Diamond Bar, Cal., Code of Ordinances ch. 22.18 § 22.18.030

(a) Purpose. The purpose of this section is to establish minimum requirements and procedures for the preparation, execution, and recording of regulatory agreements establishing covenants to ensure the initial and continued affordability of income-restricted residential dwelling units required to be provided in conjunction with the approval of a development project pursuant a provision of this Code or state law.
(b) Definitions. As used in this section, the following terms shall have the following meanings:
(1) "Affordable units" means residential dwelling units required to be made affordable to, and occupied by, households with incomes that do not exceed the limits specified in applicable law for middle income, moderate-income, lower income, very low income, or extremely low income households, as applicable, at an affordable rent or affordable housing cost, pursuant to state law or any provision of this Code.
(2) "Owner" means the record owner or owners of the parcel or parcels on which affordable units will be located.
(3) "Regulatory agreement" means an agreement or agreements entered into between the city and an owner pursuant to this section.
(c) Requirement for regulatory agreement. Whenever an applicant for a development project offers to or is required as a condition of development pursuant to state law or any provision of this Code to construct a specified number or percentage of affordable units, the owner shall enter into a regulatory agreement with the city meeting the requirements of this section in the form approved by the city manager.
(d) Required provisions of regulatory agreements. Unless otherwise provided by law or authorized by the city manager, each regulatory agreement shall include provisions addressing or requiring the following:
(1) Identification of affordable units. The number, affordability level, unit size and bedroom count mix, and location of the affordable units shall be set forth in the regulatory agreement. Unless otherwise mutually agreed by the applicant and city, affordable units shall be dispersed throughout the project. Projects that include mixed income multifamily structures shall comply with the requirements set forth in Health and Safety Code Section 17929.
(2) Timing of construction. The regulatory agreement shall require that the affordable units be constructed concurrently with or prior to other components of the development project.
(3) Affordability period for affordable units. The regulatory agreement shall require that the affordable units remain affordable to, and be occupied by, persons and families of the required income level at an affordable rent or affordable housing cost, as applicable, for the minimum period of time required by law, or a longer period of time if required by a construction or mortgage financing assistance program, mortgage insurance program, or subsidy program associated with the development project. Where a minimum affordability period is not otherwise specified by statute or ordinance, the required affordability period for affordable units that will be rented shall be a minimum of 55 years and the required affordability for affordable units that will be offered for sale shall be a minimum of 45 years. Determinations of affordable rents, affordable housing costs, and household income levels shall be made in accordance with the regulations published from time to time by the California Department of Housing and Community Development pursuant to Health and Safety Code Section 50093.
(4) Annual tenant income verification, compliance reporting, and certification. For projects containing affordable units that will be rented, the regulatory agreement shall include uniform provisions requiring the owner to verify and certify, prior to the initial occupancy, and annually thereafter, that each tenant household occupying each affordable unit meets the applicable income and eligibility requirements established for the affordable unit, and to annually prepare a compliance report and certify that the affordable units are in compliance with the regulatory agreement.
(5) For-sale affordable units. For projects containing affordable units that will be offered for sale, the regulatory agreement shall include uniform provisions requiring the owner to either: (i) ensure that each affordable unit is offered at an affordable housing cost and is initially sold to and occupied by a household that meets the applicable income and eligibility requirements established for the affordable unit, or (ii) sell the affordable unit(s) to a qualified nonprofit housing corporation pursuant to applicable legal requirements and terms acceptable to the city. If the affordable units are developed pursuant to section 22.18.010 or section 22.18.020 , the regulatory agreement shall contain provisions satisfying the criteria set forth in paragraph (2) of subdivision (c) of Government Code Section 65915. The regulatory agreement shall also require the initial purchaser and, if applicable, each subsequent purchaser, of an affordable unit, to execute and/or record one or more agreements and/or restrictive covenants benefiting and enforceable by the city, which address, among other things, the purchaser's obligations pertaining to certification of income, financing or refinancing of the unit, occupancy of the unit, property maintenance, insurance, periodic certification of compliance with applicable agreement terms, and re-sale of the unit. Such agreements or restrictive covenants may include, without limitation promissory notes, deeds of trust, reimbursement agreements, option agreements, equity sharing agreements, and/or other covenants and regulatory documents necessary to ensure continued compliance with pertinent provisions of applicable law, conditions of approval, and the regulatory agreement for the required affordability period.
(6) Maintenance standards. The regulatory agreement shall contain uniform provisions governing the owner's maintenance obligations and the city's rights in the event the owner fails to adhere to its maintenance obligations.
(7) Annual compliance report. Each regulatory agreement shall contain provisions requiring the owner to submit an annual compliance report containing specified information to the city in a form reasonably satisfactory to director and to annually certify that the affordable units are in compliance with the requirements of the regulatory agreement.
(8) Recordkeeping requirements. The regulatory agreement shall contain uniform provisions requiring the owner to maintain affordable unit sales documents, tenant leases, income certifications, and other books, documents, and records related to the sale or rental of the affordable units and operation of the project for a period of not less than five years after creation of each such record; to allow the city to inspect any such books, documents, or records and to conduct an independent audit or inspection of such records at a location that is reasonably acceptable to the city manager upon prior written notice; and to permit the city and its authorized agents and representatives to access the property and examine the housing units and to interview owners, occupants, tenants and employees for the purpose of verifying compliance with the regulatory agreement.
(9) Marketing and sale of affordable units. For housing development projects containing affordable units that will be offered for sale, the regulatory agreement shall contain uniform provisions addressing: (i) how eligible buyers of the affordable units will be solicited, identified, and selected; (ii) procedures for establishing the affordable sales prices of the affordable units; (iii) procedures for verifying the income and eligibility of prospective buyers of the affordable units; and (iv) a description of the responsibilities of an owner or buyer upon resale of an affordable unit.
(10) Marketing and management plan for rental affordable units. For multi-family housing development projects containing affordable units that will be rented, the regulatory agreement shall contain uniform provisions regarding property management and management responsibilities and shall require the owner to prepare and obtain the city's approval of a marketing and management plan for the project prior to the issuance of a certificate of occupancy for any portion of the project. The marketing and management plan shall address in detail, without limitation, the following matters: (i) how the owner plans to market the affordable units to prospective tenant households; (ii) procedures for the selection of tenants of affordable units, including a description of how the owner plans to certify the eligibility of tenant households; (iii) procedures for annually verifying income and recertifying the eligibility of tenants of affordable units; (iv) the standard form(s) of rental agreement(s) the owner proposes to enter into with tenants of affordable units; (v) procedures for the collection of rent; (vi) procedures for eviction of tenants; (vii) procedures for ensuring that the required number and unit size mix of affordable units is maintained and that affordable units do not become congregated to a certain area of the building or project; (viii) procedures for complying with the owner's monitoring and recordkeeping obligations; (ix) the owner's property management duties; (x) the owner's plan to manage and maintain the project and the affordable units; (xi) the rules and regulations of the property and manner of enforcement; and (xii) and a program addressing security and crime prevention at the project.
(11) Provisions regarding Section 8 certificates. For projects containing affordable units that will be rented, the regulatory agreement shall include uniform provisions regarding the acceptance of federal certificates for rent subsidies pursuant to the existing program under Section 8 of the United States Housing Act of 1937, or its successor (i.e., "Section 8 certificates"), which shall include the following requirements and limitations:
a. The owner shall accept as tenants persons who are recipients Section 8 certificates on the same basis as all other prospective tenants; provided, the owner shall not rent one of the affordable units to a tenant household holding a Section 8 certificate unless none of the housing units not restricted to occupancy by the affordability covenants are available. If the only available housing unit is an affordable unit, the owner shall no longer designate the housing unit rented to a tenant household holding a Section 8 certificate as an affordable unit, shall designate the next-available housing unit as an affordable unit, and shall make available, restrict occupancy to, and rent such newly designated affordable unit to a qualified tenant at the applicable affordable rent pursuant to the affordability covenants, such that at all times reasonably possible all of the required affordable units shall not be occupied by tenants holding Section 8 certificates.
b. Furthermore, in the event the owner rents an affordable unit to a household holding a federal certificate, the rental agreement (or lease agreement, as applicable) between the owner, as landlord, and the tenant shall expressly provide that monthly rent charged shall be the affordable rent required for the affordable unit (not fair market rent) and that the rent collected directly from such tenant holding a federal certificate shall be not more than the specified percentage of the tenant's actual gross income pursuant to the applicable federal certificate program regulations; i.e., the rent charged to such tenant under the rental agreement shall be the affordable rent chargeable under the affordability covenant and not fair market rent for the area, as would otherwise be permitted under the applicable federal certificate program.
c. The owner shall not apply selection criteria to Section 8 certificate holders which are more burdensome than criteria applied to any other prospective tenants.
d. If and to the extent these restrictions conflict with the provisions of Section 8 of the United States Housing Act of 1937 or any rules or regulations promulgated thereunder, the provisions of Section 8 of the United States Housing Act of 1937 and all implementing rules and regulations thereto shall control.
(12) Annual monitoring fee. Each regulatory agreement shall contain a provision requiring the owner to reimburse city for the estimated reasonable costs incurred by the city in administering and monitoring the owner's compliance with the regulatory agreement, including, but not limited to, city's review of annual compliance reports and conduct of inspections and/or audits.
(e) Recordation. Each regulatory agreement entered into pursuant to this section shall be recorded as a covenant against the property prior to final or parcel map approval, or, where the development project does not include a subdivision map, prior to issuance of a building permit for any structure in the development project. Except as otherwise authorized by the city manager, the regulatory agreement shall remain a senior, non-subordinate covenant and as an encumbrance running with the land for the full term thereof, and in no event shall the regulatory agreement be made junior or subordinate to any deed of trust or other documents providing financing for the construction or operation of the project, or any other lien or encumbrance whatsoever for the entire term of the required covenants.
(f) Delegation of authority. The city manager is authorized to approve and execute each regulatory agreement and any amendments thereto on behalf of the city. The city shall maintain authority of each regulatory agreement and the authority to implement each regulatory agreement through the city manager. The city manager shall have the authority to make approvals, issue interpretations, waive provisions, make and execute further agreements and/or enter into amendments of each regulatory agreement on behalf of city.
(g) Fees. The city may charge a fee or fees to recover the city's reasonable costs to implement the provisions of this section. Any such fees shall be adopted by resolution of the city council.
(h) Reimbursement of professional fees and costs. To the extent not factored into the fee or fees established pursuant to subsection (g), in addition to such fees, the development proponent and/or owner shall reimburse the city for the actual fees and costs charged for the services of attorneys and/or other professional third-party consultants engaged by the city to provide consultation, advice, analysis, and/or review or preparation of documents in connection with: (i) preparation of the regulatory agreement and ancillary documents; (ii) establishing the affordable sales price and verifying the incomes and eligibility of prospective buyers of for-sale affordable units; (iii) review of the initial marketing and management plan and any amendments thereto; (iv) review of annual compliance reports submitted by an owner pursuant to a regulatory agreement; and (v) inspections and audits.
(i) Preparation of regulatory agreement; reimbursement agreement. Unless otherwise approved by the city manager, each regulatory agreement shall be prepared by the city at the cost of the applicant and/or owner. Prior to the city commencing preparation of a regulatory agreement, the applicant and/or owner shall execute a reimbursement agreement with the city in a form approved by the city manager and provide a deposit to the city in an amount sufficient to cover the estimated total professional fees and costs to be incurred by the city for preparation of the regulatory agreement, as determined by the director in his or her reasonable discretion. The city manager or his or her designee is authorized to execute said reimbursement agreement on behalf of the city.