operative 9-29-2003 pursuant to Government Code section 11343.4 (Register 2003, No. 40).
2. Amendment of subsections (b) and (c)(2) and new subsection (c)(3) filed 6-11-2010; operative 7-11-2010 (Register 2010, No. 24).
3. Editorial correction of subsection (b) (Register 2010, No. 29).
4. Amendment of subsections (a)(1) and (b), new subsections (b)(1)-(2), amendment of subsections (c)(2)-(3), new subsection (d) and amendment of Note filed 11-8-2017; operative 11/15/2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 45).