Regulatory Agreement

This agreement is required for the initial closing and sets forth requirements that the owner must meet over the term of the HUD commitment. See Form HUD-92466-CA.  

The Guide recommends that the owner and appropriate members of the development team review and understand the provisions of the Regulatory Agreement. If the provisions of the Agreement are not followed to HUD's satisfaction, the project could be declared in default.  See paragraph 15 which sets forth the actions that HUD can take if there is a default, including taking over the project, or requiring repayment of the capital advance with interest. 

Key provisions include:      

• The Note and Mortgage bear no interest and repayment is not required so long as the housing remains available for very-low income elderly persons or persons with disabilities as applicable.

• Schedule for the submission of an annual budget to HUD (i.e., 30 days prior to the end of the project fiscal year)

• Requirements regarding the establishment and maintenance of separate bank accounts such as a reserve fund for replacements, and accounts for minimum capital investment, residual receipts and security deposits.

• Use of income and charges collected.

• Description of the real property covered by the Mortgage and the Agreement.

• Requirement for a written approval from HUD to transfer, dispose or encumber the mortgaged property; to remodel, reconstruct, add to or demolish any part of the mortgaged property or subtract from any real or personal property of the project; pay any compensation to the officers or directors or stockholders of the owner; enter into any contracts for supervisory or managerial services; require as a condition of occupancy any fee other than the required security deposit amount; permit the use of the dwelling accommodations of the project for any purpose except for the use which was originally intended or permit commercial use greater than that approved by HUD; amend its articles of incorporation or by-laws other than as permitted under the terms of the articles of incorporation approved by HUD.

• The project will be maintained in good and substantial repair and condition.

• Requirements in respect to:  the owner's use of the property; filing a petition of bankruptcy, etc.; addressing liens; segregating bank accounts; establishing a management contract; maintenance of a license to operate the project, if required by the State or other licensing authority; payments made for services rendered to the project; maintenance of contracts, books and accounts; and responsiveness to requests for information by HUD.

• Submission of a complete annual report within 60 days following the end of the project fiscal year and prepared in accordance with requirements of HUD.

• Requirements as to fees charged to the tenants.

• Obligation of the owner to comply with the Project Rental Assistance Contract.

• No officer, director, trustee, member, stockholder or any other authorized representative of the owner, except for management by the sponsor or non-profit affiliate, shall have any financial interest in any contractual arrangement entered into by the owner for services or goods or any other matters.

• Other requirements for the owner.

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