Sec. 05.04.11.08. Loan Terms—Public Purpose Restrictions

A. Limited Income Occupancy. The sponsor shall execute a recorded agreement stating that as long as the loan is outstanding, or such longer period of time as the Administration may require, not less than a specified number of occupants of the project shall be families of limited income in accordance with Regulation .04B of this chapter.

B. Limited Income Distribution. The Administration may require the sponsor to agree to limits on the disposition of operating income of the project after payment of all project expenses, including loan payments and mortgage insurance premiums required by the Administration and the State or county agency which provides operating subsidies to the project.

C. Project Monitoring. The sponsor shall permit monitoring by the Administration or an approved agent of the Administration during the term of the loan of the:

(1) Physical condition of the project;

(2) Financial condition of the project and sponsor; and

(3) Incomes of those residing in the project.

D. Management. The project shall be managed directly or, in special circumstances, under a type of management contract acceptable to the Administration and its bond counsel.

E. Tax Compliance Agreement. The sponsor shall execute a legally binding covenant, to be recorded among the land records, requiring for as long as the loan is outstanding that:

(1) The sponsor shall continue to be a nonprofit organization;

(2) No portion of the loan may be used for a private business use or in an unrelated trade or business within the meaning of §513 of the Internal Revenue Code;

(3) The sum of the following amounts does not exceed $150,000,000:

(a) The Administration's §501(c)(3) bonds allocated to the sponsor; plus

(b) The outstanding tax-exempt nonhospital bonds allocated to the sponsor;

(4) The project qualifies as a special housing facility.

F. For purposes of §E(3) of this regulation, sponsor includes any organization under common management or control as the sponsor, any related person, and any test period beneficiary within the meanings of the Internal Revenue Code.