825 R.I. Code R. 825-RICR-30-00-2.6

Current through October 25, 2024

Section 825-RICR-30-00-2.6 - AFFORDABLE HOUSING RESTRICTION AGREEMENT

A. On the Closing Date, the Owner or Transferee, as applicable, shall enter into an Affordable Housing Restriction Agreement with the Corporation, in form and substance satisfactory to the Corporation, which shall, among other things, impose the following requirements and restrictions relating to the Housing Development income for a period of forty (40) years beyond any current use restrictions (the "Term"):

1. Tenant Income. During the term of or any extension or renewal of any Housing Assistance Payments Contracts applicable to the Housing Development tenant income restrictions required thereunder shall be complied with. Thereafter, all units of the Housing Development shall, except as set forth below, be rented only to tenants having aggregate family incomes which, on the date of commencement of the lease term do not exceed sixty percent (60%) of the Area Median Income as defined in 26 U.S.C. § 42(d) as amended from time to time and the rules and regulations promulgated thereunder (the "Median Family Income"). In the event any tenant assistance is made available to the Development during the term of the Affordable Housing Restriction Agreement the Development shall, to the extent economically feasible, endeavor to lease at least forty percent (40%) of the units to tenants with aggregate family income not in excess of forty percent (40%) of the Area Median Income. Notwithstanding the foregoing, in the event the Development is occupied exclusively by tenants of age 62 and older, and to the extent permitted under any federal regulations applicable to the Housing Development, the Owner may admit tenants with incomes up to eighty percent (80%) of the Area Median Income. The Owner of the Housing Development shall annually obtain certifications of tenants' income and certify the same to the Corporation. All vacancies in the Housing Development shall be filled as expeditiously as possible with tenants whose incomes will insure compliance with this section. Nothing contained herein shall require the displacement of existing tenants of a Housing Development. Additionally, resident selection shall be conducted in accordance with the requirements of that certain Section 8-R esident Selection Plan (as applicable), contained in the consent order of the United States District Court for the District of Rhode Island entered on November 22, 1985 in the case of Martinez v. Rhode Island Housing and Mortgage Finance Corporation, C.A. No. 83-03193, which plan was submitted for public comment and re-adopted by the Corporation on February 18, 1987.

2. Tenant Contributions of Rental Charges. Tenant contributions of rental charges for each unit, including utility payments, shall not, after the expiration of any applicable Housing Assistance Payment Contracts, exceed the maximum tenant contribution in effect for the low income housing tax credit program established by §42(g)(1)(B) of the Internal Revenue Code, or as determined by the Corporation from time to time by Program Bulletin in the event that the low income housing tax credit program established by §42(d) of the Internal Revenue Code is terminated. Any permitted increases in tenant contributions of rental charges following expiration of any applicable Housing Assistance Payments Contracts shall be phased in under a transition schedule approved by the Corporation so as to minimize the financial burden on tenants residing at the Housing Development at the time of expiration of such Housing Assistance Payments Contracts.

3. Additional Subsidies. Owners and/or all Transferees of the Housing Development shall use best efforts to renew or extend the terms of any existing federal rental subsidies received for the Housing Development and to secure any available additional subsidies made available from time to time by the federal government, the State of Rhode Island or the municipality in which the Housing Development is located.

4. Reserve Accounts. The Owner shall maintain the following accounts for the Housing Development:

a. Operating Reserve Fund. An Operating Reserve Fund in an amount determined by the Corporation necessary to satisfy the future operating requirements of the Housing Development during the term of the Affordable Housing Restriction Agreement, taking into account, without limitation, the rent, transition and income provisions within the Affordable Housing Restriction Agreement and the anticipated net operating income of the Housing Development (the "Preservation Operating Reserve Fund Requirement");

b. Replacement Reserve Account. A Replacement Reserve Account in an amount determined by the Corporation to satisfy the future capital needs of the Housing Development;

c. Rehabilitation Reserve Account. A Rehabilitation Reserve Account in an amount determined by the Corporation to satisfy the current capital needs of the Housing Development, which account shall only be maintained until the current needs are satisfied and the funds of the account are depleted accordingly; and

d. Other Reserve Accounts. Such other reserve accounts deemed necessary by the Corporation to insure the maintenance and financial viability of the Housing Development.

5. Asset Management Fee. Owners shall be eligible to receive an annual Asset Management Fee from available cash flow consistent with Program Bulletins issued from time to time. Payment of the Asset Management Fee shall not affect any property management fees paid to management agents for a Housing Development.

6. Return on Equity/Surplus Funds.

a. Distribution of Surplus Cash. One-half of any Surplus Cash of the Housing Development at the end of each calendar may be distributed to the Owner up to the amount of the Approved Return on Equity as defined below. The balance of Surplus Cash shall be distributed to and become the sole property of the Preservation Trust. Notwithstanding the foregoing, the Corporation may, as to a specific Housing Development and in its sole discretion, allow the Owner and/or the Transferee to retain ownership of all of a portion of the Surplus Cash upon the condition that the owner pays the Preservation Trust a preservation fee from the Surplus Cash during and after the remaining term of any applicable Housing Assistance Payments Contract; provided, however, that in no event shall the amount of such preservation fee be less than one-half of the present value of the estimated Surplus cash to be generated by the Housing Development during the remaining term of any applicable Housing Assistance Payments Contract, as determined by the Corporation. In the event that the Available Proceeds for any specific Preservation transaction includes funds made available in whole or part as a result of the sale of Tax Credits, the minimum preservation fee, in the Corporation's sole discretion, may be increased by up to one-half of the amount of such proceeds and may be paid from such proceeds. Such preservation fee may be evidenced by promissory notes of the Owner or Transferee.

b. Return on Equity. Owners shall be eligible to receive an annual return on equity in an amount approved by the Corporation and not to exceed six percent (6%) ("Approved Return on Equity"), which shall be paid from Surplus Cash as described above. Owners' equity in the Housing Development will be established at the Closing in accordance with Program Bulletins issued from time to time. Owners are entitled to an Approved Return on Equity only to the extent that funds remain in the Operating Account of the Housing Development after payment of mortgage debt service, operating expenses, reserve deposits and the Asset Management Fee, such funds to be known as Surplus Cash. In the event that sufficient Surplus Cash is not available to pay the Approved Return on Equity in any one year, the balance shall not accrue and the Owner shall not be entitled to that portion of the Approved Return on Equity for that year.

B. Binding Effect. The Affordable Housing Restriction Agreement shall run with the land, constitute a lien on the Housing Development for all obligations of the Owner thereunder and shall bind all permitted successors and assigns of the Owner.

825 R.I. Code R. 825-RICR-30-00-2.6