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HomeMy WebLinkAbout2006/08/22 Item 12 CITY COUNCIL AGENDA STATEMENT ITEM NO.: MEETING DATE: 12 8/22/06 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING THE AFFORDABLE HOUSING REGULATORY AGREEMENT RELATED TO R-19, OTAY RANCH VILLAGE ELEVEN BETWEEN THE CITY AND SHEA HOMES AND AUTHORIZING THE MAYOR TO EXECUTE THE AGREEMENT SUBMITTED BY: ACTING COMMUNITY DEVELO ENT DIRECTOR REVIEWED BY: INTERIM CITY MANAGER .j ITEM TITLE: 4/5THS VOTE: YES D NO ~ BACKGROUND On February 18, 2003, the City af Chula Vista and Brookfield Shea Otay, LLC, a California Limited Liability Corporation, entered into an Affordable Housing Agreement for Otay Ranch Village Eleven. The Affordable Housing Agreement stated that pursuant to the City of Chula Vista Housing Element and the establishment of the City's "Affordable Housing Policy," the Developer is required to provide 10% of each housing development of 50 or more units to be affordable to low and moderate income households, with at least one half of those units (5% of project total units) designated for low income households. Brookfield Shea Otay, LLC ("Developer") desires to satisfy their affordable housing obligation through a for-sale project located in the R-19 neighborhood in Otay Ranch Village Eleven (Location Map provided as Attachment 1). The details of the project are contained within the Affordable Housing Regulatory Agreement ("Agreement") contemplated herein (Attachment 2). ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed project for compliance with the California Environmental Quality Act and has determined that the proposed proiect was adequately covered in previously adopted Final Second Tier Environmental Impact Report, EIR 01-02 Thus, no further environmental review or documentation is necessary. 12-1 PAGE 2, ITEM NO.: MEETING DATE: I~ 8/22/06 RECOMMENDATION That City Council adopt the resolution approving: 1) The Affordable Housing Regulatory Agreement related to the R-19 neighborhood in Otay Ranch Village Eleven in substantially the form presented to the City Council, subject to such revisions as may be made by the City Manager or his designee subject to the review and approval of the City Attorney, and authorizing the Mayor to execute the Affordable Housing Regulatory Agreement on behalf of the City. 2) The City Manager (or designee), on behalf of the City, to make revisions to the Affordable Housing Regulatory Agreement which do not materially or substantially increase the City's obligations thereunder or materially or substantially change the uses or development permitted on the Site, to sign all documents, to make all approvals and take all actions necessary or appropriate to carry out and implement the Affordable Housing Regulatory Agreement and to administer the City's obligations, responsibilities and duties to be performed under the Affordable Housing Regulatory Agreement and related documents. Any such revisions or modifications to the Affordable Housing Regulatory Agreement are subject to the review and approval of the City Attorney. BOARDS/COMMISSIONS RECOMMENDATION Not applicable. DISCUSSION Under the City's Balanced Communities Policy of the Housing Element, the Developer has an obligation to provide 10 percent of those new residential housing units within the project as affordable to low and moderate-income families (5% low and 5% moderate) Based on a total of 2,304 residential housing units which are currently allowed to be constructed within Otay Ranch Village Eleven and credits given for larger units (3 bedrooms), the Developer has an obligation to provide 207 affordable units (92 low income and 115 moderate income). The development will include a total of 239 3- bedroom units, of which, 92 will be available as low income units and 115 as moderate income units, and 32 market rate units. 12-2 PAGE 3, ITEM NO.: I ;Z MEETING DATE: 8/22/06 Affordable Housinq Requlatorv Aqreement The attached Agreement details the accord between the City and the Developer regarding the development of the proposed affordable for-sale units and the satisfaction of the Developer's affordable housing obligation. The Agreement also details the Developer's guidelines and requirements for the development of the project and employs the Affordable For Sale Housing Policy approved by the City Council as the basis for the Agreement. The Affordable For Sale Housing Policy consists of key principles that govern all such developments, including: 1) The establishment of a Second Trust Deed ("Silent Second") that is extended to the Homebuyer in favor of the City; 2) An equity share system, that is based upon the Homebuyer's length of occupancy; 3) Maximum income; 4) Maximum sales price; 5) Underwriting criteria; and 6) Buyer selection criteria Affordable buyers must be income qualified, earning no more than 80% and 120% of the Area Median Income. The chart below shows maximum income figures for 2006. 1 2 3 4 2006 Maximum Annual Income Low Income Moderate 80% Income 120% $38,650 $54,500 $44,150 $62,300 $49,700 $70,100 $55,200 $77,900 Household Size Differences for Moderate Income Buyers Although the Affordable For Sale Housing Policy is the foundation for this Agreement, the Policy specifically addresses low income buyers. There are a few deviations from the Policy in the Agreement to address different circumstances for moderate income buyers' . 30-year deferred loan, as opposed to an Equity Share; . No "first time homebuyer" requirement; and . Maximum allowable assets increased from $25,000 to $40,000 12-3 PAGE 4, ITEM NO.: l,;;z MEETING DATE: 8/22/06 DECISION MAKER CONFLICTS Staff has reviewed the property holdings of the Agency Board Members and has found no such holdings within 500' of the property which is the subject of this action. FISCAL IMPACT Upon sale, transfer, refinance, or change in title of the affordable unit, the City will receive repayment of the silent second loan and any additional equity share. Based on the formula provided in the City's Affordable For Sale Housing Policy, the silent second loan amount is the difference between the market rate price and the affordable price, established at the time of sale by the Developer. No expenditure or allocation of City funds is required; therefore, there is no fiscal impact. AnACHMENTS 1. Location Map 2. Affordable Housing Regulatory Agreement 3. Disclosure Statement Prepared by, Amanda Mills, Housing Manager, Community Development Department J:\COMMDEVlSTAFF.REI'I2006\08-22-06\Shea\Shea Homes AffHsg Reg Agreement Staff Report MI).doc 12-4 Attachment ....l Otay Ranch Village 11 ..> CD - :&. -- --SlaOfaLI.U: 12-5 12-5 Attachment.....l City of Chula VISta Disclosure Statement Pursuant to Council Policy 101-01, prior to any action upon matters that will requirediscretionmy action by the Council, Plannihg Commission and all other official bodies of the City, a statement of disclosure of certain ownership or financial interests, payments, or campaign contributions for a City ofChula VISta election must be filed. The folloWing information must be disclosed: 1. List the names of all persons having a financial interest in the property that is the subject of the application or the contract, e.g., owner, applicant, contIactor, subcontractor, mllt~ 1 supplier. ~ Sk ~ J,.I(")I.....v;. [. P 1:,50 U~ 2. If any person. identified pursuant to (1) above is a corporation or partnership, list the names of all individuals with a $2000 investment in the business (corporationlpartnership) entity. .uiA , 3. If any person. identified pursuant to (l) above is a non-profit OIW'ni7.mon or trust, list the names of any person serving as director of the non-profit oIgll11ization or as trustee or beneficiary or trustor of the trust -'fA 4. Please identify every person, inclnding any agents, employees, consultants, or independent contractors you have assilPled to represent you before the City in this matter. .::st"^^- 'C.l \C..t"'N'""-\! \ /-!oY\.<;:..,.lrl.-r /,><^",,) A~<,cc-lrj.<..< 1-10UJo..r d "AA) A ~ toA-.e-G 5. Has any person. associated with this contract had any financial dealings with an official.. of the City of Chn1a Vista as it relates to this contract within the past 12 months. Y es_ No~ 12-6 City of Chula Vista Disclosure Statement If Yes, briefly describe the nature of the financial interest the official** may have in this contract j J;A , 6. Have you made a contnbution of more than $250 within the past twelve (12) months to a current member of the Chula Vista City Council? No.&: Yes _ If yes, which Council member? 7. Have you provided more than $340 (or an item of equivalent value) to an official** of the City of Chula Vista in the past twelve (12) months? (This includes being a source of income, money to retire a legal debt, gift, loan, etc.) Yes _ No X- If Yes, which official** and what was the nature of itCIrt provided? Date: C, -z.. 'I, (j to Print or type name of Contractor/Applicant * Person is defmed as: any individual, firm, co-partnership,joint venture, association, social club, fratemal organization, cOIporation, estate, trust, receiver, syndicate, any other county, city, municipality, district, or other political subdivision, -or any other group or combination acting as a unit. ** Official includes, but is not limited to: Mayor, Council member, Planning Cmnmissioner, Member of a board, commission, or committee of the City, employee, or staff members. 1:\Auomey\fixms~ SCafl:mcDt 3.0.03 12-7 RESOLUTION NO 2006- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING THE AFFORDABLE HOUSING REGULATORY AGREEMENT RELATED TO R-19, OTAY RANCH VILLAGE ELEVEN, BETWEEN THE CITY AND BROOKFIELD SHEA OTAY, LLC AND AUTHORIZING THE MAYOR TO EXECUTE THE AGREEMENT WHEREAS, Brookfield Shea Otay, LLC [Shea] proposes to construct a multifamily housing project in Otay Ranch Village 11 [Project]; and WHEREAS, the City of Chula Vista and Shea executed an Affordable Housing Agreement for Otay Ranch Village Eleven, then known as Winding Walk, which was recorded February 24, 2003 as Document No. 2003-0200562 [the 2003 Agreement] for purposes of further implementing Shea's affordable housing obligation under the City's Balanced Communities Policy of the Housing Element of the General Plan; and WHEREAS, pursuant to the 2003 Agreement, of the total of 2,304 residential housing units which are currently allowed to be constructed within Otay Ranch Village Eleven and credits given for larger units (3 bedrooms), Shea has an obligation to provide 92 units affordable to low income households and 115 units affordable to moderate income households within the Project; and WHEREAS, Shea desires to satisfy this affordable housing obligation through a for-sale project, the details of which are contained within the Affordable Housing Regulatory Agreement; and WHEREAS, the Environmental Review Coordinator has reviewed the proposed project for compliance with the California Environmental Quality Act and has determined that the proposed project was adequately covered in previously adopted Final Second Tier Environmental Impact Report, EIR 01-02. Thus, no further environmental review or documentation is necessary NOW THEREFORE, BE IT RESOLVED, by the City Council of the City of Chula Vista that it approves the Affordable Housing Regulatory Agreement related to the R-19 neighborhood in Otay Ranch Village Eleven in substantially the form presented to the City Council, subject to such revisions as may be made by the City Manager or his designee and subject to the review and approval of the City Attorney, a copy of which shall be placed on file in the office of the City Clerk. BE IT FURTHER RESOLVED, by the City Council of the City of Chula Vista that the Mayor is authorized to execute the Affordable Housing Regulatory Agreement on behalf of the City 12-8 Resolution No. 2006- Page 2 BE IT FURTHER RESOLVED, by the City Council of the City of Chula Vista that the City Manager (or designee) is authorized, on behalf of the City, to make non-substantive revisions to the Affordable Housing Regulatory Agreement which do not materially or substantially change the obligations of the parties, to sign all documents, to make all approvals and take all actions necessary or appropriate to carry out and implement the Affordable Housing Regulatory Agreement and to administer the City's obligations, responsibilities and duties to be performed under the Affordable Housing Regulatory Agreement and related documents. Any such revisions or modifications to the Affordable Housing Regulatory Agreement are subject to the review and approval of the City Attorney Presented by Approved as to form by AnnHix Acting Community Development Director J~_OL (h Ann Moore City Attorney I~-- 2 12-9 THE A TT ACHED AGREEMENT HAS BEEN REVIEWED AND APPROVED AS TO FORM BY THE CITY ATTORNEY'S OFFICE AND WILL BE FORMALLY SIGNED UPON APPRO V AL BY THE CITY COUNCIL ~~ f< C~ Ann Moore City Attorney Dated: _8/16/06_ The Affordable Housing Agreement between The City of Chula Vista and Shea Homes for the Winding Walk Community for the Development of 207 Units of Affordable to Low to Moderate Income Buyers 12-10 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO' City of Chula Vista 276 Fourth Avenue Chula Vista CA 91910 Attn: City Clerk No fee for recording pursuant to Government Code Section 27383 (Space above for Recorder's Use) AFFORDABLE HOUSING REGULATORY AGREEMENT THIS AFFORDABLE HOUSING REGULATORY AGREEMENT (this "Agreement") is entered into as of ,2006, between the CITY OF CHULA VISTA, a municipal corporation ("City"), and BROOKFIELD SHEA OTAY LLC, a California limited liability company ("Developer") and/or its successors or assignees. 1. - Recitals 1 1 Authoritv The City is a municipal corporation, organized and existing under the laws of the State of California. City is authorized to enter into binding agreements for the purpose of protecting public health, safety, and welfare. 1.2. Developer Developer is the legal owner of the fee title to the real property which is described in the attached Exhibit "A", which is hereby incorporated herein (the "Real Property"). The Real Property will be a condominium project established pursuant to Section 1350, et seq. of the California Civil Code. The Real Property is currently unimproved. 1.3. Proiect. Developer, or a home builder entity established by Developer, proposes to construct a multifamily housing project (the "Project") with 239 row home condominiums in Olay Ranch Village II Each dwelling unit in the Project is referred to as a "Unit" in this Agreement. The Project will consist of ninety two (92) Units affordable to Low Income Buyers, one hundred fifteen (115) Units affordable to Moderate Income Buyers, with the remaining thirty two (32) Units unrestricted in any manner by this Agreement. The thirty two (32) unrestricted Units are referred to as the "Unrestricted Units" Developer shall not be bound by any of the provisions contained hereafter with respect to the Unrestricted Units. I 4 Implementation ofCitv Council Resolution 2003-492. This Agreement is intended to satisfy the requirements of City Council Resolution 2003-492 and the Affordable Housing Agreement previpusly entered into between Brookfield Shea Otay, LLC, a California limited liability company ("Master Developer") and the City and recorded February 24, 2003, as Document No. 2003-0200562, which requires that, as a condition to issuance of certain building permits to the land covered by the Otay Ranch, Village 11 Sectional Planning Area (SPA) Plan, an Affordable Housing Regulatory Agreement be entered into between the City and Developer whereby Developer agrees to provide for a specified percentage of the Units as low income housing and moderate income housing. The parties intend that this Agreement constitute the agreement referred to in City Council Resolution 2003-492 and constitute the Affordable Housing Regulatory Agreement described in this Section 1.4, and that this Agreement satisfy the remainder of Master Developer's affordable housing obligations thereunder with respect to approximately 489 acres ofland described as the "Project" in the Affordable Housing Agreement described in this Section 1.4 1 8/14/06 12-11 1.5 Imolementation of City Council Policv No. 453-02. This Agreement is also intended to implement City Council Policy No. 453-02, which became effective on December 9, 2003 ] .6. Binding On Successive Owners. Pursuant to California Government Code Section 27281.5, the parties intend that this Agreement constitute an encumbrance against the Real Property (other than the Unrestricted Units) which, during the Term of this Agreement, is binding on the owners and successive owners of the Real Property (other than the Unrestricted Units) for the benefit of the City NOW THEREFORE, THE CITY AND DEVELOPER HEREBY AGREE AS FOLLOWS: 2. - Definitions The following definitions apply for purposes of this Agreement: 2.1 "Affordable Buyer" means a Low Income Buyer as defined in Section 2.8 or Moderate Income Buyer as defined in Section 2.13. 2.2 "Affordable Unit" means a Low Income Unit or Moderate Income Unit. 2.3 "Area Median Income" means the latest median income from time to time determined by the United States Department of Housing and Urban Development (pursuant to Section 8 of the United States Housing Act of 1937) for the San Diego Standard Metropolitan Statistical Area, and as established by regulation of the State of California pursuant to Health and Safety Code Section 50093. 2.4 "Buyer-Elected Options and Upgrades" means options and upgrades included in a Unit that are not included within the plans and specifications for standard production Units and that are paid for in cash by the buyer. 2.5 "Buyer-Qualified Interest Rate" means the interest rate a buyer qualifies for and obtains under a loan, the proceeds of which are used to purchase the Affordable Unit. 2.6 "City Notice of Approval" means the letter from the City identifying the applicant as an eligible Affordable Buyer 2.7 "Low Income Affordable Sales Price" shall be determined pursuant to Section 3.3 below 2.8 "Low Income Buyers" means individuals or families with an income which does not exceed eighty percent (80 %) of the Area Median Income, as adjusted for household size; provided, however, all income from members ofthe household who are under the age of twenty -three (23) years old and are full-time students, upon submission to the City of sufficient verification thereof, shall be excluded from the calculation ofaLowIncomeBuyer's income. 2.9 "Low Income Unit" means any of the ninety two (92) Units which shall be sold by Developer to a Low Income Buyer at the Low Income Affordable Sales Price and occupied by a Low Income Buyer. 2.10 "Low Income Unit Marketing Period" means the period commencing on the first day the first Low Income Unit is marketed to Low Income Buyers in the public pursuant to all normal State of California Department of Real Estate regulations and upon approval by the City and continuing for ninety (90) days thereafter, during which period Developer shall market the three (3) bedroom Low Income Units pursuant to Section 3.4. 2 8/14/06 12-12 2.11 "Market Rate Price(s)" shall be as described in Section 3.2 below 2.12 "Maxim urn Affordable Sales Price" means either the Maximum Low Income Affordable Sales Price of a Low Income Unit as described in Section 3.3 or the Maximum Moderate Income Affordable Sales Price of a Moderate Income Unit as described in Section 3.7 2.13 "'Moderate Income Affordable Sales Price" shall be determined pursuant to Section 3.7 below 2.14 "Moderate Income Buyers" means individuals or families With an income which does not exceed one hundred twenty percent (120 %) of the Area Median Income, as adjusted for household size; provided, however, all income from members of the household who are under the age of twenty. three (23) years old and are full-time students, upon submission to the City of sufficient verification thereof, shall be excluded from the calculation of a Moderate Income Buyer's income. 2.15 "Moderate Income Unit" means any of the one hundred fifteen (115) Units which shall be sold by Developer to and occupied by a Moderate Income Buyer. 2.16 "Moderate Income Unit Marketing Period" means the period commencing on the first day the first Moderate Income Unit is marketed to Moderate Income Buyers in the public pursuant to all normal State of California Department of Real Estate regulations and upon approval by the City and continuing for ninety (90) days thereafter, during which period Developer shall market the three (3) bedroom Moderate Income Units pursuant to Section 3.8. 2.17 "Monthly Housing Cost" means the sum of monthly payments for all of the following with respect to a Low Income Unit or Moderate Income Unit: 2.17 1 Principal and interest, amortized over thirty (30) years, at the then current fixed interest rate, payable under the First Trust Deed Loan (as defined below), which is then available to acquire an Affordable Unit; 2.17.2 Any special tax district assessments, Mello-Roos special taxes, prorated monthly, which apply to the Affordable Unit; 2.17.3 The monthly homeowners association regular assessments which apply to the Affordable Unit; and 2.174 A reasonable allowance for real estate taxes and insurance not included in the above costs, prorated monthly 2.18 "Mortgage Amount" shall be as described in Sections 3.3.1, 3.3.2, 3.7.1 or 3.7.2, whichever is applicable. 2.19 "Silent Second Note" shall refer to the promissory note made by an Affordable Buyer in favor ofthe City The principal amount of a Silent Second Note for a Low Income Unit shall be equal to the difference between the Market Rate Price and the Maximum Low Income Affordable Price of a Low Income Unit. The principal amount of a Silent Second Note for a Moderate Income Unit shall be equal to the difference between the Market Rate Price and the Maximum Moderate Income Affordable Price ofa Moderate Income Unit. The form ofthe Silent Second Note shall be as set forth on Exhibit "B" attached hereto. 3 8/14/06 12-13 2.20 "Silent Second Trust Deed" shall refer to a deed of trust which secures a Silent Second Note. The form of the Silent Second Trust Deed that secures a Silent Second Note for aLow Income Unit shall be as set forth on Exhibit "C-I" attached hereto (which includes equity sharing provisions). The form of the Silent Second Trust Deed that secures a Silent Second Note for a Moderate Income Unit shall be as set forth on Exhibit "C-2" attached hereto (which includes deferred loan provisions). 2.21 "Term" shall be described in Article 4 below. 3. - Marketin!! of Affordable Units 3 1 Low Income Units: Silent Second Note Trust Deed: Eauity Sharin!!. Of the two hundred thirty nine (239) Units in the Project, Developer shall sell ninety two (92) Units only to Low Income Buyers. Developer shall restrict the initial sale of the ninety two (92) Low Income Units to Low Income Buyers. The ninety two (92) Low Income Units shall be three (3) bedroom Units. The sales price of each such Low Income Unit shall be the Market Rate Price, with the Silent Second Note being in original principal amount equal to the difference between the Market Rate Price and the Maximum Low Income Affordable Sales Price ofa Low Income Unit. The Silent Second Note shall be secured by the Silent Second Trust Deed encumbering the Low Income Unit which is sold to a Low Income Buyer. The Silent Second Trust Deed that encumbers a Low Income Unit shall be in the form attached hereto as Exhibit "C-I" and include the equity sharing provisions set forth in paragraph 15 of the Silent Second Trust Deed attached hereto as Exhibit "C- t" The Silent Second Trust Deed shall be subordinate in priority to the institutional trust deed loan ("First Trust Deed Loan") which the Low Income Buyer obtains to purchase the property Repayment of the Silent Second Note shall become due and payable upon the expiration of the 3D-year term or upon the resale of the Low [ncome Unit to a person who is not qualified as a Low Income Buyer at a Low Income Affordable Price. Repayment shall not be required if the resale is to a qualified Low Income Buyer who purchases at aLow Income Affordable Price (as determined by the City) and who expressly assumes the Silent Second Note and trust deed. 3.2. Market Rate Price. The Market Rate Prices for the Affordable Units shall initially be the amounts set forth in the attached Schedule "I" Pursuant to the procedures set forth in this Section 3.2 and subject to the City's prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed, the Market Rate Prices for the Affordable Units in an upcoming phase may be revised at any time prior to the release of such phase. No less than ten (I 0) business days prior to the scheduled release date of a phase, Developer shall submit to the City Developers proposed revisions, if any, to the Market Rate Prices for the Affordable Units in such phase. Within five (5) business days after such submission, the City shall approve or disapprove such proposed revisions. Ifthe City disapproves proposed revisions, it shall state the grounds for such disapproval in writing. If the City disapproves and objects to Developer's proposed revisions within such five (5)-day period, Developer may re-submit further revisions to the Market Rate Prices to address the City's grounds for objection, and the City shall thereafter have five (5) business days to approve or disapprove Developer's proposed revisions. If, however, the City fails to approve or disapprove Developer's proposed revisions within the initial five (5)-business day period (or the subsequent five (5)-business day period in case ofre-submission), Developers proposed revisions shall be deemed approved. 3.3. Calculation of Maximum Low Income Affordable Sales Price. The Maximum Low Income Affordable Sales Price of a Low Income Unit shall be the sum of the Mortgage Amount plus an assumed down payment amount of3% of the Low Income Affordable Sales Price. The actual down payment shall not be less than 3% of the Affordable Sales Price of a Low Income Unit and should the down payment amount exceed 3% of the Affordable Sales Price of a Low Income Unit the actual First Trust Deed amount (but not the actual Mortgage Amount for determining the Maximum Low Income Affordable Sales Price) shall decrease by the amount the actual down payment exceeds 3% of the Affordable Sales Price ofa Low Income Unit. 4 8/14/06 12-14 3.3 I The Mortgage Amount - FHA Insured Loans. For FHA insured loans, the Mortgage Amount for Low Income Buyers shall be a First Trust Deed Loan in that original principal amount which requires equal monthly payments, amortized over thirty (30) years at the Buyer-Qualified Interest Rate, which when added to the other Monthly Housing Costs results in Monthly Housing Costs that equal 28.8% (that is 36% times 80%) of the Area Median Income, as adjusted for household size appropriate to the Low Income Unit as specified in Section 3.10 below The Buyer-Qualified Interest Rate must remain fixed for at least the first five (5) years of the term of the FHA insured loan. 3.3.2. The Mortgage Amount - Conventional Loans. For conventional loans, the Mortgage Amount for Low Income Buyers shall be a F'irst Trust Deed Loan in that original principal amount which requires equal monthly payments, amortized over thirty (30) years at the Buyer-Qualified Interest Rate, which when added to the other Monthly Housing Costs results in Monthly Housing Costs that equal 32% (that is 40% times 80%) of the Area Median Income, as adjusted for household size appropriate to the Low Income Unit as specified in Section 3.10 below The Buyer-Qualified Interest Rate must remain fixed for at least the first five (5) years of the term of the conventional loan. 3 4 Marketing of} Bedroom Low Income Units. During the Low Income Unit Marketing Period, each three (3) bedroom Low Income Unit shall be marketed by Developer oniy to persons who qualify as Low Income Buyers with households of three (3) persons or more. 3.5 After the Low Income Unit Marketing Period. After the Low Income Unit Marketing Period, Developer may market any remaining Low Income Units which are affordable to Low Income Buyers with any household size. Developer shall deliver to the City written notice of the first day and the last day of the Low Income Unit Marketing Period. The termination of the Low Income Unit Marketing Period will be evidenced by written notice to Developer from the City 3.6. Moderate Income Units: Silent Second Note ad Trust Deed: Deferred Loan. Developer shall sell one hundred fifteen (lIS) of the Units to Moderate Income Buyers. The one hundred fifteen (lIS) Moderate Income Units shall be comprised of three (3) bedroom Units. Developer shall restrict the initial sale of one hundred fifteen (I 15) Moderate Income Units to Moderate Income Buyers. The sales price of each such Moderate Income Unit shall be the Market Rate Price, with the Silent Second Note being in original principal amount equal to the difference between the Market Rate Price and the Moderate Income Affordable Price ofa Moderate Income Unit. The Silent Second Note shall be secured by the Silent Second Trust Deed encumbering the Moderate Income Unit which is sold to a Moderate Income Buyer. The Silent Second Trust Deed that encumbers a Moderate Income Unit shall be in the form attached hereto as Exhibit "C-2" and shall not include equity sharing provisions set forth in paragraph IS of Exhibit "C-l" The Silent Second Trust Deed shall be a 30-year deferred loan subordinate in priority to the institutional trust deed loan (nFirst Trust Deed Loan") which the Moderate Income Buyer obtains to purchase the property Repayment of the Silent Second Note shall become due and payable upon the expiration of the 30-yearterm or upon the resale of the Moderate Income Unit to a person who is not qualified as a Moderate Income Buyer at a Moderate Income Affordable Price. Repayment shall not be required ifthe resale;s to a qualified Moderate Income Buyer who purchases at a Moderate Income Affordable Price (as determined by the City) and who expressly assumes the Silent Second Note and trust deed. 3 7 Calculation of Maxi mum Moderate Income Affordable Sales Price. The Maximum Moderate Income Affordable Sales Price of a Moderate Income Unit shall be the sum of the Mortgage Amount plus an assumed down payment amount of3% of the Moderate Income Affordable Sales Price. The actual down payment shall not be less than 3% of the Affordable Sales Price ofa Moderate Income Unit and should the down payment amount exceed 3% of the Affordable Sales Price ofa Low Income Unit the actual First Trust Deed amount (but not the actual Mortgage Amount for determining the Maximum Moderate Income Affordable Sales Price) shall decrease by the amount the actual down payment exceeds 3% ofthe Affordable Sales Price of a Moderate Income Unit. 5 8/14/06 12-15 3.7.1 The Maximum Mortgage Amount - FHA Insured Loans. For FHA insured loans, the maximum Mortgage Amount shall be an amount which when added to the other Monthly Housing Costs does not exceed 43.2% (that is 36% times 120%) of the Area Median Income, as adjusted for household size appropriate to the Moderate Income Unit as specified in Section 3.10 below The Buyer-Qualified Interest Rate must remain fixed for at least the first five (5) years of the term of the FHA insured loan. 3 7.2. The Maximum Mortgage Amount- Conventional Loans. For conventional loans, the maximum Mortgage Amount shall be an amount which when added to the other Monthly Housing Costs does not exceed 48% (that is 40% times 120%) of the Area Median Income, as adjusted for household size appropriate to the Moderate Income Unit as specified in Section 3.10 below The Buyer-Qualified Interest Rate must remain fixed for at least the first five (5) years of the term of the conventional loan. 3.8. Marketing of 3 Bedroom Moderate Income Units. During the Moderate Income Unit Marketing Period, each three (3) bedroom Moderate Income Unit shall be marketed by Developer only to persons who qualify as Moderate Income Buyers with households of three (3) persons or more. 3.9 After the Moderate Income Unit Marketing Period. After the Moderate Income Unit Marketing Period, Developer may market any remaining Moderate Income Units which are affordable to Moderate Income Buyers with any household size. Developer shall deliver to the City written notice of the first day and the last day of the Moderate Income Unit Marketing Period. The termination of the Moderate Income Unit Marketing Period will be evidenced by written notice to Developer from the City 3 10. Unit Sizes and Appropriate Household Sizes. The following are the household sizes appropriate to an Affordable Unit, for calculation of Mortgage Amount based upon 1.5 persons per bedroom and consistent with the City ofChula Vista Policy for the Development of Affordable For Sale Housing for First-Time Affordable Income Buyers: Unit Size Household Size Three (3) Bedroom Four and a half Persons Calculation of the Low Income Affordable Sales Price and Moderate Income Affordable Sales Price shall be based upon the assumed household size specified for the Affordable Unit size as set forth in the foregoing table notwithstanding the actual size of the household that purchases the Affordable Unit. 3 II Proof ofOualification. Developer will obtain from each person(s) to whom Developer sells an Affordable Unit a "Supplemental Buyer Application" (the "Application") in the form of Exhibit "D" attached hereto (or such other form as the City may from time to time adopt and of which the City will notify Developer in writing). Developer or an institutional lender designated by Developer shall use commercially reasonable efforts to verify the Application and supporting documents in determining the eligibility of such person(s) to buy such Affordable Unit. Developer will retain the Application and supporting documents for a period of at least seven (7) years after the buyer thereof closes escrow for the purchase of the Affordable Unit. 3.12. Records. Audits. Developer will submit to the City copies of all Applications, availabie settlement or closing statements with respect to each Affordable Unit that has closed escrow, and documents submitted containing information with respect to each Affordable Unit including (i) the monthly amortized Mortgage Amount, (ii) the number of occupants for which the Affordable Unit is sold, (ili) the income of such occupant(s), (iv) the Market Rate Price of the Affordable Unit and (v) the Low Income Affordable Sales Price of the Low Income Unit or the Moderate Income Affordable Sales Price of the Moderate Income Unit, whichever is applicable. Such submission shall be in the form of Exhibit "D" attached hereto (or such other form as the City may from time to time adopt and of which the City notifies Developer in writing). If the City 6 8/14/06 12-16 reasonably believes that violations of the sales price, occupancy and/or income requirements of this Agreement have occurred, and that an audit is necessary to verify submitted Applications and documentation, it will so notify Developer in writing thereof. Within ten (10) days after delivery of said notice, Developer will deliver to the City the names of three certified public accountants doing business in the metropolitan San Diego area. The City will promptly deliver to Developer the former's approval of one or more of said names. The audit will be completed by an approved certified public accountant, at Developer's cost, within 60 days after the delivery to Developer of the City's said approval. The certified public accountant will promptly deliver a copy of the written audit to the City Developer shall regularly evaluate its compliance with the sales price, occupancy and income requirements of this Agreement and exercise good faith efforts to avoid any violations thereof. 3 13. City Approval of Marketine Plan; Selection of Affordable Buvers. The following requirements shall apply with respect to Developer's marketing of the Affordable Units 3.13.1 Marketine Plan. Developer shall prepare a marketing plan in compliance with Federal and State Fair Housing Laws, and the City shall review the same for compliance with City laws, policies and other requirements. Such marketing plan shall include a plan for publicizing the availability of the Affordable Units within the City, such as notices in any City sponsored newsletter, newspaper advertising in local newspapers and notices in City offices. The marketing plan shall require Developer to obtain from the City the names oflow/moderate income households who have been displaced by the City Redevelopment Agency redevelopment projects, and to notify persons on such list ofthe availability of Affordable Units in the Project prior to undertaking other forms of marketing. The marketing plan shall provide that the persons on such list of displaced persons be given not fewer than fifteen (15) days after receipt of such notice to respond by completing application forms for purchase of Affordable Units, as applicable. 3 13.2. Income Requirements. All Affordable Buyers shall meet the income requirements set forth in this Agreement. Selection of Affordable Buyers shall be made based upon the Buyer Selection Criteria as established by the City's Policy for the Development of Affordable For Sale Housing for First- Time Affordable Buyers (Council Policy 453-02) within the following levels of priority A point system has been established so that applicants with a higher number of points will receive preference for Affordable Units. 5 points Households which are displaced from their primary residence as a result of any of the following: (i) expiration of affordable housing covenants applicable to such residence; (ii) an action of the City or the City Redevelopment Agency; (iii) closure ofamobile home or trailer park community in which the household's residence was located; or (iv) a condominium conversion involving the household's residence. One member in the household must have resided in such housing as the primary place ofresidence for at least one year prior to such action or event. 3 points Households with at least one member who has worked within the City, as that person's principal place of full-time employment, for at least one year prior to the date of application for such housing. 3 ooints Households currently residing within the boundaries of the City ofChula Vista, at the time of application. 2 ooints Households with at least one member who is a Public Safety employee (fire and police) or Credentialed Teacher. The individual must be working in such position as his/her full-time profession at the time of application. I point All other applicants who do not meet any of the above criteria. 7 8/14/06 12-17 I n the situation where there are applicants with an equal nwnber of points but not enough Affordable Units are available, a lottery will be held at a place and time to be announced by the City and Developer. Ifthere are not more eligible applicants than units upon release, the points system will not be required. 3 14 City's Evaluation ofOualification of Affordable Buvers: Authority of City To Receive Loan Aoolications. Developer shall reasonably assist the City in obtaining from each Affordable Buyer (or prospective Affordable Buyer) a form signed by the Affordable Buyer authorizing the release to the City of the prospective buyer's 1003 (Mortgage Loan Application), Good Faith Estimate and Underwriting Transmittal Summary (1008) or similar form from the applicable lender. Developer shall request that each such lender forward to the City the loan documentation for any loan to an Affordable Buyer. The City will evaluate these forms and communicate its evaluation to Developer. After the City's review and verification that a prospective buyer is qualified as an Affordable Buyer, the City will send a City Notice of Approval to the lender and Developer confirming the prospective buyer's eligibility 3 15 Oualification Criteria. The City will utilize the following criteria in evaluating an application by an Affordable Buyer (or prospective Affordable Buyer): 3.15.1. Neither the Low Income Buyer nor such Low Income Buyer's spouse has owned a home during the three (3) - year period immediately preceding the purchase of the Affordable Unit. 3.15.2. An Affordable Buyer's down payment must not be less than three percent (3%) of the Affordable Sales Price. 3 15.3 The Affordable Buyer's liquid assets after down payment, Affordable Buyer's closing costs and Affordable Buyer's cash payments for Buyer-Elected Options and Upgrades must not exceed $25,000.00 for Low Income Buyers and $40,000 for Moderate Income Buyers. 3 15.4 Non-occupant co-borrowers are not allowed. 3.15.5 The maximum Monthly Housing Costs must not exceed 36% of monthly income for FHA insured loans and 40% of monthly income for all other loans 3.15.6. The maximum debt-to-income ratios must not exceed 41 % for FHA insured loans and 45% for all other loans 3.15.7 No refinancing for cash-out or debt consolidation purposes will be allowed (but rate and term refinancing is permitted). 3.16. Aoolication OfOualification Criteria. The Housing Manager of the City's Community Development Department may allow one or more underwriting criteria set forth in Section 3.1 to not apply to a a particular sale ofan Affordable Unit after the date at least 50% of the type of Affordable Unit (46 of the 92 Low Income Units or 58 of the 115 Moderate Income Units, as applicable) have already been sold and if for a period of 120 days Developer has not been able to sell the Affordable Unit to an Affordable Buyer who could meet all of the qualification criteria set forth in Section 3.15. 3 17 Information Packet. Developer shall provide an informational packet to each Affordable Buyer, summarizing the requirements of the City's affordable for sale housing for an Affordable Buyers program provided for in this Agreement. The City shall, at Developer's request, reasonably assist Developer with the preparation or review of the informational packet. 3 18 Insurance. The City shall have the right to require the following of a each Affordable Buyer: Within ten (10) days after an Affordable Buyer's acquisition of a Affordable Unit, such Affordable Buyer 8 8/14/06 12-18 shall furnish to the City duplicate originals or appropriate certificates of insurance coverage evidencing that such Affordable Buyer has obtained, or cause to be obtained, the insurance coverage with respect to the Affordable Unit that is required under the terms and conditions of the Silent Second Trust Deed. 4. - Term 4.1 Term of Agreement. The agreement shall commence on the date of this Agreement. The Term ends after all obligations under this agreement have been met and verified by the City. Upon verification from the City that all obligations have been satisfied, the City shall record a termination of this Agreement in the Office of the County Recorder of San Diego County, California. 4.2. Unrestricted Units. The thirty-two (32) Unrestricted Units are those Units that, pursuant to this Agreement, are not encumbered by a Silent Second Trust Deed when they close escrow to a Purchaser. 4.3 Conveyance of Restricted Units. No Owner of an Affordable Unit shall convey the Affordable Unit, by reason of sale or otherwise, unless and until the owner gives the City at least thirty (30) days prior written notice of such conveyance. The City shall have the right to require payment of the Silent Second Note in full upon any such owner unless (i) the intended purchaser, during those thirty (30) days provides to the City such information as the City may require to allow it to verify that the purchaser meets all applicable criteria of a qualified Affordable Buyer of the Affordable Unit and (Ii) the purchaser assumes all obligations under the Silent Second Note and Silent Second Trust Deed by executing and acknowledging an assumption agreement in the form required by the City 5. - Subordination Upon request, the City shall subordinate this Agreement to any first deed of trust which Developer obtains for construction of the Project and the First Trust Deed Loans obtained by buyers to purchase their Affordable Units. However, any subordination agreement entered into by the City shall contain written commitments which the City finds are reasonably designed to protect the City's interests in the event of default, such as any of the following: (a) a right of the City to cure a default on the loan prior to foreclosure, (b) a right of the City to negotiate with the lender after notice of default from the lender and prior to foreclosure, (c) an agreement that if prior to foreclosure of the loan, the City takes title to the property and cures the default on the loan, the lender will not exercise any right it may have to accelerate the loan by reason of the transfer oftitle to the City, and (d) a right ofthe City to acquire through foreclosure under the Silent Second Trust Deed the Affordable Unit from the buyer at any time after a material default on the loan. 6. - Additional Provisions Re~ardin~ The Real Prooertv 6.1 Condition of the Real Prooertv The following provisions shall apply until the last Affordable Unit is sold, which is the term ofthis agreement. 6.1.1 Developer shall prevent the release, by Developer or its contractors, into the environment of any Hazardous Materials which may be located in, on or under the Real Property Such precautions shall include compliance with all Governmental Requirements with respect to Hazardous Materials. In addition, Developer shall install and utilize such equipment and implement and adhere to such procedures as are consistent with commercially reasonable standards as respects the disclosure, storage, use, removal and disposal of Hazardous Materials. 6.1.2. . Developer shall indemnify, defend and hold the City, its elected officials, officers, agents, employees, representatives, and successors harmless from and against any claim, action, suit, proceeding, loss, cost, damage, liability, deficiency, fine, penalty, punitive damage, or expense (including, without limitation, reasonable attorneys' fees), resulting from, arising out of, or based upon Developer's or its 9 8/14/06 12-19 contractor's (i) release, use, generation, discharge, storage or disposal of any Hazardous Materials on, under, in or about, or the transportation of any such Hazardous Materials to or from, the Real Property, no matter when such claim, action, suit or proceeding is first asserted or begun and no matter how the Hazardous Materials came to be released, used, generated, discharged, stored or disposed of on, under, in or about, to or from the Real Property, or by whom or how they are discovered, or (ii) violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit,judgment or license relating to the use, generation, release, discharge, storage, disposal or transportation of Hazardous Materials on, under, in or about, to or from, the Real Property. This indemnity shall include, without limitation, any damage, liability, fine, penalty, parallel indemnity after closing, cost or expense arising from or out of any claim, action, suitor proceeding, including injunctive, mandamus, equity or action at law, for personal injury (including sickness, disease or death), tangible or intangible property damage, compensation for lost wages, business income, profits or other economic loss, damage to the natural resource or the environment, nuisance, contamination, leak, spill, release or other adverse effect on the environment. This indemnity shall survive the Term or earlier termination of this Agreement. 6.1.3. For purposes of this Agreement, "Hazardous Materials" means any substance, material, or waste which is or becomes regulated by any local governmental authority, San Diego County, the State of California, regional governmental authority, or the United States Government, including, but not limited to, any material or substance which is (i) defined as a "hazardous waste," "extremely hazardous waste," or "restricted hazardous waste" under Section 25115,25117 or 25122.7, or listed pursuant to Section 25130 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law)), (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a IIhazardous material,1I lIhazardous substance, II or "hazardous waste II under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) friable asbestos, (vii) polychlorinated byphenyls, (viii) methyl tertiary butyl ether, (ix) listed under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant to Article II of Title 22 of the California Code of Regulations, Division 4, Chapter 20, (x) designated as "hazardous substances" pursuantto Section 311 of the Clean Water Act (33 V.S.C. Section 1317), (xi) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 V.S.C. Section 6901, ef seq. (42 U.S.C. Section 6903) or (xii) defined as "hazardous substances" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601, ef seq. 6.1 4 For purposes of this Agreement, "Governmental Requirements" means all laws, ordinances, statutes, codes, rules, regulations, orders and decrees of the United States, the State, the County of San Diego, the City, or any other political subdivision in which the Real Property is located, and of any other political subdivision or instrumentality exercising jurisdiction over the City, Developer or the Real Property 6.1.5. Taxes. Assessments. Encumbrances. and Liens. Developer shall pay prior to delinquency all real estate taxes and assessments properly assessed and levied on portions of the Real Property which are owned by Developer. Nothing in this Agreement shall be deemed to prohibit Developer from contesting the validity or amounts of any tax, assessment, encumbrance, or lien, nor to limit the remedies available to Developer in respect thereto. 6.2. Hold Harmless. Developer agrees to indemnify, protect, defend and hold harmless the City, its elected officials, officers, agents, employees, representatives and successors, from and against any and all claims, damages, actions, costs, demands, expenses or liability, including without limitation, reasonable attorneys' fees and court costs, which may arise from the direct or indirect actions or inactions of Developer or 10 8/14/06 12-20 those of its contractors, subcontractors, agents, employees or other persons acting on Developers' behalf which relate to Developer's construction and marketing activities of the Real Property or Project. This hold harmless agreement applies, without limitation, to all damages and claims for damages suffered or alleged to have been suffered by reasons of the operations referred to in this Section 6.2, regardless of whether or not the City prepared, supplied or approved plans or specifications, or both, for the Real Property or Project. Notwithstanding anything to the contrary contained herein, this indemnity shall not apply to any claims, damages, actions, costs, demands, expenses or liability which arises out of either' (a) the exclusive marketing requirements contained in Section 3.13.1, or (b) the use of the point system contained in Section 3.13.2. This indemnity by Developer, and all other indemnities set forth herein shall survive any foreclosure of the Real Property by the City pursuant to the terms of the Silent Second Trust Deed and the Term or earlier termination of this Agreement. 6.3 Obligation to Refrain from Discrimination. There shall be no discrimination against, or segregation of, any persons, or group of persons, on account afraee, color, creed, religion, sex, marital status, ancestry, or national origin in the enjoyment ofthe Real Property Developer shall further comply with all the requirements ofthe Americans with Disabilities Act and the Americans with Disabilities Act Accessibility Guideiines (collectively, "ADA"). 6.4 Form of Nondiscrimination and Nonsegregation Clauses. Developer shall refrain from restricting the sale ofany portion of the Real Property, or contracts relating to the Real Property, on the basis ofrace, color, creed, religion, sex, marital status, ancestry, or national origin of any person and shall comply with all the requirements for the ADA. All such deeds, leases or contracts, shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: 6.4 I In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the land herein conveyed, nor shall the grantee himself, or any persons claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the land herein conveyed and further covenants that all such individuals and entities shall comply with all requirements of the Americans with Disabilities Act of1990, as the same may be amended from time to time (42 V.S.C. Section 12101, et .eg.), and the Americans with Disabilities Accessibility Guidelines. The foregoing covenants shall run with the land." 6.4.2. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him, and this lease is made and accepted upon and subject to the following conditions: 'That there shall be no discrimination against or segregation of any person or group of persons on account efrace, color, creed, religion, sex, marital status, ancestry, or national origin in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the land herein leased, nor shall the lessee himself, or any person claiming under or through him, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, sub lessees, subtenants, or vendees in the land herein lease and the lease shall be carried out in compliance with all requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 V.S.C. Section 12101, et .eg.), and the Americans with Disabilities Accessibility Guidelines.''' 6.4.3 In contracts: "There shall be no discrimination against or segregation of any persons or group of persons on account of race, color, creed, religion, sex, marital status, ancestry, or national origin in the sale, lease, transfer, use, occupancy, tenure, or enjoyment ofland, nor shall the transferee himself, or any person claiming under or through him, establish or permit any such practice or practices of discrimination 11 8/14/06 12-21 or segregation with reference to the selection, location, number, use, or occupancy of tenants, lessees, subtenants, sublessees, or vendees ofland and all such activities shall be conducted in compliance with all the requirements of the Americans with Disabilities Act of 1990, as the same may be amended from time to time (42 U.S.C. Section 12101, et seq), and the Americans with Disabilities Accessibility Guidelines." 7. - Escrow Documentation The City shall provide Developer with any revision it reasonably deems appropriate to the form Silent Second Note or the Silent Second Trust Deed for the use in escrow for the sale of each Affordable Unit. The Silent Second Trust Deed shall be recorded with the County Recorder of San Diego County at close of escrow for the sale by Developer of each Affordable Unit, and each Silent Second Trust Deed shall legally describe the particular Affordable Unit it covers, using the same legal description as is used in Developer's deed to its buyer. Each Silent Second Trust Deed shall be consistent with and implement the terms of this Agreement. 8. - Breach 8.1 Breach bv City If the City breaches any of its covenants contained in this Agreement, Developer will have available to it all legal and equitable remedies afforded by the laws of the State of California. 8.2. Breach bv Developer of Sale Price Limit ReQuirements. If, with respect to any Affordable Unit, Developer breaches this Agreement by charging higher sales prices than that herein permitted, Developer will, immediately upon the City's demand, (i) reduce the sales price to that permitted herein and (iI) refund to any buyers who theretofore paid such higher sales price the amount of the excess, together with interest hereon at the rate often percent (10%) per annum or the maximum legal rate, whichever is less, computed from the date(s) of payment of the excess by said buyers to the date of said refund. The provisions of this Section 8.2 constitute a third-party beneficiary contract in favor of such buyers. Further, the City is hereby granted the power (but not the duty) to act as attorney-in-fact of such buyers in enforcing this Section 8.2. '8.3. Breach bv Developer of Sales ReQuirements. If, with respect to any Affordable Unit, Developer breaches this Agreement by selling to buyers who are not qualified by the City pursuant to Section 3.14, Developer will, immediately upon the City's written demand, and at Developer's sole cost, use its reasonable best and lawful efforts to terminate such sale or otherwise substitute an Umestricted Unit in such sale. 8.4. Breach bv Developer of Other ReQuirements. If Developer breaches any of its covenants contained in this Agreement, the City shall have available to it all legal and equitable remedies afforded by the laws of the State of California. 8.5. Remedies Not Exclusive. The remedies set forth in this Article 8 are not exclusive, but are in addition to all legal or equitable remedies otherwise available to the City and Developer. 9. - Conflicts of Law 9 I Conflict of City and State or Federal Laws. In the event that state or federal laws or regulations enacted after this Agreement has been entered into prevent or preclude compliance with one or more provisions of this Agreement, the parties will: 9 1 1. Notice and Copies: Provide the other party with written notice of such state or federal restriction, provide a copy of such regulation or policy and statement of conflict with the provisions of this Agreement. 12 8/14/06 12-22 9 1.2. Modification Conferences: The parties will, within 30 days, meet and confer in good faith in a reasonable attempt to modify this Agreement to comply with such federal or state law or regulation. 9.2. City Council Hearinlls. Thereafter, regardless of whether the parties reach an agreement on the effect of such federal or state law or regulation upon this Agreement, the matter will be scheduled for consideration by the governing board of the City Council. The City Council, at such meeting, will determine the exact modification or suspension which shall be necessitated by such federal or state law or regulation. Developer, at the meeting, will have the right to offer oral and written testimony Any modification or suspension will be taken by the affirmative vote of not less than a majority of the authorized voting members of the governing board of the City Council. 9.3 Cooperation in Securinll Permits. The City shall cooperate with Developer in the securing of any permits which may be required as a result of such modifications or suspensions. 10.. General Provisions 10 I Severability. The parties hereto agree that the provisions are severable. If any provision of this Agreement is held invalid, the remainder of this Agreement will be effective and will remain in full force and effect unless amended or modified by mutual written consent of the parties. 10.2. Entire Allreement. Waivers and Amendments. This Agreement, together with any other written document referred to or contemplated herein, embody the entire Agreement and understanding between the parties relating to the subject matter hereof. Neither this Agreement nor any provision hereof may be amended, modified, waived, cancelled or discharged except by an instrument in writing executed by the both parties. 10.3. Caoacities of Parties. Each signatory and party hereto hereby warrants and represents to the other party that it has legal authority and capacity and direction from its principal to enter into this Agreement, and that all resolutions or other actions have been taken so as to enable it to enter into this Agreement. 10.4 Governinll LawNenue. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Any action arising under or relating to this Agreement shall be brought only in the Federal or State courts located in San Diego County, State of California, and if applicable, the City of Chula Vista, or as close thereto as possible. Venue for this Agreement, and performance hereunder, shall be the City of Chula Vista. lO.5 Assillnment. Subject to the City's prior review and approval, which review and approval shall not be unreasonably withheld, delayed or conditioned, the rights and obligations of Developer under this Agreement may be transferred or assigned and Developer may be released from such obligations upon such transfer or assignment, provided such transfer or assignment is made as a part of the conveyance ofthe fee of all or a portion of the Real Property. Any such transfer or assignment will be subject to the provisions ofthis Agreement. During the term of this Agreement, any such assignee or transferee will observe and perform all of the duties and obligations of Developer contained in this Agreement as such duties and obligations pertain to the portion of the Real Property so conveyed. 10.6. Enforcement. Unless amended or cancelled as provided in Section 10.2, this Agreement is enforceable by any party to it despite a change in the applicable general or specific plans, zoning, subdivision or building regulations adopted by the City which alter or amend the rules, regulations or policies governing permitted uses of the land, density and design. 13 8/14/06 12-23 10.7. Bindine Effect of Aereement. The burdens of this Agreement bind and the benefits ofthis Agreement inure to the parties' successors or assignees in interest. 10.8. Notices. All notices, demands or requests provided for or permitted to be given pursuantto this Agreement must be in writing. All notices, demands or requests to be sent to any party shall be deemed to have been properly given or served if (i) personally served, (Ii) deposited in the United States mall, addressed to such party, postage prepaid, registered or certified, with return receipt requested, at the addresses identified herein as the places of business for each of the designated parties and places of business addresses identified herein for each of the designated parties. Qt;,. City of Chula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: Director, Community Development Department With a coo v to: City ofChula Vista 276 Fourth Avenue Chula Vista, CA 91910 Attn: City Attorney DeveloDer' Shea Homes 9990 Mesa Rim Road San Diego, CA 92121 Attn: Jim Kilgore With a CODY to: Brookfield Shea Otay LLC 12865 Pointe Del Mar, Suite 200 Del Mar, CA 92014 Attention: Ron Grunow With another CODY to: Hecht, Solberg, Robinson, Goldberg & Bagley 600 West Broadway, Suite 800 San Diego, CA 92101 Attn: John Hecht E-mail.jhecht@hsrgb.com A party may change its address by giving notice in writing to the other party. Thereafter, notices, demands and requests shall be addressed and transmitted to the new address. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed as of the day and year first written above. "CITY". CITY OF CHULA VISTA, a municipal corporation of the State of California By' Stephen C. Padilla, Mayor ATTEST 14 8/14/06 12-24 Susan Bigelow, City Clerk APPROVED AS TO FORM, Ann Moore, City Attorney "DEVELOPER'" BROOKFIELD SHEA OT A Y LLC, a California limited liability company iability company, a Member By Name:~........ DW v1~ 'R--r~:I.J' <("./S. " B, < ~-J!::t Name:.", lJ~ '7kt'd Its: I/fc,< At-~. Its: Date: Date: g ../t).(jp By: Shea Otay II, LLC, a California limited liability company, a Member By Shea Homes Limited Partnership, a California limited partnership, its sole M mber Date: ~ -, By' '4 N am :.4 ....,c",.......". c<Z-- L.. Its Authorized Agent Pc.-, s; ,., 1-t:&/t- Date: o I!> . I.. "'E>. 15 8114/06 12-25 CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California }ss. County of San Diego On August 15, 2006, before me, Nicole Sutherland, Notary Public, personally appeared Ronald D Grunow and E. Dale Gleed, J~- - - - - - - - - NICOl.E SUTHERlAND ~ Q Commls.llon # 1565413 F !. Notary PublIc - COllfomia ~ j San Diego County f My Comm. Expirea Feb 27,2009 - - - - - - - - - - - ~ personally known to me to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacity, and that by their sig natures on the instrument the persons, or the entity upon behalf of which the persons acted, executed the instrument. WITNESS my hand and official seal. lu lffi.L ~\A-t ~ \~ Place Notary Seal Above Signature of Notary Public 12-26 CALIFORNIA ALL.PURPOSE ACKNOWLEDGMENT ~~~~~~~~~~~~~~~~~~~~~ State of California County of <~n D\es ('; On f1uCrS+ \5 2DC:J.&>, Date I personally appeared ( } ss. before me, yo; h ( , n Name and TItle of Officer (e.g., "Jane Doe, Neta G..n-1 -A it''XLLVi (\e r ~ntSlgner(s) I. :pubI1c:... hn€..(--- )WYI 1I1jo(r- I ~erSOnallY known to me - - - - - - - - - - - - ~ SARAH J. BeCKMAN ~~' Commission # 1591862 ~ i .... Notary PubliC . Collfomia ~ . Son Diego County l t _ ~~ _ ~:o~m~Ex~~~1:.2~ o proved to me on the basis of satisfactory evidence to be the persor@ whose name@)S@ubscribed to the wi . instrument and acknowledged to me that he/sh they execu~ the same in his/he their authoriz capaci~, and that by hislhe their signature<@on the instrument the persorj@, or the entity upon behaif of which the perso~ acted, executed the instrument. Place Notary Seal Above '" -p-...J OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. Description of Attached Document Title or Type of Document: Document Date: Number of Pages: Signer(s) Other Than Named Above: Capacity(ies) Claimed by Signer(s) Signer's Name: o Individual o Corporate Officer - Title(s): o Partner - 0 limited 0 Generai o Attorney in Fact o Trustee o Guardian or Conservator o Other' Top of thumb here Signer's Name: o Individual o Corporate Officer - Title(s): o Partner - 0 Limited 0 General o Attorney in Fact o Trustee o Guardian or Conservator o Other' RIGHT THUMBPRINT OF SIGNER RIGHT THUMBPRINT OF SIGNER TOp of thumb here Signer Is Representing: Signer Is Representing: ,::g; g:~~~~~ ~~~~~ _'-:z.v=~==,~=V'>I!O"""",,,,,,,~y~.=~:.c. """""""....~ C 2004 National Notary Association. 9350 De Sota Ave.. P.O. Box 2402' Chatsworth, CA 91313~2402 Item No. 5907 Reorder: Call Toll-Free 1-800-876-6827 12-27 EXHIBIT A LEGAL PROPERTY DESCRIPTION All that certain real property situated in the City ofChula Vista, County of San Diego, State of California, described as follows: Lots I of CHULA VISTA TRACT NO. 01.11 OTAY RANCH VILLAGE 11 NEIGHBORHOODS MU.} AND R.19, in the City ofChula Vista, County of San Diego State of California, according to Map thereof No. , filed with the County Recorder of San Diego County EXIDBIT A 8/14/2006 12-28 NOTICE: THIS NOTE MAY REQUIRE PAYMENT OF PRINCIPAL, INTEREST AND EQUITY SUMS UPON THE SALE OR TRANSFER OF THE PROPERTY OR UPON A PREPAYMENT FURTHER, THIS NOTE IS A SHARED APPRECIATION NOTE AS DEFINED IN SECTION 1917, ET SEQ. OF THE CALIFORNIA CIVIL CODE. PROMISSORY NOTE SECURED BY DEED OF TRUST $ Amount Date [Property Address] Borrower's Promise to Pay. For value received, the undersigned, ("Borrower"), promises to pay to the City of Chula Vista ("City"). or order, the sum of DOLLARS ($ ) with interest accruing thereon as hereinafter provided, and payable as set forth below It is understood that the City may transfer this Note, The City or anyone who takes this Note by transfer and who is entitled to receive payments under this Note will be called the "Note Holder" 2. No Interest. This Note will bear no interest unless Borrower defaults under the terms of this Note or the Deed of Trust securing it. In the event of default, interest from the Date of this Note shall be calculated at: a) The rate equal to the interest rate of the senior trust deed or, in the event of no senior trust deed, b) The prevailing rate of the Prime Rate as published in the Wall Street Journal, on the date of default. 3 Payments and Term. The sums evidenced by this Note, including all principal, interest lif any) and the share of the Equity due and payable to the Note Holder shall become due and payable at such time as Borrower sells, rents, refinances, transfers or changes the title to the property (the "Property") which is encumbered by the second deed of trust ("Deed of Trust") which secures this Note. "Equity" and the portion payable to the Note Holder are defined and described in the Deed of Trust. As described in the Deed of Trust, the sale, rental, refinance, conveyance, transfer or change in title of the Property prior to the thirtieth (3D") anniversary date of the Deed of Trust will result in the Note Holder's share of the Equity to be payable to the Note Holder Principal shall also become due and payable upon the thirtieth (3D") anniversary date of the Deed of Trust. No delay or omission on the part of the City shall operate as a waiver of such right of repayment or of any other right of this Note. The principal amount of this Note, together with interest lif any) accruing thereon from the date hereof as set forth in Section 3 and the Equity, shall be due and payable on or before the date provided by the City in the Notice of Acceleration, which shall not be less than ninety (90) days, if all or any part of the Property or any interest in it is sold, rented, refinanced, conveyed, or transferred or if a beneficial interest in Borrower is sold, rented, refinanced, conveyed, EXHIBIT B-1 8/14/2006 12-30 or transferred (each of which is called a "Transfer") without the prior written consent of the City The City shall not exercise this right of acceleration if prohibited by federal law or if the Note Holder has executed a separate written waiver of its right to do so. The following shall not constitute a Transfer: (.) A transfer of the Property from a deceased Borrower to the surviving spouse of Borrower if the surviving spouse is also named as a Borrower; (b) A transfer of the Property by Borrower to his/her spouse pursuant to which the spouse becomes a co-owner of the Property; (c) A transfer of the Property resuiting from a decree of dissolution of the marriage or legal separation or from a property settiement agreement incidental to such a decree which requires Borrower to continue to make payments on the Note and by which a spouse who is already a Borrower becomes the sole owner of the Property; (d) A transfer of the Property by Borrower to an inter-vivos trust in which Borrower is the sole beneficiary and which is done for estate planning purposes oniy and does not result in any change in possession of the Property; (e) A refinancing to which the beneficiary under the Deed of Trust is obligated to subordinate the Deed of Trust. (f) A refinancing which does not result in cash excess paid to Borrower or which is used for debt consolidation, equity line of credit or similar purposes. (g) A conveyance by sale or otherwise, to a party which the Housing Manager of the Community Development Department of the City of Chula Vista determines meets all the requirements to be deemed a "Low Income Buyer" as defined in the" Affordable Housing Regulatory Agreement" filed for record with the County recorder of the San Diego County on , 2006 as Document No. 2006- _ and which the Housing Manager determines meets all the requirements set forth in Section 4.3 of that Affordable Housing Regulatory Agreement. All payments made under this Note shall be paid in lawful money of the United States to the City of Chula Vista at 276 Fourth Avenue, Chula Vista, CA 91910, Attention: Community Development Department, Housing Division. 4 Prepayment. Borrower has the right to prepay the principal without incurring any penalty, apart from any interest that may be due under default provisions above. In the event that Borrower chooses to prepay the Note, Borrower must notify Note Holder in writing. Upon any such prepayment, the City's share of the Equity shall become immediately due and payable to the Note Holder 5 No Interest If No Default; No Equity Sharing If After 30 Years If No Default. Provided that Borrower is not in default under the terms of this Note or Loan Documents, no interest shall accrue under the Note. The City shall not share any Equity unless the principal balance of this Note becomes accelerated prior to expiration of the THIRTIETH (30"') year after the date of the execution of the Note. Nothing contained in this Section 5 shall be construed as a promise by the City to EXIDBIT B-1 8/1412006 1 2-31 forgive or relinquish the right to seek repayment of the principal of this Note. 6 Default Under Deed of Trust. Notwithstanding any other provisions of the Note, if default occurs in any of the covenants or agreements contained in the Deed of Trust securing this Note, this Note, including all unpaid principal, interest and Equity sharing, shall immediately become due and payable in full at the option of the City In the event the City exercises such option, the amounts due and payable shall be the principal balance remaining on the Note and other amounts owing, together with accrued but unpaid interest as described above. 7 Attorneys' Fees. Should suit be commenced to collect on this Note, or any portion thereof, such sum as the court may deem reasonable shall be added hereto as attorneys' fees. 8 Time. Time is of the essence herein. g Amendments. This Note may not be modified or amended except by an instrument in writing expressing such intention and signed by an authorized representative of the City and Borrower 10 Severability If any term or provision hereof is illegal or invaltd for any reason whatsoever, such illegality or invalidity shall not affect the validity and binding effect of the remainder of this Note upon the parties. 11 Borrower's Waivers. Borrower waives any rights to require the City to perform certain acts. Those acts are: (a) To demand payment of amounts due (known as "presentment") (b) To give notice that amounts due have not been paid (known as "notice of dishonor") (c) To obtain an officiai certification of non-payment (known as "protest") 12. Giving of Notices. Any notice that must be given to Borrower under this Note will be given by delivering it or by mailing it first class mail or by certified mail, return receipt requested, addressed to Borrower at the address set forth above. A notice that must be given to the City under this Note will be given by mailing it certified mail, return receipt request, to the City at the address stated in Section 3 above. Any party may change its address by a notice given to the other party in the manner set forth in this Section. 13. Joint and Several Responsibility If more than one person executes this Note, each is fully and personally obligated to pay the full amount owed and to keep all promises in this Note. EXHIBIT B-1 8/14/2006 12-32 NOTICE TO BORROWER Do not sign this Note if it contains blank spaces. All spaces should be completed before you sign. Date: Borrower Borrower EXHIBIT B-1 8/1412006 12-33 EXIDBIT B-2 MODERATE INCOME FORM OF SILENT SECOND NOTE EXHIBIT B-2 8/14/2006 12-34 NOTICE: THIS NOTE MAY REQUIRE PAYMENT OF PRINCIPAL AND INTEREST SUMS UPON THE SALE OR TRANSFER OF THE PROPERTY OR UPON A PREPAYMENT FURTHER, THIS NOTE IS A SHARED APPRECIATION NOTE AS DEFINED IN SECTION 1917, ET SEa. OF THE CALIFORNIA CIVIL CODE. PROMISSORY NOTE SECURED BY DEED OF TRUST $ Amount Date [Property Address] Borrower's Promise to Pay For value received, the undersigned, ("Sorrower"), promises to pay to the City of Chula Vista ("City"), or order, the sum of DOLLARS ($ ) with interest accruing thereon as hereinafter provided, and payable as set forth below It is understood that the City may transfer this Note. The City or anyone who takes this Note by transfer and who is entitled to receive payments under this Note will be called the "Note Holder" 2. No Interest. This Note will bear no interest unless Sorrower defaults under the terms of this Note or the Deed of Trust securing it. In the event of default, interest from the Date of this Note shall be calculated at: c) The rate equal to the interest rate of the senior trust deed or, in the event of no senior trust deed, d) The prevailing rate .of the Prime Rate as published in the Wall Street Journal, on the date of default. 3 Payments and Term. The sums evidenced by this Note, including all principal and interest lif any) shall become due and payable at such time as Borrower sells, rents, refinances, transfers or changes the title to the property Ithe "Property") which is encumbered by the second deed of trust ("Deed of Trust") which secures this Note. As described in the Deed of Trust, the sale, rental, refinance, conveyance, transfer or change in title of the Property prior to the thirtieth 130'") anniversary date of the Deed of Trust will result in the principal becoming due and payable. Principal shall also become due and payable upon the thirtieth (30'") anniversary date of the Deed of Trust. No delay or omission on the part of the City shall operate as a waiver of such right of repayment or of any other right of this Note. The principal amount of this Note, together with interest lif any) accruing thereon frorn the date hereof as set forth in Section 3, shall be due and payable on or before the date provided by the City in the Notice of Acceleration, which shall not be less than ninety {901 days, if ali or any part of the Property or any interest in it is sold, rented, refinanced, conveyed, or transferred or if a beneficial interest in Borrower is sold, rented, refinanced, conveyed, or transferred (each of which is called a "Transfer") without the prior written consent of the City The City shall not exercise this right of acceleration if prohibited by federal law or if the EXHIBIT B-2 8/14n006 12-35 Note Holder has executed a separate written waiver of its right to do so. The following shall not constitute a Transfer: la) A transfer of the Property from a deceased Borrower to the surviving spouse of Borrower if the surviving spouse is also named as a Borrower; Ib) A transfer of the Property by Borrower to his/her spouse pursuant to which the spouse becomes a co-owner of the Property; (c) A transfer of the Property resulting from a decree of dissolution of the marriage or legal separation or from a property settlement agreement incidental to such a decree which requires Borrower to continue to make payments on the Note and by which a spouse who is already a Borrower becomes the sole owner of the Property; Id) A transfer of the Property by Borrower to an inter-vivos trust in which Borrower is the sole beneficiary and which is done for estate planning purposes only and does not result in any change in possession of the Property; (e) A refinancing to which the beneficiary under the Deed of Trust is obligated to subordinate the Deed of Trust. If) A refinancing which does not result in cash excess paid to Borrower or which is used for debt consolidation, equity line of credit or similar purposes. (g) A conveyance by sale or otherwise, to a party which the Housing Manager of the Community Deve[opment Department of the City of Chula Vista determines meets a[1 the requirements to be deemed a "Moderate Income Buyer" as defined in the "Affordable Housing Regu[atory Agreement" fiied for record with the County recorder of the San Diego County on , 2006 as Document No 2006,_ All payments made under this Note sha[1 be paid in lawful money of the United States to the City of Chura Vista at 276 Fourth Avenue, Chuia Vista, CA 91910, Attention: Community Development Department, Housing Division. 4 Prepayment. Borrower has the right to prepay the principal without incurring any penalty, apart from any interest that may be due under default provisions above. In the event that Borrower chooses to prepay the Note, Borrower must notify Note Holder in writing. 5 No Interest If No Default. Provided that Borrower is not in default under the terms of this Note or Loan Documents, no interest shall accrue under the Note. Nothing contained in this Section 5 shall be construed as a promise by the City to forgive or relinquish the right to seek repayment of the principal of this Note. 6. Default Under Deed of Trust. Notwithstanding any other provisions of the Note, if default occurs in any of the covenants or agreements contained in the Deed of Trust securing this Note, this Note, including all unpaid principal and interest, shall immediately become due and payable in full at the option of the City In the event the City exercises such option, the amounts due and EXHIBIT B-2 8/14/2006 12-36 payable shall be the principal balance remaining on the Note and other amounts owing, together with accrued but unpaid interest as described above. 7 Attorneys' Fees. Should suit be commenced to collect on this Note, or any portion thereof, such sum as the court may deem reasonable shall be added hereto as attorneys' fees. 8. Time. Time is of the essence herein. 9 Amendments. This Note may not be modified or amended except by an instrument in writing expressing such intention and signed by an authorized representative of the City and Borrower 10 Severability If any term or provision hereof is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity and binding effect of the remainder of this Note upon the parties. 11 Borrower's Waivers. Borrower- waives any rights to require the City to perform certain acts. Those acts are: (d) To demand payment of amounts due (known as "presentment") (e) To give notice that amounts due have not been paid (known as "notice of dishonor"). (f) To obtain an official certification of non-payment (known as 'protest") 12. Giving of Notices. Any notice that must be given to Borrower under this Note will be given by delivering it or by mailing it first class mail or by certified mail, return receipt requested, addressed to Borrower at the address set forth above. A notice that must be given to the City under this Note will be given by mailing it certified mail, return receipt request, to the City at the address stated in Section 3 above. Any party may change its address by a notice given to the other party in the manner set forth in this Section. 13 Joint and Several Responsibility If more than one person executes this Note, each is fully and personally obligated to pay the full amount owed and to keep all promises in this Note. EXHIBIT B-2 8/14/2006 12-37 NOTICE TO BORROWER Do not sign this Note if it contains blank spaces. All spaces should be completed before you sign. Date: Borrower Borrower EXHIBIT B-2 8/14/2006 12-38 EXHIBIT C-I LOW INCOME FORM OF SILENT SECOND TRUST DEED EXHIBIT C-I 8/14/2006 065550-0009 251465.3 doc 12-39 WHEN RECORDED PLEASE MAil TO' City of Chula Vista Community Development Department Housing Division 276 Fourth Avenue Chula Vista, CA 91910 THIS SPACE FOR RECORDER'S USE ONLY NOTICE: THIS DEED OF TRUST SECURES A SHARED APPRECIATION lOAN WITHIN THE MEANING OF CIVil CODE SECTION 1917, ET SEQ. DEED OF TRUST (SHARED APPRECIATION) THIS DEED OF TRUST, is made this day of ,200-, among the Trustor(s), , (herein "Borrower"), and the City of Chula Vista (herein "Beneficiary") a public body, corporate and politic, whose address is 276 Fourth Avenue, Chula Vista, CA 91910. This Deed of Trust is second and subsequent in lien to a First Deed of Trust recording concurrently herewith in favor of the first lien holder, , a in the amount of Trust Deed"); and "/100 Dollars (herein "First BORROWER, in consideration of the indebtedness herein recited and the trust herein created, irrevocably grants and conveys to First American Title (herein "Trustee"), in trust, with power of sale, the following described property located in the City of Chula Vista, County of San Diego, State of California [which has the address of (herein "Property Address")]: SEE EXHIBIT "A" ATIACHED HERETQFOR lEGAL DESCRIPTION TOGETH ER with all the improvements now and hereafter erected on the Property, and all easements, rights, appurtenances and rents (subject however to the rights and authorities given herein to Beneficiary to collect and apply such rents), all of which shall be deemed to be and remain part of the property covered by this Deed of Trust; and all of the foregoing, together with said property (or the leasehold estate if this Deed of Trust is on a leasehold) are hereinafter referred to as the "Property", TO SECURE to Beneficiary the repayment of the indebtedness evidenced by Borrower's promissory note, dated ,200 and extensions and renewals thereof (herein "Note"), in the principal sum of - and 00/10 Dollars ($ ), with EXHIBIT C-1 8/14/2006 12-40 default interest thereon, if any, and the Equity portion payable to Beneficiary as provided hereinafter, if not sooner paid, which shall become immediately due and payable if all or any part of the Property or any interest in it is sold, rented, refinanced, conveyed or transferred (or if a beneficial interest in Borrower is sold, rented, refinanced, conveyed or transferred and Borrower is not a natural person), (each of which is called a "Transfer') without the prior written consent of Beneficiary; the payment of all other sums, with default interest thereon, if any, advanced in accordance herewith to protect the security of this Deed of Trust; and the performance of the covenants and agreements of Borrower herein contained. Borrower covenants that Borrower is lawfully seized of the estate hereby conveyed and has the right to grant and convey the Property, and that Borrower's subject property is unencumbered except for encumbrances of record. Borrower covenants that Borrower warrants and will defend generally the title to the Property against all claims and demands, subject to encumbrances of record. UNIFORM COVENANTS Borrower and Beneficiary covenant and agree as follows: 1 Payment of Principal and Default Interest. Borrower shall promptly pay when due the principal Indebtedness and accrued default interest, if any, evidenced by the Note and the portion of the Equity payable by Borrower as provided in Paragraph 13 of this Deed of Trust. If payment of the indebtedness is required due to a sale of the Property where the purchase price is equal to or less than the acquisition cost of the Property, assuming an open and competitive sale, then repayment shall be made in the following order and amount: (a) Outstanding principal and interest balance of the primary lender's loan; (b) Borrower's initial down-payment investment and normal cost of sale; (c) The principal amount of Beneficiary's loan; (d) Amount of equity share due to Beneficiary; and (e) Remainder to Borrower Borrower has the right to prepay the principal secured by this Deed of Trust without incurring any penalty, apart from any interest that may be due under default provisions contained in the Note. In the event that Borrower chooses to prepay the Note, Borrower must notify Beneficiary in writing. Upon any such prepayment, Beneficiary's share of the Equity shall become immediately due and payable to the Beneficiary 2. Funds for Taxes. To protect the security of this Deed of Trust, Borrower agrees to pay, at least ten (10) days before delinquency, all taxes and assessments affecting said property; when due, all encumbrances, charges and liens, with interest, on said property or any part thereof, which appear to be prior or superior hereto; and all costs, fees and expenses of this Deed of Trust. EXHIBIT C-l 8/14/2006 12-41 Should Borrower fail to make any payment or to do any act as herein provided, then Beneficiary, without obligation to do so and without notice to or demand upon Borrower and without releasing Borrower from any obligation hereof, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon said property for such purposes; appear in and defend any action or proceeding purporting to affect the security hereof or the rights powers of Beneficiary or Trustee; pay, purchase, contest or compromise any encumbrance, charge or lien which in the judgment of either appears to be prior or superior hereto; and, in exercising any such powers, pay necessary expenses, employ counsel and pay his/her reasonable fees. 3 Application of Payments. Unless applicable law provides otherwise, all payments received by Beneficiary under section 1 and 2 shall be applied; first, to any prepayment charges due under the Note; second, to amounts payable under section 2, third, to accrued default interest, if any, due; fourth, to principal due; and last, to any late charges due under the Note. 4 Prior MortRaRes and Deeds of Trust; CharRes; liens. Borrower shall perform all of Borrower's obligations under any mortgage, deed of trust or other security agreement with a lien which has priority over this Deed oITrust, including Borrower's covenants to make payments when due. Borrower shall payor cause to be paid all taxes, assessments and other charges, fines and impositions attributable to the Property which may attain a priority over this Deed of Trust, and leasehold payments or ground rents, if any 5 Preservation and Maintenance of Property, Condominium, Cooperatives, Planned Unit Developments. Borrower will keep the Property in good repair and shall not commit waste or permit impairment or deterioration of the Property and shall maintain property including the principle house, garage, and out buildings as well as lawn maintenance, and shall comply with the provisions of any lease if this Deed of Trust is on a leasehold. If this Deed of Trust is on a unit in a condominium or a pianned unit development (herein "PUD"), Borrower shall perform all of Borrower's obligations under the declaration or covenants, conditions and restrictions, creating or governing the condominium, PUD, the by-laws and regulations of the condominium or PUD, and constituent documents. 6 Protection of Beneficiary Security. If Borrower fails to perform the covenants and agreements contained in this Deed of Trust, or if any action or proceeding is commenced which materially affects Beneficiary's interest in the Property, then Beneficiary, at Beneficiary's option, upon notice to Borrower, may make such appearances, disburse such sums including reasonable attorneys' fees, and take such action as is necessary to protect Beneficiary's interest. If Beneficiary required mortgage insurance as a condition of making the loan secured by this Deed of Trust, Borrower shall pay the premiums required to maintain such insurance in effect until such time as the requirement for such insurance terminates in accordance with Borrower's and Beneficiary's written agreement or applicable law Any amounts disbursed by Beneficiary pursuant to this Paragraph, with interest thereon, at EXHIBIT C-l 8/14/2006 12-42 the original Note rate, will become additional indebtedness of Borrower secured by this Deed of Trust. Unless Borrower and Beneficiary agree to other terms of payment, such amounts will be payable upon notice from Beneficiary to Borrower requesting payment thereof. Nothing contained in this Paragraph will require Beneficiary to incur any expense or take any action hereunder. 7 Inspection. Beneficiary may make or cause to be made reasonable entries upon and inspections of the Property, provided that Beneficiary will give Borrower notice prior to any such inspection specifying reasonable cause therefore related to Beneficiary's interest in the Property 8. Condemnation. The proceeds of any award or claim for damages, direct or consequential, in connection with any condemnation or other taking the Property, or part thereof, or for conveyance in lieu of condemnation, are hereby assigned and shall be paid to Beneficiary subject to the terms of any mortgage, deed of trust or other security agreement with a lien which has priority over this Deed of Trust. 9 Borrower Not Released; Forbearance by Beneficiary Not a Waiver. Extension of the time for payment or modification of payment of the sums secured by this Deed of Trust granted by Beneficiary to any successor in interest of Borrower shall not operate to release, in any manner, the liability of the original Borrower and Borrower's successors in interest. Beneficiary shall not be required to commence proceedings against such successor or to extend time for payment or otherwise modify payment of the sums secured by this Deed oITrust by reason of any demand made by the original Borrower and Borrower's successors in interest. Any forbearance by Beneficiary in exercising any right or remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any such right or remedy 10. manner, any notice to Borrower provided for in this Deed of Trust shall be given by delivering it or by mailing such notice by certified mail, addressed to Borrower at the Property address or such other address as Borrower may designate by notice to Beneficiary as provided herein, and Notice. Except for any notice required under applicable law to be given in another (a) Any notice to Beneficiary will be given by certified mail, return receipt requested, to Beneficiary address slated herein or to such other address as Beneficiary may designate by notice to Borrower as provided herein. (b) Any Notice provided for in this Deed of Trust shall be deemed to have been given to Borrower or Beneficiary when given in the manner designated herein. 11 Governinlllaw, Severability. The state and local laws applicable to this Deed of Trust shall be the laws of the jurisdiction in which the Property is located. The foregoing sentence shall not limit the applicability of Federal law to this Deed of Trust. In the event that any provision or clause of this Deed of Trust or the Note conflicts with applicable law, such conflict shall not affect other provisions of this Deed of Trust or the Note which can be given effect without the conflicting provision, and to this end the provisions of this Deed of Trust and the Note are declared to be severable. As used herein, "costs", "expenses" and "attorneys' fees" include all sums to the extent not prohibited by applicable law or limited herein. EXHIBIT C-1 8/14/2006 12-43 12. Borrower's Copy. Borrower shall be furnished a conformed copy of the Note and this Deed of Trust at the time of execution or after recordation hereof. 13 Transfer of the Property or a Beneficial Interest in Borrower. In the event of a Transfer or the prepayment of the entire Note balance, the "Equity", as hereafter defined, in the Property shall be shared between Borrower and Beneficiary on the following basis: Occuoancv Period (vears) Beneficiarv Eauitv Share Borrower Eauitv Share Before 1 100% 0% 1-5 70% 30% 6-10 60% 40% 11-15 50% 50% 16-20 40% 60% 21-25 25% 75% 26-30 10% 90% After 30 0% 100% If, for example, the Property is sold in the first year through the fifth year of the term of the Note secured by this Deed of Trust, Borrower shall receive thirty percent (30%) of the Equity in the Property and Beneficiary shall receive seventy percent (70%) of the Equity "Equity" is defined as the dollar amount that constitutes the difference between the sales price of the Property and the sum of the following amounts: (a) The principal on the First Note and the First Trust Deed, along with any interest and fees due thereof; and (b) The principal on the Note secured by this Deed of Trust to the City of Chula Vista, along with any fees due thereof; and (c) All costs of sale, including costs of brokers' commissions, escrow fees, title costs and fees, recording costs, etc., and (d) Current year taxes, including all real estate taxes prorated to the date of sale; and (e) The down payment paid by Borrower when he/she/they purchased the Property, not including the loan from Beneficiary to Borrower; and (0 The costs of any improvements to the Property, provided such improvements were approved by the City of Chula Vista prior to construction and provided that such improvements have been documented to the satisfaction of Beneficiary; and (g) The costs of any Borrower-elected options and upgrades included in the Property that are not included in the plans and specifications of standard production units for which Borrower paid cash at the time Borrower purchased the Property EXHIBIT C-t 8/14/2006 12-44 The amount of Borrower's share in the Equity of the Property shall increase by the percentages set forth in the table above, measured on the anniversary date of this Deed ofTrust. Correspondingly, Beneficiary's share in the equity of the Property shall decrease by the percentages set forth in the table above. For the sake of example, if the Property is sold more than five (5) but less than six (6) years after the date of th is Deed ofTrust, Beneficiary would have a seventy percent (70%) share in the equity and Borrower would have a thirty percent (30%) share in the Equity of the Property [n the event of a Transfer, the entire unpaid principal of the Note together with accrued default interest thereon, if any, shall become immediately due and payable. The Equity payable to Beneficiary is in addition to such unpaid principal and interest. In the event that no Equity exists at the time of transfer or sale, full amount of the principal of the Note secured hereby shall be required to be repaid to Beneficiary (item 13b above) will still be due and payable. In the event that a negative Equity situation exists, arid the fu[1 amount of the principal of the Note secured hereby shall be required to be repaid to Beneficiary. The following shall not constitute a Transfer: (a) A transfer of the Property from a deceased Borrower to the surviving spouse of Borrower if the surviving spouse is also named as a Borrower; (b) A transfer of the Property by Borrower to hislher spouse pursuant to which the spouse becomes a co-owner of the Property; (c) A transfer of the Property resulting from a decree of dissolution of the marriage or [egal separation or from a property settlement agreement incidental to such a decree which requires Borrower to continue to make payments on the Note and by which a spouse who is already a Borrower becomes the sole owner of the Property; (d) A transfer of the Property by Borrower to an inter-vivos trust in which Borrower is the sole beneficiary and which is done for estate planning purposes only and does not result in any change in possession of the Property; (e) A refinancing to which Beneficiary under this Deed of Trust is obligated to subordinate this Deed of Trust; and (f) A refinancing which does not result in cash excess paid to Borrower or which is used for debt consolidation, equity line of credit or similar purposes. (g) A conveyance by sale or otherwise, to a party which the Housing Manager of the Community Development Department of the City of Chula Vista determines meets all the requirements to be deemed a "Low Income Buyer" as defined in the" Affordab[e Housing Regu[atory Agreement" filed for record with the County recorder of the San Diego County on , 2006 as Document No. 2006-_ and which the Housing Manager determines meets ali the requirements set forth in Section 4.3 of that Affordable Housing Regulatory Agreement. EXlDBIT C-I 8/14/2006 12-45 Provided that Borrower is not in default under the terms of the Note or this Deed of Trust , no interest shall accrue under the Note. Beneficiary shall not share any Equity unless the principal balance of the Note is prepaid or becomes accelerated prior to the thirtieth (30th) year after the date of the execution of the Note, as provided in Section 5 of the Note. Nothing contained in this Paragraph or Section 5 of the Note shall be construed as a promise by Beneficiary to forgive or relinquish the right to seek repayment of the principal of the Note. NON-UNIFORM COVENANTS Borrower and Beneficiary further covenant and agree as follows: 14 Acceleration, Remedies. Upon Borrower's breach of any covenant or agreement of Borrower in this Deed of Trust; including the covenants to pay when due any sums secured by this Deed of Trust, Beneficiary, prior to acceleration, shall give notice to Borrower as provided in Paragraph 10 hereof specifying: (a) The breach; (b) The action required to cure such breach; (c) A date, not less than 10 days from the date the notice is mailed to Borrower, by wh ich such breach must be cured; and (d) That failure to cure such breach on or before the date specified in the notice may result in acceleration of the sums secured by this Deed of Trust and sale of the Property The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of a default or any other defense of Borrower to acceleration of sale. If the breach is not cured on or before the date specified in the notice, Beneficiary, at Beneficiary's option, may declare all of the sums secured by this Deed of Trust to be immediately due and payable without further demand and may invoke the power of sale and any other remedies permitted by applicable law Beneficiary shall be entitled to collect all reasonable costs and expenses incurred in pursuing the remedies provided in this Paragraph, including, but not limited to, reasonable attorneys' fees. If Beneficiary invokes power of sale, Beneficiary shall execute or cause Trustee to execute a written notice of the occurrence of an event of default and of Beneficiary's election to cause the Property to be sold and shall cause such notice to be recorded in each county in which the Property or some part thereof is located. Beneficiary or Trustee shall mail copies of such notice in the manner prescribed by applicable law Trustee shall give public notice of sale to the persons and in the manner prescribed by applicable law After the lapse of such time as may be required by applicable law, Trustee, without demand on Borrower, shall sell the Property at public auction to the highest bidder at the time and place and under the terms designated in the notice of sale in one or more parcels and in such order as Trustee may determine. Trustee may postpone sale of all or any parcel of the Property by public announcement at the time and place of any previously scheduled sale. Beneficiary or Beneficiary's designee may purchase the Property at any sale. EXHIBIT C-l 8/14/2006 12-46 Trustee shall deliver to the purchaser Trustee's deed conveying the Property so sold without any covenant or warranty, expressed or implied. The recitals in the Trustee's deed shall be prima facie evidence of the truth of the statements made therein. Trustee shall apply the proceeds of the sale in the following order' (a) To all reasonable costs and expenses of the sale, including, but not limited to, reasonable Trustee's and attorneys' fees and costs of title evidence; (b) To all sums secured by this Deed of Trust; and thereto. (c) The excess, if any, to the person or persons legally entitled 15 Borrower's Right to Reinstate. Not withstanding Beneficiary's acceleration of the sums secured by this Deed of Trus.! due to Borrower's breach, Borrower shall have the right to have any proceedings begun by Beneficiary to enforce this Deed of Trust discontinued at any time prior to five days before sale of the Property pursuant to the power of sale contained in this Deed of Trust or at any time prior to entry of a judgment enforcing this Deed of Trust if: (a) Borrower pays Beneficiary all sums, which would be then due under this Deed of Trust, and the Note, had no acceleration occurred; (b) Borrower cures all breaches of any other covenants or agreements of Borrower contained in this Deed of Trust; (c) Borrower pays all reasonable expenses incurred by Beneficiary and Trustee in enforcing the covenants and agreements of Borrower contained in this Deed of Trust, and in enforcing Beneficiary's and Trustee's rights as provided in Paragraph 15 hereof, including, but not limited to, reasonable attorneys' fees; and (d) Borrower takes such action as Beneficiary may reasonably require to assure that the lien of this Deed of Trust, Beneficiary's interest in the Property and Borrower's obligation to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon such payment and cure by Borrower, this Deed of Trust and the obligations secured hereby shall remain in full force and effect as if no acceleration had occurred. 16. Reconveyance. Upon payment of all sums secured by this Deed of Trust, Beneficiary shall request Trustee to reconvey the Property and will surrender this Deed of Trust and all Notes evidencing indebtedness secured by this Deed of Trust to Trustee. Trustee shall reconvey the Property without warranty and without charge to the person or persons legally entitled thereto. Such person or persons shall pay all costs of recordation, if any 17 Substitute Trustee. Beneficiary, or any successor in ownership of any indebtedness secured hereby, may from time to time appoint a successor trustee to any Trustee appointed hereunder by an instrument executed and acknowledged by Beneficiary and recorded in the office EXHIBIT C-! 8/14/2006 12-47 of the Recorder of the county where the Property is located. The instrument shall contain the name of the original Lender, Trustee and Borrower, the book and page where this Instrument is recorded and the name and address of the successor trustee. The successor trustee shall, without conveyance of the Property, succeed to all the title, power and duties conferred upon the Trustee herein and by applicable law This procedure for substitution of trustee shall govern to the exclusion of all other provisions for substitution. 1 B. Request for Notices. Borrower requests that copies of the Notice of Default and Notice of Sale be sent to Borrower's address, which is the Property Address. Beneficiary requests that copies of notices of foreclosure from the holder of any lien which has priority over this Deed of Trust be sent to Beneficiary's address, as set forth on Page One of this Deed of Trust as provided by Section 2924b of the Civil Code of California. 19 Fee for Requested Statements. Beneficiary may charge a fee not to exceed Fifty Dollars ($50.00) for furnishing the statement of obligation as provided in Section 2943 of the Civil Code of California. 20 Deed of Trust Rider. The Deed of Trust Rider (if any) executed by Borrower is attached and made part of this Deed oITrus!. 21 Warranties of Borrower. Borrower warrants to Beneficiary that Borrower is qualified to purchase the Property pursuant to the criteria set forth in City Council Policy No. 435-02 (Development of Affordable for Sale Housing for Low-Income Buyers), which became effective on December 9, 2003 22. Subordination To First Deed of Trust. Beneficiary and Borrower acknowledge and agree that this Deed of Trust is subject to and will subordinate in all respects to the liens, terms, covenants and conditions of the First Trust Deed recorded prior to this Deed of Trust, which secures the institutional loan as evidenced by a promissory note (herein "First Note"), the proceeds of which were used by Borrower to purchase the Property and to all advances heretofore made or which may hereafter be made pursuant to the First Trust Deed including all sums advanced for the purpose of. (a) Protecting or further securing the lien of the First Trust Deed, curing defaults by Borrower under the First Trust Deed or for any other purpose expressly permitted by the First Trust Deed, and (b) Constructing, renovating, repairing, furnishing, fixturing or equipping the Property The terms and provisions of the First Trust Deed are paramount and controlling, and they supersede any other terms and provisions hereof in conflict therewith. In the event of a foreclosure of deed in lieu of foreclosure of the First Trust Deed, any provisions herein or any provision in any other collateral agreement restricting the use of the Property to low or moderate income households or otherwise restricting Borrower's ability to sell the Property shall have no further force or effect on subsequent owners or purchasers of the Property Any person, including his/her successors or assigns (other than Borrower or a related entity of Borrow<;!r), receiving title to the Property through a foreclosure or deed in lieu of foreclosure of the First Trust Deed shall receive EXHIBIT C-I 8/14/2006 12-48 title to the property free and clear from such restrictions. Further, if the First Trust Deed Beneficiary acquires title to the Property pursuant to a deed in lieu of foreclosure, the lien of this Deed of Trust shall automatically terminate upon the First Trust Deed Beneficiary's acquisition of title, provided that: (a) Beneficiary has been given written notice of a default under the First Trust Deed,and (b) Beneficiary shall not have cured the default under the First Trust Deed, or diligently pursued curing the default as determined by the First Trust Deed holder, within the 60-day period provided in such notice sent to Beneficiary Beneficiary and Borrower further acknowledge and agree that this Deed of Trust will only subordinate for a rate and term refinance of the First Trust Deed at the discretion of Beneficiary and shall not be subject to subordination for a cash out refinance, equity line of credit or any other such form of refinance as deemed inappropriate by Beneficiary 23 Subordination To Refinancin!l First Trust Deed. Beneficiary agrees to subordinate this Deed of Trust to a new first deed of trust, the proceeds of which are to refinance the First Trust Deed loan, provided that the new loan is not in an amount in excess of the then existing First Trust Deed loan plus costs of the refinancing; that is a refinancing which does not result in cash excess or which is used for debt consolidation, equity line of credit or similar purposes. The new loan to be subordinated to must be at a fixed interest rate and fully amortized over a term of not less than th irty (30) years. 24 Funds for Taxes and Insurance. Beneficiary will waive collection of impounds for taxes and assessments (including condominium, PUD and planned residential development assessments, if any). Borrower will make all payments for impounds to the First Trust Deed holder 25 Riders to this Deed of Trust. If one or more riders are executed by Borrower and recorded together with this Deed of Trust, the covenants and agreements of each such rider shall be incorporated into and shall amend and supplement the covenants and agreements of this Deed of Trust as if the rider(s) were a part of this Deed ofTrust. [Check applicable box(es)J o Transfer Rider 01-4 Family Rider o Other(s) [specify]: o Condominium Rider o PU D Rider BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants contained in this Deed of Trust and in any rider(s) executed by Borrower and recorded with it. EXHIBIT C-l 8/1412006 12-49 ACKNOWLEDGMENT State of California County of San Diego On before me, , Notary, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature: EXHIBIT C-l 8/14/2006 12-50 DO NOT RECORD THIS PAGE REQUEST FOR RECONVEYANCE TO TRUSTEE: Th~ undersigned is the holder of the note or notes secured by this Deed of Trust. Said note or notes, together with all other indebtedness secured by this Deed of Trust, have been paid in full. You are hereby directed to cancel said note or notes and this Deed of Trust, which are delivered hereby, and to reconvey, without warranty, all the estate now held by you under this Deed of Trust to the person or persons legally entitled thereto. Dated: DO NOT lOSE OR DESTROY THIS DEED OF TRUST OR THE NOTE WHICH IT SECURES. BOTH MUST BE DELIVERED TO THE TRUSTEE FOR CANCEllATION BEFORE RECONVEYANCE Will BE MADE. EXHIBIT C.l 8/14/2006 1 2-51 EXHIBIT C-I 8/14/2006 12-52 EXHIBIT "A" LEGAL DESCRIPTION A CONDOMINIUM COMPRISED OF: CONDOMINIUM RIDER THIS CONDOMINIUM RIDER is made this _ day of ,200_, and is incorporated into and shail be deemed to amend and supplement the Deed of Trust (Shared Appreciation) ("Deed of Trust") and the Promissory Note ("Note") of the same date herewith given by the undersigned ("Borrower') to secure Borrower's performance under the Note in favor of the City of Chula Vista, a municipal corporation ('City') and covering that certain real property described in the Deed of Trust ("Property") and located at: (Property Address) The Property includes a unit in, together with an undivided interest in the common elements of, a condominium project known as: THE LANDING ("Condominium Project"). if the owners association or other entity which acts for the Condominium Project ("Owners Association") holds title to property for the benefit or use of its members or shareholders, the Property also includes Borrower's interest in the Owners Association and the uses, proceeds and benefits of Borrower's interest therein. CONDOMINIUM COVENANTS In addition to the covenants and agreements made in the Deed of Trust, Borrower and City further covenant and agree as follows: Condominium Obligations. Borrower shall perform all of Borrower's obligations under the Condominium's Constituent Documents. The "Constituent Documents" are the (I) declaration of covenants, conditions and restrictions; (Ii) articles of incorporation, trust instrument or any equivalent document which creates the Owners Association; and (iii) any by-laws or other rules or regulations of the Owners Association. Borrower shall promptly pay, when due, all dues and assessments imposed pursuant to the Constituent Documents. 2. Property Insurance. So long as the Owners Association maintains, with a generally accepted insurance carrier, a "master' or "blanket" policy insuring the Property which is satisfactory to City and which provides insurance coverage in the amounts (including deductibie levels) for the periods, and against loss by fire, hazards included within the term "extended coverage: and any EXHIBIT C-t 8/14/2006 12-53 other hazards, including but not limited to, earthquakes and floods, for which City requires insurance, then: (i) City waives the provision for the periodic payment to City of the yearly premium installments for property insurance on the Property; and (ii) Borrower's obligation under Paragraph S of the Deed of Trust to maintain property insurance coverage on the Property is deemed satisfied to the extent that the required coverage is provided by the Owners Association policy. (a) What City requires as a condition of this waiver can change during the term of the loan. (b) Borrower shall give City prompt notice of any lapse in required property insurance coverage provided by the master or blanket policy (c) In the event of a distribution of property insurance proceeds in lieu of restoration or repair following a loss to the Property, or to common areas and facilities of the planned unit development ("PU D"), any proceeds payable to Borrower are hereby assigned and shall be paid to City City shall apply the proceeds to the sums secured by the Deed of Trust, whether or not then due, with the excess, if any, paid to Borrower 3 Public liability Insurance. Borrower shall take such actions as may be reasonable to insure that the Owners Association maintains a public liability insurance policy acceptable in form, amount, and extent of coverage to City. 4 Condemnation. The proceeds of any award or claim for damages, direct or consequential, payable to Borrower in connection with any condemnation or other taking of all or any part of the Property or the common areas and facilities of the PUD, orfor any conveyance in lieu of condemnation, are hereby assigned and shall be paid to City Such proceeds shall be applied by City to the sums secured by the Deed ofTrust as provided in Paragraph 8 of the Deed of Trust. S City's Prior Consent. Borrower shall not, except after notice to City and with City's prior written consent, either partition or subdivide the Property or consent to: (i) the abandonment or termination of the PUD, except for abandonment or termination required by law in the case of substantial destruction by fire or other casualty or in the case of a taking by condemnation or eminent domain; (ii) any amendment to any provision of the "Constituent Documents" if the provision is for the express benefit of City; (iii) termination of professional management and assumption of self-management of the Owners Association; or (iv) any action which would have the effect of rendering the public liability insurance coverage maintained by the Owners Association unacceptable to City 6. Remedies. If Borrower does not pay PUD dues and assessments when due, then City may pay them. Any amounts disbursed by City under this Paragraph 6 shall become additional debt of Borrower secured by the Deed of Trust. Unless Borrower and City agree to other terms of payment, these amounts shall bear interest from the date of disbursement at the Note default rate EXHIBIT C-l 8/14/2006 12-54 and shall be payable, with such accrued interest, upon notice from City to Borrower requesting payment. BY SIGNING BELOW, Borrower accepts and agrees to the terms and provisions contained in this Condominium Rider. Date: Date: EXmBIT C-l 8/14/2006 12-55 EXHIBIT C-2 MODERATE INCOME FORM OF SILENT SECOND TRUST DEED EXffiBIT C-2 8/14/2006 12-56 WHEN RECORDED PLEASE MAIL TO: City of Chula Vista Community Development Department Housing Division 276 Fourth Avenue Chula Vista, CA 91910 THIS SPACE FOR RECORDER'S USE ONLY NOTICE: THIS DEED OF TRUST SECURES A DEFERRED LOAN WITHIN THE MEANING OF CIVIL CODE SECTION 1917, ET SEQ. DEED OF TRUST (SHARED APPRECIATION) THIS DEED OF TRUST, is made this day of ,200_, among the Trustor(s), , (herein "Borrower"), and the City of Chula Vista (herein "Beneficiary") a public body, corporate and politic, whose address is 276 Fourth Avenue, Chula Vista, CA 91910. This Deed of Trust is second and subsequent in lien to a First Deed of Trust recording concurrently herewith in favor of the first lien holder, , a and 00/'00 Dollars (herein "First in the amount of Trust Deed"); BORROWER, in consideration of the indebtedness herein recited and the trust herein created, irrevocably grants and conveys to First American Title (herein "Trustee"), in trust, with power of sale, the following described property located in the City of Chula Vista, County of San Diego, State of California [which has the address of (herein "Property Address")]: SEE EXHIBIT "A" ATTACHED HERETO FOR LEGAL DESCRIPTION TOGETHER with all the improvements now and hereafter erected on the Property, and all easements, rights, appurtenances and rents (subject however to the rights and authorities given herein to Beneficiary to collect and apply such rents), all of which shall be deemed to be and remain part of the property covered by this Deed of Trust; and all of the foregoing, together with said property (or the leasehold estate if this Deed of Trust is on a leasehold) are hereinafter referred to as the II Propertyl1; TO SECU RE to Beneficiary the repayment of the indebtedness evidenced by Borrower's promissory note, dated ,200 and extensions and renewals thereof (herein "Note"), in the principal sum of - and 00;'0 Dollars ($ ), with EXHlllIT C-2 8/14/2006 1 2-57 default interest thereon, if any, shall become immediately due and payable if all or any part of the Property or any interest in it is sold, rented, refinanced, conveyed or transferred (or if a beneficial interest in Borrower is sold, rented, refinanced, conveyed or transferred and Borrower is not a natural person), (each of which is called a "Transfern) without the prior written consent of Beneficiary; the payment of all other sums, with default interest thereon, if any, advanced in accordance herewith to protect the security of this Deed of Trust; and the performance of the covenants and agreements of Borrower herein contained. Borrower covenants that Borrower is lawfully seized of the estate hereby conveyed and has the right to grant and convey the Property, and that Borrower's subject property is unencumbered except for encumbrances of record. Borrower covenants that Borrower warrants and will defend generally the title to the Property against all claims and demands, subject to encumbrances of record. UNIFORM COVENANTS Borrower and Beneficiary covenant and agree as follows: 1 Payment of Principal and Default Interest. Borrower shall promptly pay when due the principal indebtedness and accrued default interest, if any, evidenced by the Note and secured by th is Deed oITrust. If payment of the indebtedness is required due to a sale of the Property where the purchase price is equal to or less than the acquisition cost of the Property, assuming an open and competitive sale, then repayment shall be made in the following order and amount: (a) Outstanding principal and interest balance of the primary lender's loan; (b) Borrower's initial down-payment investment and normal cost of sale; (c) The principal amount of Beneficiary's loan; and (d) Remainder to Borrower Borrower has the right to prepay the principal secured by this Deed of Trust without incurring any penalty, apart from any interest that may be due under default provisions contained in the Note. In the event that Borrower chooses to prepay the Note, Borrower must notify Beneficiary in writing. 2. Funds for Taxes. To protect the security of this Deed of Trust, Borrower agrees to pay, at least ten (10) days before delinquency, all taxes and assessments affecting said property; when due, all encumbrances, charges and liens, with interest, on said property or any part thereof, which appear to be prior or superior hereto; and all costs, fees and expenses of this Deed of Trust. Should Borrower fail to make any payment or to do any act as herein provided, then Beneficiary, without obligation to do so and without notice to or demand upon Borrower and without releasing Borrower from any obligation hereof, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, EXHIBIT C-2 8/14/2006 12-58 Beneficiary or Trustee being authorized to enter upon said property for such purposes; appear in and defend any action or proceeding purporting to affect the security hereof or the rights powers of Beneficiary or Trustee; pay, purchase, contest or compromise any encumbrance, charge or lien which in the judgment of either appears to be prior or superior hereto; and, in exercising any such powers, pay necessary expenses, employ counsel and pay his/her reasonable fees. 3 Application of Payments. Unless applicable law provides otherwise, all payments received by Beneficiary under section 1 and 2 shall be applied; first, to any prepayment charges due under the Note; second, to amounts payable under section 2; third, to accrued default interest, if any, due; fourth, to principal due; and last, to any late charges due under the Note. 4 Prior Mortgages and Deeds of Trust; Charges; Liens. Borrower shall perform all of Borrower's obligations under any mortgage, deed of trust or other security agreement with a lien which has priority over this Deed oITrust, including Borrower's covenants to make payments when due. Borrower shall payor cause to be paid all taxes, assessments and other charges, fines and impositions attributable to the Property which may attain a priority over this Deed of Trust, and leasehold payments or ground rents, if any 5 Preservation and Maintenance of Property, Condominium, Cooperatives, Planned Unit Developments. Borrower will keep the Property in good repair and shall not commit waste or permit impairment or deterioration of the Property and shall maintain property including the principle house, garage, and out buildings as well as lawn maintenance, and shall comply with the provisions of any lease if this Deed of Trust is on a leasehold. If this Deed of Trust is on a unit in a condominium or a planned unit development (herein "PU D"), Borrower shall perform all of Borrower's obligations under the declaration or covenants, conditions and restrictions, creating or governing the condominium, PU D, the by-laws and regulations of the condominium or PUD, and constituent documents. 6. Protection of Beneficiary Security. If Borrower fails to perform the covenants and agreements contained in this Deed of Trust, or if any action or proceeding is commenced which materially affects Beneficiary's interest in the Property, then Beneficiary, at Beneficiary's option, upon notice to Borrower, may make such appearances, disburse such sums including reasonable attorneys' fees, and take such action as is necessary to protect Beneficiary's interest. If Beneficiary required mortgage insurance as a condition of making the loan secured by this Deed of Trust, Borrower shall pay the premiums required to maintain such insurance in effect until such time as the requirement for such insurance terminates in accordance with Borrower's and Beneficiary's written agreement or applicable law Any amounts disbursed by Beneficiary pursuant to this Paragraph, with interest thereon, at the original Note rate, will become additional indebtedness of Borrower secured by this Deed of Trust. Unless Borrower and Beneficiary agree to other terms of payment, such amounts will be payable upon notice from Beneficiary to Borrower requesting payment thereof Nothing contained in this Paragraph will require Beneficiary to incur any expense or take any action hereunder EXHIBIT C-2 8/14/2006 12-59 7 Inspection. Beneficiary may make or cause to be made reasonable entries upon and inspections of the Property, provided that Beneficiary will give Borrower notice prior to any such inspection specifying reasonable cause therefore related to Beneficiary's interest in the Property 8. Condemnation. The proceeds of any award or claim for damages, direct or consequential, in connection with any condemnation or other taking the Property, or part thereof, or for conveyance in lieu of condemnation, are hereby assigned and shall be paid to Beneficiary subject to the terms of any mortgage, deed of trust or other security agreement with a lien which has priority over this Deed of Trust. 9 Borrower Not Released; Forbearance by Beneficiary Not a Waiver. Extension of the time for payment or modification of payment of the sums secured by this Deed of Trust granted by Beneficiary to any successor in interest of Borrower shall not operate to release, in any manner, the liability of the original Borrower and Borrower's successors in interest. Beneficiary shall not be required to commence proceedings against such successor or to extend time for payment or otherwise modify payment of the sums secured by this Deed of Trust by reason of any demand made by the original Borrower and Borrower's successors in interest. Any forbearance by Beneficiary in exercising any right or remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any such right or remedy. 10. Notice. Except for any notice required under applicable law to be given in another manner, any notice to Borrower provided for in this Deed of Trust shall be given by delivering it or by mailing such notice by certified mail, addressed to Borrower at the Property address or such other address as Borrower may designate by notice to Beneficiary as provided herein, and (a) Any notice to Beneficiary wi II be given by certified mai I, return receipt requested, to Beneficiary address stated herein or to such other address as Beneficiary may designate by notice to Borrower as provided herein. (b) Any Notice provided for in this Deed of Trust shall be deemed to have been given to Borrower or Beneficiary when given in the manner designated herein. 11 Governing law, Severability. The state and local laws applicable to this Deed of Trust shall be the laws of the jurisdiction in which the Property is located. The foregoing sentence shall not limit the applicability of Federal law to this Deed oITrust. In the event that any provision or clause of this Deed of Trust or the Note conflicts with applicable law, such conflict shall not affect other provisions of th is Deed of Trust or the Note which can be given effect without the conflicting provision, and to this end the provisions of this Deed of Trust and the Note are declared to be severable. As used herein, "costs", "expenses" and "attorneys' fees" include all sums to the extent not prohibited by applicable law or limited herein. 12. Borrower's Copy. Borrower shall be furnished a conformed copy of the Note and this Deed of Trust at the time of execution or after recordation hereof. 13 Transfer of the Property or a Beneficial Interest in Borrower. In the event of a Transfer, EXHmIT C-2 8/14/2006 12-60 the entireunpaid principal of the Note together with accrued default interest thereon, if any, shall become immediately due and payable. The following shall not constitute a Transfer' (a) A transfer of the Property from a deceased Borrower to the surviving spouse of Borrower if the surviving spouse is also named as a Borrower; (b) A transfer of the Property by Borrower to his/her spouse pursuant to which the spouse becomes a co-owner of the Property; (c) A transfer of the Property resulting from a decree of dissolution of the marriage or legal separation or from a property settlement agreement incidental to such a decree which requires Borrower to continue to make payments on the Note and by which a spouse who is already a Borrower becomes the sole owner of the Property; (d) A transfer olthe Property by Borrower to an inter-vivos trust in which Borrower is the sole beneficiary and which is done for estate planning purposes only and does not result in any change in possession of the Property; (e) A refinancing to which Beneficiary under this Deed of Trust is obligated to subordinate this Deed of Trust; and (I) A refinancing which does not result in cash excess paid to Borrower or which is used for debt consolidation, equity line of credit or similar purposes. (g) A conveyance by sale or otherwise, to a party which the Housing Manager of the Community Development Department of the City of Chula Vista determines meets all the requirements to be deemed a "Moderate Income Buyer" as defined in the "Affordable Housing Regulatory Agreement" filed for record with the County recorder of the San Diego County on ,2006 as Document No. 2006- .and which the Housing Manager determines meets all the requirements set forth in Section 4.3 of that Affordable Housing Regulatory Agreement.. Provided that Borrower is not in default under the terms of the Note or this Deed of Trust, no interest shall accrue under the Note. Nothing contained in this Paragraph or Section 5 of the Note shall be construed as a promise by Beneficiary to forgive or relinquish the right to seek repayment of the principal of the Note. NON-UNIFORM COVENANTS Borrower and Beneficiary further covenant and agree as follows: 14 Acceleration, Remedies. Upon Borrower's breach of any covenant or agreement of Borrower in this Deed of Trust, including the covenants to pay when due any sums secured by this EXHIBIT C-2 8/14/2006 1 2-61 Deed of Trust, Beneficiary, prior to acceleration, shall give notice to Borrower as provided in Paragraph 10 hereof specifying: (a) The breach; (b) The action required to cure such breach; (c) A date, not less than 10 days from the date the notice is mailed to Borrower, by which such breach must be cured; and (d) That failure to cure such breach on or before the date specified in the notice may result in acceleration of the sums secured by this Deed of Trust and sale of the Property The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of a default or any other defense of Borrower to acceleration of sale. If the breach is not cured on or before the date specified in the notice, Beneficiary, at Beneficiary's option, may declare all of the sums secured by this Deed of Trust to be immediately due and payable without further demand and may invoke the power of sale and any other remedies permitted by applicable law Beneficiary shall be entitled to collect all reasonable costs and expenses incurred in pursuing the remedies provided in this Paragraph, including, but not limited to, reasonable attorneys' fees. If Beneficiary invokes power of sale, Beneficiary shall execute or cause Trustee to execute a written notice of the occurrence of an event of default and of Beneficiary's election to cause the Property to be sold and shall cause such notice to be recorded in each county in which the Property or some part thereof is located. Beneficiary or Trustee shall mail copies of such notice in the manner prescribed by applicable law Trustee shall give public notice of sale to the persons and in the manner prescribed by applicable law After the lapse of such time as may be required by applicable law, Trustee, without demand on Borrower, shall sell the Property at public auction to the highest bidder at the time and place and under the terms designated in the notice of sale in one or more parcels and in such order as Trustee may determine. Trustee may postpone sale of all or any parcel of the Property by public announcement at the time and place of any previously scheduled sale. Beneficiary or Beneficiary's designee may purchase the Property at any sale. Trustee shall deliver to the purchaser Trustee's deed conveying the Property so sold without any covenant or warranty, expressed or implied. The recitals in the Trustee's deed shall be prima facie evidence of the truth of the statements made therein. Trustee shall apply the proceeds of the sale in the following order: (a) To all reasonable costs and expenses of the sale, including, but not limited to, reasonable Trustee's and attorneys' fees and costs of title evidence; (b) To all sums secured by this Deed of Trust; and (c) The excess, if any, to the person or persons legally entitled thereto. 15 Borrower's Ri!lht to Reinstate. Not withstanding Beneficiary's acceleration of the sums EXHIBIT C-2 8/14/2006 12-62 secured by this Deed of Trust due to Borrower's breach, Borrower shall have the right to have any proceedings begun by Beneficiary to enforce this Deed of Trust discontinued at any time prior to five days before sale of the Property pursuant to the power of sale contained in this Deed of Trust or at any time prior to entry of a judgment enforcing this Deed of Trust if: (a) Borrower pays Beneficiary all sums, which would be then due under this Deed of Trust, and the Note, had no acceleration occurred; (b) Borrower cures all breaches of any other covenants or agreements of Borrower contained in this Deed of Trust; (c) Borrower pays all reasonable expenses incurred by Beneficiary and Trustee in enforcing the covenants and agreements of Borrower contained in this Deed of Trust, and in enforcing Beneficiary's and Trustee's rights as provided in Paragraph 14 hereof, including, but not limited to, reasonable attorneys' fees; and (d) Borrower takes such action as Beneficiary may reasonably require to assure that the lien of this Deed of Trust, Beneficiary's interest in the Property and Borrower's obligation to pay the sums secured by this Deed of Trust shall continue unimpaired. Upon such payment and cure by Borrower, this Deed of Trust and the obligations secured hereby shall remain in full force and effect as if no acceleration had occurred. 16. Reconveyance. Upon payment of all sums secured by this Deed of Trust, Beneficiary shall request Trustee to reconvey the Property and will surrender this Deed of Trust and all Notes evidencing indebtedness secured by this Deed of Trust to Trustee. Trustee shall reconvey the Property without warranty and without charge to the person or persons legally entitled thereto. Such person or persons shall pay all costs of recordation, if any 17 Substitute Trustee. Beneficiary, or any successor in ownership of any indebtedness secured hereby, may from time to time appoint a successor trustee to any Trustee appointed hereunder by an instrument executed and acknowledged by Beneficiary and recorded in the office of the Recorder of the county where the Property is located. The instrument shall contain the name of the original Lender, Trustee and Borrower, the book and page where this Instrument is recorded and the name and address of the successor trustee. The successor trustee shall, without conveyance of the Property, succeed to all the title, power and duties conferred upon the Trustee herein and by applicable law This procedure for substitution of trustee shall govern to the exclusion of all other provisions for substitution. 18. Request for Notices. Borrower requests that copies of the Notice of Default and Notice of Sale be sent to Borrower's address, which is the Property Address. Beneficiary requests that copies of notices of foreclosure from the holder of any lien which has priority over this Deed of Trust be sent to Beneficiary's address, as set forth on Page One of this Deed of Trust as provided by Section 2924b of the Civil Code of California. 19 Fee for Requested Statements. Beneficiary may charge a fee not to exceed Fifty Dollars EXHmIT C-2 8/14/2006 12-63 ($50.00) for furnishing the statement of obligation as provided in Section 2943 of the Civil Code of California. 20. Deed of Trust Rider. The Deed of Trust Rider (if any) executed by Borrower is attached and made part of this Deed ofTrust. 21 Warranties of Borrower. Borrower warrants to Beneficiary that Borrower is qualified to purchase the Property as a "Moderate Income Buyer" as defined in that certain agreement entitled "Affordable Housing Regulatory Agreement" that encumbers the Propenty and was filed with the County Recorder of San Diego. 22. Subordination To First Deed of Trust. Beneficiary and Borrower acknowledge and agree that this Deed of Trust is subject to and will subordinate in all respects to the liens, terms, covenants and conditions of the First Trust Deed recorded prior to this Deed ofTrust, which secures the institutional loan as evidenced by a promissory note (herein "First Note"), the proceeds of which were used by Borrower to purchase the Propenty and to all advances heretofore made or which may hereafter be made pursuant to the First Trust Deed including all sums advanced for the purpose of: (a) Protecting or further securing the lien of the First Trust Deed, curing defaults by Borrower under the First Trust Deed or for any other purpose expressly permitted by the First Trust Deed, and (b) Constructing, renovating, repairing, furnishing, fixturing or equipping the Pro perty The terms and provisions of the First Trust Deed are paramount and controlling, and they supersede any other terms and provisions hereof in conflict therewith. In the event of a foreclosure of deed in lieu of foreclosure of the First Trust Deed, any provisions herein or any provision in any other collateral agreement restricting the use of the Propenty to low or moderate income households or otherwise restricting Borrower's ability to sell the Prop-enty shall have no further force or effect on subsequent owners or purchasers of the Property Any person, including hislher successors or assigns (other than Borrower or a related entity of Borrower), receiving title to the Property through a foreclosure or deed in lieu of foreclosure of the First Trust Deed shall receive title to the property free and clear from such restrictions. Further, if the First Trust Deed Beneficiary acquires title to the Property pursuant to a deed in lieu of foreclosure, the lien of this Deed of Trust shall automatically terminate upon the First Trust Deed Beneficiary's acquisition of title, provided that: (a) Beneficiary has been given written notice of a default under the First Trust Deed, and (b) Beneficiary shall not have cured the default under the First Trust Deed, or diligently pursued curing the default as determined by the First Trust Deed holder, within the 60-day period provided in such notice sent to Beneficiary EXHIBIT C-2 8/14/2006 12-64 Beneficiary and Borrower further acknowledge and agree that this Deed of Trust will only subordinate for a rate and term refinance of the First Trust Deed at the discretion of Beneficiary and shall not be subject to subordination for a cash out refinance, equity line of credit or any other such form of refinance as deemed inappropriate by Beneficiary 23 Subordination To Refinancin!! First Trust Deed. Beneficiary agrees to subordinate this Deed ofTrust to a new first deed of trust, the proceeds of which are to refinance the First Trust Deed loan, provided that the new loan is not in an amount in excess of the then existing First Trust Deed loan plus costs of the refinancing; that is a refinancing which does not result in cash excess or which is used for debt consolidation, equity line of credit or similar purposes. The new loan to be subordinated to must be at a fixed interest rate and fully amortized over a term of not less than thirty (30) years. 24 Funds for Taxes and Insurance. Beneficiary will waive collection of impounds for taxes and assessments (including condominium, PUD and planned residential development assessments, if any). Borrower will make all payments for impounds to the First Trust Deed holder 25 Riders to this Deed of Trust. If one or more riders are executed by Borrower and recorded together with this Deed of Trust, the covenants and agreements of each such rider shall be incorporated into and shall amend and supplement the covenants and agreements of this Deed of Trust as if the rider(s) were a part of this Deed of Trust. [Check applicable box(es)] o Transfer Rider 01-4 Family Rider o Other(s) [specify]: o Condominium Rider o PUD Rider BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants contained in this Deed of Trust and in any rider(s) executed by Borrower and recorded with it. EXHIBIT C-2 8/14/2006 12-65 ACKNOWLEDGMENT State of California County of San Diego On before me, , Notary, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature: EXHIBIT C-2 8/14/2006 12-66 DO NOT RECORD THIS PAGE REQUEST FOR RECONVEYANCE TO TRUSTEE: The undersigned is the holder of the note or notes secured by this Deed of Trust. Said note or notes, together with all other indebtedness secured by this Deed of Trust, have been paid in full. You are hereby directed to cancel said note or notes and this Deed of Trust, which are delivered hereby, and to reconvey, without warranty, all the estate now held by you under this Deed of Trust to the person or persons legally entitled thereto. Dated: DO NOT LOSE OR DESTROY THIS DEED OF TRUST OR THE NOTE WHICH IT SECURES. BOTH MUST BE DELIVERED TO THE TRUSTEE FOR CANCELLATION BEFORE RECONVEYANCE WILL BE MADE. EXIDBIT C-2 8/14/2006 12-67 EXHIBIT C-2 8/14/2006 12-68 EXHIBIT "A" LEGAL DESCRIPTION A CONDOMINIUM COMPRISED OF: CONDOMINIUM RIDER THIS CONDOMINIUM RIDER is made this _ day of ,200-, and is incorporated into and shall be deemed to amend and supplement the Deed of Trust (Shared Appreciation) ("Deed of Trust") and the Promissory Note ("Note") of the same date herewith given by the undersigned ("Borrower") to secure Borrower's performance under the Note in favor of the City of Chula Vista, a municipal corporation ("City") and covering that certain real property described in the Deed of Trust ("Property") and located at: (Property Address) The Property includes a unit in, together with an undivided interest in the common elements of, a condominium project known as: THE LANDING ("Condominium Project"). If the owners association or other entity which acts for the Condominium Project ("Owners Association") holds title to property for the benefit or use of its members or shareholders, the Property also includes Borrower's interest in the Owners Association and the uses, proceeds and benefits of Borrower's interest therein. CONDOMINIUM COVENANTS In addition to the covenants and agreements made in the Deed of Trust, Borrower and City further covenant and agree as follows: 7 Condominium Obli!';ations. Borrower shall perform all of Borrower's obligations under the Condominium's Constituent Documents. The "Constituent Documents" are the (i) declaration of covenants, conditions and restrictions; (ii) articles of incorporation, trust instrument or any equivalent document which creates the Owners Association; and (iii) any by-laws or other rules or regulations of the Owners Association. Borrower shall promptly pay, when due, all dues and assessments imposed pursuant to the Constituent Documents. 8. Property Insurance. So long as the Owners Association maintains, with a generally accepted insurance carrier, a "master' or "blanket" policy insuring the Property which is satisfactory to City and which provides insurance coverage in the amounts (including deductible levels) for the periods, and against loss by fire, hazards included within the term "extended coverage," and any EXHIBIT C-2 8/14/2006 12-69 other hazards, including but not limited to, earthquakes and floods, for which City requires insurance, then: (i) City waives the provision for the periodic payment to City of the yearly premium installments for property insurance on the Property; and (ii) Borrower's obligation under Paragraph S of the Deed of Trust to maintain property insurance coverage on the Property is deemed satisfied to the extent that the required coverage is provided by the Owners Association policy (a) What City requires as a condition of this waiver can change during the term of the loan. (b) Borrower shall give City prompt notice of any lapse in required property insurance coverage provided by the master or blanket policy (c) In the event of a distribution of property insurance proceeds in lieu of restoration or repair following a loss to the Property, or to common areas and facilities of the planned unit development ("PUD"), any proceeds payable to Borrower are hereby assigned and shall be paid to City City shall apply the proceeds to the sums secured by the Deed ofTrust, whether or not then due, with the excess, if any, paid to Borrower 9 Public liability Insurance. Borrower shall take such actions as may be reasonable to insure that the Owners Association maintains a public liability insurance policy acceptable in form, amount, and extent of coverage to City. 10. Condemnation. The proceeds of any award or claim for damages, direct or consequential, payable to Borrower in connection with any condemnation or othertaking of all or any part of the Property orthe common areas and facilities of the PUD, or for any conveyance in lieu of condemnation, are hereby assigned and shall be paid to City Such proceeds shall be applied by City to the sums secured by the Deed ofTrust as provided in Paragraph 9 of the Deed ofTrust. 11 City's Prior Consent. Borrower shall not, except after notice to City and with City's prior written consent, either partition or subdivide the Property or consent to: (i) the abandonment or termination of the PU D, except for abandonment or termination required by law in the case of substantial destruction by fire or other casualty or in the case of a taking by condemnation or eminent domain; (ii) any amendment to any provision of the "Constituent Documents" if the provision is for the express benefit of City; (iii) termination of professional management and assumption of self-management of the Owners Association; or (iv) any action which would have the effect of rendering the public liability insurance coverage maintained by the Owners Association unacceptable to City 12. Remedies. If Borrower does not pay PUD dues and assessments when due, then City may pay them. Any amounts disbursed by City under this Paragraph 6 shall become additional debt of Borrower secured by the Deed of Trust. Unless Borrower and City agree to other terms of payment, these amounts shall bear interest from the date of disbursement at the Note default rate EXHffiIT C-2 8/14/2006 12-70 and shall be payable, with such accrued interest, upon notice from City to Borrower requesting payment. BY SIGNING BELOW, Borrower accepts and agrees to the terms and provisions contained in this Condominium Rider. Date: Date: EXHIBIT C-2 8/14/2006 12-71 EXHIBIT D FORM OF SUPPLEMENTAL BUYER APPLICATION EXHIBIT D 12-72 8/14/2006 Dear Applicant: Thank you for your interest in the The Landing project. The successful completion of the application process may result in your being qualified for an Affordable Housing Unit. Therefore, it is very important that you take the time to read and understand the Program Requirements and that you complete the Application and attach all required documentation. The Landing at Windingwalk The Landing offers row homes from approximately sq. ft. Each unit has a , 3 bedrooms, and baths. Community amenities include The Landing will include _ Affordable Units. 3 bedrooms bath ( sq ft) The Affordable Housing Units will be sold at the market rate price, but the City will provide a silent second loan for the difference between the market rate price and the Affordable Housing Unit Price as determined by your household income. APPLICATIONS WILL BE ACCEPTED UNTIL NO LATE OR INCOMPLETE APPLICATIONS WILL BE CONSIDERED. EACH APPLICATION MUST BE MAILED TO THE ADDRESS CONTAINED HEREIN. AFFORDABLE HOUSING UNITS The City of Chula Vista has established an Affordable For Sale Housing Policy that governs all affordable for sale housing units constructed within the City. In order to qualify to purchase an Affordable Housing Unit, applicants must meet ALL of the requirements outlined within this document. Please do NOT submit an application if you do not meet ALL of the requirements. Income restrictions apply Please refer to the chart below for the MAXIMUM gross income based upon household size, which is defined as the total number of people residing within the household. Gross income is the total amount of income earned by all persons, over the age of 18, within the household before all standard withdrawals (including federal tax, state tax, social security, etc.) EXHIBIT D 8/14/2006 12-73 Household Size 1 2 3 4 5 6 7 Maximum Gross Income (low $38,650 $44,150 $49,700 $55,200 $59,600 $64,050 $68,450 Income) Maximum Gross Income $54,500 $62,300 $70,100 $77,900 $84,100 $90,350 $96,550 (Moderate Income) AFFORDABLE HOUSING PROGRAM REQUIREMENTS · Low Income Buyers must be a First time Homebuyer, which is defined as a person who has not had an ownership interest in their primary residence within the last three years. . Have an annual gross income that does not exceed the program limits as described earlier. . Have sufficient funds available to contribute the required downpayment of three percent (3 %) of the Affordable Purchase Price plus closing costs. · Maximum liquid assets after down payment and closing cost contribution must not exceed $25,000 for Low Income Buyers and $40,000 for Moderate Income Buyers. . Property must be owner-occupied for the duration of ownership. Buyers may not rent or lease out the property . Must be able to qualify for the loan with the incomes of only the members who will occupy the Affordable Unit. Non-occupant co-borrowers are NOT allowed. · Be a citizen or other national of the United States or a qualified alien as defined by the federal Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) . Low Income Buyers must attend a qualified "Home Training Program" or "First Time Home Buyer Program" and provide evidence to the City and to the lender of their attendance . Meet credit, income and loan requirements of the lender and the mortgage insurer. . Be pre-qualified by in order to purchase an Affordable Unit. Be advised that you may obtain a mortgage from any lender, but due to the EXHIBIT D 8/14/2006 12-74 extensive requirements for this Affordable Housing Development many lenders may have difficulty qualifying you. BUYER SELECTION CRITERIA The Developer will use the following criteria in order to determine priority for purchase of an Affordable Unit. A point system has been established so that applicants with a higher number of points will receive preference for units. 5 points 3 points 3 points 2 points 1 point Households which are displaced from their primary residence as a result of any of the following: (i) expiration of affordable housing covenants applicable to such residence; (ii) an action of the City or the City Redevelopment Agency; (iii) closure of a mobile home or trailer park community in which the household's residence was located; or (iv) a condominium conversion involving the household's residence. One member in the household must have resided in such housing as the primary place of residence for at least one year prior to such action or event. Households with at least one member who has worked within the City, as that person's principal place of full-time employment, for at least one year prior to the date of application for such housing. Households currently residing within the boundaries of the City of Chula Vista, at the time of application. Households with at least one member who is a Public Safety employee (fire and police) or Credentialed Teacher The individual must be working in such position as his/her full-time profession at the time of application. All other applicants who do not meet any of the above criteria. In the situation where there are applicants with an equal number of points but not enough units available, a lottery will be held at a place and time to be announced by the City and the home builder. In addition to the established point system, consideration for units will be given to larger families based upon the number of bedrooms per unit. Please be advised that you will be required to verify each household member that you indicate will occupy the unit. EXHIBIT D 8/1412006 12-75 LOW INCOME AFFORDABLE HOUSING RESTRICTIONS The purpose of this program is to provide affordable homeownership opportunities for low-income households and to ensure that upon sale of the "affordable" unit the City of Chula Vista receives adequate funds to continue to promote affordable homeownership programs throughout the City. Therefore, if you purchase an Affordable Unit a Second Trust Deed restriction will be placed on the property. When you sell the Affordable Unit you will have to repay the amount of the Second Trust Deed plus a portion of the equity with the City of Chula Vista based upon the length of time that you have occupied the Affordable Unit. The longer you live in the Affordable Unit the less equity you have to share with the City. Regardless of when you sell the Affordable Unit you are ALWAYS responsible for repayment of the Second Trust Deed amount. Please refer to the chart below for equity share information. Occupancy Period (years) Beneficiary Equity Share Borrower Equity Share Before 1 100% 0% 1-5 70% 30% 6-10 60% 40% 11-15 50% 50% 16-20 40% 60% 21-25 25% 75% 26-30 10% 90% After 30 0% 100% EXAMPLE Assuming that a family of three purchases a two-bedroom unit for the market rate value of $250,000. The household would qualify for the maximum allowable purchase price of $170,421 (Table 2) and the Developer/Builder would provide a Silent Second loan in favor of the City for the difference between the market rate price and the maximum allowable purchase price equaling $79,579 (Table 3). Five years later, assuming a sales price of $350,000, the Homeowner decides to sell the property. The Homeowner would receive their initial downpayment amount of $5,112 plus $28,000 (8% of the sales price) as reimbursement for the costs associated with the sale of the property plus their equity share amount of $26,193, which is 30% of the remaining equity. The Homeowner would make full payment to the City on the principal of the Silent Second loan ($79,579) PLUS 70% of the remaining equity based upon the length of occupancy (Table 4). Therefore, the total EXHIBIT D 8/1412006 12-76 amount repaid to the City upon resale would be $140,695. EXAMPLE TABLE Current Sales Price (5 years Later) $ 1st Loan S 2nd Loan S Borrower's Investment (Initial DP= 3% ofSI70,421+CoslS of Sale 8% of sales price) S Equity $ Times Equity Share Percentage Equity Share (City) $ epaymen 0 n oan qUl are $ TOT AL EQU ITY TO HOMEOWNER (Borrower's lnitiallnvestment + Equity Share) $ MORTGAGE LENDER REQUIREMENTS . Buyers must have good credit history and good credit scores. 350,000 ( 150,000) (79,579) (33,112) 87,309 70.0% 61,116.30 140,695 59,305 . Buyers must have good job history and steady income. . Buyers must have enough stable and documented income for the proposed housing payment in addition to any current monthly debt. APPLICATION REVIEW PROCESS . Applicants will be contacted by the home builder sales staff via U.S mail acknowledging receipt of complete application and supporting documentation. the home builder and the City will review all applications to determine eligibility . Eligible applications will be forwarded to to be reviewed for eligibility. Please be advised that your financial information will be reviewed for two different purposes: . To determine that your household annual income does NOT exceed the maximum allowed by the City of Chula Vista for the Affordable Housing Purchase. ALL income will be considered for all persons living in the home who are 18 years or older, even if the income is not taxable income. . To determine if your income, employment history and credit rating are sufficient to qualify for a mortgage. Only the income for those adults who will occupy the home and be the recipients of the mortgage loan is used in determining qualification for a mortgage. EXHIBIT D 12-77 8/14/2006 Before you submit your complete application and supporting documentation please ask yourself the following questions. Do you: . Meet ALL the program requirements? · Have a good credit rating? . Have stable job time and income? · Have funds for the 3% down payment and closing costs? If you have answered yes to ALL the above questions..... .. Fill out the attached application and submit it plus ALL required documentation and MAIL to: ATTN: The Landing Development EXHIBIT D 8/1 4/2006 12-78 THE LANDING AFFORDABLE HOUSING UNIT APPLICATION (1) APPLICANT #1 Name Social Security Number Age Address City State Zip Code Employer Name and Address Position/Title Home Phone Work Phone (1 a) Marital Status Gender First-time Buyer Single Divorced Married Male Female Yes No 21 APPLICANT #2 Name Social Security Number Age Address City State Zip Code Employer Name and Address Position/Title Home Phone Work Phone (2a) Marital Status Gender First-time Buyer Single Divorced Married Male Female Yes No EXHIBIT D 8/] 4/2006 12-79 HOUSEHOLD INFORMATION: List ALL household members (Including Applicant(s)) that will reside in the Affordable Housing Unit Total # of persons in Household Total yearly Household Income $ - Name Age M/F Relationship to Applicant - Name Age M/F Relationship to Applicant - Name Age M/F Relationship to Applicant - Name Age M/F Relationship to Applicant - Name Age M/F Relationship to Applicant - Name Age M/F Relationship to Applicant BUYER SELECTION CRITERIA INFORMATION: If you respond YES to any of the questions below, you MUST provide written evidence with your application or you may not receive all eligible points. 1 ) Do/Did you have to leave your most recent PRIMARY residence due to either: 1) the expiration of affordable housing covenants, 2) an action of the City of Chula Vista or its Redevelopment Agency; 3) closure of the mobilehome park that you reside in; or 4) the conversion from rental condominiums to for-sale condominiums. Please note that in order for you to be eligible under this category at least one member of your household must have resided in the unit for at least one year In addition, the displacement must have occurred within the last year or is scheduled to occur within one year You must submit evidence of your displacement in order to be awarded points in this category. 0 Yes 0 No 2) Do you have one member of your household whose principal place of full-time employment is located within the City of Chula Vista? 0 Ves 0 No 3) Do you have any member of your household who is a full-time Public Safety employee (fireman/woman or policeman/woman) or full-time CREDENTIALED teacher? Vou must submit evidence of your employment position. EXHIBIT D 8/1412006 12-80 o Yes o No EXHIBIT D 8/14/2006 12-81 AFFORDABLE HOUSING UNIT CHECKLIST This checklist contains a list of documents that you are REQUIRED to submit, along with the completed Application as part of the application review process. Please review the list carefully and include COPIES of all documents that you are submitting. If there are any documents listed that you do not believe you are required to submit please indicate N/A and state the reason why the information is not attached. You must attach this signed checklist as part of your application packet. APPLICATIONS THAT ARE MISSING DOCUMENTATION WILL NOT BE CONSIDERED. a Six months of most current and consecutive bank/investment/retirement statements for ALL accounts (all pages) a Most recent paycheck stubs covering a 30-day period for each borrower a Most recent three (3) years W-2s and/or 1 099s for each borrower a Most recent three (3) years Federal Tax Returns for each borrower (all schedules) a Complete divorce decree(s) with all attachments, if applicable a Complete bankruptcy papers with all schedules and discharge papers for bankruptcies within the last 7 years, if applicable a Name and phone number of Real Estate Agent, if applicable a Copy of Green Card, front and back, if applicable or other appropriate proof of legal U.S residency If you are self-employed, also provide the following: o Most recent two (2) years tax returns and copies of 1040s, W-2s, 1099s and/or K-1 s for each borrower a Limited or General Partnership returns (if ownership interest is 25% or greater)- copies of form 1065 a Sub Chapter S Corporation returns (if ownership interest is 25 % or greater)- copies of form 11 20 S a U.S. Corporation returns (if ownership interest is 25% or greater)- copies of form 11 20 a YTD Profit and Loss Statement (in some cases this may need to be audited) EXHIBIT D 8/14/2006 12-82 AFFORDABLE HOUSING UNIT AFFIDAVIT By signing below each applicant makes the foil owing certifications: I, the undersigned, as part of my application for an Affordable Housing Unit within the The Landing development (the "Program"), and in connection with a purchase of a multi-family condominium (the "Residence") and an application for a mortgage loan (the "Mortgage Loan") from a lender (the "Lender") of my choosing, do hereby state that I have carefuily reviewed this document. I understand and agree with the answers on Pages One and Two, and do furthermore certify the foilowing: 1. That those people who I expect to share occupancy of the Residence with me are listed on Page One of the Application. 2. That my spouse, whether on title or not, is an Applicant for the Program and must sign this Application. 3 That I am a first-time homebuyer, who has not had an ownership interest in a principal residence within the three years immediately preceding the date of this application, and I do not and wiil not have an ownership interest in a principal residence prior to the date of loan closing. (A principal residence includes a single-family residence, a condominium, share in a housing cooperative, any manufactured home or mobilehome, or occupancy in a multifamily residence owned by me. An ownership interest means ownership by any means, whether outright or partial, including property subject to mortgage or other security interest; it also includes a fee simple ownership interest, a joint ownership interest by joint tenancy in common, or tenancy by the entirety or a life estate interest.) 4. That I will submit true and complete copies of ail requested documentation. 5 That the Residence will be occupied and used as my principal place of residence within 30 days of the date of Mortgage Loan closing. 6 That the Residence wiil not be used as an investment property, vacation home or recreation home 7. That I wiil notify the Program in writing if the Residence ceases to be my principal residence. 8 That the Mortgage Loan is a first mortgage, not a replacement mortgage. 9 That my income does not exceed the program income limits 10 That no person related to me has, or is expected to have, an interest as a creditor in the Mortgage Loan being acquired for the Residence 11 That the City Loan is issued on my behalf and may not be transferred. 12 That I may seek financing from any Lender of my choosing, and that I am in no way prohibited from seeking financing from any potential Lender, so long as the Lender executes and complies with the terms of the Program Guidelines. EXHIBIT D 8/14/2006 12-83 AFFORDABLE HOUSING UNIT CERTIFICATION I acknowledge and understand that this Affidavit, as completed above, will be relied on for determining my eligibility for An Affordable Housing Unit. I acknowledge that a material misstatement negligently made by me in this Affidavit or in any other connection with my Application for an Affordable Housing Unit will constitute a violation punishable by a fine and possible criminal penalties imposed by law, and will result in the cancellation or revocation of the Loan. I acknowledge that any false statement or misrepresentation or the fraudulent use of any instrument, facility, article, or other valuable thing or service pursuant to my participation in the Program is punishable by fine. BUYER DATE BUYER DATE BUYER DATE BUYER DATE EXHIBIT D 8/14/2006 12-84 SCHEDULE 1 LIST OF MARKET RATE PRICES TO BE INSERTEDAT A LATER DATE EXHIBIT D 8/14/2006 12-85