N.Y. Private Housing Finance Law § 1102: Cooperative or condominium, homesteading and rental contracts

§ 1102. Cooperative or condominium, homesteading and rental contracts.

1. Within the limit of funds available in the housing trust fund

account, the corporation is hereby authorized to enter into contracts

with eligible applicants for the furnishing by such applicants of

housing for persons of low income. Each such contract shall provide that

eligible applicants rehabilitate or construct one or more projects or

convert one or more nonresidential properties. Such contracts may

provide for payments, grants or loans by the corporation for the

activities to be carried out by the eligible applicant under the

contract. Such contracts shall provide that a private developer make an

equity investment of the greater of (i) two and one-half percent of

project costs or (ii) five percent of project costs less grants which

are to be applied to such costs. The foregoing shall not preclude a

private developer from making a greater equity investment. Any payments,

grants or loans made by the corporation outstanding at the time of

resale shall be subject to repayment in whole or in part upon resale

after termination of the regulatory period and as otherwise provided

therein. Such repayment provisions may survive the end of the regulatory

period. Such contracts may provide that eligible applicants shall either

(a) perform activities specified under the contract themselves or (b)

act as administrators of a program under which projects are

rehabilitated or constructed or nonresidential properties are converted

by other eligible applicants or (c) perform both such functions. In the

case of a municipality acting as an administrator, funds provided to

such municipality hereunder shall not be deemed to be municipal funds.

The corporation shall refer any request for payments, grants or loans

from persons of low income to eligible applicants in the area in which

such persons reside. Loans may be in the form of participation in loans

including but not limited to participation in loans originated or

financed by lending institutions as defined in section forty-two of this

chapter, the state of New York mortgage agency, the New York city

housing development corporation, the New York state housing finance

agency or private or public employee pension funds. Notwithstanding any

other provision of law, payments, grants and loans may be deposited by

the corporation directly with a lending institution at or before the

time of initial loan closing pursuant to an escrow agreement

satisfactory to the corporation. Payments, grants and loans shall be on

such terms and conditions as the corporation, or the eligible applicant

with the approval of the corporation, as the case may be, shall

determine. Payments, grants and loans shall be used to pay for the

actual and necessary cost of acquisition, construction, rehabilitation

or conversion, provided that not more than fifty percent of such

payments, grants and loans received for the rehabilitation, construction

or conversion of a project may be used for the cost of the project's

acquisition and not more than ten percent of such payments, grants and

loans may be used for the rehabilitation, construction or conversion of

community service facilities and, provided further, that payments,

grants or loans shall not be used for (i) the administrative costs of an

eligible applicant except as otherwise authorized by law, (ii) the cost

of the acquisition, construction, conversion or rehabilitation of

residential units which, subsequent to such acquisition, construction,

conversion or rehabilitation, are to be occupied by persons other than

persons of low income, and (iii) the cost of the acquisition,

construction, conversion or rehabilitation of units which, subsequent to

such acquisition, construction, conversion or rehabilitation, are

occupied or to be occupied for other than residential purposes, except

for community service facilities as described above. No such payments,

grants or loans shall exceed a total of two hundred fifty thousand

dollars per dwelling unit, or such amount of additional funds as the

corporation may determine in accordance with this subdivision. Among the

criteria the corporation shall consider in determining whether to

provide additional funds are: average cost of construction in the area,

location of the project and the impact of the additional funding on the

affordability of the project for the occupants of such project. The

length of any loan provided under this article shall not exceed forty

years. No more than fifty percent of the total amount originally

appropriated pursuant to this article in any fiscal year shall be

allocated to projects located within any single municipality. Of the

amount originally appropriated to the corporation in any fiscal year, no

more than thirty-three and one-third percent shall be allocated to

private developers for projects within a city with a population of one

million or more. Of the amount originally appropriated to the

corporation in any fiscal year, no more than thirty-three and one-third

percent shall be allocated to private developers for projects in the

area outside cities with a population of one million or more.

2. The corporation and eligible applicants which act as administrators

of a program under this article shall deposit any recaptured funds or

funds from the repayment of loans and interest received on loans into

the housing trust fund account.

3. The corporation shall not enter into a contract under this article

unless the eligible applicant has submitted an application and such

application contains a plan, acceptable to the corporation, which

provides for each project:

(a) That violations on the project which are classified as hazardous

or immediately hazardous shall be repaired in accordance with state and

local laws and regulations of state and local agencies and the project

shall be brought into compliance with all applicable laws and

regulations.

(b) For the establishment of occupant selection procedures which

provide that any lawful occupants who live in a project prior to

rehabilitation shall not be displaced as a result of such

rehabilitation, other than temporarily, in which case suitable

relocation arrangements shall be provided, and that any additional

occupants who move into a project are persons of low income. Preference

in selection of such additional occupants; (i) shall be given to persons

or families with the lowest incomes possible, given the income

requirements of the project and; (ii) shall also be given to persons or

families whose current housing fails to meet basic standards of health

and safety and who have little prospect of improving the condition of

their housing except by residing in a project receiving payments, grants

or loans under this article.

(c) In the case of a homesteading project that (i) the project may

only be transferred or sold to an eligible applicant; and (ii) the

resale price of the project shall not exceed an amount equal to the sum

of (A) the original equity paid by the owner for the project and

rehabilitation or construction thereof, exclusive of any payments,

grants or loans received pursuant to this article for such purposes, or

from such other sources as determined by the corporation, with interest

thereon at the rate of six percent per annum, (B) the cost of capital

improvements to the project paid by such owner after the completion of

rehabilitation or construction, exclusive of any payments, grants or

loans received pursuant to this article for such purposes, or from such

other sources as determined by the corporation, with interest thereon at

the rate of six percent per annum, (C) the actual amortization paid by

such owner in the reduction of total outstanding principal indebtedness

on all existing and prior mortgages on, or loans for, such project, but

only to the extent that the proceeds of such mortgages or loans were

used by the owner for the project and rehabilitation or construction

thereof or for the cost of capital improvements thereto, with interest

thereon at the rate of six percent per annum, (D) the actual outstanding

principal indebtedness on all existing mortgages on, or loans or other

obligations for, such project which the owner is required to satisfy,

but only to the extent that the proceeds of such mortgages or loans were

used by the owner for the project and rehabilitation or construction

thereof or for the cost of capital improvements thereto, with interest

thereon at the rate of six percent per annum, provided that if the

indebtedness is not paid in full upon the sale of the project, such

owner shall not be credited with the amount of such indebtedness, and

(E) the reasonable costs and expenses incurred in connection with the

sale of such project.

(d) In the case of a cooperative project that (i) the shares

applicable to a cooperative unit shall be transferred or sold only to an

eligible applicant; and (ii) the resale price of shares applicable to a

cooperative unit shall not exceed an amount equal to the sum of (A) the

original equity paid by the tenant shareholder for such shares and for

the rehabilitation or construction of such unit, exclusive of any

payments, grants or loans received pursuant to this article for such

purposes or from such other sources as determined by the corporation,

with interest thereon at the rate of six percent per annum, (B) the cost

of capital improvements to such unit paid by such tenant shareholder

after the completion of rehabilitation or construction, exclusive of any

payments, grants or loans received pursuant to this article for such

purposes or from such other sources as determined by the corporation,

with interest thereon at the rate of six percent per annum, (C) the

pro-rata portion of any capital assessments or capital contributions for

building wide improvements paid by such tenant shareholder, with

interest thereon at the rate of six percent per annum, (D) the pro-rata

portion of actual amortization paid by such tenant shareholder on all

existing and prior mortgages on such project in the reduction of total

outstanding principal indebtedness, with interest thereon at the rate of

six percent per annum, (E) the actual amortization paid by such tenant

shareholder in the reduction of total outstanding principal indebtedness

on all existing and prior loans for such unit, but only to the extent

that the proceeds of such loans were used by the tenant shareholder for

the purchase of such shares or for the cost of the rehabilitation or

construction of, or capital improvements to, such unit, with interest

thereon at the rate of six percent per annum, (F) the actual outstanding

principal indebtedness on all existing loans or other obligations for

such unit which the tenant shareholder is required to satisfy, but only

to the extent that the proceeds of such loans were used by such tenant

shareholder for the purchase of such shares or for the cost of the

rehabilitation or construction of, or capital improvements to, such

unit, provided that if such indebtedness is not paid in full upon the

sale of such tenant's shares such tenant shareholder shall not be

credited with the amount of such indebtedness, and (G) the reasonable

costs and expenses incurred in connection with the sale of such shares.

(e) In the case of a condominium project that (i) a condominium unit

shall be transferred or sold only to an eligible applicant; and (ii) the

resale price of a condominium unit shall not exceed an amount equal to

the sum of (A) the original equity paid by the owner for such unit and

the rehabilitation or construction thereof, exclusive of any payments,

grants or loans received pursuant to this article for such purposes or

from such other sources as determined by the corporation, with interest

thereon at the rate of six percent per annum, (B) the cost of capital

improvements to such unit paid by such owner after the completion of

rehabilitation or construction, exclusive of any payments, grants or

loans received pursuant to this article for such purposes or from such

other sources as determined by the corporation, with interest thereon at

the rate of six percent per annum, (C) the pro-rata portion of any

capital assessments or capital contributions for building wide

improvements paid by such owner to the project, with interest thereon at

the rate of six percent per annum, (D) the actual amortization paid by

such owner on all existing and prior mortgages on, or loans for, such

unit in the reduction of total outstanding principal indebtedness, but

only to the extent that the proceeds of such mortgages or loans were

used by such owner for the unit and the rehabilitation or construction

thereof or for the cost of capital improvements thereto with interest

thereon at the rate of six percent per annum, (E) the actual outstanding

principal indebtedness on all existing mortgages on, and loans or other

obligations for, such unit which the owner is required to satisfy, but

only to the extent that the proceeds of such mortgages or loans were

used by such owner for the unit and the rehabilitation or construction

thereof or for the cost of capital improvements thereto, provided that

if the indebtedness is not paid in full upon the sale of such unit, such

owner shall not be credited with the amount of such indebtedness, and

(F) the reasonable costs and expenses incurred in connection with the

sale of such unit.

(f) In the case of a rental project that (i) the rental project may

only be transferred or sold to an eligible applicant; and (ii) the

resale price of the rental project shall not exceed an amount equal to

the sum of (A) the original equity paid by the owner for the project and

rehabilitation or construction thereof, exclusive of any payments,

grants or loans received pursuant to this article for such purposes or

from such other sources as determined by the corporation, with interest

thereon at the rate of six percent per annum, (B) the cost of capital

improvements to the project paid by the owner after the completion of

rehabilitation or construction, exclusive of any payments, grants or

loans received pursuant to this article for such purposes or from such

other sources as determined by the corporation, with interest thereon at

the rate of six percent per annum, (C) the actual amortization paid by

such owner on all existing and prior mortgages on, or loans for, such

project in the reduction of total outstanding principal indebtedness,

but only to the extent that the proceeds of such mortgages or loans were

used by such owner for the project and rehabilitation thereof or for the

cost of capital improvements thereto, with interest thereon at the rate

of six percent per annum, (D) the actual outstanding principal

indebtedness on all existing mortgages on, or loans or other obligations

for, such project which the owner is required to satisfy, but only to

the extent that the proceeds of such mortgages or loans were used by the

owner for the project and rehabilitation thereof or for the cost of

capital improvements thereto, provided that if the indebtedness is not

paid in full upon the sale of the project, such owner shall not be

credited with the amount of such indebtedness, and (E) the reasonable

costs and expenses incurred in connection with the sale of such project.

(g) In the case of a rental project, that the project shall be

operated initially as a rental property, and when located in the city of

New York shall be subject to the rent stabilization law of nineteen

hundred sixty-nine, and when located in a municipality which has elected

to be covered by the provisions of the emergency tenant protection act

of nineteen seventy-four, be subject to the provisions of such act. Any

subsequent conversion to cooperative or condominium ownership during the

period in which such property remains subject to the provisions of this

article shall only be allowed with the consent of the corporation and if

done pursuant to section three hundred fifty-two-eeee or three hundred

fifty-two-eee of the general business law shall only be allowed pursuant

to a non-eviction plan. The conversion of a rental project to

cooperative or condominium ownership shall make the cooperative or

condominium subject to the provisions of this article for cooperative or

condominium projects for the remaining term which the rental project was

to be subject to the provisions of this article.

(h) To be located in an area which is blighted, deteriorated or

deteriorating, or has a blighting influence on the surrounding area, or

is in danger of becoming a slum or a blighted area because of the

existence of substandard, insanitary, deteriorating or deteriorated

conditions, an aged housing stock, or vacant non-residential property,

or other factors indicating an inability or unwillingness of the private

sector unaided to cause the rehabilitation, construction or conversion

which is contracted for under this article.

3-a. The corporation shall provide the applicant with a list of

conditions that must be met prior to entering into a contract pursuant

to this article. Within fifteen working days of receipt by the

corporation of all documents in satisfaction of the list, the

corporation shall notify the applicant of the sufficiency or

insufficiency of the documents. After satisfaction by the applicant of

all conditions required by the corporation prior to entering into a

contract the corporation shall enter into the contract within forty-five

working days of satisfaction of such conditions.

4. Notwithstanding the provisions of, or any regulation promulgated

pursuant to, the emergency housing rent control law, the local emergency

housing rent control act, or local law enacted pursuant thereto, the

rent stabilization law of nineteen hundred sixty-nine, or the emergency

tenant protection act of nineteen seventy-four, the eligible applicant

with the approval of the corporation shall have the power to set the

initial rent level of any rental housing accommodation which is located

in a rental or homesteading project receiving payments, grants or loans

under this article.

5. Any cooperative or condominium or rental project which receives

payments, grants or loans pursuant to this article shall be subject to

its provisions for a period of twenty years following completion of

rehabilitation work, construction or conversion or for the period during

which any loan or indebtedness received under this article remains

outstanding, whichever is greater provided however that all housing

accommodations in rental projects shall continue to be subject to the

rent stabilization law of nineteen hundred sixty-nine or the emergency

tenant protection act of nineteen seventy-four, as provided in paragraph

(g) of subdivision three of this section as the case may be, for the

period specified in this subdivision and thereafter the applicability of

such laws shall terminate as to each accommodation upon the first

vacancy which occurs in each accommodation.

6. Any homesteading project which receives payments, grants or loans

under this article shall be subject to its provisions for a period of

fifteen years following completion of rehabilitation work, construction

or conversion, or for the period during which any loan or indebtedness

received under this article remains outstanding, whichever is greater.

6-a. Notwithstanding any provisions of subdivisions five and six of

this section to the contrary, in the case of projects subject to a

mortgage made by any lender:

(a) such lender, if not the corporation, shall give the corporation

notice when an owner has defaulted on any payment of principal or

interest on such mortgage loan for a project for a consecutive period of

sixty days.

(b) following receipt of such notice, or at such earlier time as the

corporation deems appropriate, the corporation shall seek to cure such

default and make the project economically viable by assisting the owner

in entering into a mortgage modification agreement with the lender,

finding a new eligible applicant to own the project and assume the

obligations under the mortgage or taking such other actions, consistent

with the provisions of this article, as the corporation deems

appropriate.

(c) notwithstanding the provisions of paragraphs (a) and (b) of this

subdivision, with respect to any lender other than the corporation, the

corporation may provide in agreements respecting any project that where

a lender shall have foreclosed or obtained title to a project in

accordance with law and the provisions of its mortgage, the project or

particular residential units therein shall not be subject to one or more

provisions of this article, other than the rent stabilization coverage

provisions of paragraph (g) of subdivision three of this section. Any

agreement pursuant to this paragraph shall only be made upon a finding

by the corporation that such agreement is necessary in order to enable a

project owner to obtain a mortgage loan from a lender other than the

corporation.

7. The corporation shall provide for the review, at periodic intervals

at least annually, of the performance of eligible applicants under

contract pursuant to this article. Such review shall, among other

things, be for the purposes of ascertaining conformity to contractual

provisions, the financial integrity and efficiency of eligible

applicants and the evaluation of the project. Contracts entered into

pursuant to this article may be terminated, funds may be withheld and

unspent funds may be recaptured by the corporation upon a finding of

substantial nonperformance or breach by the eligible applicant of its

obligations under its contract.

8. Within each of the three categories of projects (cooperative or

condominium, rental, or homesteading), preference in the awarding of

contracts shall be given to economically feasible projects which contain

a substantial number of persons of low income whose income does not

exceed fifty percent of the median income for the metropolitan

statistical area in which the project is located, or if the project is

located outside such an area, to projects which contain a substantial

number of persons of low income whose incomes do not exceed fifty

percent of the median income for the county in which the project is

located, additional preference shall be given to economically feasible

projects located on a brownfield site that has received a certificate of

completion.