Sec. 05.05.05.08. Project Eligibility

A. General Requirements. Buildings and improvements comprising a project shall meet the following requirements:

(1) Be located within the State;

(2) When the project is complete, be in compliance with applicable codes and standards;

(3) Be owned by an eligible borrower, with title and title insurance insuring the Department that are acceptable to the Department; and

(4) For projects involving new construction, be located within a priority funding area as described in State Finance and Procurement Article, §5-7B-02, Annotated Code of Maryland.

B. A project is eligible only if:

(1) The Department has complied with COMAR 05.01.06.06; and

(2) The Secretary has issued the written determination required under COMAR 05.01.06.07.

C. Project Income.

(1) Rents charged for partnership units shall be in amounts adequate for total income from the partnership units plus any funds contributed under §C(2) of this regulation, to be sufficient to:

(a) Pay all operating costs, insurance premiums, and payments instead of taxes, if any, that may be due; and

(b) Fund a reserve account for future maintenance, renovation, and improvement of the project by periodic deposits in amounts, as determined by the Department, that are adequate for the long-term maintenance and renovation of the project.

(2) The local government in its discretion may increase total income with operating or rent subsidies appropriated by the local government from its funds specifically for the project.

(3) The total income collected under §C(1) and (2) of this regulation shall be of such an amount that it is reasonable to anticipate that additional State and federal subsidies will not be required to maintain, on a long-term basis, occupancy of the partnership units by households of lower income.

D. Occupancy Limitation.

(1) Throughout the term of the capital assistance financing, all of the residential rental units in a project that are financed with the capital assistance, other than units occupied by management personnel, shall be:

(a) Occupied by households of lower income; or

(b) If the project is owned by a private sector entity, occupied by households of lower income that include one or more individuals with disabilities or special needs.

(2) A household whose annual income after initial occupancy exceeds the income limit set by the Secretary for continuing occupancy for households of lower income shall be given notice requiring it to vacate on or before that date which is 24 months after the date of the notice. The sponsor or its management agent shall deliver the required notice within 2 months of the date of the certification showing that the annual income of the household exceeded the income limit for continuing occupancy for households of lower income.

(3) Notwithstanding §D(2) of this regulation, a lease renewal may be entered into with a household that is required to receive a notice to vacate, but the term of the renewal may not exceed 24 months after the date of the notice, unless conflicting federal requirements apply.

(4) Partial Financing.

(a) If capital assistance is used to partially finance a project, there shall be a minimum number of partnership units, other than units occupied by management personnel, that shall be occupied by households of lower income throughout the term of the capital assistance financing.

(b) Except as provided in §D(4)(c) of this regulation, the minimum number of partnership units shall be equal to the amount of the loan divided by $75,000 or such other per unit cap as may be established by the Secretary.

(c) For capital assistance to private sector entities for rental housing for households that include one or more individuals with disabilities or special needs, the minimum number of partnership units shall be as set by the Program.

(d) The income levels and the disabilities or special needs of households not residing in the partnership units may not be restricted by the Program.

(e) Only those households that reside in partnership units in a project are subject to the tenant participation requirements as provided under Regulation .18 of this chapter.

(f) The sponsor shall provide equal access for all tenants to any amenities and common areas in a project that is partially funded with capital assistance from the Program.

(g) A household having excess income may stay in its rental unit if, within 12 months of the income certification showing excess income:

(i) There is another residential rental unit in the project that is not a required partnership unit;

(ii) The nonpartnership unit is either vacant and will be rented to an income eligible household, or is occupied by an income eligible household; and

(iii) Converting the nonpartnership unit to a partnership unit would not otherwise cause a violation of this regulation.

(h) If the sponsor or its management agent has not identified a substitute partnership unit in accordance with §D(4)(g) of this regulation within the 12-month period, the household having excess income shall be given a notice requiring it to vacate the partnership unit on or before that date which is 24 months after the date of the notice.

(i) If a nonpartnership unit becomes available before the 24-month date, the sponsor or its management agent may convert the available nonpartnership unit under the same restrictions identified in §D(4)(g) of this regulation and allow the household having excess income to remain in its rental unit, which shall be converted to nonpartnership status.

(j) A lease renewal may be entered into with a household that is scheduled to receive or has received a notice to vacate under §D(4)(h) of this regulation, but the term of the lease renewal may not extend beyond 24 months after the date of the household's notice of excess income.