Cal. Code Regs. Tit. 21, § 1478 - Conditions of Conditional Offer Prior to Sale

Current through Register 2021 Notice Reg. No. 52, December 24, 2021

(a) For all surplus residential property offered at fair market value, the following conditions shall apply:
(1) The sales price shall be determined by a Department approved appraisal of fair market value.
(b) For all single-family surplus residential property offered at an affordable price, the following conditions shall apply:
(1) The sales price shall be determined in an amount and under such terms that results in an affordable housing cost to the prospective buyer.
(2) The Department shall verify tenure, income, real property ownership interest, and household size for prospective buyers.
(3) Pursuant to subdivision (b) of section 54237 of the Government Code, the Department shall provide necessary repairs limited to the Minimum Property Standards and reasonable lender required repairs identified pursuant to a written inspection report prepared in accordance with Section 1996, Title 16, of the California Code of Regulations provided however the Department may offer a single-family surplus residential property in an "as is" condition at the request of a prospective buyer given priority to purchase such surplus residential property at an affordable price.
(4) Notwithstanding the requirement to provide repairs in subdivision (b) of section 54237 of the Government Code, the Department may elect to offer a replacement dwelling in lieu of the property that would have otherwise been offered to a prospective buyer, pursuant to Government Code section 54237.5. In such event, the sales price for the replacement dwelling shall be determined under the same terms and conditions set forth in this section, including the recordation of the use and resale restrictions, and the surplus residential property shall then be sold at an affordable price.
(5) There shall be use and resale restrictions commencing from the date of transfer from the Department in accordance with Government Code section 54237(b). Such restrictions shall include, but are not limited to, a prohibition against renting the subject property, with the exception that a buyer purchasing at an affordable price may rent to persons or families of low or moderate income at an affordable rent, not to exceed buyer's affordable housing cost at the time of purchase if the buyer is forced to relocate temporarily because of hardship beyond the control of the buyer. A finding of hardship shall include, but is not limited to: loss of work, personal health problems or health problems of an immediate family member, or divorce. In no case shall rental of the property exceed a total of twelve (12) months measured over any consecutive sixty (60) month period for the time the property is considered affordable.
(6) Any transfer of the surplus residential property within the first year after transfer shall give rise to the presumption that the buyer did not intend to make the surplus residential property the individual's principal place of residence. In the event the buyer cannot overcome such presumption, then such transfer shall be deemed a default under the use and resale restrictions and the Department may take such action to enforce its rights including those under section 1488.
(7) In no event shall the affordable sales price be less than the original acquisition price paid by the Department.
(c) For all surplus residential properties offered at a reasonable price, the following priorities and conditions shall apply:
(1) If to housing-related private and public entities on condition that the purchasing entity shall cause the surplus residential property to be rehabilitated and developed as a limited equity cooperative housing cooperative or cooperatives in accordance with Civil Code section 817, then the sales price shall be the price which is best suited to the economically feasible use of the surplus residential property as decent, safe, and sanitary housing at affordable rents and affordable prices as established by the entity, in accordance with this chapter, for persons or families of low or moderate income, and households whose gross income exceeds the maximum income for moderate income households but does not exceed 150 percent of area median income adjusted for family size, with first right of occupancy to current tenants.
(2) If to a housing-related private or public entity other than as described in (c)(1), then the sales price shall be the price which is best suited to the economically feasible use of the property as decent, safe, and sanitary housing at affordable rents and affordable prices as established by the entity, in accordance with this chapter, for persons or families of low or moderate income and households whose gross income exceeds the maximum income for moderate income households but does not exceed 150 percent of the area median income adjusted for family size, on condition said entity shall first offer to sell the surplus residential property within the same time frames imposed by this chapter for sales made by the Department, at fair market value to present tenants in good standing who intend to be owner occupants. In the event such tenants elect not to purchase the surplus residential property within such time frames, the entity shall cause the surplus residential property to be used as decent, safe, and sanitary housing at affordable rents for persons or families of low or moderate income, and households whose gross income exceeds the maximum income for moderate income households but does not exceed 150 percent of the area median income adjusted for family size with first right of occupancy to present tenants at (i) affordable rents in accordance with this section or (ii) fair market rents in the event such tenants do not qualify at affordable rents.
(3) In order to ensure that the surplus residential property will remain available to persons or families of low or moderate income, and households whose gross income exceeds the maximum income for moderate income households but does not exceed 150 percent of area median income adjusted for family size there shall be use and resale restrictions commencing from the date of transfer from the Department limiting occupancy to persons or families of low or moderate income, and households whose gross income exceeds the maximum income for moderate income households but does not exceed 150 percent of area median income adjusted for family size, and the subsequent sale of the surplus residential property in accordance with Government Code section 54237(d).
(4) Any transfer of the surplus residential property within the first year after transfer to a housing-related private or public entity shall give rise to the presumption that such entity did not intend to use the surplus residential property in accordance with either subsections (c) (1) or (c) (2) above. In the event such entity cannot overcome such presumption, then such transfer shall be deemed a default under the use and resale restrictions and the Department may take such action to enforce its rights including those under section 1488.
(5) In no event shall the reasonable sales price be less than the original acquisition price paid by the Department.
(d) Notwithstanding the restriction limiting occupancy and the subsequent sale of the surplus residential property in accordance with Government Code sections 54237(b) and (d), a buyer of surplus residential property may elect to resell the surplus residential property at fair market value during the term of the use and resale restrictions subject to the following:
(1) Upon subsequent sale, the seller shall pay the CalHFA, any net proceeds, which shall be equal to any net equity as defined in subdivision (d) (2) of this section, and the proportionate share of net appreciation, as defined in subdivision (d) (3) of this section; provided, however, in the event the seller is a private or public housing-related entity, such net proceeds shall be paid as follows:
(A) Any net equity as defined in subparagraph (2) shall be evenly divided and paid to the CalHFA and the entity.
(B) Any net appreciation as defined in subparagraph (3), shall be divided as set forth in subparagraph (4) and paid to the CalHFA and the entity.
(C) All net proceeds paid to housing-related entities shall be used to preserve, upgrade and expand the supply of affordable housing exclusively in the Pasadena, South Pasadena, Alhambra, La Canada Flintridge, and the 90032 ZIP code unless otherwise restricted to a particular city in accordance with state law. Housing-related private entities will be monitored at least annually to ensure compliance with this section.
(2) For purposes of this chapter, the net equity shall be equal to the Department approved appraised fair market value of the surplus residential property at the time of initial sale, minus the initial sale price to the buyer pursuant to Government Code section 54237. If upon resale, the appraised fair market value is lower than the Department approved appraised fair market value of the property without the use and resale restrictions, the value at the time of the resale shall be used as the Department approved appraised fair market value.
(3) For purposes of this chapter, "net appreciation" means the difference between the sales price upon resale and the sum of the following deductions:
(A) Any net equity as defined in subdivision (d) (2) of this section;
(B) The remaining principal loan balance on all financing previously approved by the Department on the property;
(C) All actual closing costs paid by the seller when the property is sold (i.e., escrow, title, broker's fee, real estate commissions);
(D) The owner's down payment, if any; and
(E) Any costs of improvements for which the Department determines, in its good faith discretion that such costs of improvements were reasonable and resulted in a higher fair market value of the property.
(4) For purposes of this chapter, the CalHFA's proportionate share of net appreciation shall be equal to one hundred percent (100%) through the end of the first year. Beginning in the second year, the CalHFA's proportionate share of net appreciation shall be reduced by twenty percent (20%) each year to zero percent (0%). At the completion of five (5) years, the CalHFA shall no longer be entitled to any net appreciation.
(5) The owner may refinance a loan on the surplus residential property provided that any net cash proceeds derived from such refinancing shall be limited to an amount equal to the current appreciation, if any, over and above the net equity to which the CalHFA is entitled under this subparagraph (d). Such proceeds shall be further divided between the owner and the CalHFA based upon the current proportionate share of net appreciation as set forth in subparagraph (d) (4).
(6) The provisions of this section shall be set forth in the use and resale restrictions and shall not be subject to subordination.
(e) Upon the occurrence of the earlier of the termination of the use and resale restrictions or resale at fair market value, the Department shall execute and record a full conveyance of its rights to the surplus residential property in the manner required pursuant to Civil Code section 2941.

Notes

Cal. Code Regs. Tit. 21, § 1478

Note: Authority cited: Sections 54235, 54236, 54237, 54238, 54238.3 and 54238.4, Government Code; and Section 118.6, Streets and Highways Code. Reference: 24 C.F.R. Section 200.926; Sections 54237 and 54237.3, Government Code; Sections 817 and 2941, Civil Code; and Sections 104.5 and 118, Streets and Highways 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).
The amended version of this section by Register 2021, No. 52, effective 12/13/2021 is not yet available.

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