Cal. Code Regs. Tit. 21, § 1481 - Priority 1: Sales to Lower and Moderate-Income Households

(a) Offer at Priority 1. A Single-Family Residence not sold at Priority 0 shall next be offered to its current Occupant(s) at an Affordable Price or at Fair Market Value pursuant to this section.

(b) Eligibility Criteria to Receive a Sales Contract.

(1) To be eligible to receive a sales contract to purchase a property at an Affordable Price, an Occupant shall:

(A) have used the property as their Principal Place of Residence continuously for the two years prior to the postmarked date on the letter sent pursuant to § 1478(a)(1); and

(B) meet the definition of Persons and Families of Low or Moderate Income; and

(C) have had no ownership interest in any real property for the three years prior to the postmarked date on the letter sent pursuant to § 1478(a)(1); and

(D) have provided a written response that meets the criteria in both § 1478(d) and 1478(f); and

(E) have a Calculated Affordable Price with a positive dollar value.

(2) To be eligible to receive a sales contract to purchase a property at Fair Market Value, an Occupant shall meet the criteria in (1)(A) through (D).

(c) Determining Eligibility to Receive a Sales Contract. The Department will send to each Occupant who provided a written response that meets the criteria in both § 1478(d) and 1478(f) a written request for documentation supporting and demonstrating the criteria in (b). To support and demonstrate the criteria in (b), an Occupant shall provide the following documentation for every Occupant living at the property:

(1) Documentation showing how long the property has been the Occupant's Principal Place of Residence, such as:

(A) utility bills;

(B) records from any state or national bank, state or federal savings association, trust company, industrial loan company, state or federal credit union, or any institution or entity that has issued a credit card;

(C) vehicle registrations;

(D) insurance documents;

(E) school documents;

(F) employment documents; or

(G) tax returns.

(2) Documentation of household income for the five years prior to the postmarked date on the letter sent pursuant to § 1478(a)(1). Such documentation shall include Federal and State income tax returns, with schedules. If those are unavailable, then documentation of income from all sources, including, but not limited to payments from:

(A) employment; and

(B) investments; and

(C) pensions and annuities; and

(D) retirement programs and accounts; and

(E) insurance; and

(F) Social Security; and

(G) unemployment programs and funds; and

(H) scholarships and grants; and

(I) gifts; and

(J) alimony and court awards; and

(K) rentals; and

(L) tips.

(3) An executed IRS form 4506-T or 4506T-EZ.

(4) Disclosure of all assets and their current value. Disclosable assets include, but are not limited to:

(A) stocks and bonds; and

(B) retirement accounts, 401(k), and annuities; and

(C) any legal interest in real property owned in the prior five years; and

(D) trust accounts; and

(E) account balances and cash on hand; and

(F) amounts due.

(d) Time to Provide Documentation. An Occupant wanting to purchase at Priority 1 shall provide the documentation specified in (c) to the Department within the following time limits:

(1) If providing the documentation to the Department by mail, then it shall be postmarked no later than 60 calendar days after the date of the Department's request for the information.

(2) If providing the documentation to the Department by email, then it shall be sent no later than 60 calendar days after the date of the Department's request for the information.

(e) 30-Day Extensions. If the Department determines an Occupant's documentation is insufficient to demonstrate they meet the criteria in (b), then the Department will provide written notice of the deficiency and provide an additional 30 calendar days for the Occupant to provide the missing documentation. The Department may provide two such 30-day extensions but shall not extend the initial 60 calendar day deadline by more than 60 calendar days.

(f) Burden. An Occupant has the burden of demonstrating they meet the criteria in (b). Failure to provide adequate documentation will result in the Department finding an Occupant ineligible to receive a sales contract to purchase at Priority 1.

(g) Notice of Finding. The Department will notify an Occupant in writing of its finding of eligibility or ineligibility to receive a sales contract to purchase at Priority 1. A determination of eligibility to receive a sales contract does not entitle an Occupant to purchase a property at Priority 1.

(h) Occupants with Equal Priority. If the Department determines that more than one Occupant is eligible to receive a sales contract to purchase the same property at Priority 1, then the Department will give priority as follows:

(1) First to original signatories to the current written lease or rental agreement; and then

(2) To other signatories to the current written lease or rental agreement, with older signatures having priority over newer signatures; and then

(3) To all other Occupants based on length of occupancy, with longer occupancies having priority over newer occupancies; and then

(4) Based on the order in which the Department received written responses to its solicitation for interest pursuant to § 1478; and then

(5) As decided by the Department's District 7 Director after considering the affordable housing needs of the potential buyers based on an evaluation of income, adjusted for family size.

(i) Purchase Options. If an Occupant is eligible to receive a sales contract to purchase at Priority 1 and desires to purchase at Fair Market Value, then the Occupant shall elect to purchase at Fair Market Value before the Department begins repairs pursuant to § 1481.2(d).

(j) Sales Contract. The Department will send a sales contract to the Occupant who is eligible to receive a sales contract and who has priority pursuant to (h). The sales contract shall be executed and returned to the Department within 30 calendar days of the date the Department sends the contract.

(k) Escrow. Upon contract execution, an Occupant will have 120 calendar days to close escrow. Upon written request, the Department will provide an additional 30 calendar days to close escrow.

(l) Pending Rent Obligations. All rent owed to the Department by a purchasing Occupant when the sales contract is executed shall be paid to the Department from the proceeds of a subsequent sale at Fair Market Value, as described in 1481.1(c)(2)(C).

(m) Closing Costs and Escrow Fees.

(1) If the property is being sold at Fair Market Value, then the Department will pay: one-half of the escrow fees; all seller notary fees; termite inspection; termite work; and documentary transfer tax.

(2) If the property is being sold at an Affordable Price, then the Department will pay all closing and escrow costs except recurring closing costs.

(n) Disclosure of Financing. Upon the Department's request, an Occupant shall provide to the Department written authorization to review the information and documents provided to a lender to obtain financing for the purchase of the property, and the terms of any financing.

(1) If an Occupant fails to provide such authority, then the sales contract is void.

(2) If the information and documents provided to the lender differs from the documents previously provided to the Department pursuant to (c), but still demonstrates that an Occupant meets the criteria described in (b), then the Department will recalculate the Affordable Price based on the financial information and documents provided to the lender.

(3) If the information and documentation provided to the lender indicates that an Occupant does not meet the criteria described in (b), then the sales contract is void.

(o) Disclosure of Cash. Upon the Department's request, an Occupant shall disclose the source of all cash funds used towards the purchase of a property. If an Occupant fails to identify such sources within 15 calendar days of a request, then the sales contract is void.

(p) Subordination of Mortgage. To protect the amounts owed to CalHFA as described in § 1481.1(e)(2), all lenders shall agree in writing to unconditionally subordinate all loans to the Use and Resale Restrictions described in § 1481.1.

(q) No Warranty on FMV Sale. Any Priority 1 sale at Fair Market Value is "as-is" and without warranty.

Notes

Cal. Code Regs. Tit. 21, § 1481

1. New section filed 7-26-2016; operative 7-26-2016 pursuant to Government Code section 11343.4(b)(3) (Register 2016, No. 31).
2. Repealer and new section filed 12-13-2021 as an emergency; operative 12-13-2021 (Register 2021, No. 51). Pursuant to Government Code Section 54237.10, this is a statutorily deemed emergency and the emergency language remains in effect until 12-14-2023. A Certificate of Compliance must be transmitted to OAL by 12-13-2023 or emergency language will be repealed by operation of law on the following day.
3. Pursuant to Government Code section 54239.5(e)(3), as added by Senate Bill 959 (Stats. 2022, Ch. 668), a Certificate of Compliance must be transmitted to OAL by 9-30-2024 or language of the emergency order of 12-13-2021 (Register 2021, No. 51) will be repealed by operation of law on the following day (Register 2023, No. 27).

Note: Authority cited: Section 54237, Government Code. Reference: Sections 54236, 54237 and 54237.3, Government Code; and Article XVI section 6, California Constitution.

1. New section filed 7-26-2016; operative 7/26/2016 pursuant to Government Code section 11343.4(b)(3) (Register 2016, No. 31).
2. Repealer and new section filed 12-13-2021 as an emergency; operative 12/13/2021 (Register 2021, No. 51). Pursuant to Government Code Section 54237.10, this is a statutorily deemed emergency and the emergency language remains in effect until 12-14-2023. A Certificate of Compliance must be transmitted to OAL by 12-13-2023 or emergency language will be repealed by operation of law on the following day.