IMPORTANT UPDATES FOR ORGANIZATIONS FORMING A HOUSING DEVELOPMENT FUND CORPORATION WITH THE NEW YORK STATE HOMES AND COMMUNITY RENEWAL

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1 December 2013 REAL PROPERTY ALERT IMPORTANT UPDATES FOR ORGANIZATIONS FORMING A HOUSING DEVELOPMENT FUND CORPORATION WITH THE NEW YORK STATE HOMES AND COMMUNITY RENEWAL In order to form a housing development fund corporation ( HDFC ) in New York State, you need to designate a supervising agency. NY PHFL, Art. 11, Sec For New York City projects, the supervising agency may be either the City of New York Department of Housing Preservation and Development ( HPD ) or the New York State Homes And Community Renewal ( HCR ). Typically a sponsor selects an agency based on the project s primary funding source. If you have questions about which agency to select you may want to consult your project manager or an attorney. Both agencies have recently revised the approval process for new HDFCs. This alert outlines HCR s requirements. The new submission requirements will be required of all sponsor corporations for all new HDFC incorporation requests. A sample of several of the required documents are attached for your information and use. The following documentation should be submitted to HCR: 1. cover letter; 2. an executed original of the proposed HDFC Certificate of Incorporation using the HCR form, which shows that the HDFC complies with the not-for-profit corporation law and Section 573 of the Private Housing Finance Law (Exhibit A); 3. a copy of the sponsor's Certificate of Incorporation, or, if unincorporated, a copy of the sponsor's by-laws; 4. proof of the sponsor corporation's good standing in the form of a Certificate of Good Standing from the Secretary of New York State, or an attorney's opinion letter; 5. a copy of the board resolution authorizing the sponsor to organize the proposed HDFC; 6. an executed Omnibus Certification (Exhibit B);

2 7. the sponsor's current financial statement; 8. the HCR Relevant Experience form, which is completed for the sponsor corporation (Exhibit C). If the sponsor corporation does not have prior housing experience, the form must be submitted for other pertinent members of the project development team. Corporate resumes which outline specific housing development experience will be accepted in lieu of this form. 9. a brief narrative which describes and details the proposed housing project and the sponsor (Exhibit D); 10. evidence of permanent funding commitment(s) if the HDFC term is proposed as perpetual, if the HDFC does not have permanent funding the COI initial term will be limited to 3 years but can be renewed or become perpetual when a funding commitment is received; 11. authorization to release information for sponsor of proposed HDFC (Exhibit E); and; 12. a completed federal tax return (IRS Form 990 for a non-profit organization) for the sponsor corporation for the last applicable calendar year. Please also note that the submission requirements are subject to change. The HDFC Article XI incorporation documents requested above can be sent to Kurian Chattathil at the following address: NYS Homes and Community Renewal, State Street, Hampton Plaza, Room 603S, Albany, NY 12207, ATTN: Kurian Chattathil. This alert is meant to provide general information only, not legal advice. Please contact Hedwig O'Hara at hohara@lawyersalliance.org (212) ext. 226 if you have any questions about this alert. Lawyers Alliance for New York is the leading provider of business and transactional legal services for nonprofit organizations that are improving the quality of life in New York City neighborhoods. Our network of pro bono lawyers from law firms and corporations and staff of experienced attorneys collaborate to deliver expert corporate, tax, real estate, employment, intellectual property, and other legal services to community organizations. By connecting lawyers, nonprofits and communities, we help nonprofits to develop affordable housing, stimulate economic development, promote community arts, and operate and advocate for vital programs for children and young people, the elderly, and other low-income New Yorkers.

3 Exhibit A CERTIFICATE OF INCORPORATION OF [ORGANIZATION NAME] HOUSING DEVELOPMENT FUND COMPANY, INC. PURSUANT TO ARTICLE XI OF THE PRIVATE HOUSING FINANCE LAW AND SECTION 402 OF THE NOT-FOR-PROFIT CORPORATION LAW We, the undersigned, for the purpose of forming a company pursuant to Article XI of the Private Housing Finance Law and the Not-for-profit Corporation Law, both of the State of New York, hereby certify: I The name of the proposed company is [Organization Name] Housing Development Fund Company, Inc. and is hereinafter referred to as the "Company." II This Company has been organized exclusively to develop, on a non-profit basis, a housing project for persons of low income. The Company is empowered to do and perform all acts reasonably necessary to accomplish the purposes of the Company, including the execution of a Regulatory Agreement with a funding agency or any agency or instrumentality thereof, and such other instruments and undertakings as may be necessary to enable the Company to secure the benefits of financing. This Certificate of Incorporation may not be altered or amended without the consent of both the funding agency, if any, and the State Commissioner of Housing and Community Renewal. This Company is a Corporation as defined in subparagraph (a) (5) of Section 102 of the Not-for-profit Corporation Law. This Company is a Type D Not-for-profit Corporation under Section 201 of the Not-for-profit Corporation Law. Notwithstanding any other provisions of these articles, the Company is organized exclusively for one or more of the following purposes: religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, as specified in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, and shall not carry on any activities not permitted to be carried on by a corporation exempt from Federal

4 income tax under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or corresponding provisions of any subsequent Federal tax law. All income and earnings of the Company shall be used exclusively for corporate purposes. No part of the net income, net earnings or assets of the Company shall inure to the benefit or profit of any private shareholder, firm, corporation, association or individual (except that reasonable compensation may be paid for services rendered to or for the Company), and no private shareholder, firm, corporation, association or individual shall be entitled to share in the distribution of any of the corporate assets on dissolution of the Company. No substantial part of the activities of the Company shall be the carrying on of propaganda, or otherwise attempting to influence legislation (except as otherwise provided by the Internal Revenue Code Section 501(h)). The Company may not participate in, or intervene in (including the publication or distribution of statements), any political campaign on behalf of or in opposition to any candidate for public office. III In the event of the dissolution of the Company or the winding up of its affairs, the Company's property after payment of necessary expenses thereof shall not be conveyed or distributed to any individual or organization created or operated for profit, but shall, subject to the approval of a Justice of the Supreme Court of the State of New York, be conveyed or distributed only to an organization or organizations created and operated for non-profit purposes substantially similar to those of the Company, and which shall qualify as an organization exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, provided, however, that the Company shall at all times have the power to convey all of its property to the Federal Housing Commissioner or his nominee. IV If the Company receives a temporary loan or advance from the Housing Development Fund, or a municipal housing development fund, as established by, or pursuant to, Article Eleven of the Private Housing Finance Law, it shall be authorized to enter into an agreement with the Commissioner of Housing and Community Renewal of the State of New York, or the supervising agency as the case may be, providing for regulation with respect to rents, profits, dividends and disposition of property or franchises. If the Company receives a temporary loan or advance from the Housing Development Fund, or a municipal housing development fund, as established by, V

5 or pursuant to, Article Eleven of the Private Housing Finance Law, the Commissioner of Housing and Community Renewal of the State of New York, or the supervising agency, as the case may be, shall have the power, if, in his, or its, discretion, he, or it, determines either that such temporary loan or advance is in jeopardy of not being repaid, or that the proposed housing project for which such temporary loan or advance was made is in jeopardy of not being constructed, to appoint to the board of directors of such Company a number of new directors, which number shall be sufficient to constitute a majority of such board, notwithstanding any other provision of this certificate of incorporation or any other provision of law. VI (Use only if Company is to receive funding from the Housing Trust Fund Corporation) If the Company receives a payment, grant or loan from the Housing Trust Fund Corporation, the Housing Trust Fund Corporation shall have the power, if, in its discretion, it determines either that any such payment, grant or loan is in jeopardy of not being repaid, or that the proposed housing project for which the payment, grant or loan was made is in jeopardy of not being constructed or not being operated in compliance with the terms of the payment, grant or loan, to appoint to the board of directors of such Company a number of new directors, which number shall be sufficient to constitute a majority of such board, notwithstanding any other provision of this certificate of incorporation. The project shall be the sole asset and business purpose of the Company. VII Nothing contained in the Certificate of Incorporation shall authorize the Company to undertake or carry out any of the activities specified in Section 404 of the Not-for-profit Corporation Law. VIII The office of the Company is to be located in the County of and State of New York. By-laws of the Company may be adopted by the directors at any regular meeting or at any special meeting called for that purpose, so long as they are not inconsistent with the provisions of these Articles, Article Eleven of the Private Housing Finance Law, or the By-laws of the members. IX

6 X The number of directors of the Company shall be not less than three nor more than eleven. The exact number of directors shall be set forth in the By-Laws. The names and residences of the directors of the Company until the first annual meeting are: XI Name Residences (If within a city, give house no., street, city or other particular description) XII All of the incorporators to this Certificate of Incorporation are of full age. At least two-thirds of them are citizens of the United States, and at least one of the persons named as a director of the Company is a citizen of the United States and a resident of the State of New York. XIII The Company hereby designates the Secretary of State as its agent upon whom process may be served. The post office address of the Company to which the Secretary of State shall mail a copy of any process served upon him as against the Company is. XIV (If the Company is to be perpetual, omit this Section.) The duration of the Company shall be for a period of three years from the date of filing this Certificate of Incorporation with the Secretary of State. IN WITNESS WHEREOF, we have made, subscribed and acknowledged this Certificate of Incorporation this day of, 20. Name:

7 STATE OF NEW YORK ) ) ss.: COUNTY OF ) On, 201, before me personally came to me known and known to me to be the same person(s) described in and who executed the foregoing Certificate of Incorporation of Housing Development Fund Company, Inc. and he / she / they duly severally acknowledged to me that he / she / they executed the same. Notary Public

8 Exhibit B OMNIBUS CERTIFICATION FOR HOUSING DEVELOPMENT FUND CORPORATION FORMATION On my behalf and on behalf of the parties listed herein (collectively referred to as the Sponsor), I hereby certify to the NYS Division of Housing & Community Renewal ( DHCR ) that I am duly authorized to file this submission, and that the following statements and information, including information contained in any attachments to this Omnibus Certification are to the best of my knowledge, based on due inquiry, true, accurate and complete. I agree to immediately inform the Agency of any material change in the information provided herein and acknowledge that a false certification or failure to disclose material information shall be grounds denial of the application for formation of a Housing Development Fund Corporation ( HDFC ). The information is submitted to the Agency in order that the Sponsor may be approved as the controlling principal of the [Organization Name] HDFC. For the period beginning five (5) years prior to the date of this omnibus certification: No The Sponsor has not been a principal in a project in which a mortgage has ever been in default, assigned or foreclosed or for which relief by a lender has been granted. No The Sponsor has not experienced a default or non-compliance under any HUD, USDA, ESDC, HFA, AHC, DHCR,HTFC or any other federal, state or local loan or grant. No There are no unresolved findings raised as a result of audits, management reviews or other investigations by federal, state or local government entities concerning the Sponsor or projects in which the Sponsor is a principal. No Neither the Sponsor, its board members, executive directors or financial officers have been convicted of a felony, nor is the Sponsor presently the subject of a complaint or indictment charging a felony (a felony is defined as any offense punishable by imprisonment for a term exceeding one year but not including any offense classified as a misdemeanor under the laws of a state and punishable by imprisonment or two years or less). No The Sponsor has not been suspended, disbarred or otherwise restricted by any department, agency or authority of the federal government or any state or local government from doing business with such department, agency or authority. No The Sponsor is not currently the subject or any bankruptcy or insolvency

9 proceeding nor has the Sponsor been the subject of a bankruptcy or insolvency proceeding for the time period covering this omnibus certification. No The Sponsor has not defaulted on an obligation covered by any surety or performance bond and has not been the subject of a claim under an employee fidelity bond. No There is no hazardous violations, or immediately hazardous violations filed against any project for which the sponsor has an ownership or management interest for failure to comply with local building, housing maintenance and/or construction codes, the New York Multiple Dwelling Law, or the New York Multiple Residence Law. Attached N/A Provide a description of any pending or current litigation or judgments related to the ownership or operation of any real estate which could materially and adversely impact the financial condition of the Sponsor. If the answer to any of these questions is NO, please provide a signed, detailed explanation on a separate page. Provide the names and titles of all officers, directors, executive staff, financial officers and board members of the Sponsor: (add lines if needed) Name Title Omnibus certification completed by: Print Name: Date: Title: Name of the Sponsor: Tax ID# of the Sponsor:

10 Exhibit C

11 Exhibit D Sample Narrative [PROPERTY ADDRESS], [BOROUGH], NY The housing project is to consist of an approximately [###]-unit new low-income apartment building at [PROPERTY ADDRESS] in the [BOROUGH], on land to be purchased by the corporation. It is anticipated that the development of the project will be financed by a variety of government grants and loans, and by the syndication of lowincome housing tax credits. It is anticipated that approximately [###] percent of the apartments will be set aside for [TYPE OF TENANTS]. [Social services for the tenants will be available on-site and will be provided by the sponsor, [COMPANY NAME].] [COMPANY NAME], the sponsor, is a not-for-profit corporation formed in [YEAR] to provide housing and services for people with [TYPE OF TENANTS]. It has developed approximately [###] units of supportive housing in New York City, with grants and loans from [CITY AND STATE ORGANIZATIONS]. [COMPANY NAME] has social service contracts with the [CITY AND STATE ORGANIZATIONS].

12 Exhibit E AUTHORIZATION TO RELEASE INFORMATION I, on behalf of (sponsor), hereby consent to and authorize DHCR, as part of application to form a Housing Development Fund Corporation ( HDFC ), to request, access and review any and all information concerning the sponsor with respect to application for the formation of an HDFC, and only as necessary or desirable, in the sole discretion of DHCR, for final determination of character and competence to participate in an HDFC as required under Article 11 of the Private Housing Finance Law (the Statute ). I hereby authorize the release of Information in order to permit DHCR to comply with the requirements of the Statute. I understand and acknowledge that the sponsor disclosing information to DHCR is not responsible for any negligent misrepresentation or omission, and I agree to hold DHCR and such disclosing parties harmless from and against all claims, actions, suits or other proceedings, and any and all losses, judgments, damages, expenses or other costs (including reasonable counsel fees and disbursements), arising from or in any way relating to their disclosure. I understand that DHCR is requiring this release solely for the purpose of conducting a Lexis/Nexis review of the sponsor corporation. By completing and signing this form, I acknowledge and agree to the above and also confirm that I am authorized by the board member of the sponsor to sign this document on behalf of the sponsor. Name of the sponsor: Signature: Name of the Signatory Title: (Last First Middle Initial) Tax ID # of the sponsor: Date: