202 Use Agreement

Attachment 1

USE AGREEMENT
For Section 202 and 202/8 Projects that require HUD’s
approval to prepay their direct loan.
This Agreement entered into this _____ day of
________, 20__ by and between
______________________________ (herein called “Owner") and
the Secretary of Housing and Urban Development, acting by
and through the Assistant Secretary for Housing-Federal
Housing Commissioner (herein called “HUD"),
Witnesseth:
WHEREAS, HUD is directed, pursuant to Section 811 of
the American Homeownership and Economic Opportunity Act of
2000 (AHEO Act), as amended by Public Law 111 – 372, to
permit the Owner to prepay Section 202 direct loans; and
WHEREAS, in consideration of the promise to permit the
prepayment of the direct loan, and as required by Section
811 of AHEO Act Owner agrees to implement this Use
Agreement.
NOW THEREFORE, the parties agree as follows:
1.

Owner, for itself, its successors and assigns,
covenants with HUD that the Owner will continue to
operate the project on terms at least as
advantageous to existing and future tenants as the
terms required by the original Section 202 direct
loan agreement and, where applicable, Section 8 or
any HUD rental assistance payments contract and all
applicable Federal regulations for not less than the
twenty years following the maturity date of the
original Section 202 direct loan. Accordingly, this
Use Agreement shall remain in effect until [insert
expiration date];

2.

Where applicable:
a. Subject to the availability of appropriations and so
long as Owner is in compliance with all HUD
requirements, including but not limited to this Use
Agreement, HUD shall provide, and Owner shall
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accept, renewals of the Section 8 Housing Assistance
Payments contract in accordance with the relevant
HUD requirements related the Section 202 and 202/8
program at that time.
b. Subject to the availability of appropriations,
projects selected to receive the Senior Preservation
Rental Assistance Contracts (SPRACs) or any other
HUD rental assistance, shall comply with the
requirements of the particular HUD rental assistance
program.
3.

In the event of a breach or a threatened breach of
any of the above covenants and agreements by the
Owner, HUD and/or any tenant as a third-party
beneficiary shall be entitled to institute legal
action to enforce performance and observance of such
covenants and agreements and to enjoin any acts
which violate such covenants and agreements. HUD
and/or any tenant as a third-party beneficiary may
also seek an award of damages and/or other relief as
may be appropriate.

4.

Owner shall not impede the reasonable efforts of
tenants to organize pursuant to 24 CFR Part 245, or
any successor regulations of Part 245, or
unreasonably withhold the use of any community room
or other available space appropriate for meetings
which is part of the mortgaged property when
requested by: (i) a resident tenant organization in
connection with the representational purposes of the
organization; or (ii) tenants seeking to organize or
to consider collectively any matter pertaining to
the operation of the mortgaged property.

5.

When the 202 Direct Loan project initially
refinances the 202 Direct Loan, the Owner, for
itself, its successors and assigns, hereby agrees
and acknowledges that this Use Agreement shall be
recorded in the appropriate land records.
[Subsequent refinancings of the 202 Project do not
require a re-recording of this Use Agreement.]

6.

Consistent with the tenancy eligibility
requirements, if any, of the original Section 202
Direct Loan agreement, Owner will accept all forms
of HUD rental assistance when offered for units that

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do not have section 8 or any other HUD rental
assistance for the life of the Use Agreement.
7.

Upon execution of the refinancing for the project,
as approved by HUD, Owner must use the proceeds that
result from the refinancing in a manner that is
advantageous to the tenants of the project. Or,
Owner must use the proceeds in the provision of
affordable rental housing and related social
services of elderly persons that are tenants of the
project or are tenants of other HUD assisted senior
housing by the nonprofit owner, private nonprofit
project sponsor or private nonprofit organization
project developer. The following are examples of
allowable uses of the proceeds pursuant to AHEO:
(a) for up to 15 percent of the cost of increasing the
availability or provision of supportive services,
which may include the financing of service
coordinators and congregate services. HUD may
waive the 15 percent limitation, as necessary, to
better enable seniors to age in place, if a
waiver is sought by a nonprofit owner, sponsor or
organization.;
(b) rehabilitation, modernization, or retrofitting of
structures, common areas, or individual dwelling
units, including reducing the number of units by
reconfiguring units that are functionally
obsolete, unmarketable, or not economically
viable;
(c) construction of an addition or other facility in
the project, including assisted living
facilities (or, upon the approval of the
Secretary, facilities located in the community
where the project sponsor refinances a project
under this section, or pools shared resources
from more than one such project);
(d) rent reduction of unassisted tenants residing in
the project;
(e) rehabilitation of the project to ensure long-term
viability; and
(f) payment to the project owner, sponsor, or thirdparty developer of a developer’s fee in an amount
not to exceed or duplicate: (i) in the case of a
project refinanced through a State low income
housing tax credit program, the fee permitted by
the low income housing tax credit program as

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calculated by the State program as a percentage
of acceptable development cost as defined by that
State program; or (ii) in the case of a project
refinanced through any other source of
refinancing, 15 percent of the acceptable
development costs (includes, as applicable, the
cost of acquisition, rehabilitation, loan
prepayment, initial reserve deposit and
transaction costs).
8.

To ensure Owner’s compliance with the use of
proceeds requirements found in section 7, Owner
shall comply with all HUD administrative
requirements with respect to those proceeds.

9.

Ownership of the project will at all times be
controlled by a nonprofit mortgagor entity or a
limited partnership entity of which the general
partner is a: (1) nonprofit affordable housing
provider; (2) for profit corporation wholly owned
and controlled by one or more non-profit affordable
housing provider; or (3) a limited liability company
wholly owned and controlled by one or more nonprofit affordable housing provider.

10. Owner will comply with the provisions of
Federal, State or local law prohibiting
discrimination in housing on the grounds
color, religion or creed, sex, handicap,
status or national origin, including the
Housing Act of 1968, as amended.

any
of race,
familial
Fair

11. The rent charged for each unit shall not exceed the
upper limit of the range shown for such type of unit
on a rental schedule approved in writing by HUD, and
shall include the reasonable use of all utilities
shown on said schedule, but in no event shall the
total gross monthly rents for all dwelling units
exceed the gross monthly dwelling income for all
units approved by HUD on the rental schedule.
12. No increase will be made in the amount of the gross
monthly dwelling income for all units as shown on
the rental schedule unless such increase is approved
by HUD, who will at any time entertain a written
request for an increase properly supported by

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substantiating evidence and within a reasonable time
shall approve or deny such request.
13. Owner shall maintain the premises and equipment,
appurtenant thereto, in good repair and condition.
14. The books and accounts of the operations of the
property and of the project shall be kept in
accordance with the relevant HUD requirements
related to the Section 202 and 202/8 program.
15. Within ninety (90) days following the end of each
fiscal year, Owner shall provide a complete annual
financial report based upon an examination of the
books and records of the project prepared in
accordance with the requirements of HUD and
certified by a Certified Public Accountant, or other
person acceptable to HUD.
16. Owner further covenants and agrees that if Owner
conveys title to the project prior to the Use
Agreement’s expiration, Owner will prior to transfer
of title: (1) confirm the purchaser has been
approved by HUD and (2) require the purchaser to
assume the obligations of this Use Agreement.
17.

Owner shall provide to HUD (or to such third party
as HUD may, in its sole discretion, determine to
have the monitoring function under this Agreement),
promptly following receipt of a written request from
HUD (or from such third party), copies of all
business or any other documents regarding the
Housing Project, so that HUD may evaluate Owner's
compliance with the terms of this Agreement. In
addition, Owner shall permit representatives of HUD
(or any third party given the monitoring
responsibility) following notice from the HUD (or
from the third party), to examine the originals of
all such documents, at the Project's office during
regular business hours.

18. Owner must certify annually by _________ of each
year (insert date within 30 calendar days of the
anniversary date of this Agreement), to the local
HUD field office, or such other location as
determined by HUD, that it is operating the Project
in compliance with this Agreement and, more

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specifically, that all of the individual units, as
well as the physical structure of the project as a
whole, for example grounds and equipment, comply
with all applicable codes and requirement of this
Agreement or that a remedial program to correct any
existing deficiencies has been implemented.
Should any of the above covenants be held invalid in
whole or in part, it shall not affect or invalidate the
balance of such covenant or any other covenants.
NOW THEREFORE, in consideration of the mutual promises set
forth herein, the parties hereto agree as follows:
In witness whereof, the parties hereto have hereunto
caused these presents to be executed on their behalf and
their seals affixed the day and year written below.

WITNESS
(Owner)
BY
_________________________________ ________________________
Secretary of Housing
and
Urban Development
Acting
by and through the
Assistant Secretary
for Housing - Federal
Housing Commissioner

BY
___________________________________
________________________
(Authorized Agent)
ACKNOWLEDGEMENT BY OWNER BEFORE NOTARY PUBLIC
(Complete according to requirements of state of execution.)
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Attachment 1
ACKNOWLEDGEMENT BY COMMISSIONER:)
STATE OF________________________) SS:
CITY AND COUNTY OF ___________________)
On this _______________ day of
_______________________,
20___, before me ______________________________, a Notary
Public in and for the City and County of ________________,
_____________________, appeared _________________________
to
me personally known and known to me to be the duly
Authorized Agent of ________________________________, and
the person who executed the aforesaid instrument bearing
the
date of __________________, 20___, and acknowledged that he
executed the aforesaid instrument for and on behalf of
_______________________________ for the purposes herein.

(NOTARY PUBLIC)
My Commission
Expires:______________________________________
ACKNOWLEDGEMENT BY COMMISSIONER:)
STATE OF________________________)
CITY AND COUNTY OF _____________)

SS:

ON this __________________ day of ________________,
20___, before me ___________________________, a Notary
Public in and for the City and County of ____________,

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________________, appeared ______________________________
to
me personally known and known to me to be the duly
Authorized Agent of the Secretary of Housing and Urban
Development acting by and through the Assistant Secretary
for Housing - Federal Housing Commissioner, and the person
who executed the aforesaid instrument bearing the date of
_________________, 20___, and acknowledged that he executed
the aforesaid instrument for and on behalf of the said
Secretary of Housing and Urban Development for the purposes
herein.
___________________________________________________________
NOTARY PUBLIC)
My Commission Expires:_____________________________________

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