Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
C-9806-3 - Regulatory Agreement and Declaration of Covenants and Restrictions
Recorded in Official Records, Orange County RECORDING REQUESTED BY: LENNAR TITLE, INC. Ig500o1- 0006,+-1 AND WHEN RECORDED MAIL TO: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attn: City Manager Hugh Nguyen, Clerk -Recorder �1I I I II III III 111 I I 111111 II N0 FEE *$ R 0 0 1 5 4 3 9 4 6 1 $ * 2025000068064 01:15 pm 02/28/25 7 RecSup3A Al2 D05 43 0.00 0.00 0.00 0.00126.00 0.00 0.00 0.00 0.00 0.00 Regulatory Agreement and Declaration of Covenants and Restrictions Unrecorded lease (Please fill in documenttitle(s) on this line) 1 0 Exempt from fee per GC27388.1 due to being recorded in connection with concurrent transfer that is subject to the imposition of documentary transfer tax, or, 2 ❑ Exempt from fee per GC27388.1 due to being recorded in connection with a transfer that was subject to documentary transfer tax which was paid on document recorded previously on (date*) as document number of Official Records, or, 3 ❑ Exempt from fee per GC27388.1 due to the maximum fees being paid on documents in this transaction, or, 4 ❑ Exempt from fee per GC27388.1 due to the maximum fees having been paid on documents in the transaction(s) recorded previously on (date*) as document number(s) of Official Records, or, 5 ❑ Exempt from fee per GC27388.1, document transfers real property that is a residential dwelling to an owner -occupier, or, document is recorded in connection with concurrent transfer that is a residential dwelling to an owner -occupier, or, 6 ❑ Exempt from fee per GC27388.1 due to it being recorded in connection with a transfer of real property that is a residential dwelling to an owner -occupier. The recorded document transferring the dwelling to the owner -occupier was recorded on (date*) as document number(s) 7 ❑ Exempt from fee per GC27388.1 due to being executed or recorded by the federal government in accordance with the Uniform Federal Lien Registration Act, by the state, or any county, municipalityor other political subdivision of the state, or, 8 ❑ Exempt from the fee per GC 27388.1(a) (1); Not related to real property, or, 9 ❑ Exempt from fee under GC27388.1 for the following reasons: THIS PAGE ADDEDTOPROVIDE SENATE BLL2DOW ION INFORMATION (Additional recording fee applies) Rev 1/19 *The Prior Recording Reference must have been recorded within the last 60 days and is subject to review RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attn: City Manager WITH A CONFORMED COPY TO: City of Costa Mesa 77 Fair Drive Costa Mesa, California 92626 Attn: City Manager (Space Above This Line for Recorder's Office Use Only) (Exempt from Recording Fee per Gov. Code § 27383) REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND RESTRICTIONS This REGULATORY AGREEMENT AND DECLARATION OF COVENANTS AND RESTRICTIONS ("Agreement") is made and entered into this 2-e day of *�br t ct 2025 ("Effective Date"), by and between the CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("Newport Beach"), the CITY OF COSTA MESA, a California municipal corporation ("Costa Mesa"), and AMERICAN FAMILY HOUSING, a California Nonprofit Public Benefit Corporation ("Developer"). Costa Mesa and Newport Beach are herein collectively referred to as the "Cities." RECITALS: A. Pursuant to that certain ground lease between the County of Orange, as lessor (the "County"), and the Developer, as lessee (the "Ground Lease"), Developer has a leasehold interest in that certain real property and the existing improvements thereon located at 1400 Bristol Street North, Costa Mesa, California, Assessor's Parcel Number 439-312-12, which was formerly known as Travelodge Motel more particularly described in Exhibit "A," attached hereto and incorporated by reference herein ("Property"). B. Pursuant to an Affordable Housin& Loan Agreement entered into by and between Developer and Newport Beach, dated _2j ZI 12-02-6 ("Newport Beach AHA"), Newport Beach has agreed to provide financial assistance to Developer in an amount up to Three Million Dollars ($3,000,000.00) ("Newport Beach Loan"); and pursuant to an Affordable Housing Grant and Loan Agreement entered into by and between Developer and Costa Mesa dated 2 1 2$ 1 202.a (the "Costa Mesa AHA"), Costa Mesa has agreed to provide financial assistance to Developer in an amount up to Four Million Dollars ($4,000,000.00) (Newport Beach AHA and Costa Mesa AHA are hereinafter together referred to as "AHAs"). 4- C. The AHAs were entered into for the purpose of assisting Developer to finance the rehabilitation of the existing building and related improvements on the Property, in accordance with the Ground Lease, and to make available, and restrict occupancy to, seventy-six (76) Permanent Supportive Housing ("PSH" or "PSH Units") units plus two (2) unrestricted managers' units, with Costa Mesa receiving local preference for no less than sixteen (16) PSH Units and Newport Beach receiving local preference for no less than twelve (12) PSH Units, subject to the terms of this Agreement and the AHAs ("Project"). D. The affordability period under the AHAs, and Sections 1.2 and 6.1 of this Agreement is 55 years as more particularly set forth below ("Affordability Period"). E. Developer intends to rehabilitate and operate the Project at the Property utilizing the proceeds of: (1) the Newport Beach Loan sourced solely from the Newport Beach General Fund, or as much thereof as is disbursed by Newport Beach to Developer; (2) a loan in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00) from the Housing Authority of the City of Costa Mesa ("Authority") Low Moderate Income Housing Asset Funds and a grant in the amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) from the American Rescue Plan Act ("ARPA") (collectively the loan and the grant are known as the "Costa Mesa Loan"); (3) proceeds from the following sources that Developer will obtain: State of California, Housing and Community Development Project Homekey funding in the amount of Twenty Nine Million Dollars ($29,000,000.00), County loans in amounts of Four Million Four Hundred Twenty One Thousand Five Hundred Twenty Dollars $4,421,520.00 for the County's Mental Health Services Act (MHSA) loan and Two Million Three Hundred Sixty Thousand Dollars ($2,360,000.00) for the OC Housing Fund 15G loan (collectively the "County Loans"); and (4) deferred developer fees in the approximate amount of Eight Hundred Nineteen Thousand Six Hundred and Sixty Dollars ($819,660.00). F. Newport Beach has agreed to make the Newport Beach Loan to Developer on the condition that the Project be maintained and operated in accordance with the covenants, conditions and restrictions of the Newport Beach AHA and this Agreement related to the long-term ownership, affordability, operation, management, and maintenance of the PSH Units. Costa Mesa has agreed to make the Costa Mesa Loan to Developer on the condition that the Project be maintained and operated in accordance with the covenants, conditions and restrictions of the Costa Mesa AHA and this Agreement related to the long-term ownership, affordability, operation, management, and maintenance of the PSH Units. This Agreement is intended to ensure that Developer, its successors, its assigns and every successor in interest to the Property or any part thereof, shall use, maintain and operate the Project in accordance with the terms and conditions of this Agreement and AHAs, including that the PSH Units shall be available only to Eligible Tenant(s) at an Affordable Rent (as those terms are defined in Article 1 below) during the Affordability Period. G. The provision of the Newport Beach Loan and the Costa Mesa Loan to Developer and the completion of rehabilitation and subsequent operation of the Project pursuant to the terms and conditions of the AHAs and this Agreement are in the vital and best interest of Newport Beach and Costa Mesa and the health, safety and welfare of its residents, and are in accord with the public purposes and provisions of applicable state and local laws. -2- AGREEMENT: NOW, THEREFORE, Newport Beach, Costa Mesa, and the Developer declare, covenant and agree, by and for themselves, their heirs, executors, administrators, successors and assigns, and all persons claiming under or through them as follows: The Recitals above form an integral and substantive part of this Agreement and are hereby incorporated by reference into this Agreement. ARTICLE 1 DEFINITIONS 1.1 Affiliate. As used in this Agreement, the term "Affiliate" shall mean (1) any Person directly or indirectly controlling, controlled by or under common control with another Person; (2) any Person owning or controlling ten percent (10%) or more of the outstanding voting securities of such other Person; or (3) if that other Person is an officer, director, member or partner, any company for which such Person acts in any such capacity. The term "control" as used in the immediately preceding sentence, shall mean the power to direct the management or the power to control election of the board of directors. It shall be a presumption that control with respect to a corporation, limited liability company or limited partnership is the right to exercise or control, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the controlled corporation, limited liability company or limited partnership, and, with respect to any individual, partnership, trust, other entity or association, control is the possession, indirectly or directly, of the power to direct or cause the direction of the management or policies of the controlled entity. 1.2 Affordability Period. As used in this Agreement, the term Affordability Period shall mean the duration of the affordable housing requirements and other covenants of and as required by the AHAs and as set forth is this Agreement. The Affordability Period shall be fifty- five (55) years and shall be memorialized in a Notice of Commencement of Affordability Restrictions as provided in the AHAs. 1.3 Affordable Rent. As used in this Agreement, the term "Affordable Rent" shall be defined in Section 3.3 of this Agreement. 1.4 AMI. As used in this Agreement, the term "AMI" or "Area Median Income" shall mean the median family income (adjusted for family size) for the Orange County area established by the U.S. Department of Housing and Urban Development ("HUD"). 1.5 Annual Financial Statement. As used in this Agreement, Annual Financial Statement shall mean the certified financial statement of Developer for the Project using generally accepted accounting principles (GAAP), as separately accounted for this Project, including Operating Expenses and Annual Project Revenue, as prepared annually and provided to the City at Developer's expense, by an independent certified public accountant reasonably acceptable to the City. -3- 1.6 Capital Improvements. As used in this Agreement, the term "Capital Improvements" means all work and improvements with respect to the Property for which costs and expenses may be capitalized in accordance with generally accepted accounting principles as in effect from time to time, consistently applied. 1.7 City Manager. As used in this Agreement, the term "City Manager" shall mean the individual duly appointed to the position of City Manager of the City of Newport Beach or the City of Costa Mesa, or either of their authorized designees. Whenever an administrative action is required by either City to implement the terms of this Agreement, the City Manager, or his or her authorized designee, shall have authority to act on behalf of City. The City Managers, or their designees, agree to work together so as not to cause any undo delay in any decision. 1.8 Eligible Tenant. As used in this Agreement, the term "Eligible Tenant" shall mean a household experiencing homelessness, a household at risk of homelessness, those chronically homeless, persons with mobility disabilities, persons with hearing or vision disabilities whose annual income does not exceed the thirty percent (30%) of the AMI level. 1.9 Manager's Unit. As used in this Agreement, the term "Manager's Unit" shall mean a Unit occupied by an on -site property manager who does not need to be an Eligible Tenant. The Project contains two (2) Manager's Units. 1.10 Operating Expenses. As used in this Agreement, the term "Operating Expenses" shall have the meaning ascribed in the AHAs. 1.11 Rehabilitation. As used in this Agreement, the term "Rehabilitation" shall mean the entire work of rehabilitation, repair, construction, and improvement to the overall Property that are required to be completed under this Agreement and the AHAs. The Rehabilitation shall ensure that the housing units are decent, safe, sanitary, and in good repair for use and occupancy by Eligible Tenants; such standards are established for inspectable items for each of the following areas: site, building exterior, building systems, dwelling units, and common areas. 1.12 Restricted Unit Matrix. As used in this Agreement, the term "Restricted Unit Matrix" shall mean that certain matrix attached hereto and incorporated herein as Exhibit `B." 1.13 Term. As used in this Agreement, the term "Term" shall mean the period commencing on the Effective Date and terminating fifty-five (55) years from date on which a Notice of Commencement of Affordability Restrictions, as provided in the AHAs, is recorded in the Official Records of Orange County, or if such date cannot be determined, fifty-seven (57) years after the Effective Date. ARTICLE 2 REHABILITATION, COMPLETION, AND OPERATION OF PROJECT 2.1 Rehabilitation. Developer agrees to cause the rehabilitation of the Property subject to the terms and in accordance with the provisions of the AHAs including the Scope of Development, Schedule of Performance, the approved Rehabilitation Plans ("Project Documents"), the Costa Mesa Municipal Code, Uniform Codes, and all other applicable federal, state and local codes, regulations, and ordinances. 13 ARTICLE 3 LAND USE RESTRICTIONS AND AFFORDABLE HOUSING COVENANTS 3.1. Permitted Uses. The Property and Project shall be used only for a permanent supportive affordable housing project that is comprised of private rental dwelling units and related amenity uses and for no other purposes in accordance with this Agreement and the AHAs. None of the PSH Units at the Property shall at any time be utilized on a transient basis, nor shall the Property or any portion thereof ever be used as a hotel, motel, dormitory, fraternity or sorority house, rooming house, short-term rental, vacation home such as AirBnB or VRBO, or hospital, nursing home, sanitarium or rest home. Developer shall not convert the Property to condominium ownership during the Affordability Period without the prior consideration and action approving such conversion by the respective City Councils of Newport Beach and Costa Mesa, which approval may be granted, withheld or denied in their sole and absolute discretion and until such approval is granted, if at all by both City Councils. Developer shall be in material breach of this Agreement if Developer files a "White Report" and/or records a condominium plan for the Property. Developer shall not maintain or cause to be maintained any public nuisance or private nuisance on or about the Property. Nothing in this Section shall prohibit the Developer from entering into Commercial Leases as defined in the AHAs, or as permitted by the Ground Lease. 3.2 Number and Allocation of PSH Units to Costa Mesa and Newport Beach. Developer covenants and agrees to develop, operate, and maintain seventy-six (76) PSH Units with no less than sixteen (16) Units for which Costa Mesa shall receive local preference, as set forth in the Costa Mesa AHA ("Costa Mesa Preference Units"), and no less than twelve (12) Units for which Newport Beach shall receive local preference, as set forth in the Newport Beach AHA ("Newport Beach Preference Units"), all at an Affordable Rent as defined in Section 3.3 below, including two (2) additional Units designated as the Managers" Units that are reserved for occupancy by an onsite property managers. The Costa Mesa Preference Units and Newport Beach Preference Units are herein collectively referred to as the "Preference Units." Nothing in this Agreement shall require Developer to violate any law in connection with the Preference Units, and provided that the Developer selects Eligible Tenants in accordance with the Tenant Selection Plan, the Cities shall not be permitted to declare any breach of this Agreement in connection with Developer's obligation to lease the Preference Units. The AHAs require Developer to enter into this Agreement, which provides, among other requirements, that the seventy-six (76) Units within the Project be rented to and occupied by "Eligible Tenants" (as those terms are defined in Article 1 above). Developer shall require that all Eligible Tenants occupying Preference Units execute a Lease Rider as attached hereto and incorporated herein by reference as Exhibit "C." To the extent an Eligible Tenant cannot be located for any vacant PSH Unit, in accordance with the Tenant Selection Plan (as defined below), the Developer may continue to hold such PSH Unit vacant, or may lease such vacant unit to any household, subject to Section 3.4 below, whose annual income does not exceed the thirty percent (30%) of the AMI level, and Developer shall be deemed to be in compliance with this Section. 3.3 Affordable Rent Defined. Pursuant to California Health and Safety Code Section 50053, the maximum Affordable Rent, including a reasonable utility allowance for extremely low- -5- income households shall not exceed the thirty percent (30%) of the AMI adjusted for family size appropriate for the unit ("Affordable Rent"). Affordable Rent shall be charged for all Preference Units (excepting the Manager's Units) throughout the Affordability Period. Provided however, that Affordable Rent and income limits for Eligible Tenant(s) shall be subject to the possibility of adjustment, if applicable, under Section 3.6 herein. Further, the term Affordable Rent includes the total of monthly payments by the tenants of a PSH Unit for (a) use and occupancy of a PSH Unit and facilities associated therewith, (b) any separately charged fees or service charges assessed by Developer that are required of all tenants of the PSH Units, other than security deposits, (c) a reasonable allowance for utilities not included in (a) or (b) above, including (as applicable) garbage collection, sewer, water, electricity and gas, and (d) possessory interest, taxes or other fees or charges assessed for the use of the PSH Units and facilities associated therewith by a public or private entity other than Developer. 3.4 Tenant Selection Covenants. The Project shall utilize the County Coordinated Entry System ("CES") for the referral of potential tenants for the PSH Units in compliance with the applicable federal, state and local laws during the Affordability Period, as applicable and subject to lawful and reasonable criteria, all of which shall be set forth in the Tenant Selection Plan, as provided in Section 3.4.3 below ("Tenant Selection Plan"). The Tenant Selection Plan shall establish the eligibility criteria for the selection of tenants that meet the applicable requirements of this Section 3.4, with first reasonable preference to rent vacant Preference Units to an Eligible Tenant on the County's CES list who qualifies for a Preference Unit. 3.4.1 Minimum Occupancy Limits. As included in the annual income certification provided by Developer, or as otherwise reasonably requested by either City, Developer shall make available for both City Manager's review and approval such information that Developer reviewed and considered in its tenant selection process, together with its statement that Developer has determined that each selected tenant will comply with the income, rent, and operational covenants and all applicable terms and conditions of this Agreement. Subject to applicable law, the minimum occupancy of the PSH Units in the Project shall be one person per bedroom. 3.4.2 PSH Units Intended as Replacement Housing by Newport Beach, Costa Mesa, and their Affiliated Entities. Developer acknowledges that the Cities are investing in the Project and providing their respective loan to Developer to cause long-term permanent supportive housing, qualifying as reserved or banked replacement housing under federal or state laws, as, if, and when applicable to each respective City or its affiliated entities. Therefore, this Agreement shall serve as notice and evidence that each City is investing in the Project and providing its respective City financial assistance to Developer under the AHAs to qualify, use, and bank the PSH Units in this Project (excluding the Manager's Units) for purposes of replacement housing as defined and required under federal and state laws, as, if and when applicable, to either City and Housing Authority. 3.4.3 Tenant Selection Plan. Developer shall operate the Project in compliance with the approved Tenant Selection Plan as described in the AHAs. The Tenant Selection Plan includes tenant eligibility criteria, method of selection of tenants. income qualifications, and local preferences. Subsequent to approval of an amendment or new Tenant Selection Plan by both City I on Managers for the ongoing management and operation of the Project, Developer shall be in full compliance with this Agreement, applicable law, and the AHAs. In this regard, Developer and Property Manager may from time to time submit to the Cities City Managers proposed amendments to the Tenant Selection Plan, which are also subject to the prior written approval of the Cities City Managers, which shall not be unreasonably withheld, delayed or conditioned, or required in the event any amendment is solely to comply with any applicable law. 3.4.4 Supporting Documentation of Tenant Selection. As included in the annual income certification provided by Developer, or as otherwise reasonably requested by Cities, Developer shall make available for both City Manager's review such information that Developer reviewed and considered in its selection process, together with its statement that Developer has determined that each selected tenant satisfies the income eligibility requirements, Affordable Rent requirements, and other requirements of this Agreement. (a) In this regard, Developer covenants and agrees that (i) each Preference Unit tenant (other than the on -site Property Managers) shall and will be an Eligible Tenant (at initial occupancy, and Developer will use commercially reasonable efforts to comply with the Tenant Selection Plan for each subsequent tenant placed in a Preference Unit), and (ii) the cost to each tenant household (other than onsite Property Managers) for the corresponding Preference Unit on the Property shall be at and within the defined applicable Affordable Rent, and (iii) each tenant household (other than onsite Property Managers) shall meet HUD Housing Quality Standards ("HQS") occupancy standards for the PSH Unit, and (iv) the occupancy and use of the PSH Units and Property shall comply with all other covenants and obligations of this Agreement (collectively, "Tenant Selection Covenants"). 3.5 Income Certification Requirements. Following the completion of the Rehabilitation and occupancy by Eligible Tenant(s) of the PSH Units, and annually thereafter (on or before March 31 of each calendar year), Developer shall submit to the Cities, at Developer's expense, a written summary of the income, household size, and rent payable by the tenants of the PSH Units. At either City's request, but not less frequently than prior to each initial and subsequent rental of each PSH Unit to a new tenant household (but not lease renewals) and every sixth -year thereafter, Developer shall prepare income computation, asset evaluation, and certification forms, for any such tenant or tenants. Developer shall obtain, or shall cause to be obtained by the Property Manager(s), an annual certification from each household leasing a Preference Unit demonstrating that such household is an Eligible Tenant. Developer shall determine if the Eligible Tenant of the Preference Units continue to qualify as Eligible Tenant(s) under this Agreement. Developer shall require each tenant of a Preference Unit to provide documentation supporting and certifying that the occupant continues to meet the income requirements of an Eligible Tenant, and Developer may rely upon such certification and supporting documentation in recertifying the tenant. 3.6 Affordable Rent during the Affordability Period. Maximum monthly rent chargeable for the Preference Units shall comply with the definition of Affordable Rent applicable to the Preference Units as set forth in Section 3.3 above. -7- 3.6.1 Rent Schedule and Utility Allowance. Developer shall annually reexamine the income of each tenant household of the PSH Units for compliance with the AHAs and this Agreement. The maximum monthly rent must be recalculated by Developer, and the Cities shall have the right to review such recalculated rent levels annually with respect to the Preference Units. Any increase in rents for the PSH Units is subject to the provisions of outstanding leases. Developer must provide all tenants not less than thirty (30) days, or such longer period pursuant to applicable federal, state or local laws, prior written notice before implementing any increase in monthly rent. 3.6.2 Increases in Eligible Tenant Income. A tenant who qualifies for a Preference Unit (e.g. Eligible Tenant) shall be deemed to continue to be so qualified until such time as the annual re -verification of such tenant's income demonstrates that such tenant no longer qualifies as an Eligible Tenant. A tenant household whose income increases such that such tenant household ceases to be income qualified to occupy any Preference Unit at the Project, may continue to occupy his or her Preference Unit and be charged rent including a reasonable utility allowance, not greater than the lesser of thirty percent (30%) of the household's adjusted monthly income, recertified annually, or the market rent applicable to the PSH Unit as published by the California Department of Housing and Community Development for a period of six (6) months after the tenant household no longer income -qualifies to continue to occupy a PSH Unit in compliance with this Agreement. Thereafter, Developer shall use commercially reasonable efforts to assist such tenant in relocating to alternative housing outside of the Project. 3.7 Maintenance. 3.7.1 At Occupancy of the PSH Units at Completion of Rehabilitation. As of the date of and prior to initial occupancy of each of the Preference Units by Eligible Tenant(s), Developer shall rehabilitate and improve each unit so that the condition of each unit is decent, safe and sanitary and complies with HQS. 3.7.2 During Operation of the Project. Developer shall, at its sole cost and expense, maintain or cause to be maintained the interior and exterior of the Project and all PSH Units thereof and the Property in a decent, safe and sanitary manner, in accordance with HQS and the standards of maintenance of comparable high quality, well -managed permanent supportive housing projects within Orange County, California such as and comparable to those owned or operated by other highly reputable owners and developers of high quality permanent supportive housing projects in Orange County. If at any time Developer fails to maintain the Project or the Property in accordance with this Agreement and such condition is not corrected within ten (10) days after written notice from Costa Mesa with respect to graffiti, debris, and waste material, or thirty (30) days after written notice from Costa Mesa with respect to general maintenance, landscaping and building improvements, then Costa Mesa, in addition to whatever remedy it may have at law or at equity, shall have the right to enter upon the applicable portion of the Project or the Property and perform all acts and work necessary to protect, maintain, and preserve the Project and the Property, and to attach a lien upon the Property, or to assess the Property, in the amount of the expenditures arising from such acts and work of protection, maintenance, and preservation by Costa Mesa and/or costs of such cure, including a reasonable administrative charge, which amount shall be promptly paid by Developer to Costa Mesa upon demand. The liens created under this Section 3.7 shall be subject and subordinate to the lien of the mortgages or deeds of trust encumbering the Property (or any part of the Property). Nothing in such lien rights diminish or lessen Costa Mesa's rights under applicable federal, state and local laws, including but not limited to code enforcement, inspection warrants, public or private nuisance, or receivership laws. 3.8 Management of the Project. 3.8.1 Property Manager. Developer shall cause the Project, and all appurtenances thereto that are a part of the Project, to be managed in a prudent and business -like manner, consistent with property management standards for other comparable high quality, well - managed rental housing projects in Orange County, California. Developer itself may be the property manager or Developer shall contract with a property management company or property manager to operate and maintain the Project in accordance with the terms of this Article 3; however, the selection and hiring of the Property Manager (and each successor or assignee Property Manager) is and shall be subject to prior written approval of the Cities' City Managers at their sole, reasonable discretion. The City Managers shall work together in their decision so as not to cause any undo delay. For each and any subsequent Property Manager, Developer shall conduct due diligence and background evaluation of any potential outside property manager or property management company to evaluate experience, references, credit worthiness, and related qualifications as a property manager. Any proposed property manager shall have prior experience with rental housing projects and properties comparable to the Project, including prior experience in managing permanent supportive housing projects, and the references and credit record of such manager/company shall be investigated (or caused to be investigated) by Developer prior to submitting the name and qualifications of such proposed property manager to the to the Cities City Managers for review and approval. A complete and true copy of the results of such background evaluation shall be provided to the Cities City Managers. Approval of a Property Manager by the Cities City Managers shall not be unreasonably delayed but shall be in their sole, reasonable discretion, and the City Managers shall use good faith efforts to respond as promptly as practicable in order to facilitate effective and ongoing management of the Project. Upon request, Developer shall make available for the Cities review support documentation that substantiates the annual property management fee. (a) Gross Mismanagement. In the event of "Gross Mismanagement" of the Preference Units, the Cities shall require any condition(s), acts, or inactions of Gross Mismanagement to cease and/or be corrected immediately, and further to direct and require the immediate removal of the Property Manager and replacement with a new qualified and approved Property Manager, if such condition(s) is/are not ceased and/or corrected after expiration of thirty (30) days from the date of written notice from either City. If Developer or Property Manager has commenced to cure such Gross Mismanagement condition(s) on or before the 201h day from the date of written notice (with evidence of such submitted to the Cities), but has failed to complete such cure by the thirtieth (30th) day, then Developer or Property Manager shall have an additional ten (10) days to complete the cure of such Gross Mismanagement condition(s). Due to the importance and nature of good property management of permanent supportive housing and the provision of Supportive Services in connection there with as defined and provided in Section 3.12 of this Agreement, in no event shall any condition of Gross Mismanagement continue uncured for a period exceeding forty-five (45) days from date of the initial written notice of such condition(s) from either City. If such condition(s) does persist beyond such period, the Cities shall have the sole and absolute right to immediately and without further notice to Developer (or to Property In Manager or any other person/entity) replace the Property Manager with a new property manager of the Cities City Managers selection at the sole cost and expense of Developer. If Developer takes steps to select a new Property Manager that selection is subject to the requirements set forth above for selection of a Property Manager. (i) For purposes of this Agreement, the term "Gross Mismanagement" shall mean management of the Project (or any part of the Project) in a manner which materially violates the terms and/or intention of this Agreement to operate a high quality permanent supportive housing complex comparable to other similar complexes in Orange County, California, and shall include, but is not limited to, any one or more of the following: (A) Knowingly leasing to tenants who exceed the prescribed income levels; (B) Knowingly allowing the tenants to exceed the prescribed occupancy levels without taking immediate action to stop such overcrowding; (C) Knowingly allowing the tenants to allow or use any PSH Unit for vacation rental purposes without taking immediate action to stop such activity; (D) Underfanding required reserve accounts, and not making timely Reserve Deposits, unless funds are not available to deposit in such accounts despite commercially reasonable efforts to operate the Project and fund such accounts; (E) Failing to timely maintain the Project in accordance with the Leasing Plan (as the term is defined in the Newport Beach AHA), Tenant Selection Plan and the manner prescribed herein; (F) Failing to submit timely and/or adequate annual reports to City as required herein; (G) Fraud or embezzlement of Project funds, including without limitation funds in the reserve accounts; (H) Failing to reasonably cooperate and communicate with the Costa Mesa Police Department or other local law enforcement agency(ies) with jurisdiction over the Project, in maintaining a crime -free environment within the Project; (I) Failing to reasonably cooperate and communicate with the Costa Mesa Fire Department or other local public safety agency(ies) with jurisdiction over the Project, in maintaining a safe environment within the Project; (J) Failing to reasonably cooperate and communicate with the Costa Mesa Planning & Building Department, including the Code Enforcement Division, or other local health and safety enforcement agency(ies) with jurisdiction over the Project, in maintaining a safe environment within the Project; and -10- (K) Spending funds from the Capital Replacement Reserve account(s), as provided in the AHAs, for items that are not defined as capital costs under the standards imposed by GAAP (and/or, as applicable, generally accepted auditing principles.) (ii) Notwithstanding the requirements of the Property Manager to correct any condition of Gross Mismanagement as described above, Developer is obligated and shall use commercially reasonable efforts to correct any defects in property management or operations at the earliest feasible time and, if necessary, to replace the Property Manager as provided above. Developer shall include advisement and provisions of the foregoing requirements and requirements of this Agreement within any contract between Developer and its Property Manager. (b) Marketing. Developer shall comply with an affirmative marketing plan reasonably approved by the Cities, including methods for informing the public and potential tenants about the federal fair housing laws, procedures to inform and solicit applications from persons in the housing market area not likely to apply for tenancy at the PSH Units without special outreach and recordkeeping methods that will permit City to evaluate the actions taken by Developer (or Property Manager) to affirmatively market the PSH Units at the Project. Specific procedures for marketing and leasing PSH Units shall be set forth in the Tenant Selection Plan and shall include: (i) Posting advertisements and notices of the availability of the Housing Unit(s) in local newspapers and other publications. Such advertisements and notices shall include a description of the age and income requirements applicable to the Housing Unit(s). (ii) Posting advertisements and notices of the vacancy(ies) at local religious institutions, community centers, public buildings such as post -offices and at: (i) City Hall for the Cities, (ii) Newport Beach OASIS and Costa Mesa Senior Center, and (iii) Family Resource Centers, or other locations as the Cities may suggest. (iii) Posting advertisements and notices of the vacancy(ies) anywhere Developer believes tenant households eligible for occupancy in the PSH Units at the Project are likely to become informed. 3.8.2 Operation and Management of Property Post -Closing. After the rehabilitation of the Project, the day to -day management and operation of the Project and the overall Property shall be undertaken by and shall be the sole legal and financial responsibility of Developer. After completion of the Rehabilitation and during the Affordability Period, Developer is and shall remain responsible for and shall exercise its best efforts to manage and operate the Property consistent with good property management standards of comparable permanent supportive housing properties in Orange County, California such as those owned or operated by Developer and by other highly reputable owners and developers of high -quality permanent supportive housing projects in the Orange County. 3.9 Code Enforcement. Developer acknowledges and agrees that Costa Mesa and its employees and authorized agents shall have the right to conduct code compliance and/or code enforcement inspections of the Project and the individual units, both exterior and interior, during -11- normal business hours and upon reasonable written notice (not less than 72 hours prior notice) to Developer and/or an individual tenant. If such notice is provided by City representative(s) to Developer, then Developer (or its Property Manager) shall immediately and directly advise tenant of such upcoming inspection and cause access to the area(s) and/or units on the Project to be made available and open for inspection. Developer shall include express advisement of such inspection rights within the approved lease/rental agreements for each Housing Unit in the Project in order for each and every tenant and tenant household to be aware of this inspection right. Costa Mesa and Developer acknowledge and agree that the Property and Project is located within the sole jurisdiction of Costa Mesa and that Newport Beach has no legal obligations or authority to enforce the Costa Mesa Municipal Code including violations of housing, fire code, zoning, public nuisance and all other applicable laws. 3.10 Operating Budget. Developer shall submit to both Cities on not less than an annual basis the operating budget for the Project that sets forth the projected Operating Expenses for the upcoming calendar year. 3.11 Monitoring and Recordkeeping. 3.11.1 Affordability Period Compliance. Developer shall comply with all applicable recordkeeping and monitoring requirements including this Section 3.11 and shall annually complete and submit to both Cities a Certification of Continuing Program Compliance substantially in the form of attached hereto as Exhibit "D" or other form provided by the Cities ("Program Certification"). (a) Cities shall be entitled to monitor compliance with this Agreement, to inspect the records of the Project, and to conduct an independent audit or inspection of such records. Developer agrees to maintain records in a businesslike manner, to make such records available to the Cities upon seventy-two (72) hour notice, and to maintain such records for the entire Affordability Period. 3.11.2 Annual Monitoring Fee. Concurrently with the delivery of each annual report and Program Certificate to City, to the extent not prohibited by any applicable law, Developer shall pay an Annual Monitoring Fee to each City in the amount One Thousand Six Hundred Dollars ($1,600) increased annually by 3%, which shall compensate the Cities for their costs incurred to monitor Developer's compliance with this Agreement. 3.12 Supportive Services. Developer shall use its best efforts to create a comprehensive supportive services program that is targeted to the needs of the residents of the Project ("Support Services"). Any change in the scope, amount, or type of Supportive Services to be provided at the Property shall be subject to prior approval of both Cities, which approval shall not be unreasonably withheld or conditioned. Developer shall provide (or cause the provision of) Supportive Services at the Project throughout the entire Affordability Period. While Developer intends to provide the Supportive Services and pay the expenses therefor from the Project's operating budget, Developer and the Cities agree to cooperate in good faith to obtain additional or other funding sources to provide the various Supportive Services and other programs that shall be provided to the residents throughout the Affordability Period. -12- 3.13 Capital Reserve Requirements. Developer shall annually deposit into a set aside Capital Replacement Reserve account an amount equal to Five Hundred Dollars ($500.00) for each PSH Unit, or shall cause the Property Manager to do so; provided, that funding of replacement reserves under the requirements of any other funder, so long as such replacement reserve deposits are not less than the amount required under this Section, shall satisfy this requirement. The Capital Replacement Reserve deposits shall be allocated from the gross collections for all rents received from the operation of the Property and shall be deposited into a separate interest -bearing trust account. Funds in the Capital Replacement Reserve shall be used for capital replacements to the fixtures and equipment on the Property (including common areas) that are normally capitalized under generally accepted accounting principles and shall include the following: carpet and drape replacement; appliance replacement; exterior painting, including exterior trim; hot water heater replacement; plumbing fixtures replacement, including tubs, showers, toilets, lavatories, sinks, faucets; air conditioning and heating replacement; asphalt repair and replacement, and seal coating; roofing repair and replacement; landscape tree replacement; irrigation pipe and controls replacement; gas line pipe replacement; lighting fixture replacement; elevator replacement and upgrade work; miscellaneous motors and blowers; common area furniture replacement; and common area repainting. The non -availability of funds in the Capital Replacement Reserve does not in any manner relieve Developer of the obligation to undertake necessary capital repairs and improvements and to continue to maintain the Property and all common areas and common improvements in the manner prescribed herein. 3.13.1 Annual Accounting of Capital Replacement Reserve. Not less than once per calendar year, Developer, at its expense, shall submit to the Cities an accounting for the Capital Replacement Reserve set forth in the Annual Financial Statement, demonstrating compliance with this Section. 3.14 Capitalized Operating Reserve. In connection with operation of the Project, Developer shall, or shall cause the Property Manager to, deposit in an amount equal to three (3) months of Operating Expenses for the Project ("Target Amount") in a Capitalized Operating Reserve to be held in a separate interest bearing trust account, which initial deposit shall be funded using proceeds of any primary loan, provided that funding of, and disbursements from, a capitalized operating reserve under the requirements of any primary loan, so long as such capitalized operating reserve amounts are no less than the amount required under this Section, shall satisfy this requirement. The Capitalized Operating Reserve shall thereafter be replenished from Annual Project Revenue (if any) only to the extent required by any funder. The amount in the Capitalized Operating Reserve shall be retained to cover shortfalls between Annual Project Revenue and actual Operating Expenses but shall in no event be used to pay for distributions to Developer, capital items or capital costs properly payable from the Capital Replacement Reserve. 3.14.1 Annual Accounting of Capitalized Operating Reserve. Not less than once per calendar year, Developer, at its expense, shall submit to the Cities an accounting for the Capitalized Operating Reserve set forth in the Annual Financial Statement, demonstrating compliance with this Section. -13- ARTICLE 4 COMPLIANCE WITH LAWS. 4.1 Property Standards. Developer agrees to ensure that Rehabilitation and operation of the Project will comply with all applicable requirements, including the following: 4.1.1 State and Local Requirements. The Project and all PSH Units and common areas at the Property shall meet all applicable State and local codes, ordinances, and zoning requirements, including all applicable requirements set forth in the Costa Mesa Municipal Code and all applicable State and local residential and building codes. The Project and all PSH Units and common areas at the Property must meet all such applicable requirements upon Project completion. 4.1.2 Ongoing Property Condition Standards: Rental Housing. Developer shall ensure that the Project, including all PSH Units and common areas at the Property, comply with City of Cosa Mesa established property standards for rental housing ("City Property Standards") throughout the Affordability Period. In accordance with City Property Standards, Developer shall maintain the Project, including all PSH Units and common areas at the Property: (a) as decent, safe, and sanitary housing in good repair, (b) free of all health and safety defects and all life -threatening deficiencies, and (c) in compliance with the lead -based paint regulations and requirements in 24 CFR Part 35. 4.1.3 Inspections; Corrective and Remedial Actions. The parties understand that the County of Orange will undertake ongoing inspections of the Project. Developer agrees it will take all remedial actions to address and correct deficiencies and other issues identified by the County. 4.1.4 Handicapped Accessibility. Developer shall comply with, as and to the extent applicable, (a) Section 504 of the Rehabilitation Act of 1973, and implementing regulations at 24 CFR 8C governing accessibility of projects assisted with federal funds; (b) the Americans with Disabilities Act of 1990, and implementing regulations at 28 CFR 35-36 in order to provide handicapped accessibility to the extent readily achievable; (c) the Uniform Federal Accessibility Standards (UFAS) pursuant to the Architectural Barriers Act of 1968, 42 U.S.C. 4151-4157, as amended; and (d) any other applicable law. 4.1.5 Use of Debarred, Suspended, or Ineligible Participants. To the extent applicable during the Rehabilitation, Developer shall comply with the provisions of 24 CFR 24 relating to the employment, engagement of services, awarding of contracts, or funding of any contractor or subcontractor during any period of debarment, suspension, or placement in ineligibility status. Developer, each subcontractor, and any other contractors or subcontractors or agents of Developer (subject to compliance with 24 CFR part 135) shall have provided to Costa Mesa the certification in appendix B of 24 CFR Part 24 that neither it nor its principals is presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation from this Project, and Costa Mesa shall be responsible for determining whether each contractor has been debarred. -14- 4.1.6 Maintenance of Drug -Free Workplace. Developer shall certify that Developer will provide a drug -free workplace in accordance with 2 CFR 2429. 4.1.7 Lead -Based Paint. Costa Mesa, as a recipient of federal funds, has modified and conformed all of its federally funded housing programs to the Lead -Based Paint Poisoning Prevention Act, Title X of the 1992 Housing and Community Development Act, 42 U.S.C. §4800, et seq., specifically §§4821 4846, and the implementing regulations thereto. In this regard, Developer shall comply with all applicable federal requirements relating to lead -based paint. 4.1.8 Affirmative Marketing. Developer shall adopt and implement affirmative marketing procedures and requirements at the Property. 4.1.9 Nondiscrimination, Equal Opportunity and Fair Housing. Developer shall carry out the Project and perform its obligations under this Agreement in compliance with all of the federal laws and regulations regarding nondiscrimination equal opportunity and fair housing described in 24 CFR 92.350 and 24 CFR 5.105. 4.1.10 Energy Conservation Standards. As applicable to the Project, Developer shall cause the Property to meet the cost-effective energy conservation and effectiveness standards in 24 CFR 965 and 24 CFR 990.185. 4.1.11 Displacement and Relocation. Developer acknowledges and agrees that, pursuant to Federal Program Limitations and consistent with the other goals and objectives of that part and pursuant to a Relocation Plan, Developer must ensure that it has taken all reasonable steps to minimize the displacement of persons as a result of the Rehabilitation work. Furthermore, to the extent feasible, residential tenants must be provided a reasonable opportunity to lease and occupy a suitable, decent, safe, sanitary and affordable PSH Unit at the Property or comparable outside property upon completion of the Rehabilitation work. Developer shall cause all Relocation of tenants and occupants of the Property to be conducted in accordance with the Relocation Laws and all Federal Program Limitations. Developer further agrees to cooperate with Costa Mesa in meeting the requirements of the Federal Program Limitations and shall take all actions and measures reasonably required by Costa Mesa's City Manager (or his or her duly authorized representative) in connection therewith. 4.1.12 Documentation and Monitoring Requirements. Developer shall maintain records, reports and information as required by Exhibit "B" hereof. Upon request, Developer shall make records available for the Cities review. 4.1.13 Conflict of Interest. Developer shall comply with and be bound by the conflict of interest provisions set forth at 24 CFR 570.611. 4.1.14 Conflicts between and among Federal Program Limitations and State or Local Law. If and to the extent applicable for any source of federal revenue expended to implement the Project and in the event of any conflict or inconsistency between applicable Federal Program Limitations and/or and State or local law, then the more stringent requirement(s) shall control. -15- 4.1.15 Layering Review. To the extent applicable, Developer acknowledges that a layering review will be performed in accordance with Federal Program Limitations. In connection with such review Developer acknowledges and agrees it shall be required to represent and certify to City that no government assistance other than the Costa Mesa Loan, the Newport Beach Loan, the County Loan, the Homekey grants, the welfare exemption under California Revenue and Taxation Code Section 214(g), and the HAP Contract assistance has been obtained or is contemplated to be obtained for the Rehabilitation and operation of the Property. After such layering review, Developer agrees to notify City in the event that it applies for or proposes to use governmental funds, other than as listed in the previous sentence, for the Property or the Project. 4.2 Compliance with Laws. Developer shall carry out the design and construction of the Rehabilitation and operation of the Project in conformity with all applicable federal, state and local laws, including, without limitation, applicable state labor standards, City zoning and development standards, building, plumbing, mechanical and electrical codes, and all other provisions of the Costa Mesa Municipal Code, and all applicable disabled and handicapped access requirements, including without limitation (to the extent applicable) the Section 8 laws, Americans With Disabilities Act, 42 U.S.C. Section 12101, et seq., Government Code Section 4450, et seq., Government Code Section 11135, et seq., and the Unruh Civil Rights Act, Civil Code Section 51, et seq., HOTMA, and any other applicable governmental requirements. Developer (and its Affiliates and successors and assigns) shall pay prior to delinquency all ad valorem real estate taxes, possessory interest taxes, and assessments, if any, as to the Property and Project, subject to Developer's (and its Affiliates and successors and assigns) right to contest in good faith any such taxes. Developer may apply for and receive any exemption from the payment of property taxes or assessments on any interest in or as to Property and Project without the prior approval of Costa Mesa. 4.2.1 Prevailing Wage Laws. In accordance with the California Labor Code (Sections 1770 et seq.), the Director of Industrial Relations has ascertained the general prevailing rate of per diem wages in the locality in which the work is to be performed for each craft, classification, or type of workman or mechanic needed to execute the contract. A copy of said determination is available by calling the prevailing wage hotline number (415) 703-4774, and requesting one from the Department of Industrial Relations. All parties to this Agreement shall be governed by all provisions of the California Labor Code — including, but not limited to, the requirement to pay prevailing wage rates (Sections 1770-7981 inclusive) during the Rehabilitation. A copy of the prevailing wage rates shall be posted by the Developer at the Project during the Rehabilitation. Developer acknowledges and understands that other federal and/or state funding sources and financing scenarios may trigger compliance with applicable state and federal prevailing wage laws and regulations. The highest applicable wage requirements will apply. Notwithstanding the foregoing in this Section, Developer shall carry out the construction through completion of the Rehabilitation of the Property in conformity with applicable federal, state and local labor laws and regulations, including, without limitation, as and if applicable, the requirements to pay prevailing wages under federal law (including Davis -Bacon Act, 40 U.S.C. Section 3141, et seq., and the regulations promulgated thereunder set forth at 29 CFR Part 1 (collectively, "Davis -Bacon")) and California law (Labor Code Section 1720, et seq.). As such, and specifically in connection with the Rehabilitation, Developer acknowledges and agrees that it shall be required to, and shall be required to cause all of its contractors and their contractors to, pay prevailing wages in compliance with California Labor Code Section 1770 et seq., and shall be -16- responsible for the keeping of all records required pursuant to Labor Code Section 1770 et seq., including but not limited to Labor Code Section 1776, and complying with the maximum hours requirements of Labor Code Sections 1810 through 1815, and complying with all regulations and statutory requirements pertaining thereto. Developer acknowledges and agrees that it shall be independently responsible for reviewing the applicable laws and regulations with respect to the payment of prevailing wages and complying therewith. Upon any request by either City, Developer shall provide a true and correct copy of such payroll records as are required under applicable state law. (a) Developer Compliance. In this regard, Developer shall be solely responsible, expressly or impliedly, for determining and effectuating compliance with all applicable federal, state and local public works requirements, prevailing wage laws, labor laws and standards, and Costa Mesa and Newport Beach make no representation, either legally and/or financially, as to the applicability or non -applicability of any federal, state and local laws to the Rehabilitation and the Project, both onsite and offsite, as applicable. Developer expressly, knowingly and voluntarily acknowledges and agrees that Costa Mesa and Newport Beach have not previously represented to Developer or to any representative, agent or Affiliate of Developer, or its General Contractor or any subcontractor(s) for the construction of the Rehabilitation, in writing or otherwise, in a call for bids or otherwise, that the work and construction undertaken pursuant to this Agreement is (or is not) a "public work," as defined in Section 1720 of the Labor Code or under Davis -Bacon. (b) Indemnification re Prevailing Wages. Developer knowingly and voluntarily agrees that Developer shall have the obligation to provide any and all disclosures or identifications with respect to the Rehabilitation as required by Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation. Developer hereby indemnifies the Indemnified Parties and shall indemnify, protect, pay for, defend (with legal counsel acceptable to City and City) and hold harmless the Indemnified Parties, from and against any and all loss, liability, damage, claim, cost, expense and/or "increased costs" (including reasonable attorneys' fees, court and litigation costs, and fees of expert witnesses) which, in connection with the development, construction (as defined by applicable law) and/or operation of the Project, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (i) the noncompliance by Developer with any applicable local, state and/or federal law or regulation, including, without limitation, any applicable federal and/or state labor laws or regulations (including, without limitation, if applicable, the requirement to pay state and/or federal prevailing wages); (ii) the implementation of Section 1781 of the Labor Code and/or of Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation; and/or (iii) failure by Developer to provide any required disclosure or identification as required by Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, or any other similar law or regulation. It is agreed by the parties that, in connection with the development and construction (as defined by applicable law or regulation) of the Project, including, without limitation, any and all public works (as defined by applicable law or regulation), Developer shall bear all risks of payment or non-payment of prevailing wages under applicable federal, state and local law or regulation and/or the implementation of Labor Code Section 1781 and/or by Davis -Bacon, as the same may be amended from time to time, and/or any other similar law or regulation. "Increased costs," as used in this Section 4.2.1, shall have the meaning ascribed to it in Labor Code Section -17- 1781, as the same may be amended from time to time. The foregoing indemnity shall survive termination of this Agreement and shall continue after completion of the Rehabilitation by Developer. ARTICLE 5 NONDISCRIMINATION COVENANTS 5.1 Nondiscrimination. Except to the extent legally permissible in connection with the Preference Units and to comply with the Project's public financing requirements, Developer covenants by and for itself and any successors in interest that there shall be no discrimination against or segregation of any person, or group of persons on any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, rental, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Property and Project, or any part thereof, nor shall Developer, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Property or Project, or any part thereof. 5.2 Covenants Run with the Land. The covenants established in this Article 5 shall, without regard to technical classification and designation, be binding for the benefit and in favor of the Cites and their successors and assigns, and shall remain in effect in perpetuity. 5.3 Clauses in Contracts and Leases. All contracts and leases relating to the Property shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (a) In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." (b) In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: "That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926. 1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." (c) In contracts: "There shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises which are the subject of this Agreement, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." ARTICLE 6 TERM AND EFFECT OF COVENANTS 6.1 Affordability Period. The provisions of this Agreement shall apply to the Property, even if the Costa Mesa and Newport Loans are paid in full, until the end of the Affordability Period. This Agreement shall bind any successor, heir or assign of Developer, whether a change in interest occurs voluntarily or involuntarily, by operation of law or otherwise, with or without the approval of City, except as expressly released by City. The Cities awarded funding to Developer based on the condition, and in consideration of, this provision, and would not do so otherwise. 6.2 Covenants to Run with the Land. Cosa Mesa, Newport Beach and Developer hereby declare their express intent that the covenants and restrictions set forth in this Agreement shall run with the land, and shall bind all successors in title to the Property. Each and every contract, deed or other instrument hereafter executed covering or conveying the Property or any -19- portion thereof shall be held conclusively to have been executed, delivered and accepted subject to such covenants and restrictions, regardless of whether such covenants or restrictions are set forth in such contract, deed or other instrument, unless the Cities expressly release such conveyed portion of the Property from the requirements of the Agreement. ARTICLE 7 TRANSFERS 7.1 Transfers; General Prohibition of Transfer without Cities Consent. The qualifications and identity of Developer as the qualified Developer and as an experienced and successful developer and operator/manager of affordable housing, in particular permanent supportive rental housing, are of particular concern to City. It is because of these identities and the qualifications of the Developer that each City has entered into their respective AHA and this Agreement with Developer. Accordingly, commencing upon the execution of the AHAs and this Agreement and continuing until the end of the Affordability Period, no voluntary or involuntary successor in interest of Developer shall acquire any rights or powers under the AHAs or this Agreement, nor shall Developer make any total or partial sale, transfer, conveyance, assignment, subdivision, refinancing or lease of the Property (excepting rental/lease of PSH Units), or any part thereof, or the AHAs or this Agreement (collectively referred to herein as a "Transfer") without the prior written approval of the Cities in their sole, reasonable discretion, except as expressly set forth in the AHAs (each a "Permitted Transfer"). Approval of a Permitted Transfer, pursuant to the AHAs, shall not waive, limit, or otherwise impair the Cities rights regarding any subsequent Permitted Transfer. ARTICLE 8 ENFORCEMENT AND REMEDIES 8.1 Remedies. In the event of default or breach of any of the terms or conditions of this Agreement by Developer, its heirs, executors, administrators or assigns, the Cities may pursue the remedy thereof by any and all means of enforcement, both in equity and at law, as provided by the laws of the State of California, including, but not limited to, injunctive relief and/or specific performance. 8.2 Dispute Resolution. The Cities and Developer agree that they will engage in a meaningful meet and confer process on demand of either party during the life of this Agreement to discuss and resolve any disputes arising out of or related to this Agreement, including but not limited to, discrepancies in the Tenant Selection Plan and/or Tenant Leasing Plan, the allocation or distribution of Units, and issues with CES. The parties shall meet and confer within thirty (30) days after the date of such written notice with the objective of attempting to arrive at a mutually acceptable solution to the disputes. The parties shall exchange information relevant to the subject matter of the meeting in a timely manner. 8.3 Rights of Cities. Except as limited by Section 3.9 of this Agreement, Costa Mesa and Newport Beach have the right to enforce all of the provisions of this Agreement. This Agreement does not in any way infringe on the right or duties of Costa Mesa to enforce any of the -20- provisions of the Costa Mesa Municipal Code including, but not limited to, the abatement of dangerous buildings. In addition to the general rights of enforcement, Costa Mesa shall have the right, through Costa Mesa's agents and employees, to enter upon any part of the Property upon seventy-two (72) hours' written notice and during normal business hours for the purpose of enforcing the California Vehicle Code and the ordinances and other regulations of City, and for maintenance and/or repair of any or all publicly owned utilities. 8.4 Nuisance. The result of every act or omission whereby there is a material violation by Developer of any of the covenants contained in this Agreement in whole or in part is hereby declared to be and constitutes a nuisance, and every remedy allowable at law or equity against a nuisance, either public or private, shall be applicable against every such result and may be exercised by Costa Mesa or its successors in interest, without derogation of Costa Mesa's rights under law. Developer does not by this Section 8.3 waive any procedural rights under applicable law (including, without limitation, the rights to notice, cure, and appeal, if any). 8.5 No Third Parties Benefited. Except as provided herein as to the Cities, which shall be third -party beneficiaries hereunder, this Agreement is made for the purpose of setting forth rights and obligations of Developer and the Cities, and no other person shall have any rights hereunder or by reason hereof. 8.6 Right of Entry for Maintenance and Repair. Costa Mesa has the right of entry during normal business hours and upon and after reasonable attempts to contact Developer or Property Manager, to effect emergency repairs or maintenance which Developer has failed to perform. Subsequent to sixty (60) days written notice to Developer (or Property Manager) specifically outlining the noncompliance, Costa Mesa shall have the right of entry during normal business hours to enforce compliance with this Agreement which Developer or Property Manager have failed to perform. 8.7 Costs of Repair. The costs borne by Costa Mesa of any such repairs or maintenance emergency and/or non -emergency pursuant to Section 8.5 above, shall become a charge for which Developer shall be responsible and may, if unpaid, be assessed as a lien against the Property, subordinate to all existing financing liens. 8.8 Cumulative Remedies. The remedies herein provided for breach of the covenants contained in this Agreement shall be deemed cumulative, and none of such remedies shall be deemed exclusive. ARTICLE 9 HOLD HARMLESS, INDEMNITY AND INSURANCE 9.1 Hold Harmless and Indemnity. To the fullest extent permitted by law, Developer shall defend, indemnify, assume all responsibility for, and save and hold harmless Costa Mesa and Newport Beach, and their respective officers, officials, agents, employees, representatives, volunteers, successors or assigned (collectively, "Indemnified Parties") from and against any and all claims (including, without limitation, claims for bodily injury, death or damage to property), demands, obligations, damages, -21- actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including, without limitation, attorneys' fees, disbursements and court costs) of every kind and nature whatsoever (individually, a Claim; collectively, "Claims"), which may arise from or in any manner relate (directly or indirectly) to any breach of the terms and conditions of this Agreement, any damages to property or injuries to persons directly or indirectly related to or in connection with this Agreement, the Project, and/or the Rehabilitation, operation, management, or ownership of the Property including, without limitation, defects in workmanship or materials or Developer's presence or activities conducted on the Project (including the negligent, reckless, and/or willful acts, errors and/or omissions of Developer, its principals, officers, agents, employees, vendors, suppliers, consultants, subcontractors, anyone employed directly or indirectly by any of them or for whose acts they may be liable, or any or all of them). The foregoing indemnity shall survive termination of this Agreement. Notwithstanding the foregoing, nothing herein shall be construed to require Developer to indemnify the Indemnified Parties from any Claim arising from the sole negligence or willful misconduct of the Indemnified Parties, or any Claim arising from either City's refusal to permit the Developer to amend, modify, or implement the Tenant Selection Plan in accordance with any applicable law provided that the Developer provided written notice to the Cities regarding Developers' proposed amendment or implementation. Nothing in this indemnity shall be construed as authorizing any award of attorneys' fees in any action on or to enforce the terms of this Agreement. This indemnity shall apply to all claims and liability regardless of whether any insurance policies are applicable. The policy limits do not act as a limitation upon the amount of indemnification to be provided Developer. 9.2 Developer Insurance Requirements. Developer, for the term of this Agreement, shall procure and keep in full force and effect or cause to be procured and kept in full force and effect for the mutual benefit of Developer, Costa Mesa and Newport Beach, insurance policies reasonably determined by both Cities and commensurate with industry standards for the area, as are required in the AHAs. 9.3 Knowledge of Claim. If at any time Developer or any of its contractors and/or subcontractors becomes aware of a claim or a potential claim related to the Project in which the demand or probably ultimate cost exceeds $25,000.00, Developer (and as applicable each and all of its contractors and subcontractors) shall promptly provide written notice ("Claim Notice") to the Cities which sets forth the nature of the claim or potential claim and the date on which Developer became aware of such claim or potential claim and shall provide the Cities with copies of any documents relating to such claim or potential claim. 9.4 Notice of Change in Coverage. If, at any time, Developer or any of its contractors and/or subcontractors becomes aware that any of the coverages provided above are going to be canceled, limited in scope or coverage, terminated or non -renewed, then Developer and each contractor and/or subcontractor shall promptly provide the Cities with written notice ("Insurance Notice") of such cancellation, limitation, termination or non -renewal. Upon the receipt of the Insurance Notice or the Claim Notice, or at any time when the Cities have knowledge of (i) the cancellation, limitation, termination or non -renewal of one or more of Developer's or any of its contractors and/or subcontractors insurance policies enumerated above or (ii) a claim or potential claim under one or more of such policies in accordance with Section 9.3 above, then, in addition -22- to its other rights and remedies pursuant to this Agreement, the Cities shall have the right to suspend each City's obligations under this Agreement until such time as Developer and each of its contractors and/or subcontractors furnishes, or causes to be furnished to Cities, duplicate originals or appropriate certificates of insurance for coverages in the amount of not less than those specified above or until the time such claim or potential claim has been resolved to the reasonable satisfaction of Cities, whichever first occurs. 9.5 Waiver of Subrogation. Developer and each of its contractors and subcontractors hereby waive all rights to recover against the Indemnified Parties for any loss incurred by Developer and each or any of its contractors and subcontractors from any cause insured against or required by any Project Document to be insured against; provided, however, that this waiver of subrogation shall not be effective with respect to any insurance policy if the coverage thereunder would be materially reduced or impaired as a result. Developer and each of its contractors and subcontractors shall use their best efforts to obtain only policies that permit the foregoing waiver of subrogation. 9.6 Obligation to Repair and Restore Damage Due to Casualty Covered by Insurance. Subject to the provisions below and to the rights of the County, pursuant to the Ground Lease, and the primary lender and any replacement primary lender if the Project shall be totally or partially destroyed or rendered wholly or partly uninhabitable by fire or other casualty required to be insured against by Developer, subject to the rights of the primary lender, Developer shall promptly proceed to obtain insurance proceeds and take all steps necessary to begin reconstruction and, immediately upon receipt of insurance proceeds, to promptly and diligently commence the repair or replacement of the Project improvements to substantially the same condition as the Project improvements existed immediately prior to the casualty, if and to the extent the insurance proceeds are available and sufficient to cover the actual cost of repair, replacement, or restoration, then subject to the rights of the primary lender. Developer shall complete the same as soon as possible thereafter so that the Project Improvements can be occupied in accordance with this Agreement. Subject to force majeure delays, in no event shall the repair, replacement, or restoration period exceed two (2) calendar years from the date Developer obtains insurance proceeds unless each Cities City Manager, in their reasonable discretion, approves a longer period of time. Costa Mesa shall cooperate with Developer, at no expense to Costa Mesa, in obtaining any governmental permits required for the repair, replacement, or restoration. If, however, the then -existing laws of any other governmental agencies with jurisdiction over the Property do not permit the repair, replacement, or restoration, Developer may elect not to repair, replace, or restore the Project Improvements by giving notice to both Cities (in which event Developer will be entitled to all insurance proceeds but Developer shall be required to remove all debris from the applicable portion of the Property) or Developer may reconstruct such other improvements on the Property as are consistent with applicable land use regulations and approved by Costa Mesa and the other governmental agency or agencies with jurisdiction. 9.7 Non -Liability of Cities. Developer acknowledges and agrees that: (a) The relationship between Developer, Cosa Mesa and Newport Beach is and shall remain solely that of borrower and lender, and by this Agreement or any of the other Project documents, Costa Mesa and Newport Beach neither undertake nor assume any responsibility to review, inspect, supervise, approve (other than for aesthetics) or inform Developer of any matter -23- in connection with the Project, including matters relating to: (i) the scope of Rehabilitation, (ii) architects, contractors, subcontractors and materialmen, or the workmanship of or materials used by any of them, or (iii) the progress of the Rehabilitation of the Project and its conformity with its scope; and Developer shall rely entirely on its own judgment with respect to such matters and acknowledges that any review, inspection, supervision, approval or information supplied to Developer by Costa Mesa or Newport Beach in connection with such matters is solely for the protection of Cities and that neither Developer nor any third party is entitled to rely on it; (b) Notwithstanding any other provision of any Project document: (a) Cities are not a partner, joint venturer, alter -ego, manager, controlling person or other business associate or participant of any kind of Developer and Cities do not intend to ever assume any such status; (b) Cities activities in connection with the Property shall not be "outside the scope of the activities of a lender of money" within the meaning of California Civil Code Section 3434, as modified or recodified from time to time, and Cities do not intend to ever assume any responsibility to any person for the quality or safety of the Property; and (c) Cities shall not be deemed responsible for or a participant in any acts, omissions or decisions of Developer; (c) Cities shall not be directly or indirectly liable or responsible for any loss or injury of any kind to any person or property resulting from any construction on, or occupancy or use of, the Property, whether arising from: (a) any defect in any building, grading, landscaping or other on -site or off -site improvement; (b) any act or omission of Developer or any of Developer's agents, employees, independent contractors, licensees, invitees or volunteers; or (c) any accident on the Property or any fire or other casualty or hazard thereon; and (d) By accepting or approving anything required to be performed or given to Cities under the Project Documents, including any certificate, financial statement, survey, appraisal or insurance policy, Cities shall not be deemed to have warranted or represented the sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a warranty or representation by Cities to anyone. Nothing in this Article 9 shall be construed as limiting in any way the extent to which Developer may be held responsible for payments of damages to persons or property resulting from Developer's performance of the work covered under the AHAs or this Agreement. 9.8 Reimbursement of City for Enforcement of Project Documents. Developer shall reimburse Cities within thirty (30) days following written demand itemizing all costs reasonably incurred by Cities (including the reasonable fees and expenses of attorneys, accountants, appraisers and other consultants, whether the same are independent contractors or employees of Cities) in connection with the enforcement of the Project documents including the following: (a) Cities commencement of, appearance in, or defense of any action or proceeding purporting to affect the rights or obligations of the parties to any Project document, and (b) all claims, demands, causes of action, liabilities, losses, commissions and other costs against which Cities are indemnified under the Project documents and defense of any action if Costa Mesa and/or Newport Beach have tendered the defense of such action to Developer and Developer fails to defend any such action. Such reimbursement obligations shall bear interest commencing upon the expiration of such 30-day notice, at a simple interest rate of six percent (6%) per annum, and shall be secured by Costa Mesa's or Newport Beach's deeds of trust. If not fully paid, then such -24- reimbursement obligations shall survive the cancellation of the Costa Mesa and Newport Beach promissory notes, release and reconveyance of the Cities' deeds of trust, issuance of the Release of Construction Covenants, and termination of the AHAs and this Agreement. ARTICLE 10 ASSIGNMENT OF AGREEMENT This Agreement shall be binding upon Developer, its executors, administrators and assigns and all persons claiming under or through Developer. Wherever this Agreement employs the term "Developer," it shall be deemed to include Developer, its executors, administrators and assigns and all persons claiming under or through Developer. Except for Permitted Transfers, Developer shall not voluntarily assign any of its rights or obligations under this Agreement without the prior written consent of City and any purported assignment made without said consent shall be null and void for all purposes. ARTICLE 11 RECORDATION Developer agrees that this Agreement and any amendment or cancellation hereof shall be recorded in the official records of Orange County by Developer within ten (10) days after the effective date of this Agreement and within ten (10) days after any amendment or cancellation hereof. Developer agrees to provide Cities with two copies of the recorded Agreement (or any amendment) within five (5) days of the recording date. ARTICLE 12 NOTICE Written notice, demands and communications between Costa Mesa, Newport Beach and Developer shall be deemed sufficient if dispatched by personal delivery, overnight delivery by a reputable courier service, registered or certified mail, postage prepaid, return receipt requested to the principal offices of Costa Mesa, Newport Beach and Developer, the addresses of which are hereinafter set forth. Such written notices, demands and communications may be sent in the manner prescribed to each other's addresses as either party may, from time to time, designate by mail, or the same may be delivered in person to representatives of either party upon such premises. Said addresses are as follows: To Developer: American Family Housing Attention: Chief Executive Officer 15161 Jackson Street Midway City, California 92655 Copy to: Goldfarb & Lipman LLP 1300 Clay Street, 11th Floor Oakland, CA 94612 Attention: William DiCamillo -25- If to Newport Beach: City of Newport Beach 100 Civic Center Drive Newport Beach, California 92660 Attn: City Manager With Copies to: City of Newport Beach 100 Civic Center Drive Newport Beach, CA 92660 Attn: City Attorney If to Costa Mesa: City of Costa Mesa 77 Fair Drive Costa Mesa, California 92626 Attn: City Manager With copies to: Jones Mayer 3777 N. Harbor Boulevard Fullerton, California 92835 Attention: Kimberly Barlow, Esq. Notices herein shall be deemed given as of the date of personal service or three (3) consecutive calendar days after deposit of the same in the custody of the United States Postal Service. ARTICLE 13 WAIVER Failure by a party to insist upon the strict performance of any of the provisions of this Agreement by the other party or the failure by the party to exercise its rights under or upon a default by the other party herein shall not constitute a waiver of such party's right to demand strict compliance from such other party in the future. ARTICLE 14 SUBORDINATION OF CITY LOAN 14.1 Subordination Agreements. Costa Mesa, Newport Beach, Developer and initial approved primary lender have agreed to enter into or will enter into a subordination agreement, each of which authorize Cosa Mesa and Newport Beach Loans as subordinate mortgage liens against the Property subject to all of the conditions contained therein; provided however in all events this Agreement is and shall remain a senior, non -subordinate encumbrance against the Property, subject to the Ground Lease and any deed of trust in favor of the County. Further, the subordination agreement establishes rights, benefits and obligations between and among the parties relating defaults, mortgagee protections, rights to cure, etc. and shall apply as and between Cities and Developer until the maturity date as set forth therein. -26- 14.2 Estoppels and Reaffirmation of Subordination. A subordination agreement may include the terms, conditions and limitations relating to estoppel(s) and/or reaffirmation thereof subject to the condition therein and as provided herein; provided however, the reaffirmation shall be evidenced by an agreement in a form reasonably acceptable to Cities and their respective legal counsel. If and to the extent any reaffirmation, new, or amended subordination, or any estoppel certificates, or similar documents are requested and/or necessary, Developer expressly acknowledges and agrees that any and all third -party cost incurred or to be incurred by Cities, including for example attorney fees or other consultant's costs, are and shall be the sole financial responsibility of Developer (or its Lender or other third party, but in no event Cities). Cities shall have no obligation to commence work on such additional work relating to subordination or reaffirmation of subordination without a deposit of the estimated third -party costs which Cities may draw upon to pay such third -party costs. Cities agrees that the fees for such third party(ies), including consultants and attorneys, will be pursuant to current fee or consulting agreement(s) at the time of such request, which as of the effective date of this Agreement are materially less than rates charged to private entity clients. ARTICLE 15 SEVERABILITY If any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision(s) had never been contained herein. ARTICLE 16 CAPTION AND PRONOUNS The captions and headings of the various Articles and Sections of this Agreement are for convenience only, and are not to be construed as confining or limiting in any way the scope or intent of the provisions hereof. Whenever the context requires or permits, the singular shall include the plural, the plural shall include the singular, and masculine, feminine and neuter shall be freely interchangeable. ARTICLE 17 NO ATTORNEYS' FEES In any action to interpret or enforce any provision of this Agreement, the prevailing party shall not be entitled to attorneys' fees. -27- ARTICLE 18 MODIFICATION OF AGREEMENT This Agreement may be modified or amended by mutual consent of the parties, provided that all amendments are in writing. ARTICLE 19 SOLE AGREEMENTS The AHAs, this Agreement, and all other Project Documents contain the sole and entire agreement and understanding of the parties with respect to the subject matter hereof. No representations, oral or otherwise, express or implied, other than those contained herein, have been made by the parties. In the event of a conflict between the provisions of this Agreement and the AHAs, this Agreement shall control. ARTICLE 20 COUNTERPARTS; MULTIPLE ORIGINALS This Agreement may be executed in counterparts, and in multiple originals, each of which shall constitute one, and the same, agreement. [Signatures appear on the following pages] ME IN WITNESS WHEREOF, the Cities and Developer have executed this Regulatory Agreement and Declaration of Covenants and Restrictions by duly authorized representatives on the Effective Date. "NEWPORT BEACH" CITY OF NEWPORT BEACH, a California municipal corporation and charter city Dated: 52025 By; Gr e . Leung Ci anager ATTEST: Dated: J�ebr v cv u 2 , 2025 _ By: :�'Rerbrfarr;S for 1,614i I. Brown City Clerk �Wpo t� .T APPROVED AS TO FORM: Dated: IF61 e � , 2025 e� air By: q �- Aa n C. Harp City Attorney -29- CALIFORNIA ACKNOWLEDGMENT CIVIL CODE § 1189 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of On r� , 2° before me, CAS y't A((`, �pG , ate Here Insert Name and Title of the Micer personally appeared Name(s) of who proved to me on the basis of satisfactory evidence to be the personwhose name(; is/asubscribed to the within instrument and acknowledged to me that ht0she/tht7 executed the same in 449/her/their authorized capacity(' and that by h4s/her/theif signature( on the instrument the person* or the entity upon behalf of which the person acted, executed the instrument. r-� C_ASSANDRA HAWKS Notary public • California Orange County Commission # 2462273 My Comm. Expires Sep 5, 2027 Place Notary Seal and/or Stamp Above I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature Vr 1 IV19rtv- Signature of Notary Public Completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. Description of Attached Document Title or Type of Document: Document Date: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name: ❑ Corporate Officer — Title(s): ❑ Partner — ❑ Limited ❑ General ❑ Individual ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer is Representing: ©2019 National Notary Association Number of Pages: Signer's Name: ❑ Corporate Officer — Title(s): ❑ Partner — ❑ Limited ❑ General ❑ Individual ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer is Representing: "COSTA MESA" CITY OF COSTA MESA, a California municipal corporation Dated: �� ZiS� 12025 By: City Manager ATTEST: Dated: z� 25 , 2025 By��� City Clerk APPROVED By: / Dated: , 2025 ��, ' G� ity �ttorney CALIFORNIA ACKNOWLEDGMENT CIVIL CODE § 1189 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California 1 County of 000(o J} On KOZ0,4P1 ZG .2a S before me, rNOWN' S• 13E , W&e& P09UG , Date Here Insert Name and Title of the Officer personally appeared &A gNN MM Nome(s) of Signer(a) who proved to me on the basis of satisfactory evidence to be the person( whose nameKwffre subscribed to the within instrument and acknowledged to me that be/she/tlxey executed the same in hWher/them authorized capacity(ie�), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. CAROLINE S. TSE Notary Public - California Orange County X, z Commission # 2439153 My Comm. Expires Mar 24, 2027 Place Notary Seal and/or Stamp Above I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature Wl'— Signature of Notary Public Completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. Description of Attached Document Title or Type of Document: #-,%V .(k1L)r-1 Document Date: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name: ❑ Corporate Officer — Title(s): ❑ Partner — ❑ Limited ❑ General ❑ Individual ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer is Representing: ©2018 National Notary Association Number of Pages: Signer's Name: ❑ Corporate Officer — Title(s): ❑ Partner — ❑ Limited ❑ General ❑ Individual ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other - Signer is Representing: CALIFORNIA ACKNOWLEDGMENT CIVIL CODE § 1189 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California 1 County of nRA'NGr J} On A , DZ2< before me, ('Ok"(kk S . TIC , NcS7412-4 M�►G Date Here Insert Name and Title of the Officer personally appeared 6k&jDk G2QE1-� Name(o of Signers) who proved to me on the basis of satisfactory evidence to be the person(sr) whose name(s) Ware subscribed to the within instrument and acknowledged to me that he/she/th6y executed the same in his/her/thefr authorized capacity(ias), and that by 17.is/her/their signature(s) on the instrument the person(, or the entity upon behalf of which the personi(s) acted, executed the instrument. s'~\ CAROLINE S. TSE Notary Public • California Z )� Orange County Commission # 439153 My Comm. Expires Mar 24, 2027 I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature LL Place Notary Seal and/or Stamp Above Signature of Notary Public Completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. Description of Attached Document Title or Type of Document: P-Vog►Aloe'l AZ2flirlet'1 Document Date: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name: ❑ Corporate Officer — Title(s): ❑ Partner — ❑ Limited ❑ General ❑ Individual ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer is Representing: 02018 National Notary Association Number of Pages: Signer's Name: ❑ Corporate Officer — Title(s): ❑ Partner — ❑ Limited ❑ General ❑ Individual ❑ Attorney in Fact ❑ Trustee ❑ Guardian or Conservator ❑ Other: Signer is Representing: Dated: 52025 "DEVELOPER" AMERICAN FAMILY HOUSING, a California nonprofit public benefit corporation Myles Anthony Peinemann II Chief Executive Officer Attachments: Exhibit A — Legal Description Exhibit B — Restricted Unit Matrix Exhibit C — Lease Rider Exhibit D — Certification of Continuing Program Compliance Exhibit E — Documentation and Monitoring Requirements -31- A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or of that document. STATE OF CALIFORNIA ) )ss. COUNTY OF UV, UQ) On ��M � �25 , before me, �tA -ewet 1c5 , Notary Public, (here insert name and title of the officer) personally appeared h(i��eo Nn�Y1�U W16irry(CLnel who proved to me on the basis of satisfactory evidence to be the person() whose name($) is/�re subscribed to the within instrument, and acknowledged to me that he/sAe/tAey executed the same in his/h/r/their authorized capacity(#), and that by hisgr/tgir signature(t) on the instrument the person(t), or the entity upon behalf of which the person( ,sij acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS in d official seal. Signature (seal) A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE OF CALIFORNIA )ss. COUNTY OF *my KRISTY PARRALES Notary Public - CaliforniaLos Angeles County T Commission # 2415150 Comm. Expires Sep 6, 2026 On , before me, , Notary Public, (here insert name and title of the officer) personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (seal) -32- EXHIBIT "A" LEGAL DESCRIPTION OF SITE PARCEL 2, IN THE CITY OF COSTA MESA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 24 PAGE 23 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM THAT PORTION CONVEYED TO MESA CONSOLIDATED WATER DISTRICT BY DEED RECORDED DECEMBER 31, 1986 AS INSTRUMENT NO. 86-656909, OFFICIAL RECORDS. ALSO EXCEPTING ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS, NATURAL GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING AND OPERATING THEREFORE AND REMOVING THE SAME FROM SAID LAND OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND MINE FROM LANDS OTHER THAN THOSE HEREINABOVE DESCRIBED, OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AND TO BOTTOM SUCH WHIPSTCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, EXPLORE AND OPERATE THROUGH THE SURFACE OF THE UPPER 500 FEET OF THE SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AS RESERVED IN DEED FROM THE IRVINE COMPANY, A CORPORATION, RECORDED MARCH 5, 1968 IN BOOK 8535 PAGE 62 OF OFFICIAL RECORDS. APN: 439-312-12 -33- EXHIBIT `B" RESTRICTED UNIT MATRIX* City: Size No. of Units 30% AMI Household Unit Newport Beach Studio 12 12 Costa Mesa Studio 16 16 *The Project includes two (2) unrestricted Manager's Units that shall each be occupied by an on - site property manager and not an Eligible Tenant. -34- EXHIBIT "C" LEASE RIDER [See following page] -35- PERMANENT SUPPORTIVE HOUSING PROJECT Lease Rider RESIDENT: (if there is more than one adult occupant, each person must sign the rider) LEASE DATE: UNIT NO.: The undersigned tenant(s) hereby certify and agree as follows: 1. Income Certification. The attached income certification is true, correct and complete. I/we agree to provide a similar certification annually upon request during the term of my occupancy. 2. Employer Verification. The landlord or property manager has my permission to verify my/our income from any sources of income I/we receive. 3. False Statements. If the income certification and/or lease application submitted by me/us is false, or if I/we fail to provide annual certifications, the landlord or property manager will have the right to terminate my/our lease and recover possession of my/our unit. I/we understand that the landlord and property manager are relying on this income certification and the related third -party income and asset verifications in accepting me/us as a tenant, and the landlord or property manager will be seriously harmed if my/our income does not qualify the unit for the affordable housing program. 4. This rider shall be considered as part of my/our lease. Date: Tenant Tenant Tenant Tenant -36- EXHIBIT "D" CERTIFICATION OF CONTINUING PROGRAM COMPLIANCE , a duly authorized officer of and on behalf of AMERICAN FAMILY HOUSING ("Owner/Operator"), hereby represents and warrants that: 1. He/she has read and is thoroughly familiar with the provisions of the Regulatory Agreement and Declaration of Covenant and Restrictions ("Agreement") by and between the City of Costa Mesa, the City of Newport Beach (collectively "Cities") and American Family Housing of which this certification is an attachment. 2. As of the date of this certification, each PSH Unit on the Property (other than the two on - site manager's units) (i) is currently occupied by tenants qualifying as an Eligible Tenant(s) at an Affordable Rent (as such terms are defined in the Agreement); or (ii) is currently vacant and being held available for occupancy by such Eligible Tenant(s) in accordance with the Agreement and have been so held continuously since the date the previous qualifying Eligible Tenant vacated such PSH Unit, as indicated: [describe number of vacant PSH Units and length of time each such PSH Unit has remained vacant]; or (iii) is occupied by qualifying Eligible Tenant(s) whose incomes have increased above such qualifications in accordance with the terms and conditions of Sections 3.4, 3.5 and 3.6 of the Agreement. 3. The unit size, the rental amount charged and collected by Owner/Operator, the number of occupants and the income of the occupants for the Property is set forth below: [Add attachment if needed] This affidavit is made with the knowledge that it will be relied upon by Authority to determine compliance with the Agreement. Owner/Operator warrants that all information set forth in this document is true, correct and complete and based upon information Owner/Operator deems reliable and based upon such investigation as Owner/Operator deemed necessary. Owner/Operator acknowledges that Owner/Operator has been advised that the making of any misrepresentation or misstatement in this affidavit will constitute a material breach of the Agreement with both Cities and may entitle both Cities to initiate and pursue all applicable legal and equitable remedies with respect such Agreement. Owner/Operator does hereby swear under penalty of perjury that the foregoing statements are true and correct and that this certificate was executed on 520 . "OWNER/OPERATOR" -37- EXHIBIT "E" DOCUMENTATION AND MONITORING REQUIREMENTS Developer shall comply with the requirements set forth in this Exhibit at all times during the term of that certain Newport Beach AHA and Costa Mesa AHA (collectively referred to as the "AHAs") and that certain Regulatory Agreement to which this Exhibit is attached ("Agreement"). Documentation and Recordkeeping. (a) Records to be maintained. Developer shall maintain all records pertinent to the Construction and operation of the Project funded under the AHAs. Records shall be maintained for each tenant household, each PSH Unit, and each expenditure of Newport Beach and Costa Mesa Loans (collectively referred to as "City Loan") for the Project pursuant to the Agreement. Such records shall include but are not limited to: (i) Records providing a full description of each activity undertaken for which City Loan funds were applied. (ii) Records required to determine the eligibility of activities for use of City Loan funds. (iii) Records (including property inspection reports) demonstrating that each PSH Unit meets the City Property Standards upon occupancy and at the time of each annual inspection and was constructed and is maintained in accordance with the Agreement. (iv) With respect to the Preference Units, Records demonstration Developers compliance with the tenant selection covenants and tenant selection policies pursuant to Section 3.4 of the Agreement. (v) Records (e.g. all source documentation collected by Developer or the Property Manager, written eligibility determinations and documentation regarding any appeals of eligibility determinations) demonstrating the eligibility of each tenant household, including documentation showing income eligibility as Eligible Tenant(s). (vi) Records demonstrating that each rental agreement or lease for tenant household occupying a PSH Unit complies with the requirements of this Agreement including Sections 3.2 & 5.3. (vii) Records documenting compliance with Developer's marketing and outreach obligations under the Agreement. (viii) Records documenting compliance with the lead -based hazards requirements under the Agreement. (ix) Records demonstrating compliance by Developer, and each of its contractors and subcontractors with all applicable prevailing wage and labor compliance requirements set forth in the Agreement or otherwise required by applicable law. me (b) Retention. Developer shall retain all financial records, supporting documents, statistical records, and all other records pertinent to the Agreement for a period of five (5) years after the end of each Developer's fiscal year. Notwithstanding the above, if there are litigation matters, claims, audits, negotiations or other actions that involve any of the records cited and that have started before the expiration of the five-year period, then all pertinent records must be retained until completion of the actions and resolution of all issues, or the expiration of the five-year period, whichever occurs later. (c) Client Data. Developer shall maintain data regarding each tenant household that rents and occupies a Preference Unit at the Project demonstrating eligibility under the Agreement. Such data shall include, but not be limited to, client name, address, and income level. Such information shall be made available to City monitors or their designees for review upon request. (d) Disclosure. Developer understands that client information collected under this Agreement is private and the use or disclosure of such information, when not directly connected with the administration of the Cities or Developer's responsibilities with respect to Developer's performance under this Agreement, is prohibited unless written consent is obtained from such person receiving housing or any services and, in the case of a minor, that of a responsible parent/guardian. (e) Audits and Inspections. All Developer records with respect to any matters covered by this Agreement shall be made available to the Cities or any of their authorized representatives, at any time during normal business hours, as often as deemed necessary, to audit, examine, and make excerpts or transcripts of all relevant data. Any deficiencies noted in audit reports must be fully cleared by Developer within 30 days after receipt by Developer. Failure of Developer to comply with the above audit requirements will constitute a violation of this Agreement and may result in the withholding of future payments. Upon request by the Cities, Developer hereby agrees to conduct an annual audit in accordance with requirements and policies set by the Cities. -39-