HUD-90066 Use Agreement/Cooperative Prepayment subject to Section

Use Agreement

U.S. Department of Housing and
Urban Development
Office of Housing
Federal Housing Commissioner

OMB Approval No. 2502-0577
Expiration: 12/31/2014

Public reporting burden for this collection of information is estimated to average 1 hour per response, including
the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. This agency may not collect this information, and you are
not required to complete this form, unless it displays a currently valid OMB control number.
This information collection is authorized by Section 250 of the National Housing Act, Section 223(f)(3) of the
National Housing Act, and Section 219 of the 1999 Appropriations Act. This information is used to ensure that
units are maintained and used solely as rental housing in accordance with the terms of the Use Agreement through
the original maturity date of the mortgage. This information is also monitored by HUD (via form HUD-90075) to
ensure compliance with the executed and recorded Use Agreement. No assurance of confidentiality is provided.

Section 221(d)(3)-(d)(5) (Below Market Interest Rate Note) Cooperative
Prepayment subject to Section 250 of the National Housing Act
FHA Project Number_______________________
Name of Project____________________________

THIS USE AGREEMENT (this "Agreement") is made, as of ______________,____ by
and between ___________________________, a _____________ {limited/general partnership,
corporation} (the "Owner"), and SECRETARY OF HOUSING AND URBAN
DEVELOPMENT, Washington, D.C. (the "Secretary" or "HUD").
RECITALS:
A. The Owner is the owner of {all of/a leasehold interest in} that certain real property
located in the {City/Town/Village} of __________________, in the County of _____________,
in the {State/Commonwealth} of ___________________, as more particularly described in
Exhibit A attached hereto and made a part hereof (the "Real Property"), on which is constructed
that certain rental cooperative project known as ____________________ Cooperative, known as
FHA Project No. ________________ (the "Project") and, together with the Real Property, (the
"Property").
B. The Property is encumbered by that certain first lien mortgage loan (the "Loan") made
to the Owner, or a predecessor in interest, which Loan is evidenced and/or secured by that certain
{Deed of Trust/Mortgage} Note dated _____________ __, ____, insured under Section 221(d)(3)
of the National Housing Act, 12 U.S.C. §1715l(d)(3), and bearing interest at the below-market
interest rate prescribed in the proviso of Section 221(d)(5) of the National Housing Act,
§1715l(d)(5), and that certain {Deed of Trust/Mortgage} of even date therewith, and certain other
instruments executed in connection with the Loan.
C. The Owner has requested the approval of the Secretary to prepay the Mortgage Note
and Mortgage on the Project; and as a condition of the Secretary's approval of the prepayment
subject to Section 250 of the National Housing Act, 12 U.S.C. §1715z-15, the Owner has agreed
that the Project shall be subject to certain rental restrictions and other requirements, as set forth
herein.
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NOW, THEREFORE, in consideration of the foregoing and the mutual promises set
forth herein, the parties hereto, for themselves and for their respective successors and assigns,
herby agree as follows:
1. Incorporation of Recitals. The foregoing recitals are hereby incorporated by
reference as if fully set forth herein.
2. Definitions.
a. "Area Median Income" shall mean the median gross income for a
person or a family, as applicable, as from time to time calculated and released by
the Secretary, based on the median income for the _________________________
Metropolitan Statistical Area (hereinafter called the "______________ MSA"). If
the Area Median Income for the ____________ MSA is no longer released at
least annually by the Secretary, then the median income calculation which most
closely approximates the aforesaid calculation, based on available data, as if it had
been recalculated annually, shall be substituted as the Area Median Income for all
purposes under this Use Agreement, and in such event, the parties hereto shall
acknowledge in writing the utilization of such substitute median income
calculation.
b. "Area Median Income Factor" is the number obtained by dividing the
Area Median Income as then most recently released, by the Area Median Income
in effect on the date of this Agreement.
c. "Current Members" shall mean those members who are lawfully in
residence at the Project on the date of this Use Agreement. Current Members
shall not include any persons defined below as "New Members."
d. "Initial Carrying Charges" shall mean the monthly charges noted in the
Carrying Charges Schedule attached hereto as Exhibit B, and made a part hereof.
These charges must not exceed 30% of 95% of Area Median Income for a person
or a family, as applicable.
e. "New Members" shall mean those tenants who lawfully begin residence
at the Project after the date of this Agreement. New Members never become
Current Members.
f. “Moderate Income Families” for Section 221(d)(3)-(d)(5) (Below
Market Interest Rate) projects are persons or families whose annual incomes do
not exceed 95% of Area Median Income.

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g. “Lower Income Families” are persons or families whose annual
incomes do not exceed 80% of Area Median Income.
h. “Very Low Income Families” are persons or families whose annual
incomes do not exceed 50% of Area Median Income.
i. "Net Increase in Total Operating Costs" is the net increase in total
expenditures for: real estate, personal property, and similar ad valorem taxes;
assessments; utilities; repairs and maintenance; and all other items properly
constituting direct project operating costs according to standard accounting
practices, (not including depreciation or amortization; debt service; financial,
organizational, or accounting costs attributable to the Owner; or any expenditures
required to be capitalized for federal income tax purposes). Furthermore, Net
Increase in Total Operating Costs shall not take into account any changes in
management fees paid to identify-of-interest entities; or any other expenditures
over which the Owner has effective control of the cost.
3. Term. This Agreement shall remain in effect until ___________ __, ____,
{insert date of term of original mortgage} (such period being hereinafter referred to as
the "Term").
4. Use Restriction and Carrying Charges. Throughout the Term, the Project
shall be used solely as housing for Moderate Income Families, with no reduction in the
number of residential units, and no Current Member will be required to relocate on the
basis of his or her income. The Owner may enter into Occupancy Agreements with
Lower Income Families and Very Low Income Families.
a. The Owner shall not enter into an Occupancy Agreement as to any unit
to any New Member whose Adjusted Income (as shown on the income
certification obtained from such prospective member) exceeds ninety-five percent
(95%) of the Adjusted Area Median Income.
a. For those units occupied by a Current Member, and the unit is not
assisted by a project-based Section 8 Housing Assistance Payments Contract, the
Owner shall not increase the Initial Carrying Charges for the unit without the
prior written approval of HUD. For those units occupied by a Current Member,
and the unit is assisted by a project-based Section 8 Housing Assistance Payments
(HAP) Contract, carrying charge increases shall be processed and determined in
accordance with HAP Contract requirements.
c. The Owner shall obtain from each prospective New Member, prior to
admission to the Project, a certification of Income signed by such New Member.
The Owner will make a reasonable effort to verify the accuracy of the income
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certification made by the New Member. The Owner shall obtain a similar signed
recertification of Income from every member in the Project at least annually
following the date of admission or the member's last recertification and shall
make a reasonable effort to verify the accuracy of the income recertification;
provided however, that no recertification shall be required within 6 months of the
time this Agreement is due to expire.
d. The Owner shall provide to the Secretary (or to such third party as the
Secretary may, in his sole discretion, determine to give the monitoring function
under this Agreement), promptly following receipt of a written request from the
Secretary (or from such third party), copies of all member certifications of Income
ranges regarding the Project and such other documents as may be reasonably
required to evaluate the Owner's compliance with the terms of this Agreement. In
addition, the Owner shall permit representatives of the Secretary (or any third
party given monitoring responsibility) following notice from the Secretary (or
from the third party), to examine the originals of all such documents, at the
Project's office during regular business hours.
5. Displacement Prohibition. No Current Member shall be displaced, except for
good cause. The Owner agrees not to refuse to enter into an Occupancy Agreement for a
dwelling unit, or otherwise discriminate in the terms of membership, solely because any
member or prospective member is the holder of a Certificate or a Voucher under Section
8 of the United States Public Housing Act of 1937 (42 U.S.C. §1437f), or any successor
legislation (hereinafter referred to as "Section 8").
6. Member Selection. Unless designed primarily for occupancy by elderly
persons, Owners shall not in selecting members discriminate against any person or
persons by reason of the fact that there are children in the family.
7. Transfer Value Restrictions.
a. The Owner agrees that any membership shall be sold by the Owner or
by a member only in the manner provided in Article III, Section 8 of the "Model
Form of By-Laws" for Cooperatives and for the "Transfer Value" amount as
shown in Exhibit C attached. A sale by a member shall be supported by a
certification delivered to the Owner by the seller and the purchaser as to the
amount of the sales price not in excess of that permitted by the Transfer Value in
Exhibit C.
b. The Owner acknowledges that it is the intention of the parties to ensure
affordability as determined by the Secretary and in order to maintain affordability
it is agreed that the Transfer Value Exhibit C attached will not be changed and no
increase in the current Transfer Value schedule will be initiated beyond that
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presently applicable. Further the Owner shall continue to comply with the terms
of Article III, Section 10 of the "Model Form of By-Laws" for Cooperatives
("Sales Price") and all of the provisions of Article III of the "Model Form of ByLaws" for Cooperatives ("Membership") and agrees that it will not amend these
provisions during the term of this Agreement without the approval of the
Secretary.
8. Civil Rights Requirements. The Owner will comply with the provisions of
any applicable federal, state or local law prohibiting discrimination in housing on the
basis of race, color, religion, creed, sex, national origin, handicap, or familial status,
including but not limited to: Title VI of the Civil Rights Act of 1964 (P.L. 90-284, 82
Stat. 73), the Fair Housing Act of 1968, as amended (42 U.S.C. §3601 et seq.; 24 CFR
100 et seq.), Executive Order 11063, and all requirements imposed by or pursuant to the
regulations of the HUD implementing these authorities, including, but not limited to, 24
CFR Parts 1, 100, 107 and 110, and Subparts I and M of Part 200.
9. Housing Standards. The Owner agrees that throughout the Term, it shall (a)
maintain the Project in good repair and condition in accordance with applicable local
codes, and the Uniform Physical Condition Standards set forth in 24 CFR Part 5, Subpart
G as amended; (b) maintain and operate the Units and related facilities to provide decent,
safe and sanitary housing, including the provision of all services, maintenance and
utilities; and (c) comply with the lead-based paint regulations set forth in 24 CFR Part 35,
as amended.
10. Management and Maintenance of the Project.
a. The Owner shall provide for the management of the Project in a
manner satisfactory to the Secretary. Any management contract entered into by
the Owner involving the Project shall contain a provision that it shall be subject to
termination, without penalty and with or without cause, upon written request by
the Secretary addressed to the Owner. Upon receipt of such request the Owner
shall immediately terminate the contract within a period of not more than thirty
days and shall make arrangements satisfactory to the Secretary for continuing
proper management of the Project.
b. The Owner shall not, without the prior written approval of the
Secretary, demolish any part of the Project or subtract from, without replacing,
any real or personal property of the Project. In the event all or any of the
buildings constituting the Project are destroyed or damaged by fire or other
casualty, the money derived from any insurance on the property shall be applied
to rebuild the Project unless otherwise directed by the Secretary.
c. The books and records, documents and other papers relating to the
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financial condition of the Project, shall at all times be maintained in accordance
with Generally Accepted Accounting Principals which can be subjected to an
audit performed in accordance with Generally Accepted Auditing Standards and
shall be subject to examination and inspection at any reasonable time by the
Secretary or his duly authorized agents. The Owner shall keep copies of all
written contracts or other instruments that affect the Project, all or any of which
may be subject to inspection and examination by the Secretary or his agents.
11. Violations and Secretary's Remedies. If the Secretary determines that the
Owner has violated any of the terms of this Agreement, the Secretary shall notify the
Owner of its determination and the Owner shall have thirty (30) calendar days after
receipt of such notification in which to cure the violation. Promptly following the
expiration of the foregoing thirty (30) day period, the Secretary shall reinspect the Project
and/or take other investigative steps as it deems necessary in order to ensure compliance.
Failure to cure the violation shall deem the owner in default. The parties further agree
that upon any default under this Agreement, the Secretary may apply to any court, state
or federal, for specific performance of this Agreement, or for such other equitable relief
as may be appropriate, since the injury to the Secretary arising from a violation under any
of the terms of this Agreement would be irreparable and the amount of damage would be
difficult to ascertain.
12. Reports. The Owner shall provide the Secretary an annual financial
statement in compliance with 24 CFR Part 5, Subpart H, Uniform Financial Reporting
Standards. The Owner will provide the Secretary with an annual certification that 1) the
unit meets HUD's physical inspection standards contained in 24 CFR Part 5, Subpart G,
Physical Condition Standards and Inspection Requirements, 2) family income meets the
income restrictions as set out in this Agreement, and, 3) eligible families are paying rent
for the units that is no more than 30% of 95% of area median income. A supplemental
certification will be provided when a family moves or a new unit is substituted.
An event of default by the owner will include any of the following:
a. Failure to provide an annual certification as required by the above paragraph.
b. Failure to provide a supplemental certification as required by the above
paragraph.
c. Failure to submit the annual report as required by the above paragraph, or
submission of an annual report that contains inaccurate information.
d. Failure to charge income eligible residents occupying affordable housing units
an amount that is within the monthly affordable rent limits.

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Upon an event of default and the owner’s failure to take corrective action to the
Secretary's satisfaction, the Owner agrees to provide the Secretary with liquidated
damages. The liquidated damages shall be in an amount no less than $1,000 per
violation per unit. Such liquidated damages shall be levied every three months
commencing with the end of the corrective period until compliance is achieved.
The Secretary may seek any other legal or equitable remedy, including but not
limited to, specific performance, in addition to liquidated damages.
13. Covenants to Run with Land. The Owner hereby subjects the Property to
the covenants, reservations and restrictions set forth in this Agreement. The Owner shall
not convey or transfer any of the Property without the prior written approval of the
Secretary. The Owner hereby declares its express intent that the covenants, reservations
and restrictions set forth herein shall be deemed covenants running with the land to the
extent permitted by law and shall pass to and be binding upon the successors in title to
the Property throughout the Term. Each and every contract, deed, mortgage or other
instrument hereafter executed covering or conveying the Property or any portion thereof
shall conclusively be held to have been executed, delivered and accepted subject to such
covenants, reservations and restrictions, regardless of whether such covenants,
reservations and restrictions are set forth in such contract, deed or other instrument. The
Secretary hereby agrees that, upon the request of the Owner made on or after the
expiration of the Term, the Secretary shall execute a recordable instrument approved by
the Secretary for purposes of releasing this Agreement of record. All costs and expenses
relating to the preparation and recording of such release shall be paid by the Owner.
14. Superiority. The parties hereto understand and agree that, notwithstanding
any provisions contained in this Agreement, or any other instrument or agreement
affecting the Property, the restrictions and covenants hereunder are not intended by the
parties hereto to either create a lien upon the Property, or grant any right of foreclosure,
under the laws of the jurisdiction where the project is located, to any party hereto or third
party beneficiary hereof upon a default of any provision herein, rather they are intended
by the parties hereto to constitute a restrictive covenant that is filed of record prior in time
to any instrument or agreement granting a security interest in the Project, and that,
notwithstanding a foreclosure or transfer of title pursuant to any other instrument or
agreement, the restrictive covenants and provisions hereunder shall remain in full force
and effect.
15. Other Agreements. The Owner represents and warrants that it has not and
will not execute any other agreements with provisions contradictory or in opposition to
the provisions of this Agreement and that, in any event, the provisions of this Agreement
are paramount and controlling as to the rights and obligations set forth herein and
supersede any other conflicting requirements.

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16. Binding Effect. Upon conveyance of the Property during the Term, the
Owner shall require its successor or assignee to assume its obligations under this
Agreement. In any event, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and/or assigns.
17. Amendment. This Agreement may not be modified except by an instrument
in writing executed by each of the parties that are signatories hereto.
18. Severability. Notwithstanding anything herein contained, if any one or more
of the provisions of this Agreement shall for any reason whatsoever be held to be illegal,
invalid or unenforceable in any respect, such illegality, invalidity or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall be
construed as if such illegal, invalid or unenforceable provision had never been contained
herein.
19. Notice to Tenants upon Expiration of Use Agreement. The Owner shall
notify each Tenant at least 90 days prior to the expiration of the Term of the Use
Agreement that after the expiration of the Term of the Use Agreement, the Owner will be
free to alter unit rents without the Secretary's approval (to the extent that the unit rents are
not otherwise regulated by the Secretary under a Housing Assistance Payments Contract),
and that the Tenant will be required to bear the entire cost of the rent, subject to any
applicable requirements or restrictions under the lease or under State or local law. The
notice to each Tenant shall also state: (a) The actual (if known) or the estimated unit rent
that each Tenant will be charged for the unit that Tenant occupies following the
expiration of the Term of the Use Agreement; (b) the difference between the actual (if
known) or estimated unit rent that each Tenant will be charged for the unit that Tenant
occupies, and the current unit rent paid by each Tenant the Terms of the Use Agreement.
The Owner shall provide the Secretary a certification that each Tenant has been notified
in accordance with this provision with an example of the text of the notice attached.
20. Recording. The Owner, for itself, its successors and assigns, hereby agrees
and acknowledges that this Agreement shall immediately be recorded by Owner, at no
expense to HUD, in the appropriate land records office and returned to HUD as soon as
possible following recordation and prior to prepayment.
21. Headings. The headings and titles to the sections of this Agreement are
inserted for convenience only and shall not be deemed a part hereof nor affect the
construction or interpretation of any provisions hereof.
22. Governing Law. This Agreement shall be governed by all applicable federal
laws and the laws of the state in which the Project is located.
23. Counterparts. This Agreement may be executed in any number of
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counterparts, all of which counterparts shall be construed together and shall constitute but
one agreement.
24. Signatory Authority. Any person signing this Agreement on behalf of a
party (e.g., the General Partner signing for an owner) represents that he or she has the
authority to bind the party for whom he or she is signing.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Use Agreement to be
executed and made effective as of the date first above written.

WITNESS/ATTEST:

OWNER:
____________________________,
a ______________ {limited/general
partnership, corporation}

_______________________________

By: _________________________________
Name: _______________________________
Title: ________________________________

{insert appropriate acknowledgment form}

WITNESS:

SECRETARY OF HOUSING
AND URBAN DEVELOPMENT,
WASHINGTON, D.C.

___________________________________

By: __________________________________
Authorized Agent
_________________________ Office

{insert appropriate acknowledgment form}

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Exhibit A
Legal Description

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Exhibit B
Carrying Charges Schedule

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Exhibit C
Membership Transfer Values

Form HUD-90066
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