Section 7686 - Construction Requirements(a) The department shall review and underwrite project plans and specifications to ensure the following objectives: (1) The rental housing development shall have a minimum useful life of 20 years for projects proposing only rehabilitation and 30 years for projects proposing rehabilitation and either acquisition or refinancing; and(2) Maintenance, repair, and replacement costs shall be minimized during the useful life of the rental housing development.(b) The sponsor shall ensure that the rehabilitation work for the project all be performed in a competent, professional manner at the lowest reasonable cost consistent with the project's scope and locality and not in excess of the total funds available. The sponsor may demonstrate the reasonableness of the proposed cost by soliciting bids based on a bid package distributed to potential licensed contractors located in the general area of the rental housing development or by the use of other methods which adequately demonstrate to the department's satisfaction that the costs are reasonable. Such bid package or other method shall include at a minimum:(1) complete plans and specifications for the work; and(2) a full description of the program requirements for rehabilitation, including the required provisions of the construction contract.(c) The sponsor shall only enter into written contracts with contractors possessing valid California contractor's licenses. The contract shall be subject to the prior approval of the department to determine compliance with program requirements.(d) The construction contract shall be a completely integrated agreement containing all the understandings, covenants, conditions and representations between the parties and, at a minimum, contain provisions which:(1) require that the contractor complete the work in accordance with the approved plans and specifications and applicable local, state and federal laws, regulations and building codes and standards;(2) require the contractor to proceed with and complete the work in accordance with the approved schedule for work;(3) specify a total contract price consistent with the approved project budget;(4) provide for a method of payment to the contract or consistent with program requirements which may include progress payments and retentions;(5) require that the contractor provide a payment bond securing payment to persons providing goods or services to the project and a performance bond securing faithful completion of the work. Each bond shall be in an amount equal to 50 percent of the total contract price and include the department as a dual obligee. The department may waive the payment and performance bond requirements, or reduce their scope, upon the sponsor's either:(A) providing alternative security for payment and performance under the construction contract which is substantially equivalent to the bond requirements, or(B) demonstrating that the bonds, or the full amount thereof, are not necessary to protect the interests of the department and ensure completion of the rehabilitation work;(6) permit the sponsor and the department and their designated agents and employees the right to inspect the project site and all books, records and documents maintained by the contractor in connection with rehabilitation work;(7)(A) require the contractor to maintain insurance coverage in the following amounts: 1. Comprehensive General Liability Insurance in a minimum amount of $1,000,000 including: premises, operations, products/completed operations hazard, contractual insurance, independent contractor's protection, and personal injury, or their equivalent;2. Broad Form Property Damage in a minimum amount of coverage equal to the total of all existing loans secured against the property;3. Comprehensive Automotive Liability, including bodily injury of $1,000,000 per occurrence and per person and $1,000,000 or the total of existing loans secured against the property, whichever is greater, in Property Damage coverage;4. Worker's Compensation and Employer's Liability Insurance to the extent required by State law.(B) require the contractor to provide prior to the commencement of construction proof of coverage as evidenced by a Certificate of Insurance or a binder followed by a Certificate within thirty days.(C) require all policies to include the sponsor and the department and its officers, agents, and employees, named as additional insureds.(D) require the policies to include a cancellation clause notifying the department 30 days prior to cancellation of the policies. The department may approve alternate amounts of coverage based on the size of the project and scope of work to be performed.(8) obligate the contractor to warrant the rehabilitation work for a period of not less than one year;(9) require that the contractor pay all amounts when due for labor, work performed under subcontract, or materials, supplies and equipment provided to the project;(10) provide for the assignment of the construction contract to the department upon sponsor's breach of the Rehabilitation Loan Agreement;(11) include such special conditions applicable to the construction contract as may have been imposed in connection with the department's approval of the project for funding;(12) require that the general contractor require all subcontractors to maintain similar insurance coverage as mentioned above, with the exception that the subcontractor' insurance need not name the sponsor or the department as additional insureds, and the minimum amount of coverage shall be $500,000.(e)(1) The sponsor shall insure the property before, during, and after construction at the following minimum levels:(A) Hazard (property) insurance to include:1. all risk, or fire and lightning, extended coverage, vandalism and malicious mischief, or equivalent;2. coverage of the entire structure to include all risk contents coverage;3. replacement cost coverage or total value;4. a maximum deductible per occurrence of $2,500, or $1,000 if the completed project value is less than $300,000;5. a lenders loss payable endorsement insuring the department.(B) Other property insurance to include: 1. Flood insurance with coverage insuring to 80% of replacement cost if the property is located in a 100 year flood plain;2. Steam boiler and related machinery coverage insuring to 80% of replacement cost when applicable.(C) Comprehensive General Liability insurance coverage, to include $1,000,000 per occurrence or $2,000,000 per occurrence for buildings with elevators.(D) Other insurance coverage to include Loss of Rents coverage insuring 75% of annual gross rent receipts, and Worker's compensation as required by State law if employees are involved.(2) The sponsor shall provide to the department prior to disbursement of funds evidence of such insurance coverage in the form of a Certificate of Insurance or binder followed by a certificate within 30 days.(3) All policies must include the department, its officers, agents, and employees, named as additional insureds.(4) The policies must include a cancellation clause notifying the department 30 days prior to cancellation of the insurance policy.(5) The department may approve alternate amounts of coverage based on the size of the project and scope of work to be performed.Cal. Code Regs. Tit. 25, § 7686
1. New section filed 6-12-89 as an emergency pursuant to Health and Safety Code section 50668.5(g); operative 6-12-89 (Register 89, No. 24). A Certificate of Compliance must be transmitted to OAL within 120 days or the regulation will be repealed on 10-10-89. For history of former subchapter 8 (sections 7700-7714.5, not consecutive), see Register 85, No. 33.
2. New section refiled 10-6-89 as an emergency pursuant to Health and Safety Code section 50668.5(g) and Government Code section 11346.1(h); operative 10-10-89 (Register 89, No. 42). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 2-7-90.
3. New section refiled 2-5-90 as an emergency pursuant to Health and Safety Code section 50668.5(g) and Government Code section 11346.1(h); operative 2-7-90 (Register 90, No. 6). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 6-7-90.
4. Amendment of subsections (a)-(c) filed 3-5-90 as an emergency pursuant to Health and Safety Code section 50668.5(g); operative 3-5-90 (Register 90, No. 12). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 7-3-90.
5. Certificate of Compliance as to 2-5-90 and 3-5-90 orders including amendment of subsection (b), (c), (d), and (e) transmitted to OAL 5-22-90 and filed 5-29-90 (Register 90, No. 29). Note: Authority cited: Section 50668.5, Health and Safety Code. Reference: Section 50668.5, Health and Safety Code.
1. New section filed 6-12-89 as an emergency pursuant to Health and Safety Code section 50668.5(g); operative 6-12-89 (Register 89, No. 24). A Certificate of Compliance must be transmitted to OAL within 120 days or the regulation will be repealed on 10-10-89. For history of former subchapter 8 (sections 7700-7714.5, not consecutive), see Register 85, No. 33.
2. New section refiled 10-6-89 as an emergency pursuant to Health and Safety Code section 50668.5(g) and Government Code section 11346.1(h); operative 10-10-89 (Register 89, No. 42). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 2-7-90.
3. New section refiled 2-5-90 as an emergency pursuant to Health and Safety Code section 50668.5(g) and Government Code section 11346.1(h); operative 2-7-90 (Register 90, No. 6). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 6-7-90.
4. Amendment of subsections (a)-(c) filed 3-5-90 as an emergency pursuant to Health and Safety Code section 50668.5(g); operative 3-5-90 (Register 90, No. 12). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed on 7-3-90.
5. Certificate of Compliance as to 2-5-90 and 3-5-90 orders including amendment of subsection (b), (c), (d), and (e) transmitted to OAL 5-22-90 and filed 5-29-90 (Register 90, No. 29).