HomeMy WebLinkAbout23 - Restrictive Covenants - North 3rd Developer LLC - North 3rd Apartments, WESTLAKES FOURTH SUBDIVISION 2815369
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Eric Semerad - Gallatin County, MT MISC
After recording return to:
Montana Board of Housing
Multifamily Program
P.O.Sox 200528
Helena,MT 59620-0528
DECLARATION OF RESTRICTIVE COVENANTS
FOR LOW-INCOME HOUSING CREDITS
FOR NORTH 31d APARTMENTS
THIS DECLARATION OF RESTRICTIVE COVENANTS(this"AGREEMENT"),dated as of the date of its execution
specified below,by North 3`d Devoloper, LLC and their successors and assigns(the"Owner")is given as a condition
precedent to the allocation of low-Income housing credits by the Montana Board of dousing,an agency of the State
of Montana(together with any successor to its rights,duties and obligations,the"Board").
WITNESSETH:
WHEREAS, the Owner is or will be the owner of a rental housing development located in the State of
Montana on lands more particularly described in Exhibit A-1,attached hereto and incorporated herein by reference
(together with all existing and later constructed buildings and improvements,the"Project");and
WHEREAS, as specified in Exhibit A-1, the land upon which the Project is located (the "Project Land")is
either owned by Owner or leased by Owner from the landowner as provided in and subject to a ground lease,and if
the Project Land Is leased by Owner pursuant to a ground lease(the"Lease"),such ground lease is attached as Exhibit
Band incorporated herein by reference;and
WHEREAS, if the Project Land is leased by Owner pursuant to a ground lease as specified in Exhibit A-1,
notwithstanding anything to the contrary contained in this Agreement,the terms of the Lease shall control in the
event of any conflict between this Agreement and the Lease;and
WHEREAS, all of the Owner's right, title and interest in and to the Project is subject to this Agreement,
including but not limited to all buildings, structures and improvements, and, as applicable,the Project Land or the
Owner's leasehold Interest in the Project Land,and as used in this Agreement,the term"Project'includes all such
right,title and interest of Owner in the Project,including in the Project Land;and
WHEREAS,the Board has been designated by the Governor of the State of Montana as the housing credit
agency for the State of Montana to make allocations of low-income housing tax credit dollars(the"Credit")for the
State and to carry out the provisions of Section 42 of the Internal Revenue Code of 1986,as amended(the"Code");
and
WHEREAS, the Owner has applied to the Board for an allocation of Credit to the Project in the Credit
Allocation Amount specified in Exhibit A-2,attached hereto and incorporated herein by reference("Exhibit A-2")(or
in such other amount as is determined by the Board and set forth in IRS Form 8609 upon final allocation of the
Credit);and
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WHEREAS, the Owner has represented and committed to the Board in the Owner's Low-Income Housing
Tax Credit Application (the "Application") that, for the duration of this Agreement: (i) the Owner shall lease that
certain percentage of the units in the Project specified in Exhibit A-2 as the low-Income Occupancy Percentage(the
"Low-Income Occupancy Percentage" and such units, the "Low-Income Units") to individuals or families whose
income is at or below the percentage(s) of the area median gross income(as adjusted for family size)specified in
Exhibit A-2 as the Income Restrictions (the "Income Restrictions" and those individuals or families meeting the
Income Restrictions, the "Low-Income Tenants") as determined in accordance with the Code; (ii)the Owner shall
target such percentage of the Law-Income Units to tenants whose income is at or below the percentages of median
income specified in Exhibit A-2 as the Targeting Requirements (the"Targeting Requirements");(iii)the Owner shall
not charge Low-Income Tenants gross lease or rent payments("Rent")exceeding the percentages of Area Median
Income specified in Exhibit A-2 as the Rent Restrictions (the "Rent Restrictions")(the Low-Income Occupancy
Percentage, the Income Restrictions, the Targeting Requirements and the Rent Restrictions together referred to
herein as the "Occupancy Restrictions"); and in its Application represented and committed to certain additional
specifications and characteristics for the Project, specified in Exhibit A-2 as Additional Project Specifications, upon
which the Board relied in making its reservation of housing tax credits for the Project and which shall be binding
upon the Owner and the Project;and
WHEREAS,the Board has determined that the Project qualifies for a Credit allocation,subject to completion
of all applicable requirements, in an amount to be determined by the Board and set forth in IRS Form 8609 upon
final allocation of the Credit;and
WHEREAS, the Project is eligible for a Credit allocation only if the Project wlll be subject to a binding
commitment to maintain the Project as low-income housing for the initial 15-year compliance period plus an
additional period of years,together specified in Exhibit A-2 as the Commitment Period(the"Commitment Period"),
as provided in and subject to subsection 5(a), including without limitation certain Occupancy Restrictions and
Transfer restrictions as set forth in this Agreement(the"Transfer Restrictions");and
WHEREAS,in the Application,the Owner committed to maintain the Project as low-income housing for the
full duration of the Commitment Period;and
WHEREAS, as a condition of allocation of the low-income housing tax credits as described herein, the
Board's Qualified Allocation Plan ("QAP") requires that the Owner waive and forfeit the right to request that the
Board locate a non-profit qualified buyer(the"qualified contract process"),agree to maintain the Low-Income Units
through the entire Commitment Period, and agree that the Commitment Period may not be terminated early
through the qualified contract process; and
WHEREAS, the Code requires as a condition precedent to the allocation of the Credit that the Owner
execute, deliver and record in the official land deed records of the county in which the Project is located this
Agreement in ordertocreate certain covenants runningwith the Project for the purpose of enforcing the Occupancy
Restrictions,Transfer Restrictions and other requirements of Section 42 of the Code by regulating and restricting the
use,occupancy and transfer of the Project as set forth herein;and
WHEREAS, the Board further requires as a condition precedent to the allocation of the Credit that the
Owner execute,deliver and record in the official land deed records of the county in which the Project is located this
Agreement,in order to create certain covenants running with the Project that the Owner and the Project shall be
subject to applicable requirements, including without limitation operating and replacement reserves, record-
keeping, reporting,training, certification, audit, inspection and other compliance and enforcement requirements
and payment of related fees to the Board,as set forth in Section 42 of the Code, and the Board's rules,guidelines
and Applicable CLAP(such requirements and fees together referred to as the"Compliance Provisions"); and
WHEREAS, the Board further requires as a condition precedent to the allocation of the Credit that the
Owner execute,deliver and record in the official land deed records of the county in which the Project is located this
Agreement, in order to create certain covenants running with the Project(the "Enforcement Provisions") for the
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purpose of enforcing the Occupancy Restrictions,Transfer Restrictions,the Energy and Green Building Requirements
specified in Exhibit A-3,attached hereto and incorporated herein by this reference(the'Energy and Green Building
Requirements")and Compliance Provisions(the Occupancy Restrictions, Transfer Restrictions, Energy and Green
Building Requirements, Compliance Provisions and Enforcement Provisions together referred to herein as the
"Covenants");and
WHEREAS,the Owner,under this Agreement,intends,declares and covenants that all Covenants set forth
herein, including without limitation the regulatory and restrictive covenants governing the use, occupancy and
transfer of the Project, shall be and are covenants running with the Project for the term stated herein {including
without limitation any applicable Tenant Protection Period during which the Tenant Protections shall continue in
effect,as set forth in subsection S(d))and binding upon all subsequent ownersof the Project Land for such term and
are not merely personal covenants of the Owner;
NOW, THEREFORE, in consideration of the promises and covenants hereinafter set forth, and of other
valuable consideration,the receipt and sufficiency of which are hereby acknowledged,the Owner agrees as follows:
Section 1. Definitions. Words and phrases used herein shall have the same meaning as set forth in
Section 42 of the Code, in regulations pertaining thereto promulgated by the Department of Treasury, the
Department of Housing and Urban Development or another authorized federal agency or in the Board Requirements.
(a)References herein to "median income" or"Area Median Income"mean the area median gross income
as adjusted for family size.
(b)References herein to"Board Requirements"mean and include the Board's rules,guidelines,Applicable
QAP.
(c)References herein to"Applicable QAP"mean the Board's QAP(designated by year)that is applicable for
purposes of the particular issue, process,criteria,standard,requirement,fee,determination or award as specified
in the Board's most recently adopted CLAP.
Section 2. Recording,and Filing Covenants To Run With the Project:Consent of Prior Lien Holders.
(a)Upon execution and delivery by the Owner,the Owner shall cause this Agreement and all amendments
hereto to be recorded and filed in the official public land deed records of the county in which the Project is located
and shall pay all fees and charges incurred in connection therewith. Upon recording,the Owner shall immediately
transmit to the Board an executed original of the recorded Agreement and any amendment showing the date of
recording and recording references. The Owner acknowledges and agrees that the Board will not issue a Carryover
Commitment or the Internal Revenue Service Form 8609 constituting final allocation of the Credit unless and until
the Board has received the recorded executed original of the Agreement,
(b) The Owner intends,declares and covenants,on behalf of itself and all future owners and operators
of the Project during the term of this Agreement, that this Agreement and the Covenants, including without
limitation those regulating and restricting the use, occupancy and transfer of the Project: (1) shall be and are
covenants running with the Project, encumbering the Project for the term of this Agreement, binding upon the
Owner's successors in title and all subsequent owners and operators of the Project, (ii) are not merely personal
covenants of the Owner,and(iii)shall bind the Owner(and the benefits shall inure to the Board and any past,present
or prospective tenant of the Project)and its respective successors and assigns during the term of this Agreement.
The Owner hereby agrees that any and all requirements of the laws of the State of Montana to be satisfied in order
for the provisions of this Agreement to constitute Project ownership restrictions and covenants running with the
Project are and shall be deemed to be satisfied in full, or, in the alternate, that an equitable servitude has been
created to insure that these restrictions run with the Project. For the longer of the period this Credit is claimed or
the term of this Agreement,each and every contract,deed, bill of sale, assignment or other instrument hereafter
executed conveying or providing for the conveyance of the Project or any portion thereof shall expressly provide
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that such conveyance is subject to this Agreement; provided, however, this Agreement and the Covenants shall
survive and be effective regardless of whether such contract, deed, bill of sale, assignment or other instrument
hereafter executed conveying or providing for the conveyance of the Project or any portion thereof provides that
such conveyance is subject to this Agreement.
(c) The Owner covenants to obtain a written agreement of any prior recorded lienholder on the
Project, subordinating such lien to this Agreement,and the obtaining and submission to the Board of such written
subordination agreement shall be a condition precedent to the issuance of Intemdl Revenue Service Form 8649
constituting final allocation of the Credit.
Section 3. Representations and Warranties of the Owner. The Owner hereby represents and warrants as
follows:
(a) The Owner. (i) is an entity of the type and duly organized under the laws of the state specified
under Entity Type and State in Exhibit A-2;(il)is authorized to transact business in the State of Montana;f iii)has the
power and authority to own its properties and assets and to carry on its business as now being conducted and as
represented in its Credit Application;and(iv)has the full legal right,power and authority to execute and deliver this
Agreement.
(b) The execution, recording and performance of this Agreement by the Owner: (i) have been duly
authorized by all necessary action;(ii)do not violate any provision of law,rule orregulation or any orderof any court
or other agency or governmental body applicable to Owner, or Owner's properties,assets or liabilities; (iii)do not
conflict with,violate or constitute a default under any provision of any indenture,agreement,mortgage, mortgage
note or other instrument to which the Owneris a party or by which it or the Project is bound;and(iv)will not result
in the creation or imposition of any prohibited encumbrance of any nature.
W The Owner will, at the time of execution and delivery of this Agreement, have (i) good and
marketable title to the premises constituting the Project free and clear of any lien or encumbrance (subject to
encumbrances created pursuant to this Agreement or other permitted encumbrances),or(ii)a lease of the Project
Land effective for a period at least as long as the Commitment Period specified in subsection 5(a).
(d) There is no action,suit, investigation or proceeding at law or in equity or by or before any court,
governmental instrumentality or other agency now pending or,to the knowledge of the Owner,threatened against
or affecting it or any of its properties or rights which, if adversely determined,would materially impair its right to
carry on business substantially as now conducted,as represented in its Credit Application or as now contemplated
by this Agreement,or that would materially adversely affect its financial condition.
(e) The Project constitutes orupon placement in service will constitute a qualified low-income building
or qualified low-income project,as applicable,as defined in Section 42 of the Code and applicable Regulations.
(f) Each unit in the Project contains or upon placement in service will contain complete facilities for
living, sleeping, eating, cooking and sanitation (unless the Project qualifies as a single-room occupancy project or
transitional housing for the homeless)which are to be used on other than a transient basis.
(g) Each Low-Income Unit is or upon placement in service will be suitable for occupancy in accordance
with Section 42 of the Code and applicable local health,safety and building codes.
Section 4- Owner's Covenants and A reements.
A. Occupancy Requirements. Owner covenants and agrees throughout the term of this Agreement
that:
(i) Income Election Set Aside. The Owner shall meet and comply,in accordance with Section 42 of the
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Code and Board Requirements,with the Income Election Set Aside in subsection(a),(b)or(c)that is specified as the
Income Election Set Aside in Exhibit A-2(the"Income Election Set Aside"):
(a) 20-50Test:At least 20%or more of the residential units in the Project are both rent-restricted and
occupied by individuals whose income is 50%or less of area median income(the"20-50 Test");
(b) 40-60 Test:At least 40%or more of the residential units in the Project are both rent-restricted and
occupied by individuals whose income is 50%or less of area median income(the"40-60 Test");or
(c) Average Income Test: At least 40% or more of the residential units in the Project are both
rent-restricted and occupied by individuals whose income does not exceed the imputed income limitation
designated by the taxpayer with respect to the respective unit, where: (1) such designated imputed Income
limitations shall be in logo increments from 20% to 80% of area median gross income, (II) the average of the
designated imputed income limitations shall not exceed 60%of area median gross income,and (III)the units with
respect to which an imputed income limitation has been designated shall be proportionately dispersed among the
different unit sizes and buildings in the Project(the "Average Income Test").
(ii) Low-income Occupancy Percentage;Income Restrictions. The Owner shall lease the Low-Income Units
(i.e.,a percentage of the units in the Project that equals the Low-Income Occupancy Percentage specified in Exhibit
A-2)to Low-Income Tenants(i.e.,at or below the Income Restrictions specified in Exhibit A-2),
(iii) Targeting Requirements. The Owner shall target such percentage of the Low-Income Units to tenants
whose income is at or below the percentages of median income as set forth in the Targeting Requirements in Exhibit
A-2.
(iv) Rent Restrictions. The Owner shall not charge Low-Income Tenants Rent exceeding the percentages
specified in the"Rent Restrictions in Exhibit A-2.
(v) Changes in Targeting Requirements or Rent Restrictions. Except as provided in subsection 4.A.v.1 below.
the Targeting Requirements or Rent Restrictions of units may be changed only if the Board, in its sole discretion,
determines that maintaining such Targeting Requirements or Rent Restrictions would cause undue hardship for the
Project and approves such changes in writing.
(1) To the extent permitted by federal law,the Targeting Requirements(percentages of area median gross
income)assigned to specific units may be changed from time to time so long as: (A)the average of the designated
imputed income limitations for all Low-Income Units subject to the Average Income Test does not exceed 60%of
area median gross income at any time;(6)the assignment of the various Targeting Restrictions(percentages of area
median gross income) among the various unit sizes (i.e., 1-bedroom, 2-bedroom, etc.)remain at substantially the
same proportions as originally established in accordance with the Project's Application;(C)the applicable Targeting
Restriction for any unit does not change during the tenancy of any tenant;and (D)the Owner notifies the Board in
writing of the changes prior to the effective date of such changes. The Board may disapprove any such changes that
fail to meet the foregoing requirements upon written notice to the Owner and such disapproval shall be effective
prospectively with respect to tenant rental agreements entered into after the date of such notice. The Owner shall
remain solely responsible for compliance with all applicable federal tax credit set aside requirements and neither
this subparagraph nor the Board's disapproval or failure to disapprove of any such changes shall be deemed to
constitute a representation or warranty by the Board of such compliance.
(vi) Eviction;Rent Increases. The Owner shall not(i)evict or terminate the tenancy of an existing tenant of
any low-income unit other than for good cause, or (ii) impose any increase in the Rent with respect to any low-
income unit not otherwise permitted under Section 42 of the Code or Board Requirements.
(vii) General Public Tenants. All Low-income Unitsshall be leased and rented ormade availableto members
of the general public who qualify as Low-income Tenants(or otherwise quality for occupancy of the Low-Income
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Units)under the Income Restrictions/Income Election Set Aside specified in Exhibit A-2.
(viii) Fair Housing Act. The Owner agrees to comply fully with the requirements of the Fair Housing Act as
it may from time to time be amended.
(ix) SuitabilityforOccupancy. Each Low-Income Unit is and will remain suitable for occupancy in accordance
with Section 42 of the Code and applicable local health,safety and building codes.
(x) Section 8 Tenants. The Owner shall not refuse to lease any Low-Income Unit to a holder of a voucher
or certificate of eligibility under Section 8 of the United States Housing Act of 1937 because of the status of the
prospective tenant as such a holder.
B. Transfer Restrictions. Owner covenants and agrees throughout the term of this Agreement that:
(i) Sale, Transfer or Exchange Subject to Covenants. Subject to the requirements of Section 42 of the Code,
Board Requirements and this Agreement, the Owner may sell,transfer or exchange the entire Project at any time,
but prior to such sale,transfer or exchange the Owner shall:(a)notify in writing and obtain the written agreement
of any buyer,transferee,successor or other person acquiring the Project or any interest therein that such acquisition
is subject to this Agreement, Board Requirements and Section 42 of the Code and applicable regulations, including
without limitation Owner training and certification requirements;(b)notify the Board in writing in accordance with
the requirements of subsection B(ii); and (c) submit to the Board such completed forms, documents and other
information as required by the Applicable QAP. This provision shall not act towaive any other restriction on sale,
transfer or exchange of the Project or any low-income portion of the Project. The Owner agrees that the Board may
void any sale,transfer or exchange of the Project if the buyer, transferee, successor or other person acquiring the
Project or any interest therein fails to assume in writing the requirements of this Agreement, the Board
Requirements and the requirements of Section 42 of the Code. Notwithstanding the provisions of this subsection,
no portion of a building to which this Agreement applies may be sold to any person unless all of such building is sold
to such person.
(ii) Notification of Transfer. The Owner must provide the Board with at least 120 days advance written
notice prior to offering or listing the Project or any Project real property for sale, assignment,transfer or exchange
or entering into any agreement for such transaction, The Board may notify prospective buyers of any proposed
offering or listing and such prospective buyers may submit offers to Owner to purchase such property. The Owner
shall further notify the Board in writing within ten (10) business days of the closing of any such sale, transfer or
exchange of the entire Project and shall provide the Board with the written agreement, in the form prescribed by
the Board, of the buyer,transferee, successor or other person to assume the requirements of this Agreement,the
Board Requirements and Section 42 of the Code, including without limitation Owner training and certification
requirements.
(hi) Project Retention of Reserves on Sale, Transfer or Exchange. Project replacement and operating
reserves and reserve accounts required by applicable law,Board Requirements or this Agreement must be retained
by the Project(and transferred to the new owner as applicable)in or as part of any sale,transfer or exchange of the
Project. The Owner shall not withdraw or retain any such reserves or reserve accounts in or as part of any sale,
transfer or exchange of the Project and the Owner agrees that the Board may void any sale,transfer or exchange of
the Project that violates this subsection.
(iv) No Demolition or Change in Use. The Owner shall not demolish any part of the Project or substantially
subtract from any real or personal property of the Project or permit the use of any residential rental unit for any
purpose other than rental housing in compliance with the Covenants during the term of this Agreement unless
otherwise required by law.
(v) Project Restoration. If the Project, or any part thereof, shall be damaged or destroyed or shall be
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condemned or acquired for public use, the Owner shall use its best efforts to repair and restore the Project to
substantially the same condition as existed prior to the event causing such damage or destruction,or to relieve the
condemnation,and thereafter to operate the Project in accordance with the terms of this Agreement.
C. Energy and Green Building Requirements.
(i) Conditions of Tax Credit Allocation, The Owner shall comply with the Energy and Green Building
Requirements specified in Exhibit A-3.
D. Compliance Provisions. Owner covenants and agrees throughout the term of this Agreement that:
(i) Compliance with Applicable Requirements. The Owner shall be subject to and comply with all applicable
requirements,including without limitation operating and replacement reserves,record-keeping,reporting,training,
certification,audit,inspection and other compliance and enforcement requirements and payment of related fees to
the Board, as set forth in Section 42 of the Code, and Board Requirements(such applicable requirements and fees
together referred to as the "Compliance Provisions") In addition to the foregoing requirements, the Owner shall
comply with all requirements regarding the maintenance, distribution, use and expenditure of replacement and
operating reserves as specified in the Owner's partnership, operating or other governing owner or investor
documents or agreements.
(ii) Annual Compliance Certification. The Owner shall prepare and submit to the Board a certification of
program compliance in the form prescribed by the Board annually on or before the 25th of the month following the
assigned annual period.
(iii) Tenant Income Certification,Owner's Compliance Certificate. The Owner shall, unless waived by the
Department of Treasury pursuant to Section 42 of the Code, annually obtain and maintain on file from each
Low-Income Tenant residing in the Project an updated copy of each tenant's executed Tenant Income Certification
and Owner's Certificate of Continuing Compliance in the form prescribed by the Board. The Owner must submit a
copy of each tenant's annual certification to the Board. The determination of whether a tenant meets the
low-income requirement shall be made by the Owner at least annually on the basis of the current income of such
Low-Income Tenant.
iiv) Additional Records. The Owner shall retain the following information for each year for each building in
the Project for at least six years after the due date for filing the federal Income tax return for such year, and with
respect to the first year of the credit period,for at least 6 years beyond the due date for filing the federal income
tax return for the last year of the compliance period for the building: (1)the total number of residential rental units
in a building (Including the number of bedrooms and the size in square feet of each residential rental unit); (ii)the
percentage of residential rental units in the building that are Low-Income Units; (iii)the Rent charged on each
residential rental unit in the building(including any utility allowances and mandatory fees); (iv) Low-Income Unit
vacancies in the building and information showing when,and to whom,the next available units were rented;(v)the
annual income certification of each Low-income Tenant by unit,including annual certifications for each continuous
Low-Income Tenant;(vi)documentation to support each low-income Tenant's income certification,including a copy
of verification of income from third parties or 6 consecutive pay stubs;(vii)the eligible basis and qualified basis of
the building at the end of the first year of the credit period; and (viii)the character and use of any nonresidential
portion of the building included in the eligible basis of the building.
(v) Additional Compliance Monitoring. If at any point following execution of this Agreement,Section 42 of
the Code or regulations implementing said section require the Board to undertake additional monitoring of the
Owner's or Project's compliance with the Occupancy Restrictions or,alternatively,if the Board chooses to undertake
additional monitoring of the Owner's or Project's compliance with the Occupancy Restrictions,the Owner shall take
any and all actions reasonably necessary and required by the Board to substantiate the Owner's compliance with
the Occupancy Restrictions and will pay a reasonable fee to the Board for such monitoring activities performed by
the Board.
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(vi) Inspection. At least once every three years, or more frequently if determined necessary by the Board
in its sole discretion, the Owner shall permit,during normal business hours and upon minimal advance notice, any
duly authorized representative of the Board to inspect any building in the Project and to inspect any books and
records of the Owner regarding the Project with respect to the incomes of Low-Income Tenants and Rents charged
to Low-Income Tenants (including utility allowances and mandatory fees) which pertain to compliance with the
Occupancy Restrictions.
(vii) Additional Compliance Substantiation. The Owner shall submit any other information,documents or
certifications requested by the Board which the Board shall deem reasonably necessary to substantiate the Owner's
continuing compliance with the Covenants and this Agreement.
(viii) Compliance with Covenants. The Owner shall comply with and shall not knowingly take or permit any
action or omission that would result in a violation of the requirements of Section 42 of the Code and applicable
Regulations, Board Requirements,or of this Agreement.
(ix) Reliance Upon Representations. The Owner's representations and covenants set forth herein may be
relied upon by the Board and all persons interested in Project compliance under Section 42 of the Code and the
applicable Regulations.
E. Enforcement Provisions. Owner covenants and agrees throughout the term of this Agreement
that:
(1) Actions to Comply with Covenants. Owner shall take any lawful action (including without limitation
amendment of this Agreement, as may be necessary in the opinion of the Board)to comply fully with (i)the Code
and with all applicable rules, rulings, policies,procedures, regulations or other official statements promulgated or
proposed from time to time by the United States Department of the Treasury, the internal Revenue Service, the
Department of Housing and Urban Development or any other authorized governmental agency or instrumentality
pertaining to the Owner's obligations under Section 42 of the Code and affecting the Project;(ii)this Agreement and
the Covenants;or(iii)Board Requirements.
(ii) Action for Specific Performance Authorized. In consideration for receiving low-income housing credits
for the Project and for purposes of assuring compliance of the Project and the Owner with this Agreement,
Section 42 of the Code and the applicable regulations,and Board Requirements, the Owner hereby acknowledges
and agrees that(a) the beneficiaries of the Owner's obligations hereunder cannot be adequately compensated by
monetary damages in the event of any default hereunder,and(5)the Board or any individual who meets the income
limitation applicable under this Agreement or Section 42 of the Code (whether a prospective, present or former
occupant)shall be entitled,for any breach of the provisions hereof,and in addition to all other remedies provided
by law or in equity, to enforce specific performance by the Owner of its obligations under this Agreement in a
Montana state court of competent jurisdiction.In the event of default by Owner under the terms of this Agreement,
a Limited Partner of the Owner may cure such default on behalf of the Owner according to the provisions of this
Agreement.
(iii)Actions of Non-Managing Members. Notwithstanding anything contained herein to the contrary, any
cure made or tendered by Owner's non-managing members shall be deemed to be a cure by Owner and shall be
accepted or rejected on the same basis as if made or tendered by the Owner.
Section 5. Term of Agreement.
(a) Term. Except as hereinafter provided, this Agreement and the Covenants shall commence with and
apply beginning on the first day on which any building which is part of the Project is placed in service and shall
terminate on the end of the Commitment Period. The Owner has committed to maintaining and shall maintain the
Project as Low-Income Housing subject to the terms of this Agreement for and throughout the entire Commitment
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Period specified in Exhibit A-2.
(b) Waiver of Qualified Contract Process. Except as specifically otherwise provided in subsection 5(c),this
Agreement and the Covenants shall remain binding and effective and the Owner shall comply therewith for and
during the entire Commitment Period specified above. By execution and recording of this Agreement, the Owner:
(i)waives and forfeits the right to request that the Board locate a non-profit qualified buyer(the"qualified contract
process");(ii)agrees to maintain the Low-Income Units through the entire Commitment Period:and(ii!)agrees that
the Commitment Period may not be terminated early through the qualified contract process.
(c) Partial Termination on Foreclosure. The Occupancy Restrictions, Transfer Restrictions, Compliance
Provisions and Enforcement Provisions specified herein, other than the Tenant Protections specified in subsection
S(d), shall terminate with respect to the Project or any Project building on the date the Project or any respective
Project building is acquired by foreclosure or instrument in lieu of foreclosure(unless the Secretary of the Treasury
determines that such acquisition is part of an arrangement to terminate the Occupancy Restrictions or, except as
otherwise provided in the Lease,upon the date that the Lease terminates.
(i) ldotrce of Default or Foreclosure. Owner shall notify the Board within ten business days of the filing of
any judicial foreclosure action,receipt of any notice of trustee's sale,receipt or submission of any proposal for a
deed in lieu of foreclosure, receipt of any notice of default under any obligation secured by a mortgage or creation
of any judgment lien with respect to the Project or any Project real property and provide MBOH with copies of the
complaint,notice of trustee's sale,deed in lieu of foreclosure proposal,default notice or judgment,as applicable.
The Board may notify the United States Secretary of the Treasury if it has reason to believe that any potential
foreclosure sale or deed in lieu of foreclosure is part of an arrangement to terminate the LURA restrictions.
(d) Tenant Protection Period. In the event of termination as provided by subsection 5(c)above,the Tenant
Protections specified in this subsection 5(d) shall remain binding and effective for a period of three years (the
"Tenant Protection Period")following such termination. During the Tenant Protection Period,the Owner shall not
(i) evict or terminate the tenancy of an existing tenant of any Low-Income Unit other than for good cause, or(ii)
impose any increase in the Rent with respect to any Low-Income Unit not otherwise permitted under Section 42 of
the Code (the`Tenant Protections"). The Tenant Protections that apply during the Tenant Protection Period also
include the Compliance Provisions and Enforcement Provisions provided hereunder with respect to compliance with
and enforcement of the requirements of clauses (1) and (ii) of this subsection S(d). The Tenant Protection Period
shall survive termination of the Lease except as specifically otherwise provided for in the Lease,
Section 6. Miscellaneous.
(a) Severability. The invalidity of any clause,part or provision of this Agreement shall not affect the
validity of the remaining portions thereof.
(b) Notices. All notices to be given pursuant to this Agreement shall be in writing and shall be deemed
given when mailed by certified or registered mail, return receipt requested, to the parties hereto at the addresses
set forth below,or to such other addresses)as a party may from time to time designate in writing.
To the Board: Montana Board of Housing
P.O_Box 200528
Helena, MT 5962D-0528
Attn: LIHTC Program
To the Owner: See Owner's Notice Address in Exhibit A-2.
The Board and the Owner may,by notice given hereunder,designate any further or different address(es)to which
subsequent notices,certificates or other communications shall be sent,
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(c) Amendment. The Owner agrees that it will take all actions necessary to effect amendment of this
Agreement as may be necessary to comply with the Code and any and all applicable rules, regulations, policies,
procedures,rulings or other official statements pertaining to the Credit.
(d) Release and Indemnification. The Owner hereby agrees to pay, indemnify and hold the Hoard
harmless from any and all claims, losses, demands, suits, judgments, costs, expenses and fees, including all
reasonable attorneys'fees which may be incurred by the Board,arising from or relating to this Agreement,allocation
of the Credit or recapture of the Credit. The Owner agrees to release the Board from and to indemnify the Board
for any claim, loss, demand or judgment as a result of the allocation of tax credit dollars to the Project or the
recapture of same by the Internal Revenue Service.
(e) Attorney Fees. The Owner hereby agrees to pay the Board's reasonable attorneys'fees and costs
incurred in enforcing this Agreement, whether the same shall be enforced by suit or otherwise. The Owner also
hereby agrees to pay the Board's costs,fees and expenses,including all reasonable fees and expenses of the Board's
Counsel,which may be incurred in connection with any amendment to this Agreement,whether such amendment
Is at the request of the Owner or the Board.
(f) Priority.Subordination or Termination of Agreement. This Agreement shall apply according to its
terms and shall have priority over any subsequently recorded or any subordinated mortgage or other instrument,
except as otherwise provided in any subordination agreement executed by the Board. In the event of termination
as provided in subsection 5(c), the Covenants,other than the Tenant Protections specified in subsection 5(d),shall
terminate,but the Tenant Protections shall thereafter remain valid and effective during the 3-yearTenant Protection
Period specified in subsection 5(d) and or Section 42 of the Code. In the event of Lease termination, the Tenant
Protection Period shall survive termination of the Lease except as specifically otherwise provided for in the Lease.
(g) Governing Law. This Agreement shall be governed bythe laws of the Stateof Montana and,where
applicable,the laws of the United States of America.
(h) Survival of Obligations_ The obligations of the Owner as set forth herein and in the Application
shall survive the allocation of the Credit and shall not be deemed to terminate or merge with the awarding of the
allocation.
(1) Agreement Controlling. Except with respect to the Lease or a Prior Declaration as provided in
subsection 6(j), if applicable,the Owner shall not execute any other agreement with provisions contradictory to,or
in opposition to, the provisions of this Agreement, and,in any event,the terms of this Agreement are paramount
and controlling as to the rights and obligations herein set forth and supersede any other requirements in conflict
herewith-
fill
Conflict with Prior Declaration. If a separate Declaration of Restrictive Covenants for Low-Income
Housing Credits (the"Prior Declaration") was recorded prior to this Agreement with respect to a previous Credit
award for the Project, the Prior Declaration is identified in Exhibit A-2 and shall remain effective according to its
terms; provided, however,that in the event of any conflict between the terms of this Agreement and any Prior
Declaration:(i)the term of this Agreement or the Prior Declaration that is more protective of or beneficial to tenants
shall control and continue to apply with respect to each tenant whose tenancy existed as of the date of recording of
this Agreement for so long as such tenancy shall continue;and(ii)the requirements of this Agreement shall control
with respect to each tenant whose tenancy commences after the date of recording of this Agreement(regardless of
whether the terms of this Agreement are more or less protective of or beneficial to tenants than the Prior
Declaration).
(k) Exceptions. Waivers and Variances. Subject to applicable laws, the Board may in its discretion
grant an exception,waiver or variance from any restriction, requirement or other term of this Agreement, and may
impose any conditionis) or limitations it deems appropriate upon any such exception, waiver or variance. As a
condition of considering any request for an exception, waiver or variance, the Board may require the owner to
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submit supporting information,documentation and justification for the request.
[Signature Page Follows:}
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IN WITNESS WHEREOF, the Owner has caused this Agreement to be executed by its duly authorized
representative on:
Owner Name,. North 3rd Apartments,LLC
Type: Limited Liability Company
Organized in: Washington
Street: 10900 NE 8th Street Suite 1200
State City Zip: Bellevue,WA 98Q04
Taxpayer Federal ID is: 88-3860948
By: North 3rd Manager,LLC
Its: Managing Member
Signature: #m"&,
Signature Name: Evan 1.Hund
Title: Managing Member
Date of Document:
[SEAL]
STATE OF VJAsu 1&An—rOIJ )
]S5.
COUNTY OF W i/U2 )
On this )q day off 2 before me a notary public for the state of (/l/ {N(�jT0� ,
l of personally appeared E1 T. to"04 the 1�11 N�j h7 L�y111�E forty
IVM� Zi1'1ts� the entity which is subscribed to the within instrument, and acknowledged to me that
he/she executed the same in his/her authorized capacity,and that by his/her si nature on the instrument,the entity
upon behalf of which he/she acted executed the instrument. t4,0e L. jY1Qv�C�er LLG� �'Flpfna'Y"
IF �q�fj�,I have hereunto set my hand and affixed my notarial seal on the day and year first-
above� iioi�
23
o '1'
NOTARY .
1 ? Notary Public for the State of 'CJI`l
PUBLIC r2
Nier.....`NG
(Notarial Seal/Stamp Abovef
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Exhibit A-1
(Legal Description of Project Land)
® The following described land upon which the Project is located is owned by the Owner and such
land is subject to the terms of this Agreement.
❑ The following described land upon which the Project is located is leased by Owner from the owner
of the land,as provided in and subject to the ground lease(the"Lease")attached as Exhibit B and
such land is subject to the terms of this Agreement to the extent and as provided in the Lease.
The Project is located on land located in the City of Bozeman,County of Gallatin,State of Montana,more
particularly described as follows:
LOT 1,OF BLOCK 1,OF WESTLAKE'S FOURTH SUBDIVISION TO THE CITY OF BOZEMAN,ACCORDING TO THE
OFFIGAL
PLAT THEREOF ON FILE AND OF RECORD IN THE OFFICE OF THE COUNTY CLERK AND RECORDER OF GALLATIN
COUNTY,MONTANA,EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PARCEL:
A TRACT OF LAND BEING A PORTION OF LOT 1,BLOCK 1,WESTLAKE'S FOURTH SUBDIVISION TO THE CITY OF
BOZEMAN,LOCATED IN THE SOUTHEAST ONE-QUARTER SECTION 1,TOWNSHIP 2 SOUTH,RANGE 5 EAST,
PRINCIPAL
MERIDIAN MONTANA AND BEING FURTHER DESCRIBED AS FOLLOWS:
BEGINNING AT THE NORTHEAST CORNER OF SAID LOT 1,BLOCK 1,THENCE SOUTH 00-02-21 EAST,ALONG THE
EAST
LINE OF SAID BLOCK 1,A DISTANCE OF 168.94 FEET.THENCE NORTH 89-57-41 WEST A DISTANCE OF 194.03 FEET.
THENCE SOUTH 00•01-15 WEST A DISTANCE OF 31.90 FEET.THENCE NORTH 89-58-45 WEST A DISTANCE OF 100.00
FEET TO THE WEST LINE OF SAID LOT 1,BLOCK 1.THENCE NORTH 00-01-15 EAST ALONG SAID WEST LINE OF LOT 1,
A DISTANCE OF 200.87 FEET.THENCE SOUTH 89-57-41 EAST ALONG THE NORTH LINE OF SAID BLOCK 1,A
DISTANCE
OF 293.85 FEET TO THE POINT OF BEGINNING,
THE ABOVE DESCRIBED TRACT OF LAND BEING LOTS 403,405,407,409,501,502,503,504,505,506,AND 507
AND
ALL COMMON AREA AND PRIVATE STREET AREA CONTAINED WITHIN THE PLAT OF HOMESTEAD TOWNHOUSES,
PHASE I,CITY OF BOZEMAN,GALLATIN COUNTY,MONTANA.
[DEED REFERENCE: INSTRUMENT NO.2537347)
LOT TWO(2)OF BLOCK ONE(1)OF WESTLAKE'S FOURTH SUBDIVISION TO THE CITY OF BOZEMAN,MONTANA,
ACCORDING TO THE OFFICIAL PLAT THEREOF ON FILE AND OF RECORD IN THE OFFICE OF THE COUNTY CLERK AND
RECORDER,GALLATIN COUNTY, MONTANA.
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Exhibit A-2
1. Additional Proiect Specifications:
North 3r1d Apartments
Bozeman MT,Gallatin County
Buildings:6
Low Income Units:216
Any substantial changes to the Project from the Project as represented and described In the original
Application must be approved in writing by the Board as provided in the Applicable QAP.
2. Owner's Notice Address:
North 3`d Developer,LLC
Devco Preservation
10900 N E 8eh St STE 1200
Bellevue,WA 98004
3. Entity Type and State:
Entity Type: Limited Liability Corporation
State of Formation: Montana
4. Credit Allocation Amount: $3,357.500 annually(or such other amount as determined by the Board and set
forth in IRS Form 8609 upon final allocation of the Credit).
5. Low-Income Occupancy Percentaee:100%of the units will be leased to Low-Income Tenants.
6. Income Restrictions/Income Election Set-aside: Per Section 42 of the Code,the Owner has elected and the
following Income Election Set Aside and Income Restrictions shall apply to the Project:
a. ❑20-50 Test.
b. O 40-60 Test.
c. 0 Average Income Test.
7. Targeting Requirements:(49%and 55%targeting are not allowed with Average Income projects)
Of the units will be income targeted to 20%or less of Area Median Income Tenants
Of the units will be income targeted to 30%or less of Area Median Income Tenants
Of the units will be income targeted to 40%or less of Area Median Income Tenants
Of the units will be income targeted to 49%or less of Area Median Income Tenants
53 Of the units will be income targeted to 50%or less of Area Median Income Tenants
Of the units will be income targeted to 55%or less of Area Median Income Tenants
110 Of the units will be income targeted to 60%or less of Area Median Income Tenants
53 Of the units will be income targeted to 70%or less of Area Median Income Tenants
Of the units will be income targeted to 90%or less of Area Median Income Tenants
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Of the units will be income targeted to Market Tenants
8. Rent Restrictions:
Of the units will have Rents based on 20%of Area Median Income
Of the units will have Rents based on 30 of Area Median Income
Ot the units will have Rents based on 40%of Area Median Income
53 Of the units will have Rents based on 50%of Area Median Income
110 Of the units will have Rents based on 60%of Area Median Income
53 Of the units will have Rents based on 70%of Area Median Income
Of the units will have Rents based on 80%of Area Median Income
Of the units will have Rents based on the market
9. Commitment Period:
The Commitment Period for the Project is 50 years(consisting of an Extended Use Period that includes the
initial 15-year Compliance Period plus a period of 35 years beyond and in addition to the initial 15-year
compliance period).
10. Unit amenities include but are not limited to:Air Conditioning,Dishwasher—Disposal,Microwave,Ground
Floor Unit Patios.Washer& Dryers In Units. T
11. Proiect or site amenities include but are not limited to:Community Room,On Site Manager.Outdoor
Community Area,Play Area&Dog-Park
12. Rent Increases
For existing tenants, Rent increases in any calendar year shall not exceed the lesser of any Rent increase
permitted under:(a)Section 42 of the Code;or(b) Board Requirements.
13. Prior Declaration(for Resyndication Proiects):
NONE
14, Type of Pro4ect:(as noted in application)(select all that apply)
®Family
❑Elderly(55+)
O Elderly(62+)
❑Supportive
D Other:
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EXHIBIT A-3
(Energy and Green Building Requirements)
See attached Architects letter and Green Initiatives Form-to be attached upon final version
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HDJ 9
Hu ker DeJono,
ARCHITECT LETTER OF ENERGY AND GREEN BUILDING STANDARDS
PROJECT;
North 3'Apartments located in Bozeman, MT
'I'o Whom it May Concern,
To the best of my knowledge, inforruation and belief,the renovation project will provide the following green
initiatives.These initiatives are applicable to residential units within the development.
1. {construction documents specify an energy star refrigerator to be provided a irhin all units.
2. Construction documents sp eciry an energy star dishwasher to be provided within all units.
;. Construction documents specify an enerK star range hood with the fan ducted to exterior to he provided at
all units.
4, Construction documents specify energy star exhaust fans in bathrooms.ducted to exterior to be provided at
at] units_
5. Construction documents specify to use Low 'No VOC Paints and adhesives.
6. Per the civil engineer/landscape architect contracted by the Owner,water efficient landscaping is achieved
by utilizing 75%of the landscaping that is drought tolerant and/or requires minimal water use.
7. Per the construction doCUnlents showerheads and kitchen faucets will have L5 GPM and lavatory faucets
will be t.0 GPM.
$_ 1 understand the developer and their property manager will enforce a smoke-free policy that includes all
units,buildings,and their respective indoor common areas using a 20-foot setback from windows and doors
for smoking.
Such a statement of opinion or intention does not constitute a warranty,either express or implied. It is understood
that this st.u_mem shalt not relieve the Client or the Client's Contractors of any responsibility or obligation they may
have to industry custom or under any contract.
By:
Name:David Layman
Title: President
Dated:April 28,2023