N.Y. Private Housing Finance Law § 576: Regulatory agreements

§ 576. Regulatory agreements. 1. Every housing development fund

company as a condition precedent to receiving an advance pursuant to

this article, shall enter into an agreement with the commissioner or

with the supervising agency, as the case may be, to be regulated as

follows:

a. Maximum rentals shall be fixed by the commissioner or the

supervising agency, as the case may be, based upon the final gross

project cost, at an amount sufficient to pay the necessary costs of the

project.

b. Dwellings in any such project shall be available for persons or

families whose probable aggregate annual income does not exceed six

times the rental (including the value or cost to them of heat, light,

water and cooking fuel) of the dwellings to be furnished such persons or

families, except that in the case of persons or families with three or

more dependents, such ratio shall not exceed seven to one. For purposes

of this paragraph, tenants in a housing project of a housing development

fund company organized under the provisions of the business corporations

law and this article shall have added to their total annual carrying

charges an amount equal to six per centum of the original investment of

such person or family in the equity obligations of such housing company.

c. Profits shall be used for capital improvements or to reduce

rentals.

d. Ordinary dividends may not be declared. Capital dividends may be

declared only with the consent of the commissioner or the supervising

agency, as the case may be.

e. The property or franchises of the corporation may not be disposed

of without the consent of the commissioner or the supervising agency, as

the case may be, nor may the corporation be dissolved unless payment in

full is made of remaining balances of principal and interest due and

unpaid on any mortgage or mortgages, of any advances made from the fund

pursuant to this article and of any and all expenses incurred in

effecting such dissolution.

f. The commissioner or the supervising agency, as the case may be,

shall have power, in his or its discretion, if he or it determines that

any advance pursuant to this article is in jeopardy of not being repaid,

or that the proposed housing project for which such advance was made is

in jeopardy of not being constructed, to appoint to the board of

directors of the corporation a number of new directors, which number

shall be sufficient to constitute a majority of such board. Directors so

appointed need not be stockholders or members or meet other

qualifications which may be prescribed by the certificate of

incorporation or by-laws. In the absence of fraud or bad faith

directors so appointed shall not be personally liable for the debts,

obligations or liabilities of the corporation.

2. A regulatory agreement pursuant to this section shall be terminated

upon repayment in full of any and all advances made pursuant to this

article provided that such termination shall not take place until (a)

assumption of the regulation of the project by the commissioner, in the

case of a state-aided mortgage, or by the supervising agency, in the

case of a municipally-aided mortgage or by the appropriate federal

authorities in the case of a federally-aided mortgage or (b) if the

project is not to be financed with a state-aided, municipally-aided or

federally-aided mortgage, the expiration of any exemption of the real

property of the project from local and municipal taxes.

3. The commissioner or supervising agency may require a housing

development fund company receiving advances under this article to

execute a financing statement for real property improvement. The

financing statement shall be in such form as the commissioner or

supervising agency shall prescribe and shall include the name and

address of the housing development fund company and of the agency making

the advances, the location of the project, with a description sufficient

to identify the property, including street address, if any, and a

statement that funds have or will be advanced to the company pursuant to

this article and the maximum amount of such advances, together with such

other information as the form shall specify. The financing statement

shall be filed in the office in which a mechanic's lien affecting the

property would be filed, which office shall accept it for filing without

fee and docket it in the manner of such lien. From the date of such

filing the state or municipality, as the case may be, shall have a lien

for the total of advances under this article made and not repaid. The

provisions of articles two and three of the lien law shall govern such

lien, except that it shall be valid for a period of three years from the

date of filing, unless extended as provided in section seventeen of the

lien law. Upon repayment of the advances, the commissioner or

supervising agency shall deliver to the housing development fund company

a copy of the financing statement with an endorsement thereon that the

lien is satisfied. Upon filing of such copy, without payment of fee, in

the office in which the financing statement was filed, the lien shall be

discharged.