Cal. Code Regs. Tit. 21, § 1485 - Priority 5

(a) Offer at Priority 5. When Priority 5 is specified as the next priority by §§ 1477.1, 1477.2, or 1477.3, as applicable, then all Surplus Residential Properties not already sold shall be next offered to a Housing-Related Private Entity at a Reasonable Price pursuant to this section. A Housing-Related Private Entity is a joint venture, partnership, limited partnership, trust, corporation, community land trust, or other legal entity approved by the Department as qualified to own, construct, acquire, or rehabilitate affordable housing for Persons and Families of Low or Moderate Income. The entity may be for profit, nonprofit, or limited profit. If the property is located in the City of Los Angeles, then the City of Los Angeles will be treated as a Housing-Related Private Entity for the purposes of this section and section 1485.1.

(b) HRE Registry. The Department will maintain a registry of approved Housing-Related Private Entities on its website. The registry will be created and maintained subject to the following:

(1) No less than once each calendar year, the Department will solicit applications for entities to be approved as Housing-Related Private Entities by publishing a notice in at least one newspaper of general circulation within the County of Los Angeles, pursuant to Government Code §§ 6060 and 6061.3. The Department may also use other means to solicit interest.

(2) Entities may submit a written application to the Department. Applications shall include the entity's qualifications, address, and email address.

(3) The Department will review applications submitted pursuant to (2) based on criteria that includes, but is not limited to:

(A) the entity's experience in providing affordable housing for Persons and Families of Low or Moderate Income; and

(B) the experience of the entity's employees, management, board members, etc. in providing affordable housing; and

(C) the number of affordable housing units in the entity's portfolio; and

(D) the entity's reputation as a provider of affordable housing; and

(E) the entity's stated mission.

(4) The Department will notify the entity by email whether it has been approved as a Housing-Related Private Entity. Approval and placement on the registry create no entitlement to purchase under this chapter.

(5) The Department may reassess a Housing-Related Private Entity's qualifications at any time at its sole discretion.

(6) An approved Housing-Related Private Entity shall resubmit an application every three years to remain on the registry.

(7) Notwithstanding (1) through (6), the Department will place the City of Los Angeles on the registry for properties located within the City of Los Angeles.

(c) Request Bids. The Department will request bids by email from the entities on the registry described in (b). The request will include the following information for each property offered at Priority 5:

(1) the Reasonable Price, which for Surplus Residential Properties located in the Cities of Los Angeles and South Pasadena, is set at the Minimum Sales Price; and

(2) a copy of the current lease or rental agreement, if any; and

(3) copies of all repair records for the prior three years; and

(4) a copy of the Use and Resale Restrictions described in § 1485.1; and

(5) the due date for bids.

(d) Bid Submittal. An approved Housing-Related Private Entity has 45 calendar days from the date of the email described in (c) to provide written bids to the Department. Bids shall include, but are not limited to:

(1) if proposing to utilize the Surplus Residential Property for affordable rental housing, a 10-year proforma showing the financial sustainability of renting the Surplus Residential Property at Affordable Rents, showing estimated operation revenue, expenses, reserves, and debt service costs, or if proposing to utilize the Surplus Residential Property for affordable homeownership, a proforma including, but not limited to, rehabilitation or constructions costs, developer's fees, the proposed affordable sales price and financing; and

(2) an explanation of the Housing-Related Private Entity's plan for current Occupants, if any; and

(3) an explanation of the Housing-Related Private Entity's proposal to comply with this chapter and the Use and Resale Restrictions; and

(4) a marketing plan for targeting Persons and Families of Low or Moderate Income, including the target levels for affordability; and

(5) a plan for rehabilitation of the property including cost estimates and timeframes; and

(6) a readiness component, including but not limited to, secured financing and draft contracts with contractors for rehabilitation; and

(7) if the Surplus Residential Property is in the City of Pasadena and the Housing Related Private Entity proposes to utilize the property for affordable homeownership, then the Housing-Related Private Entity's determination of whether it is feasible to develop the property as a limited equity cooperative with first right of refusal to present Occupants.

(e) Bid Evaluation. The Department will review all bids provided by approved Housing-Related Private Entities pursuant to (d). Bids will be reviewed based on the following criteria:

(1) the entity's experience and capability in providing affordable housing; and

(2) the entity's ability to sustainably provide affordable housing; and

(3) the target income with preference to provide affordable housing for lower incomes;

(4) the financial feasibility of the submitted proforma based on the target income population stated in the Bid;

(5) compliance with this chapter and the Use and Resale Restrictions described in § 1485.1; and

(6) the entity's Plan for rehabilitation; and

(7) the entity's readiness to perform.

(f) Interview. The Department may request a meeting with Housing-Related Private Entities to discuss their bids. Any such meeting may be held virtually or in Los Angeles County, and the Department will provide at least 15 calendar days written notice of the time and place.

(g) Bid Deficiencies. If the Department determines that all bids for a Surplus Residential Property are deficient and that there is no acceptable bid, then the Department shall provide the bidding entities an additional 30 calendar days to supplement their bids for that property. If after supplementation there is no acceptable bid, then the Department shall move the property to Priority 6.

(h) Bid Awards. The Department retains sole discretion in determining a winning bid for a Surplus Residential Property and will announce the winning bid for each property by sending an email to all Housing-Related Private Entities that bid on the property. The email will include:

(1) The address of the Surplus Residential Property; and

(2) A ranking of the top three bids. Bids that do not score at least 70%, or that do not comply with, or propose noncompliance with, §§ 1485 or 1485.1 shall not be ranked; and

(3) An explanation of the rankings of the top three bids.

(i) Appeal Process. An approved Housing-Related Private Entity has seven calendar days from the date of the email described in (h) to submit an appeal by email to the Department describing the basis of the appeal. The appeal process consists of:

(1) A review by the Department's District 7 Director of all bids for the Surplus Residential Property subject to the appeal; and

(2) A determination by the Department's District 7 Director on the stated basis of the appeal; and

(3) A written response to the appealing entity regarding the findings of the appeal; and

(4) The decision of the Department's District 7 Director is final.

(j) Sales Contracts. The Department will send a sales contract to a Housing-Related Private Entity for each property awarded to it. The sales contract shall be executed and returned to the Department within 30 calendar days of the date the Department sends the contract.

(1) The Department will send the contracts no sooner than 10 calendar days after it sends the email announcing winning bids described in (h).

(2) For any bid subject to appeal under (i), the Department will send the contract no sooner than 10 calendar days after a written response described in (i)(3).

(k) Escrow. Upon execution of the sales contract, a Housing-Related Private Entity has 120 calendar days to close escrow. Upon written request, the Department will provide an additional 30 calendar days to close escrow.

(l) Closing Costs and Escrow Fees.

The purchasing Housing-Related Private Entity shall pay all closing costs and escrow fees.

(m) Nonperformance. If a Housing-Related Private Entity fails to timely execute a sales contract in the time provided in (j) or fails to close escrow in the time provided in (k), then:

(1) The sales contract is void.

(2) The Department will award the property to the Housing-Related Private Entity with the next highest ranked bid and send a sales contract pursuant to (j).

(3) If there is no next highest ranked bid, then the property will proceed to Priority 6.

(n) No Warranty. Any Priority 5 sale is "as-is" and without warranty.

Notes

Cal. Code Regs. Tit. 21, § 1485

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. Amendment of subsection (a) and NOTE filed 4-7-2022 as an emergency; operative 4-7-2022 (Register 2022, No. 14). Pursuant to Government Code section 54239.4(f), this is a statutorily deemed emergency and the emergency language remains in effect until 4-7-2024. A Certificate of Compliance must be transmitted to OAL by 4-7-2024 or emergency language will be repealed by operation of law on the following day.
4. Refiling of 4-7-2022 emergency amendments, including amendment of section and NOTE, on 7-3-2023 as an emergency; operative 7-3-2023 (Register 2023, No. 27). Pursuant to Government Code section 54239.5(e), this is a statutorily deemed emergency and the emergency language remains in effect until 9-30-2024. A Certificate of Compliance must be transmitted to OAL by 9-30-2024 or emergency language will be repealed by operation of law on the following day.

Note: Authority cited: Sections 54237, 54237.10, 54239.4 and 54239.5, Government Code. Reference: Sections 54236, 54237, 54239.4 and 54239.5, Government Code.

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. Amendment of subsection (a) and Note filed 4-7-2022 as an emergency; operative 4/7/2022 (Register 2022, No. 14). Pursuant to Government Code section 54239.4(f), this is a statutorily deemed emergency and the emergency language remains in effect until 4-7-2024. A Certificate of Compliance must be transmitted to OAL by 4-7-2024 or emergency language will be repealed by operation of law on the following day.
4. Refiling of 4-7-2022 emergency amendments, including amendment of section and Note, on 7-3-2023 as an emergency; operative 7/3/2023 (Register 2023, No. 27). Pursuant to Government Code section 54239.5(e), this is a statutorily deemed emergency and the emergency language remains in effect until 9-30-2024. A Certificate of Compliance must be transmitted to OAL by 9-30-2024 or emergency language will be repealed by operation of law on the following day.