HomeMy WebLinkAbout2014 CON CDC HA - Paradise Creek Housig Partners - Ground Lease for Phase IOR/0/414t
GROUND LEASE FOR PHASE I
[Transit -Oriented Infill Affordable Housing and Paradise Creek Enhancement Project]
By and Between
COMMUNITY DEVELOPMENT COMMISSION -HOUSING AUTHORITY OF THE
CITY OF NATIONAL CITY
"Landlord"
and
PARADISE CREEK HOUSING PARTNERS, L.P.
"Tenant"
Dated as of November 19, 2014
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GROUND LEASE FOR PHASE I
THIS GROUND LEASE (the "Lease"), dated, for identification purposes only, as of
November 19, 2014, is entered into by and between the COMMUNITY DEVELOPMENT
COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, a public
body, corporate and politic ("Landlord" or "Commission"), and PARADISE CREEK
HOUSING PARTNERS, L.P., a California limited partnership ("Tenant" or "Developer").
RECITALS
A. WHEREAS, Commission is a California community development commission
acting to implement the California Housing Authorities Law, Part 2 of Division 24 of the Health
and Safety Code;
B. WHEREAS, Developer is controlled by an experienced owner, developer and
manager of affordable housing for very -low and low-income families;
C. WHEREAS, Commission is the owner of certain real property situated in the
City of National City, County of San Diego, State of California, and legally described in Exhibit
"A" (the "Property");
D. WHEREAS, the Community Development Commission of the City of National
City and Developer entered into that certain "Disposition and Development Agreement" dated as
of June 21, 2011 (the "DDA");
E. WHEREAS, the Commission elected to retain the housing assets of and functions
previously performed by the Community Development Commission of the City of National City
pursuant to California Health and Safety Code Section 34176, and thereby, by operation of law,
the Commission assumed the rights and obligations of the Community Development
Commission of the City of National City with respect to the DDA;
F. WHEREAS, the DDA provided that upon the satisfaction of certain conditions,
Commission would ground lease the Property to Developer; and
G. WHEREAS, all conditions precedent to the parties entering into this Lease have
been satisfied or waived.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and
conditions herein contained, Commission and Developer agree as follows:
ARTICLE 1. LEASE OF THE PROPERTY
1.1 Lease of the Property. Landlord leases to Tenant, and Tenant hires from
Landlord, the Property on the terms and conditions as set forth in this Lease.
1.2 Purpose of Lease. The purpose of this Lease is to provide for the construction,
maintenance, management and operation of a 109-unit (which includes one manager's unit),
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multi -family, low-income rental housing project. Tenant will not occupy or use the Property, or
permit the Property to be used or occupied, nor do or permit anything to be done in or on the
Property, in whole or in part, for any other purpose. The foregoing notwithstanding, after the
foreclosure of a Mortgage, or acceptance by a Mortgagee of an assignment or deed in lieu of
foreclosure, the Property may be used for any lawful purpose.
1.3 Recorded Encumbrances. This Lease, the interests of Landlord and Tenant
hereunder, and the Property, are in all respects subject to and bound by all of the covenants,
conditions, restrictions, reservations, rights, rights -of -way and easements of record including,
without limitation: those items shown as exceptions to title in that certain Preliminary Report
dated as of September 18, 2014, issued by Old Republic Title Company with respect to the
Property, and that certain Easement Agreement (Fire Lane) which is being recorded concurrently
herewith.
1.4 Memorandum of Lease. A short form Memorandum of Lease referring to this
Lease is being executed by Landlord and Tenant concurrently herewith, and recorded in the
Official Records of the County of San Diego, California (the "Official Records").
1.5 Assignment of Utility Rights. Landlord, by virtue of its fee title to the Property,
may hold certain rights, entitlements or credits with respect to utility capacity, connections, etc.
(the "Utility Rights"). Landlord hereby assigns said Utility Rights to Tenant as an incidence of
its leasehold interest in the Property.
ARTICLE 2. DEFINITIONS
All capitalized terms used herein may be defined where first used in this Lease and/or as
set forth in this Article 2. Unless otherwise defined herein, all capitalized terms shall have the
same meanings ascribed to them in the DDA. For the purpose of supplying such definitions, the
DDA, notwithstanding anything contained therein or herein to the contrary, shall not merge with
this Lease.
"Award" means any compensation or payment made or paid for the Total, Partial or
Temporary Taking of all of any part of or interest in the Property and/or the Improvements,
whether pursuant to judgment, agreement or otherwise.
"Capital Improvements" means all work and improvements with respect to the Property
for which costs and expenses may be capitalized in accordance with GAAP.
"Cash Flow" has the meaning set forth in the Commission Subordinate Loan Note.
"Commencement Date" has the meaning set forth in Article 3 of this Lease.
"Commission Subordinate Loan Note" means that certain promissory note, dated as of
even date with this Lease, made by Tenant in favor of Landlord in the original principal amount
of $6,000,000.00.
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"Compliance Period" has the meaning set forth in Section 42(i)(1) of the Internal
Revenue Code of 1986, as amended.
"Construction" means the improvement of the Property pursuant to the Plans.
"Construction Loan" refers to the loan from a lender (or consortium of lenders)
acceptable to the Executive Director of Landlord, the proceeds of which are used to construct the
Project.
"Debt Service" has the meaning set forth in the Commission Subordinate Loan Note.
"Environmental Law" means any federal, state or local environmental, health and/or
safety -related law, rule, regulation, requirement, order, ordinance, directive, guideline, permit or
permit condition, currently existing and as amended, enacted, issued or adopted in the future.
The term Environmental Law includes, but is not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, and similar state or local laws.
"Event of Default" has the meaning set forth in Article 21.
"Executive Director" means the Executive Director of Landlord or his designee.
"Fiscal Year" has the meaning set forth in the Commission Subordinate Loan Note.
"Hazardous Materials" means any chemical, substance, object, condition, material,
waste, or controlled substance which is or may be hazardous to human health or safety or to the
environment, due to its radioactivity, ignitability, corrosiveness, explosivity, flammability,
reactivity, toxicity, infectiousness, or other harmful or potentially harmful properties or effects,
including, without limitation, all chemicals, substances, materials, or wastes that are now or
hereafter may be listed, defined, or regulated in any manner by any federal, state, or local
government agency or entity, or under any federal, state, or local law, regulation, ordinance, rule,
policy or procedure due to such properties or effects.
"Impositions" means all taxes (including, without limitation, sales and use taxes);
assessments (including, without limitation, all assessments for public improvements or benefits
whether or not commenced or completed prior to the Commencement Date and whether or not to
be completed within the Term); water, sewer or other rents, rates and charges; excises; levies;
license fees; permit fees; inspection fees and other authorization fees and other charges; in each
case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every
character (including all interests and penalties thereon), which are attributable or applicable to
any portion of the Term and may be assessed, levied, confirmed or imposed on or in respect of,
or be a lien upon (a) the Property or the Improvements, or any part thereof, or any estate, right or
interest therein, (b) any occupancy, use or possession of or activity conducted on the Property or
the Improvements, or any part thereof, or (c) this Lease. The term "Impositions" shall also
include any and all increases in the foregoing, whether foreseen or unforeseen, ordinary or
extraordinary, including, without limitation, any increase in real property taxes resulting from a
sale of the Property by Landlord.
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"Improvements" means all buildings, structures and other improvements, including the
building fixtures thereon, now located on the Property or hereafter constructed on the Property;
all landscaping, fencing, walls, paving, curbing, drainage facilities, lighting, parking areas,
roadways and similar site improvements now located or hereafter placed upon the Property.
"Indemnitees" means Landlord, the Community Development Commission -Housing
Authority of the City of National City, the City of National City, California ("City") and their
employees, agents, members and officials.
"Index" means the Consumer Price Index -Urban Wage Earners and Clerical Workers
(San Diego, All Items, Base 1982-84 = 100) as published by the United States Department of
Labor, Bureau of Labor Statistics. Should the Bureau discontinue the publication of the Index,
or publish the same less frequently or on a different schedule, or alter the same in some other
manner including, without limitation, changing the name of the Index or the geographic area
covered by the Index, Landlord and Tenant shall adopt a substitute index or procedure which
reasonably reflects and monitors consumer prices.
"Institutional Lender" means any one or combination (including, without limitation, a
consortium) of the following lending institutions: a commercial or savings bank; a trust
company; an insurance company; a savings and loan association; a building and loan association;
an educational institution; a pension, retirement or welfare fund; a charity; an endowment fund
or foundation authorized to make loans in the State of California; a company engaged in the
ordinary course of business as a lender with net unencumbered assets in the amount of not less
than $50,000,000 which is duly licensed or registered with any regulatory agency having
jurisdiction over its operation, if any, and is not under any order or judgment of any court or
administrative agency restricting or impairing its operation as a lender where the restriction or
impairment would be directly related to a proposed loan to Tenant, and which is regularly
engaged in business in an office or location in the State of California; or any other entity having
a net worth of $75,000,000 or more whether or not a so-called institution; or any division,
subsidiary, parent or affiliate owned or controlled by, owning or in control of or in common
control or ownership with any of the foregoing entities.
"Insurance Requirements" means all terms of any insurance policy covering or
applicable to the Property or the Improvements, or any part thereof, all requirements imposed by
the issuer of any such policy, and all orders, rules, regulations and other requirements of the
National Board of Fire Underwriters (or any other body exercising similar functions) applicable
to or affecting the Property or the Improvements, or any part thereof, or any use or condition of
the Property or the Improvements, or any part thereof.
"Lease Year" means the year commencing on the first day of the first full calendar
month following the Commencement Date, or anniversary thereof, and ending at midnight on the
last day of the month in which an anniversary of the Commencement Date occurs.
"Legal Requirements" means all laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations, directions
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and requirements of and agreements with all governments, departments, commissions, boards,
courts, authorities, agents, officials and officers, foreseen or unforeseen, ordinary or
extraordinary, which now or at any time hereafter may be applicable to the Property or the
Improvements, or any part thereof, or to any of the adjoining sidewalks, streets or ways, or to
any use or condition of the Property or the Improvements, or any part thereof.
"Memorandum of Lease" refers to the memorandum of lease which has been recorded
as described in Section 1.4.
"Mortgage" has the meaning set forth in Section 18.1.1 of this Lease.
"Mortgagee" has the meaning set forth in Section 18.1.1 of this Lease.
"Net Operating Income" has the meaning set forth in the Commission Subordinate
Loan Note.
"Notice of Intended Taking" means any notice or notification on which a reasonably
prudent person would rely and which said person would interpret as expressing an existing
intention of Taking as distinguished from a mere preliminary inquiry or proposal. It includes,
without limitation, the service of a condemnation summons and complaint on a party to this
Lease. The notice is considered to have been received when a party to this Lease receives from
the condemning agency or entity a notice of intent to take, in writing, containing a description or
map of the taking which reasonably defines the extent of the taking.
"Official Records" means the Official Records of San Diego County, California.
"Operating Deficits" means, for the applicable period, the shortfall, if any, between
Operating Income and Operating Expenses.
"Operating Expenses" has the meaning set forth in the Commission Subordinate Loan
Note.
"Operating Income" has the meaning set forth in the Commission Subordinate Loan
Note.
"Partial Taking" means any taking of the fee title of the Property and/or the
Improvements that is not either a Total, Substantial or Temporary Taking.
"Plans" means the plans and specifications for the Construction, a set of which, initialed
by Tenant, are on file in the offices of Landlord.
"Potential Default" means any condition or event which, with the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
"Project" refers to the Property and the Improvements constructed and maintained
thereon.
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"Property" has the meaning set forth in Recital "C," above.
"Substantial Taking" means the taking of so much of the Property and/or the
Improvements that the portion of the Property and/or the Improvements not taken cannot be
repaired or reconstructed, taking into consideration the amount of the Award available for repair
or reconstruction, so as to constitute a complete, rentable structure, capable of producing a
proportionately fair and reasonable net annual income after payment of all Operating Expenses,
and all other charges payable under this Lease, and after performance of all covenants and
conditions required by Tenant by law and under this Lease.
"Taking" means a taking or damaging, including severance damage, by eminent domain
or by inverse condemnation or for any public or quasi -public use under any statute. The taking
may occur as a result of a transfer pursuant to the recording of a fmal order in condemnation, a
voluntary transfer or conveyance to the taking authority under threat of condemnation, or a
transfer while condemnation proceedings are pending. Unless otherwise provided, the taking
shall be deemed to occur as of the earlier of (a) the date actual physical possession is taken by
the condemnor, or (b) the date on which the right to compensation and damages accrues under
the law applicable to the Property and/or the Improvements. A taking as used in this Lease does
not include the voluntary dedication of any portion of the Property necessary to obtain building
permits or to comply with any other applicable governmental rule, regulation or statute; nor does
it include the enactment of any law, ordinance or regulation which may affect the use or value of
the Property but which does not involve an actual taking of any portion thereof. Eminent domain
actions filed by Landlord against owners of portions of the Property and pending as of the
Commencement Date shall not be deemed, construed or interpreted as a Taking under this Lease.
"Tax Credit Partner" means MUFG Union Bank, N.A., a national banking association
and its successors and assigns.
"Temporary Taking" means a taking of all or any part of the Property and/or the
Improvements for a term certain which term is specified at the time of taking. Temporary
Taking does not include a taking which is to last for an indefmite period or a taking which will
terminate only upon the happening of a specified event unless it can be determined at the time of
the taking substantially when such event will occur. If a taking for an indefinite term should take
place, it shall be treated as a Total, Substantial or Partial Taking in accordance with the
definitions set forth herein.
"Term" has the meaning set forth in Article 3 of this Lease.
"Total Taking" means the taking of the fee title to all of the Property.
"Unit" means a dwelling unit on the Property.
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ARTICLE 3. TERM
The term of this Lease (the "Term") shall commence on the date the Memorandum of
Lease records in the Official Records (the "Commencement Date"), and shall continue thereafter
until the ninety-ninth (99th) anniversary of the date on which a Notice of Completion records in
the Official Records for the Construction.
ARTICLE 4. RENTAL
4.1 Rent. Tenant shall pay, without abatement, deduction, or offset, the following
sums (the "Annual Rent"):
(a) Rent Commencement Date. Lease Year 1 shall commence on the
Commencement Date of this Lease. That notwithstanding, Annual Rent shall not commence until
the earlier of (the "Rent Commencement Date"): (i) the date that the Construction Loan converts
from temporary construction to permanent status pursuant to its terms (the "Loan Conversion
Date"), or (ii) the third (3rd) anniversary of the Commencement Date of this Lease. If the Loan
Conversion Date, occurs prior to the third (3rd) anniversary of the Commencement Date of this
Lease, Tenant shall promptly give notice of such loan conversion to Landlord.
(b) First 30 Lease Years from Rent Commencement Date. For each of the
first thirty (30) Lease Years commencing with the Rent Commencement Date (the "First 30 Rent
Year Period"), the Annual Rent shall be the fixed sum of Seventy -Five Thousand Dollars
($75,000). For the first Lease Year of such First 30 Rent Year Period, the Annual Rent shall be
prorated at the rate of Two Hundred Five Dollars ($205) per day to account for the number of
days between the Rent Commencement Date and the first day of such Lease Year.
(c) Next 25 Lease Years. For each of the next twenty-five (25) Lease Years
following the First 30 Rent Year Period (the "Next 25 Rent Year Period), the Annual Rent shall
be the sum of Seventy -Five Thousand Dollars ($75,000) as escalated at the fixed rate of two
percent (2%) per Lease Year. Accordingly, the Annual Rent for such first Lease Year of the Next
25 Rent Year Period shall be Seventy -Six Thousand Five Hundred Dollars ($76,500).
(d) Remainder of Term. For each of the Lease Years following the Next 25
Rent Year Period until the end of the Term (the "Appraisal/COLA Period"), Tenant shall pay
Annual Rent at a rate determined by a two (2) part process, as follows:
(i) Part 1. Periodic Appraisal. The Annual Rent for the first Lease
Year of the Appraisal/COLA Period (the " First Appraisal/COLA Period Lease Year") through
Lease Year 60, Lease Years 71 through 75, and 86 through 90 shall be the result of the following
process:
1. Step 1: Meet and Confer. Not later than ten (10) days after
the first day of each of the last Lease Year of the Next 25 Rent Year Period, Lease Year 70 and
Lease Year 85, the parties shall meet and confer for the purpose of attempting to agree on the
Annual Rent for, in each case (except only the very first case), the next succeeding "Five (5)-
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Lease Year Period" (i.e., First Appraisal/COLA Period Lease Year through Lease Year 60, 71
through 75, and 86 through 90, respectively). Landlord and Tenant acknowledge and agree that
the first such Five (5)-Lease Year Period only will be truncated as a consequence of it
commencing closer to the end of Lease Year 60 than a full five (5) years. In each case,
agreement, if any, shall be confirmed in writing by Landlord and Tenant. If, in any case, the
parties fail to agree within thirty (30) days of such meeting (the "Meet and Confer Period"), then
the parties shall proceed to Step 2.
2. Step 2: Selection of Appraiser(s). First the parties shall
attempt to agree on a single MAI appraiser. If the parties have not so agreed in writing within
fifteen (15) days after expiration of the Meet and Confer Period, then within fifteen (5) days
thereafter each shall appoint an MAI appraiser (with an active practice in the appraisal of
commercial real property in the County of San Diego) to participate in the appraisal process
provided for in this section and shall give written notice thereof to the other party. Upon the
failure of either party so to appoint, the nondefaulting party shall have the right to apply to the
Superior Court for the County of San Diego, California, to appoint an appraiser to represent the
defaulting party. Within ten (10) days of the parties' appointments, the two (2) appraisers shall
jointly appoint a third MAI appraiser and give written notice thereof to Landlord and Tenant, or
if, within ten (10) days of the appointment of said appraisers, the two (2) appraisers shall fail to
appoint a third, then either party hereto shall have the right to make application to said Superior
Court to appoint such third appraiser.
3. Step 3: Appraisal Process. The appointed appraiser(s)
shall be given the "Letter of Instruction" attached to this Lease as Exhibit "E" and shall complete
his/her/their appraisal(s) within sixty (60) days, and shall execute and acknowledge his/her/their
determination of fair market ground rent in writing and cause a copy thereof to be delivered to
each of the parties hereto.
4. Step 4: Establishment of Annual Rent. If the parties
agreed on a single appraiser, then the determination of that appraiser shall fix the Annual Rent
for the subject Five (5)-Lease Year Period (or shorter period as to the very first of such Five (5)-
Lease Year Periods). If three (3) appraisers made such determinations, then the three (3)
determinations shall be added together and divided by three (3). The resulting quotient shall be
the fair market ground rent. If, however, the low determination and/or high determination is or
are more than twenty-five percent (25%) lower and/or higher than the middle determination, the
low and/or high determination shall be disregarded. If only one determination is disregarded, the
remaining two (2) determinations shall be added together and their total divided by two (2). The
resulting quotient shall be the Annual Rent for the subject Five (5)-Lease Year Period (or shorter
period as to the very first of such Five (5)-Lease Year Periods). If both the low and the high
appraisals are disregarded, the middle determination shall be the Annual Rent for the subject
Five (5)-Lease Year Period (or shorter period as to the very first of such Five (5)-Lease Year
Periods).
If the determination of the appraisal process is not completed by the commencement of
the subject Five (5)-Lease Year Period (or shorter period as to the very first of such Five (5)-
Lease Year Periods), Tenant shall continue to pay rent at the then prevailing Annual Rent rate
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until the adjusted rate is determined, at which time Tenant shall pay any difference for the period
affected by the adjustment.
(ii) Part 2. Intermediate Cost of Living Adjustment. The Annual
Rent for the Five (5)-Lease Year Periods 61 through 65, 66 through 70, 76 through 80, 81
through 85, 91 through 95, and 95 through 99 shall be set in accordance with the following cost
of living process:
1. Step 1. For each of the subject Five (5)-Lease Year Periods,
the Annual Rent in effect for the immediately preceding Five (5)-Lease Year Period shall be
adjusted upward, but never downward.
2. Step 2. For each of the subject Five (5)-Lease Year Periods,
the index shall be the then most recently published monthly figure as shown in the Consumer
Price Index (CPI) for All Urban Consumers for San Diego MSA based on the year 1982-
1984=100 as published by the U.S. Department of Labor's Bureau of Labor Statistics (BLS) (the
"Adjustment Index").
The base for computing the adjustment shall be the index figure for the same month as
the Adjustment Index but twenty (20) years earlier (the "Base Index"). [For example, if the
Adjustment Index is the month of March 2068, the base for that computation would be March
2048.]
The Adjustment Index shall be computed as a percentage of the Base Index and the
percentage increase shall be divided by four (4) (the "Divisor"); provided, however, the Divisor
for the first of such Five (5)-Lease Year Periods only shall be adjusted upward to reflect the
extent to which the preceding Five (5)-Lease Year Period was truncated. For example, assuming
the Base Figure is 110 and the Adjustment Index is 190, the percentage increase is
190/110=1.7272=173%, for a percentage increase of 73% for the subject twenty (20)-year
period. That percentage increase is then divided by four (4) (or such larger Divisor for the first
of such Five (5)-Lease Year Periods) to yield the percentage to be applied or 18.25%. So
118.25% shall be applied to the Annual Rent for the Five (5)-Lease Year Period then prevailing.
If the index is changed so that the base year differs from that in effect on the
Commencement Date, the index shall be converted in accordance with the conversion factor
published by the BLS. If the index is discontinued or revised during the Term, such other
government index or computation with which it is replaced shall be used in order to obtain
substantially the same result as would be obtained if the index had not been discontinued or
revised.
The Annual Rent as adjusted above shall prevail for the subsequent five (5)-Lease Year
Period.
4.2 Time for Payment of Annual Rent. The Annual Rent shall be due and payable
in arrears not later than the last day of the Lease Year for which such Annual Rent is due.
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4.3 Utilities. Tenant shall be responsible for the payment of all water, gas, electricity
and other utilities used by Tenant on the Property.
4.4 Taxes and Assessments.
4.4.1 Notice of Possessory Interest; Payment of Taxes and Assessments on
Value of Entire Property. In accordance with California Revenue and Taxation Code Section
107.6(a), Landlord states that by entering into this Lease, a possessory interest subject to
property taxes may be created. Tenant or other party in whom the possessory interest is vested
may be subject to the payment of property taxes levied on such interest.
4.4.2 Payment of Taxes. Subject to any applicable exemptions, Tenant shall
pay the real property and/or possessory interest taxes applicable to the Property during the term
of this Lease. All such payments shall be made prior to the delinquency date of such payment.
Tenant shall promptly furnish Landlord with satisfactory evidence that such taxes have been paid
or that an exemption from such taxes has been obtained. If any such taxes paid by Tenant shall
cover any period of time prior to or after the expiration of the Term, Tenant's share of such taxes
shall be equitably prorated to cover only the period of time within the tax fiscal year during
which this Lease shall be in effect, and Landlord shall reimburse Tenant to the extent required.
If Tenant shall fail to pay any such taxes, Landlord shall have the right to pay the same, in which
case Tenant shall repay such amount to Landlord within ten (10) days after demand from
Landlord together with interest at the rate set forth in Section 4.5.
4.4.3 Definition. As used herein, the term "real property tax" shall include any
form of real estate tax or assessment (including, without limitation, on possessory interests),
general, special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income, or estate taxes)
imposed on the Property or any interest (including, without limitation, possessory interests)
therein by any authority having the direct or indirect power to tax, including any city, state or
federal government, or any school, agricultural, sanitary, fire, street, drainage or other
improvement district thereof, as against any legal or equitable interest of Landlord or Tenant in
the Property or in the real property of which the Property are a part, as against Landlord's right
to rent or other income therefrom, and as against Landlord's business of leasing the Property.
The term "real property tax" shall also include any tax, fee, levy, assessment or charge (i) in
substitution of, partially or totally, any tax, fee, levy, assessment or charge hereinabove included
within the definition of "real property tax," or (ii) the nature of which was hereinbefore included
within the definition of "real property tax," or (iii) which is imposed as a result of a transfer,
either partial or total, of Landlord's interest in the Property or which is added to a tax or charge
hereinbefore included within the definition of real property tax by reason of such transfer, or (v)
which is imposed by reason of this lease transaction, any modifications or changes hereto, or any
transfers hereof.
4.4.4 Personal Property. Tenant shall pay prior to delinquency all taxes
assessed against and levied upon trade fixtures, furnishings, equipment and all other personal
property of Tenant contained in the Property or elsewhere. When possible, Tenant shall cause
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said trade fixtures, furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of Landlord.
4.4.6 Apportionment. If any of Tenant's said personal property shall be
assessed with Landlord's real property, Tenant shall pay Landlord the taxes attributable to
Tenant not later than the later of (a) ten (10) days after receipt of a written statement setting forth
the taxes applicable to Tenant's property or (b) fifteen (15) days prior to the date said taxes are
due and payable.
4.5 Overdue Interest. Any amount due to Landlord, if not paid when due and before
expiration of the applicable grace period, if any, shall bear interest from the date due until paid at
the lower of: (a) the reference or prime rate of Bank of America, N.T. & S.A., in effect from time
to time plus three percent (3%); or (b) the highest rate of interest allowed under applicable usury
law.
ARTICLE 5. POSSESSION OF PROPERTY
5.1 Acceptance of Premises. Tenant hereby accepts the Property.
5.2 Ownership of Improvements. During the term of this Lease title to all
Improvements, now existing or later made, on the Property are and shall be vested in Tenant.
Tenant shall not, however, remove or demolish any Improvements from the Property except as
permitted herein.
5.3 Surrender of Property.
5.3.1 Upon Expiration. Tenant agrees that on expiration or termination of the
Term, the Improvements on the Property shall become the property of Landlord, free from any
liens or claims whatsoever, without any further compensation therefor from Landlord to Tenant
or any other person.
5.3.2 Condition. On expiration or termination of the Term, Tenant shall
peaceably and quietly leave and surrender the Property and the Improvements to Landlord in
good order, condition and repair, reasonable wear and tear and obsolescence excepted. Tenant
shall leave in place and in good order, condition and repair, all fixtures and machinery; except (if
Tenant is not then in default under this Lease) Tenant shall have the right to remove only Tenant -
owned appliances, other unattached equipment, furniture and merchandise that Tenant shall have
installed, which removal must be done without damage to the Property or Improvements.
Landlord shall have the right to have the Property and the Improvements inspected at Tenant's
cost to determine whether the Property and the Improvements have been properly maintained,
repaired and restored in accordance with the terms of this Lease. That notwithstanding, Tenant
shall not be responsible for the interior condition of individual occupied apartments on the
termination or expiration of this Lease.
5.3.3 Delivery of Documents. Contemporaneous with the expiration or
termination of the Term, Tenant shall immediately deliver to Landlord the following:
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(a) Such documents, instruments and conveyances as Landlord may
reasonably request to enable Landlord's ownership of the Property and the Improvements to be
reflected of record, including, without limitation, a quitclaim deed in recordable form to the
Property and the Improvements.
(b) If requested by Landlord, title insurance, surety bond, or other security
reasonably acceptable to Landlord insuring against all claims and liens against the Property and
the Improvements other than those incurred by Landlord or accepted by Landlord in writing.
(c) All construction plans, surveys, permits and other documents relating to
the Improvements as may be in the possession of Tenant at the time and from time to time
thereafter.
(d) All documents and instruments required to be delivered by Tenant to
Landlord pursuant to this Section shall be in form reasonably satisfactory to Landlord.
5.4 Abandonment. Tenant shall not abandon or vacate the Property or the
Improvements at any time during the Term. If Tenant shall abandon, vacate or otherwise
surrender the Property or the Improvements, or be dispossessed (other than dispossession as the
result of a Substantial Taking or a Taking) thereof by process of law or otherwise, the same shall
constitute a default under this Lease on the part of Tenant and, in addition to any other remedy
available on the part of Landlord, any of Tenant's property left in, upon or about the Property or
the Improvements (except for underground storage tanks) shall, at Landlord's option, be deemed
to be abandoned and shall become the property of Landlord. The appointment of a receiver
pursuant to a Mortgagee's exercise of its rights under a Mortgage, or the foreclosure of a
Mortgage, shall not be a default under this Section.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
6.1 Landlord's Representations. Landlord represents and warrants to Tenant that it
owns the Property in fee simple and has the power and authority to enter into this Lease and
perform all obligations and agreements incidental or pertinent to the Lease. Landlord makes no
representation or warranty with respect to the condition of the Property or its fitness or
availability for any particular use, and Landlord shall not be liable for any latent or patent defect
therein.
6.2 Tenant's Representations. Tenant represents and warrants to Landlord that it
has examined the Property and acknowledges that it hereby accepts possession of the Property in
its "AS IS" condition, with all faults and defects, including, without limitation, infestation of or
damage to the Property caused by wood -destroying pests or organisms.
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ARTICLE 7. DEVELOPMENT OF THE PROPERTY
7.1 Construction. Within thirty (30) days after the Construction Loan Closing, or
such longer period as the Executive Director may approve, Tenant shall commence the
Construction. All Improvements, together with all off -site improvements that may be made by
reason of governmental requirements as a condition to the Construction upon the Property, shall
be constructed in a good and workmanlike manner using materials of good quality and in
substantial compliance with the Plans as modified pursuant to this Article 7, and shall comply
with all applicable governmental permits, laws, ordinances and regulations. Any of the Plans,
including, without limitation, landscaping plans, not approved by the Executive Director as of
the Construction Loan Closing shall be subject to the prior approval of the Executive Director.
7.2 Construction Cost. Tenant shall bear the cost of the Construction, including all
fees and mitigation measures.
7.3 Changes; Landlord Consent. Except as otherwise provided in this Lease,
Tenant shall not make any changes in the Plans without the Executive Director's prior written
consent if such change (a) constitutes a material change in the building material or in the
architectural design, value or quality of any of the Improvements, or (b) would result in an
increase in construction costs in excess of Seventy -Five Thousand Dollars ($75,000.00) for any
single change or in excess of Three Hundred Thousand Dollars ($300,000.00) for all such
changes. Without limiting the above, Landlord agrees that Tenant may make minor changes
which do not change the Projects aesthetics without the Executive Director's prior written
consent, provided that such changes do not violate any of the conditions specified herein.
7.3.1 Submission Requirement; Consent Process. Tenant shall submit any
proposed material changes in the Plans to the Executive Director at least ten (10) days prior to
the commencement of construction relating to such proposed material change. Requests for any
material change which requires consent shall be accompanied by working drawings and a written
description of the proposed change, submitted on a change order form acceptable to the
Executive Director, signed by Tenant and, if required by the Executive Director, also by the
Project architect. If a proposed change is approved, then Tenant shall be notified in writing
within ten (10) days after submission. If the Executive Director fails to disapprove a proposed
change within said ten (10)-day period, and state the reason(s) for such disapproval with
reasonable particularity, then the proposed change shall be deemed approved.
7.4 Landlord's Review. Landlord does not have, and by this Lease expressly
disclaims, the right to or duty for any review of the Plans for the purpose of determining
compliance with building codes, safety features or standards or for the purpose of determining or
approving engineering or structural design, sufficiency or integrity. Landlord's approval of a
direction or request to change the plans, specifications or drawings submitted by Tenant is not
and shall not be a review or approval of the quality, adequacy or suitability of such plans,
specifications or drawings, nor of the labor, materials, services or equipment to be furnished or
supplied in connection therewith. Landlord does not have and expressly disclaims any right of
supervision or control over the architects, designers, engineers or other draft persons and
professionals responsible for the drafting and formulation of the Plans, or any right of
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supervision or control of contractors, builders, trades and other persons engaged in constructing
and fabricating the improvements pursuant to the Plans. Landlord further acknowledges that it
shall not have any right to disapprove any plan, specification or drawing which logically evolves
from any previously approved plan, specification or drawing or to request or require a change in
any previously approved item.
7.5 Soil Conditions. Landlord makes no covenants or warranties respecting the
condition of the soil or subsoil or any other condition of the Property, provided, however, that
the foregoing shall not constitute a release of Landlord under any statute or common law theory.
7.6 Diligent Prosecution to Completion. Once the work is begun, Tenant shall, with
reasonable diligence, prosecute the Construction to completion. The Construction shall be com-
pleted and ready for use not later than the earlier of: (a) seven hundred twenty days (720) days
after the Construction Loan Closing (subject to the right to notice and cure set forth in Section
21.1.4), or (b) the time required to satisfy the requirements of the Proposition 1C Financing;
provided, however, that the time for completion shall be extended for as long as Tenant shall be
prevented from completing the Construction by delays beyond Tenant's control. Additionally,
upon the written request of Tenant, the Executive Director may, at his sole and absolute
discretion, grant one or more extensions of the date by which the Construction must be
completed of, in the aggregate, not more than ninety (90) days. All work shall be performed in a
good and workmanlike manner, shall substantially comply with the Plans, and shall comply with
all applicable governmental permits, laws, ordinances, and regulations.
7.7 Right of Access. During normal construction hours, representatives of Landlord
shall have the reasonable right of access to the Property without charges or fees for the purpose
of inspecting the work of the Construction; provided, however, that such representatives shall
present and identify themselves at Tenant's construction office, be accompanied by a
representative of Tenant while on the Property and obey Tenant's, or its contractor's, safety rules
and regulations. In addition, Landlord shall have the right to authorize the City and other public
agencies to enter the Property, upon the same terms after reasonable prior written notice to
Tenant, for the purpose of constructing, reconstructing, maintaining or repairing any public
improvements or public facilities located on the Property. Landlord shall deliver written notice
of the identity of its representatives to Tenant before such representatives enter the Property.
Landlord hereby indemnifies and holds Tenant, and its contractors, subcontractors, agents,
representatives and employees, and the Property, harmless from and against any loss, cost,
damage or liability, including, without limitation, attorneys' fees, which results from the exercise
by Landlord, or any party acting under Landlord's authority, of the rights granted by this Section.
7.8 Governmental Approvals. If requested by Landlord in writing, Tenant
covenants and agrees to deliver to Landlord conformed copies (and certified copies of all
recorded instruments) of all governmental approvals and permits obtained by Tenant for the
construction, alteration or reconstruction of any Improvements upon the Property in accordance
with the Plans. In no event shall Tenant commence construction of any Improvements pursuant
to the provisions of this Article 7 until such time as Tenant shall have obtained all necessary
governmental approvals and permits to so construct such Improvements.
Page 15
7.9 Landlord's Right to Discharge Lien. If Tenant does not cause to be recorded
the bond described in California Civil Code Section 3143 or otherwise protect the Property under
any alternative or successor statute, and a final judgment has been entered against Tenant by a
court of competent jurisdiction for the foreclosure of a mechanic's, materialman's, contractor's,
or subcontractor's lien claim, and if Tenant fails to stay the execution of the judgment by lawful
means or to pay the judgment, Landlord shall have the right, but not the duty, subject to the
notice and cure rights of Mortgagees and the Tax Credit Partner set forth elsewhere in this Lease,
to pay or otherwise discharge, stay, or prevent the execution of any such judgment or lien or
both. Tenant shall reimburse Landlord for all sums paid by Landlord under this Section, together
with all Landlord's reasonable attorneys' fees and costs, plus interest on those sums, fees, and
costs from the date of payment until the date of reimbursement at the rate set forth in Section 4.5.
7.10 Force Majeure. All obligations of Tenant to promptly commence and thereafter
diligently prosecute to completion the Construction shall be extended by such number of days as
Tenant shall be delayed by reason of events of force majeure pursuant to Article 24.
7.11 Notice of Non -Responsibility. After the recordation of the Certificate of
Completion for the Improvements in the Official Records, Tenant shall provide Landlord with
prior written notice of not less than fifteen (15) days before commencing construction of any
structural alteration of the Improvements, or any non-structural alteration which will cost more
than Twenty -Five Thousand Dollars ($25,000.00), and shall permit Landlord to record and post
appropriate notices of non -responsibility on the Property. The foregoing Twenty -Five Thousand
Dollar ($25,000.00) limitation shall be increased each calendar year by the corresponding
percentage increase in the Index.
7.12 Notice of Completion. On completion of construction of the Improvements,
Tenant shall file or cause to be filed a notice of completion. Tenant hereby appoints Landlord as
Tenant's attorney -in -fact to file the notice of completion on Tenant's failure to do so after the
work of improvement has been substantially completed.
7.13 Subsequent Alterations. Following the Construction in substantial accordance
with the Plans, Tenant may from time to time, at its sole expense, make improvements and other
alterations to the Property which Tenant reasonably determines to be beneficial. Tenant shall not
make any alteration or improvement to the Property the cost of which exceeds Fifty Thousand
Dollars ($50,000.00) without Landlord's prior written consent, which consent shall not be
unreasonably withheld or delayed. The foregoing dollar amount limitations shall be increased
each calendar year by the corresponding increase in the Index. Tenant shall timely pay any
obligation incurred by Tenant with respect to any such alterations or improvements that could
become a lien against the Property and shall defend, indemnify and hold Landlord harmless in
connection therewith.
ARTICLE 8. USE OF THE PROPERTY, HAZARDOUS MATERIALS, AND NON-
DISCRIMINATION
8.1 Definitions Applicable to this Article. All capitalized terms used in this Article
8 and not elsewhere defined shall have the following meanings:
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"Adjusted Income" means the adjusted income of a person (together with the
adjusted income of all persons of the age of eighteen (18) years or older who intend to reside
with such person in one residential unit) as calculated in the manner prescribed under Section
142(d)(2)(B) of the Code.
"Affordable Rent for 30% of Median Income Tenants" means monthly rent
(including the Utility Allowance, and excluding any supplemental rental assistance from the
State of California, the federal government or any other public agency) not in excess of thirty
percent (30%) of one -twelfth (1/12th) of thirty percent (30%) of the Median Income for the Area
adjusted for family size appropriate for the Unit.
"Affordable Rent for 40% of Median Income Tenants" means monthly rent
(including the Utility Allowance, and excluding any supplemental rental assistance from the
State of California, the federal government or any other public agency) not in excess of thirty
percent (30%) of one -twelfth (1/12th) of forty percent (40%) of the Median Income for the Area
adjusted for family size appropriate for the Unit.
"Affordable Rent for 50% of Median Income Tenants" means monthly rent
(including the Utility Allowance, and excluding any supplemental rental assistance from the
State of California, the federal government or any other public agency) not in excess of thirty
percent (30%) of one -twelfth (1/12th) of fifty percent (50%) of the Median Income for the Area
adjusted for family size appropriate for the Unit.
"Affordable Rent for 110% of Median Income Tenants" means monthly rent
(including the Utility Allowance, and excluding any supplemental rental assistance from the
State of California, the federal government or any other public agency) not in excess of thirty
percent (30%) of one -twelfth (1/12th) of one hundred ten percent (110%) of the Median Income
for the Area adjusted for family size appropriate for the Unit.
"Certificate of Continuing Program Compliance" shall mean the Certificate to
be filed annually (or quarterly at the written request of the Executive Director) by Grantee with
the Executive Director which shall be substantially in the form attached to this Lease as Exhibit
"Code" means the Internal Revenue Code of 1986, as amended, including the
Regulations promulgated thereunder or under any predecessor statute.
"30% of Median Income Tenants" means persons or families with Adjusted
Income that does not exceed thirty percent (30%) of the Median Income for the Area, adjusted
for household size.
"40% of Median Income Tenants" means persons or families with Adjusted
Income that does not exceed forty percent (40%) of the Median Income for the Area, adjusted for
household size.
Page 17
"50% of Median Income Tenants" means persons or families with Adjusted
Income that does not exceed fifty percent (50%) of the Median Income for the Area, adjusted for
household size.
"110% of Median Income Tenants" means persons or families with Adjusted
Income that does not exceed one hundred ten percent (110%) of the Median Income for the Area,
adjusted for household size.
"Median Income for the Area" means the median income for the area as
determined and published annually by the Secretary of Housing and Urban Development under
Section 8 of the United States Housing Act of 1937, as amended, or if programs under Section 8
are terminated, median income for the Area determined under the method used by the Secretary
of Housing and Urban Development prior to such termination.
"Utility Allowance" means a monthly allowance for Utility Services based on a
utility allowance schedule published annually by Landlord.
"Utility Services" means all utility services included on the utility allowance
schedule published annually by Landlord.
8.2 Affordable Housing. As hereinafter more particularly provided, Tenant shall use
the Property and the Improvements as multi -family rental housing and ancillary purposes as
follows: (a) twelve (12) of the Units shall be leased to 30% of Median Income Tenants at
Affordable Rent for 30% of Median Income Tenants, of which three (3) of said Units shall be
one (1)-bedroom Units, five (5) of said Units shall be two (2)-bedroom Units, and four (4) of
said Units shall be three (3)-bedroom Units; (b) twenty-three (23) of the Units shall be leased to
40% of Median Income Tenants at Affordable Rent for 40% of Median Income Tenants, of
which five (5) of said Units shall be one (1)-bedroom Units, ten (10) of said Units shall be two
(2)-bedroom Units, and eight (8) of said Units shall be three (3)-bedroom Units; and (c) eighteen
(18) of the Units shall be leased to 50% of Median Income Tenants at Affordable Rent for 50%
of Median Income Tenants, of which three (3) of said Units shall be one (1)-bedroom Units of
which nine (9) of said Units shall be two (2)-bedroom Units, and six (6) of said Units shall be
three (3)-bedroom Units. The remaining Units (save for one (1) manager's unit) shall be leased
to 110% of Median Income Tenants at Affordable Rent for 110% of Median Income Tenants.
The one (1) manager's unit, if not so used, shall also be leased to 110% of Median Income
Tenants at Affordable Rent for 110% of Median Income Tenants. Except for such reasonable
periods during which a Unit is, or Units are, being maintained, repaired or rehabilitated, Tenant
shall actively market any vacant unit or units and lease it or them as soon as reasonably possible
so as to satisfy the subleasing requirements immediately above.
8.2.1 Subtenant Selection. In the selection of subtenants for occupancy
of the Units, Tenant shall give priority to eligible persons and families displaced by Landlord or
by the National City Redevelopment Agency. Any such priority shall be subject to the rules and
regulations of the Tax Credit Program and to each such subtenant meeting screening criteria
(pursuant to the management plan delivered by Tenant to Commission pursuant to Section
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11.4(q) or 12.4(q) of the DDA) approved by the Executive Director, which approval shall not be
unreasonably withheld.
8.3 Increase in Person's or Family's Income. For purposes of satisfying the
obligation to rent the dwelling units as set forth in Section 8.2 above, a person or family who at
the commencement of his, hers or its occupancy qualified as a 30%, 40%, 50% or 110% of
Median Income Tenant shall continue to be treated as such Tenant irrespective of any later
increase in his, her or their income. A Unit occupied by a 30%, 40%, 50% or 110% of Median
Income Tenant shall be deemed, upon the termination of such person's or family's occupancy, to
be continuously occupied by such 30%, 40%, 50% or 110% of Median Income Tenant until
reoccupied, provided that Owner actively, diligently and continuously markets such Unit for
occupancy by a Tenant of the same income classification.
8.4 Section 8 Certificate Holders. Tenant shall accept as Low -Income Tenants, on
the same basis as all other prospective Low -Income Tenants, persons and families that are
recipients of federal certificates for rent subsidies pursuant to the existing program under Section
8 of the United States Housing Act of 1937, as amended, or its successor, and shall not apply
selection criteria to Section 8 certificate holders that are more burdensome than the criteria
applied to all other prospective Low -Income Tenants. Tenant agrees to modify the subleases for
the Units, as necessary, to allow the rental of Units to Section 8 certificate holders.
8.5 Rent Increases. Tenant may adjust the Affordable Rents in accordance with
periodic revisions to the Median Income for the area by the U.S. Secretary of Housing and Urban
Development; provided, however, that the Affordable Rent for any Unit may not be increased
more often than one time per 12-month period, and only after at least thirty (30) days prior
written notice to the affected Low -Income Tenant.
8.6 Initial Income Certification. Immediately prior to the initial occupancy of each
subtenant, and at least annually thereafter, Tenant shall obtain, in substantially the form set forth
on Exhibit `B", current income certification statements for each subtenant. Tenant shall make a
good faith effort to verify each income certification statement provided by an applicant for
subtenancy or a subtenant by taking one or more of the following steps as part of the verification
process: (a) obtain a pay stub for the most recent pay period, (b) obtain an income tax return for
the most recent tax year, (c) conduct a credit rating or similar search, (d) obtain an income
verification form from the applicant's or subtenant's current employer, (e) obtain an income
verification form from the Social Security Administration and/or the California Department of
Social Services if the applicant receives assistance from either of such agencies, or (f) if the
applicant is unemployed and has no such tax return, obtain another form of independent
verification. Tenant shall maintain each such income certification statement on file for not less
than three (3) years.
8.7 Annual Recertification. Not less than annually, Tenant shall obtain and
maintain a file, again in substantially the form set forth in Exhibit `B", of current income
recertification statements for each subtenant. Tenant shall make a good faith effort to verify each
income recertification statement in the manner described in Section 8.6. Tenant shall also
maintain each such income recertification statement on file for not less than three (3) years.
Page 19
8.8 Form of Sublease. The form of sublease or subrental agreement used by Tenant
shall clearly notify subtenants that Tenant has relied on the income certification supplied by the
subtenant, and will rely on the annual income recertification to be supplied by the subtenant, in
determining qualification for occupancy at Affordable Rent, and that any material misstatement
in such certification or recertification will be cause for immediate termination of such sublease or
subrental agreement.
8.9 Low -Income Housing Tax Credit Program. Notwithstanding anything
contained in this Lease to the contrary, if and when the Property is subject to the requirements of
the Federal Low -Income Housing Tax Credit Program under the provisions of Section 42 of the
Code (the "Tax Credit Program"), and there is a conflict between the requirements of the Tax
Credit Program and the affordability provisions set forth in Sections 8.1 through 8.8 above,
inclusive, then (a) as to the Units described in Section 8.2(a) and (b), above, the Tax Credit
Program provisions shall prevail, and (b) as to the Units described in Section 8.2(c), above, the
more restrictive terms and conditions provisions shall prevail.
8.10 Access and Reporting. Tenant shall permit the representatives of Landlord at
any time or from time to time, upon one business day's notice, to inspect, audit and copy all of
its properties, books, records and accounts. Tenant shall maintain a system of accounting
established and administered in accordance with sound business practices to permit preparation
of financial statements which shall be in conformity with GAAP basis of accounting. Tenant
shall furnish or cause to be furnished to Landlord the following:
(a) Notice of Default. As soon as possible, and in any event not later than five (5)
days after the occurrence of any Event of Default, a statement of an officer of Tenant describing
the details of such Event of Default and any curative action Tenant proposes to take;
(b) Annual Statements. As soon as available, and in any event not later than one
hundred twenty (120) days after the close of each fiscal year of Tenant, fmancial statements of
Tenant, including a profit and loss statement, reconciliation of capital accounts and a
consolidated statement of changes in financial position of Tenant as at the close of and for such
fiscal year, all in reasonable detail, certified as provided in clause (a) above by an officer or
partner of Tenant and, upon request of Landlord, if total Operating Expenses for such year
exceed the total amount set forth in the Pro Forma Budget by more than five percent (5%),
accompanied by a compilation report prepared by a firm of certified public accountants, and in a
format, each reasonably acceptable to the Executive Director;
(c) Pro Forma Budget. As soon as available and in any event not later than
December 15 of each calendar year beginning with the year in which Construction is completed,
Tenant shall provide Landlord with a detailed projection of Operating Income and budgets of
estimated Operating Expenses for the immediately succeeding calendar year (the "Pro Forma
Budget") and a detailed Cash Flow projection for the next succeeding year. Tenant shall also
submit to Landlord on request additional detail, information and assumptions used in the
preparation of the Pro Forma Budget. Tenant shall use commercially reasonable efforts to
operate the Property during such calendar year within the Pro Forma Budget;
Page 20
(d) Tax Returns. As soon as available, and in any event not later than at the time of
filing with the Internal Revenue Service, the federal tax returns (and supporting schedules, if
any) of Tenant;
(e) Certificate of Performance. Concurrently with delivery of each of the financial
statements provided for in clause (b) above, a certificate of an officer or partner of Tenant stating
that Tenant has, in all material respects, performed and observed each of its covenants contained
in this Lease and that no Event of Default or Potential Default has occurred or, if any such event
has occurred, specifying its nature;
(f) Redevelopment Monitoring. Tenant shall submit to Landlord on an annual basis
the annual report required by Section 33418 of the California Health and Safety Code. The
annual report shall include for each dwelling unit the rental rate and the income and the family
size of the occupants.
(g) Rent Roll. As soon as possible and in any event not later than forty-five (45)
days after the close of each calendar quarter, the rent roll as of the end of such calendar quarter
setting forth such information, and in such format, as is reasonably acceptable to the Executive
Director;
(h) Audit Reports. Promptly upon receipt thereof, copies of all reports submitted to
Tenant by independent certified public accountants in connection with each annual, interim or
special audit of the financial statements of Tenant made by such accountants, including the
comment letter submitted by such accountants to management in connection with their annual
audit;
(i) Notices, Certificates or Communications. Immediately upon giving or receipt
thereof, copies of any notices, certificates or other communications given by or on behalf of
Tenant or received by or on behalf of Tenant from lenders pursuant to or in connection with any
of the loan documents, as well as any notices and other communications delivered to the
Property or to Tenant naming Landlord or the "Construction Lender" as addressee, or which
could reasonably be deemed to affect the Construction or the ability of Tenant to perform its
obligations to Landlord;
(j) Monthly Leasing Report. As soon as available and in no event later than the
twenty fifty (25th) day of every calendar month, a monthly property analysis report for the
Property indicating the current leasing status for the Property;
(k) Monthly Operating Statements. As soon as available and in no event later than
the twenty-fifth (25th) day of every calendar month, commencing with the first full calendar
month following commencement of lease -up of the Property, a "Monthly Operating Statement"
showing all Operating Income, Operating Expenses, Debt Service and any other amounts taken
into consideration in computing Net Operating Income, Operating Deficits, and/or Cash Flow, as
applicable, for the prior month, in a form reasonably satisfactory to the Executive Director;
Page 21
(1) Certificate of Continuing Program Compliance. Tenant shall submit to
Landlord on an annual basis the Certificate of Continuing Program Compliance.
(m) Other Information. Such other documents and information relating to the affairs
of Tenant and the Property as Landlord reasonably may request from time to time which Tenant
can provide for a reasonable cost.
8.11 Onsite Manager. Tenant, through an onsite professional property manager or
property management company, shall manage the Project or cause it to be managed. Any
manager or management company retained to act as agent for Tenant in meeting the obligation
of providing an onsite manager shall be subject to prior written approval of the Executive
Director, which approval shall not be unreasonably withheld or delayed. Related Management
Company, L.P. ("RMC") is hereby approved by Landlord as the initial property manager. In
exercising his/her approval rights hereunder, the Executive Director may require proof of ability
and qualifications of the manager and/or management company based upon (i) prior experience,
(ii) assets, and (iii) other factors determined by the Executive Director as necessary.
Furthermore, upon sixty (60) days prior written demand from Landlord with cause, Tenant shall
remove and replace a property manager and/or property management company. In any
agreement with a property manager or property management company ("Management
Agreement"), Tenant shall expressly reserve the right to terminate such agreement upon written
demand of Landlord with cause. That notwithstanding, Landlord agrees that RMC shall be
entitled to a thirty (30)-day notice of default and a reasonable opportunity to cure before any
such termination.
8.12 No Use of Hazardous Materials on the Property. Tenant covenants and agrees
that it shall not, and that it shall not permit any subtenant to, treat, use, store, dispose, release,
handle or otherwise manage Hazardous Materials on the Property from and after the date hereof
except in connection with any construction, operation, maintenance or repair of the
Improvements or in the ordinary course of its business, and that such conduct shall be done in
compliance with all applicable federal, state and local laws, including all Environmental Laws.
Tenant's violation of the foregoing prohibition shall constitute a breach hereunder and Tenant
shall indemnify, hold harmless and defend the Landlord for such violation as provided below.
8.13 Notice and Remediation by Tenant. Tenant shall promptly give the Landlord
written notice of any significant release of any Hazardous Materials, and/or any notices,
demands, claims or orders received by Tenant from any governmental agency pertaining to
Hazardous Materials which may affect the Property.
8.14 Environmental Indemnity. Tenant agrees to indemnify, protect, hold harmless,
and defend (with counsel reasonably satisfactory to Landlord) the Indemnitees from and against
any and all losses, costs, claims, expenses, damages (including, without limitation, foreseeable or
unforeseeable consequential damages), and liabilities directly or indirectly arising out of or in
any way connected with (a) Tenant's breach or violation of any covenant, prohibition or
warranty in this Lease concerning Hazardous Materials, or (b) the activities, acts or omissions of
Tenant, its employees, contractors or agents on or affecting the Property from and after the
Commencement Date, including but not limited to the release of any Hazardous Materials or
Page 22
other kinds of contamination or pollutants of any kind into the air, soil, groundwater or surface
water on, in, under or from the Property. This indemnification supplements and in no way limits
the scope of the indemnification set forth in Article 13.
8.15 Termination; Subtenants. The agreements and obligations of Tenant under this
Article 8 with regard to indemnification of Landlord shall survive the scheduled termination or
sooner expiration of the Term for any reason, for five (5) years and all claims relating thereto
must be delivered in writing to Tenant within such period. That notwithstanding, the extension
of time within which to deliver a claim to Tenant shall not extend, beyond the date of expiration
or termination of this Lease, the period in which Claims may arise. No action by any subtenant
in violation of its sublease shall constitute a cause to terminate this Lease provided that Tenant
diligently pursues its available remedies against such subtenant.
8.16 Nondiscrimination. There shall be no discrimination against or segregation of
any person or group of persons, on account of race, color, creed, religion, sex, marital status,
national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or
enjoyment of the Property nor shall the Tenant itself, or any person claiming under or through
Tenant, establish or permit any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees,
subtenants, or vendees in the Property.
8.17 Form of Nondiscrimination and Nonsegregation Clauses. Tenant covenants
and agrees for itself, its successors, its assigns and every successor in interest to the Property or
any part thereof, that it shall refrain from restricting the lease, sublease, rental, transfer, use,
occupancy, tenure, or enjoyment of the Property (or any part thereof) on the basis of sex, marital
status, race, color, religion, creed, ancestry or national origin of any person. All such leases, or
contracts pertaining thereto shall contain or be subject to substantially the following
nondiscrimination or nonsegregation clauses:
8.17.1 In leases: "The lessee herein covenants by and for itself, its successors
and assigns, and all persons claiming under or through them, and this lease is made and accepted
upon and subject to the following conditions: That there shall be no discrimination against or
segregation of any person or group of persons, on account of sex, marital status, race, color,
religion, creed, national origin, or ancestry, in the leasing, subleasing, renting, transferring, use,
occupancy, tenure or enjoyment of the land herein leased, nor shall lessee itself, or any person
claiming under or through it, establish or permit such practice or practices of discrimination or
segregation with reference to the selection, location, number, or occupancy of tenants, lessees,
sublessees, tenants, or vendees in the land herein leased."
8.17.2 In contracts: "There shall be no discrimination against or segregation of,
any person or group of persons on account of sex, marital status, race, color, religion, creed,
national origin or ancestry in the sale, lease, sublease, rental, transfer, use, occupancy, tenure or
enjoyment of the land, nor shall the transferee itself or any person claiming under or through it,
establish or permit any such practice or practices of discrimination or segregation with reference
to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or
vendees of the land."
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8.18 Social Services. From not later than six (6) months after the date of issuance of a
temporary certificate of occupancy for the Project until expiration of the Term, Tenant shall
provide, or cause to be provided by a reasonably qualified person or firm, services to the
residents of the Project in accordance with the plan therefor attached hereto as Exhibit "D," as
such plan may be amended from time to time with the consent of the Executive Director.
Community HousingWorks is hereby approved by Landlord as the initial provider of such social
services
8.19 Effect and Duration of Covenants. Subject to Section 8.21 below, the
covenants established in this Article shall, without regard to technical classification and
designation, be binding on Tenant and any successor in interest to the Property, or Tenant's
leasehold interest therein, or any part thereof, for the benefit and in favor of the Landlord, its
successors and assigns, and the City until the expiration of the Term, except to the extent said
covenant expressly provides that it shall survive the expiration of the Term.
8.20 Indemnification. Tenant hereby saves, defends, indemnifies and holds the
Indemnitees harmless from and against any and all losses, costs, damages or liabilities,
including, without limitation, attorneys' fees and costs, which result from the breach of any
representations and warranties contained in this Article 8.
8.21 Terminable Upon Foreclosure. Notwithstanding anything contained in this
Lease to the contrary, upon foreclosure of a Mortgage, or acceptance by a Mortgagee of an
assignment or deed in lieu of foreclosure, Section 8.1 through Section 8.16, inclusive, Section
8.18 and Section 8.20 of this Lease shall be terminable by the purchaser at the foreclosure sale,
or the assignee or grantee of a deed in lieu of foreclosure, by notice to Landlord. Termination of
such Sections pursuant to this provision shall not affect the validity of the remaining provisions
of this Lease and Tenant's rights hereunder.
ARTICLE 9. INSURANCE
9.1 Landlord Not Liable. Except as the result of the sole or willful negligence or
intentional acts or omissions by Landlord or its representatives, employees or agents, or as
otherwise expressly set forth herein, Landlord shall not be liable for injury to Tenant's business
or any loss of income therefrom or for any damage or liability of any kind or for any injury to or
death of persons or damage to property of Tenant, or to Tenant's agents, employees, servants,
contractors, subtenants, licensees, concessionaires, customers or business invitees or any other
person which occurs on the Property during the Term.
9.2 Indemnification. Except as the result of the sole or willful negligence or
intentional acts or omissions by Landlord or its representatives, employees or agents, Tenant
shall indemnify, defend and hold the Indemnitees harmless from and against all liability, loss,
damage, cost or expense (including attorneys' fees and court costs) arising from or as a result of
the death of any person or any accident, injury, loss or damage whatsoever caused to any person
or to the property of any person caused by Tenant's performance of its obligations under this
Lease or any errors or omissions of Tenant, whether such performance, errors or omissions of
Page 24
Tenant be made by Tenant, its contractors or subcontractors, or anyone directly or indirectly
employed by Tenant, and whether such damage shall accrue or be discovered before or after the
termination of this Lease. This indemnification provision supplements and in no way limits the
scope of the indemnifications in Article 13. The indemnity obligation of Tenant under this
Article shall survive the expiration or termination, for any reason, of this Lease. This Section
notwithstanding, indemnification with respect to Hazardous Materials shall be governed by
Section 8.14.
9.3 Insurance. From and after the Commencement Date until the termination of this
Lease, Tenant shall take out and maintain the following types of insurance in the forms and
amounts (as may be increased each calendar year by the corresponding increase in the Index) set
forth below, at Tenant's sole expense. Notwithstanding the amounts of insurance set forth
below, the Executive Director shall have the right, but not the obligation, to reduce the amounts
required from time to time.
9.3.1 Comprehensive General Liability in an amount not less than Two Million
Dollars ($2,000,000.00) combined single limit for each occurrence or Four Million Dollars
($4,000,000.00) general aggregate for bodily injury, personal injury and property damage
including contractual liability. The limits of this insurance shall be increased to an amount not
less than Five Million Dollars ($5,000,000.00) combined single limit upon the recordation of the
Certificate of Completion for any of the Improvements in the Official Records. The Indemnitees
shall be covered as additional insureds with respect to liability arising out of activities by or on
behalf of Tenant or in connection with the use or occupancy of the Property. Coverage shall be
in a form acceptable to the City Risk Manager and shall be primary and non-contributing with
any insurance or self-insurance maintained by City or Commission.
9.3.2 Automobile Liability in an amount not less than One Million Dollars
($1,000,000.00) combined single limit per accident for bodily injury and property damage
covering owned, non -owned and hired vehicles.
9.3.3 Workers' Compensation as required by the Labor Code of the State of
California and Employers' Liability insurance in an amount not less than One Million Dollars
($1,000,000.00).
9.3.4 "All Risk" property including builder's risk protection during the course
of construction, covering the full replacement value of the Improvements constructed on or about
the Property by Tenant. Said insurance shall include debris removal, and, if typically carried
upon similar affordable housing projects in San Diego County, California, coverage for
earthquake and flood if this protection is required by the Senior Lender. Landlord shall be
named as insured under a standard loss payable endorsement.
9.4 Other Insurance. Tenant shall also obtain and maintain such other insurance in
forms and amounts reasonably required from time to time by Landlord or the City Risk Manager
for protection against the same or other insurable hazards which are then typically insured
against by similar properties in San Diego County, California, provided that such coverage is
available at commercially reasonable rates.
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9.5 Contractors. All contractors employed by Tenant with contracts of Fifty
Thousand Dollars ($50,000.00) or more shall be required to furnish evidence of Comprehensive
General Liability insurance subject to all the requirements stated herein with limits of not less
than One Million Dollars ($1,000,000.00) combined single limit each occurrence. The
Indemnitees shall have the right to receive evidence of compliance with the foregoing by
contractors at any time upon written request therefor.
9.6 Acceptable Terms of Covera2e. Acceptable insurance coverage shall be placed
with carriers admitted to write insurance in California, or carriers with a rating of or equivalent
to A-:VIII by A.M. Best & Company. Any deviation from this rule shall require specific
approval in writing from the City's Risk Manager. Any deductibles in excess of Twenty -Five
Thousand Dollars ($25,000.00) per occurrence or self -insured retentions must be declared to and
approved by the City Risk Manager. At the option of the City Risk Manager, Tenant may be
required to reduce or eliminate such deductibles or self -insured retentions or to procure a bond
guaranteeing payment of losses and related investigations, claim administration and defense
costs. In the event such insurance provides for deductibles or self -insured retention, Tenant
agrees that it will fully protect the Indemnitees in the same manner as those interests would have
been protected had the policy or policies not contained a deductible or retention. Coverage under
each policy shall not be suspended, avoided or canceled by either party except after thirty (30)
days' prior written notice to Landlord. Tenant shall furnish the Indemnitees with certificates of
insurance and with original endorsements effecting coverage as required under this Article. The
certificates and endorsements for each insurance policy shall be signed by a person authorized by
the insurer to bind coverage on its behalf. The Indemnitees reserve the right to require complete
certified copies of all insurance policies not previously provided at any time.
9.7 Blanket Covera2e. Notwithstanding anything to the contrary set forth in this
Article 9, Tenant's obligations to carry the insurance provided for herein may be brought within
the coverage of a so-called blanket policy or policies of insurance carried and maintained by
Tenant; provided, however, (i) that the Indemnitees and other parties in interest to it shall be
named as additional insureds as their interests may appear, and (ii) that the coverage afforded the
Indemnitees will not be reduced or diminished by reason of the use of such blanket policy of
insurance, and (iii) that the requirements set forth in this Article 9, are otherwise satisfied.
9.8 Waiver of Subrogation. Each policy of insurance procured pursuant to Article 9
shall contain, if obtainable upon commercially reasonable terms, either (i) a waiver by the insurer
of the right of subrogation against either party hereto for negligence of such party, or (ii) a
statement that the insurance shall not be invalidated should any insured waive in writing prior to
a loss any or all right of recovery against any party for loss accruing to the property described in
the insurance policy. Each of the parties hereto waives any and all rights of recovery against the
other, or against the officers, employees, agents and representatives of such other party, for loss
or damage to such waiving party or its property or the property of others under its control, arising
from any cause insured against under the form of insurance policies required to be carried
pursuant to Article 9 of this Lease or under any other policy of insurance carried by such waiving
party.
Page 26
ARTICLE 10. MAINTENANCE; REPAIRS; ALTERATIONS; RECONSTRUCTION
10.1 General Maintenance. Throughout the Term, Tenant shall, at Tenant's sole cost
and expense, maintain the Property and the Improvements in good condition and repair, ordinary
wear and tear excepted, and in accordance with all applicable federal, state and local laws,
ordinances and regulations of (a) governmental agencies and bodies having or claiming
jurisdiction and all their respective departments, bureaus, and officials, (b) insurance
underwriting boards or insurance inspection bureaus having or claiming jurisdiction, and (c) all
insurance companies insuring all or any part of the Property or the Improvements, or both.
10.2 Program Maintenance. In addition to the routine maintenance and repair
required pursuant to Section 10.1, Tenant shall perform the following programmed maintenance
on the Improvements:
(a) Interior painting and window covering replacement at least every five (5) years;
(b) Exterior painting at least every ten (10) years;
(c) Repair and resurfacing of parking areas and walkways at least every five (5)
years; and
(d) Replacement of all deteriorated or worn landscaping and play equipment at least
every five (5) years.
Upon the request of Tenant, the Executive Director, at his sole and absolute discretion, may grant
a waiver or deferral of any program maintenance requirement. Tenant shall keep such records of
maintenance and repair as are necessary to prove performance of the program maintenance
requirements.
ARTICLE 11. OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS
11.1 Ownership During Term.
11.1.1 Improvements. All Improvements on the Property as permitted or
required by this Lease shall, during the Term, be and remain the property of Tenant, and
Landlord shall not have title thereto. Tenant shall not, however, demolish or remove any
Improvements from the Property except as permitted herein.
11.1.2 Personal Property. All personal property, furnishings, fixtures and
equipment, including, without limitation, Tenant -owned appliances, which are not so affixed to
the Property or the buildings thereon as to require substantial damage to the buildings upon
removal thereof shall constitute personal property including, but not limited to: (a) functional
items related to the everyday operations of the Property; (b) personal property furnishings,
fixtures and equipment of the nature or type deemed by law as permanently resting upon or
attached to the buildings or land by any means, including, without limitation, cement, plaster,
nails, bolts or screws, or essential to the ordinary and convenient use of the Property and the
Page 27
Improvements. At any time during the Term and at termination thereof, Tenant shall have the
right to remove any and all such personal property, furnishings, fixtures and equipment;
provided, that Tenant repairs any damage to the Property or the Improvements caused by such
removal.
11.1.3 Basic Building Systems. For purposes of this Lease, the personal
property, furnishings, fixtures and equipment described in this Section 11.1 shall not include
those major building components or fixtures necessary for operation of the basic building
systems such as, but not limited to, the elevators, plumbing, sanitary fixtures, heating and central
air-cooling system.
11.2 Ownership at Expiration or Termination.
11.2.1 Property of Landlord. At the expiration or earlier termination of the
Term, except as provided in Section 11.2.2, all Improvements which constitute or are a part of
the Property shall become (without the payment of compensation to Tenant or others) the
property of Landlord free and clear of all claims and encumbrances on such Improvements by
Tenant, and anyone claiming under or through Tenant, except for such title exceptions permitted
or required during the Term. Tenant shall then quitclaim to Landlord any and all rights, interests
and claims to the Improvements. Tenant agrees to and shall defend, indemnify and hold
Landlord harmless from and against all liability and loss which may arise from the assertion of
any such claims and any encumbrances on such Improvements (except claims arising due to
Landlord's actions) and except for such title exceptions permitted or required during the Term.
11.2.2 Removal by Tenant. Tenant shall not be required or permitted to remove
the Improvements, or any of them, at the expiration or sooner termination of the Term; provided,
however, that, within thirty (30) days following the expiration or sooner termination of the Term,
Tenant may remove all personal property, furniture, and equipment.
11.2.3 Unremoved Property. Any personal property, furnishings or equipment
not removed by Tenant within thirty (30) days after the expiration or sooner termination of the
Term, shall, without compensation to Tenant, become Landlords' property, free and clear of all
claims to or against them by Tenant or any third person, firm or entity arising by, through or
under Tenant.
11.2.4 Maintenance and Repair of Improvements. Subject to the provisions of
this Lease concerning condemnation, alterations and damage and destruction, Tenant agrees to
assume full responsibility for the operation and maintenance of the Property and the
Improvements and all fixtures and furnishings thereon or therein throughout the Term hereof
without expense to Landlord, and to perform all repairs and replacements necessary to maintain
and preserve the Property, the Improvements, fixtures and furnishings in a decent, safe and
sanitary condition consistent with good practices and in compliance with all applicable laws.
Tenant agrees that Landlord shall not be required to perform any maintenance, repairs or
services, or to assume any expense not specifically assumed herein in connection with the
Property and the Improvements thereon unless specifically required under the terms of this
Lease.
Page 28
Except as otherwise provided in this Section 11.2 and in Section 11.4, the condition of
the Improvements required to be maintained hereunder upon completion of the work of
maintenance or repair shall be equal in value, quality and use to the condition of such
Improvements before the event giving rise to the work.
11.3 Waste. Subject to the alteration rights of Tenant and damage and destruction or
condemnation of the Property or any part thereof, Tenant shall not commit or suffer to be
committed any waste of the Property or the Improvements, or any part thereof.
Tenant agrees to keep the Property and the Improvements clean and clear of
refuse and obstructions, and to dispose properly of all garbage, trash and rubbish.
11.4 Alteration of Improvements. Except as provided in Section 7.1, Tenant shall
not make or permit to be made any material, exterior alteration of, addition to or change in, the
Improvements which would materially affect the exterior elevations (including materials
selection and color) or the size, bulk and scale of the Property, other than routine maintenance
and repairs, nor demolish all or any part of the Improvements, without the prior written consent
of Landlord. Nothing herein shall prohibit interior alterations or decorations, or the removal and
replacement of interior improvements consistent with the specified use of the Property. In
requesting consent for such exterior improvements as required by the foregoing, Tenant shall
submit to Landlord detailed plans and specifications of the proposed work and an explanation of
the need and reasons thereof. Tenant may make such other improvements, alterations, additions
or changes to the Improvements which do not materially affect the exterior elevations (including
materials selection and color) or the size, bulk and scale thereof without Landlord's prior written
consent.
Notwithstanding the prohibition in this Section 11.4, Tenant may make such
changes, repairs, alterations, improvements, renewals or replacements to the exterior elevations,
materials, size, bulk or scale of the Improvements as are required (a) by reason of any law,
ordinance, regulation or order of a competent government authority, (b) for the continued safe
and orderly operation of the Property, or (c) to continue to receive the Low Income Housing Tax
Credit.
ARTICLE 12. SIGNS
Tenant shall not place or suffer to be placed on the Property or upon the roof or any
exterior door or wall or on the exterior or interior of any window of the Improvements, any sign,
awning, canopy, marquee, advertising matter, decoration, lettering or other thing of any kind
(exclusive of the signs, awnings and canopies, if any, which may be provided for in the Plans)
without the written consent of the Executive Director first had and obtained.
ARTICLE 13. INDEMNIFICATION
Tenant will protect, indemnify and save the Indemnitees harmless from and against all
liabilities, obligations, claims, damages, penalties, causes of action, judgments, costs and
Page 29
expenses (including, without limitation, reasonable attorneys' fees and expenses) imposed upon
or incurred by or asserted against Landlord, or the Property or the Improvements during the
Term, unless caused solely by the willful act or gross negligence of Landlord, by reason of (a)
any accident or injury to or death of persons or loss of or damage to property occurring on or
about the Property or the Improvements, (b) any failure on the part of Tenant to perform or
comply with any of the terms of this Lease, or (c) any negligence or tortious act on the part of
Tenant or any of its agents, employees, contractors, subtenants, licensees or invitees. In the
event that any action, suit or proceeding is brought against the Indemnitees by reason of any such
occurrence, Tenant, upon Landlord's request, will, at Tenant's expense, defend such action, suit
or proceeding with counsel approved by Landlord. This Section notwithstanding,
indemnification with respect to Hazardous Materials shall be governed by Section 8.14.
ARTICLE 14. DAMAGE OR DESTRUCTION OF PROPERTY OR
IMPROVEMENTS
14.1 Tenant's Repair Obligation.
14.1.1 In case of damage to or destruction of the Property or the Improvements, or any
part thereof, by fire or other cause at any time during the Term of this Lease, Tenant, if and to
the extent insurance proceeds are available, shall restore the same as nearly as possible to their
value, condition and character immediately prior to such damage or destruction. Such
restoration shall be commenced with due diligence and in good faith, and prosecuted with due
diligence and in good faith, unavoidable delays excepted.
14.1.2 In case of damage to or destruction of the Improvements by fire or other cause
resulting in a loss exceeding in the aggregate Ten Thousand Dollars ($10,000), Tenant shall
promptly give written notice thereof to Landlord.
14.2 Tenant's Restoration of Premises.
14.2.1 If, during the Term, the Improvements are damaged or destroyed, and the
total amount of loss does not exceed thirty-three percent (33%) of the replacement value of the
Improvements, Tenant shall make the loss adjustment with the insurance company insuring the
loss, with the approval of Landlord, which approval shall not be unreasonably withheld or
delayed. The proceeds shall be paid directly to a Mortgagee, if any, and if there is not a
Mortgagee, to Landlord and Tenant for the sole purpose of making the restoration of the
Improvements in accordance with this Article 14.
14.2.2 If, during the Term, the Improvements are damaged or destroyed, and the
total amount of loss exceeds thirty-three percent (33%) of the replacement value of the
Improvements, Tenant shall make the loss adjustment with the insurance company insuring the
loss, with the approval of Landlord, which approval shall not be unreasonably withheld or
delayed, and the insurance company shall immediately pay the proceeds to a bank or trust
company designated by Landlord and approved by Tenant ("Insurance Trustee"), which approval
shall not be unreasonably withheld or delayed. Any leasehold mortgagee shall be an acceptable
Page 30
Insurance Trustee. All sums deposited with the Insurance Trustee shall be held for the following
purposes and the Insurance Trustee shall have the following powers and duties:
(a) The sums shall be paid in installments by the Insurance Trustee to the
contractor retained by Tenant and approved by Landlord as construction progresses, for payment
of the cost of restoration. A ten percent (10%) retention fund shall be established that will be
paid to the contractor on completion of restoration, payment of all costs, expiration of all
applicable lien periods, and proof that the Property and the Improvements are free of all
mechanics' liens and lienable claims;
(b) Payments shall be made on presentation of certificates or vouchers from
the architect or engineer retained by Tenant and approved by Landlord (which approval shall not
be unreasonably withheld or delayed) showing the amount due. If the Insurance Trustee, in its
reasonable discretion, determines that the certificates or vouchers are being improperly approved
by the architect or engineer retained by Tenant, the Insurance Trustee shall have the right to
appoint an architect or an engineer to supervise construction and to make payments on
certificates or vouchers approved by the architect or engineer retained by the Insurance Trustee.
The reasonable expenses and charges of the architect or engineer retained by the Insurance
Trustee shall be paid by the Insurance Trustee out of the trust fund;
(c) If, after the work of restoration has commenced, the sums held by the
Insurance Trustee are not sufficient to pay the actual cost of restoration, Tenant shall deposit the
amount of the deficiency with the Insurance Trustee within ten (10) days after receipt of request
for payment of such amount from the Insurance Trustee, which request shall be made by the
Insurance Trustee promptly after it is determined there will be a deficiency;
(d) If the Insurance Trustee has received notice from Landlord that the Tenant
is in default under this Lease or under the Commission Subordinate Loan Note, then, subject to
the lien of a Mortgagee's Mortgage and the Mortgagee's prior written consent, the Insurance
Trustee shall pay to Landlord an amount sufficient to cure such default as specified in Landlord's
notice to the Insurance Trustee;
(e) Any amounts remaining after making the payments hereinabove referred
to in clauses (a), (b) and (d), and after paying the reasonable costs and expenses of the Insurance
Trustee, shall be paid to any leasehold Mortgagee to the extent (a) required by any Mortgage and
(b) such leasehold Mortgagee makes written demand therefor to the Insurance Trustee;
(f) Any undisbursed funds remaining after compliance with all of the
provisions of this Section 14.2 shall, if and to the extent required by any Mortgage, be delivered
to the Mortgagee, and if there is no leasehold Mortgagee, to Tenant; and
(g) All actual costs and charges of the Insurance Trustee shall be paid by
Tenant. If the Insurance Trustee resigns or for any reason is unwilling to act or continue to act,
Landlord shall substitute a new Insurance Trustee in the manner described in this Section.
Page 31
14.2.3 Both parties shall promptly execute all documents and perform all acts
reasonably required by the Insurance Trustee to perform its obligations under this Section 14.2.
14.3 Procedure for Restoring Improvements.
14.3.1 If and to the extent Tenant is obligated to restore the Improvements
pursuant to this Article 14, Tenant shall restore the Improvements substantially in accordance
with the Plans. Within forty-five (45) days after the date of such damage or destruction (as such
time may be reasonably extended at the written request of Tenant), Tenant, at its cost, shall
prepare and deliver to Landlord final plans and specifications and working drawings complying
with applicable laws that will be necessary for such restoration. Such plans and specifications
shall specify differences from the Plans. The plans and specifications and working drawings are
subject to the approval of Landlord only insofar as they vary from the Plans. Landlord shall have
twenty (20) days after receipt of the plans and specifications and working drawings to either
approve or disapprove the plans and specifications and working drawings and return them to
Tenant. If Landlord disapproves the plans and specifications and working drawings, Landlord
shall notify Tenant of its objections in writing, specifying the objections clearly and stating what
modifications are required for Landlord's approval. Tenant acknowledges that the plans and
specifications and working drawings shall be subject to approval of the appropriate government
bodies and that they will be prepared in such a manner as to obtain that approval.
14.3.2 The restoration shall be accomplished as follows:
(a) Tenant shall complete the restoration within fifteen (15) months after final
plans and specifications and working drawings have been approved by the appropriate
government bodies and all required permits have been obtained.
(b) Tenant shall retain a licensed contractor that is bondable. The contractor
shall be required to carry public liability and property damage insurance, builders risk insurance,
standard fire and extended coverage insurance, with vandalism and malicious mischief
endorsements, during the period of construction in accordance with Article 9. Such insurance
shall contain waiver of subrogation clauses in favor of Landlord and Tenant in accordance with
the provisions of and to the extent required by Section 9.8.
(c) Tenant shall notify Landlord of the date of commencement of the
restoration not later than ten (10) days before commencement of the restoration to enable
Landlord to post and record notices of nonresponsibility. The contractor retained by Tenant shall
not commence construction until a completion bond and a labor and materials bond have been
delivered to Landlord to insure completion of the construction.
(d) Tenant shall accomplish the restoration in a manner that will cause the
least inconvenience, annoyance, and disruption to the Property and the Improvements.
of completion.
(e) On completion of the restoration Tenant shall immediately record a notice
Page 32
(f) If Section 14.2.2 is applicable, the restoration shall not be commenced
until sums sufficient to cover the cost of restoration are placed with the Insurance Trustee as
provided in said Section 14.2.2.
14.4 Mortgagee Protection. The following provisions are for the protection of a
Mortgagee and shall, notwithstanding anything contained in this Lease to the contrary, control:
14.4.1 Insurance. Any insurance proceeds payable from any policy of insurance
(other than liability insurance) required by the Lease shall be paid to the Mortgagee, if any, to the
extent required by the Mortgage. The Mortgagee, if any, shall have the right to participate in all
adjustments, settlements, negotiations or actions with the insurance company regarding the
amount and allocation of any such insurance proceeds. Any insurance policies permitted or
required by this Lease shall name the Mortgagee, if any, as an additional insured or loss payee,
as appropriate, if required by such Mortgage.
14.4.2 Restoration. Tenant shall have no obligation to restore or repair the
Improvements following the occurrence of any casualty for which insurance is not required
under this Lease. The Mortgagee, if any and if it exercises any of its remedies set forth in this
Lease, shall have no obligation to restore or repair damage to the Improvements that cost in
excess of available insurance proceeds. Tenant shall have no obligation to restore or repair
damage to the Improvements if the casualty occurs during the last five (5) years of the Lease
term. In the event such a loss occurs in the last five (5) years, then, at the election of Tenant,
with the prior written consent of the Mortgagee, if any, insurance proceeds shall be used, first, to
clear the Property of the damaged Improvements and any debris, and second, to reduce or pay in
full the Mortgage, with any excess being payable as provided in this Lease.
Article 15. EMINENT DOMAIN
15.1 Notice. The party receiving any notice of the kind specified in this Section 15.1
shall promptly give the other party notice of the receipt, contents and date of the notice received.
For purposes of this Article 15, the term "Notice" shall include:
(a) Notice of Intended Taking;
(b) Service of any legal process relating to condemnation of the Property or the
Improvements;
(c) Notice in connection with any proceedings or negotiations with respect to such
condemnation; or
(d) Notice of intent or willingness to make or negotiate a private purchase, sale or
transfer in lieu of condemnation.
15.2 Representation in Proceedings or Negotiations. Landlord and Tenant shall
each have the right to represent their respective interests in each proceeding or negotiation with
respect to a Taking or intended Taking and to make full proof of their claims. No agreements or
Page 33
settlement with or sale or transfer to the condemning authority shall be made without the consent
of Landlord, but, as to its reversionary interest only, Landlord may enter into such agreement,
settlement, sale or transfer without the consent of Tenant. Landlord and Tenant each agree to
execute and deliver to the other any instruments which may be required to effectuate or facilitate
the provisions of this Lease relating to condemnation.
15.3 Total Taking.
15.3.1 In the event of a Total Taking, this Lease shall terminate as of the date of
the Taking.
15.3.2 If this Lease is terminated pursuant to this Section 15.3, the Award for
such Taking shall be apportioned and distributed as follows:
15.3.2.1 First, to the Mortgagee, if any, to the extent of the
Mortgage;
15.3.2.2 Second, to Landlord, a sum equal to the fair market value
of the Property (subject to the remaining Term and the Rent reserved) on the date immediately
preceding the Taking as determined by the appraisal method set forth in Article 16 and
determined as if there were no taking nor threat of condemnation. The parties shall commence
said appraisal by the earlier of ten (10) days after Tenant's receipt of a copy of a Notice of
Intended Taking or ten (10) days after the date of the Taking;
15.3.2.3 Third, to Tenant, a sum equal to the fair market value of the
Improvements made by Tenant on the date immediately preceding the Taking as determined by
the appraisal method set forth in Article 16 and determined as if there were no Taking, nor threat
of condemnation; plus the residual value of the Term, subject to the Rent reserved; plus any part
of the Award attributable to the Low Income Housing Tax Credit; and
15.3.2.4 Fourth, to Landlord, the remainder, if any.
15.4 Substantial Taking.
15.4.1 In the event of a Taking which, in Tenant's reasonable judgment is
substantial, Tenant may, subject to the rights of the Mortgagee, if any, terminate this Lease. If
Tenant elects to terminate this Lease under this provision, Tenant shall give written notice of its
election to do so to Landlord within forty-five (45) days after receipt of a copy of a Notice of
Intended Taking. In the event Landlord disputes the right of Tenant to terminate this Lease
under this provision, Landlord shall give Tenant notice of this fact within forty-five (45) days
after receiving the notice of Tenant's election to terminate, and the parties shall either raise this
issue in the eminent domain proceeding, if any, as an issue with respect to the apportionment of
the Award between Landlord and Tenant or, if there is no eminent domain proceeding, submit
the issue to arbitration as provided in Article 23. In the event it is determined that Tenant does
not have the right to terminate this Lease, the apportionment of the Award for such Taking and
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the obligations of Tenant to restore shall be governed by the terms of Section 15.6 or
Section 15.8, whichever is applicable.
15.4.2 In the event it is determined that Tenant has the right to terminate this
Lease, or in the event Landlord does not dispute Tenant's right to terminate this Lease, such
termination shall be as of the time when the Taking entity takes possession of the portion of the
Property and the Improvements taken. In such event, the Award for such Substantial Taking
(including any award for severance, consequential or other damages which will accrue to the
portion of the Property and/or the Improvements not taken) shall be apportioned and distributed
as follows:
(a) First, to the Mortgagee, if any, to the extent of the Mortgage;
(b) Second, to Landlord, a sum equal to the fair market value of the Property
taken (subject to the remaining Term and the Rent reserved) immediately preceding the date of
the Taking as determined by the appraisal process provided for in Article 16, commenced as
provided in Section 15.3.2, and as modified by Section 15.6.3;
(c) Third, to Landlord, an amount equal to the portion of the award for
severance, consequential or other damages which accrued to the portion of the Property and/or
Improvements not taken;
(d) Fourth, to Tenant a sum equal to the fair market value of the
Improvements made by Tenant taken immediately preceding the date of the Taking as
determined by the appraisal process provided for in Article 16, commenced as provided in
Section 15.3.2, and as modified by Section 15.6.3; plus the residual value of the Term, subject to
the Rent reserved; plus any part of the Award attributable to the Low Income Housing Tax
Credit; and
(e) Fifth, to Landlord, the remainder, if any.
15.5 Tenant's Right to Revoke Notice of Termination. Notwithstanding anything to
the contrary contained in Section 15.4, if Tenant has elected to terminate this Lease, and the
taking authority abandons or revises the Taking, Tenant shall have forty-five (45) days from
receipt of written notice of such abandonment or revision to revoke its notice of termination of
this Lease.
15.6 Partial Taking.
15.6.1 In the event of a Partial Taking, this Lease shall continue in full force and
effect and Landlord and Tenant shall agree upon an equitable reduction in the Annual Rent. If
the parties fail to agree upon such reduction within sixty (60) days from the date Tenant is
required to give up such occupancy, use or access, whichever is earlier, Landlord and Tenant
shall each choose one arbitrator and the two arbitrators so chosen shall choose a third arbitrator.
The decision of any two of the arbitrators concerning the reduction in Annual Rent, if any, shall
be binding on the Landlord and Tenant and any expense of the arbitrators only shall be divided
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equally between Landlord and Tenant (each party shall be liable for any and all costs incurred by
such party, including without limitation attorneys' fees and expert fees).
15.6.2 The Award for such Partial Taking shall be apportioned and distributed
first to the Mortgagee, if any, to the extent of the Mortgage, then to Landlord and Tenant in
proportion to the fair market value of their respective interests in the Property and
Improvements, as such interests existed immediately prior to such Partial Taking. Tenant's only
interest in the Property and the Improvements for purposes of this Section 15.6.2 is in those
Improvements constructed by Tenant. Notwithstanding anything contained herein to the
contrary, any part of the Award attributable to the Low Income Housing Tax Credit shall belong
to Tenant.
15.6.3 The fair market value of the parties' respective interests in the Property
and the Improvements shall be determined by the appraisal process provided in Article 16,
except that the assumptions listed in such Article shall not apply. Rather, the appraisal shall be
based on the value of the Property as improved and encumbered by this Lease and on the value
of the Improvements as they stand, but without regard to any Taking or threat of condemnation.
15.6.4 Any Award for severance, consequential or other damages which accrues
by reason of the Partial Taking to the portion of the Property or the Improvements not taken shall
be distributed first to the Mortgagee, if any, to the extent of the Mortgage, then shall be
apportioned between Landlord and Tenant in accordance with the diminution in value of their
respective interests.
15.7 Obligation to Repair on Partial Taking. Promptly after any Partial Taking and
regardless of the amount of the Award for such Taking, Tenant shall, to the extent of the Award
received by Tenant and in the manner specified in the provisions of this Lease, repair, alter,
modify or reconstruct the Improvements and/or other improvements on the Property so as to
make them usable for the designated purpose and capable of producing a fair and reasonable net
income.
15.8 Temporary Taking.
15.8.1 In the event of a Temporary Taking of the whole or any part of the
Property and/or Improvements, the Term shall not be reduced or affected in any way and Tenant
shall continue to pay in full any sum or sums of money and charges herein reserved and provided
to be paid by Tenant, and, subject to the other provisions of this Section 15.8, Tenant shall be
entitled to any Award or payment for the temporary use of the Property and/or Improvements
prior to the termination of this Lease, and Landlord shall be entitled to any Award or payment for
such use after the termination of this Lease.
15.8.2 If possession of the Property and/or Improvements shall revert to Tenant
prior to the expiration of the Term, Tenant shall, unless at such time there remains less than five
(5) years in the Term, restore the Property and/or Improvements whether or not the Taking
authority has made any Award or payment for such restoration and regardless of the amount of
any award or payment and in all other respects indemnify and hold Landlord harmless from the
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effects of such Taking so that the Property and/or Improvements in every respect shall upon
completion of such restoration be in the same condition as they were prior to the taking thereof.
15.8.3 If possession of the Property shall revert to Landlord after expiration of
the Term, any sums deposited pursuant to this Section 15.8 shall be paid over to Landlord in
their entirety and without apportionment and Tenant shall be excused from its obligation to
restore the Property and/or Improvements.
15.8.4 Any Award or payment for damages or cost of restoration made on or
after the termination of this Lease shall be paid first to the Mortgagee, if any, to the extent of the
Mortgage, then to Landlord absolutely, together with the remaining balance of any other funds
paid to Tenant for such damages or cost of restoration and Tenant shall thereupon be excused
from any obligation to restore the Property and/or Improvements upon the termination of such
Temporary Taking except that any obligation that may have accrued for Tenant to restore the
Property and/or Improvements prior to the commencement of said Temporary Taking shall
continue to be the obligation of Tenant.
15.9 Mortgagee Protection. Notwithstanding anything contained in this Lease to the
contrary, any and all condemnation proceeds shall be paid first to the Mortgagee, if any, to be
applied to reduce the Mortgage if required by the mortgage documents.
ARTICLE 16. APPRAISAL
Whenever an appraisal of the Property is called for under the terms of this Lease other
than as set forth in Section 4.1(d)(i), the parties shall use the following procedure:
16.1 Appointment of Appraiser. Within ten (10) days after notice from Landlord to
Tenant, Landlord and Tenant shall each appoint an MAI appraiser to participate in the appraisal
process provided for in this Article 16 and shall give written notice thereof to the other party.
Upon the failure of either party so to appoint, the nondefaulting party shall have the right to
apply to the Superior Court of the County of San Diego, California, to appoint an appraiser to
represent the defaulting party. Within ten (10) days of the parties' appointment, the two (2)
appraisers shall jointly appoint a third MAI appraiser and give written notice thereof to Landlord
and Tenant, or if within ten (10) days of the appointment of said appraisers the two (2) appraisers
shall fail to appoint a third, then either party hereto shall have the right to make application to
said Superior Court to appoint such third appraiser.
16.2 Determination of Fair Market Value.
16.2.1 Within thirty (30) days after the appointment of the third appraiser, the
appraisers shall determine the fair market value of the Property and the Improvements in
accordance with the provisions hereof, and shall execute and acknowledge their determination of
fair market value in writing and cause a copy thereof to be delivered to each of the parties hereto.
16.2.2 The appraisers shall determine the fair market value of the Property and
the Improvements as of the date of Landlord's notice referred to in Section 16.1 above, based on
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sales of comparable property in the area in which the Property is located. If, however, in the
judgment of a majority of the appraisers, no such comparable sales are available, then the
appraisal shall be based on the following assumptions: (i) that the Property is free and clear of
this Lease, the Improvements and all other improvements, and all easements and encumbrances;
and (ii) that the Property is available for immediate sale and development for the purposes and at
the density and intensity of development permitted under the zoning, subdivision and land use
planning ordinances and regulations applicable to the Property in effect on the Commencement
Date of this Lease, and any changes or amendments thereto or modification or variance from the
provisions thereof or conditional use permits which could reasonably be anticipated to have been
granted or approved as of the date of this Lease. Notwithstanding anything contained herein to
the contrary, if the appraisal, for the particular purposes for which it is being done, should
reasonably reflect the rent restrictions imposed on the Property pursuant to Article 8 of this
Lease, and such other covenants, conditions and restrictions to which the Property is subject
pursuant to this Lease or to other documents recorded against the Property in the Official
Records of the County of San Diego, California, then such covenants, conditions and restrictions
shall be taken into consideration by the appraisers.
16.2.3 If a majority of the appraisers are unable to agree on fair market value
within thirty (30) days of the appointment of the third appraiser, the three (3) appraisals shall be
added together and their total divided by three (3). The resulting quotient shall be the fair market
value of the Property and the Improvements. If, however, the low appraisal and/or high appraisal
is or are more than ten percent (10%) lower and/or higher than the middle appraisal, the low
and/or high appraisal shall be disregarded. If only one appraisal is disregarded, the remaining
two appraisals shall be added together and their total divided by two (2). The resulting quotient
shall be the fair market value of the Property and the Improvements. If both the low and high
appraisals are disregarded, the middle appraisal shall be the fair market value of the Property.
16.4 Payment of Fees. Each of the parties hereto shall (a) pay for the services of its
appointee, (b) pay one-half (1/2) of the fee charged by the appraiser selected by their appointees,
and (c) pay one-half (1/2) of all other proper costs of the appraisal.
ARTICLE 17. ASSIGNMENT/TRANSFER
17.1 Prohibition Against Transfer.
17.1.1 Prior to Recordation of the Certificate of Completion. Prior to
recordation of the Certificate of Completion, but subject to Article 19 pursuant to which Tenant
is permitted to sublease the Units for residential occupancy, Tenant shall not assign or attempt to
assign this Lease or any right herein (other than to a general or limited partnership of which
Tenant is the managing general partner) without the prior written consent of Landlord, which
consent may be withheld in Landlord's absolute discretion.
17.1.2 Following Recordation of the Certificate of Completion. Following
recordation of the Certificate of Completion, but subject to Article 19 pursuant to which Tenant
is permitted to sublease the Units for residential occupancy, Tenant shall not assign or attempt to
assign this Lease or any right herein, nor make any total or partial sublease, sale, transfer,
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conveyance or assignment of the whole or any part of the Property or the Improvements thereon,
without the prior written consent of Landlord, which consent shall not be unreasonably withheld.
In the absence of specific written agreement by Landlord, no unauthorized sublease, sale,
transfer, conveyance or assignment of the Property, or any portion thereof, or approval thereof
by Landlord shall be deemed to relieve Tenant or any other party from any obligations under this
Lease.
17.1.3 Qualifications of Tenant. In connection with the above prohibition and
limitation on assignments, Tenant acknowledges that the qualifications, expertise and identities
of Tenant are of particular concern to Landlord, and that Landlord continues to rely on such
expertise to ensure the satisfactory completion of the construction and operation of the
Improvements on the Property. Tenant further recognizes that it is because of such qualifications
and identities that Landlord is entering into this Lease with Tenant. No voluntary or involuntary
successor in interest of Tenant shall acquire any rights or powers under this Lease except as
expressly set forth in the Lease.
17.1.4 Conditions. Tenant's right to make an assignment after the recordation of
the Certificate of Completion shall be subject to compliance with the following further
conditions:
(a) No Default. At the time of such assignment, this Lease shall be in full
force and effect and either no Event of Default (as defined in Section 21.1) then exists or no
Event of Default will exist upon consummation of the assignment.
(b) Assumption. The assignee shall have executed an express assumption of
the obligations and liabilities of Tenant under this Lease from and after the date of delivery and
recording of the assignment and there shall have been delivered to Landlord at the time of the
request for such assignment a conformed copy of such assumption.
(c) Net Worth of Assignee. The assignee shall have a Net Worth equal to at
least One Million Dollars ($1,000,000.00) ("Net Worth Minimum"), which Net Worth Minimum
shall be increased on the date that is five (5) years after the first day of the first calendar year
following the Commencement Date, and on the same date every fifth (5th) year thereafter ("Net
Worth Adjustment Date"), by an amount equal to the percentage change in construction industry
costs, from the first day of the calendar year following the Commencement Date until the
applicable Net Worth Adjustment Date, as published by the Engineering News Record, or such
similar construction industry index as the parties shall agree in the event such information is not
available in the Engineering News Record or such publication is no longer published. Net Worth
is to be evidenced by a statement of financial condition as of a date not more than three hundred
sixty (360) days prior to the date of assignment which is accompanied either by an opinion of a
certified or a chartered public accountant or by a certificate by the chief fmancial or accounting
officer of the assignee that it fairly represents the fmancial condition of the assignee. In the
event Tenant agrees to remain liable under this Lease from and after the effective date of such
assignment and to guaranty the obligations of the assignee under this Lease, the Net Worth
Minimum standard set forth in this Section 17.1 shall not apply to such assignee.
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Notwithstanding the foregoing, the Executive Director, at her sole and absolute
discretion, shall be permitted to waive the Net Worth Minimum standard for a proposed assignee
that is (a) a California nonprofit, public benefit corporation, and (b) has demonstrated experience
and ability in owning, operating and managing similar affordable housing projects in the State of
California.
17.1.5 Assignment Agreement. No assignment of any interest in the Lease
made with Landlord's consent or as herein otherwise permitted shall be effective unless and until
there shall have been delivered to Landlord an executed counterpart of such assignment or other
transfer document containing an agreement, in recordable form, executed by the assignor and the
proposed assignee, wherein and whereby such assignee assumes due performance of the
obligations on the assignor's part to be performed under this Lease from the effective date of the
assignment to the end of the Term.
17.1.6 Further Assignments. The consent by Landlord to an assignment shall
not in any way be construed to relieve Tenant from obtaining the express consent in writing of
Landlord to any further assignment if required by the terms of this Lease.
17.2 Terminable Upon Foreclosure. Notwithstanding anything contained in this
Lease to the contrary, upon foreclosure of a Mortgage, or acceptance by a Mortgagee of an
assignment or deed in lieu of foreclosure, Article 17 of this Lease shall be terminable by the
purchaser at the foreclosure sale, or the assignee or grantee of a deed in lieu of foreclosure, by
notice to Landlord.
17.3 Other Rights of Mortgagees. Landlord agrees that none of the restrictions or
limitations on assignment or transfer by Tenant set forth in this Article 17 shall be construed to
limit or abrogate the rights of a Mortgagee to (a) seek the appointment of a receiver, or
(b) delegate or assign its rights under this Lease to any third party in connection with the exercise
of said Mortgagee's rights and remedies under its Mortgage.
17.4 Limitation on Transfer by Landlord. Landlord agrees, during the Compliance
Period, not to transfer its interest in the Property or under this Lease without the prior written
approval of the Tax Credit Partner; provided, however, no such approval shall be required for
such a transfer to another public body.
17.5 Transfer by Tax Credit Partner. Notwithstanding the foregoing limitations on
transfer and assignment, nothing herein shall limit or condition a transfer, sale, assignment or
other conveyance of all or a portion of the limited partner interests of the Tax Credit Partner to
any affiliate of the Tax Credit Partner, and the interests of the Tax Credit Partner shall be freely
transferable to any affiliate of the Tax Credit Partner without the consent or approval of but only
with prior, written notice to Landlord; provided however that in the event of non-payment of
capital contribution obligations by the transferee pursuant to the terms and conditions of the
Tenant's Partnership Agreement, the Tax Credit Partner shall remain liable for the amount of
such unpaid capital contribution obligations. After all required capital contributions of the Tax
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Credit Partner have been made to the Tenant, no consent shall be required for the transfer of all
or a portion of the interest of the Tax Credit Partner to any person or entity.
ARTICLE 18. MORTGAGES
18.1 Leasehold Mortgages
18.1.1 General Provisions. At all times during the Term, Tenant shall have the
right to mortgage, pledge, deed in trust, assign rents, issues and profits and/or collaterally (or
absolutely for purposes of security if required by any lender) assign its interest in this Lease, or
otherwise encumber this Lease, and/or the interest of Tenant hereunder, in whole or in part, and
any interests or rights appurtenant to this Lease, and to assign or pledge the same as security for
any debt (the holder of any such mortgage, pledge or other encumbrance, and the beneficiary of
any such deed of trust being hereafter referred to as "Mortgagee" and the mortgage, pledge, deed
of trust or other instrument hereafter referred to as "Mortgage"), upon and subject to each and all
of the following terms and conditions:
(a) Prior to the issuance of a Certificate of Completion, Mortgages entered
into by Tenant shall be limited in purpose to and shall not exceed the amount necessary and
appropriate to develop the Improvements, and to acquire and install equipment and fixtures
thereon. Said amount shall include all hard and soft costs of acquisition, development,
construction, lease -up and operation of the Improvements. After the recordation of the
Certificate of Completion, the limitation contained in this subsection shall no longer apply.
(b) Any permitted Mortgages entered into by Tenant are to be originated only
by lenders approved in writing by Landlord, which approval will not be unreasonably withheld.
Landlord shall state the reasons for any such disapproval. Notwithstanding the forgoing,
Landlord shall be deemed to have automatically approved (i) a commercial or savings bank, a
trust company, an insurance company, a savings and loan association, a building and loan
association, an educational institution, a pension, retirement or welfare fund, or other fund
authorized to make loans in the State of California; (ii) any other entity having a net worth of
$50,000,000 or more whether or not a so-called institution, or any division, subsidiary, parent or
affiliate owned or controlled by, owning or in control of or in common control or ownership with
any entities described in (i) or (ii); or (iii) a lender regularly engaged in business in an office or
location in the State of California, or who has a registered agent for service of process in
California. In addition, any lender must be duly licensed or registered with any regulatory
agency having jurisdiction over its operation, if any; and any lender must not be under any order
or judgment of any court or administrative agency restricting or impairing its operation as a
lender where the restriction or impairment would be directly related to the proposed loan to
Tenant. If the lender is other than a lender deemed automatically approved pursuant to
subdivisions (i), (ii) or (iii) of this Section, then upon the reasonable request of Landlord, the
beneficial owners of lender must be disclosed to Landlord.
(c) All rights acquired by said Mortgagee shall be subject to each and all of
the covenants, conditions and restrictions set forth in this Lease, and to all rights of Landlord
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thereunder, none of which covenants, conditions and restrictions is or shall be waived by
Landlord by reason of the giving of such Mortgage.
If Tenant encumbers its leasehold estate by way of a Mortgage as permitted
herein, and should Landlord be advised in writing of the name and address of the Mortgagee,
then this Lease shall not be terminated or canceled on account of any Event of Default by Tenant
in the performance of the terms, covenants or conditions hereof until Landlord shall have
complied with the provisions of Section 18.2 as to the Mortgagee's rights to cure and to obtain a
new lease.
18.1.2 Consent of Mortgagee Required. No cancellation, surrender,
termination, or modification of this Lease shall be effective without the written consent of the
holder of any Mortgage.
18.2 Rights and Obligations of Leasehold Mortgagees. If Tenant or Tenant's
successors or assigns shall mortgage the leasehold interest herein demised, then, as long as any
such Mortgage shall remain unsatisfied of record, the following provisions shall apply:
18.2.1 No Cancellation. Landlord will not cancel, accept a surrender of,
terminate or modify this Lease in the absence of a default by Tenant without the prior consent in
writing of the Mortgagee.
18.2.2 Notice of Defaults. Landlord agrees to give each Mortgagee immediate
notice of all defaults by Tenant under the Lease, and to simultaneously give to each Mortgagee a
written copy of all notices and demands that Landlord gives to Tenant. No notice or demand
under the Lease shall be effective until after notice is received by Mortgagee. Any notices of
default given by Landlord under the Lease shall describe the default(s) with reasonable detail.
Each Mortgagee shall have the right to cure any breach or default within the time periods given
below.
18.2.3 Mortgagee's Cure Rights.
(a) Notice and Cure. After receipt by Tenant of a notice of default under the
Lease and the expiration of any applicable period of cure given to Tenant under the Lease,
Landlord shall deliver an additional notice ("Mortgagee's Notice") to each Mortgagee specifying
the default and stating that Tenant's period of cure has expired. Each Mortgagee shall thereupon
have the additional periods of time to cure any uncured default, as set forth below, without
payment of default charges, fees, late charges or interest that might otherwise be payable by
Tenant. Landlord shall not terminate the Lease or exercise its other remedies under the Lease if:
(i) Within ninety (90) days after Mortgagee's receipt of the Mortgagee's Notice, any
Mortgagee (i) cures the default, or (ii) if the default reasonably requires more than ninety (90)
days to cure, commences to cure said default within such ninety (90)-day period and thereafter
diligently prosecutes the same to completion; or
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(ii) Where the default cannot be cured by payment or expenditure of money or
without possession of the Property or otherwise, Mortgagee initiates foreclosure or other
appropriate proceedings within ninety (90) days after receipt of the Mortgagee's Notice,
thereafter cures all other defaults reasonably capable of cure by the payment of money to
Landlord, and thereafter continues to pay all rents, real property taxes and assessments, and
insurance premiums to be paid by Tenant under the Lease. Mortgagee shall then have ninety
(90) days following the later to occur of (i) the date of execution and delivery of a new lease of
the Property pursuant to Section 18.2.4 of the Lease (a "New Lease"), or (ii) the date on which
Mortgagee or its nominee is able to occupy the Property following foreclosure under such
Mortgage and the eviction of or vacating by Tenant of the leased premises, to cure such default;
provided, however, that if any such default, by its nature, is such that it cannot practicably be
cured within ninety (90) days, then Mortgagee shall have such additional time as shall be
reasonably necessary to cure the default provided that Mortgagee commences such cure within
such ninety (90)-day period and thereafter diligently prosecutes the cure to completion.
(b) Landlord agrees to accept performance by Mortgagee of all cures,
conditions and covenants as though performed by Tenant, and agrees to permit Mortgagee access
to the Property to take all such actions as may be necessary or useful to perform any condition or
covenants of the Lease or to cure any default of Tenant. Mortgagee shall not be required to
perform any act or cure any default which is not reasonably susceptible to performance or cure
by Mortgagee.
(c) Mortgagee elects any of the above -mentioned options, then upon
Mortgagee's acquisition of the Lease by foreclosure, whether by power of sale or otherwise or by
deed or assignment in lieu of foreclosure, or if a receiver be appointed, the Lease shall continue
in full force and effect, provided that, if Mortgagee elects the option provided in Section
18.2.3(a)(ii) above, then upon Mortgagee's acquisition of the Lease, Mortgagee shall cure all
prior defaults of Tenant under the Lease that are reasonably capable of being cured by
Mortgagee within the time set forth in said Section, and Landlord shall treat Mortgagee as
Tenant under the Lease. If Mortgagee commences an action as set forth in Section 18.2.3(a)(ii)
above, and thereafter Tenant cures such defaults (which cure Landlord shall be obligated to
accept) and Mortgagee then terminates all proceedings under the option in said Section, then the
Lease shall remain in full force and effect between Landlord and Tenant.
18.2.4 New Lease. In the event the Lease is terminated for any reason prior to the end of
the Lease Term, Landlord shall promptly give Mortgagee written notice of such termination and
shall enter into a new lease ("New Lease") with Mortgagee or Mortgagee's nominee covering the
Property, provided that Mortgagee (a) requests such New Lease by written notice to Landlord
within sixty (60) days after Mortgagee's receipt of written notice by Landlord of termination of
the Lease, and (b) cures all prior defaults of Tenant that are reasonably capable of being cured by
Mortgagee. The New Lease shall be for the remainder of the Lease Term, effective at the date of
such termination, and shall only include all the rents and all the covenants, agreements,
conditions, provisions, restrictions and limitations contained in the Lease, except as otherwise
provided in the Lease. In connection with a New Lease, Landlord shall assign to Mortgagee or
its nominee all of Landlord's interest in all existing subleases of all or any part of the Property
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and all attornments given by the sublessees. Landlord shall not terminate or agree to terminate
any sublease or enter into any new lease or sublease for all or any portion of the Property without
Mortgagee's prior written consent, unless Mortgagee fails to deliver its request for a New Lease
under this Section. In connection with any such New Lease, Landlord shall, by grant deed,
convey to Mortgagee or its nominee title to the Improvements, if any, which become vested in
Landlord as a result of termination of the Lease. Landlord shall allow to the tenant under the
New Lease a credit against rent equal to the net income derived by Landlord from the Property
during the period from the date of termination of the Lease until the date of execution of the New
Lease under this Section.
18.2.5 Security Deposits. Mortgagee or any other purchaser at a foreclosure sale of the
Mortgage (or Mortgagee or its nominee if one of them enters into a New Lease with Landlord)
shall succeed to all the interest of Tenant in any security or other deposits or other impound
payments paid by Tenant to Landlord.
18.2.6 Permitted Delays. So long as Mortgagee is prevented by any process or
injunction issued by any court or by any statutory stay, or by reason of any action by any court
having jurisdiction of any bankruptcy or insolvency proceeding involving Tenant or any other
person, from commencing or prosecuting foreclosure or other appropriate proceedings in the
nature thereof, Mortgagee shall not be deemed for that reason to have failed to commence such
proceedings or to have failed to diligently prosecute such proceedings, provided that Mortgagee
uses reasonable efforts to contest and appeal the issuance or continuance of any such process,
stay or injunction.
18.2.7 Defaults Deemed Cured. On transfer of the Lease at any foreclosure sale under
the Mortgage or by deed or assignment in lieu of foreclosure, or upon creation of a New Lease,
any or all of the following defaults relating to the prior owner of the Lease shall be deemed
cured:
(a) Attachment, execution or other judicial levy upon the Lease;
(b) Assignment of the Lease for the direct or indirect benefit of creditors of
the prior Tenant;
(c) Judicial appointment of a receiver or similar officer to take possession of
the Lease;
(d) Filing any petition by, for or against Tenant under any chapter of the
federal Bankruptcy Act or any federal or state debtor relief statute, as amended;
(e) Any failure by Tenant to make a disclosure of a hazardous substance
release as required by the California Health and Safety Code, the Lease or otherwise; and
(f) Any other defaults personal to Tenant and/or not otherwise reasonably
curable by Mortgagee.
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18.2.8 Anything herein contained to the contrary notwithstanding, the provisions
of this Section shall inure only to the benefit of the holders of Mortgages. If the holders of more
than one such Mortgage shall make written requests upon Landlord in accordance with this
Lease, the new lease (as provided for in subsection 18.2.4 above) shall be entered into pursuant
to the request of the holder whose Mortgage shall be prior in lien thereto and thereupon the
written requests for a new lease of each holder of a Mortgage junior in lien shall be and be
deemed to be void and of no force or effect.
18.3 Landlord's Forbearance and Right to Cure Defaults on Leasehold Mortgages
18.3.1 Notice. Landlord will give to Mortgagee, at such address as is specified
by the Mortgagee in accordance with Section 26.1 hereof, a copy of each notice or other
communication with respect to any claim that a default exists or is about to exist from Landlord
to Tenant hereunder at the time of giving such notice or communication to Tenant, and Landlord
will give to Mortgagee a copy of each notice of any rejection of this Lease by any trustee in
bankruptcy of Tenant. Landlord will not exercise any right, power or remedy with respect to any
Event of Default hereunder, and no notice to Tenant of any such Event of Default and no
termination of this Lease in connection therewith shall be effective, unless Landlord has given to
Mortgagee written notice or a copy of its notice to Tenant of such Event of Default or any such
termination, as the case may be.
18.3.2 Mortgagee's Transferees, Etc. In the event the leasehold estate
hereunder shall be acquired by foreclosure, trustee's sale or deed or assignment in lieu of
foreclosure of a Mortgage, the purchaser at such sale or the transferee by such assignment and its
successors as holders of the leasehold estate hereunder shall not be liable for any Rent, if any, or
other obligations accruing after its or their subsequent sale or transfer of such leasehold estate
and such purchaser or transferee and its successors shall be entitled to transfer such estate or
interest without consent or approval of Landlord; provided that, the purchaser or transferee or
successor as holder of the leasehold estate hereunder shall be liable for the payment of all Rent,
if any, becoming due with respect to the period during which such purchaser, transferee or other
successor is the holder of the leasehold estate hereunder. This Section shall also apply to the
rights of a Mortgagee in connection with the entry into a new lease under Section 18.2.4 and to
the appointment of a receiver on behalf of a Mortgagee.
18.3.3 Insurance and Condemnation. In the event of any casualty to, or
condemnation of, all or any part of the leased premises or any improvements now or hereafter
located thereon, the provisions of the Mortgages relating thereto shall prevail over any provisions
of this Lease relating thereto.
18.4 No Liability of Mortgagee for Prior Indemnified Acts. A Mortgagee shall not
be obligated to assume the liability of Tenant for any indemnities arising for a period prior to
Mortgagee's acquiring the right to possession of the Property under this Lease.
18.5 Landlord Cooperation. Landlord covenants and agrees that it will act and fully
cooperate with Tenant in connection with Tenant's right to grant leasehold mortgages as
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hereinabove provided. At the request of Tenant or any proposed or existing Mortgagee,
Landlord shall promptly execute and deliver (i) any documents or instruments reasonably
requested to evidence, acknowledge and/or perfect the rights of Mortgagees as herein provided;
and (ii) an estoppel certificate certifying the status of this Lease and Tenant's interest herein and
such matters as are reasonably requested by Tenant or such Mortgagees. Such estoppel
certificate shall include, but not be limited to, certification by Landlord that (a) this Lease is
unmodified and in full force and effect (or, if modified, state the nature of such modification and
certify that this Lease, as so modified, is in full force and effect), (b) all rents currently due under
the Lease have been paid, (c) there are not, to Landlord's knowledge, any uncured Events of
Default on the part of Tenant under the Lease or facts, acts or omissions which with the giving of
notice or passing of time, or both, would constitute an Event of Default. Any such estoppel
certificate may be conclusively relied upon by any proposed or existing leasehold Mortgagee or
assignee of Tenant's interest in this Lease.
18.6 Priority. The Lease, and any extensions, renewals or replacements thereof, and
any sublease entered into by Tenant as sublessor, and any Mortgage or other encumbrance
recorded by any Mortgagee shall be superior to any mortgages, deeds of trust or similar
encumbrances placed by Landlord on the Property and to any lien right, if any, of Landlord on
the buildings, and any furniture, fixtures, equipment or other personal property of Tenant upon
the Property or any interest of Landlord in sublease rentals or similar agreements.
18.7 Claims. Landlord and Tenant shall deliver to Mortgagee notice of any litigation
or arbitration proceedings between the parties or involving the Property or the Lease. Mortgagee
shall have the right, at its option, to intervene and become a party to any such proceedings. If
Mortgagee elects not to intervene or become a party, Landlord shall deliver to Mortgagee prompt
notice of and a copy of any award, decision or settlement agreement made in connection with
any such proceeding.
18.8 Further Amendments. Landlord and Tenant shall cooperate in including in the
Lease by suitable amendment from time to time any provision which may be reasonably
requested by any proposed Mortgagee for the purpose of implementing the mortgagee protection
provisions contained in this Lease and allowing that Mortgagee reasonable means to protect or
preserve the lien of its Mortgage upon the occurrence of a default under the terms of the Lease.
Landlord and Tenant each agree to execute and deliver (and to acknowledge for recording
purposes, if necessary) any agreement required to effect any such amendment.
ARTICLE 19. SUBLEASING
19.1 Subleasing of Property. All subleases ("Subleases") made by Tenant shall be
subject to the following provisions and restrictions:
19.1.1 Tenant may, without the consent of Landlord, let individual units of the
Improvements to any person who qualifies.
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19.1.2 Each Sublease shall contain a provision, satisfactory to Landlord,
requiring the Subtenant to attorn to Landlord upon (a) an Event of Default by Tenant under this
Lease, and (b) receipt by such Subtenant of written notice of such Event of Default and
instructions to make such Subtenant's rental payments to Landlord.
19.1.3 On any termination of this Lease prior to the expiration of the Term, all of
Tenant's interest as sublessor under any and all existing valid and enforceable Subleases for
which Landlord has issued a non -disturbance agreement shall be deemed automatically assigned,
transferred and conveyed to Landlord and subtenants under such Subleases shall be deemed to
have attorned to Landlord. Landlord shall thereafter be bound on such Subleases to the same
extent Tenant, as sublessor, was bound thereunder and Landlord shall have all the rights under
such Subleases that Tenant, as sublessor, had under such Subleases; provided, however, that any
amendments to any such Sublease made after the issuance of a non -disturbance agreement to a
subtenant shall not be binding on Landlord.
19.1.4 Any subtenant qualifying shall, upon written request, receive a non -
disturbance agreement from Landlord.
19.1.5 Not later than thirty (30) days after each anniversary of the date of
commencement of the term of this Lease, Tenant shall deliver to Landlord a current list of the
name and mailing address of each Subtenant.
19.1.6 Tenant shall not accept, directly or indirectly, more than two (2) months
prepaid rent plus a reasonable security deposit from any subtenant.
19.1.7 Each Sublease shall expressly provide that it is subject to each and all of
the covenants, conditions, restrictions and provisions of this Lease.
19.2 Rights of Mortgagees. Notwithstanding anything contained in this Lease to the
contrary, all attornment provisions applicable to the Landlord shall also be applicable to a
Mortgagee and, as between Landlord and Mortgagee, the Mortgagee shall have priority in any
attornment situation.
ARTICLE 20. PERFORMANCE OF TENANT'S COVENANTS
20.1 Right of Performance. If Tenant shall at any time fail to pay any Imposition or
other charge in accordance with Article 4 hereof, within the time period therein permitted, or
shall fail to pay for or maintain any of the insurance policies provided for in Article 9 hereof,
within the time therein permitted, or to make any other payment or perform any other act on its
part to be made or performed hereunder, within the time permitted by this Lease, then Landlord,
after thirty (30) days' written notice to Tenant (or, in case of an emergency, on such notice, or
without notice, as may be reasonable under the circumstances) and without waiving or releasing
Tenant from any obligation of Tenant hereunder, may (but shall not be required to):
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(a) pay such Imposition or other charge payable by Tenant pursuant to the
provisions of Article 4 hereof, or
(b) pay for and maintain such insurance policies provided for in Article 9
hereof, or
(c) make such other payment or perform such other act on Tenant's part to be
made or performed as in this Lease provided.
20.1.1 Rights of Mortgagees. Notwithstanding anything contained in this Lease
to the contrary, all of the performance rights available to Landlord under Section 20.1 shall also
be available to Mortgagee and, as between Landlord and Mortgagee, the rights of the Mortgagee
shall take precedence over the rights of Landlord.
20.2 Reimbursement and Damages. All sums so paid by Landlord and all costs and
expenses incurred by Landlord in connection with the performance of any such act, together with
interest thereon at the rate provided in Section 4.5 from the respective dates of Landlord's
making of each such payment or incurring of each such cost or expense, shall be paid by Tenant
to Landlord on demand. Landlord shall not be limited in the proof of any damages which
Landlord may claim against Tenant arising out of or by reason of Tenant's failure to provide and
keep in force insurance as aforesaid, to the amount of the insurance premium or premiums not
paid or incurred by Tenant and which would have been payable upon such insurance, but
Landlord shall also be entitled to recover as damages for such breach, the uninsured amount of
any loss (to the extent of any deficiency in the insurance required by the provisions of this
Lease), damages, costs and expenses of suit, including attorneys' fees, suffered or incurred by
reason of damage to, or destruction of, the Improvements, occurring during any period in which
Tenant shall have failed or neglected to provide insurance as aforesaid.
ARTICLE 21. EVENTS OF DEFAULT; REMEDIES
21.2 Events of Default. Any one or all of the following events shall constitute an
Event of Default hereunder:
21.1.1. If Tenant shall default in the payment of any Rent when and as the same
becomes due and payable and such default shall continue for more than ten (10) days after
Landlord shall have given written notice thereof to Tenant; or
21.1.2 The abandonment or vacation of the Property by Tenant for a period of
thirty (30) days; or
21.1.3 The entry of any decree or order for relief by any court with respect to
Tenant, or any assignee or transferee of Tenant (hereinafter "Assignee"), in any involuntary case
under the Federal Bankruptcy Code or any other applicable federal or state law; or the
appointment of or taking possession by any receiver, liquidator, assignee, trustee, sequestrator or
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other similar official of Tenant or any Assignee (unless such appointment is in connection with a
Mortgagee's exercise of its remedies under its Mortgage), or of any substantial part of the
property of Tenant or such Assignee, or the ordering or winding up or liquidating of the affairs of
Tenant or any Assignee and the continuance of such decree or order unstayed and in effect for a
period of ninety (90) days or more (whether or not consecutive); or the commencement by
Tenant or any such Assignee of a voluntary proceeding under the Federal Bankruptcy Code or
any other applicable state or federal law or consent by Tenant or any such Assignee to the entry
of any order for relief in an involuntary case under any such law, or consent by Tenant or any
such Assignee to the appointment of or taking of possession by a receiver, liquidator, assignee,
trustee, sequestrator or other similar official of Tenant or any such Assignee, or of any
substantial property of any of the foregoing, or the making by Tenant or any such Assignee of
any general assignment for the benefit of creditors; or Tenant or any such Assignee takes any
other voluntary action related to the business of Tenant or any such Assignee or the winding up
of the affairs of any of the foregoing.
21.1.4 If Tenant shall default in the performance of or compliance with any other
term, covenant or condition of this Lease (other than as set forth in Paragraph 21.1.1 of this
Section 21.1) and such default shall continue for more than thirty (30) days after Landlord shall
have given written notice thereof to Tenant, provided, however, if cure of such default
reasonably requires more than thirty (30) days, then, provided that Tenant commences to cure
within such thirty (30) day period and thereafter diligently and continuously prosecutes the cure
to completion, Tenant shall not be in default during the cure period.
21.2 Remedies.
21.2.1 If an Event of Default shall occur and continue as aforesaid, then in
addition to any other remedies available to Landlord at law or in equity, Landlord shall have the
immediate option to terminate this Lease and bring suit against Tenant or submit the issue of
Tenant's default to arbitration as provided in Article 23 and recover as an award in such suit or
arbitration proceeding the following:
(a) the worth at the time of award of the unpaid rent and all other sums due
hereunder which had been earned at the time of termination;
(b) the worth at the time of award of the amount by which the unpaid rent and
all other sums due hereunder which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been reasonably
avoided;
(c) the worth at the time of award of the amount by which the unpaid rent and
all other sums due hereunder for the balance of the Term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided;
(d) any other amount necessary to compensate Landlord for all the detriment
proximately caused by the Tenant's failure to perform its obligations under this Lease or which
in the ordinary course of things could be likely to result therefrom; and
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(e) such amounts in addition to or in lieu of the foregoing as may be permitted
from time to time by applicable California law.
21.2.2 The "worth at the time of the award" of the amounts referred to in
Subparagraphs 21.2.1(a) and 21.2.1(b) above shall be computed by allowing interest at the rate
provided in Section 4.5 as of the date of the award. The "worth at the time of award" of the
amount referred to in subparagraph 21.2.1(c) above shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%).
21.2.3 If an Event of Default occurs, Landlord shall also have the right, with or
without terminating this Lease, but subject to any nondisturbance agreements entered into with
Subtenants, to reenter the Property and remove all persons and property from the Property; such
property may be removed and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant.
21.2.4 If an Event of Default occurs, Landlord shall also have the right, with or
without terminating this Lease, to relet the Property. If Landlord so elects to exercise its right to
relet the Property but without terminating this Lease, then rentals received by Landlord from
such reletting shall be applied: First, to the payment of any indebtedness other than rent due
hereunder from Tenant to Landlord; Second, to the payment of any cost of such reletting; Third,
to the payment of the cost of any alterations and repairs to the Property; Fourth, to the payment
of rent due and unpaid hereunder; and Fifth, the residue, if any, shall be held by Landlord and
applied in payment of future rent as the same may become due and payable hereunder. Should
the amount of rental received from such reletting during any month which is applied to the
payment of rent hereunder be less than that agreed to be paid during that month by Tenant
hereunder, then Tenant shall pay such deficiency to Landlord immediately upon demand therefor
by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in such reletting
or in making alterations and repairs not covered by the rentals received from such reletting.
21.2.5 No reentry or taking possession of the Property by Landlord pursuant to
Paragraphs 21.2.3 or 21.2.4 shall be construed as an election to terminate this Lease unless a
written notice of such intention is given to Tenant or unless the termination thereof is decreed by
a court of competent jurisdiction. Notwithstanding any reletting without termination by Tenant
because of any default by Tenant, Landlord may at any time after such reletting elect to
terminate this Lease for any such default.
21.3 Receipt of Rent, No Waiver of Default. The receipt by Landlord of the rents or
any other charges due to Landlord, with knowledge of any breach of this Lease by Tenant or of
any default on the part of Tenant in the observance or performance of any of the conditions or
covenants of this Lease, shall not be deemed to be a waiver of any provisions of this Lease. No
acceptance by Landlord of a lesser sum than the rents or any other charges then due shall be
deemed to be other than on account of the earliest installment of the rents or other charges due,
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nor shall any endorsement or statement on any check or any letter accompanying any check or
payment of rent or charges due be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the balance of such
installment or pursue any other remedy provided in this Lease. The receipt by Landlord of any
rent or any other sum of money or any other consideration paid by Tenant after the termination
of this Lease, or after giving by Landlord of any notice hereunder to effect such termination,
shall not, except as otherwise expressly set forth in this Lease, reinstate, continue, or extend the
term of this Lease, or destroy, or in any manner impair the efficacy of any such notice of
termination as may have been given hereunder by Landlord to Tenant prior to the receipt of any
such sum of money or other consideration, unless so agreed to in writing and signed by
Landlord. Neither acceptance of the keys nor any other act or thing done by Landlord or by its
agents or employees during the Term shall be deemed to be an acceptance of a surrender of the
Property or the Improvements, excepting only an agreement in writing signed by Landlord
accepting or agreeing to accept such a surrender.
21.4 Effect on Indemnification. Notwithstanding the foregoing, nothing contained in
this Article 21 shall be construed to limit the Indemnitees' right to indemnification as otherwise
provided in this Lease.
21.5 Limited Waiver of Right to Terminate Lease. Landlord hereby waives it right
to terminate this Lease during the Compliance Period for a default by Tenant other than the
failure to pay Annual Rent. That notwithstanding, Landlord, during the Compliance Period, shall
retain all other rights and remedies available hereunder or by law for such a non -monetary
default, including, without limitation, an action to compel performance of the covenant or
condition that is the subject of the alleged default.
ARTICLE 22. PERMITTED CONTESTS
Tenant, at no cost or expense to Landlord, may contest (after prior written notice to
Landlord), by appropriate legal proceedings conducted with due diligence, the amount or validity
or application, in whole or in part, of any Imposition or lien or any Legal Requirement or
Insurance Requirement, provided that (a) in the case of liens of mechanics, materialmen,
suppliers or vendors, or Impositions or liens therefor, such proceedings shall suspend the
collection thereof from Landlord, and shall suspend a foreclosure against the Property and/or the
Improvements, or any interest therein, or any Rent, if any, (b) neither the Property or the
Improvements, nor any part thereof or interest therein, or the Rent, if any, or any portion thereof,
would be in any danger of being sold, forfeited or lost by reason of such proceedings, (c) in the
case of a Legal Requirement, Landlord would not be in any danger of any criminal liability or,
unless Tenant shall have furnished a bond or other security therefor satisfactory to Landlord, any
additional civil liability for failure to comply therewith and the Property and the Improvements
would not be subject to the imposition of any lien as a result of such failure, and (d) Tenant shall
have furnished to Landlord, if requested, a bond or other security, satisfactory to Landlord. If
Tenant shall fail to contest any such matters, or to give Landlord security as hereinabove
provided, Landlord may, but shall not be obligated to, contest the matter or settle or compromise
the same without inquiring into the validity or the reasonableness thereof. Landlord, at the sole
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cost and expense of Tenant, will cooperate with Tenant and execute any documents or pleadings
legally required for any such contest.
ARTICLE 23. ARBITRATION OF DISPUTES
23.1 Matters Subject to Arbitration.
All disputes arising under this Lease shall be submitted to arbitration prior to either party
bringing suit based on such disputes, except that any dispute relating to the following rights and
obligations shall not be subject to arbitration:
23.1.1 Tenant's obligation to:
(a) pay Rent, if any, and other charges due under this Lease;
(b) indemnify Landlord as provided herein; and
(c) keep the Property and the Improvements free and clear of any mechanics'
or other liens:
23.1.2 Landlord's right to:
(a) pursue any of the remedies defined in Article 21; and
(b) assign, transfer, sell or encumber its interest in the Property or this Lease;
23.1.3 Any right or obligation the exercise or performance of which is dependent
on Landlord's approval, if the issue is the reasonableness of Landlord's action.
23.1.4 Any right of the Mortgagee to exercise its remedies under its Mortgage or
in connection with the bankruptcy of the Tenant or Landlord.
23.2 Arbitration Process.
Either party may refer a dispute subject to arbitration for settlement by arbitration in
National City, California, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be
entered in any Court having jurisdiction.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO
HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION
AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU
MAY POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL.
BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL
RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY
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INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO
SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE
COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE
OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS
VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO
SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
Tenant's Initials Landlord's Initials
ARTICLE 24. FORCE MAJEURE
24.1 Subject to Paragraph 24.2 below, any prevention, delay, nonperformance or
stoppage by Tenant due to any of the following causes shall be excused: any regulation, order,
act, restriction or requirement or limitation imposed by any federal, state, municipal or foreign
government or any department or agency thereof, or civil or military authority; acts of God; acts
or omissions of Landlord or its agents or employees; fire; explosion; floods and/or earthquakes;
strikes, walkouts or inability to obtain materials; war, riots, sabotage or civil insurrection; or any
other causes beyond the reasonable control of Tenant.
24.2 No prevention, delay, or stoppage of performance shall be excused unless:
24.2.1 Tenant notifies Landlord within thirty (30) days of such prevention, delay
or stoppage that it is claiming excuse of its obligations under this Article 24; and
24.2.2 Tenant diligently proceeds within thirty (30) days of the conclusion of
such prevention, delay or stoppage to cure the condition causing the prevention, delay or
stoppage; and
24.2.3 Tenant effects such cure within a reasonable time.
ARTICLE 25. GENERAL PROVISIONS
25.1 Notices. All notices or demands shall be in writing and shall be served
personally, by overnight courier, or by express or certified mail. Service shall be deemed
conclusively made at the time of service if personally served; the next business day if sent by
overnight courier and receipt is confirmed by the signature of an agent or employee of the party
served; the next business day after deposit in the United States mail, properly addressed and
postage prepaid, return receipt requested, if served by express mail; and three (3) days after
deposit thereof in the United States mail, properly addressed and postage prepaid, return receipt
requested, if served by certified mail.
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25.1.1 Any notice to Landlord shall be given to:
Community Development Commission -
Housing Authority of the City of National City
1243 National City Blvd.
National City, California 91950
Attn: Executive Director
25.1.2 Any notice to Tenant shall be given to:
Paradise Creek Housing Partners, L.P.
c/o the Related Companies of California
18201 Von Karman Avenue, Suite 900
Irvine, California 92612
Attn: Frank Cardone
and to:
Community HousingWorks
2815 Camino Del Rio South, Suite 350
San Diego, California 92108
Attn. Susan M. Reynolds
With copies to:
MUFG Union Bank, N.A.
200 Pringle Avenue, Suite 200
Walnut Creek, CA 94596
Attn. CDF Head
Bocarsly Emden Cowan Esmail & Arndt LLP
633 W. 5th St., 64th Fl
Los Angeles, CA 90071
Attn: Lance Bocarsly
Any party may, by virtue of written notice in compliance with this Section 25.1, alter or
change the address or the identity of the person to whom any notice, or copy thereof, is to be
sent.
25.2 Certificates. Landlord or Tenant, as the case may be, shall execute, acknowledge
and deliver to the other, promptly upon request, a Certificate of Landlord or Tenant, as the case
may be, certifying (a) that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that the Lease is in full force and effect, as modified, and stating the date of
each instrument so modifying the Lease), (b) the date, if any, through which the Rent, if any, has
been paid, (c) whether there are then existing any offsets or defenses against the enforcement of
any term hereof on the part of Tenant to be performed or complied with (and, if so, specifying
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the same), and (d) whether any default exists hereunder and, if any such default exists, specifying
the nature and period of existence thereof and what action Landlord or Tenant, as the case may
be, is taking or proposes to take with respect thereto and whether notice thereof has been given to
the party in default. Any Certificate may be relied upon by any prospective purchaser,
transferee, mortgagee or trustee under a deed of trust of the fee or leasehold estate in the Property
or any part thereof or of Landlord's or Tenant's interest under this Lease. Tenant will also
deliver to Landlord, promptly upon request, such information with respect to the Property or any
part thereof as from time to time may reasonably be requested.
25.3 No Merger of Title. There shall be no merger of this Lease or the leasehold
estate created by this Lease with any other estate in the Property or any part thereof by reason of
the fact that the same person, firm, corporation or other entity may acquire or own or hold,
directly or indirectly: (a) this Lease or the leasehold estate created by this Lease or any interest
in this Lease or in any such leasehold estate, and (b) any other estate in the Property and the
Improvements or any part thereof or any interest in such estate, and no such merger shall occur
unless and until all persons, corporations, firms and other entities, including any leasehold
mortgagee or leasehold mortgagees, having any interest (including a security interest) in (i) this
Lease or the leasehold estate created by this Lease, and (ii) any other estate in the Property or the
Improvements or any part thereof shall join in a written instrument effecting such merger and
shall duly record the same.
25.4 Utility Services. Tenant shall pay or cause to be paid all charges for all public or
private utility services and all sprinkler systems and protective services at any time rendered to
or in connection with the Property or the Improvements, or any part thereof, and shall comply
with all contracts existing on the date hereof or subsequently executed by Tenant relating to any
such services, and will do all other things required for the maintenance and continuance of all
such services.
25.5 Quiet Enjoyment. Tenant, upon paying the Rent, if any, and other charges
herein provided for and upon performing and complying with all covenants, agreements, terms
and conditions of this Lease to be performed or complied with by it, shall lawfully and quietly
hold, occupy and enjoy the Property during the term of this Lease without hindrance or
molestation by Landlord, or any person or persons claiming through Landlord.
25.6 No Claims Against Landlord. Nothing contained in this Lease shall constitute
any consent or request by Landlord, express or implied, for the performance of any labor or
services or the furnishing of any materials or other property in respect of the Property or any part
thereof, nor as giving Tenant any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or other property in such
fashion as would permit the making of any claim against Landlord or its interest in the Property
in respect thereof.
25.7 Inspection. Landlord and its authorized representatives may enter the Property or
any part thereof at all reasonable times for the purpose of inspecting, servicing or posting
notices, protecting the Property or the Improvements, or for any other lawful purposes. That
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notwithstanding, Landlord may only enter residential units after giving Tenant three (3) days
prior written notice.
25.8 No Waiver by Landlord. To the extent permitted by applicable law, no failure
by Landlord to insist upon the strict performance of any term hereof or to exercise any right,
power or remedy consequent upon a default under this Lease, and no acceptance of rent during
the continuance of any such default, shall constitute a waiver of any such default or of any such
term. No waiver of any default shall affect or alter this Lease, which shall continue in full force
and effect, or the rights of Landlord with respect to any other then existing or subsequent default.
25.9 Holding Over. In the event Tenant shall hold over or remain in possession of the
Property or the Improvements with the consent of Landlord after the expiration of the Term, such
holding over or continued possession shall create a tenancy for month to month only, upon the
same terms and conditions as are herein set forth so far as the same are applicable.
25.10 Exculpation of Certain Personal Liability. Notwithstanding anything to the
contrary provided in this Lease, including, without limitation, the remedies provisions set forth in
Section 21.2 above, it is specifically understood and agreed that except as to:
(a) the obligation to pay Annual Rent pursuant to Section 4.1;
(b) the obligation to pay any and all Impositions;
(c) acts of fraud and/or criminal misconduct;
(d) acts of gross negligence and/or willful misconduct;
(e) any and all legal costs and expenses reasonably incurred by Landlord in
the enforcement of this Lease; and/or
(f) liability for risks required to be covered by insurance under this Lease but
for which Tenant fails to maintain such coverage;
there shall be no personal liability or obligation on the part of any partner in Tenant or any
assignee or successor in interest of any such partner with respect to the provisions of this Lease.
25.11 No Partnership. Anything contained herein to the contrary notwithstanding,
Landlord does not in any way or for any purpose become a partner of Tenant in the conduct of its
business, or otherwise, or a joint venturer or member of a joint enterprise with Tenant hereunder.
25.12 Remedies Cumulative. The various rights, options, elections and remedies of
Landlord and Tenant, respectively, contained in this Lease shall be cumulative and no one of
them shall be construed as exclusive of any other, or of any right, priority or remedy allowed or
provided for by law and not expressly waived in this Lease.
Page 56
25.13 Attorney's Fees. In the event of a dispute between the parties arising out of or in
connection with this Lease, whether or not such dispute results in arbitration or litigation, the
prevailing party (whether resulting from settlement before or after arbitration or litigation is
commenced) shall be entitled to have and recover from the losing party reasonable attorneys'
fees and costs of suit incurred by the prevailing party.
25.14 Time Is Of The Essence. Time is of the essence of this Lease and all of the
terms, provisions, covenants and conditions hereof.
25.15 Survival of Representations, Warranties and Covenants. The respective
representations, warranties and covenants contained herein shall survive the Commencement
Date and continue throughout the Term.
25.16 Construction of Agreement. This Lease shall be construed in accordance with
the substantive laws of the State of California, without regard to the choice of law rules thereof.
The rule of construction that a document be construed strictly against its drafter shall have no
application to this Lease.
25.17 Severability. If one or more of the provisions of this Lease shall be held to be
illegal or otherwise void or invalid, the remainder of this Lease shall not be affected thereby and
shall remain in full force and effect to the maximum extent permitted under applicable laws and
regulations.
25.18 Entire Agreement: Modification. This Lease contains the entire agreement of
the parties with respect to the matters discussed herein. This Lease may be amended only by an
agreement in writing signed by the party against whom enforcement of any waiver, change,
modification, extensions or discharge is sought.
25.19 Binding Effect and Benefits. This Lease shall inure to the benefit of and be
binding on the parties hereto and their respective successors and assigns. Except as otherwise set
forth herein, nothing in this Lease, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Lease.
25.20 Further Assurances. Each party hereto will promptly execute and deliver
without further consideration such additional agreement, assignments, endorsements and other
documents as the other party hereto may reasonably request to carry out the purposes of this
Lease.
25.21 Counterparts. This Lease may be executed simultaneously in counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
Lease.
25.22 Number and Gender. Whenever the singular number is used in this Lease and
required by the context, the same shall include the plural, and the masculine gender shall include
the feminine and neuter genders.
Page 57
25.23 Incorporation by Reference. Every Exhibit attached to this Lease and referred
to herein is hereby incorporated by reference.
25.24 Tax Credit Partner Rights. Notwithstanding anything to the contrary contained
in this Lease, Landlord, prior to any action to enforce this Lease, shall give MUFG Union Bank,
N.A., and its successors and assigns (the "Tax Credit Partner") notice and opportunity to cure for
a period of not less than (a) fifteen (15) days if a monetary default, and (b) thirty (30) days if a
nonmonetary default; provided, however, if in order to cure such a default Tax Credit Partner
reasonably determines that it must remove the general partner of Borrower, Tax Credit Partner
shall so notify Lender and so long as Tax Credit Partner is diligently and continuously
attempting to so remove such general partner, Tax Credit Partner shall have until the date thirty
(30) days after the effective date of the removal of the general partner or general partners to cure
such default but in no event more than one (1) year.
IN WITNESS WHEREOF, the undersigned have executed this Lease as of the date first
above written.
"Landlord"
COMMUNITY DEVELOPMENT COMMISSION -
HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY,
a public body, corporate and politic
Leslie Deese, Executive Director
APPROVED AS TO FORM:
Christensen & Spath LLP
Landlo d ` . ecial Counsel
By:
Walter F. Spa
[SIGNAT $ 'TINUED ON FOLLOWING PAGE]
Page 58
"Tenant"
PARADISE CREEK HOUSING PARTNERS, L.P., a California limited partnership
By: RELATED/PARADISE CREEK DEVELOPMENT CO., LLC,
a California limited liability company
its Administrative General Partner
By: /l
Frank Cardone, Vice President
By: CHW PARADISE CREEK DEVELOPMENT CO., LLC,
a California limited liability company
its Managing General Partner
By: COM
a Califo
its Ma
HOUSING WORKS,
nprofit publi `;befit corporation
By:
ilson, Senior Vice President
Page 59
EXHIBIT "A"
LEGAL DESCRIPTION OF THE PROPERTY
Real property in the City of National City, County of San Diego, State of California,
described as follows:
All that certain real property in the City of National City, County of San Diego, State of
California, described as Parcel 1 in that certain Certificate of Compliance No. 2012-04
LS, SC, recorded in the Official Records of San Diego County on August 20, 2013, as
Document No. 2013-0521150.
Page 60
EXHIBIT `B"
INCOME COMPUTATION AND CERTIFICATION
NOTE TO APARTMENT OWNER: This form is designed to assist you in computing
Annual Income in accordance with the method set forth in the Department of Housing and Urban
Development ("HUD") Regulations (24 CFR 813). You should make certain that this form is at
all times up to date with the HUD Regulations.
Re: Housing Project, National City, California
UWe, the undersigned state that Uwe have read and answered fully, frankly and
personally each of the following questions for all persons who are to occupy the unit being
applied for in the above apartment project. Listed below are the names of all persons who intend
to reside in the unit:
1.
Names of
Members of
Household
2.
Relationship to
Head of
Household
3.
Age
4.
Social Security
Number
5.
Place/Source of
Employment
6.
Monthly Gross
Income Amount
(before
deductions)
HEAD
SPOUSE
Income Computation
6. The total anticipated income, calculated in accordance with the provisions of this
paragraph 6, of all persons over the age of 18 years listed above for the 12-month period
beginning the date that Uwe plan to move into a unit is $
Included in the total anticipated income listed above are:
EXHIBIT "B"
Page 1
(a) all wages and salaries, overtime pay, commissions, fees, tips and bonuses and
other compensation for personal services, before payroll deductions;
(b) the net income from the operation of a business or profession or from the rental of
real or personal property (without deducting expenditures for business expansion or amortization
of capital indebtedness or any allowance for depreciation of capital assets),
(c) interest and dividends (including income from assets excluded below);
(d) the full amount of periodic payments received from social security, annuities,
insurance policies, retirement funds, pensions, disability or death benefits and other similar types
of periodic receipts, including any lump sum payment for the delayed start of a periodic
payment;
(e) payments in lieu of earnings, such as unemployment and disability compensation,
worker's compensation and severance pay;
(f) the maximum amount of public assistance available to the above persons other
than the amount of any assistance specifically designated for shelter and utilities;
(g) periodic and determinable allowances, such as alimony and child support
payments and regular contributions and gifts received from persons not residing in the dwelling;
(h) all regular pay, special pay and allowances of a member of the Armed Forces
(whether or not living in the dwelling) who is the head of the household or spouse; and
(i)
any earned income tax credit to the extent that it exceeds income tax liability.
Excluded from such anticipated income are:
(a) casual, sporadic or irregular gifts;
(b) amounts which are specifically for or in reimbursement of medical expenses;
(c) lump sum additions to family assets, such as inheritances, insurance payments
(including payments under health and accident insurance and workmen' s compensation), capital
gains and settlement for personal or property losses;
(d) amounts of educational scholarships paid directly to the student or the educational
institution, and amounts paid by the government to a veteran for use in meeting the costs of
tuition, fees, books and equipment. Any amounts of such scholarships or payments to veterans
not used for the above purposes are to be included in income;
EXHIBIT "B"
Page 2
(e) special pay to a household member who is away from home and exposed to
hostile fire;
(f) relocation payments under Title II of the Uniform Relocation Assistance and Real
Property Acquisition Policies Act of 1970;
(g) foster child care payments;
(h) the value of coupon allotments for the purchase of foods pursuant to the Food
Stamp Act of 1977;
(i) payments to volunteers under the Domestic Volunteer Service Act of 1973;
(j) payments received under the Alaska Native Claims Settlement Act;
(k) income derived from certain submarginal land of the United States that is held in
trust for certain Indian tribes;
(1) payments or allowances made under the Department of Health and Human
Services' Low -Income Home Energy Assistance Program;
(m)
payments received from the Job Training Partnership Act;
(n) income derived from the disposition of funds of the Grand River Band of Ottawa
Indians; and
(o) the first $2,000.00 of per capita shares received from judgment funds awarded by
the Indian Claims Commission or the Court of Claims.
7. Do the persons whose income or contributions are included in item 6 above:
(a) have savings, stocks, bonds, equity in real property or
other form of capital investment (excluding the values of necessary
items of personal property such as furniture and automobiles and Yes No
interests in Indian trust land); or
(b) have they disposed of any assets (other than at a
foreclosure or Credit Bankruptcy sale) during the last two years at Yes No
less than fair market value?
(c) If the answer to (a) or (b) above is yes, does the
combined total value of all such assets owned or disposed of by all Yes No
such persons total more than $5,000?
EXHIBIT "B"
Page 3
(d) If the answer to (c) above is yes, state:
(1) the amount of income expected to be derived
from such assets in the 12-month period beginning on the date of $
initial occupancy in the unit that you propose to rent:
(2) the amount of such income, if any, that was $
included in item 6 above:
8. (a) Are all of the individuals who propose to Yes No
reside in the unit full-time students*?
A full-time student is an individual enrolled as a full-time student during each of 5 calendar
months during the calendar year in which occupancy of the unit begins at an educational
organization which normally maintains a regular faculty and curriculum and normally has a
regularly enrolled body of students in attendance and is not an individual pursuing a full-
time course of institutional or farm training under the supervision of an accredited agent of
such an educational organization or of a state or political subdivision thereof.
(b) If the answer to 8(a) is yes, is at least 1 of the
proposed occupants of the unit a husband and wife entitled to file a
joint federal income tax return?
Yes No
9. Neither myself nor any other occupant of the unit Uwe propose to rent is the
owner of the rental housing project in which the unit is located (hereinafter the "Owner"), has
any family relationship to the Owner, or owns directly or indirectly any interest in the Owner.
For purposes of this paragraph, indirect ownership by an individual shall mean ownership by a
family member, ownership by a corporation, partnership, estate or trust in proportion to the
ownership or beneficial interest in such corporation, partnership, estate or trustee held by the
individual or a family member; and ownership, direct or indirect, by a partner of the individual.
10. This certificate is made with the knowledge that it will be relied upon by the
Owner to determine maximum income for eligibility to occupy the unit, and Uwe declare that all
information set forth herein is true, correct and complete and based upon information Uwe deem
reliable and that the statement of total anticipated income contained in paragraph 6 is reasonable
and based upon such investigation as the undersigned deemed necessary.
11. Uwe will assist the Owner in obtaining any information or documents required to
verify the statements made herein, including either an income verification from my/our present
employer(s) or copies of federal tax returns for the immediately preceding calendar year.
12. Uwe acknowledge that Uwe have been advised that the making of any
misrepresentation or misstatement in this declaration will constitute a material breach of my/our
agreement with the Owner to lease the unit and will entitle the Owner to prevent or terminate
my/our occupancy of the unit by institution of an action for ejection or other appropriate
proceedings.
EXHIBIT "B"
Page 4
13. Housing Commission Statistical Information (Optional - will be used for reporting
purposes only).
Hispanic
Race (Head of Household)
White Black
Native American Other
Physical Disability: Yes No
Asian
Uwe declare under penalty of perjury that the foregoing is true and correct.
Executed this day of in the County of
California.
Applicant
Applicant
[Signatures of all persons over the age of 18 years listed in number 2 above required.]
EXHIBIT "B"
Page 5
FOR COMPLETION BY APARTMENT OWNER ONLY:
1. Calculation of eligible income:
a. Enter amount entered for entire household in 6 above: $
b. (1) If answer to 7(c) above is yes, enter the total amount entered in
7(d)(1), subtract from that figure the amount entered in 7(d)(2) and enter the
remaining balance ($ )
(2) Multiply the amount entered in 7(c) times the current passbook
savings rate to determine what the total annual earnings on the amount in
7(c) would be if invested in passbook savings ($ ), subtract from
that figure the amount entered in 7(d)(2) and enter the remaining balance
($ )
(3) Enter at right the greater of the amount calculated under (1) and (2)
above:
$
c. TOTAL ELIGIBLE INCOME (line l.a plus line 1.b(3)): $
2. The amount entered in 1.c:
Qualifies the applicant(s) as a Very Low -Income Tenant(s).
Does not qualify the applicant(s) as a Very Low -Income Tenant(s).
3. Number of apartment unit assigned: Bedroom
Size: Rent: $
Tenant -Paid Utilities:
Water Gas Electric
Trash Other (list Type)
4. Was this apartment unit last occupied for a period of 31 consecutive days
by persons whose aggregate anticipated annual income as certified in the
above manner upon their initial occupancy of the apartment unit qualified Yes No
them as Very Low -Income Tenants?
EXHIBIT "B"
Page 6
5. Method used to verify applicant(s) income:
Employer income verification.
Social Security Administration verification
Department of Social Services verification
Copies of tax returns
Other: ( )
Manager
EXHIBIT "B"
Page 7
Wages:
Title:
Article I. INCOME VERIFICATION
(For Employed Persons)
The undersigned employee has applied for a rental unit located in a project financed
under the Multifamily Housing Program for persons of low income.
Every income statement of a prospective tenant must be stringently verified. Please indicate
below the employee' s current annual income from wages, overtime, bonuses, commissions or
any other form of compensation received on a regular basis.
Overtime:
Bonuses:
Commissions:
Total Current Income:
I hereby certify that the statements above are true and complete to the best of my
knowledge.
Signature
I hereby grant you permission to disclose my income to in
order that they may determine my income eligibility for rental of an apartment located in their
project which has been financed under Multifamily Housing
Program.
Signature
Please send form to:
EXHIBIT `B"
Page 8
INCOME VERIFICATION
(For Social Security Recipients)
TO: SOCIAL SECURITY ADMINISTRATION
Ladies and Gentlemen:
I have applied for a rental unit located in a project financed under the
Multifamily Housing Program for persons of low income. Every income statement of a
prospective tenant must be stringently verified. In connection with my application for a rental
unit, I hereby give my consent to release to the specific
information requested below.
Signature
Social Security No.: Name (Print):
Address (Print):
Monthly Benefits Began/Will Begin:
Social Security Benefit Amount: $
Other Benefit(s): Amount: $
Medicare Deduction: $
Are benefits expected to change? Yes No
If yes, please state date and amount Date:
of change: Amount:
If recipient is not receiving full benefit amount, please indicate reason and date recipient will
start receiving full benefit amount:
Reason:
Signature
Date of Resumption: Amount: $
Telephone: Name (Print):
Title:
Please send form to:
EXHIBIT "B"
Page 9
INCOME VERIFICATION
(For Department of Social Services Aid Recipients)
TO: CALIFORNIA DEPARTMENT OF SOCIAL SERVICES
Ladies and Gentlemen:
I am receiving assistance through your office. I have applied for a rental unit located in a
project financed under the Multifamily Housing Program for persons
of very low income. Every income statement of a prospective tenant must be stringently
verified. In connection with my application for a rental unit, I hereby authorize the Department
of Social Services to release to the specific information
requested below.
Signature
Caseload Number:
Case Number:
Name (Print):
Case Worker:
1. Number of persons included in budget:
Total monthly budget: $
a. Amount of grant: $ Date aid last began:
b. Other income and source:
c. Is other income included in total budget? Yes No
3. Please specify type of aid
(AFDC, FR, Food Stamps, ANB, MediCal, etc.)
4. If recipient is not receiving full grant, please indicate reason:
Overpayment due to client's failure to report other income
Computation error
Other
EXHIBIT "B"
Page 10
Date when full grant will resume:
Case Worker's Signature
Telephone:
District Office
Your very early response will be appreciated.
Please return form to:
EXHIBIT "B"
Page 11
INCOME VERIFICATION
(For Self -Employed Persons)
I hereby attach copies of my individual federal and state income tax returns for the
immediately preceding calendar year and certify that the information shown in such income tax
returns is true and complete to the best of my knowledge.
Signature
EXHIBIT "B"
Page 12
EXHIBIT "C"
CERTIFICATE OF CONTINUING PROGRAM COMPLIANCE
[Paradise Creek Housing Project]
With reference to that certain Lease Agreement by and between PARADISE CREEK
HOUSING PARTNERS, L.P. ("Tenant") and the COMMUNITY DEVELOPMENT
COMMISSION -HOUSING AUTHORITY OF THE CITY OF NATIONAL CITY, dated as
of November 19, 2014 (the "Lease Agreement"), Tenant hereby certifies, as of ,
2 , the following percentages of units at the Paradise Creek Housing Project, National City, California
are occupied or being held vacant for low-income tenants:
1. Occupied by 30%, 40%, and 50% of Median Income Tenants:
_%; Unit Nos.
The undersigned hereby certifies that the information contained in this Certificate is true and
complete and that Tenant is not in default under the Ground Lease.
PARADISE CREEK HOUSING PARTNERS, L.P., a California limited partnership
By: RELATED/PARADISE CREEK DEVELOPMENT CO., LLC,
a California limited liability company
its Administrative General Partner
By:
Frank Cardone, Vice President
By: CHW PARADISE CREEK DEVELOPMENT CO., LLC,
a California limited liability company
its Managing General Partner
By: COMMUNITY HOUSING WORKS,
a California nonprofit public benefit corporation
its Managing Member
By:
Anne B. Wilson, Senior Vice President
EXHIBIT `B"
Page 13
EXHIBIT "D"
PLAN FOR SOCIAL SERVICES
Community HousingWorks (CHW) will provide outcome -based, result -oriented services
and programs for residents in the community building, starting no later than six (6)
months after the date of issuance of a temporary certificate of occupancy for each phase
of the affordable housing, until expiration of the Term. The services will be administered
by on -site CHW staff. Programs will be tailored to the needs of the community and age -
appropriate for the entire family. The services will include, but not be limited to:
■ Learning Communities — This program will provide access to computers and
after -school tutoring and homework assistance designed to improve school performance.
The Learning Center will be available to both children and adults, and will provide:
family education on sustainable green practices through CHW's nationally -recognized
Green Curriculum; accessibility to work readiness; and vocational and leadership
empowerment opportunities;
• Financial Fitness Training — Family Asset Building Programs (FAB), such as the
nationally recognized Financial Fitness Education, will be provided in classes tailored to
residents, and will focus on empowering residents to create and attain sustainable
financial goals, including potential homeownership; and,
• Homebuyer Education (HBE) — Programs will provide an incubator for
homeownership with educational tools and counseling to assist residents in realizing the
dream of homeownership. Qualified residents will also have access to first time
homebuyer loans after completion of homebuyer education workshops.
EXHIBIT "D"
Page 1
EXHIBIT "E"
LETTER OF INSTRUCTION TO APPRAISER(S)
Dear Sir or Madam:
The land legally described in Exhibit "A" hereto is subject to a certain Ground Lease
dated as of , 201_ (the "Ground Lease"), a complete copy of which is enclosed.
At this juncture, the Ground Lease requires that the ground rent be adjusted to fair market in
accordance with an appraisal. Your duties in connection with the making of that appraisal are as
follows:
1. Determine the fair market value of the land as of jinsert first day of Lease Year 55
(for the Five (5)-Lease Year Period 56 through 60), Year 70 (for the Five (5)-Lease Year Period
71 through 75), Lease Year 85 (for the Five (5)-Lease Year Period 86 through 90) — See Section
4.1(d)(i) of the Ground Lease] for use as multifamily rental housing in accordance with and
subject to (a) all of the terms, conditions, and restrictions set forth in the Ground Lease,
including, without limitation, the restrictions on the rents that may be charged to residents of the
dwelling units set forth in Article 8 of the Ground Lease, and (b) any other covenants,
conditions, and/or restrictions to which the land is subject pursuant to a document recorded in the
Official Records of the County of San Diego. You shall also take into account any property tax
exemption or reduction to which the Tenant is entitled by virtue of the restricted use of the
property as affordable multifamily rental housing, unless the Tenant is contractually committed
not to avail itself of such exemption or reduction. Your appraisal is to be based upon approaches
to value mandated by the Appraisal Standards Board of the Appraisal Foundation, or its
successor organization.
2. For the purposes of such appraisal, disregard any depreciation of the
improvements.
3. Once you have established the fair market value of the land, determine, based on
rates prevailing in the market area, the percentage rate to be applied to that fair market value so
as to produce the fair market ground rent.
4. State the fair market ground rent in annual terms.
EXHIBIT "E"
Page 1