Rules of the City of New York -

Title 28
Housing Preservation and Development

 §3-21  Limited Profit Housing Companies Having Federally Insured Mortgages Pursuant to §223(f) of the National Housing Act.
 (a)  General. Certain limited profit housing companies have been refinanced under §223(f) of the National Housing Act through the New York City Housing Development Corporation (HDC). Such housing companies remain subject to the provisions of the Private Housing Finance Law and the rules and regulations governing city-aided limited profit housing companies, except as provided otherwise by agreement with, or regulations of, the U.S. Department of Housing and Urban Development (HUD). In general, all matters involving management, maintenance, and operation shall be supervised by HUD except as otherwise set forth by statute or in this section. Compliance with the requirements of the Private Housing Finance Law shall continue to be supervised by HPD. To the extent that HUD should relinquish authority over matters such as rent setting and management supervision, those responsibilities shall revert back to HPD.
 (b)  Tenant/cooperator income and eligibility requirements. Tenant/cooperator income and eligibility standards, as set forth in the Private Housing Finance Law and §3-02 of these rules apply to housing companies refinanced under §223(f). This includes, but is not limited to, rules regarding filing of applications, tenant/cooperator eligibility, maintenance of waiting lists, occupancy priorities, income verification at admission and during occupancy, occupancy standards and primary residence requirements.
 Refinanced housing companies shall not be required, however, to submit applications to HPD for its prior approval. Instead, a post-audit of applications shall be conducted by HPD. Notwithstanding the foregoing, HPD reserves the right, where violations of law or of HPD rules are found, to reinstitute temporarily or permanently, a requirement of prior review and approval of all applications for admission to or transfer within a development. In addition, HPD and/or the housing company shall conduct income verification audits periodically either as a result of a spot check or other procedures. Tenant/cooperators and members of their household selected for audit shall be required to provide certified copies of IRS or New York State income tax returns, as requested and shall assume the cost of such copies.
 In refinanced housing companies which have "236" mortgage interest subsidy contracts, the housing companies are required to meet HUD income limits, where they differ from HPD, and any other federal law or regulation which may apply unless they are violative of New York State laws. HPD rules must be met regarding such things as waiting lists and submission of rent rolls. HUD does not prescribe the form of waiting list for "236" developments. If a "236" housing company maintains a single bound waiting list in chronological order, it shall also be required to maintain lists by bedroom size in chronological order for HPD.
 (c)  Surcharge billing, collection and remittance. Refinanced housing companies are obligated to bill and collect surcharges. HPD will continue to supervise the billing and collection of surcharges as required by the Private Housing Finance Law and §3-03 of this chapter. All agreements with managing agents must include a provision that it is the responsibility of the managing agent to bill and collect surcharges. Refinanced housing companies are obligated to recognize hardship cases as set forth in §3-03 of these rules.
 (d)  Housing company funds and bonds. The provisions of §3-04 apply to §223(f) housing companies.
 (e)  Resale of cooperative shares. The provisions of the Private Housing Finance Law and §3-06 of this chapter apply to mutual housing companies refinanced under §223(f). These include, but are not limited to, the provision that a mutual company electing to amend its by-laws regarding sale of shares, shall submit to HPD for its approval, a Board of Directors Resolution certified and acknowledged by the Secretary of the Corporation setting forth the adoption of the amendment and a fully executed copy of a by-law amendment certified by the Secretary of the Corporation.
 In the case of §223(f) refinanced mutual housing companies, where the appliances were included as security for the insured mortgage, the outgoing shareholder shall be required to leave behind the appliances which were in place at the time of refinancing or to replace them with appliances of equal size and amenities.
 (f)  Occupancy rights of family members and applicability of §235-f of the Real Property Law. The provisions of §3-02(o) and (p) apply to housing companies refinanced under §223(f).
 (g)  Joint ownership of shares. The provisions of §3-06(c) of these rules [and regulations] apply to housing companies refinanced under §223(f).
 (h)  Bequeathing of apartments. In no event may the right of occupancy in a unit in a refinanced housing company be bequeathed to another. Upon the death of the tenant/cooperator, the shares must be returned to the mutual housing company which will arrange for a sale pursuant to §3-06(a) of this chapter. Notwithstanding the foregoing, eligible members of the tenant/cooperator's immediate family in occupancy may acquire such shares if they meet the requirements of §3-02(p) of this chapter.
 (i)  Billing and collection of amounts due on subordinate mortgages. HPD shall bill and collect amounts due pursuant to the terms and conditions of the Subordinate Mortgage executed by each housing company in connection with its §223(f) refinancing. Each housing company is required to submit on a timely basis an annual audited financial statement. Such statement shall indicate whether or not surplus cash, as defined in the Regulatory Agreement, is available. If surplus cash is available, and is required to be paid to the City of New York pursuant to the Disbursement Agreement, a payment equal to the amount of surplus cash shall accompany the submission of the audited financial statement.
 (j)  Submissions. The following documents are required to be submitted to HPD and HDC on a timely basis:
 (1) Audited Financial Statement
 (2) Annual Budget (HDC only)
 (3) Surcharge Tabulation Sheets (HPD only)
 (4) Income Affidavits (HPD only)
 (5) Waiting Lists and Internal Transfer Lists (HPD only)
 (6) Original Insurance Policies to HDC
 (7) Copies of excess rent reports as required in the Federal 236 interest reduction subsidy program
 (8) Data relating to Senior Citizen Rent Increase Exemption Program (HPD only)
 (9) Rent Roll (at request of HPD)
 (10) Data relating to compliance by the housing company with any applicable law, rules, regulation or administrative order of the city, state or federal government (at request of HPD)
 (11) Amendments to Certificates of Incorporation, by-laws, and partnership agree- ments
 (12) Any and all books and records of the housing company which HPD directs to be made available
 (k)  Rent or carrying charge increases. HUD will be responsible for the approval of all rent/carrying charge increases with respect to all refinanced developments. HPD and HDC shall be notified by the housing company of its request for a rent/carrying charge increase. HUD shall notify HPD and HDC of its approval of any rent/carrying charge increase. A revised rent/carrying charge roll shall be submitted to HPD and HDC subsequent to implementation of an increase.
 (l)  Distributions of surplus cash. All distributions of surplus cash by any housing company require the prior written approval by HPD.
 (m)  Reserve requirements. Reserve requirements and releases from reserve accounts are subject to HUD supervision and approval.
 (n)  Annual physical inspection. HPD reserves the right to conduct a physical inspection of each development at any time. A copy of any inspection report prepared by HDC will be provided to HPD.
 (o)  Shelter rent certification. HPD shall continue to certify Shelter Rent pursuant to §33(1)(d) of the Private Housing Finance Law. All housing companies must make timely submission of all data required to enable HPD to make such certification.
 (p)  Notifications. Notification of changes in Board of Directors, officers, managing agents, attorneys and accountants shall be provided promptly to HPD and HDC.
 (q)  Transfer of ownership interests in rental developments. All transfers of ownership interests in rental developments including changes in general partners are subject to prior written approval of HPD and HDC.
 (r)  Terms of subordinate mortgage and disbursement agreement. Nothing contained in these rules shall limit obligations of housing companies pursuant to the Private Housing Finance Law or pursuant to the mortgage closing documents applicable to each development, including, without limitations, the terms and conditions of the Subordinate Mortgage and of the Disbursement Agreement.
 (s)  Managing agents agreements. All managing agents' contracts must be sent to HDC for written approval
 HDC will review and approve the selection of and agreements with managing agents of refinanced developments, including self-management, and renewals or extensions of prior managing agents' agreements. If HDC approves a managing agent's agreement, HDC will evidence its consent by letter or by executing the managing agent's agreement. HDC will submit the executed agreement to HUD for approval. HPD reserves the right, in conjunction with HDC, to review and approve agreements with managing agents of refinanced developments.
 If HDC disapproves a managing agent's agreement, HDC will advise the owner of the refinanced project and HUD of the reasons for the disapproval.
 (t)  Structural changes and major capital improvements. In order to remodel, add to, alter, remove or demolish the project or any portion thereof, the owner of a refinanced project must
 (1) notify HUD, HDC and HPD in writing, and
 (2) obtain the prior written consent of HDC and HUD (and, where necessary, HPD) except that such notification and consent is not required to perform such minor repairs as do not require a permit from the City of New York Department of Buildings or to perform emergency repairs.
 (u)  Lease terminations and renewals. HPD will apply the procedures set forth in §3-18 of this chapter to all refinanced projects so that no eviction proceeding may be instituted against any tenant/cooperator continuing to pay his or her rent/carrying charges without the issuance by HPD of a certificate of eviction.
 (v)  Notification of legal proceedings. The housing company or managing agent shall notify HPD, HDC and the Tenants Association of any litigation by or against the housing company which would have a material effect upon the financial condition of the housing company. Failure to notify HPD or the Tenants Association shall in no event be deemed to afford a defense to litigation.
 (w)  Removal of Board of Directors. The provisions of the Private Housing Finance Law and §3-13 of this chapter apply to housing companies refinanced under §223(f).
 (x)  Tenants Association. The provisions of the Private Housing Finance Law and §3-17 of this chapter apply to rental housing companies refinanced under §223(f).
 (y)  Senior citizen rent increase exemption program. The provisions of the Private Housing Finance Law and §3-19 of this chapter apply to housing companies refinanced under §223(f).
 (z)  Insurance. Refinanced housing companies must meet insurance requirements of HUD, HDC and HPD. HPD shall be named as an Additional Insured.

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