PART 904—LOW RENT HOUSING HOMEOWNERSHIP OPPORTUNITIES Authority: 42 U.S.C. 1437-1437ee and 3535(d). Source: 39 FR 10966, Mar. 22, 1974, unless otherwise noted. Redesignated at 40 FR 15580, Apr. 7, 1975, and further redesignated at 49 FR 6714, Feb. 23, 1984. Subpart A—Introduction to Low-Rent Housing Homeownership Opportunity Program [Reserved] Subpart B—Turnkey III Program Description § 904.101 Introduction. (a) Purpose. (b) Applicability. (1) With respect to any development to be operated as Turnkey III, the Annual Contributions Contract (ACC) shall contain the “Special Provisions for Turnkey III Homeownership Opportunity Project” as set forth in Appendix I. A Turnkey III development may include only units which are to be operated as such under Homebuyers Ownership Opportunity Agreements. If for any reason it is determined that certain units should be operated as conventional rental units, such units must comprise or be made part of a conventional rental project. (2) With respect to Turnkey III developments pursuant to an executed ACC where no Agreements with Homebuyers have been signed, the ACC shall be amended (i) to include the “Special Provisions” set forth in Appendix I, (ii) to extend its term to 30 years, and (iii) to reduce its Maximum Contribution Percentage to a rate that will amortize the debt in 30 years at the minimum Loan Interest Rate specified in the ACC for the specific Turnkey III project involved. Further development and operation shall be in accordance with this subpart including use of the form of Homebuyers Ownership Opportunity Agreement set forth in Appendix II. (3) With respect to developments where Agreements with homebuyers have been signed, the following steps shall be taken: (i) The ACC shall be amended to include the Special Provisions” set forth in Appendix I; further development and operation of the Project shall be in accordance with this subpart. (ii) The LHA shall offer all qualified homebuyers in the development a new Homebuyers Ownership Opportunity Agreement as set forth in Appendix II with an amendment to section 16a to refer to “the latest approved Development Cost Budget, or Actual Development Cost Certificate if issued,” in lieu of “the Development Cost Budget in effect upon award of the Main Construction Contract or execution of the Contract of Sale,” and, if the ACC for the Project has a term of 25 years, an amendment to section 16(b) to refer to a term of 25 years, instead of 30, for the Purchase Price Schedule. Each Purchase Price Schedule shall commence with the first day of the month following the effective date of the initial Agreement. No other modification in the new Agreement may be made. In the event the homebuyer refuses to accept the new Agreement, no modifications may be made in the old Agreement and the matter shall be referred to HUD. (4) With respect to Projects which were under ACC on the effective date of this subpart, the Total Development Cost Budget shall be revised, if financially feasible, to include the cost of the appraisals which are necessary for computation of the initial purchase prices pursuant to § 904.113. In the event this is not financially feasible, the matter shall be referred to HUD, which may, if necessary, authorize a different method for computation of such initial purchase prices on an equitable basis. (5) With respect to all developments which were completed by the effective date of this subpart, the appraisals which are necessary for computation of the initial purchase prices pursuant to § 904.113 shall be made as of the date of completion of the development. [39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, and 49 FR 6714, Feb. 23, 1984, and amended at 56 FR 922, Jan. 9, 1991] § 904.102 Definitions. (a) The term common property Provided, however, common property common areas, common facilities, common elements, common estate, (b) The term development (c) The term EHPA (d) The term homebuyer (e) The term homebuyers association (f) The term homeowner (g) The term homeowners association (h) The term LHA (i) The term NRMR (j) The term Project [39 FR 10966, Mar. 22, 1974, as amended at 61 FR 5214, Feb. 9, 1996] § 904.103 Development. (a) Financial framework. (b) Maximum total development cost. (c) Contractual framework. (1) An Annual Contributions Contract containing “Special Provisions For Turnkey III Homeownership Opportunity Project,” Form HUD-53010C (see Appendix I); (2) A Homebuyers Ownership Opportunity Agreement (see Appendix II) which sets forth the respective rights and obligations of the low-income occupants and the LHA, including conditions for achieving homeownership; and (3) A Recognition Agreement (see Appendix II of Subpart D of this part) between the LHA and the HBA under which the LHA agrees to recognize the HBA as the established representative of the homebuyers. (d) Community Participation Committee CPC [39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, and amended at 47 FR 39482, Sept. 8, 1982. Redesignated at 49 FR 6714, Feb. 23, 1984, and amended at 53 FR 41598, Oct. 24, 1988] § 904.104 Eligibility and selection of homebuyers. (a) Announcement of availability of housing; fair housing marketing. (2) The LHA shall submit to HUD an Affirmative Fair Housing Marketing Plan and shall otherwise comply with the provisions of the Affirmative Fair Housing Marketing Regulations, 24 CFR part 200, subpart M, as if the LHA were an applicant for participation in an FHA housing program. This Plan shall be submitted with the development program, and no development program may be approved without prior approval of the Plan pursuant to HUD procedures under said Affirmative Fair Housing Marketing Regulations. If the development program has been approved, but the Annual Contributions Contract has not been executed, prior to the effective date of this subpart, an Affirmative Fair Housing Marketing Plan must be approved prior to execution of said contract. (b) Eligibility and standards for admission. (2) An LHA may establish income limits for Turnkey III which are different from those for its conventional rental program: Provided (c) Determination of eligibility and preparation of list. (1) There is an adequate pool of applicants who are likely to qualify for a Federal preference, and (2) It is unlikely that, on the basis of the LHA's system for applying the Federal preferences, the preference or preferences that the applicant claims, and the preferences claimed by applicants on the waiting list, the applicant would qualify for admission before other applicants on the waiting list. (d) List of applicants. (1) Dating of applications. (2) Effect on applicant status. (e) Determination of potential for homeownership Recommending committee. (2) Potential for homeownership. (i) Income sufficient to result in a required monthly payment which is not less than the sum of the amounts necessary to pay the EHPA, the NRMR, and the estimated average monthly cost of utilities attributable to the home; (ii) Ability to meet all the obligations of a homebuyer under the Homebuyers Ownership Opportunity Agreement; (iii) At least one member gainfully employed, or having an established source of continuing income. (f) Selection of homebuyers. (1) Selection procedures that do not automatically deny admission to a particular class; that ensure selection on a nondiscriminatory and nonsegregated basis; that give a Federal preference in accordance with § 904.122; and that facilitate achievement of the anticipated results for occupancy stated in the approved Affirmative Fair Housing Marketing Plan. (2) Achievement of an average monthly payment for the Project, including consideration of the availability of the Special Family Subsidy, which is at least 10 percent more than the breakeven amount for the Project (see § 904.108). This standard shall be complied with both in the initial selection of homebuyers and in the subsequent filling of vacancies at all times during the life of the Project. If there is an applicant who has potential for homeownership but whose required monthly payment under the LHA's Rent Schedule would be less than the break-even amount for the suitable size and type of unit, such applicant may be selected as a homebuyer, provided that the incomes of all selected homebuyers shall result in the required average monthly payment of at least 10 percent more than the break-even amount for the Project. Such an average monthly payment for the Project may be achieved by selecting other low-income families who can afford to make required monthly payments substantially above the break-even amounts for their suitable sizes and types of units. (g) Notification to applicants. (2) Applicants who are not selected for a specific Turnkey III development shall be notified in accordance with HUD-approved procedure. The notice shall state: (i) The reason for the applicant's rejection (including a nonrecommendation by the recommending committee unless the applicant has previously been so notified by the committee); (ii) That the applicant will be given an information hearing on such determination, regardless of the reason for the rejection, if the applicant makes a request for such a hearing within a reasonable time (to be specified in the notice) from the date of the notice; and (iii) For denial of assistance for failure to establish citizenship or eligible immigration status, the applicant may request, in addition to the informal hearing, an appeal to the INS, in accordance with 24 CFR part 5. (h) Eligibility for continued occupancy. (2) The term “monthly housing cost,” as used in this paragraph, means the sum of: (i) The monthly debt service amount shown on the Purchase Price Schedule (except where the homebuyer can purchase the home by the method described in § 904.113(c)(1) of this part); (ii) One-twelfth of the annual real property taxes which the homebuyer will be required to pay as a homeowner; (iii) One-twelfth of the annual premium attributable to fire and extended coverage insurance carried by the LHA with respect to the home; (iv) The current monthly per unit amount budgeted for routine maintenance (EHPA), and for routine maintenance-common property; and (v) The current LHA and HUD approved monthly allowance for utilities paid for directly by the homebuyer plus the monthly cost of utilities supplied by the LHA. (Approved by the Office of Management and Budget under control number 2577-0083) [39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, and at 49 FR 6714, Feb. 23, 1984, as amended at 49 FR 21490, May 21, 1984; 53 FR 1172, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39710, Sept. 27, 1989; 56 FR 7544, Feb. 22, 1991; 60 FR 14848, Mar. 20, 1995; 61 FR 13626, Mar. 27, 1996] § 904.105 Counseling of homebuyers. The LHA shall provide counseling and training as provided in subpart C of this part, with funding as provided in § 904.206 of this part. Applicants for admission shall be advised of the nature of the counseling and training program available to them and the application for admission shall include a statement that the family agrees to participate and cooperate fully in all official pre-occupancy and post-occupancy training and counseling activities. Failure to participate as agreed may result in the family not being selected or retained as a homebuyer. § 904.106 Homebuyers Association (HBA). An HBA is an incorporated organization composed of all the families who are entitled to occupancy pursuant to a Homebuyers Ownership Opportunity Agreement or who are homeowners. It is formed and organized for the purposes set forth in § 904.304 of this part. The HBA shall be funded as provided in § 904.305 of this part. In the absence of a duly organized HBA, the LHA shall be free to act without the HBA action required by this subpart. § 904.107 Responsibilities of homebuyer. (a) Repair, maintenance and use of home. (b) Repair of damage. (c) Care of home. (d) Inspections. (e) Use of home. (f) Obligations with respect to other persons and property. (g) Structural changes. (h) Statements of condition and repair. (i) Maintenance of common property. (j) Homebuyer's required monthly payment. (2) For purposes of determining eligibility of an applicant (see 24 CFR parts 5 and 913, as well as this part) and the amount of Homebuyer payments under paragraph (j)(1) of this section, the LHA shall examine the family's income and composition and follow the procedures required by 24 CFR part 5 for determining citizenship or eligible immigration status before initial occupancy. Thereafter, for the purposes stated in this paragraph and to determine whether a Homebuyer is required to purchase the home under § 904.104(h)(1), the LHA shall reexamine the Homebuyer's income and composition regularly, at least once every 12 months, and shall undertake such further determination and verification of citizenship or eligible immigration status as required by 24 CFR part 5. The Homebuyer shall comply with the LHA's policy regarding required interim reporting of changes in the family's income and composition. If the LHA receives information from the family or other source concerning a change in the family income or other circumstances between regularly scheduled reexaminations, the LHA, upon consultation with the family and verification of the information (in accordance with 24 CFR parts 5 and 913 of this chapter) shall promptly make any adjustments determined to be appropriate in the Homebuyer payment amount or take appropriate action concerning the addition of a family member who is not a citizen with eligible immigration status. Any change in the family's income or other circumstances that results in an adjustment in the Total Tenant Payment and Tenant Rent must be verified. (3) The LHA shall not refuse to accept monthly payments because of any other charges (other than overdue monthly payments) owed by the homebuyer to the LHA; however, by accepting monthly payments under such circumstances the LHA shall not be deemed to have waived any of its rights and remedies with respect to such other charges. (k) Application of monthly payment. (1) To the credit of the homebuyer's EHPA (see § 904.110); (2) To the credit of the homebuyer's NRMR (see § 904.111); and (3) For payment of monthly operating expense including contribution to operating reserve (see § 904.109). (l) Assignment and survivorship. (1) A homebuyer shall not assign any right or interest in the home or under the Homebuyers Ownership Opportunity Agreement without the prior written approval of the LHA and HUD; (2) In the event of death, mental incapacity or abandonment of the family by the homebuyer, the person designated as the successor in the Homebuyers Ownership Opportunity Agreement shall succeed to the rights and responsibilities under the Agreement if that person is an occupant of the home at the time of the event and is determined by the LHA to meet all of the standards of potential for homeownership as set forth in § 904.104(e)(2). Such person shall be designated by the homebuyer at the time the Homebuyers Ownership Opportunity Agreement is executed. This designation may be changed by the homebuyer at any time. If there is no such designation or the designee is no longer an occupant of the home or does not meet the standards of potential for homeownership, the LHA may consider as the homebuyer any family member who was an occupant at the time of the event and who meets the standards of potential for homeownership. (3) If there is no qualified successor in accordance with paragraph (l) (2) of this section, the LHA shall terminate the Agreement and another family shall be selected except under the following circumstances: where a minor child or children of the homebuyer family are in occupancy, then in order to protect their continued occupancy and opportunity for acquisition of ownership of the home, the LHA may approve as occupants of the unit, an appropriate adult(s) who has been appointed legal guardian of the children with a duty to perform the obligations of the Homebuyers Ownership Opportunity Agreement in their interest and behalf. (m) Termination by LHA. (2) Notice of termination by the LHA shall be in writing. Such notice shall state (i) The reason for termination, (ii) That the homebuyer may respond to the LHA, in writing or in person, within a specified reasonable period of time regarding the reason for termination, (iii) That in such response he may be represented or accompanied by a person of his choice, including a representative of the HBA, (iv) That the LHA will consult the HBA concerning this termination, and (v) That unless the LHA rescinds or modifies the notice, the termination shall be effective at the end of the 30-day notice period. (n) Termination by the homebuyer. (o) Transfer to rental unit. (2) If the final determination of the LHA, after considering the views of the HBA, is that the homebuyer should be transferred to a suitable dwelling unit in an LHA rental project, the LHA shall give the homebuyer written notice of the LHA determination of the loss of homeownership potential and of the offer of transfer to a rental unit. The notice shall state that the transfer shall occur as soon as a suitable rental unit is available for occupancy, but no earlier than 30 days from the date of the notice, provided that an eligible successor for the homebuyer unit has been selected by the LHA. The notice shall also state that if the homebuyer should refuse to move under such circumstances, the family may be required to vacate the homebuyer unit, without further notice. The notice shall include a statement (i) that the homebuyer may respond to the LHA in writing or in person, within a specified reasonable time, regarding the reason for the determination and offer of transfer, (ii) that in such response he may be represented or accompanied by a person of his choice including a representative of the HBA, and (iii) that the LHA has consulted the HBA concerning this determination and offer of transfer. (3) When a Homebuyers Ownership Opportunity Agreement is terminated pursuant to this paragraph (o), the amount in the homebuyer's EHPA shall be paid in accordance with the provisions of § 904.110(j). (Approved by the Office of Management and Budget under control number 2577-0083) [39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, and at 49 FR 6714, Feb. 23, 1984, as amended at 49 FR 21490, May 21, 1984; 49 FR 26719, June 29, 1984; 54 FR 39710, Sept. 27, 1989; 56 FR 7544, Feb. 22, 1991; 60 FR 14848, Mar. 20, 1995; 60 FR 13626, Mar. 27, 1996] § 904.108 Break-even amount. (a) Definition. Illustration. The following is an illustration of the computation of the break-even amount based upon hypothetical amounts. (1) Operating Expense (see § 904.109): Administration $8.50 Homebuyer services 2.00 Project supplied utilities 3.00 Routine maintenance—common property 3.00 Protective services 2.00 General expense 6.50 Nonroutine maintenance—common property (Contribution to operating reserve) 2.00 $27.00 (2) Earned Home Payments Account (see § 904.110) 12.00 (3) Nonroutine Maintenance Reserve (see § 904.111) 7.50 Break-Even Amount 46.50 The break-even amount does not include the monthly allowance for utilities which the homebuyer pays for directly, nor does it include any amount for debt service on the Project notes. (b) Excess over break-even. (c) Deficit in monthly payment. § 904.109 Monthly operating expense. (a) Definition and categories of monthly operating expense. (1) Administration. (2) Homebuyer services. (3) Utilities. (4) Routine maintenance—common property. (5) Protective services. (6) General expense. (7) Nonroutine maintenance—common property (Contribution to operating reserve). (b) Monthly operating expense rate. (c) Provision for common property maintenance. (d) Posting of monthly operating expense statement. § 904.110 Earned Home Payments Account (EHPA) (a) Credits to the account. (1) Any voluntary payments made pursuant to paragraph (f) of this section, and (2) Any amount earned through the performance of maintenance as provided in paragraph (d) of this section and § 904.111(c). (b) Charges to the account. (2) To the extent NRMR expense is attributable to the negligence of the homebuyer as determined by the HBA and approved by the LHA (see § 904.111), the cost thereof shall be charged to the EHPA. (c) Exercise of option; required amount in EHPA. (1) Within the first two years of his occupancy, he has achieved a balance in his EHPA equal to 20 times the amount of the monthly EHPA credit as initially determined in accordance with paragraph (a) of this section; (2) He has met, and is continuing to meet, the requirements of the Homebuyers Ownership Opportunity Agreement; (3) He has rendered, and is continuing to render, satisfactory performance of his responsibilities to the HBA. When the homebuyer has met these conditions precedent, the LHA shall give the homebuyer a certificate to that effect. After achieving the required minimum EHPA balance within the first two years of his occupancy, the homebuyer shall continue to provide the required maintenance, thereby continuing to add to his EHPA. If the homebuyer fails to meet either his obligation to achieve the minimum EHPA balance, as specified, or his obligation thereafter to continue adding to the EHPA, the LHA and the HBA shall investigate and take appropriate corrective action, including termination of the Agreement by the LHA in accordance with § 904.107(m). (d) Additional equity through maintenance of common property. (e) Investment of excess. (2) Periodically, but not less often than semi-annually, the LHA shall prepare a statement showing (i) the aggregate amount of all EHPA balances; (ii) the aggregate amount of investments (savings accounts and/or securities) held for the account of all the homebuyers' EHPAs, and (iii) the aggregate uninvested balance of all the homebuyers' EHPAs. This statement shall be made available to any authorized representative of the HBA. (f) Voluntary payments. (g) Delinquent monthly payments. (h) Annual statement to homebuyer. (i) Withdrawal and assignment. (j) Application of EHPA upon vacating of dwelling. (i) The amount due the LHA, including the monthly payments the homebuyer is obligated to pay up to the date he vacates; (ii) The monthly payment for the period the home is vacant, not to exceed 30 days from the date of notice of intention to vacate, or, if the homebuyer fails to give notice of intention to vacate, 30 days from the date the home is put in good condition for the next occupant in conformity with § 904.107; and (iii) The cost of any routine maintenance, and of any nonroutine maintenance attributable to the negligence of the homebuyer, required to put the home in good condition for the next occupant in conformity with § 904.107. (2) If the EHPA balance is not sufficient to cover all of these charges, the LHA shall require the homebuyer to pay the additional amount due. If the amount in the account exceeds these charges, the excess shall be paid to the homebuyer. (3) Settlement with the homebuyer shall be made promptly after the actual cost of repairs to the dwelling has been determined (see paragraph (j)(1)(iii) of this section), provided that the LHA shall make every effort to make such settlement within 30 days from the date the homebuyer vacates. The homebuyer may obtain a settlement within 7 days of the date he vacates, even though the actual cost of such repair has not yet been determined, if he has given the LHA notice of intention to vacate at least 30 days prior to the date he vacates and if the amount to be charged against his EHPA for such repairs is based on the LHA's estimate of the cost thereof (determined after consultation with the appropriate representative of the HBA). § 904.111 Nonroutine Maintenance Reserve (NRMR). (a) Purpose of reserve. (b) Amount of reserve. (c) Charges to NRMR. (2) The cost of nonroutine maintenance shall be charged to the NRMR for the home except that (i) to the extent such maintenance is attributable to the fault or negligence of the homebuyer, the cost shall be charged to the homebuyer's EHPA after consultation with the HBA if the hombuyer disagrees, and (ii) to the extent such maintenance is attributable to defective materials or workmanship not covered by warranty, or even though covered by warranty if not paid for thereunder through no fault or negligence of the homebuyer, the cost shall be charged to the appropriate operating expense account of the Project. (3) In the event the amount charged against the NRMR exceeds the balance therein, the difference (deficit) shall be made up from continuing monthly credits to the NRMR based upon the homebuyer's monthly payments. If there is still a deficit when the homebuyer acquires title, the homebuyer shall pay such deficit at settlement (see paragraph (d)(2) of this section). (d) Transfer of NRMR. (2) In the event the homebuyer purchases the home, and there remains a balance in the NRMR, the LHA shall pay such balance to the homebuyer at settlement. In the event the homebuyer purchases and there is a deficit in the NRMR, the homebuyer shall pay such deficit to the LHA at settlement. (e) Investment of excess. (2) Periodically, but not less often than semi-annually, the LHA shall prepare a statement showing (i) the aggregate amount of all NRMR balances, (ii) the aggregate amount of investments (savings accounts and/or securities) held for the account of the NRMRs, and (iii) the aggregate uninvested balance of the NRMRs. A copy of this statement shall be made available to any authorized representative of the HBA. § 904.112 Operating reserve. (a) Purpose of reserve. (1) The infrequent but costly items of nonroutine maintenance and replacements of common property, taking into consideration the types of items which constitute common property, such as nondwelling structures and equipment, and in certain cases, common elements of dwelling structures, (2) Nonroutine maintenance for the homes to the extent such maintenance is attributable to defective materials or workmanship not covered by warranty, (3) Working capital for payment of a deficit in a homebuyer's NRMR, until such deficit is offset by future monthly payments by the homebuyer or at settlement in the event the homebuyer should purchase, and (4) A deficit in the operation of the Project for a fiscal year, including a deficit resulting from monthly payments totaling less than the break-even amount for the Project. (b) Nonroutine maintenance—common property (Contribution to operating reserve). (c) Maximum operating reserve. (d) Transfer to homeowners association. (e) Disposition of reserve. § 904.113 Achievement of ownership by initial homebuyer. (a) Determination of initial purchase price. Step 1: Step 2: (b) Purchase price schedule. 1 2 1/4 1 2 (c) Methods of purchase. (2) Where the sum of the purchase price and Incidental Costs is greater than the amounts in the homebuyer's EHPA and NRMR as described in paragraph (c)(1) of this section, the homebuyer may achieve ownership by obtaining financing for or otherwise paying the excess amount. The purchase price shall be the amount shown on his Purchase Price Schedule for the month in which the settlement date for the purchase occurs. (d) The maximum period for achieving ownership shall be 30 years, but depending upon increases in the homebuyers income and the amount of credit which the homebuyer can accumulate through maintenance and voluntary payments, the period may be shortened accordingly. § 904.114 Payment upon resale at profit. (a) Promissory note. (2) The note to be signed by the homebuyer pursuant to paragraph (a)(1) of this section shall be a non interest-bearing promissory note (see Appendix IV) to the LHA. The note shall be executed at the time the homebuyer becomes a homeowner and shall be secured by a second mortgage. The initial amount of the note shall be computed by taking the appraised value of the home at the time the homebuyer becomes a homeowner and subtracting (i) the homebuyer's purchase price plus the Incidental Costs and (ii) the increase in value of the home, determined by appraisal, caused by improvements paid for by the homebuyer with funds from sources other than the EHPA or NRMR. The note shall provide that this initial amount shall be automatically reduced by 20 percent thereof at the end of each year of residency as a homeowner, with the note terminating at the end of the five-year period of residency, as determined by the LHA. To protect the homeowner, the note shall provide that the amount payable under it shall in no event be more than the net profit on the resale, that is, the amount by which the resale price exceeds the sum of (A) the homebuyer's purchase price plus the Incidental Costs, (B) the costs of the resale, including commissions and mortgage prepayment penalties, if any, and (C) the increase in value of the home, determined by appraisal, due to improvements paid for by him as a homebuyer (with funds from sources other than the EHPA or NRMR) or as a homeowner. (3) Amounts collected by the LHA under such notes shall be retained by the LHA for use in making refunds pursuant to paragraph (a)(1) of this section. After expiration of the period for the filing of claims for such refunds, any remaining amounts shall be applied (i) to reduce the LHA's capital indebtedness on the Project and (ii) after such indebtedness has been paid, for such purposes as may be authorized or approved by HUD under such Annual Contributions Contract as the LHA may then have with HUD. Illustration. If the homeowner's purchase price is $10,000, the Incidental Costs are $500, the value added by improvements is $1,000, and the FHA appraised value at the time he acquires ownership is $17,000, the note computation would be as follows: FHA appraised value $17,000 Homeowner's purchase price $10,000 Incidental costs 500 Improvements 1,000 11,500 Initial note amount 5,500 In this example, the amount of the note during the first year of residence is $5,500. In the second year, the amount of the note is $4,400, and in the third year, it is $3,300, etc. The note shall terminate at the end of the fifth year. If the homeowner in this example resells his home during the first year for a sales price of $17,500, has resale costs of $1,600 (including a sales commission), and has added $1,500 value by further improvements, he would be required to pay the LHA $2,900 rather than the $5,500, as indicated in the following computations: Resale price $17,500 Resale costs $1,600 Purchase price and Incidental costs 10,500 All improvements 2,500 14,600 Payable to LHA 2,900 (b) Residency requirements. § 904.115 Achievement of ownership by subsequent homebuyers. (a) Definition. (b) Determination of initial purchase price. (c) Purchase price schedule. (d) Residual receipts. § 904.116 Transfer of title to homebuyer. When the homebuyer is to obtain ownership as described in § 904.113 or § 904.115, a closing date shall be mutually agreed upon by the parties. On the closing date the homebuyer shall pay the required amount of money to the LHA, sign the promissory note pursuant to § 904.114, and receive a deed for the home. § 904.117 Responsibilities of homebuyer after acquisition of ownership. After acquisition of ownership, each homeowner shall be required to pay to the LHA or to the homeowners association, as appropriate, a monthly fee for (a) the maintenance and operation of community facilities including utility facilities, if any, (b) the maintenance of grounds and other common areas and, (c) such other purposes as determined by the LHA or the homeowners association, as appropriate, including taxes and a provision for a reserve. This requirement shall be set out in the planned unit development or condominium documents which shall be recorded prior to the date of full availability, or in an LHA-homeowner contract in this regard. § 904.118 Homeowners association—planned unit development (PUD). If the development is organized as a planned unit development: (a) Ownership and maintenance of common property. (b) Title restrictions. (c) Votes in association. (d) Voting control. § 904.119 Homeowners association—condominium. If the development is organized as a condominium: (a) The LHA at the outset shall own each condominium unit and its undivided interest in the common areas; (b) All the land, including that land under the housing units, shall be a part of the common areas; (c) The homeowners association shall own no property but shall maintain and operate the common areas for the individual owners of the condominium units except that the LHA shall be responsible for maintenance until such time as the homeowners association assumes such responsibility (see § 904.112(d)); (d) The percentage of undivided interest attached to each condominium unit shall be based on the ratio of the value of the units to the value of all units and shall be fixed when the development is completed. This percentage shall determine the homeowner's liability for the maintenance of the common areas and facilities; (e) Each homeowner's vote in the homeowners association shall be identical with the percentage of undivided interest attached to his unit; and (f) The LHA shall not lose its majority voting interest in the association as soon as units representing 50 percent of the value of all units have been conveyed, unless the law of the state requires control to be transferred at a particular time or the LHA so desires. For voting purposes, until units representing 75 percent of the value of all units have been acquired by homeowners, the total undivided interest attributable to the homes owned by the LHA shall be multiplied by three, if such weighted voting plan is permitted by state law. Under this plan, the LHA shall continue to maintain voting control until 75 percent of the homes have been acquired by homeowners. However, at its discretion, the LHA may transfer voting control to the homeowners when units representing at least 50 percent of the value of all units have been acquired by the homeowners. § 904.120 Relationship of homeowners association to HBA. The HBA and the LHA may make arrangements to permit homebuyers to participate in homeowners association matters which affect the homebuyers. Such arrangements may include rights to attend meetings and to participate in homeowners association deliberations and decisions. § 904.121 Use of appendices. Use of the following Appendices is mandatory for Projects developed under this subpart: § 904.122 Statutory preferences. In selecting applicants for assistance under this part, the LHA must give preference, in accordance with the authorized preference requirements described in 24 CFR 5.410 through 5.430. Notwithstanding those preferences, the LHA can limit homeownership admission to eligible homeownership candidates. [59 FR 36651, July 18, 1994, as amended at 61 FR 9048, Mar. 6, 1996] Appendixes I-IV to Subpart B of Part 904 Appendix I—Annual Contributions Contract “Special Provisions for Turnkey III Homeownership Opportunity Project” Appendix II—Homebuyers Ownership Opportunity Agreement (Turnkey III) Appendix III—Certificate of Achievement of Homebuyer Status Appendix IV—Promissory Note for Payment Upon Resale by Homebuyer at Profit No modification may be made in format, content or text of these Appendices except (1) as required under state or local law as determined by HUD or (2) with approval of HUD. Appendix I to Subpart B of Part 904—Annual Contributions Contract (Subpart B) ( ) Special Provisions for Turnkey III Homeownership Opportunity Project No. __________. (1) The Local Authority agrees to operate the Project in accordance with requirements for the Homeownership Opportunity Program for Low-Income Families (Turnkey III) as prescribed by the Government. The Local Authority shall enter into an agreement with the occupant of each dwelling unit in the Project which agreement shall be in the form of the Homebuyers Ownership Opportunity Agreement approved by the Government, which form provides an opportunity for the acquisition of ownership of the dwelling unit by each occupant who has performed all of the obligations and conditions precedent imposed upon him by such agreement. Upon conveyance of any such dwelling unit, the Local Authority's outstanding obligations in respect to the Project shall be reduced by the amount received for such conveyance, and the Government's obligation for payment of annual contributions in respect to the Project shall be reduced by the amount allocable to the initial purchase price of the dwelling unit. The term “initial purchase price” as used in these Special Provisions shall have the same meaning as in the Homebuyers Ownership Opportunity Agreement, and the term “dwelling unit” shall have the same meaning as the term “Home” used in the Homebuyers Ownership Opportunity Agreement. (2) Failure of the Local Authority to enter into such Homebuyers Ownership Opportunity Agreements at the time and in the form as required by the Government, failure to perform any such agreement, and failure to meet any of its obligations under these Special Provisions shall constitute a Substantial Default under this Contract. (3) The books of account and records of the Local Authority shall be maintained to meet the requirements of the Homebuyers Ownership Opportunity Agreement as well as the other provisions of this Contract and in such manner as will at all times show the operating receipts, operating expenditures, reserves, residual receipts, and other required accounts for the Project separate and distinct from all other Projects under this Contract. (4) As of the Date of Full Availability, or at such earlier date as the Government may require, the Local Authority shall determine and submit to the Government for its approval the amount below which the Development Cost of the Project will in no event fall. Upon approval thereof by the Government, such amount shall constitute and be known as the “Minimum Development Cost” of the Project. The Local Authority shall issue its Project Loan Notes, Permanent Notes or Project Notes as the Government may require to finance the Minimum Development Cost. On each Annual Contribution Date the Government shall pay an annual contribution for the Project in an amount equal to the Maximum Contribution Percentage of the latest approved Minimum Development Cost. The first annual contribution shall be paid or made available as of the next Annual Contribution Date following the approval of the Minimum Development Cost of the Project. (5) Notwithstanding section 403(A)(4), the term “Development Cost” shall include interest on that portion of borrowed monies allocable to the Project for the period ending with the Date of Full Availability or such earlier date as may be specifically approved by the Government. (6) (a) During the __ 1 1 (b) During the period of years immediately following and equal to the Maximum Contribution Period established for the Project, the Local Authority shall, within 60 days after the end of each Fiscal Year, pay to the Government all Residual Receipts of the Project for such Fiscal Year. (c) Following the end of the Fiscal Year in which the last dwelling unit has been conveyed by the Local Authority, the balance of the operating reserve held by the Local Authority shall be paid to the Government, provided that the aggregate amount of payments under (b) and (c) of this paragraph shall not exceed the aggregate amount of annual contributions paid by the Government with respect to the Project. (7) No part of the Funds on deposit in the Debt Service Fund or the Advance Amortization Fund with respect to any other Project under this Contract or the funds available for deposit in such Funds for such other Projects, shall be applied to the retirement of Notes issued for this Project, nor shall any such funds on deposit for this Project be used with respect to any other Project or Projects under this Contract. (8) To the extent that the provisions of this section conflict with other provisions of this Contract, the provisions of this section shall be controlling with respect to the Project. Appendix II to Subpart B of Part 904—Homebuyers Ownership Opportunity Agreement (Turnkey III) (Subpart B) part i This Agreement, made and entered into __________________, 19____, by and between __________ (herein called the “Authority”), and __________ (herein called the “Homebuyer”); witnesseth: In consideration of the agreements and covenants contained in this Agreement and in Homebuyers Ownership Opportunity Agreement Part II, which is hereby incorporated into this Agreement by reference, the Authority leases to the Homebuyer the following described land and improvements thereon together with an undivided interest in all common areas and property (herein called the “Home”) located in the ________ Development (Project No. ____), which Home is identified and located as follows: [Insert address and legal description of location of Home, including rights with respect to common areas and property, and making reference to Book and Page No. in Recorder of Deeds Recorded]. A. Term of Agreement. 1 1 B. Monthly Payment. 2. The amount of the Monthly Payment may be increased or decreased only by reason of changes in the Rent Schedule (see section 7c of Part II) or changes in the Homebuyer's family income or other circumstances (see section 7b of Part II). Any change in Monthly Payment shall become effective by written notice from the Authority to the Homebuyer as of the date specified in such notice, and such notice shall be deemed to constitute an Amendment to this Agreement. C. Option to Purchase. D. Purchase Price. E. Amount of NRMR. F. Homebuyers Association. G. Designation of Successor. First Name Initial Last Name Relationship H. Entire Agreement. THIS AGREEMENT is signed in duplicate, original for all purposes. The Homebuyer hereby acknowledges receipt of one of these signed copies. WITNESSES: The Authority: By (Official Title) The Homebuyer(s): Initial Subsequent part ii terms and conditions 1. Introduction The Home. b. Annual Contributions Contract. c. Management. d. Definitions. (1) The term “Authority” means the local housing authority which acquires or develops a low-rent housing development with financial assistance from HUD, owns the Homes until title is transferred to the Homebuyers, and is responsible for the management of the homeownership opportunity program. (2) The term “common property” means the nondwelling structures and equipment, common areas, community facilities, and in some cases certain component parts of dwelling structures, which are contained in the Development: Provided, however, (3) The term “Development” means the entire undertaking including all real and personal property, funds and reserves, rights, interests and obligations, and activities related thereto. (4) The term “EHPA” means the Earned Home Payments Account established and maintained pursuant to section 10 of the Agreement. (5) The term “Homebuyer” means the member or members of a low-income family who have executed a Homebuyers Ownership Opportunity Agreement with the Authority. (6) The term “Homebuyers Association” (HBA) means an organization as defined in section 5 of this Agreement. (7) The term “Homeowner” means a Homebuyer who has acquired title to his Home. (8) The term “Homeowners Association” means an association comprised of Homeowners, including condominium associations, having responsibilities with respect to common property. (9) The term “HUD” means the Department of Housing and Urban Development which provides the Authority with financial assistance through loans and annual contributions and technical assistance in development and operation. (10) The term “NRMR” means the Nonroutine Maintenance Reserve established and maintained pursuant to section 11 of this Agreement. (11) The term “Project” is used to refer to the Development in relation to matters specifically related to the Annual Contributions Contract. 2. The Homebuyers Ownership Opportunity Agreement. 3. Status of Homebuyer. 4. Counseling of Homebuyers. 5. Homebuyers Association. 2 2 6. Routine maintenance, repair and use of premises. Routine maintenance. b. Repair of damage. c. Care of Home. d. Inspections. e. Use of Home. f. Obligations with respect to other persons and property. g. Structural changes. h. Statement of condition and repair. 7. Monthly payments by Homebuyer Determination of amount. b. Changes in monthly payment due to changes in family income or other circumstances. c. Changes in monthly payment due to changes in rent schedules. d. Acceptance of monthly payment. e. Application of monthly payment. 8. Break-even amount Definition. (1) Monthly Operating Expense, including provision for a contribution to Operating Reserve, pursuant to section 9a below; (2) The monthly amount to be credited to the Homebuyer's EHPA pursuant to Section 10 below; and (3) The monthly amount to be credited to the Nonroutine Maintenance Reserve for the Home pursuant to section 11 below. b. Monthly payment in excess of break-even amount. c. Monthly payment below break-even amount. 9. Monthly operating expense Definition and categories of monthly operating expense. (1) Administration. (2) Homebuyer services. (3) Utilities. (4) Routine maintenance—Common property. (5) Protective services. (6) General expense. (7) Nonroutine maintenance—Common property (contribution to operating reserve). b. Monthly operating expense rate. c. Provision for common property maintenance. d. Posting of monthly operating expense statement. 10. Earned Home Payments Account (EHPA) Credits to the account. b. Use of EHPA funds. c. Charges to the account. (2) To the extent nonroutine maintenance expense is made necessary by the negligence of the Homebuyer as determined by the HBA and the Authority (see section 11), the cost thereof shall be charged to the EHPA. d. Exercise of option; required amount in EHPA. (1) Within the first two years of his occupancy, he has achieved a balance in his EHPA equal to 20 times the amount of the monthly EHPA credit as initially determined in accordance with paragraph a of this section; (2) He has met, and is continuing to meet, the requirements of this Agreement; (3) He has rendered, and is continuing to render, satisfactory performance of his responsibilities to the HBA. When the Homebuyer has met these conditions precedent, the Authority shall give the Homebuyer a certificate to that effect. After achieving the required minimum EHPA balance within the first two years of his occupancy, the Homebuyer shall continue to be obligated to provide the required maintenance, thereby continuing to add to his EHPA. If the Homebuyer fails to meet either his obligation to achieve the minimum EHPA balance as specified or his obligation thereafter to continue adding to the EHPA, the Authority and the HBA shall investigate and take appropriate corrective action, including termination of this Agreement by the Authority in accordance with section 24. e. Additional equity through other maintenance. f. Investment of excess. Periodically, but not less often than semi-annually, the Authority shall prepare a statement showing: (1) the aggregate amount of all EHPA balances; (2) the aggregate amount of investments (savings accounts and/or securities) held for the account of all the Homebuyers' EHPAs, and (3) the aggregate uninvested balance of all the Homebuyers' EHPAs. This statement shall be made available to any authorized representative of the HBA. g. Voluntary payments. h. Delinquent monthly payments. i. Annual statement to homebuyer. j. Withdrawal and assignment. k. Application of EHPA upon vacating of dwelling. (2) If the Homebuyer's EHPA balance is not sufficient to cover all of these charges, the Authority shall require the Homebuyer to pay the additional amount due. If the amount in the EHPA exceeds these charges, the excess shall be paid the Homebuyer. (3) Settlement with the Homebuyer shall be made promptly after the actual cost of repairs to the dwelling has been determined (see paragraph k(1)(iii) of this section), provided that the Authority shall make every effort to make such settlement within 30 days from the date the Homebuyer vacates. The Homebuyer may obtain a settlement within 7 days of the date he vacates, even though the actual cost of such repairs has not yet been determined, if he has given the Authority notice of intention to vacate 30 days prior to the date he vacates and if the amount to be charged against his EHPA for such repairs is based on the Authority's estimate of the cost thereof (determined after consultation with the appropriate representative of the HBA). 11. Nonroutine maintenance reserve (NRMR) Purpose of reserve. b. Amount of reserve. c. Charges to reserve. (2) The cost of nonroutine maintenance shall be charged to the NRMR for the Home except that (i) to the extent such maintenance is attributable to the fault or negligence of the Homebuyer, the cost shall be charged to the Homebuyer's EHPA after consultation with the HBA if the Homebuyer disagrees, and (ii) to the extent such maintenance is attributable to defective materials or workmanship not covered by warranty, or even though covered by warranty if not paid for through no fault or negligence of the Homebuyer, the cost shall be charged to the appropriate operating expense account of the Project. (3) In the event the amount charged against the NRMR exceeds the balance therein, the difference (deficit) shall be made up from continuing monthly credits to the NRMR based upon the Homebuyer's monthly payments. If there is still a deficit when the Homebuyer acquires title, the Homebuyer shall pay such deficit at settlement. d. Transfer of NRMR. (2) In the event the Homebuyer purchases the Home, and there remains a balance in the NRMR, the Authority shall pay such balance to the Homebuyer at settlement. In the event the Homebuyer purchases the Home and there is a deficit in the NRMR, the Homebuyer shall pay such deficit to the Authority at settlement. e. Investment of excess. (2) Periodically, but not less often that semi-annually, the Authority shall prepare a statement showing (i) the aggregate amount of all NRMR balances, (ii) the aggregate amount of investments (savings accounts and/or securities) held for the account of the NRMR and (iii) the aggregate uninvested balance of the NRMRs. A copy of this statement shall be made available to any authorized representative of the HBA. 12. Operating reserve Purpose of reserve. b. Nonroutine maintenance common property (contribution to operating reserve). c. Maximum operating reserve. d. Transfer to Homeowners Association. e. Disposition of reserve. 13. Annual statement and copies of work orders to homebuyer. b. During the year, any maintenance or repair done on the dwelling by the Authority, which is chargeable to the EHPA or to the NRMR shall be accounted for through a work order. The Homebuyer shall receive a copy of all such work orders for his Home. 14. Insurance. b. In the event the Home is damaged or destroyed by fire or other casualty, the Authority shall consult with the Homebuyer as to whether the Home shall be repaired or rebuilt. If the Authority determines that the Home should not be repaired or rebuilt but the Homebuyer disagrees, the matter shall be submitted to HUD for final determination. If the final determination is that the Home should not be repaired or rebuilt, the Authority shall terminate this Agreement upon reasonable notice to the Homebuyer. In such case, the Homebuyer shall be paid the balance in his EHPA and (to assist him in connection with relocation expenses) the balance in his NRMR, less amounts, if any, due from him to the Authority, including Monthly Payments he may be obligated to pay. c. In the event of termination or if the Home must be vacated during the repair period, the Authority will use its best efforts to assist in relocating the Homebuyer. If the Home must be vacated during the repair period, Monthly Payments shall be suspended during the vacancy period. 15. Eligibility for continued occupancy. b. The term “monthly housing cost,” as used in this section means the sum of: (1) The monthly debt service amount shown on the Purchase Price Schedule (except where the Homebuyer can purchase the Home by the method described in section 16 below); (2) one-twelfth of the annual real property taxes which the Homebuyer will be required to pay as a Homeowner; (3) one-twelfth of the annual premium attributable to fire and extended coverage insurance carried by the Authority with respect to the Home; (4) the current monthly per unit amount budgeted for routine maintenance (EHPA) and routine maintenance-common property; and (5) the current Authority and HUD approved monthly allowance for utilities paid for directly by the Homebuyer plus the monthly cost of utilities supplied by the Authority. 16. Achievement of ownership by initial homebuyer Determination of initial purchase price. Step 1. The resulting amount is herein called Estimated Total Development Cost for Homebuyers. Step 2. b. Purchase Price Schedule. 3 3 1/4 3 c. Methods of Purchase. (2) Where the sum of the purchase price and Incidental Costs is greater than the amounts in the Homebuyer's EHPA and NRMR, the Homebuyer may achieve ownership by obtaining financing for or otherwise paying the excess amount. The purchase price shall be the amount shown on his Purchase Price Schedule for the month in which the settlement date for the purchase occurs. d. The maximum period for achieving ownership shall be 30 years, but depending upon increases in the Homebuyer's income and the amount of credit which the Homebuyer can accumulate through maintenance and voluntary payments, the period may be shortened accordingly. 17. Achievement of Ownership by Subsequent Homebuyer Definition. b. Determination of Initial Purchase Price. c. Purchase Price Schedule. 18. Transfer of Title to Homebuyer. 19. Payment Upon Resale at Profit Promissory Note. (2) The note to be signed by the Homebuyer pursuant to paragraph (a)(1) of this section shall be secured by a second mortgage. The initial amount of the note shall be computed by taking the appraised value of the Home at the time the Homebuyer becomes a Homeowner and subtracting (i) the Homebuyer's purchase price plus the Incidental Costs and (ii) the increase in value of the Home, determined by appraisal, caused by improvements paid for by the Homebuyer with funds from sources other than the EHPA or NRMR. The note shall provide that this initial amount shall be automatically reduced by 20 percent thereof at the end of each year of residency as Homeowner, with the note terminating at the end of the five-year period of residency, as determined by the Authority. To protect the Homeowner, the note shall provide that the amount payable under it shall in no event be more than the net profit on the resale, that is, the amount by which the resale price exceeds the sum of (i) the Homebuyer's purchase price plus the Incidental Costs, (ii) the costs of the resale, including commissions and mortgage prepayment penalties, if any, and (iii) the increase in value of the Home, determined by appraisal, resulting from improvements paid for by him as a Homebuyer (with funds other than from the EHPA or NRMR) or as a Homeowner. (b) Residency requirements. 20. Responsibilities of Homeowner. 21. Homeowners Association—Planned Unit Development (PUD) 4 4 If the Development is organized as a planned unit development: a. The common areas, sidewalks, parking lots and other common property in the Development shall be owned and maintained as provided for in the approved planned unit development (PUD) program, except that the Authority shall be responsible for maintenance until such time as the Homeowners Association assumes such responsibility (see section 12 above). b. The title ultimately conveyed to the Homebuyer shall be subject to restrictions and encumbrances to protect the rights and property of all other Homeowners. The Homeowners Association shall have the right and obligation to enforce such restrictions and encumbrances and to assess Homeowners for the costs incurred in connection with common areas and property and other responsibilities. c. There shall be as many votes in the Association as there are Homes in the Development, and at the outset all the voting rights will be held by the Authority. As each Home is conveyed to a Homebuyer, one vote shall automatically go to that Homebuyer so that when all the Homes have been conveyed, the Authority shall no longer have any interest in the Homeowners Association. d. The Authority shall not lose its majority voting interest in the Association as soon as a majority of the Homes have been conveyed, unless the law of the state requires control to be transferred at a particular time or the Authority so desires. If permitted by state law, provisions shall be made for each Home owned by the Authority to carry three votes while each Home owned by a Homeowner shall carry one vote. Under this weighted voting plan, the Authority will continue to have voting control until 75 percent of the Homes have been acquired by Homeowners. However, at its discretion, the Authority may transfer voting control to the Homeowners when at least 50 percent of the Homes have been acquired by the Homeowners. 22. Homeowners Association—Condominium. 5 5 a. The Authority at the outset shall own each condominium unit and the undivided interest of such unit in the common areas. b. All the land, including that land under the housing units, shall be a part of the common areas. c. The Homeowners Association shall own no property and shall merely maintain and operate the common areas for the individual owners of the condominium units, except that the Authority shall be responsible for maintenance until such time as the Homeowners Association assumes such responsibility (see section 12 above). d. The percentage of undivided interest attached to each condominium unit shall be based on the ratio of the value of the unit to the value of all units and shall be fixed when the Development is completed. This percentage shall determine the Homeowner's liability for the maintenance of the common areas and facilities. e. Each Homeowner vote in the Homeowners Association will be identical with the percentage of undivided interest attached to his unit. f. The Authority shall not lose its majority voting interest in the Association as soon as units representing more than 50 percent of the value of all units have been conveyed, unless the law of the state requires control to be transferred at a particular time or the Authority so desires. For voting purposes, until units representing 75 percent of the value of all units have been acquired by Homeowners, the total undivided interest attributable to the Homes owned by the Authority shall be multiplied by three, if such weighted voting plan is permitted by state law. Under this plan, the Authority will continue to have voting control until units representing 75 percent of the value of all units have been acquired by Homeowners. However, at its discretion the Authority may transfer voting control to the Homeowners when units representing at least 50 percent of the value of all units have been acquired by the Homeowners. 23. Relationship of Homeowners Association to Homebuyers Association. 24. Termination of Agreement Termination by the Authority (2) Notice of termination by the Authority shall be in writing. Such notice shall state (i) the reason for termination, (ii) that the Homebuyer may respond to the Authority, in writing or in person, within a specified reasonable period of time regarding the reason for termination, (iii) that in such response he may be represented or accompanied by a person of his choice, including a representative of the HBA, (iv) that the Authority will consult the HBA concerning the termination, and (v) that, unless the Authority rescinds or modifies the notice, the termination will be effective at the end of the 30-day notice period. b. Termination by the Homebuyer. c. Transfer to rental unit. (i) Income sufficient to result in a required monthly payment which is not less than the sum of the amounts necessary to pay the EHPA, the NRMR, and the estimated average monthly cost of utilities attributable to the Home; (ii) Ability to meet all the obligations of a Homebuyer under the Homebuyers Ownership Opportunity Agreement; (iii) At least one member gainfully employed, or having an established source of continuing income. (2) Accordingly, in the event it should develop that the Homebuyer no longer meets one or more of these elements of Homeownership potential, the Authority shall investigate the circumstances and provide such counseling and assistance as may be feasible in order to help the family overcome the deficiency as promptly as possible. After a reasonable time, not to exceed 30 days from the date of evaluation of the results of the investigation, the Authority shall make a re-evaluation as to whether the family has regained the potential for Homeownership or is likely to do so within a further reasonable time, not to exceed 30 days from the date of the re-evaluation. Further extension of time may be granted in exceptional cases, but in any event a final determination shall be made no later than 90 days from the date of evaluation of the results of the initial investigation. The Authority shall invite the HBA to participate in all investigations and evaluations. (3) If the final determination of the Authority, after considering the views of the HBA, is that the Homebuyer should be transferred to a suitable dwelling unit in an Authority rental project, the Authority shall give the Homebuyer written notice of the Authority determination of the loss of Homeownership potential and of the offer of transfer to a rental unit. The notice shall state that the transfer shall occur as soon as a suitable rental unit is available for occupancy but no earlier than 30 days from the date of the notice, provided that an eligible successor for the Homebuyer unit has been selected by the Authority. The notice shall also state that if the Homebuyer should refuse to move under such circumstances, the family may be required to vacate the Homebuyer unit, without further notice. The notice shall include a statement (i) that the Homebuyer may respond to the Authority in writing or in person, within a specified reasonable time, regarding the reason for the determination and offer of transfer, (ii) that in such response he may be represented or accompanied by a person of his choice including a representative of the HBA, and (iii) that the Authority has consulted the HBA concerning this determination and offer of transfer. (4) When a Homebuyers Ownership Opportunity Agreement is terminated pursuant to this paragraph 24c, the amount in the Homebuyer's EHPA shall be paid in accordance with the provisions of paragraph 10k of this Agreement. 25. Survivorship. (2) If there is no qualified successor in accordance with the above, the Authority shall terminate the Agreement and another family shall be selected, except under the following circumstances: where a minor child or children of the Homebuyer family are in occupancy, then in order to protect their continued occupancy and opportunity for acquisition of ownership of the Home, the Authority may approve as occupants of the unit, an appropriate adult(s) who has been appointed legal guardian of the children with a duty to perform the obligations of the Homebuyers Ownership Opportunity Agreement in their interest and behalf. 26. Nonassignability and Use of Reserves and Accounts Nonassignability. b. Use of Reserves and Accounts. 27. Notices. 28. Grievance Procedure. [39 FR 10966, Mar. 22, 1974. Redesignated at 49 FR 15580, Apr. 7, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, and amended at 49 FR 21490, May 21, 1984] Appendix III to Subpart B of Part 904—Certification of Homebuyer Status (Subpart B) State of __________ County of __________ This is to certify that (Homebuyer) of the Home located at ______________: (1) Has achieved, within the first two years of his occupancy a balance in his Earned Home Payments Account (EHPA) of at least __________ dollars (representing 20 times the amount of the monthly EHPA credit applicable to said Home); (2) Has met and is continuing to meet the requirements of his Homebuyers Ownership Opportunity Agreement; and (3) Has rendered and is continuing to render satisfactory performance of his responsibilities to the Homebuyers Association. Accordingly, said Homebuyer may, upon payment of the purchase price, exercise the option to purchase the Home in accordance with and subject to the provisions of his Homebuyers Ownership Opportunity Agreement.
Housing Authority By (Signature and official title) (Date) ____________________ Homebuyers Association By (Signature and official title) (Date) ____________________ Appendix IV to Subpart B of Part 904—Promissory Note for Payment upon Resale by Homebuyer at Profit (Subpart B) FOR VALUE RECEIVED, (Homeowner) promises to pay to (Authority) or order, the principal sum of ____________________ 1 1 Such principal sum shall be reduced automatically by 20 percent of the initial amount at the end of each year of such residency, as a Homeowner, and this note shall terminate at the end of five years of such residency, as determined by the Authority; Provided, however, that the amount payable under this note shall in no event be more than the net profit on the resale, that is, the amount by which the resale price exceeds the sum of (1) the Homeowner's purchase price, (2) the costs incidental to his acquisition of ownership, (3) the costs of the resale, including commissions and mortgage prepayment penalties, if any, and (4) the increase in value of the Home, determined by appraisal, due to improvements paid for by the Homeowner whether as a Homebuyer (with funds from sources other than his Earned Home Payments Account or his Nonroutine Maintenance Reserve) or as a Homeowner. If the Homeowner shall pay this note at the time and in the manner set forth above, or if, by its provisions, the amount of this note shall be zero, then the note shall terminate and the Authority shall, within thirty (30) days after written demand therefor by the Homeowner, execute a release and satisfaction of this note. The Homeowner hereby waives the benefits of all statutes or laws which require the earlier execution or delivery of such release and satisfaction by the Authority. Presentment, protest, and notice are hereby waived. Dated ________________________, 19____ Local Housing Authority By: ____________________(Homeowner) ____________________ (Homeowner's Spouse) Subpart C—Homeownership Counseling and Training § 904.201 Purpose. The purpose of the counseling and training program shall be to assure that the homebuyers, individually and collectively through their homebuyers association (HBA), will be more capable of dealing with situations with which they may be confronted, making decisions related to these situations, and understanding and accepting the responsibility and consequences that accompany those decisions. § 904.202 Objectives. The counseling and training program should seek to achieve the following objectives: (a) Enable the potential homebuyer to have a full understanding of the responsibilities that accompany his participation in the Homeownership Opportunity Program; (b) Enable the potential homebuyer to have an understanding of homeownership tasks with specific training given to individuals as the need and readiness for counseling or training indicates; (c) Assure that the role of the HBA is understood and plans for its organization are initiated at the earliest practical time; (d) Develop an understanding of the role of the LHA and of the need for a cooperative relationship between the homebuyer and the LHA; (e) Encourage the development of self-help by the homebuyer through reducing dependency and increasing independent action; (f) Develop an understanding of mutual assistance and cooperation that will develop a feeling of self-respect, pride and community responsibility; (g) Develop local resources that can be of assistance to the individual and the community on an on-going basis. § 904.203 Planning. (a) The counseling and training program shall be flexible and responsive to the needs of each prospective homebuyer. While many subjects lend themselves to group sessions, consideration shall be given to individual counseling. Individuals should not be required to attend training classes on subject matter they are familiar with unless they can actively participate in the instruction process. (b) The program may be provided by contract with an outside organization, or by the LHA staff, in either case with voluntary involvement and assistance of groups and individuals within the community. It is essential that the training entity be completely knowledgeable and supportive of the entire Homeownership Opportunity Program. It may be recognized that most of the objectives stated require specialized instructional skill and content knowledge. There shall be recognition of the differences in communication and in value systems, and an understanding and respect for past experience of the individual. Maximum possible use shall be made of indigenous trainers to insure good communication and rapport. Special attention shall be directed to the needs of working members of the family for counseling and training sessions to be held where and during the time they can attend. Where the services of outside contractors are utilized, there shall be a close working relationship with the LHA and a program for phasing in LHA staff who will have the on-going responsibility for the program. The value of local agencies, educational institutions, etc., for implementing the program rather than an outside firm shall be carefully considered since the continuing presence of such agencies and institutions in the community can often develop into an on-going resource beyond the contract period. (c) In planning a homeownership counseling and training program, whether self-administered or contracted, the LHA shall consult with HUD for advice and information on programs, qualified contractors, local resources, reasonable costs, and other similar matters. (d) Where the program is to be contracted to an outside group, proposals shall be secured either by public advertising or by sending requests for proposals to a number of competent public or private organizations. (e) In areas where there are large concentrations of homebuyers who do not read, write, or understand English fluently, the native language of the people shall be used. If feasible all instructional materials shall be in both languages. § 904.204 General requirements and information. (a) The counseling and training program shall be designed to meet the needs of the homebuyers and be sufficiently flexible to meet new needs as they arise. The nature of the program suggests four phases of counseling: (1) Pre-occupancy; (2) move-in; (3) post-occupancy; (4) assistance to the HBA. While some elements of the program lend themselves more to one phase than another, the program areas shall be coordinated and interrelated. It is recommended that the entity providing these services work closely with the participants and ensure that policies established are agreeable to both the LHA and the homebuyer. (b) The following is a description of major elements of the program which experience thus far has shown to be relevant. More detailed information is set forth in Appendix I, “Content Guide for Counseling and Training Program.” (1) Pre-occupancy phase. (i) An overload of information should be avoided in this phase since many of the subjects will be dealt with in greater depth after the family is in occupancy, and experience has shown that much of the information will be more relevant at that time. (ii) This phase should be completed for each family before the beginning of its occupancy. (2) Move-in phase. (3) Post-occupancy phase. (4) Assistance to the HBA. § 904.205 Training methodology. Equal in importance to the content of the pre- and post-occupancy training is the training methodology. Because groups vary, there should be adaptability in the communication and learning experience. Methods to be utilized may include group presentations, small discussion groups, special classes, and workshops. Especially important to a successful program are individual family home visits for discussion and instruction on unique problems and operation of equipment. § 904.206 Funding. (a) Source of funds. (b) Planned use of $500-per-unit funds. (1) Pre- and post-occupancy counseling and training; (2) Establishment and initial operation of the HBA (for operation in the management phase, see § 904.305). In planning the use of these funds, the LHA shall recognize that for a number of years after the initial counseling and training there is likely to be some turnover and follow-up counseling and training needs. Therefore, the LHA shall limit the amounts for the counseling and training of the initial homebuyers and shall reserve a reasonable amount for future counseling and training needs during the management phase of the development. (c) Period of availability of $500-per-unit funds. (d) Budgeting of $500-per-unit funds. (2) Upon HUD approval of the counseling and training program, the LHA shall include the approved amount in its Contract Award Development Cost Budget. This amount shall constitute the maximum amount that may be included for such purposes in the project development cost; provided that, if the approved amount is less than $500 per dwelling unit, it may, if necessary, be amended with HUD approval, but not later than the Final Development Cost Budget and subject to the $500-per-unit limitation. (e) Application for approval of counseling and training program. (2) The application shall include a narrative statement outlining the counseling and training program, including any services and funds to be obtained from other sources, together with copies of any proposed contract and other pertinent documents. This statement shall include the following: (i) Indication that the training entity is completely knowledgeable of the Homeownership Opportunity Program and is aware of the needs and problems of prospective homebuyers; (ii) The method and/or instruments to be used to determine individual training and counseling needs; (iii) The scope of the proposed program, including a detailed breakdown of tasks to be performed, products to be produced, and a time schedule, including provision for progress payments for specific tasks; (iv) An outline of the proposed content of the counseling and training to be provided, and the local community resources to be utilized; (v) The methods of counseling and training to be utilized; (vi) The experience and qualifications of the organization and of personnel who will directly provide the counseling and training; (vii) The estimated cost, source of funds, and methods of payment for the tasks and products to be performed or produced, including estimates of costs for each of the following categories: ( a Salaries Materials, supplies and expendable equipment Contract costs Other costs ( b ( c § 904.207 Use of appendix. A Content Guide for Counseling and Training Program (Appendix I) is provided as further detailed information for consideration in designing the counseling and training program. The items set forth therein are not to be considered mandatory. Appendix I to Subpart C of Part 904—Content Guide for Counseling and Training Program (Subpart C) Inclusion of the following items in the Counseling and Training Program should be considered, keeping in mind that the extent to which they are covered will depend on specific needs of homebuyers in the given development. preoccupancy phase 1. Explanation of program. 2. Property care and maintenance. 3. Money management. 4. Developing community. 5. Referrals. post-occupancy phase 1. Home maintenance. 2. Money management. 3. Developing community. other items In addition to the above, there are other needs and concerns, especially those expressed by the homebuyers, that may be dealt with in special classes or workshops. These may include such topics as child care, selection of furnishings, decorating and furnishing, refinishing of furniture, upholstery, sewing, food and nutrition, care of clothing, etc. Subpart D—Homebuyers Association (HBA) § 904.301 Purpose. (a) It is essential that the homebuyers have an organized vehicle for pursuing their common interests, for effectively representing the needs of residents in dealing with the LHA, and for undertaking eventual management responsibility for the development. Although this organization, called the homebuyers association (HBA), shall be representative of the homebuyers and independent of the LHA, it shall be the responsibility of the LHA and the training and counseling staff to assist the homebuyers in their initial efforts at organization. (b) Except as noted in § 904.307, each Turnkey III development shall have an HBA. There shall be a separate HBA for each development or developments where there is a physical and financial community of interest. § 904.302 Membership. Every family entitled to occupancy pursuant to a Homebuyers Ownership Opportunity Agreement and every family which is a homeowner shall automatically be a member of the HBA. § 904.303 Organizing the HBA. (a) The HBA should be organized and incorporated as early in the life of the development as is feasible, in order to allow selected homebuyers an opportunity to meet each other and begin forging a sense of community, but in any case the HBA shall be organized and incorporated no later than the date on which 50 percent of the homebuyers have been selected. Interim officers and directors shall be designated as part of the initial organization of the HBA to serve until full-term officers and directors are elected. Such full-term officers and directors shall be elected when 60 percent of the homebuyers are in occupancy, but, in any event, not later than one year from the date the first home is occupied. (b) The LHA, in cooperation with the CPC, if any, shall be responsible for assuring that competent counseling and training assistance pursuant to Subpart C of this part will be provided in organizing the HBA. These services shall be continued until the HBA is fully operational. (c) The provision of such services shall include at least the following functions: (1) Assembling homebuyers for initial orientation and planning; (2) Explaining to homebuyers the structure and functions of an HBA and the rights and responsibilities of the HBA and the LHA; (3) Aiding in the preparation of charters, by-laws, contracts with the LHA and other appropriate documents; (4) Assisting in the formation of the organization, including such things as the initial designation of interim officers and directors and subsequent election of full-term HBA officers and directors, and the establishment of necessary committees, if any. (d) The LHA and the HBA shall execute an agreement recognizing the HBA as the official representative of the homebuyers, and establishing the functions, rights, and responsibilities of both parties (see Appendix II). This agreement shall be executed as soon as possible after incorporation of the HBA. § 904.304 Functions of the HBA. (a) Subject to possible variations agreed to by the HBA and approved by HUD, the functions of the HBA shall include the following: (1) Representing its members, individually and collectively, with respect to any deficiencies in the development or in the homes and with respect to fulfillment of the construction contract and related warranties; (2) Representing its members, individually and collectively, in their relationships with the LHA and others in regard to financial matters such as monthly payments, credits to and charges against reserves, settlement upon vacating the home, acquisition of ownership, and other matters pertaining to operation and management of the development; (3) Recommending policies and rules to the LHA for operation and management including rules concerning use of the common areas and community facilities; (4) Participating in the operation of official grievance mechanisms; (5) Advising and assisting its members regarding procedures and practices relative to the Earned Home Payments Account and the acquisition of homeownership; (6) Participating with the LHA in periodic maintenance inspections of homes after occupancy, and making recommendations in case of disagreements arising out of maintenance inspections; (7) Participating with the LHA in the selection of subsequent homebuyers; (8) Coordinating, supervising, or managing the operation of credit union, child care, or other supportive services established for the development; (9) Participating with the LHA in the establishment and implementation of policies related to collection of monthly payments, termination of occupancy, and resolution of hardship situations; and (10) Performing management services as specified under contract with the Authority or with the Homeowners Association and participating in other activities pursuant to agreement with the LHA or with the Homeowners Association. (b) In addition, the HBA may offer such special services as the following: (1) The development of self-help such as consumer clubs, furniture and other co-ops, credit unions, transportation pools, and skill pools; (2) Assisting homebuyers in acquiring group insurance; (3) Developing programs and contracting for services such as child care centers to be located in the community facility where such a facility exists; (4) Assisting homebuyers in their employment, especially by participating in skill development and apprenticeship programs in cooperation with local educational organizations; (5) Assisting homebuyers in planning the management role of the HBA and in negotiating any contract for management services with the LHA. § 904.305 Funding of HBA. (a) In addition to providing the HBA with noncash contributions such as office space and duplicating services, the LHA shall make cash contributions for operating expenses of the HBA, in the amount provided for in paragraph (b) of this section. Until the project goes into management, these contributions shall be made from the development funds budgeted for the counseling and training program (see § 904.206). Thereafter, these contributions shall be provided for in the annual operating budgets of the LHA. (b) The cash contributions pursuant to paragraph (a) of this section shall be in the amount provided for in the LHA budget (development cost budget or annual operating budget, as the case may be) and approved by HUD. Such contributions shall be subject to whatever restrictions are applied by HUD to the funding of tenant councils generally, but they shall not exceed $3 per year per dwelling unit; provided that as an incentive to the HBA to provide additional funds from other sources such as homebuyer's dues, contributions, revenues from special projects or activities, etc., the LHA shall, to the extent approved by HUD in the LHA budget, match such additional funds beyond the $3 up to a maximum of $4.50, for a total LHA share of $7.50 where the total funding for the HBA is $12 or more. The HBA shall not be precluded from seeking to achieve total funding in excess of $12 per unit where this can be done with additional funds from sources other than the LHA. Furthermore, funding by the LHA for the normal expenses of the HBA is not to be confused with fees paid pursuant to management services contracts as described in § 904.306. § 904.306 Performing management services. The LHA may also contract with the HBA to perform some or all of the functions of project management for which the HBA may be better suited or located than the LHA. Such functions may include security, maintenance of common property, or collection of monthly payments. For this purpose, the HBA may form a management corporation and the officers of the HBA shall be the directors of such corporation. This corporation and the LHA shall then negotiate a management services contract. Such arrangements are consistent with the objective of providing for maximum participation by residents in the management of their developments. As an alternative, the HBA and the LHA may elect to undertake any other arrangement approved by HUD. § 904.307 Alternative to HBA. Where the homes are on scattered sites (noncontiguous lots throughout a multi-block area, with no common property), or where the number of homes may be too few to support an HBA, and where an alternative method for homebuyer representation and continuing counseling is provided, an HBA shall not be required. For such cases, a modified form of homebuyers association may be called for or a less formal organization may be desirable. This decision shall be made jointly by the LHA and the homebuyers, acting on the recommendation of HUD. § 904.308 Relationship with homeowners association. The HBA and the homeowners association are, in legal terms, separate and distinct organizations with different functions. The homeowners association may hold title to and be responsible for maintenance of common property (see §§ 904.119 and 904.120), while the HBA has more general service and representative functions. While all residents are members of the HBA, only those who have acquired title to their homes are members of the homeowners association. § 904.309 Use of appendices. Use of the Articles of Incorporation (Part I of Appendix I) and the Recognition Agreement between the Local Housing Authority and Homebuyers Association (Appendix II) is mandatory for projects developed under subpart B of this part which have homebuyers associations. No modification may be made in format, content or text of these Appendices except (1) as required under state or local law as determined by HUD or (2) with approval of HUD. The By-Laws of the Homebuyers Association is provided as a guide for such projects and it may be used or modified to the extent required by the HBA and LHA respectively to meet local needs and desires. Appendix I to Subpart D of Part 904—Articles of Incorporation and By-Laws of ______________ Homebuyers Association (Subpart D) Part I— Articles of Incorporation In compliance with the requirements of (reference to statute under which incorporation is sought) the undesigned, all of whom are natural persons, residents of ____________________, of full age, have this day voluntarily associated themselves together for the purpose of forming a Corporation, not-for-profit, and do hereby certify: Article I—Name The name of the corporation is ______________ Homebuyers Association (hereinafter referred to as the “Association”). Article II—Office The principal office of the Association is located at Article III—Agent ________________________, whose address is ________________________, is hereby appointed the initial registered agent of the Association. Article IV—Duration The period of duration of the Association is perpetual. Article V—Membership Membership in the Association shall be limited to families who are entitled to occupancy of a Home in the Development pursuant to a Homebuyers Ownership Opportunity Agreement and families who are Homeowners in the Development, and all such families shall automatically be members so long as they are in occupancy of a Home. For purposes of these Articles, the term “Development” includes the following described Development or Developments in the Homeownership Opportunity Program of ____________________ (hereinafter referred to as the Authority): Article VI—Purposes The purposes for which this Association is formed shall not result in pecuniary gain or profit to the members thereof. These purposes are to provide organization and representation for its members in their relationships with the Authority in all matters regarding the homeownership opportunity program and, if appropriate, to perform management responsibilities for the Development under contract with the Authority. 1. In order to carry out these purposes, the Association shall perform the following functions: a. Represent its members, individually and collectively, with respect to any deficiencies in the Development or in the Homes and with respect to fulfillment of the construction contract and related warranties; b. Represent its members, individually and collectively, in their relationships with the Authority and others in regard to financial matters such as monthly payments, credits to and charges against reserves, settlement upon vacating a Home, and acquisition of ownership, and other matters pertaining to operation and management of the development; c. Recommend policies and rules to the Authority for operation and management including rules concerning use of the common areas and community facilities; d. Participate in the operation of official grievance mechanisms; e. Advise and assist its members regarding procedures and practices relative to their Earned Home Payments Accounts and to their acquisition of homeownership; f. Participate with the Authority in periodic maintenance inspections of the Homes after occupancy and make recommendations in case of disagreement arising out of maintenance inspections; g. Participate with the Authority in the selection of subsequent homebuyers; h. Coordinate, supervise, or manage the operation of credit union, child care, or other supportive services established for the Development; i. Participate with the Authority in the establishment and implementation of policies related to collection of monthly payments, termination of occupancy, and resolution of hardship situations; j. Perform management services as specified under contract with the Authority or with the Homeowners Association and participate in other activities pursuant to agreement with the Authority or with the Homeowners Association. 2. The Association may also offer special services such as: a. The development of self-help such as consumer clubs, furniture and other co-ops, credit unions, transportation pools, and skill pools; b. Assisting Homebuyers in acquiring group insurance; c. Developing programs and contracting for services such as child care centers to be located in the community facility, where such a facility exists; d. Assisting Homebuyers in their employment, especially by participating in skill development and apprenticeship programs in cooperation with local educational organizations; and e. Assisting Homebuyers in planning the management role of the Association and in negotiating any contract for management services with the Authority. Article VII—Powers This Association shall have all the powers, privileges, rights and immunities which are necessary or convenient for carrying out its purposes and which are conferred by the provisions of all applicable laws of the State of __________________ pertaining to non-profit corporations. Article VIII—Voting There shall be only one vote per Home regardless of the number of persons in the family that occupies the Home. Article IX—Board of Directors and By-laws The affairs of the Association shall be managed by a Board of Directors, all of whom shall be members of the Association. The number of Directors shall be as provided in the By-Laws of the Association. The following persons shall serve as the first Board of Directors and as the first officers: Office Address This Board shall manage the affairs of the Association until election of their successors by the membership. Promptly after 60 percent of the Homes are occupied, or one year from the date the first Home is occupied, whichever occurs sooner, the Board shall call the first annual meeting of the Association at which the members shall adopt By-Laws and elect one-third of the Board for a term of one year, one-third for a term of two years, and one-third for a term of three years. At each annual meeting thereafter the members shall elect one-third of the Board for a term of three years. Article X—Dissolution After all members have acquired ownership of their Homes, the Association shall be dissolved with the assent given in writing and signed by not less than two-thirds of the members. The dissolution shall be effective when all of the assets of the Association remaining after payment of its liabilities have been granted, conveyed and assigned in such manner as the Association and Authority may mutually agree. Article XI—Amendment Amendment of these Articles shall require the assent of 75 percent of the entire membership. In witness whereof, [Witness, Notary, or Acknowledgment as required by state law] Note: The following is a suggested form of By-Laws. Different format and content to meet local needs may be used. For example, it may be considered desirable to combine HBA offices, eliminate or change functions of various committees, provide for other committees, etc. Part II— By-Laws The members of the __________________ Homebuyers Association (hereinafter referred to as the “Association”) do hereby adopt in accordance with Article IX of the Articles of Incorporation the following By-Laws: Section 1. Organization Sec. 2. Association meetings Annual meetings. B. Quarterly and special meetings. C. Notice of meetings. D. Quorum. E. Voting. F. Agenda. Sec. 3. Board of Directors Number of directors. B. Term of Office. 1 1 1 1 1 C. Removal and other vacancies of Directors. D. Chairman of the Board. E. Compensation. Sec. 4. Nomination and election of the board Nomination. B. Election. Sec. 5. Meetings of Directors Regular meetings. B. Special meetings. C. Quorum. D. Action taken without a meeting. Sec. 6. Power and duties of the Board of Directors Power and duties generally. B. Powers. C. Duties. Sec. 7. Association officers and their duties Election. B. Term. C. Removal and resignation. D. Vacancies. E. Multiple Officers. F. Duties. (1) President. (2) Vice President. (3) Secretary. (4) Treasurer. (5) Special officers. (6) Compensation. Sec. 8. Committees. Committees to be established. (1) Representation Committee (2) Rules Committee (3) Homeownership Committee (4) Selection Committee (5) Nominating Committee B. Other committees. C. Committee Chairman and Members. D. Committee Reports. E. Authority. Sec. 9. Suspension of rights. Sec. 10. Books and records. Sec. 11. Amendments. Sec. 12. Corporate seal. seal Sec. 13. Fiscal year. The foregoing By-Laws were adopted at the first annual meeting of the Association held __________ by the undersigned members of the Association. Appendix II to Subpart D of Part 904—Recognition Agreement Between Local Housing Authority and Homebuyers Association (Subpart D) WHEREAS, the ____________________ (“Authority”), a public body corporate and politic, has developed or acquired with the aid of loans and annual contributions from the Department of Housing and Urban Development (“HUD”), the following Development or Developments in its homeownership opportunity program (hereinafter referred to as the “Development”): 1 1 WHEREAS, an organization of residents (“Homebuyers”) is an essential element in such Development for purposes of effective participation of the Homebuyers in the management of the Development and representation of the Homebuyers in their relationships with the Authority, and for other purposes; and WHEREAS, the ____________________ Homebuyers Association (“Association”) fully represents the Homebuyers of the Development; NOW, THEREFORE, this agreement is entered into by and between the Authority and the Association and they do hereby agree as follows: 1. The Association, whose Articles of Incorporation are attached hereto and made a part hereof, is hereby recognized as the established representative of the Homebuyers of the Development and is the sole group entitled to represent them as tenants or Homebuyers before the Authority; 2. For each fiscal year, the Authority shall make available funds to the Association for its normal expenses, in such amounts as may be available to the Authority for such purposes and subject to whatever applicable HUD regulations; 3. The Association shall be entitled to the use of office space in __________ at the Development without charge by the Authority for such use; 4. The Authority and the officers of the Association shall meet at a location convenient to both parties on the __________ (day) of each month to discuss matters of interest to either party; 5. In the event the parties later agree that the Association should assume management responsibilities now held by the Authority, a contract for such purpose will be negotiated by ____________________ the Association; ____________________ terminate upon dissolution of the Association. IN WITNESS HEREOF, the parties have executed this Agreement on ____________________, 19____. Local Housing Authority By (Official Title) Homebuyers Association By (Official Title) WITNESSES: ________________________