Year 15 Documentation Issues Michael Kotin KayKay Realty

Year 15 Documentation Issues Michael Kotin Kay-Kay Realty Corp. 2008

Understand the Parameters

Understand the Parameters Recap of Critical Documents:

Understand the Parameters Recap of Critical Documents: Ø Its still Real Estate

Understand the Parameters Recap of Critical Documents: Ø Its still Real Estate Don’t let the tax tail wag the economic dog

Understand the Parameters Recap of Critical Documents: Ø Seller’s Partnership Structure

Understand the Parameters Recap of Critical Documents: Ø Seller’s Partnership Structure ü LP Splits ü Ultimate Tax Credit Investor

Understand the Parameters Recap of Critical Documents: Ø Seller’s Partnership Structure ü LP Splits ü Ultimate Tax Credit Investor It’s a small world.

Understand the Parameters Recap of Critical Documents: Ø Land Use Restriction Agreement

Understand the Parameters Recap of Critical Documents: Ø Land Use Restriction Agreement ü Extended Use provisions continue ü May restrict or define Target Population ü May restrict or define Income Limits

Understand the Parameters Recap of Critical Documents: Ø Land Use Restriction Agreement Example: LURA provides 100% income restriction at 50% incomes. New contemplated tax credit structure at “ 40/60” will not supercede 50% income limitation

Transfers with Credits Remaining Ø As it pertains to Compliance three areas:

Transfers with Credits Remaining Ø As it pertains to Compliance three areas: v First Year Files v Current v State Files Housing Agency

Transfers with Credits Remaining Ø First Year Files v Tenant Files v 8609 As v LURA

Transfers with Credits Remaining Ø Current Files v Tenant ü Files Back to initial qualification v Utility Allowances

Transfers with Credits Remaining Ø State Agency: v Last annual report v Open compliance issues v Non-corrected 8823 s

Year 15 Transfers Don’t Need:

Year 15 Transfers Don’t Need: Ø Initial Tenant Files

Year 15 Transfers Don’t Need: Ø Ø Initial Tenant Files Resolution of 8823 s

Year 15 Transfers Don’t Need: Ø Ø Ø Initial Tenant Files Resolution of 8823 s Annual Reports

Year 15 Transfers Don’t Need: Ø Ø Ø Initial Tenant Files Resolution of 8823 s Annual Reports Why? No credits to lose !! Only ongoing requirement is in LURA

Year 15 Transfers Do Need: Ø Ø Current Tenant Files LURA

Key Dates

Key Dates l Tenant Qualification as of Transfer Date l NOT Tenant Qualification as of Tenant Move-in Date l NOT Tenant Qualification as of last Recertification Date

Key Dates l Last Certification date can be use to ESTIMATE Qualified Occupancy l Does not actually determine Qualified Status.

Key Dates l l Last Certification date can be use to ESTIMATE Qualified Occupancy Does not actually determine Qualified Status. l l l 2008 is year 15. Tenant is Qualified at May-07 move-in. Property purchased Jan -09.

Key Dates l Last Certification date can be use to ESTIMATE Qualified Occupancy l l Does not actually determine Qualified Status. l l 2008 is year 15. Tenant is Qualified at May 07 move-in. Property purchased Jan-09. May-07 irrelevant May-08 is irrelevant Status at Jan-09 relevant Neither May-07 nor May-08 serves to “warm body” unit for new owner

Key Dates l Critical factor is whether Tenant is Qualified as of Transfer Date.

Key Dates l Critical factor is whether Tenant is Qualified as of Transfer Date. l May wish to obtain “Interim Certification” do better estimate qualified percentage.

Key Dates l Critical factor is whether Tenant is Qualified as of Transfer Date. l May wish to obtain “Interim Certification” do better estimate qualified percentage. l Application and verifications may be obtained in advance of transfer.

Key Dates l Critical factor is whether Tenant is Qualified as of Transfer Date. l May wish to obtain “Interim Certification” do better estimate qualified percentage. l Application and verifications may be obtained in advance of transfer. l TIC must be certified to new owner.

Key Dates l Critical factor is whether Tenant is Qualified as of Transfer Date. l May wish to obtain “Interim Certification” do better estimate qualified percentage. l Application and verifications may be obtained in advance of transfer. l TIC must be certified to new owner. l Doesn’t matter if same management company.

Tenant Qualification

Tenant Qualification Three Possibilities l 1. Tenant income is below move-in limits

Tenant Qualification Three Possibilities l 1. 2. Tenant income is below move-in limits Tenant income is above 140% recertification limits

Tenant Qualification Three Possibilities l 1. Tenant income is below move-in limits 2. Tenant income is above 140% recertification limits 3. Tenant income is above move-in limits but below 140% recertification limits

Tenant Qualification l Tenant income is below move-in limits:

Tenant Qualification Tenant income is below move-in limits: l 1. May income qualify existing resident as initial “warm body” tenant for new tax credits.

Tenant Qualification Tenant income is below move-in limits: l 1. May income qualify existing resident as initial “warm body” tenant for new tax credits. 2. Application and verification may be completed before transfer date but certification must be to new owners after transfer date.

Tenant Qualification Tenant income is below move-in limits: l 1. May income qualify existing resident as initial “warm body” tenant for new tax credits. 2. Application and verification may be completed before transfer date but certification must be to new owners after transfer date. 3. May retroactively complete qualification after transfer within first 120 days of ownership.

Tenant Qualification Tenant income is below move-in limits: l 1. May income qualify existing resident as initial “warm body” tenant for new tax credits. 2. Application and verification may be completed before transfer date but certification must be to new owners after transfer date. 3. May retroactively complete qualification after transfer within first 120 days of ownership. 4. Existing lease may transfer and does not need to be rewritten.

Tenant Qualification Tenant income is below move-in limits: l 5. 6 month non-transient safe harbor rule does not apply.

Tenant Qualification l Tenant income is above 140% of applicable move-in limit:

Tenant Qualification Tenant income is above 140% of applicable move-in limit: l 1. Unit is no longer technically a tax credit unit.

Tenant Qualification Tenant income is above 140% of applicable move-in limit: l 1. Unit is no longer technically a tax credit unit. » Prohibition against no-cause evictions do not apply.

Tenant Qualification Tenant income is above 140% of applicable move-in limit: l 1. Unit is no longer technically a tax credit unit. » Prohibition against no-cause evictions do not apply. » 3 -year trailer for rent protection does not apply.

Tenant Qualification Tenant income is above 140% of applicable move-in limit: l 2. Tenant may be non-renewed at lease expiration

Tenant Qualification Tenant income is above 140% of applicable move-in limit: l 2. Tenant may be non-renewed at lease expiration » Does not override protection offered by state and local ordinances which may apply.

Tenant Qualification Tenant income is above 140% of applicable movein limit: l 2. Tenant may be non-renewed at lease expiration » Does not override protection offered by state and local ordinances which may apply. » Does not override protection offered to project-based or voucher-based Section 8 tenants.

Tenant Qualification Tenant income is above 140% of applicable movein limit: l 3. Credits may commence after existing Tenant is gone and a new qualified household occupies the unit.

Tenant Qualification l Tenant income is above move-in limits but under 140% of applicable move-in limit:

Tenant Qualification Tenant income is above move-in limits but under 140% of applicable move-in limit: l 1. This is the problem scenario.

Tenant Qualification Tenant income is above move-in limits but under 140% of applicable move-in limit: l 1. This is the problem scenario. 2. Still considered a tax credit unit. apply. » Prohibition against no-cause evictions do » 3 -year trailer for rent protection does apply.

Tenant Qualification Tenant income is above move-in limits but under 140% of applicable move-in limit: l 3. Qualification at move-in with old ownership does NOT “grandfather” qualified status to resident.

Tenant Qualification l Tenant income is above move-in limits but under 140% of applicable move-in limit: Ø Options: q Treat unit as a market rate unit and forego any credits on the unit.

Tenant Qualification l Tenant income is above move-in limits but under 140% of applicable move-in limit: Ø Options: q Treat unit as a market rate unit and forego any credits on the unit. q Treat unit as a non-qualified tax credit unit. A undetermined amount of tax credits will flow in subsequent years (possibly as 15 year credits) when the unit is actually occupied by a qualified household. » Requires special treatment in LP Agreement

Tenant Qualification l Tenant income is above move-in limits but under 140% of applicable move-in limit: Ø Options: q Treat unit as a market rate unit and forego any credits on the unit. q Treat unit as a non-qualified tax credit unit. A undetermined amount of tax credits will flow in subsequent years (possibly as 15 year credits) when the unit is actually occupied by a qualified household. » q Buy the tenant out. Requires special treatment in LP Agreement

Interim

Interim l Extended Use Agreement still applies.

Interim Extended Use Agreement still applies. l Ø Most states require continued documentation at initial occupancy.

Interim Extended Use Agreement still applies. l Ø Most states require continued documentation at initial occupancy. Ø Recertification is not required in most states after 15 -year initial compliance period.

Interim Extended Use Agreement still applies. l Ø Most states require continued documentation at initial occupancy. Ø Recertification is not required in most states after 15 -year initial compliance period. Ø 3 -year rent protection trailer continues for all qualified residents in possession at end of initial credit period.

Interim Extended Use Agreement still applies. l Ø Most states require continued documentation at initial occupancy. Ø Recertification is not required in most states after 15 -year initial compliance period. Ø 3 -year rent protection trailer continues for all qualified residents in possession at end of initial credit period. Ø Prohibition against no-cause evictions still applies for all qualified residents in possession at end of intitial credit period.

Interim l If property will not be placed-in-service in year of acquisition:

Interim If property will not be placed-in-service in year of acquisition: l Ø Most states require continued documentation at initial occupancy.

Interim If property will not be placed-in-service in year of acquisition: l Ø Most states require continued documentation at initial occupancy. Ø Recertification is not required in most states after 15 -year initial compliance period.

Interim If property will not be placed-in-service in year of acquisition: l Ø Most states require continued documentation at initial occupancy. Ø Recertification is not required in most states after 15 -year initial compliance period. Ø 3 -year rent protection trailer continues for all qualified residents in possession at end of initial credit period.

Interim If property will not be placed-in-service in year of acquisition: l Ø Most states require continued documentation at initial occupancy. Ø Recertification is not required in most states after 15 -year initial compliance period. Ø 3 -year rent protection trailer continues for all qualified residents in possession at end of initial credit period. Ø Prohibition against no-cause evictions still applies for all qualified residents in possession at end of intitial credit period.

Interim l If property will not be placed-in-service in year of acquisition:

Interim If property will not be placed-in-service in year of acquisition: l Ø New residents should be income qualified at move-in.

Interim If property will not be placed-in-service in year of acquisition: l Ø New residents should be income qualified at move-in. Ø “Grandfathering” rules will apply at January 1 st of P-I-S year pursuant to 2003 -82.

Interim If property will not be placed-in-service in year of acquisition: l Ø New residents should be income qualified at move-in. Ø “Grandfathering” rules will apply at January 1 st of P-I-S year pursuant to 2003 -82. Ø Current and new residents who vacate prior to January 1 st of P-I-S year do not “warm body” the unit.