California Code of Regulations › Title 25 - Housing and Community Development › Division 1 - Housing and Community Development › Chapter 7 - Department of Housing and Community Development Programs › Subchapter 19 - Uniform Multifamily Regulations › Section 8316 - Leasehold Security

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) In
				  any Project where the Sponsor proposes to control the Project land through a
				  long-term ground lease, either:
(1) the
				  Regulatory Agreement and other Program documents shall be recorded against both
				  the Sponsor's interest in the Project and the fee interest in the land, and the
				  lease shall have a term remaining at the time of recordation at least equal to
				  the term of the Program loan or grant; or
(2) if the Regulatory agreement and other
				  Program documents are not recorded against the Project's fee interest, the
				  ground lease shall be subject to the Department's approval, must not be subject
				  to any other mortgages, regulatory agreements, use restrictions, or equivalent
				  instruments on the fee interest, and shall contain, or be amended to contain,
				  provisions which:
(A) establish a remaining
				  term of at least ninety (90) years from the date the Department documents are
				  recorded, provided that the Department may accept a lesser term, not less than
				  65 years, when the lessor is a public agency;
(B) ensure the validity of the lien of the
				  Program loan and/or grant documents on the lease;
(C) ensure that the lease permits the Project
				  to satisfy all Program requirements and permit the Department to enforce the
				  provisions of the Program loan and/or grant without restriction;
(D) expressly consent to the lessee's
				  assignment of the lease to the Department without further consent of the
				  lessor, and permit the Department, after acquisition of the leasehold property,
				  to transfer or assign the lease to a third party without consent of the
				  lessor.
(E) provide that the lessor
				  does not have the right to terminate the lease or accelerate the rent upon
				  lessee's breach without first giving the lessee and the Department reasonable
				  notice and opportunity to cure within a reasonable period;
(F) provide that no termination, modification
				  or amendment to any terms of the lease shall be effective without the written
				  consent of the Department, and any attempt to take such actions would be void
				  without the Department's consent;
(G) require that, in the event of destruction
				  of any improvements on the land, neither the lessor nor the lessee shall
				  terminate the lease if and so long as the lessee or Department pursues
				  reconstruction of the improvements with reasonable diligence;
(H) provide that the Department shall not
				  have any liability for the performance of any of the obligations of lessee
				  under the lease until the Department has acquired the leasehold interest, and
				  then only in accordance with the terms of the lease and only with respect to
				  obligations that accrue during the Department's ownership of the leasehold
				  interest;
(I) provide that neither
				  the lessor nor the lessee, in the event of bankruptcy by either, will take the
				  benefit of any provisions in the United States Bankruptcy Code that would cause
				  the termination of the lease or otherwise render it unenforceable in accordance
				  with its terms;
(J) provide that
				  the leasehold interest will not merge into the fee in the event that the lessee
				  acquires the reversionary interest in the Project; and
(K) provide that acquisition of the leasehold
				  property by the Department will not result in a termination of the leasehold;
				  and upon such event, obligate the lessor to enter into a new lease having a
				  term at least as long as the term remaining on the lease prior to acquisition
				  by the Department and on substantially the same terms and
				  conditions.