Legal Section 42 Agreement

LEGAL SECTION 42 AGREEMENT

This Legal Section 42 Agreement (the "Agreement") is made as of by and between Owner Name: , a organized under the laws of with principal address (hereinafter "Owner"), and Issuer Name: , a with principal address (hereinafter "Issuer").

RECITALS

WHEREAS, Owner is the fee simple owner or authorized managing entity of the residential rental property known as Project Name: located at (the "Project"); and

WHEREAS, the Project has been or will be allocated federal low-income housing tax credits pursuant to Section 42 of the Internal Revenue Code, and the Issuer has regulatory or contractual authority to ensure that the Project operates in compliance with the requirements of Section 42; and

WHEREAS, Owner and Issuer desire to set forth the obligations of Owner with respect to tenant income qualifications, rent restrictions, recordkeeping, monitoring and remedies to assure compliance with Section 42 during the applicable compliance and extended use periods.

NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the parties agree as follows:

1. DEFINITIONS

1.1 "Applicable Fraction" means the lesser of the unit fraction and the floor space fraction as applied to determine the percentage of low-income units for the Project in accordance with Section 42 and related administrative guidance.

1.2 "Low-Income Unit" means a dwelling unit in the Project that satisfies the income limits and rent restrictions required by Section 42 and this Agreement.

1.3 "Compliance Period" means the period described in Section 42 during which the Project must meet the low-income occupancy and rent restrictions, and any extension of such period agreed in writing between the parties or required by law.

2. PROJECT IDENTIFICATION; TERM

2.1 Project Identification. Project Legal Name: ; Tax Credit Allocation Number: ; Parcel Number: .

2.2 Term. The obligations contained in this Agreement shall commence on the effective date set forth above and shall continue for the duration of the Compliance Period and any applicable extended use period, until all restrictions required by Section 42 have expired or been lawfully terminated.

3. LOW-INCOME UNIT REQUIREMENTS; RENTS

3.1 Set-Aside and Unit Count. The Project shall contain Total Units:

3.2 Rent Restrictions. Owner shall not charge rent for any Low-Income Unit in excess of the maximum amount permitted under Section 42 for the applicable unit size. Initial maximum gross rent for a representative low-income unit is per month. Owner shall adjust rents only to the extent permitted by Section 42 and any applicable regulatory agreement with the Issuer.

3.3 Tenant Selection. Owner shall adopt and implement nondiscriminatory tenant selection policies which give preference only as permitted by Section 42 and applicable law and shall maintain documentation demonstrating compliance with such policies.

4. INCOME CERTIFICATION AND RECORDKEEPING

4.1 Income Certification. Owner shall obtain initial and periodic certifications of household income in a form sufficient to demonstrate compliance with Section 42. Each certification shall be retained in the tenant file.

4.2 Record Retention. Owner shall retain all tenant income certifications, rent records, leases, and supporting documentation for a period of no less than six (6) years following the date the relevant tax form is filed or as otherwise required by law. Such records shall be made available to Issuer for inspection upon reasonable notice.

5. MONITORING, ACCESS AND REPORTING

5.1 Inspections. Issuer or its authorized agents shall have the right to inspect the Project and tenant files upon reasonable notice during normal business hours in order to verify compliance. Owner shall provide access and copies of records as requested.

5.2 Reporting. Owner shall submit periodic compliance reports to Issuer in the form and on the schedule reasonably required by Issuer, including the names, unit numbers, incomes and rent amounts for tenants in Low-Income Units.

6. TRANSFER; ASSUMPTION OF OBLIGATIONS

6.1 Transfer Approval. Except as otherwise permitted by law, Owner shall not transfer title to the Project or any interest therein without providing prior written notice to Issuer and, where required by applicable agreements or law, obtaining Issuer's prior written consent. Any permitted transferee shall execute an assumption agreement agreeing to be bound by the terms of this Agreement.

7. DEFAULTS; REMEDIES

7.1 Events of Default. Failure by Owner to comply with material provisions of this Agreement, including but not limited to income certification, rent restrictions, and recordkeeping, shall constitute an Event of Default.

7.2 Remedies. Upon an Event of Default, Issuer may pursue any remedy available at law or in equity, including injunctive relief, specific performance, monetary damages, and recovery of costs and attorneys' fees. Owner hereby acknowledges that monetary damages may be inadequate and that equitable relief may be appropriate.

7.3 Indemnity. Owner shall indemnify and hold Issuer harmless from and against any losses, liabilities, costs or expenses (including reasonable attorneys' fees) arising from Owner's breach of this Agreement or failure to comply with Section 42.

8. AMENDMENTS; WAIVER

8.1 Amendment. This Agreement may be amended only by a written instrument executed by both parties and approved where required by law or regulatory authorities.

8.2 Waiver. No failure or delay by a party in exercising any right under this Agreement shall constitute a waiver, and no single or partial exercise of any right shall preclude any other or further exercise of that right.

9. NOTICES

Notices required or permitted under this Agreement shall be in writing and delivered to the addresses set forth below or to such other address as either party may designate by notice to the other in accordance with this Section.

10. TRANSFER OF RECORDS UPON SALE

Upon transfer of the Project, Owner shall ensure that all tenant records and compliance documentation are transferred to the transferee and that the transferee assumes the obligations under this Agreement; Owner shall provide Issuer with notice of the transfer and evidence of assumption prior to or concurrently with the closing.

11. GOVERNING LAW; VENUE

This Agreement shall be governed by and construed in accordance with the laws of the State of without regard to principles of conflicts of law. Venue for any dispute arising out of this Agreement shall lie in the state or federal courts located in the county in which the Project is located.

12. ENTIRE AGREEMENT; SEVERABILITY

12.1 Entire Agreement. This Agreement, together with any regulatory agreement, restrictive covenant, or other documents referenced herein, constitutes the entire agreement between the parties with respect to the subject matter and supersedes all prior negotiations, understandings, and agreements.

12.2 Severability. If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect and the parties shall negotiate in good faith to replace the invalid provision with a valid provision that achieves the original intent to the extent possible.

13. COUNTERPARTS

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Signatures transmitted by facsimile or electronic image shall be binding for all purposes.

MISCELLANEOUS PROVISIONS

The remedies provided herein are cumulative and in addition to any other remedies available at law or in equity. The headings used in this Agreement are for convenience only and shall not affect the interpretation of any provision.

Sign Now