Department of Housing & Community Development Chapter 40T Guidance on Notices, 760 CMR 64.03: Introduction I. Notices, General Content A. Basic Requirements for Notices B. Supplemental Information to Institutional Recipients C. Additional Information to Tenant on Request II. Contents of Specific Notices A. Notice of Future Termination B. Notice of Intent to Complete Termination C. Notice of Intent to Sell to a Preservation Purchaser D. Offer to Sell III. Notices Relating to Renewable Affordability Restrictions A. Notice to Tenants B. Notice to Institutional Recipients IV. Curative Notices A. Notice of Future Termination and Notice of Intent to Complete Termination B. Notice of Intent to Sell to a Preservation Purchaser C. Effect of Notices Introduction This Guidance is intended to provide assistance to property owners and managers about the information that the Department expects to receive in notices pursuant to M.G.L. c. 40T, 2. The level of detail provided in the Guidance is too specific to warrant inclusion in the text of 760 CMR 64.00, the regulation governing M.G.L. c. 40T.
I. Notices, General Content A. As provided in 760 CMR 64.03, there are four standard forms of notice applicable under M.G.L. c. 40T: the notice of the future Termination of an Affordability Restriction (2-year notice); the notice of the Owner s intent to complete the Termination (1-year notice); the Offer to Sell; and the Notice of Intent to Sell to a Preservation Purchaser. Under M.G.L. c. 40T and 760 CMR 64.03, the basic information regarding ownership and contact information that is required in each of these notices is the same and must be sent to both tenants and Institutional Recipients. B. Supplemental Information to Institutional Recipients. In addition to the information required to be provided to Tenants by 760 CMR 64.03, Owners required to serve a notice pursuant to M.G.L. c. 40T, 2, and/or 760 CMR 64.03, shall provide the following supplemental information to Institutional Recipients: 1. Unit and Occupancy Information. Each supplemental information packet shall contain information required for Institutional Recipients to understand the current occupancy of the property, to facilitate analysis of the aggregate impact of the proposed action or occurrence on the affordability of the property as a whole, including: the total number of units in the development, including a break-down by the number of bedrooms per unit; the total number of Publicly-assisted Housing units under each existing Affordability Restriction, including a break-down by the number of bedrooms per unit; and the number of Publicly-assisted Housing units restricted to occupancy by and the number occupied, as of the date of the notice, by each of Low, Very Low, or Extremely Low Income households under each existing Affordability Restriction, including a break-down by the number of bedrooms per 2
unit. The Owner shall indicate if occupancy is restricted by income only as of the time of initial occupancy or throughout tenancy. In place of a separate calculation of the number of units occupied by each of Low, Very Low, or Extremely Low Income households under each the existing Affordability Restriction(s), the Owner may attach to the supplemental information included above, a rent roll with unit numbers and tenant names omitted showing the most recently certified income and tenant s portion of rent for each Publicly-assisted Housing unit, along with the unit s bedroom size, and the applicable Subsidy(ies). 2. Supplemental Information to Institutional Recipients, Summary of Affected Affordability Restrictions. a. With each supplemental information packet, the Owner shall also provide a summary of the affected Affordability Restriction, as determined in 760 CMR 64.03 (2) a. 3., or a copy of the document establishing the affected Affordability Restriction (except that, if such summary or document was submitted to the Department with a previous Notice, the Owner may instead identify the previous submission by date). If an Owner chooses to identify a previous Notice by date, the Owner shall provide a copy of such previous Notice with summary or Affordability restriction upon request to any of the parties entitled to receive the supplemental information packet. b. A summary of an Affordability Restriction shall include, or the copy of the Affordability Restriction provided in lieu of a summary must disclose, the following: 3
i. the method by which the tenant s portion of rent and total rent are calculated, and the method by which rents can be increased, or a reference to any relevant statute(s), regulation(s), and/or administrative guidance providing such information, ii. the date that the Affordability Restriction will expire if no further action is taken by the Owner, iii. the terms applicable to early termination and grounds on which the Affordability Restriction may be terminated early, iv. whether income restrictions apply only upon entering the program or throughout tenancy, v. whether the restrictions are applicable to specific units within the building or are allowed to float among units depending on occupancy, and vi. whether there is any obligation or right to renew the Affordability Restriction; if so, the applicable date and time period of the renewal; and an indication of the intention of the Owner to exercise any right to renew, if applicable. C. Additional Information to Tenant on Request. Upon request by an individual Tenant or any person who submits comments in regard to any possible Department action in regard to the Notice, the Owner shall provide to such party copies of all information required to be provided to Institutional Recipients pursuant to this Guidance. The Owner may provide such information to Tenant(s) in the manner provided in 760 CMR 64.09 (4). II. Contents of Specific Notices 4
A. Notice of Future Termination. A Notice of Future Termination shall also: 1. state that an Affordability Restriction may Terminate; and 2. state the date on which each Affordability Restriction may Terminate. A form Notice of Future Termination, combined with a form Notice of Intent to Complete Termination, is available on the Department s website on the Chapter 40T webpage, http://www.mass.gov/hed/economic/eohed/dhcd/legal/mgl-chapter- 40t.html. B. Notice of Intent to Complete Termination. A Notice of Intent to Complete Termination shall also: 1. state the date upon which the Owner intends to complete Termination of an Affordability Restriction or the date upon which such Termination will occur without action by the Owner; and 2. acknowledge that, if the Owner pursues a potential Sale of the property, the Department or its Designee shall have a right of offer pursuant to M.G.L. c. 40T, 3, unless the proposed Sale is exempted under M.G.L. c. 40T, 6. 3. identify any previous Notice of Future Termination in regard to the relevant Affordability Restrictions by date and provide a copy of such Notice, together with any accompanying documents, to the Department and/or CEDAC upon request. A form Notice of Future Termination, together with a form Notice of Intent to Complete Termination, is available on the Department s website on the Chapter 40T webpage, http://www.mass.gov/hed/economic/eohed/dhcd/legal/mgl-chapter-40t.html. C. Notice of Intent to Sell to a Preservation Purchaser. A Notice of Intent to Sell to a Preservation Purchaser shall also: 5
1. state that the Owner intends to pursue a sale of the Publicly-assisted Housing to a Preservation Purchaser; 2. state that upon identifying a specific Preservation Purchaser with whom the Owner is willing to enter a Purchase Contract, the Owner intends to request an exemption to the Department s right of first offer and right of first refusal pursuant to the requirements of M.G.L. c. 40T, 6 (a) (iv), (v), (vi), or (vii), and 760 CMR 64.07; and 3. specifically identify any Affordability Restriction(s)that may be subject to Termination or Cessation in connection with the Sale, and the number of units that would be affected by the Termination or Cessation. D. Offer to Sell. An Offer to Sell given pursuant to M.G.L. c. 40T, 3 shall also: 1. state that the Department or its Designee has a right of offer pursuant to M.G.L. c. 40T, 3; 2. state that the Department or its Designee must exercise its offer within 90 days of the Department s receipt of the Offer to Sell (or such longer time as the Owner may agree to); and 3. specifically identify any Affordability Restriction(s)that may be subject to Termination or Cessation in connection with the Sale, and the number of units that would be affected by the Termination or Cessation. III. Notices Relating to Renewable Affordability Restrictions. Where Publicly-assisted housing is subject to a project-based Section 8 contract or other Affordability Restriction which by its terms is renewed upon intervals of less than two years, as described in 760 CMR 64.03(4)(e), and an Owner intends to renew the 6
Affordability Restriction prior to its expiration, in lieu of delivering recurrent Notices of Termination the Owner may provide notice pursuant to 760 CMR 64.03 (4) (e) by providing each affected Tenant with a Notice, to be countersigned by the Tenant, at initial lease execution and at the time of such Tenant s annual lease renewal. A. Notice to Tenants. Notices to Tenants pursuant to 760 CMR 64.03 (4) (e) shall contain: 1. the information required in 760 CMR 64.03 (2) (a) 2., 2. the renewal term of the applicable Affordability Restriction and associated Subsidy, if any (including the date on which the program will terminated if not renewed), and 3. a statement by the owner committing to take reasonable and diligent actions to seek all possible renewals of the Affordability Restriction and associated Subsidy during the following two years. B. Notice to Institutional Recipients. In addition to the information required under IV. (A), the Owner shall provide to each Institutional Recipient within thirty days following renewal of any such Affordability Restriction and associated Subsidy, evidence of such renewal together with a certified statement of 1. the information required in 760 CMR 64.03 (2) (a) and 760 CMR 64.03(2)(d), 2., and 3. the next date upon which such Termination will occur without action by the Owner by the applicable subsidizing agency s denial of or failure to renew a Subsidy. IV. Curative Notices A. Notice of Future Termination and Notice of Intent to Complete Termination. 7
1. The Department may determine upon request by the Owner that a defect in a Notice, including either a Defective Notice or an incomplete Curative Notice, was a de minimis defect that caused no substantial harm to the interests protected by M.G.L. c. 40T, in which case the Department may determine (in the case of a Defective Notice) that no Curative Notice is required and therefore that no Extended Time Period is required, or (in the case of an incomplete Curative Notice) that the Extended Time Period shall commence as of the date of the incomplete Curative Notice, and that other undertakings by the Owner, which may include provision of additional information in a subsequent Curative Notice, are sufficient to cure any remaining defects in the Defective or incomplete Curative Notice. 2. If, in circumstances requiring a curative notice, an Affordability Restriction imposed by a Government Program is being terminated and replaced by an otherwise materially identical affordability requirement imposed by an affordable housing program not listed in the definition of publicly-assisted housing in G.L. c. 40T, 1, in the context of providing such curative notice, the Owner shall agree in an Equivalent Affordability Restriction: (a) to provide the Tenants with a Notice equivalent to a Notice of Future Termination at least two years and not more than three years before the effective end date of the affordability requirement imposed by such affordable housing program (whether the affordability requirement ends pursuant to its own terms without further action by the Owner, or earlier due to action by the Owner such as pre-payment of a loan imposing the affordability requirement) and, if such notice is not timely provided, to extend the effective end date of the 8
affordability requirement so as to ensure a 2-year notice period to Tenants of the information required by such notice. (b) to provide the Tenants with a Notice equivalent to a Notice of Intent to Complete Termination at least 1 year and not more than 18 months before the effective end date of such replacement affordability requirement (whether the affordability requirement ends pursuant to its own terms without further action by the Owner, or earlier due to action by the Owner) and, if such notice is not timely provided, to extend the effective end date of the affordability requirement so as to ensure a 1-year notice period to Tenants of the information required by such notice. (c) to provide the Tenants with a rent protections equivalent to those provided for by G.L. c. 40T, 7, if such G.L. c. 40T, 7, were otherwise applicable, for three years from the effective end date of such affordability requirement as the same may be extended if notices are not timely pursuant to Sections V (A) (2) (a) and (b). 3. As a part of any Curative Equivalent Affordability Restriction, except a Curative Equivalent Affordability Restriction covered by Section V (A) (2) above replacing Affordability Restrictions covered by M.G.L. c. 40T with comparable restrictions under an affordable housing program not qualified as Publicly-Assisted Housing pursuant to M.G.L. c. 40T, 1, the Owner shall agree: (a) to provide to the parties listed in 760 CMR 64.03 (3) (a) 2. 5. and the Tenant Organization a copy of the Curative Equivalent Affordability Restriction, with 9
recording information from the applicable registry of deeds or registry district of the land court if applicable. (b) to provide each Tenant who would be adversely affected by the Termination if the Curative Equivalent Affordability Restriction were not required with a Plain English notice of the Tenant s rights under the Curative Equivalent Affordability Restriction, including the end date of the Extended Time Period, the method of calculation of the Tenant s portion of the rent during the Extended Time Period, and the fact that the Tenant might have further rent protections after the end of the Extended Time Period pursuant to M.G.L. c. 40T, 7. (c) to provide the Tenants with a Notice equivalent to a Notice of Intent to Complete Termination at least one year and not more than 18 months before the end of the Extended Time Period, unless the Extended Time Period is less than 18 months in duration; and (d) that when a unit is or becomes vacant more than 12 months remaining in the Extended Time Period, the Owner will take reasonable and diligent actions to rent the unit to a tenant qualified for the terminating Affordability Restriction for the remainder of the Extended Time Period with the tenant s portion of rent set pursuant to the terminating Affordability Restriction, and, if the Owner is unable to fill such unit with a qualified tenant after taking reasonable and diligent actions, the Owner may only fill such a unit with a non-qualifying tenant after notifying the Department and providing the Department with 14 days to identify a qualifying tenant. 10
No tenant selected to fill a vacancy pursuant to this provision shall qualify as a Protected Low-Income Tenant by virtue of filling such a vacancy. 4. A model Curative Equivalent Affordability Restriction is available on the Department s website pursuant to 760 CMR 64.09 (5).. B. Notice of Intent to Sell to a Preservation Purchaser. An Owner seeking a Certificate of Exemption who has entered into a Purchase Contract without first serving a timely Notice of Intent to Sell to a Preservation Purchaser may request the Department s permission to cure such failure in the context of the Department s review of the exemption request by treating the exemption request as including a late-filed Curative Notice of Intent to Sell to a Preservation Purchaser.. Any such Owner proceeds at its own risk. After review of the materials submitted with the exemption request under the standards applicable under 760 CMR 64.03(5), 760 CMR 64.07, and this Guidance, the Department may request additional information to complete its analysis, or may issue a Notice of Noncompliance under 760 CMR 64.10 and take such other action as may be appropriate in the circumstances, including, but not limited to, seeking invalidation, voiding, or rescission of the Purchase Contract. C. Effect of Notices 1. An Owner may request in writing a determination by the Department that a Curative Notice is sufficient to cure any defects in the Defective Notice, and that no further Curative Notice is required. If the Department determines that a further Curative Notice is required, the Department shall notify the Owner of such additional undertakings and information as must be provided in order to cure any remaining defects. 11
2. The issuance by the Department of a Certificate of Compliance shall be deemed a determination by the Department that any Notice that the Owner failed to serve or is actually or allegedly a Defective Notice and of which the Department has been made aware has been either cured, or found by the Department to be a de minimis defect, or found by the Department not to be defective, in each case in accordance with 760 CMR 64.03(5). 3. The issuance by the Department of a Final Exemption Certificate shall be deemed a determination by the Department that a. any Notice of Intent to Sell to a Preservation Purchaser that the Owner failed to serve or is actually or allegedly a Defective Notice in regard to the Sale of the Publicly-assisted Housing that is the subject of the Final Certificate of Exemption, b. any Notice of Future Termination or Notice of Intent to Complete Termination that is actually or allegedly a Defective Notice in regard to a Termination which the Owner was required to cure pursuant to Guidance on Certificates of Exemption I.F, has been either cured, or found by the Department to be a de minimis defect, or found by the Department not to be defective, in each case in accordance with 760 CMR 64.03(5), provided that the Department has been made aware of such Termination or failure to serve or defect in such Notice of Intent to Sell to a Preservation Purchaser as part of the request for a Final Exemption Certificate. 12
Department of Housing & Community Development Chapter 40T Guidance on Certificates of Compliance, 760 CMR 64.08 I. Preliminary Certificate of Compliance, Contents II. Final Certificate of Compliance, Additional Contents III. Service of Certificates of Compliance and Requests for Certificates of Compliance I. Preliminary Certificate of Compliance, Contents Each request for a Preliminary Certificate of Compliance shall: A. state such information as is required by Guidance on Certificates of Exemption I. A. E., G., and I. The request shall be certified by the applicant(s) to be accurate and complete, and in the case of a joint request with respect to each party s respective elements of the request. The Department may issue written guidelines further specifying the contents of a request for a Certificate of Compliance. II. Final Certificate of Compliance, Additional Contents A Purchaser requesting a Final Certificate of Compliance shall provide such information as is required by Guidance on Certificates of Exemption II. III. Service of Certificates of Compliance and Requests for Certificates of Compliance Certificates of Compliance and Requests for Certificates of Compliance shall be served as provided for Certificates of Exemption and Requests for Certificates of Exemption in Guidance on Certificates of Exemption V.
Introduction Department of Housing & Community Development Chapter 40T Guidance on Certificates of Exemption, 760 CMR 64.07 I. Preliminary Certificate of Exemption, Contents A. Information Required for Notices B. Contact Information C. Applicable Affordability Restrictions D. Affordability Restriction Terminations E. Terminations within Past 3 Years F. Grounds for Certificate G. Information Required by Form H. Information Applicable to Specific Exemptions Categories I. Interim Transaction II. Final Certificate of Exemption, Additional Contents A. Documentation of Sale B. Documentation of Completion of Conditions C. Documentation of Changes III. Standards for Review of for Final Certificate of Exemption without a Preliminary Certificate of Exemption A. General Requirements B. Preliminary Exemption Certificate Not Required C. Preliminary Exemption Certificate Required IV. Exemption Request Form V. Service of Certificates of Exemption and Requests for Certificates of Exemption A. Notice to Tenant on Request B. Recipients of Copies of Certificates
VI. Bona Fide Sale Introduction This Guidance is intended to provide information and clarification to property owners and managers about the documentation that the Department requires Owners and/or Purchasers to submit in requests for exemption pursuant to M.G.L. c. 40T ( c. 40T ), 6 (a) and the standards that the Department uses in evaluating such requests. The Guidance complements 760 CMR 64.07, the regulation governing c. 40T (the Regulation ). Capitalized terms used in this Guidance and not defined in the Guidance shall have the meaning assigned to them in c. 40T, 1; 760 CMR 64.02 (1); and the Department s Chapter 40T Guidance on Definitions. It should be noted that Sales exempt pursuant to M.G.L. c. 40T, 6 (a) (iv) (vii) (preservation of affordability, Section 8, affiliate sale, 15 remaining years of affordability) are required to obtain a preliminary exemption before Sale because these Sales are Preservation Sales under which the affordability of the property will be preserved in accordance with the statutory requirements for the applicable exemption. Analysis of affordability before and after Sale is required to determine whether the Sale qualifies under the relevant exemption. In accordance with 760 CMR 64.07 (1) (a) and (b), the Department expects that an Owner and/or Purchaser will request a Preliminary Certificate of Exemption in the case of any Preservation Sale. Sales exempt pursuant to M.G.L. c. 40T, 6 (a) (i) (iii) or (viii) (taking by eminent domain, foreclosure sale, deed in lieu of foreclosure, or sale under a contract in effect before November 23, 2009), on the other hand, are not required to obtain a preliminary exemption before Sale because the Owner is under a legal compulsion to sell and therefore 2
is not in control of the timing of the Sale. The exemptions in these cases are also nonpreservation sales, in that preservation of affordability is not required due to the legal compulsion, so no review of affordability before and after Sale is required. Owners often choose to obtain Preliminary Certificates of Exemption voluntarily in these circumstances in order to facilitate the Sale. I. Preliminary Certificate of Exemption, Contents: Each request for a Preliminary Certificate of Exemption under c. 40T, 6 (a), seeking confirmation of exemption from the otherwise applicable Right of First Offer and Right of First Refusal provisions of M.G.L. c. 40T, 3 and 4, in connection with a proposed Sale of Publicly-Assisted Housing of interests in Publicly-Assisted Housing, shall include the following information: A. Information Required for Notices. The request must include all of the information required by Guidance on Notices II.A. B.; B. Contact Information. The request must state the name and address of the Owner, the Third Party Purchaser (if a co-applicant) or Affiliate, any Tenant Organization, the project sponsor of the Owner and Third Party Purchaser or Affiliate, and the name, address, phone number, and email of the designated contact person for the Owner and the Third Party Purchaser (if a co-applicant) or Affiliate; C. Applicable Affordability Restrictions. The request must identify all the Affordability Restriction(s) to which the Publicly-assisted Housing is or has been (within the past three years) subject, including 1. all requirements to renew such Affordability Restrictions, including any Affordability Restrictions that will Terminate as a result of the proposed Sale and 3
any Affordability Restrictions to which the Publicly-assisted Housing will become subject in conjunction with or as a consequence of the Sale, and 2. the Government Program that is the basis of each Affordability Restriction; D. Affordability Restriction Terminations. The request must identify any Affordability Restriction that will terminate in conjunction with or as a consequence of the Sale and inform the Department of the dates and types of any Notices served in regard to or in conjunction with the proposed Sale. E. Terminations within Past 3 Years. If any Affordability Restriction to which the Publicly-assisted Housing is or has been subject has terminated within the three years prior to the date of the request for Preliminary Certificate of Exemption or Final Certificate of Exemption, or will terminate in conjunction with or as a consequence of the proposed Sale, the party(ies) requesting the exemption must demonstrate to the reasonable satisfaction of the Department that Notices of Future Termination and, if applicable, Notices of Intent to Complete Termination (i) have been served in regard to any such Termination, and (ii) either all such Notices were not defective, any defect in any such Notice has been cured, or any defect in any such Notice has been found by the Department to be a de minimis defect, in each case in accordance with 760 CMR 64.03(5); F. Grounds for Certificate. The request must identify and describe the statutory grounds under which the requesting party(ies) is(are) claiming an exemption M.G.L. c. 40T, 6 (a) (i), (ii), (iii), (iv), (v), (vi), (vii), or (viii); and 4
G. Information Required by Form. Each request must state such additional information and provide such additional documentation as may be required by the Department in any exemption request form issued by the Department. H. Information Applicable to Certain Specific Exemptions Categories: 1. Preservation of Affordability M.G.L. c. 40T, 6 (a) (iv). The Owner shall provide a certification of counsel or an affidavit signed by an authorized representative of the Owner providing a detailed response as to the actions taken by the Owner to Preserve Affordability and demonstrating to the Department that the Owner took reasonable and diligent actions to Preserve Affordability of the Publicly-assisted Housing, if the exemption request is based on M.G.L. c. 40T, 6 (a) (iv) (preservation of affordability), and any of the following apply: a. a Termination will occur in conjunction with or as a consequence of the proposed Sale, b. some other Loss of Affordability will occur in conjunction with or as a consequence of the proposed Sale, or c. the standards to Preserve Affordability in 760 CMR 64.02 (2) are not met. 2. Section 8 as Sole Covered Subsidy, M.G.L. c. 40T, 6 (a) (v). a. Section 6 (a) (v) applies to a proposed sale of publicly-assisted housing that the department has determined, as of the effective date of this act, was neither receiving government assistance nor was subject to regulation by any of the programs listed in the definition of publicly-assisted housing other than projectbased section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) ( Section 8 ). When Section 6 (a) (v) applies because the only Affordability 5
Restriction expected to be applicable to the Publicly-Assisted Housing at the time of the Sale is a project-based Subsidy under Section 8, the Purchaser must agree, in a regulatory agreement binding on the successors and assigns of the Purchaser, to renew all project-based Section 8 assistance contracts, or equivalent contracts under any successor project-based rental assistance program, for all renewals that become available for at least 30 years after the date of the Sale, if, at the time of such renewal, such assistance is available to the owner on economic terms and conditions that are comparable to the existing project-based rental assistance contract. If the United States Department of Housing and Urban Development and the state or local agency administering the Section 8 Subsidy have not entered into such a regulatory agreement with the Purchaser as of the time of the exemption request, the Purchaser may satisfy this requirement by entering into a binding agreement with DHCD in recordable form to the same effect. b. This exemption category does not apply when the Publicly-Assisted Housing is subject to other Affordability Restrictions at the time of Sale. The imposition of additional, new Affordability Restrictions on the Publicly-Assisted Housing under Government Programs other than Section 8 after the Sale neither creates nor prevents eligibility for this exemption category, although such an additional Affordability Restriction may contribute to eligibility under a different exemption category. c. The phrase as of the effective date of this act as used in [P]ublicly-[A]ssisted [H]ousing that the [D]epartment has determined, as of the effective date of this 6
act, was neither receiving government assistance nor was subject to regulation by any of the programs listed in the definition of [P]ublicly-[A]ssisted [H]ousing other than project-based section 8, M.G.L. c. 40T, 6 (a) (v), shall mean on or after the effective date of M.G.L. c. 40T, November 23, 2009. The relevant exemption was intended to apply to properties where the only applicable Government Program after November 23, 2009, was project-based Section 8. The intent of the phrase as of the effective date of this act was intended to clarify that some properties, which had previously been subject to Affordability Restrictions under several Government Programs, could still utilize the exemption under M.G.L. c. 40T, 6 (a) (v) if the Affordability Restrictions under the other Government Programs had already been terminated before November 23, 2009, leaving project-based Section 8 as the only remaining Affordability Restriction applicable to the Publicly-Assisted Housing. 3. Sale to an Affiliate, M.G.L. c. 40T, 6 (a) (vi). a. Information Regarding Parties, Ownership, and Control. If the exemption request is based on a sale to an affiliate pursuant to Section 6 (a) (vi), the request shall disclose the entity type (e.g., corporation, limited partnership, limited liability company, trust, etc.) and jurisdiction of formation of the Owner, the Seller, the Purchaser ( primary level entity ), any controlling entity (e.g., general partner, managing member, controlling shareholder, etc.), and any entity owning a majority equitable interest of each Owner, Seller, and Purchaser ( second level entity ), and any controlling entity and any entity owning a majority equitable interest in a second level entity ( tertiary level entity ). If there is no common 7
ownership or controlling entity at the tertiary level, then the application shall disclose additional levels of control and equitable interest to the point that common ownership or control is ascertainable. A qualifying relationship between an Owner and an Affiliate Purchaser based on common control means that the same person, group of people, or entity has ultimate control over decisionmaking by both the Owner and the Affiliate Purchaser. A qualifying relationship between an Owner and an Affiliate Purchaser based on common ownership shall be based on common ownership by the same person, group of people, or entity of at least the percentage of ownership needed to ensure ultimate decisionmaking authority in all of the relevant entities in the chain of entity relationship between the common owner, the Owner, the Seller, and the Affiliate Purchaser. If ultimate ownership or control rests with the same group of people, the decisionmaking control among the group must be materially equivalent for both the Owner and the Affiliate Purchaser. b. Sale that is Not a Termination. Section 6 (a) (vi) allows an exemption from the requirements of M.G.L. c. 40T, 3 4 for a proposed sale of publicly-assisted housing to an affiliate of the owner that is not a termination as determined by the department. (emphasis added). A Sale that is not a Termination, as used in Section 6 (a) (vi), means a Sale that occurs without any Termination occurring in conjunction with or as a consequence of the Sale. 4. Fifteen Remaining Years of Affordability under Existing Affordability Restrictions, M.G.L. c. 40T, 6 (a) (vii). 8
a. An exemption requested under M.G.L. c. 40T, 6 (a) (vii), for a sale subject to existing Affordability restrictions providing for fifteen remaining years of affordability, must meet statutory safeharbor requirements different from those applicable to M.G.L. c. 40T, 6 (a) (iv), a sale that preserves affordability. The exemption under M.G.L. c. 40T, 6 (a) (vii) only applies when all existing, nonduplicative Affordability Restrictions in regard to the Publicly-Assisted Housing will last at least fifteen years from the date of Sale. The fifteen-year period includes renewals of existing Subsidies if the relevant Government Program provides for renewals, the Purchaser enters into a formal assumption agreement with the Seller, and the Purchaser commits in such agreement, or in an Equivalent Affordability Restriction with the Department, to seek renewals on economic terms and conditions that are comparable to existing subsidies If some, but not all, of the Affordability Restrictions applicable to the property will cease less than fifteen years from the date of the Sale, but the remaining Affordability Restrictions constitute Equivalent Affordability Restrictions as to the Affordability Restrictions that will cease, in that they provide for the same affordability for all affected units such that the Cessation will have no adverse impact on tenants, then the Cessation of those duplicative Affordability Restrictions will be disregarded in determining the fifteen-year period. b. An Owner may also request that the Cessation of an existing Affordability Restriction be treated as a Cessation that is not a Termination due to Simultaneous Replacement by an Equivalent Affordability Restriction by entering into an Equivalent Affordability Restriction with the Department, 9
provided that the Equivalent Affordability Restriction will not cease for 15 years after the Sale. c. The ability of the property owner or the administering agency of any Government Program to terminate the Subsidy less than 15 years from the date of the Sale shall not be considered in determining the 15-year period provided that the Purchaser agrees, in a recorded agreement binding on the successors and assigns of the Purchaser, to take no voluntary action that would result in Termination less than 15 years from the Sale. e. Any request for a Preliminary Certificate of Exemption under this category must include the estimated date of Sale. No Preliminary Certificate of Exemption will be approved under this category if any Termination would occur less than 15 years from the estimated date of Sale. f. In addition to any other requirements applicable to a Final Certificate of Exemption, any request for a Final Certificate of Exemption under this category shall clearly identify the actual date of the Sale. If the date of the Sale is later than the estimated date of Sale in the request for the Preliminary Exemption Certificate, the time periods should be re-calculated based on the actual date of Sale. If the re-calculation indicates that a Termination will occur less than 15 years from the actual date of Sale, the Purchaser shall enter into an Equivalent Affordability Restriction continuing the applicable Affordability Restrictions through the date 15 years from actual date of Sale. I. Interim Transaction. A Preliminary Certificate of Exemption may be granted with respect to an interim or bridge Sale based on the Purchaser s representation that a 10
subsequent Sale or financing transaction will provide for extending existing Affordability Restrictions or additional Affordability Restrictions. In such cases, the Department will not grant a Final Certificate of Exemption until all Affordability Restrictions contemplated in the original Preliminary Certificate of Exemption, or alternative Affordability Restrictions considered by the Department to be equivalent, are in effect. The Department may, in these circumstances, grant a second or subsequent Preliminary Certificate of Exemption without issuance of a Final Certificate of Exemption with respect to a later transaction that involves a Sale. The Department shall condition any initial Preliminary Certificate of Exemption granted as part of an interim or bridge Sale on the Purchaser s grant to the Department of an option in writing to purchase the Publicly-assisted Housing on terms substantially equivalent to those of the original Sale, as determined pursuant to M.G.L. c. 40T, 4 (b) and 760 CMR 64.06 (3), exercisable within 90 days following the first of the following to occur: 1. the notification of the Department by the Owner, Third Party Purchaser, or Affiliate Purchaser, that the contemplated Affordability Restrictions, or their substantial equivalent, will not be executed; or 2. one year after the date of issuance of the initial Preliminary Certificate of Exemption (provided that the Department may extend such period upon demonstration of good cause and likelihood of completion of an exempt Sale within the extended period). II. Final Certificate of Exemption, Additional Contents A Third-Party Purchaser or Affiliate Purchaser requesting a Final Certificate of Exemption shall provide to the Department, the following information: 11
A. Documentation of Sale. The request must include documentation that the Sale was completed upon materially the same terms and conditions as was described in the original request, including a copy of the deed with evidence of filing with the applicable registry of deeds or registry district of the land court of the county, or equivalent evidence of consummation of a Sale other than transfer of a fee interest in property, and an executed copy of all Affordability Restrictions entered into in conjunction with or as a consequence of the Sale; B. Documentation of Completion of Conditions. The request must also include documentation that all other conditions of the Preliminary Certificate of Exemption have been met, including by provision of a certification of counsel or an affidavit signed by an authorized representative of the Purchaser or purchasing Affiliate attesting to the completion of all conditions of the Preliminary Certificate of Exemption and to the fact that there have been no material changes in any of the terms of the Sale in regard to the affordability or ownership of the Property, as detailed in the documentation supporting the request for the Preliminary Certificate of Exemption, or, if there have been such changes, the additional information requested in II.C; and, C. Documentation of Changes. If applicable, the Owner and/or Purchaser shall provide to the Department a narrative description of any changes to the factual statements made in the request for a Preliminary Certificate of Exemption or the accompanying or subsequent documentation provided to the Department that have an impact of the Affordability Restrictions, Subsidies, or Government Programs applicable to the Publicly-assisted Housing or on the ownership identity or structure of the Owner, 12
Seller, or Purchaser. The Owner and/or Purchaser shall further provide such supporting documentation of any such changes as may be requested by the Department III. Standards for Review of Request for Final Certificate of Exemption without a Preliminary Certificate of Exemption. A. General Requirements. The Owner and/or Purchaser requesting a Final Certificate of Exemption without having first received a Preliminary Certificate of Exemption shall provide the Department with all the information and documentation necessary for a request for the applicable Preliminary Certificate of Exemption pursuant to II together with any additional documentation required for a Final Certificate of Exemption pursuant to III. B. Preliminary Exemption Not Required. As a condition of the issuance of a Final Certificate of Exemption pursuant to Section 6 (a) (i) (iii) or (viii) or 760 CMR 64.07 (1) (c) 2., when the Owner and Third-Party Purchaser have not previously requested a Preliminary Certificate of Exemption, the Owner and/or Purchaser shall demonstrate to the satisfaction of the Department that the Sale met the statutory requirements for the relevant exemption category. C. Preliminary Exemption Required. If a Sale exempt from the M.G.L. c. 40T, 3 4, Right of First Offer and Right of First Refusal process pursuant to Section 6 (a) (iv) (vii) occurs without the Owner and Third-Party Purchaser or Affiliate Purchaser requesting a Preliminary Certificate of Exemption, contrary to 760 CMR 64.07 (1) (a) or (b), as a condition of the issuance of a Final Certificate of Exemption, the Owner and/or Purchaser shall demonstrate to the satisfaction of the Department that the failure to request a Preliminary Certificate of Exemption was a de minimis defect that caused no substantial 13
harm to the interests protected by M.G.L. c. 40T and 760 CMR 64.00 and that, if a request for a Preliminary Certificate of Exemption had been timely made, the request would have met the requirements for issuance of a Preliminary Certificate Exemption. If the Owner is not able to demonstrate to the satisfaction of the Department that a Final Certificate of Exemption is warranted, the Department may issue a Notice of Noncompliance under 760 CMR 64.10 and take such other action as may be appropriate in the circumstances, including, but not limited to, seeking invalidation, voiding, or rescission of the Sale. IV. Exemption Request Form. An exemption request form, with instructions, covering both requests for Preliminary Certificates of Exemption and Final Certificates of Exemption, is available on the Department s website on the Chapter 40T webpage, http://www.mass.gov/hed/economic/eohed/dhcd/legal/mgl-chapter-40t.html. All requests for exemption shall be submitted on the posted exemption request form, which may include additional informational requests beyond those specified in this Guidance. The exemption request form shall be certified by the applicant(s) to be accurate and complete. V. Service of Certificates of Exemption and Requests for Certificates of Exemption A. Notice to Tenant on Request. In addition to the parties listed in M.G.L. c. 40T, 6 (b), the Owner shall provide a copy of the request for a Certificate of Exemption to any affected Tenant upon request. B. Recipients of Copies of Certificates. In addition to the parties listed in M.G.L. c. 40T, 6 (b), the Department shall provide copies of any Preliminary Certificate of Exemption and Final Certificate of Exemption to the chief executive officer of the affected municipality, any person who submits comments in regard to any possible Department action in regard to the request for Certificate of Exemption, and, upon request, any affected Tenant. The 14
Department may require the Owner to provide such information to Tenant(s) in the manner provided in 760 CMR 64.09 (4). VI. Bona Fide Sale. For the purposes of making a determination under M.G.L. c. 40T, 6(a)(viii) as to whether a proposed Sale to a Third Party was bona fide, the Department shall consider, in its reasonable discretion, whether the purchase price, when taken together with other elements of the transaction, was consistent with the fair market price for comparable transactions during the same time period. 15