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foreclosed, HUD could eliminate the City Senior Covenant and dispose of the Property without that encumbrance. At the same time, HUD agreed to include its own senior covenant (the "HUD Senior Covenant ") in the HUD Regulatory Agreement. This covenant requires that 47 units be occupied by at least one person who is at least 62 years of age. The HUD Senior Covenant remains in place as long as the HUD Loan and HUD Mortgage are in place (35 years if the loan goes to term). Council Concerns At its June 7 work session members of the Council raised several questions and concerns. Following is a description of how those concerns have been addressed. 1. Is the Developer willing to extend the City Senior Covenant? Yes, the Developer agreed to replace the original City Senior Covenant with a new one that imposes the 55 age restriction through February 1, 2045 (roughly the same term as the HUD Loan). The City's covenant remains in place even if the HUD Mortgage is paid off early. 2. May HUD terminate all senior restrictions on the Property even if the HUD Mortgage has not been foreclosed? Most likely no. Regarding the City Senior Covenant, the HUD subordination language clearly allows HUD to terminate that covenant upon foreclosure, but the language does not expressly give HUD to right to terminate that covenant absent foreclosure. The HUD language does indicate that, in the event of conflicts between the HUD documents and the Contract, the HUD documents control, but arguably there is no conflict between the existing HUD documents and City Senior Covenant; after all HUD has included its own very similar covenant in it own documents. It its possible that HUD could take a different view of this matter in the future, but the possibility of a dispute on this point is very remote. Regarding the HUD Senior Covenant, HUD agreed to add the following language in the HUD Regulatory Agreement: Developer shall not modify [the HUD Senior Covenant] without prior written consent of the Authority, which consent shall not be unreasonably withheld, conditioned or delayed. This means that if either HUD or the Developer requests an amendment to the HUD Senior Covenant, the Authority may withhold consent to that as long as its decision to withhold is reasonable. Since the Authority has clearly indicated a goal of long -term senior use of the Property (in exchange for the City's tax increment assistance at the outset), it would be reasonable for the Authority to withhold consent of any attempt to 370912v3 SJB LN 140 -25 2 • • •