Notice of Submission of Renewal of Information Collection Requirement to OMB
Federal RegisterFeb 26, 1997
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-4200-N-30]
Notice of Submission of Renewal of Information Collection
Requirement to OMB
AGENCY: Office of the General Counsel, HUD.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: The proposed renewal/reinstatement of the existing information
collection requirement described below is being submitted to the Office
of Management and Budget (OMB) for review, as required by the Paperwork
Reduction Act (44 U.S.C. chapter 35). The Department is soliciting
public comments on the subject renewal.
DATES: Comment due date: April 28, 1997.
ADDRESSES: Interested persons are invited to submit comments regarding
this renewal. Comments should refer to the proposal by name and should
be sent to:
Joseph F. Lackey, Jr., OMB Desk, Office of Management and Budget, New
Executive Office Building, Washington, DC 20503.
John J. Daly, Associate General Counsel for Insured Housing, GI, HUD
Building, Room 9236, 451 7th St., SW., Washington, DC 20410.
FOR FURTHER INFORMATION CONTACT: Kay Weaver, Reports Management
Officer, Department of Housing and Urban Development, 451 7th Street
Southwest, Washington, DC 20410, telephone (202) 708-0050. This is not
a toll-free number. Copies of the existing forms showing clarifications
and minor changes necessary to effect the renewal and other available
documents submitted to OMB may be obtained from Ms. Weaver.
SUPPLEMENTARY INFORMATION: This Notice informs the public that the
Department of Housing and Urban Development is submitting to OMB an
information collection renewal package with respect to two guide
formats (hereinafter, ``the Guide'') which specify the components of a
legal opinion required by the Department in connection with the
insurance of mortgage loans upon multifamily rental projects and health
care facilities under Titles II and XI of the National Housing Act, 12
USC 1702, et seq., and 12 USC 1749aaa, or in connection with the making
of a capital advance under section 202 of the Housing Act of 1959, as
amended. (Please note that references to section 811 of the Cranston-
Gonzalez National Affordable Housing Act, as
[[Page 8750]]
amended, have been deleted because the Guide is no longer required in
connection with that program.)
The Guide articulates those matters upon which HUD requires an
opinion from private counsel as well as those matters upon which
confirmations are required. The Guide also contains detailed
instructions pertaining to the form as well as a format for
certifications by the mortgagor as to matters particularly within the
knowledge of the mortgagor upon which its legal counsel relies in
rendering the opinion. The section 202 Guide format is essentially the
same as the insured loan format except for some differences in
terminology and program requirements.
To the extent that the Guide represents any ``collection of
information,'' the process is necessary to ensure the Department that
the attorney representing the mortgagor or owner has followed the
otherwise specified requirements of the Department and to ensure the
Department that the attorney has exercised an acceptable degree of due
diligence in representing the client and in rendering the opinion to
the mortgagee and HUD. Although certain aspects of the process have
been clarified in the Instructions to the Guide, the process has not
changed and no substantive changes have been made the Guide itself.
Further, the program coverage has been clarified, but the actual
coverage has not been expanded. The extent of due diligence expected to
be performed under the Guide is no different than that which HUD has
required under the Guide since its approval by OMB on March 11, 1994
(OMB Number 2510-0010). Based upon the experience of HUD in using the
Guide for almost three years, HUD has determined that there have been
no major problems in using the Guide and that it has been received
positively by virtually all of the attorneys utilizing the format.
However, there are several places in the Guide and the Instructions
thereto where technical corrections are necessary and where expanded
Instructions are necessary to facilitate use of the Guide by private
attorneys and HUD field counsel.
The Notice is soliciting comments from members of the public and
affected agencies concerning the proposed renewal of the collection of
information to: (1) Evaluate whether the proposed collection of
information is necessary for the proper performance of the functions of
the agency, including whether the information will have practical
utility; (2) Evaluate the accuracy of the agency's estimate of the
burden of the proposed collection of information; (3) Enhance the
quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collection of information on those who
are to respond; including through the use of appropriate automated
collection techniques or other forms of information technology, e.g.,
permitting electronic submission of responses.
This Notice also lists the following information:
(1) The title of the information collection proposal;
(2) The office of the agency to collect the information;
(3) The description of the need for the information and its
proposed use;
(4) The agency form number, if applicable;
(5) What members of the public will be affected by the proposal;
(6) How frequently information submission will be required;
(7) An estimate of the total number of hours needed to prepare the
information submission including number of respondents, frequency of
response, and hours of response;
(8) Whether the proposal is new or an extension, reinstatement, or
revision of an information collection requirement; and
(9) The names and telephone numbers of an agency official familiar
with the proposal and of the OMB Desk Officer for the Department.
Authority: Section 3506 of the Paperwork Reduction Act, 44
U.S.C. 3506, Section 7(d) of the Department of Housing and Urban
Development Act, 42 U.S.C. 3535(d).
Dated: February 19, 1997.
George L. Weidenfeller,
Acting General Counsel.
Proposal: Renewal or reinstatement of HUD Guide for Counsel to the
Mortgagor and Renewal or reinstatement of HUD Guide for Counsel to
Owner.
Office: Office of the General Counsel.
Description of the need for the information and its proposed use:
Although it is questionable whether a legal opinion upon which HUD and
the mortgagee rely constitutes ``the collection of information,'' HUD
is taking a conservative approach and continuing to treat its use of
the Guide formats as if they are information collection to eliminate
the issue at the outset. The opinion is required to provide comfort to
HUD and the mortgage in multifamily rental and health care facility
mortgage insurance transactions and similarly to HUD and owners in the
capital advance transactions.
Form Number: None (Guide).
Respondents: Counsel to mortgagors of multifamily rental projects
and health care facilities upon which the mortgage loans are insured by
HUD and counsel to owners of section 202 projects which receive capital
advances from HUD.
Frequency of Submission: Variable. Submitted by counsel to the
mortgagor or borrower in connection with the closings of insured and
direct loans.
Reporting Burden:
------------------------------------------------------------------------
Number of Frequency of Hours per
respondents X response = response = Burden hours
------------------------------------------------------------------------
700.......... 1 1 700
------------------------------------------------------------------------
Total Estimated Burden Hours: 700 (Please note that this estimate
is based upon an attorney preparing and completing the opinion in one
hour; however, the attorney would typically perform in excess of 100
hours in representing the mortgagor or owner and performing those
actions necessary to render the opinion. These numbers do not represent
any significant change from the previous Guide formats which are being
renewed or reinstated with certain technical corrections and
clarifications which should result in slight decreases in some cases in
the time required to prepare and complete the opinion.) Even though the
Guide format is no longer required in connection with the 811 program,
the slight decrease in activity thereunder is expected to be off-set by
increases in FHA mortgage insurance activity.
Status: Renewal or reinstatement with technical corrections and
clarifications (mainly to the Instructions to the Guide). (The previous
Guide was approved by OMB on March 11, 1994 (OMB Number 2510-0010)).
Contact: Joseph F. Lackey, Jr. OMB, (202) 395-6880; John J. Daly,
HUD, (202) 708-1274.
Dated: February 19, 1997.
For use in FHA Insured Transactions.
January 30, 1997.
[[Page 8751]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FEDERAL HOUSING
ADMINISTRATOR
GUIDE FOR OPINION OF MORTGAGOR'S COUNSEL
(TO BE TYPED ON FIRM LETTERHEAD)
(INSERT DATE OF ENDORSEMENT)
Re: Project Name-------------------------------------------------------
FHA Project No.------------------------------------------------------
Location-------------------------------------------------------------
Mortgagor------------------------------------------------------------
[MORTGAGEE]
[ADDRESS]
[MORTGAGEE'S ATTORNEY]
[ADDRESS]
FEDERAL HOUSING COMMISSIONER
{INSERT APPROPRIATE FIELD OFFICE ADDRESS}
Ladies and Gentlemen: We are [I am] [general/special] counsel to
____________ {INSERT NAME OF MORTGAGOR} (the ``Mortgagor''), a
____________ {INSERT TYPE OF ENTITY} organized under the laws of the
State of ____________ {INSERT STATE} (the ``Organizational
Jurisdiction), in connection with a mortgage loan (the ``Loan'') in the
[original/increased] principal amount of ____________ Dollars
($____________) from ____________ {INSERT NAME AND TYPE OF MORGAGEE}
(the ``Mortgagee'') to the Mortgagor. The proceeds of the Loan will be
used to [construct/rehabilitate/purchase/refinance] that certain
[multifamily housing/hospital/extended care facility/nursing home/board
and care] project (the ``Project''), commonly known as ____________ and
located in ____________ {INSERT COUNTY AND STATE} (said State to be
referred to hereinafter as the ``Property Jurisdiction'') on the
property described in Exhibit B {ATTACH LEGAL DESCRIPTION} (together
with all improvements and fixtures thereon) (the ``Property''). The
Loan is being insured by the Federal Housing Administration (FHA), an
organizational unit of the United States Department of Housing and
Urban Development (``HUD''), pursuant to a commitment for insurance [of
advances OR upon completion OR for refinancing] issued to Mortgagee by
____________, Agent of the Federal Housing Commissioner, dated
____________ [as amended by that certain letter from ____________ to
____________, dated ____________] (``FHA Commitment''). The Loan is
being funded from ____________ {DESCRIBE FINANCING SOURCE, e.g., tax-
exempt bonds/mortgage backed securities guaranteed by GNMA/
participation certificates, etc.} The Mortgagor has requested that we
[I] deliver this opinion and has consented to reliance by Mortgagee's
counsel in rendering its opinion to Mortgagee and to reliance by
Mortgagee and HUD in making and insuring, respectively, the Loan and
has waived any privity between Mortgagor and us [me] in order to permit
said reliance by Mortgagee, counsel to Mortgagee and HUD. We [I]
consent to reliance on this opinion by Mortgagee, counsel to Mortgagee,
and HUD.
In our [my] capacity as [general/special] counsel to the Mortgagor,
we [I] have prepared or reviewed the following:
A. The [{DESCRIBE ORGANIZATIONAL DOCUMENTS, e.g. for corporations:
State certified copies of the articles of incorporation, the by-laws,
the borrowing resolution, the incumbency certificate and the good
standing certificate(s), fictitious Name Registration, Foreign
Corporation Registration; for partnerships: certified copies of the
partnership agreement and any amendments thereto, the certificate of
limited partnership, and any amendments thereto, the good standing
certificate (or its equivalent) if provided in the Organizational
Jurisdiction, etc.}] of the Mortgagor (collectively, the
``Organizational Documents'');
B. The FHA Commitment [extensions and assignment(s) thereof, if
any];
C. The Commitment issued by the Mortgagee and accepted by the
Mortgagor, dated ____________, (the ``Loan Commitment'');
D. The Regulatory Agreement (____________) {INSERT APPROPRIATE FORM
NO.} by and between HUD and the Mortgagor, dated ____________, (the
``Regulatory Agreement'');
E. The Note (____________) {INSERT APPROPRIATE FORM NO.} [in the
original principal amount of ____________ Dollars ($____________) OR in
the increased principal amount of ____________ Dollars ($____________)
by Mortgagor in favor of Mortgagee, dated ____________, (the ``Note'');
F. [The Mortgage OR Deed of Trust] (______ {INSERT APPROPRIATE FORM
NO.}), executed by Mortgagor for the benefit of Mortgagee, granting a
security interest in the Property, dated ______, (the ``Mortgage'');
G. {INSERT THE NUMBER OF UCC's TO BE FILED} Uniform Commercial Code
Financing Statements executed by the Mortgagor as debtor and naming the
Mortgagee and HUD as secured parties or as their interests may appear,
to be filed in ______, {INSERT LOCATION(S)} (the Filing Offices), upon
the {DESCRIBE EVENTS} (the ``Financing Statements'');
H. The Security Agreement by and between Mortgagor and the
Mortgagee, granting a security interest under the Uniform Commercial
Code, in those items of personality described therein, dated ______,
(the ``Security Agreement'');
[I. {TO BE INSERTED IF THE MORTGAGE IS ON A LEASEHOLD ESTATE} The
Ground Lease executed by ______ {INSERT LESSOR} as lessor and Mortgagor
as lessee recorded in the land records of ______, dated ______, (the
``Ground Lease'').]
[J. {TO BE INSERTED FOR CONSTRUCTION/REHABILITATION LOANS} The
Building Loan Agreement (2441) executed by Mortgagee and Mortgagor,
dated ______, (the Building Loan Agreement'').]
[K. {TO BE INSERTED FOR CONSTRUCTION/REHABILITATION LOANS} The
Construction Contract [Lump Sum (2442) or Cost Plus (2442-A)] executed
by ______ (the ``General Contractor'') and Mortgagor, dated ______ (the
``Construction Contract'').]
L. The Mortgagee's Certificate (2434), executed by the Mortgagee,
dated ______.
M. The Mortgagor's Certificate (2433), executed by the Mortgagor,
dated ______.
N. The Agreement and Certification (3305 or 3305A or 3306 or
3306A), executed by the Mortgagor, dated ______.
O. The Mortgagor's Oath (2478), executed by the Mortgagor, dated
______.
P. The Mortgagor's Opinion Certification, pertaining to factual
matters relied on by us [me] in rendering this opinion, executed by the
Mortgagor, dated ______, a copy of which is attached hereto as
Exhibit--(the ``Certification of Mortgagor'').
Q. A search conducted by ______ dated ______ {no earlier than 30
days before this opinion} of the financing records of the county and
Property Jurisdiction [and Organizational Jurisdiction] (the ``UCC
Search'').
[R. A receipt from the insurance company providing flood insurance
evidencing payment for the premium, date ______ (the ``Flood Insurance
Receipt'').]
S. The Title Insurance Policy [or date-down if appropriate in a
refinancing, for example] issued by ______ {acceptable company under
HUD's regulations}, together with all endorsements, and naming HUD and
the Mortgagee as insureds as their interests may appear, dated ______,
(the ``Title Policy'').
[[Page 8752]]
[T. The following documents evidencing zoning compliance, ______,
{DESCRIBE ALL DOCUMENTS FULLY} (the ``Zoning Certificate'').]
[U. The building permit(s) issued on ______ by] ______ (the
``Building Permit'').
[V. The following permits, ______, {DESCRIBE PERMITS} which are
required for the operation of the project, issued by ______ on ______
(``Other Permits'').]
[W. The Surveyor's Plat OR Survey showing completed project,
prepared by ______, dated ______, (the ``Survey'').]
X. The Surveyor's Report (2457), executed by ______ dated ______,
(the ``Surveyor's Report'').
[Y. The deferred note (1710, 1712 or 2223) executed by Mortgagor in
favor of ______, dated ______, (the ``Deferred Note'').]
[Z. The Performance Bond (2452) and the Payment Bond (2452-A)
issued by ______ (Surety) to secure payment and performance of ______
(General Contractor) and running to ______ OR the Completion Assurance
Agreement (2450) executed by the General Contractor, dated ______, (the
``Assurance of Completion'').]
[AA. The Owner-Architect Agreement (AIA B181 with HUD Supplement)
executed by ______ {INSERT DESIGN AND/OR CONSTRUCTION ARCHITECT} and
Mortgagor, dated ______, (the ``Owner-Architect Agreement'').]
[BB. The Off-Site Bond (2479) issued by ______ (Surety) to secure
the completion of off-site work by ______ (General Contractor) and
running to the Mortgagee and HUD OR Escrow Agreement for Off-Site
Facilities (2446) with Schedule ``A'' executed by ______ dated ______
(the ``Assurance of Completion of Off-Site Facilitate'').]
[CC. The following documents assuring water, electricity, sewer,
gas, heat or other utility services (the ``Assurance of Utility
Services''): ______ {DESCRIBE FULLY}.]
[DD. The Contrator's and/or Mortgagor's Cost Breakdown (2328)
executed by the General Contractor, dated ______, (the ``Cost
Breakdown'').]
[EE. The Latent Defects Bond (3259) issued by ______ and securing
the performance of the General Contractor and running to the Mortgagee
and HUD OR Escrow executed by ______, dated ______ (the ``Guarantee
against Latent Defects'').]
[FF. The Escrow Deposit Agreement for Incomplete On-Site
Improvements (2456) with Schedule A executed by the General Contractor,
dated ______, (the ``On-Site Deposit Escrow'').]
[GG. The Contractor's Prevailing Wage Certificate (2403-A) executed
by ______, dated ______, (the ``Contractor's Prevailing Wage
Certificate'').]
HH. The Request for Endorsement of Credit Instrument (2023) and/or
Certificate of Mortgagor and Mortgagee (2455) executed by the Mortgagor
and the Mortgagee, dated ______, (the ``Request for Endorsement'').
{MODIFY AS APPROPRIATE FOR INSURANCE UPON COMPLETION, REFINACINGS,
ETC.}
[II. The Operating Deficit Escrow (2476a) executed by ______, dated
______, (the ``Operating Deficit Escrow'').]
[JJ. The Repair Escrow executed by ______, dated ______, (the
``Repair Escrow'').]
[KK. All documents executed by Mortgagor and any State or local
government entity pertaining to development of the Property (the
``Public Entity Agreement'').]
[LL. The following documents executed or delivered in connection
with the financing of the loan with the proceeds of bonds exempt from
federal taxation: ____________ {LIST DOCUMENTS IN ACCORDANCE WITH
INSTRUCTIONS} (the ``Bond Documents'').]
MM. The Good Standing Certificate(s) {SEE ``A'' ABOVE} issued by
[Organizational Jurisdiction OR Property Jurisdiction, if different],
dated ____________ {DATE INSERTED MUST BE WITHIN 30 DAYS OF THE DATE OF
ENDORSEMENT}, (the ``Good Standing Certificate'').
[NN. The certificate executed by ____________ {INSERT ARCHITECT OR
OTHER PROFESSIONAL}, dated ____________, (the ``Certificate'').]
OO. A search conducted by ____________ dated [no earlier than 30
days before this opinion] of the public records of the federal District
Court and State and local courts in: (i) the jurisdiction where the
Property is located; (ii) the jurisdiction(s) where the Mortgagor is
located and does business; and (iii) the jurisdiction where the general
partner of the Mortgagor is organized (the ``Docket Search'').
Note: Numerical references in parentheses above are to FHA and
HUD form numbers.
The documents listed in B through I above are referred to
collectively as the ``Loan Documents.'' The documents listed in J
through OO are referred to collectively as the ``Supporting
Documents.'' The documents listed in A through OO are referred to
collectively as the ``Documents.''
In basing the several opinions set forth in this document on ``our
[my] knowledge,'' the words ``our [my] knowledge'' signify that, in the
course of our [my] representation of the Mortgagor, no facts have come
to our [my] attention that would give us [me] actual knowledge or
actual notice that any such opinions or other matters are not accurate.
Except as otherwise stated in this opinion, we [I] have undertaken no
investigation or verification of such matters. Further, the words ``our
[my] knowledge'' as used in this opinion are intended to be limited to
the actual knowledge of the attorneys within our [my] firm who have
been involved in representing the Mortgagor in any capacity including,
but not limited to, in connection with this Loan. We [I] have no reason
to believe that any of the documents on which we [I] have relied
contain matters which, or the assumptions contained herein, are untrue,
contrary to known facts, or unreasonable.
In reaching the opinions set forth below, we [I] have assumed, and
to our [my] knowledge there are no facts inconsistent with, the
following:
(a) Each of the parties to the Documents, other than the Mortgagor
(and any person executing any of the Documents on behalf of the
Mortgagor), has duly and validly executed and delivered each such
instrument, document, and agreement to be executed in connection with
the Loan to which such party is a signatory, and such party's
obligations set forth in the Documents are its legal, valid, and
binding obligations, enforceable in accordance with their respective
terms.
(b) Each person executing any of the Documents, other than the
Mortgagor (and any person executing any of the Documents on behalf of
the Mortgagor), whether individually or on behalf of an entity, is duly
authorized to do so.
(c) Each natural person executing any of the Documents is legally
competent to do so.
(d) All signatures of parties other than the Mortgagor (and any
person executing any of the Documents on behalf of Mortgagor) are
genuine.
(e) All Documents which were submitted to us [me] as originals are
authentic; all Documents which were submitted to us [me] as certified
or photostatic copies conform to the original document, and all public
records reviewed are accurate and complete.
(f) All applicable Documents have been duly filed, indexed, and
recorded among the appropriate official records and all fees, charges,
and taxes due and owing as of this date have been paid.
(g) The parties to the Documents and their successors and/or
assigns will: (i)
[[Page 8753]]
act in good faith and in a commercially reasonable manner in the
exercise of any rights or enforcement of any remedies under the
Documents; (ii) not engage in any conduct in the exercise of such
rights or enforcement of such remedies that would constitute other than
fair and impartial dealing; and (iii) comply with all requirements of
applicable procedural and substantive law in exercising any rights or
enforcing any remedies under the Documents.
(h) The exercise of any rights or enforcement of any remedies under
the Documents would not be unconscionable, result in a breach of the
peace, or otherwise be contrary to public policy.
(i) The Mortgagor has title or other interest in each item of (i)
real and (ii) tangible and intangible personal property
(``Personalty'') comprising the Property in which a security interest
is purported to be granted under the Loan Documents [and, where
Personalty is to be acquired after the date hereof, a security interest
is created under the after-acquired property clause of the Security
Agreement].
In rendering this opinion we [I] also have assumed that the
Documents accurately reflect the complete understanding of the parties
with respect to the transactions contemplated thereby and the rights
and the obligations of the parties thereunder. We [I] also have assumed
that the terms and the conditions of the Loan as stated in the
Documents have not been amended, modified or supplemented, directly or
indirectly, by any other agreement or understanding of the parties or
waiver of any of the material provisions of the Documents. After
reasonable inquiry of the Mortgagor, we [I] have no knowledge of any
facts or information that would lead us [me] to believe that the
assumptions in this paragraph are not justified.
In rendering our [my] opinion in paragraph 13, we [I] also have
assumed that: (i) all Personalty in which a security interest is
created under the Documents (other than accounts or goods of a type
normally used in more than one jurisdiction) is located at the Property
and (ii) Mortgagor's [Chief Executive Office] [only place of business]
[residence] is located in
______________________________.
After reasonable inquiry of the Mortgagor, we [I] have no knowledge of
any facts or information that would lead us [me] to believe that the
assumptions in this paragraph are not justified.
In rendering this opinion, we [I] have, with your approval, relied
as to certain matters of fact set forth in the Certification of
Mortgagor, the Good Standing Certificate(s) [and certain other
specified Documents,] as set forth herein. After reasonable inquiry of
the Mortgagor as to the accuracy and completeness of the Certification
of Mortgagor, the Good Standing Certificate(s), [and such other
Documents], we [I] have no knowledge of any facts or information that
would lead us [me] to believe that such reliance is not justified.
Based on the foregoing and subject to the assumptions and
qualifications set forth in this letter, it is our [my] opinion that:
{TO BE USED IN CASES WHERE ORGANIZATIONAL DOCUMENTS WERE PREPARED
BY MORTGAGOR'S ATTORNEY}
1. The Mortgagor is a ____________ {INSERT TYPE OF ENTITY} duly
organized and validly existing under the laws of the Organizational
Jurisdiction. The Mortgagor is duly qualified to do business and, based
solely on the Certificate(s) of Good Standing, copy attached hereto as
Exhibit [____], is in good standing under the laws of the
Organizational Jurisdiction, [and is qualified to do business as a
foreign ____________ entity in the Property Jurisdiction based on a
review of ____________.]
{OR, IF THE MORTGAGOR IS A TRUST}
The Mortgagor is ____________ {INSERT NAME OF THE TYPE OF TRUST}
duly formed and validly existing under the laws of the Organizational
Jurisdiction [, and is qualified to do business as a foreign
____________ entity in the Property Jurisdiction].
{AND, IF THE GENERAL PARTNER OF A PARTNERSHIP MORTGAGOR IS AN ENTITY}
The general partner of the Mortgagor is a ____________ {INSERT TYPE
OF ENTITY}, duly organized, validly existing and, based solely on the
Certificate(s) of Good Standing, copy attached hereto as Exhibit
[____], in good standing under the laws of the Organizational
Jurisdiction [and is qualified to do business as a foreign ____________
{INSERT TYPE OF ENTITY} in the Property Jurisdiction].
{TO BE USED IN CASES, PRINCIPALLY REFINANCINGS, WHERE ORGANIZATIONAL
DOCUMENTS WERE NOT PREPARED BY MORTGAGOR'S ATTORNEY}
1. Based solely on the Certificate(s) of Good Standing, copy
attached hereto as Exhibit [____], the Mortgagor is a ____________
{INSERT TYPE OF ENTITY} validly existing under the laws of the
Organizational Jurisdiction and in good standing under the laws of the
Organizational Jurisdiction [and is qualified to do business as a
foreign ____________ entity in the Property Jurisdiction.
{OR, IF THE MORTGAGOR IS A TRUST}
The Mortgagor is ________________ {INSERT NAME OF THE TYPE OF
TRUST} validly existing under the laws of the Organizational
Jurisdiction [and is duly qualified to do business as a foreign
____________ entity in the Property Jurisdiction].
{AND, IF THE GENERAL PARTNER OF A PARTNERSHIP MORTGAGOR IS AN ENTITY}
Based solely on the Good Standing Certificate(s), copy attached
hereto as Exhibit [____], the general partner of the Mortgagor is a
____________{INSERT TYPE OF ENTITY}, validly existing and in good
standing under the laws of ____________ {INSERT STATE} [and is
qualified to do business as a foreign ____________ {INSERT TYPE OF
ENTITY} in the Property Jurisdiction].
2. The Mortgagor has the [corporate/partnership/trust] power and
authority and possesses all necessary governmental certificates,
permits, licenses, qualifications and approvals to own and operate the
Property and to carry out all of the transactions required by the Loan
Documents and to comply with applicable federal statutes and
regulations of HUD in effect on the date of the FHA Commitment.
3. The execution and delivery of the Loan Documents by or on behalf
of the Mortgagor, and the consummation by the Mortgagor of the
transactions contemplated thereby, and the performance by the Mortgagor
of its obligations thereunder, have been duly and validly authorized by
all necessary [corporate/partnership/trust] action by, or on behalf of,
the Mortgagor.
4. All authorizations, consents, approvals, and permits have been
obtained from, appropriate actions have been taken by, and necessary
filings have been made with all necessary Organizational and Property
Jurisdictions or federal courts or governmental authorities, all as
disclosed on Exhibit ____, attached hereto, and as listed and set forth
in Paragraph(s) 2 and ____ of this opinion [i.e. good standing
certificate]. To the best of our knowledge, these represent all such
authorizations, consents, approvals, permits, actions and filings that
are required in connection with the execution and delivery by the
Mortgagor
[[Page 8754]]
of the Loan Documents and the ownership [and operation] of the
Property.
5. Each of the Loan Documents has been duly executed and delivered
by the Mortgagor and constitute the valid and legally binding promises
or obligations of the Mortgagor, enforceable against the Mortgagor in
accordance with its terms, subject to the following qualifications:
(i) The effect of applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights
of creditors generally; and
(ii) The effect of the exercise of judicial discretion in
accordance with general principles of equity (whether applied by a
court of law or of equity); and
(iii) Certain remedies, waivers, and other provisions of the Loan
Documents may not be enforceable, but, subject to the qualifications
set forth in this paragraph at (i) and (ii) above, such
unenforceability will not preclude (a) the enforcement of the
obligation of the Mortgagor to make the payments as provided in the
Mortgage and Note (and HUD's regulations), and (b) the foreclosure of
the Mortgage upon the event of a breach thereunder.
[6. {TO BE INSERTED WHEN ANY OR ALL OF THE LOAN DOCUMENTS ARE NOT
HUD APPROVED FORMS OR WHEN HUD APPROVED FORMS HAVE BEEN REVISED OR
MODIFIED IN CONNECTION WITH THE LOAN} The execution and delivery of,
and the performance of the obligations under, the Loan Documents will
not violate the Organizational Documents of the Mortgagor or any
applicable provisions of local or State law.
[7. {INSERT FOR LOANS INVOLVING CONSTRUCTION OR REHABILITATION} To
our [my] knowledge there are no proposed change(s) of law, ordinance,
or governmental regulation (proposed in a formal manner by elected or
appointed officials) which, if enacted or promulgated after the
commencement of construction/rehabilitation, would require a
modification to the Project, and/or prevent the Project from being
completed in accordance with the plans and specifications, dated
____________, executed by ____________ {INSERT MORTGAGOR} and
____________ {INSERT GENERAL CONTRACTOR}, and referred to in the
Construction Contract (the ``Plans and Specifications'').]
[8. {INSERT IF THERE IS NO ZONING ENDORSEMENT INCORPORATED INTO THE
TITLE POLICY} The attached Zoning Certificate states that the Property
appears on the zoning maps of [Property jurisdiction] as being located
in a ____________ zone. According to the zoning ordinance of the
Property Jurisdiction, the use of the Property as a ____________ is a
permitted use in such zone.
OR
Based solely on the Zoning Certificate, the Property may be used
for ____________ as a permitted use.]
[9. {USE FOR NEW CONSTRUCTION OR SUBSTANTIAL REHABILITATION IN
CASES WHERE THE DEPARTMENT DOES NOT RECEIVE A CERTIFICATE DIRECTLY FROM
THE PROFESSIONAL} Based solely on the Certificate, construction/
rehabilitation of the Project in accordance with the Plans and
Specifications will comply with all applicable land use and zoning
requirements.
{USE FOR REFINANCINGS} Based solely on the Certificate, the Project
complies with all applicable land use and zoning requirements.]
10. Based solely on (a) our [my] knowledge and (b) the
Certification of Mortgagor, the execution and delivery of the Loan
Documents will not: (i) Cause the Mortgagor to be in violation of, or
constitute a default under the provisions of, any agreement to which
the Mortgagor is a party or by which the Mortgagor is bound, (ii)
conflict with, or result in the breach of, any court judgment, decree
or order of any governmental body to which the Mortgagor is subject, or
(iii) result in the creation or imposition of any lien, charge, or
encumbrance of any nature whatsoever on any of the property or assets
of the Mortgagor, except as specifically contemplated by the Loan
Documents.
11. Based solely on (a) our [my] knowledge, (b) the Certification
of Mortgagor and (c) the Docket Search; there is no litigation or other
claim pending before any court or administrative or other governmental
body or threatened in writing against the Mortgagor, or the Property,
[{TO BE INSERTED WHEN MORTGAGOR IS NOT A SOLE-ASSET MORTGAGOR} or any
other properties of the Mortgagor] [, except as identified on Exhibit
____________].
12. The Mortgagor is in appropriate form for recordation in
____________ {INSERT PROPER NAME OF LOCAL LAND RECORDS OFFICE}
____________ {INSERT COUNTY OR CITY} of the Property Jurisdiction, and
is sufficient, as to form, to create the encumbrance and security
interest it purports to create in the Property.
13. Filing of the Financing Statements in the Filing Offices will
perfect the security interest in the Personality of the Mortgagor
located in the Project Jurisdiction, but only to the extent that, under
the Uniform Commercial Code in effect in the Project Jurisdiction, a
security interest in each described item or Personality can be
perfected by filing. The Filing Offices are the only offices in which
the Financing Statements are required to be filed in order to perfect
the Mortgagee's security interest in the Personality.
14. The Loan does not violate the usury laws or laws regulating the
use or forbearance of money of the Property Jurisdiction.
[15. {FOR USE ONLY IF MORTGAGOR IS A TRUST} The Mortgagor is an
irrevocable trust that has a term consistent with HUD's requirements
and the term of the irrevocable trust is not affected by the terms of
any of the beneficiaries' interests.] [The laws of the Property
Jurisdiction govern the interpretation and the enforcement of the Loan
Documents notwithstanding that the Mortgagor may be formed in a
jurisdiction other than the Property Jurisdiction. The Mortgagor can
sue and be sued in the Property Jurisdiction without the necessity of
joining any of the beneficiaries of the Mortgagor, including without
limitation, a suit on the Note or a foreclosure proceeding arising
under the Mortgage. Venue for any foreclosure proceeding under the
Mortgage may be had in [Property jurisdiction].
[16. {USE IN CASES INVOLVING BOND FINANCING} Based solely on the
opinion of ____________ {INSERT BOND COUNSEL}, dated as of the date
hereof and attached hereto as Exhibit ____________, to the extent that
any of the provisions of the Bond Documents are inconsistent with any
of the provisions of the Loan Documents or Supporting Documents, the
provisions of the Loan Documents or Supporting Documents shall govern.]
[17. {USE IN CASES WHERE THE DEVELOPMENT OF THE PROPERTY IS
GOVERNED BY AN AGREEMENT WITH A PUBLIC ENTITY} Based upon our knowledge
and the Certification of Mortgagor, there is no default under the
Public Entity Agreement, and construction in accordance with the Plans
and Specifications and within the time frame specified in the
Construction Contract will not lead to a default under the Public
Entity Agreement.]
In addition to the assumptions set forth above, the opinions set
forth above are also subject to the following qualifications:
(i) The Uniform Commercial Code of the Property Jurisdiction
requires the
[[Page 8755]]
periodic filing of continuation statements with ____________ [and
____________] not more than ____________ prior to and not later than
the expiration of the ____________ year period from the date of filing
of the Financing Statements and the expiration of each subsequent
____________year period after the original filing, in order to maintain
the perfection and priority of security interests and to keep the
Financing Statements in effect.
(ii) We express no opinion as to the laws of any jurisdiction other
than the laws of the Property jurisdiction [and the Organizational
Jurisdiction, if it is different,] and the laws of the United States of
America. The opinions expressed above concern only the effect of the
laws (excluding the principles of conflict of laws) of the Property
Jurisdiction [and the Organizational Jurisdiction, if it is different]
and the United States of America as currently in effect. We assume no
obligation to supplement this opinion if any applicable laws change
after the date of this opinion, or if we become aware of any facts that
might change the opinions expressed above after the date of this
opinion.
We [I] confirm that:
(a) based on the Organizational Documents, the name of the
Mortgagor in each of the Documents and the Title Policy and FHA
Commitment is the correct legal name of the Mortgagor;
(b) the legal description of the Property is consistent in the
Documents wherein it appears and in Exhibit B hereto;
(c) we [I] do not have any financial interest in the Project, the
Property, or the Loan, other than fees for legal services performed by
us, arrangements for the payment of which has been made; and we [I]
agree not to assert a claim or lien against the Project, the Property,
the Mortgagor, the Loan proceeds or income of the Project;
(d) other than as counsel for the Mortgagor, we have no interest in
the Mortgagor (or any principal thereof) or the Mortgagor or any other
party involved in the Loan transaction and do not serve as [a director,
officer or] [an] employee of the Mortgagor or the Mortgagee. We have no
undisclosed interest in the subject matters of this opinion. We do not
represent the mortgagee-of-record, any investing lender or investor in
the loan transaction, any bridge lender involved in the loan
transaction, any lender with a commitment to purchase the loan or any
interest therein or any other party involved in the Project or the loan
transaction;
(e) based solely on the Surveyor's Report and the Surveyor's Plat,
flood insurance [is OR is not] required pursuant to 42 U.S.C. 4012a(a);
[{INSERT IF FLOOD INSURANCE IS REQUIRED} Based solely on the Flood
Insurance Receipt, flood insurance is in effect which satisfies the
requirements of 42 U.S.C. 4012a(a);] and
(f) to our knowledge, there are no liens or encumbrances against
the Property which are not reflected as exceptions to coverage in the
Title Policy.
The foregoing opinions are for the exclusive reliance of
[Mortgagee, its counsel] and HUD; however, they may be made available
for informational purposes to, but not for the reliance of, the assigns
or transferees of Mortgagee, or prospective purchasers of the Loan. We
[I] acknowledge that the making, or causing to be made, of a false
statement of fact in this opinion letter and accompanying materials may
lead to criminal prosecution or civil liability as provided pursuant to
applicable law, which may include 18 U.S.C. 1001, 1010, 1012; 31 U.S.C.
3729, 3802.
Sincerely,
----------------------------------------------------------------------
[Authorized Signature]
For use in HUD-Insured Transactions.
January 30, 1997.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FEDERAL HOUSING
ADMINISTRATION
INSTRUCTIONS TO GUIDE FOR OPINION OF MORTGAGOR'S COUNSEL
EXPLANATORY COMMENTS
The Guide for this opinion was originally prepared in 1994 in view
of changes in opinion practice as reflected by the ABA Accord and
various State law bar reports on opinion letters and has been revised
to reflect approximately three years experience in using the Guide. The
principal purpose of this Guide remains to achieve a uniform format
which can be utilized throughout the Nation and which will be familiar
to HUD counsel in all jurisdictions. Such a standardized format is
crucial in an era when less resources are available to the Department;
however, it should be emphasized that certain limited changes can be
authorized by HUD field counsel as required by local law or by the
unique nature of the transaction. An effort has been made in these
revised instructions to specify examples in more (but not all) of those
areas where such changes can be authorized. Otherwise, the format of
the Guide must be followed and is not open to negotiation. In this
regard, revisions cannot be justified because of a particular Opinion
having been approved by another HUD field office. The exercise of
discretion by one HUD field counsel in unique circumstances cannot
become the basis for any modification to the Opinion. Any requested
modification must be analyzed on its own merit and in a particular
context. In these explanatory comments, the document may be referred to
as the ``Guide'' or the ``Opinion,'' depending upon the context.
The Department regards the counsel to the Mortgagor as the crucial,
central figure in the process of preparing and executing the legal and
administrative documents necessary to achieve a closing where the
mortgage note is endorsed for mortgage insurance by the Department.
Pursuant to 24 CFR Part 24, Sec. 24.105(p), attorneys or others in a
business relationship with the Mortgagor are defined as ``principals.''
Even though the Guide is quite different in form from its predecessor
(FHA Form No. 1725), the substance is not intended to be substantially
different and the revision does not in any fashion relieve the counsel
to the Mortgagor of its obligations to its client, the Mortgagee and
the Department. In part, these responsibilities entail the exercise of
due diligence to assure the accurate and timely preparation, completion
and submission of the forms required by the Department in connection
with the transaction. Further, the counsel to the Mortgagor and any
other attorneys involved in the transaction should be thoroughly
familiar with the regulations, procedures and directives of the
Department pertaining to each mortgage insurance transaction in which
counsel participates. The Department takes seriously the preparation
and completion of the various documents involved in the mortgage
insurance process (most of which are HUD form documents) and cannot
overemphasize the importance of the following:
``Warning: HUD will prosecute false claims and statements.
Conviction may result in criminal and/or civil penalties. (18 U.S.C.
1001, 1010, 1012; 31 U.S.C. 3729, 3802)''
With limited State law related exceptions, we expect that
Mortgagor's counsel will be able to follow the Guide in rendering an
Opinion and HUD field counsel should not accept Opinions that otherwise
substantially or materially deviate from the Guide. Although we
understand that attorneys and law firms may have evolved particular
styles and forms of opinion, HUD field counsel do
[[Page 8756]]
not have time to negotiate each and every Opinion for stylistic changes
and it is essential that the Guide be followed in both style and
substance in order to ensure a timely closing. The counsel to the
Mortgagor is expected to complete a draft Opinion for submission to HUD
field counsel at least ten days prior to the closing along with the
other closing documents. Any deviations should be specifically
identified (redlined or highlighted) and discussed with field counsel
at that time. Any material deviation not required by State or local law
or otherwise authorized by these instructions must be brought to the
attention of the Assistant General Counsel, Multifamily Mortgage
Division, by field counsel along with an explanation as to the
necessity for the deviation.
It was anticipated that the Guide could be utilized in connection
with all types of closings: insured advances or insurance upon
completion (for new construction or substantial rehabilitation); final
closings (for refinancings, etc.). This has proved to be the case and,
furthermore, the Guide format has been adapted and used in Transfers of
Physical Assets (TPAs). However, numerous questions have been raised--
particularly in cases involving Section 241 supplemental and equity
loans and the various refinancing transactions under Section 223.
Therefore, it is important that the correct options be selected in
instances where choices are provided and that appropriate deletions or
modifications be made to accommodate unique circumstances or programs.
On the other hand, it should be emphasized that this does not authorize
field counsel to approve changes to the Guide in cases other than where
the Guide is being adapted for a special use, e.g. refinancing or
equity loan transaction, TPA, etc. Furthermore, HUD has made an
administrative policy decision to not require an opinion by counsel to
the mortgagor for projects within the ``Small Projects Mortgage
Insurance Pilot Program (SPP).'' A Notice will be issued defining small
project and clarifying the parameters of the SMPP. The mortgagee will
have the option of requiring an opinion by counsel to the mortgagor if
the mortgagee so elects. It is anticipated that the Certification of
the Owner will be expanded slightly for use in the SMPP to provide
assurances and comfort to HUD in such cases. Otherwise, the Guide or a
variation thereof should be utilized in all FHA-insured multifamily
rental project and health care facility closings.
The Guide is not intended to serve as a closing checklist;
therefore, HUD field counsel may update or modify existing closing
checklists as necessary to meet constantly changing program needs and
handbook instructions and directives. For example, many deletions from
the list of Guide documents are appropriate for various types of
refinancings, operating loans, equity loans, etc. whereas several
additions are necessary in the case of loans for health care facilities
(e.g. certificate of need), supplemental loans, and certain complex
refinancings.
Brackets continue to be used in the Guide to indicate alternate
language, insertions, documents, or instructions depending on the
applicable facts and underlining is used to indicate blanks that must
be completed.
The Guide contains some instructions and definitions and is largely
self-explanatory; however, the following expanded instructions and
clarifications should provide additional assistance to both private
counsel and HUD counsel. The numbers and letters used below relate to
the paragraph numbers and letters in the Guide unless page numbers are
specifically designated.
Page 1 and Introductory Paragraph
Letterhead and date: The Opinion must be typed on the firm
letterhead and dated the date of endorsement of the mortgage note by
HUD.
Reference: Data regarding the project (name, HUD project
number, and location and the name or title of the Mortgagor must be
accurate and inserted in the appropriate blanks.
Addressees: The Opinion must be delivered to HUD as well
as the Mortgagee making the loan to establish the explicit right of
each to rely on the Opinion. The Mortgagee's counsel may be relying on
the Opinion for certain aspects of its opinion. If so, the Opinion must
also be addressed to counsel to the Mortgagee. HUD is aware that recent
case law has raised issues about the extent to which a mortgagee can
rely upon such an opinion; therefore, this matter of reliance by the
mortgagee could be clarified by the parties at the outset in
jurisdictions where the issue has been raised. Regardless of case law,
HUD continues to believe that this is a unique transaction where the
federal interest as insurer of the mortgagee is clear from the outset
and that it is as a result of the unique federal requirements that
counsel to the mortgagor is retained to represent the mortgagor in such
a fashion that the Opinion rendered by counsel to the mortgagor
necessarily must be addressed to, and relied upon by, HUD as the
insurer of the mortgagee and the mortgagee in order for the loan
transaction to go forward. In cases where counsel to the mortgagee
elects not to rely upon the Opinion or counsel to the Mortgagor does
not wish to permit reliance by counsel to the mortgagee, the Opinion
should not be addressed to and/or delivered to the mortgagee's counsel.
Description of the Loan: The loan amount is the original
principal amount of the loan being insured unless a modification is
necessitated in connection with the closing.
Source of funds for the Loan: In the second full sentence
on page 2 the source of funds must be accurately identified.
List of Documents
In General: If there are no brackets around a particular
document, the document is one which is commonly used for initial
endorsements for insured advances completion cases; however, it should
be emphasized that it is impossible to list every document for every
insured loan. Further, no attempt has been made to list all documents
utilized in all types of refinancings and certain specialized programs,
e.g., certificates of need and licenses for health care programs.
Conversely, some documents may not be utilized in a particular
transaction and should be deleted from the list in the actual Opinion.
Brackets around the name of the document indicate that the document may
or may not be used for every loan. If bracketed documents are not used
in a particular loan transaction, then delete such documents from the
list in the actual Opinion. Each document executed in connection with
the loan must be listed by its correct title, showing each party
executing it and its date. If documents are dated ``as of'' a
particular date, then such phrase should be included in the description
in the text. It is imperative that care must be taken to compile a list
that accurately and completely reflects the transaction in the
submission to HUD of the initial draft. After HUD review of the initial
draft, the Opinion may have to be modified, as necessary, to satisfy
HUD.
All documents executed in connection with the loan transaction must
be listed regardless of whether the document is required by HUD or
whether the Mortgagor is a party to the document. It should be
emphasized that counsel to the Mortgagor is not assuming resuming
responsibility for the content of documents that counsel does not
prepare and that the Mortgagor does not execute. The review is
necessary to provide assurance of consistency from document to
document. The appropriate HUD or
[[Page 8757]]
FHA form number, if applicable, must be indicated in parenthesis after
each document. Please note that the Guide lists a four digit number
after virtually all of the standard HUD documents. In many instances as
these forms have been updated, the four digit numbers have been changed
so that they are now preceded by a ``9.'' The ultimate plan is to
standardize a four digit number for each form; therefore, the four
digit number has been used to avoid any need for future change.
A. Organizational Documents: All of the Organizational Documents
must be reviewed and care should be taken to ensure adherence to the
HUD guidelines and directives pertaining to such documents as set forth
in:
1. The Instructions to HUD Form 92466 which pertains to corporate,
partnership and trust mortgagors;
2. HUD Form 1732 which pertains to nonprofit corporations; and
3. HUD Notice H-95-66 which pertains to partnerships and limited
liability companies (LLCs).
G. In the original version of the Guide, the requirement that HUD
be named in the Financing Statements as a secured party or as its
interests may appear was standardized through requiring the insertion
of appropriate language in the Security Agreement. The purpose was to
clarify that, under certain circumstances, HUD may assert some rights
in the personalty arising under the Regulatory Agreement which would
precede an assignment of the mortgage. Based upon experience to date, a
decision has been made that HUD need not be so named in the Financing
Statements and Security Agreement. This decision makes it more
imperative that there be specificity in the UCC documentation with
respect to the securitization of items such as receivables
(particularly in the case of hospitals and nursing homes for example)
in order to protect the interest of HUD in the securitization of
personalty.
J. Building Loan Agreement: This document is a ``bracketed
document'' which should only be used in cases involving new
construction or substantial rehabilitation. Hence, the document is not
required in equity loan transactions and most refinancing transactions
and many supplemental loan transactions.
K. Construction Contract. See J. above.
L. Mortgagee's Certificate: It has been argued that this document
is unnecessary in the context of certain insured secondary loan
transactions because the form is used to document the first mortgagee's
consent to the second loan. The first mortgagee would not be involved
in such situations. In cases where the consent of the first lender is
obtained for a second mortgage insured by HUD, a separate document (for
which there is no specified format) is utilized.
The Mortgagee's Certificate is executed by the lender making the
loan being insured, which in the cases at issue would be the lender
making the second loan, and is one of the most significant closing
documents. HUD places great reliance upon the mortgagee's certificate
and considers it necessary to reveal all fees, side transactions, etc.
Counsel to the Mortgagor is not responsible for the execution of the
document and only needs to review the document in the capacity as
counsel to the mortgagor.
M. Mortgagor's Certificate: This document may overlap somewhat with
other documents as several private attorneys have indicated;
nonetheless, the mortgagor's certificate is a significant document upon
which HUD relies. This document and the Opinion should be dated the
date of the closing.
P. Certification of Owner: Several persons have questioned whether
the references in Paragraph 6 to the Public Entity Agreement and the
Regulatory Agreement should be changed so that both refer instead to
the Public Entity Agreement. The references should not be changed
because HUD wants assurance that there will be no violations of the
Regulatory Agreement as a result of events that have occurred with the
passage of time.
Q. UCC searches: The UCC Search must be conducted within thirty
days of closing and can be conducted by either the title insurance
company, a reputable document search firm, the counsel to the Mortgagor
or any other attorney licensed in the jurisdiction.
R. Flood insurance receipt: Arguments have been made that this
document is not necessary in equity loan, supplemental loan and
refinancing transactions. Flood plain maps change. In insuring a first
or a second mortgage, it is just as significant that HUD know whether
the property is located in an area where flood insurance is required
and, if so, whether the insurance is in effect regardless of whether a
prior HUD-insured first mortgage is in effect. HUD would not
necessarily have the data on file, and it was determined that this is a
matter which counsel to the mortgagor could confirm under item (e) near
the end of the Guide. Note that no opinion is required, and the factual
determinations necessitated by the Guide are considered within the
usual duties of counsel to the mortgagor.
S. Title Insurance Policy: Currently the 1992 ALTA Format (with
appropriate endorsements) is required by HUD in most jurisdictions.
T. Evidence of zoning compliance: The evidence of zoning compliance
will vary depending on the circumstances. The evidence should establish
that the building, if constructed according to plans and circumstances,
will comply with all zoning requirements. The evidence may be in the
form of a letter or certificate from the appropriate local official
stating that, if the building is constructed according to the plans and
specifications submitted for review, the building will comply with all
zoning requirements. In refinancing cases where no construction is
involved, the evidence may be in the form of a letter certifying that
the existing building(s) is (are) in compliance with outstanding zoning
requirements or, if not, the nonconforming variance, etc., is
acceptable. If the locality has no zoning ordinance, a letter should be
submitted from the chief executive stating such. In those
circumstances, it may be necessary to obtain a letter from the local
planning body of the county in which the project is located, that the
proposed development is compatible with the county's comprehensive
plan. If the zoning approval is based upon a variance or other special
action, the closing may have to be delayed until the time for appeals
has run. In extremely complex cases, an opinion may need to be obtained
from legal counsel specializing in local zoning matters. Such letter
must be attached as an exhibit and referenced in the appropriate
paragraphs of the Opinion.
In cases involving refinancings, it has been suggested by some
attorneys that HUD should have zoning information on hand either as a
result of the closing of the first HUD-insured loan or due to periodic
site reviews. HUD would not normally maintain data pertaining to local
zoning law and the data with respect to the first loan would only be
valid with respect to the closing date of that loan. Paragraphs 7, 8
and 9 of the Opinion contain several options with respect to local
zoning law. It has also been suggested that evidence of zoning
compliance should not be required in Section 241(f) equity loans. The
only language applicable to Section 241(f) equity loans is the wording
at the end of 9 which pertains to refinancings, viz. ``Based solely on
the Certificate, the Project complies with all applicable land use and
zoning requirements.'' After considering the issue, it has been
determined that a zoning certificate is not essential in Section 241(f)
equity loan cases; however, the attorney for the
[[Page 8758]]
mortgagor will have to state: ``The project complies with all
applicable land use and zoning requirements.'' It is important that HUD
be assured that there have been no changes in the land use or zoning
which would adversely affect the continued use of the property as a
rental housing project. In this context, we reemphasize that the
attorney responsible for this matter must be licensed in the property
jurisdiction.
U. Building permit(s): If no building permit is required (as would
normally be the case in a pure Section 241(f) equity loan), this
document is not applicable and should be deleted from the Opinion.
(This would also be true with respect to occupancy permits (under V.)
unless new permits are required under local law in connection with
``pure'' refinancing transactions.)
V. Permits required for the operation of the project: Several
practitioners have argued that the documentation is unnecessary in
equity loan and refinancing transactions; however, they have not
indicated whether such a position would affect their wording of
Paragraph 4 of the Guide. In all cases (including Section 241(f) equity
loans), HUD is concerned that any permits required for the continued
operation of the project be proper and in place such that an opinion
can be rendered with respect to Paragraph 4. It is crucial in existing
projects that HUD be assured that no new requirements have been imposed
which would thwart continued operation of the project. If no such
permits are required, Paragraph 4 should be amended accordingly. This
is a matter which counsel to the mortgagor, as a specialist in the
property jurisdiction, should be able to ascertain.
W. Surveyor's plat or survey: The survey must be signed, sealed and
dated within 90 days of the closing. In a pure Section 241(f) equity
loan and certain refinancing transactions, a survey would not normally
be required because no new construction would have taken place and,
presumably, nothing would have changed with respect to the building(s)
and the site. In such situations, if there is other satisfactory
evidence that no site changes have occurred, an administrative waiver
would necessitate the deletion of the item from the Opinion. See X.
below. If the mortgagor's attorney were to become aware of any changes,
this would have to be addressed in the Opinion and a survey could be
required by HUD depending upon the circumstances.
X. Surveyor's Report: Unless there is a title endorsement
protecting against any encroachments, etc., there will have to be a
surveyor's certificate indicating that nothing has changed since the
last survey with respect to encroachments, lot line violations,
construction activity, etc. HUD should not be incurring the risk of
insuring any loan if there has been any action which would impair the
lender's and HUD's respective positions. As an alternative to a
surveyor's certificate, the mortgagor's attorney could rely upon an
appropriate certificate from a qualified architect and insert
appropriate language in the Opinion.
Z. Assurance of completion (bonds or agreements): This
documentation (now bracketed) would not be utilized in a pure
refinancing or equity loan transaction and, therefore, would only be
used in cases involving some construction where the regulation
pertaining to assurance of completion is applicable.
AA. Owner-Architect Agreement: This document (now bracketed like
Documents J and K) should only be indicated (where the Guide indicates
``{INSERT DESIGN AND/OR CONSTRUCTION ARCHITECT}'') in cases involving
new construction or substantial rehabilitation.
BB. Off-Site Bond or Agreement: This document should only be used
in cases where off-site work is involved. As such, the document would
not normally be used in pure equity loan transactions or in refinancing
transactions involving no construction.
CC. Assurance of utility services: These documents do not pertain
to pure Section 241(f) equity loan transactions and certain refinancing
transactions and, therefore, should be deleted in those instances.
FF. Escrow Deposit for On-Site Improvements: If any such
improvements are required in connection with an equity loan,
supplemental loan or refinancing transaction, the form document
specified should be tailored to the situation as determined by field
counsel. In a situation where such an escrow is necessary, counsel to
the mortgagor should modify the form as necessary and present it to
field counsel for review.
GG. Contractor's Prevailing Wage Certificate: This item is no
longer required in the HUD closing checklist; therefore, some attorneys
have taken the position that it can be eliminated from the Opinion. HUD
believes the item should be reviewed by counsel to the Mortgagor for
the purpose of assuring consistency between the documents and
performance under the Construction Contract to which the Mortgagor is a
party.
KK. Public Entity Agreement: The references to this document and to
the Regulatory Agreement in Paragraph 6 of the Certification of
Mortgagor have created some confusion about whether the reference to
the Regulatory Agreement should be changed to Public Entity Agreement.
The two separate references were intended, and no change should be
made.
LL. Bond Documents: This does not include all documents involved in
the typical bond financing. It does include those principal documents
such as the Prospectus, the Indenture, a sample Bond, etc. All
documents executed by the Mortgagor or which establish or describe any
obligations of the Mortgagor must be included.
NN. Certificate issued by architect or other professional: Normally
such a document would not be necessary in the case of a pure Section
241(f) equity loan and certain refinancing transactions and should be
deleted unless those circumstances mentioned under the last sentence
pertaining to Document X, above, make the certificate appropriate. Note
that ``Certificate'' is a defined term and that the Certificate can
come from ``an architect or other professional.'' Consequently, there
is no form for the Certificate and HUD field counsel should defer to
HUD administrators specializing in architectural and engineering
matters in determining the acceptability of the Certificate.
It is referenced in Paragraph 9 of the Opinion and should not be
confused with the Zoning Certificate which is also a defined term and
is referenced in Paragraph 8.
OO. Docket search: The Docket Search can be conducted by either the
title insurance company, a reputable document search firm, the counsel
to the Mortgagor or any other attorney licensed in the jurisdiction.
Arguments have been made by private counsel that such a docket search
is not necessary in all transactions. One of the main purposes of the
new Guide was to clearly define the work to be performed by counsel to
the mortgagor. It was determined that such a search was within the
scope of the fees permitted as a mortgage line item for counsel to the
mortgagor. Such a search is important in the case of an existing
subsidized project where matters of public record could reveal
circumstances wherein it would be inadvisable for HUD to go forward
with insuring another loan.
An argument has also been made that several record searches in
separate jurisdictions could be necessitated in some cases and that
this would cost a significant amount of money with little benefit. As
the Guide was being developed, HUD was cognizant of such
[[Page 8759]]
a scenario; however, the benefit to HUD of establishing that the public
records are clear outweighs the costs to the mortgagor of conducting
such searches. In the case where a sole-asset mortgagor is being
created, however, a search of the public records in the jurisdiction
where the mortgagor is located (assuming a different location from the
others iterated) is unnecessary. The Opinion could be amended in those
instances to indicate that particular state of facts; however, all of
the other searches would have to be done.
Opinions
1. This paragraph contains several options depending upon whether
the Mortgagor's organizational documents were prepared by counsel
rendering the Opinion and the type of mortgagor entity. Care should be
taken to ensure that the correct option is selected and that the
requisite information is inserted correctly. It is intended that, where
the mortgagor entity or general partner of the mortgagor entity is
established by counsel to the Mortgagor, no reliance on other sources
is permitted and counsel must opine as to the due organization of the
Mortgagor. If a Certificate of Good Standing is not available in the
State, but an equivalent document is (i.e., Certificate of Existence),
then the bracketed language must be revised to reflect the name/title
of the equivalent document so obtained. Any Certificate of Good
Standing or equivalent document issued by the applicable governmental
authority must be dated no more than 30 days prior to the date of the
Opinion of Mortgagor's counsel. If the Mortgagor is a foreign
corporation or partnership, the Opinion must recite the review of all
government approvals required to do business in the Property
jurisdiction. If a Certificate of Good Standing or equivalent document
cannot be obtained from the applicable governmental authority (e.g.,
for general partnerships, then the Mortgagor's attorney will be
required to do the due diligence necessary to give the opinion or may
engage other counsel to render such opinion). If the Property
jurisdiction is not the State of formation for the mortgagor entity,
counsel must also opine that the Mortgagor is qualified to transact
business in the Property jurisdiction. Such opinion may be made solely
on the basis of a certificate from the applicable governmental
authorities of the Property jurisdiction, and if counsel is relying on
such certificate(s), then the opinion must expressly identify those
certificate(s) and they must be attached to the Opinion as an exhibit.
If the Mortgagor is an individual, paragraph one should be deleted from
the Opinion.
2. This paragraph provides, among other things, that the Mortgagor
possesses all the necessary governmental certificates, permits,
licenses, qualifications and approvals to own and operate the Property.
This particular provision has generated considerable controversy--
particularly where health care facilities are being constructed or
substantially rehabilitated in large, urban jurisdictions having a
multitude of regulatory requirements pertaining to ownership and
operation. Consequently, field counsel have discretion to permit a
modification in which Counsel to the Mortgagor itemizes those local
governmental requirements which have been evaluated and indicates that,
after due diligence inquiry and insofar as the attorney is aware, these
local requirements comprise the entire universe of such requirements.
The Opinion should further state that, based upon such itemized local
requirements and compliance therewith (with all permits, certificates,
etc. being itemized), the Mortgagor possesses the power and authority
necessary to own and operate the Property and to carry out all of the
transactions required by the Loan Documents and to comply with
applicable federal statutes and regulations of HUD in effect on the
date of the FHA commitment. In most instances involving new
construction, a certificate of occupancy will not have been obtained by
the time of closing. In such instances, field counsel have discretion
to permit an appropriate clarification with respect to that particular
instrument.
11. If the Mortgagor or any principal of the Mortgagor is involved
in any litigation, all such litigation matter(s) must be disclosed in
writing to HUD field counsel in order that the Department can determine
whether the endorsement of the loan is possible. Note that litigation
involving a principal of the Mortgagor must be disclosed. Confusion has
developed when there has been litigation involving lower tiers of a
partnership. If the issue cannot be resolved through reference to the
definition of ``principal'' in the 2530 regulations, HUD field counsel
should consult with HUD program administrators and determine whether
the litigation should be disclosed. If the litigation involves HUD's
compliance with civil rights requirements, it must immediately be
brought to the attention of appropriate Fair Housing and Equal
Opportunity personnel (regardless of whether a ``principal'' or some
lesser component of the Mortgagor is the subject of the litigation). As
an example, it is not uncommon for neighbors of a proposed site for a
group home for persons with disabilities to harbor discriminatory
attitudes toward persons with disabilities and to sue to attempt to
block the establishment or operation of a group home.
13. If any UCC Financing Statements have been filed on the
Personalty in conjunction with any transaction other than the Loan,
they must be identified to the HUD field counsel as well as details
with respect to how such Financing Statements will be terminated at the
time of closings.
If the property is an elderly housing project or a health care
facility of if the loan otherwise is to be secured by significant
amounts of personal property, the matter should be discussed with field
counsel. In the event further discussion is necessary, field counsel
should contact the Assistant General Counsel, Multifamily Mortgage
Division. For projects in which the personalty is mostly household
appliances (e.g., refrigerators) or a limited quantity of smaller
equipment, the Opinion will be limited as shown. In other instances,
the Opinion may have to be expanded particularly with respect to
ensuring that items such as receivables, income stream, etc. are
security property.
One or more UCC searches performed not more than 30 days prior to
the date of the Opinion must be made and attached to the Opinion.
15. If the Mortgagor is a trust (other than a land trust), then
Paragraph 15 must be included in the Opinion. The second sentence need
only be included if the trust was formed in a jurisdiction other than
the Property jurisdiction.
Acceptability of Counsel
Mortgagor's counsel must opine as to the law of the
Property jurisdiction and the State of Mortgagor's organization, if
different from the Property jurisdiction. HUD requires that Mortgagor's
counsel be admitted to practice law in each jurisdiction in which such
admission is required by the laws or ethical considerations of the bar
to be able to give the opinion. If multiple jurisdictions are involved,
two opinions may be required: one with respect to the organization of
the Mortgagor and another with respect to the real property and loan
issues. A combination of the Mortgagor's regular counsel and special
local counsel may be required to satisfy this requirement. If counsel's
satisfaction of these requirements is not evident from the letterhead
of the firm, the field counsel should include a written explanation in
[[Page 8760]]
the Washington docket. In all events, each provision in the Guide must
be addressed whether one or more opinions is required to do so.
Signatures
The Opinion may be signed by an authorized person of the
law firm, in that person's name.
Certification of Mortgagor
A form of Certification of Mortgagor is attached. The form
represents the minimum amount of information that should be obtained
from the Mortgagor (but additions, revisions and rephrasings are
acceptable so long as the Mortgagor is certifying as to factual matters
and not legal conclusions). The Certification of Mortgagor must be
dated the same date as the Loan Documents.
Identity of Interest
Numerous issues have been raised with respect to the
confirmation in (d) of the penultimate paragraph of the Guide. A
decision was made that the attorney signing the Opinion could not have
an identity of interest with the Mortgagor entity. No waivers are
possible in such instance. In instances where other members of the firm
have an interest in the Mortgagor entity, such interest must be
disclosed and such interest must be acceptable to field counsel based
upon the ethics rules of the applicable bar. Furthermore, any interest
must be administratively acceptable to HUD and 2530 clearance must be
obtained. In addition, there appears to be an increasing trend wherein
mortgagees are insisting upon using counsel to the mortgagee to handle
many aspects of the transaction even though the Opinion is being signed
by a separate attorney. There have been some instances where counsel to
the mortgagee have asked to represent the mortgagor in whole or in part
and to provide all or a part of the Opinion. Confirmation (d) in the
penultimate paragraph has been clarified to reflect the intent of HUD
from the inception of the Opinion that any such representation of both
parties is not permitted.
Liens
Paragraph (f), which is in the penultimate paragraph of
the Opinion, contains a statement that there are no liens or
encumbrances against the Property. Several attorneys have objected to
making the statement because they indicate that, at the time of
closing, there may be liens that have actually not been released even
though the title company has received funds and/or release documents to
do so and intends to process the release after the closing. Except in
cases involving the insurance of secondary loans, HUD is only
authorized to insure first mortgages; consequently, there cannot be any
liens and encumbrances on the property when HUD endorses the mortgage
note for insurance. As a result, there cannot be any liens outstanding
which would prime the insured mortgage loan. Hence, Paragraph (f)
should not be changed.
Reliance on Other Opinions
The issue of proper wording and format has probably
surfaced most often in cases where counsel to the mortgagor is relying
on opinions issued by other attorneys. This has occurred most often in
cases involving a separate opinion for bond financing documentation,
property jurisdiction vs. organizational jurisdiction, zoning, etc. In
this area, it is imperative that counsel to the Mortgagor specifically
reference and attach the additional opinion(s) and that such opinions
track the language of the Guide as close as is practical under the
circumstances. HUD field counsel should exercise discretion in this
area, taking the unique circumstances into account.
For use in the Section 202, Supportive Housing for the Elderly
Program
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, FEDERAL HOUSING
ADMINISTRATION
GUIDE FOR OPINION OF OWNER'S COUNSEL
{TO BE TYPED ON FIRM LETTERHEAD}
{INSERT CAPITAL ADVANCE INITIAL CLOSING DATE}
Re: Project Name-------------------------------------------------------
202 Project No.------------------------------------------------------
Location-------------------------------------------------------------
[OWNER]
[ADDRESS]
FEDERAL HOUSING COMMISSIONER
{INSERT APPROPRIATE FIELD OFFICE ADDRESS}
Ladies and Gentlemen: We are [I am] [general/special] counsel to
____________ {INSERT NAME OF OWNER} (the ``Owner''), a ____________
{INSERT TYPE OF ENTITY} organized under the laws of the State of
____________ {INSERT STATE, INCLUDES THE DISTRICT OF COLUMBIA AND
PUERTO RICO} (the ``Organizational Jurisdiction''), in connection with
a first Mortgage (Deed of Trust) and Mortgage Note (``Capital
Advance'') in the amount of ____________ Dollars ($____________) from
HUD to the Owner. Such Capital Advance is being made pursuant to a
Capital Advance Agreement dated as of the date hereof, by and between
HUD and the Owner and will be used to construct, rehabilitate or
acquire and maintain the captioned 202 project (``Project''), commonly
known as ____________ and located in ____________ {INSERT COUNTY AND
STATE} (said State to be referred to hereinafter as the ``Property
Jurisdiction'') on the property described in Exhibit ____________
{ATTACH LEGAL DESCRIPTION} (together with all improvements and fixtures
thereon) (the ``Property''). The Capital Advance is being issued,
pursuant to Section 202 of the Housing Act of 1959, as amended, a firm
commitment dated ____________ and which expires on ____________
(``Commitment''). The Owner has requested that we [I] deliver this
opinion and has consented to reliance by HUD in making the Capital
Advance and has waived any privity between Owner and us [me] in order
to permit such reliance by HUD. We [I] consent to reliance on this
opinion by HUD.
In our [my] capacity as [general/special] counsel to the Owner, we
[I] have prepared or reviewed the following Capital Advance Documents,
Organizational Documents and Collateral Documents (will be collectively
referred to as ``the Documents'' unless expressly limited to a group of
the above referenced documents).
Note: Numerical references in parenthesis following the
Documents listed below are to HUD form numbers:
CAPITAL ADVANCE DOCUMENTS:
A. BEFORE INITIAL CLOSING
1. Capital Advance Agreement (HUD 90167-CA).
2. Requisition for Disbursement of Capital Advance Funds (HUD-
92403-CA).
3. Direct Deposit Sign-up Form (SF 1199A)
4. Project Rental Assistance Contracts (PRAC) documents:
a. Part I of Agreement to Enter into PRAC (HUD 90172A-CA);
b. Part II of Agreement to Enter into PRAC (HUD 90172B-CA);
c. Part I of the PRAC (HUD 90173A-CA); and
d. Part II of the PRAC (HUD 90173B-CA).
B. INITIAL CLOSING
1. Firm Commitment for Capital Advance Financing (HUD-92432-CA)
[including reissued, revised or amended commitments, thereof, if any].
2. Owner's Certificate (HUD 92433-CA).
[[Page 8761]]
3. Evidence of Owner's Deposit (minimum capital investment) (escrow
agreement, see 6(q)(1) of commitment) and ability to provide moveable
furnishings and equipment not covered by capital advance, if necessary.
4. Agreement and Certification (HUD 93566-CA).
5. Mortgage Note (HUD-93432-CA).
6. Mortgage (Deed of Trust) (HUD-90165-CA).
7. Regulatory Agreement (HUD-92466-CA).
8. Use Agreement (HUD 90163-CA).
9. Owner's assurance of funds to cover costs over and above capital
advance (if applicable).
ORGANIZATIONAL DOCUMENTS
(Documents regarding Organization of Non-Profit Owner)
1. Approved and certified articles of organization (Certificate of
Incorporation (HUD-91732A-CA).
2. Certificate of Good Standing.
3. By-laws.
4. Incumbency Certificate.
5. Owner's I.R.S. Tax-Exemption Ruling.
6. Corporate Resolution.
COLLATERAL AND OTHER DOCUMENTS (``Collateral Documents'')
1. Collateral Agreements, if any.
2. {INSERT THE NUMBER OF UCC's TO BE FILED} Uniform Commercial Code
Financing Statements executed by the Owner as debtor and naming HUD as
secured party as its interest may appear, to be filed in ____________,
{INSERT LOCATION(S)} (the Filing Offices), upon the {DESCRIBE EVENTS}
(the ``Financing Statements'');
3. The Security Agreement by and between Owner and HUD, granting a
security interest under the Uniform Commercial Code, in those items of
personalty described therein, dated ____________, (the ``Security
Agreement'');
4. A search conducted by ____________ dated ____________ {no
earlier than 30 days before this opinion} of the financing records of
the county and Property Jurisdiction [and Organizational Jurisdiction]
(the ``UCC Search'').
[5. A receipt from the insurance company providing flood insurance
evidencing payment for the premium, dated ____________, (the ``Flood
Insurance Receipt'').]
6. The Title Insurance Policy issued by ____________ {acceptable
company under HUD's regulations}, together with all endorsements, and
naming HUD as insured, dated ____________, (the ``Title Policy'').
[7. The Surveyor's Plat OR Survey showing completed project,
prepared by ____________, dated ____________, (the ``Survey'').]
8. The Surveyor's Report (HUD-92457), executed by ____________,
dated ____________, (the ``Surveyor's Report'').
[9. The following documents evidencing zoning compliance
____________, {DESCRIBE ALL DOCUMENTS FULLY} (the ``Zoning
Certificate'').]
[10. The building permit(s) issued on ____________, by ____________
(the ``Building Permit'').]
[11. The following permits, ____________, {DESCRIBE PERMITS} which
are required for the operation of the project, issued by ____________
on ____________ (``Other Permits'').]
12. Construction Contract:
a. Lump Sum (HUD 92442-CA) OR Cost Plus (HUD 92442A-CA), as
appropriate;
b. Contractor's Requisition (HUD 92448); and
c. Construction Contract, Incentive Payment (HUD 92443-CA), if
applicable.
[13. The Contractor's and/or Mortgagor's Cost Breakdown (HUD 92328)
executed by the General Contractor, dated ____________, (the ``Cost
Breakdown'').]
14. Assurance of Completion:
a. Performance/Payment Bond 100% Dual-Obligee (92452-CA); OR
b. Performance Bond (FHA 2452) and Payment Bond (FHA 2452A) and
Surety Company's Telegram or Facsimile; OR
c. Completion Assurance Agreement (HUD 92450-CA).
[15. Owner-Architect Agreement (AIA Document B181) (see attached to
Capital Advance Agreement; HUD 90167-CA) and HUD Amendment (HUD 90169-
CA)) executed by ____________ {INSERT DESIGN AND/OR CONSTRUCTION
ARCHITECT} and Owner, dated ____________, (the ``Owner-Architect
Agreement'').]
16. Real Estate Tax Exemption (if applicable).
[17. Lease (if mortgage is on leasehold) (Lease Addendum at
Appendix 14 of HUD Handbook 4571.5).]
18. Land-Dispositions Contract and Deed (required only for projects
in urban renewal areas).
19. Insurance and fidelity bonds:
a. All applicable insurance policies per Property Insurance
Requirements (HUD-90164-CA), including Property Insurance Schedule
(HUD-92329); and
b. Blanket Fidelity Bond.
20. Assurance of Completion of Off-site Facilities, if applicable:
a. Off-site Bond (HUD 90177-CA); OR
b. Escrow Agreement for Off-site Facilities (HUD 90170-CA).
21. Fair Housing
a. FHEO Certification in Connection with the development and
operation of the project (assurance of compliance with HUD regulations
(HUD Form 915); and
b. Affirmative Fair Housing Marketing Plan (HUD will determine if
administratively satisfied; Exhibit 3 to PRAC).
[22. The following documents assuring water, electricity, sewer,
gas, heat or other utility services (the ``Assurance of Utility
Services''):
----------------------------------------------------------------------
{DESCRIBE FULLY}].
[23. The certificate executed by ____________ {INSERT ARCHITECT OR
OTHER PROFESSIONAL}, dated ____________, (the ``certificate'').]
[24. A search conducted by ____________ dated [no earlier than 30
days before this opinion] of the public records of the federal District
Court and State and local courts in (i) the jurisdiction where the
Property is located; and (ii) the jurisdiction(s) where the Owner is
organized, located and does business (``Docket Search'').]
[25. Additional Closing Requirements (State or local
requirements).]
In basing the several opinions set forth in this document on ``our
[my] knowledge,'' the words ``our [my] knowledge'' signify that, in the
course of our [my] representation of the Owner, no facts have come to
our [my] attention that would give us [me] actual knowledge or actual
notice that any such opinions or other matters are not accurate. Except
as otherwise stated in this opinion, we [I] have undertaken no
investigation or verification of such matters. Further, the words ``our
[my] knowledge'' as used in this opinion are intended to be limited to
the actual knowledge of the attorneys within our [my] firm who have
been involved in representing the Owner in any capacity including, but
not limited to, in connection with the Capital Advance. We [I] have no
reason to believe that any of the documents on which we [I] have relied
contain matters which, or the assumptions contained herein, are untrue,
contrary to know facts, or unreasonable.
In reaching the opinions set forth below, we [I] have assumed, and
to our [my] knowledge there are no facts inconsistent with, the
following:
(a) Each of the parties to the Documents, other than the Owner (and
any person executing any of the Documents on behalf of the Owner), has
duly and validly executed and delivered each such instrument, document,
and
[[Page 8762]]
agreement to be executed in connection with the Capital Advance to
which such party is a signatory, and such party's obligations set forth
in the Documents are its legal, valid, and binding obligations,
enforceable in accordance with their respective terms.
(b) Each person executing any of the Documents, other than the
Owner (and any person executing any of the Documents on behalf of the
Owner), whether individually or on behalf of an entity, is duly
authorized to do so.
(c) Each natural person executing any of the Documents is legally
competent to do so.
(d) All signatures of parties other than the Owner (and any person
executing any of the Documents on behalf of the Owner) are genuine.
(e) All Documents which are submitted to us [me] as originals are
authentic; all Documents which were submitted to us [me] as certified
or photostatic copies conform to the original document, and all public
records reviewed are accurate and complete.
(f) All applicable Documents have been duly filed, indexed, and
recorded among the appropriate official records, and all fees, charges,
and taxes due and owing as of this date have been paid.
(g) The parties to the Documents and their successors and assigns
will: (i) act in good faith and in a commercially reasonable manner in
the exercise of any rights or enforcement of any remedies under the
Documents; (ii) not engage in any conduct in the exercise of such
rights or enforcement of such remedies that would constitute other than
fair and impartial dealing; and
(iii) comply with all requirements of applicable procedural and
substantive law in exercising any rights or enforcing any remedies
under the Documents.
(h) The exercise of any rights or enforcement of any remedies under
the Documents would not be unconscionable, result in a breach of the
peace, or otherwise be contrary to public policy.
(i) The Owner has title or other interest in each item of (i) real
and (ii) tangible and intangible personal property (``Personality'')
comprising the Property in which a security interest is purported to be
granted under the Documents [and, where Personalty is to be acquired
after the date hereof, a security interest is created under the after-
acquired property clause of the Security Agreement].
In rendering this opinion we [I] also have assumed that the
Documents accurately reflect the complete understanding of the parties
with respect to the transactions contemplated thereby and the rights
and the obligations of the parties thereunder. We [I] also have assumed
that the terms and the conditions of the Capital Advance as stated in
the Documents have not been amended, modified or supplemented, directly
or indirectly, by any other agreement or understanding of the parties
or waiver of any of the material provisions of the Documents. After
reasonable inquiry of the Owner, we [I] have no knowledge of any facts
or information that would lead us [me] to believe that the assumptions
in this paragraph are not justified.
In rendering our [my] opinion in paragraph 13, we [I] also have
assumed that: (i) all Personalty in which a security interest is
created under the Documents (other than accounts or goods of a type
normally used in more than one jurisdiction) is located at the Property
and (ii) Owner's [Chief Executive Office] [only place of business]
[residence] is located in ____________. After reasonable inquiry of the
Owner, we [I] have no knowledge of any facts or information that would
lead us [me] to believe that the assumptions in this paragraph are not
justified.
In rendering this opinion we [I] have, with your approval, relied
as to certain matters of fact set forth in the Owner's Opinion
Certificate, the Certificate of Good Standing [and certain other
specified Documents,] as set forth herein. After reasonable inquiry of
the Owner as to the accuracy and completeness of the Owner's Opinion
Certificate, the Certificate of Good Standing, [and such other
Documents], and we [I] have no knowledge of any facts or information
that would lead us [me] to believe that such reliance is not justified.
Based on the foregoing and subject to the assumptions and
qualifications set forth in this letter, it is our [my] opinion that:
{TO BE USED IN CASES WHERE ORGANIZATIONAL DOCUMENTS WERE PREPARED BY
OWNER'S ATTORNEY}
1. The Owner is a private non-profit corporation, duly organized
and validly existing under the laws of the Organizational Jurisdiction.
The Owner is duly qualified to do business and, based solely on the
Certificate(s) of Good Standing, copy attached hereto as Exhibit
________, is in good standing under the laws of the Organizational
Jurisdiction and is qualified to do business as a foreign ____________
entity in the Property Jurisdiction based on a review of ____________.
2. The Owner has the corporate power and authority and possesses
all necessary governmental certificates, permits, licenses,
qualifications, tax exempt status and approvals to own (including the
authority to borrow the proceeds of the Capital Advance, to encumber
the Property with the Security Instrument, to execute the Capital
Advance Documents) and operate the Property and such other assets as is
necessary to carry on its business and to carry out all of the
transactions contemplated by the Capital Advance Documents and
Collateral Documents as of the date of this opinion and to comply with
all applicable statutes and regulations of the Federal Housing
Commissioner in effect on the date of the Firm Commitment.
3. The execution and delivery of the Capital Advance Documents and
Collateral Documents (where applicable) by or on behalf of the Owner,
and the consummation by the Owner of the transactions contemplated
thereby, and the performance by the Owner of its obligations
thereunder, have been duly and validly authorized by all necessary
corporate action by, or on behalf of, the Owner.
4. All authorizations, consents, approvals, and permits have been
obtained from, appropriate actions have been taken by, and necessary
filings have been made with all necessary Organizational and Property
Jurisdictions or federal courts or governmental authorities, all
disclosed on Exhibit ________, attached hereto, and as listed and set
forth in Paragraphs ____ of this opinion [i.e., good standing
certificate]. To the best of our knowledge, these represent all such
authorizations, consents, approvals, permits, actions and filings that
are required in connection with the execution and delivery by the Owner
of the Capital Advance Documents and Collateral Documents (where
applicable) and the ownership [and operation] of the Property.
5. Each of the Capital Advance Documents and Collateral Documents
(where applicable) has been duly executed and delivered by the Owner
and constitute the valid and legally binding promises or obligations of
the Owner, enforceable against the Owner in accordance with its terms,
subject to the following qualifications:
(i) the effect of applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights
of creditors generally;
(ii) the effect of the exercise of judicial discretion in
accordance with general
[[Page 8763]]
principles of equity (whether applied by a court of law or of equity);
and
(iii) certain remedies, waivers, and other provisions of the
Documents may not be enforceable, but, subject to the qualifications
set forth in this paragraph at (i) and (ii) above, such
unenforceability will not preclude (a) the enforcement of the
obligation of the Owner to make the payments as provided in the
Mortgage and Note (and HUD's regulations), and (b) the foreclosure of
the Mortgage upon the event of a breach thereunder.
[6. {TO BE INSERTED WHEN ANY OR ALL OF THE LOAN DOCUMENTS ARE NOT
HUD APPROVED FORMS OR WHEN HUD APPROVED FORMS HAVE BEEN REVISED OR
MODIFIED IN CONNECTION WITH THE LOAN} The execution and delivery of,
and the performance of the obligations under, the Capital Advance
Documents and Collateral Documents (where applicable), will not violate
the Organizational Documents of the Owner or the applicable provisions
of local or State law.]
[7. {INSERT FOR LOANS INVOLVING CONSTRUCTION OR REHABILITATION} To
our [my] knowledge there are no proposed change(s) of law, ordinance,
or governmental regulation (proposed in a formal manner by elected or
appointed officials) which, if enacted or promulgated after the
commencement of construction/rehabilitation, would require a
modification to the Project, and/or prevent the Project from being
completed in accordance with the plans and specifications, dated
____________, and executed by ____________ {INSERT OWNER} and
____________ {INSERT GENERAL CONTRACTOR}, and referred to in the
Construction Contract (the ``Plans and Specification'').]
[8. {INSERT IF THERE IS NO ZONING ENDORSEMENT INCORPORATED INTO THE
TITLE POLICY} The attached Zoning Certificate states that the Property
appears on the zoning maps of [Property Jurisdiction] as being located
in a ____________ zone. According to the zoning ordinance of the
Property Jurisdiction, the use of the Property as a ____________ is a
permitted use in such zone.
Based solely on the Zoning Certificate, the Property may be used
for ____________ as a permitted use.]
[9. { USE FOR NEW CONSTRUCTION OR SUBSTANTIAL REHABILITATION IN
CASES WHERE HUD DOES NOT RECEIVE A CERTIFICATE DIRECTLY FROM THE
PROFESSIONAL} Based solely on the Certificate, construction/
rehabilitation of the Project in accordance with the Plans and
Specifications will comply with all applicable land use and zoning
requirements.]
10. Based solely upon (a) our [my] knowledge and (b) the Owner's
Opinion Certification, the execution and delivery of the Capital
Advance Documents and Collateral Documents (where applicable) will not:
(i) cause the Owner to be in violation of, or constitute a default
under the provisions of, any agreement to which the Owner is a party or
by which the Owner is bound, (ii) conflict with, or result in the
breach of, any court judgment, decree or order of any governmental body
to which the Owner is subject, and (iii) result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever
upon any of the property or assets of the Owner, except as specifically
contemplated by the Capital Advance Documents or Collateral Documents.
11. Based solely upon (a) our [my] knowledge, (b) the Owner's
Opinion Certification and (c) the Docket Search; there is no litigation
or other claim pending before any court or administrative or other
governmental body or threatened in writing against the Owner, or the
Property, [except as identified on Exhibit ______].
12. The Mortgage is in appropriate form for recordation in
________________ {INSERT PROPER NAME OF LOCAL LAND RECORDS OFFICE} of
________________ {INSERT COUNTY OR CITY} of the Property Jurisdiction,
and is sufficient, as to form, to create the encumbrance and security
interest it purports to create in the Property.
13. Filing of the Financing Statements in the Filing Offices will
perfect the security interest in the Personalty of the Owner located in
the Project Jurisdiction, but only to the extent that, under the
Uniform Commercial Code as in effect in the Project Jurisdiction, a
security interest in each described item of Personalty can be perfected
by filing. The Filing Offices are the only offices in which the
Financing Statements are required to be filed in order to perfect the
security interest in the Personalty.
14. The Capital Advance does not violate the usury laws or laws
regulating the use or forbearance of money of the Property
Jurisdiction.
15. The laws of Property Jurisdiction govern the interpretation and
the enforcement of the Capital Advance Documents and Collateral
Documents (where applicable) notwithstanding that the Owner may be
formed in a jurisdiction other than Property Jurisdiction. The Owner
can sue and be sued in Property Jurisdiction, including without
limitation, a suit on the Note or a foreclosure proceeding arising
under the Mortgage. Venue for any foreclosure proceeding under the
Mortgage may be had in Property Jurisdiction.
[16. {APPLIES TO CASES WHERE THE LAND IS BEING PURCHASED FROM A
PUBLIC BODY} There is no default under the Public Entity Purchase
Agreement, and construction in accordance with the Plans and
Specifications and within the time frame specified in the Construction
Contract will not lead to a default under the Public Entity Purchase
Agreement. {RELIANCE IS PERMITTED ON THE BASIS OF KNOWLEDGE AND OWNER'S
CERTIFICATE}]
[17. {APPLIES TO CASES WHERE THE PROJECT IS IN AN URBAN RENEWAL
AREA} There is no default under the Land Disposition Contract between
__________ and ____________, dated ____________ and the time within
which construction must be completed under the Capital Advance
Agreement is within the time specified for completion in said Land
Disposition Contract.]
In addition to the assumptions set forth above, the opinions set
forth above are also subject to the following qualifications:
(i) The Uniform Commercial Code of the Property Jurisdiction
requires the periodic filing of continuation statements with
____________ [and ____________] not more than ____________ prior to and
not later than the expiration of the ______ year period from the date
of filing of the Financing statements and the expiration of each
subsequent ______ year period after the original filing, in order to
maintain the perfection and priority of security interests and to keep
the Financing Statements in effect.
(ii) We express no opinion as to the laws of any jurisdiction other
than the laws of the Property Jurisdiction and [and the Organizational
Jurisdiction, if it is different,] and the laws of the United States of
America. The opinions expressed above concern only the effect of the
laws (excluding the principles of conflict of laws) of the Property
Jurisdiction [and the Organizational Jurisdiction, if it is different]
and the United States of America as currently in effect. We assume no
obligation to supplement this opinion if any applicable laws change
after the date of this opinion, or if we become aware of any facts that
might change the opinions expressed above after the date of this
opionion.
We [I] confirm that:
(a) based on the Organizational Documents, the name of the Owner in
[[Page 8764]]
each of the Capital Advance Documents and Collateral Documents (where
applicable) and the Title Policy and Firm Commitment is the correct
legal name of the Owner;
(b) the legal description of the Property is consistent in the
Documents wherein it appears and in Exhibit ______ hereto;
(c) we [I] do not have any financial interest in the Project, the
Property, or the Capital Advance, other than fees for legal services
performed by us, payment for which has been made; and we [I] agree not
to assert a claim or lien against the Project, the Owner, the Capital
Advance proceeds or income of the Project;
(d) other than as counsel for the Owner, we have no interest in the
Owner or any other party involved in the Capital Advance transaction
and do not serve as [a director, officer or] [an] employee of the
Owner. We have no undisclosed interest in the subject matters of this
opinion;
(e) based solely upon the Surveyor's Report and the Surveyor's
Plat, flood insurance [is OR is not] required pursuant to 42 U.S.C.
4012a(a). [INSERT IF FLOOD INSURANCE IS REQUIRED: Based solely on the
Flood Insurance Receipt, flood insurance is in effect which satisfies
the requirements of 42 U.S.C. 4012a(a).]
(f) we [I]] do not represent any development team member or any
other party or interest in connection with the above referenced housing
project other than the Owner except for representation as the personal
attorney for an individual associated with a development team member in
matters not involving the housing project. If a dispute arises between
the Owner and a development team member, my efforts will be directed
exclusively towards serving the Owner. We [I] have submitted to HUD an
Identity of Interest and Disclosure Certification; and
(g) to our knowledge, there are no liens or encumbrances against
the Property which are not reflected as exceptions to coverage in the
Title Policy.
The foregoing opinions are for the exclusive reliance of HUD;
however, they may be made available for informational purposes to, but
not for the reliance of, the assigns or transferees of the Owner, or
prospective purchasers of the Project. We [I] acknowledge that the
making, or causing to be made, of a false statement of fact in this
opinion letter and accompanying materials may lead to criminal
prosecution or civil liability as provided pursuant to applicable law,
which may include 18 U.S.C. 1001, 1010, 1012; 31 U.S.C. 3729, 3802.
Sincerely,
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[Authorized Signature]
To be used in FHA Insured Transactions.
JANUARY 30, 1997.
EXHIBIT A TO OPINION OF MORTGAGOR'S COUNSEL
CERTIFICATION OF MORTGAGOR
This Certification of Mortgagor is made the ______ day of
__________, 19____, by ________, (the ``Mortgagor'') for reliance upon
by __________ (the ``Mortgagor's Counsel'') in connection with the
issuance of an opinion letter dated of even date herewith (the
``Opinion Letter'') by (``Mortgagor's Counsel'') as a condition for the
provision of mortgage insurance by the Department of Housing and Urban
Development (``HUD'') of the $__________ loan (the ``Loan'') from
____________ (the ``Mortgage'') to Mortgagor. In connection with the
Opinion Letter, the Mortgagor hereby certifies to Mortgagor's Counsel
for its reliance, the truth, accuracy and completeness of the following
matters:
1. The Organizational Documents are the only documents creating the
Mortgagor or authorizing the Loan, and the Organizational Documents
have not been amended or modified except as stated in the Opinion
Letter.
2. The terms and conditions of the Loan as reflected in the Loan
Documents have not been amended, modified or supplemented, directly or
indirectly, by any other agreement or understanding of the parties or
waiver of any of the material provisions of the Loan Documents.
3. All tangible personal property of the Mortgagor in which a
security interest is granted under the Loan Documents [other than off-
site construction materials and/or accounts or goods of a type normally
used in more than one jurisdiction and/or additional collateral
personality] is located at the Property (as defined in the Opinion
Letter) and the Mortgagor's [Chief Executive Office] [only place of
business] [residence] is located in
.---------------------------------------------------------------------
4. The execution and delivery of the Loan Documents will not (i)
cause the Mortgagor to be in violation of, or constitute a material
default under the provisions of any agreement to which the Mortgagor is
a party or by which the Mortgagor is bound, (ii) conflict with, or
result in the breach of, any court judgment, decree or order of any
governmental body to which the Mortgagor is subject, and (iii) result
in the creation or imposition of any lien, charge, or encumbrance of
any nature whatsoever upon any of the property or assets of the
Mortgagor, except as specifically contemplated by the Loan Documents.
5. There is no litigation or other claim pending before any court
or administrative or other governmental body or threatened against the
Mortgagor, the Property, or any other properties of the Mortgagor
[,except as identified on Exhibit [__], List of Litigation, in the
Opinion Letter.]
6. There is no default under the Public Entity Agreement (as
defined in the Opinion Letter) nor have events occurred which with the
passage of time will result in a default under the Regulatory
Agreement.
Note: All capitalized terms not defined herein shall have the
meanings set forth in the Opinion Letter.
IN WITNESS WHEREOF, the Mortgagor has executed this Certification
of Mortgagor effective as of the date set forth above.
MORTGAGOR:
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For use in the Section 202, Supportive Housing for the Elderly
Program.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FEDERAL HOUSING
ADMINISTRATION
INSTRUCTIONS TO GUIDE FOR OPINION OF OWNER'S COUNSEL
EXPLANATORY COMMENTS
The Guide for this opinion was originally prepared in 1994 in view
of changes in opinion practice as reflected by the ABA Accord and
various State law bar reports on opinion letters and has been revised
to reflect approximately three years experience in using the Guide. The
principal purpose of this Guide remains to achieve a uniform format
which can be utilized throughout the nation and which will be familiar
to HUD counsel in all jurisdictions. Such a standardized format is
crucial in an era when less resources are available to the Department;
however, it should be emphasized that certain limited changes can be
authorized by HUD field counsel as required by local law or by the
unique nature of the transaction. An effort has been made in these
revised instructions to specify examples in more (but not all) of those
areas where such
[[Page 8765]]
changes can be authorized. Otherwise, the format of the Guide must be
followed and is not open to negotiation. In this regard, revisions
cannot be justified because of a particular Opinion having been
approved by another HUD field office. The exercise of discretion by one
HUD field counsel in unique circumstances cannot become the basis for
any modification to the Opinion. Any requested modification must be
analyzed on its own merit and in a particular context. In these
explanatory comments, the document may be referred to as the ``Guide''
or the ``Opinion,'' depending upon the context.
The Department regards the counsel to the Owner as the crucial,
central figure in the process of preparing and executing the legal and
administrative documents necessary to achieve a closing in connection
with a first Mortgage (Deed of Trust) and Mortgage Note (``Capital
Advance'') from HUD to the Owner. Pursuant to 24 CFR 24.105(p),
attorneys or others in a business relationship with the Owner are
defined as ``principals.'' Even though the Guide is quite different in
form from its predecessor (HUD 90166-CA), the substance is not intended
to be substantially different and the revision does not in any fashion
relieve the counsel to the Owner of its obligations to its client and
the Department. In part, these responsibilities entail the exercise of
due diligence to assure the accurate and timely preparation, completion
and submission of the forms required by the Department in connection
with the transaction. Further, the counsel to the Owner and any other
attorneys involved in the transaction, should be thoroughly familiar
with the regulations, procedures and directives of the Department
pertaining to each transaction in which counsel participates. The
Department takes seriously the preparation and completion of the
various documents involved in the Capital Advance Program (most of
which are HUD form documents) and cannot overemphasize the importance
of the following:
``Warning: HUD will prosecute false claims and statements.
Conviction may result in criminal and/or civil penalties. (18 U.S.C.
1001, 1010, 1012; 31 U.S.C. 3729, 3802)''
With limited state law related exceptions, we expect that Owner's
counsel will be able to follow the Guide in rendering an opinion and
HUD field counsel should not accept opinions that otherwise
substantially or materially deviate from the Guide. Although we
understand that attorneys and law firms may have evolved particular
styles and forms of opinion, HUD field counsel do not have time to
negotiate each and every Opinion for stylistic changes and it is
essential that the Guide be followed in both style and substance in
order to ensure a timely closing. The counsel to the Owner is expected
to complete a draft Opinion for submission to HUD field counsel at
least ten days prior to the closing along with the other closing
documents. Any deviations should be specifically identified (redlined
or highlighted) and discussed with field counsel at that time. Any
material deviation not required by State or local law must be brought
to the attention of HUD's Office of General Counsel by field counsel
along with an explanation as to the necessity for the deviation.
The Guide is not intended to serve as a closing checklist;
therefore, HUD field counsel may update or modify existing closing
checklists as necessary to meet constantly changing program needs and
handbook instructions and directives.
Brackets continue to be used in the Guide to indicate alternate
language, insertions, documents, or instructions depending on the
applicable facts and underlining is used to indicate blanks that must
be completed.
The Guide contains some instructions and definitions and is largely
self-explanatory; however, the following expanded instructions and
clarifications should provide additional assistance to both private
counsel and HUD counsel. The numbers and letters used below relate to
the paragraph numbers and letters in the Guide unless page numbers are
specifically designated.
Page 1 and Introductory Paragraph
Letterhead and date: The Opinion must be typed on the firm
letterhead and dated the date of the Capital Advance by HUD.
Reference: Data regarding the project (name, HUD project
number, and location must be accurate and inserted in the appropriate
blanks.
Addressees: The opinion must be delivered to HUD to
establish the explicit right to rely on the Opinion.
Description of the Capital Advance: The Capital Advance
amount is the original principal amount of the Capital Advance unless a
modification is necessitated in connection with the closing.
List of Documents
In General: If there are no brackets around a particular
document, the document is one which is commonly used for capital
advance closings; however, it should be emphasized that it is
impossible to list every document for every capital advance. Some
documents may not be utilized in a particular transaction and should be
deleted from the list in the actual Opinion. Brackets around the name
of the document indicate that the document may or may not be used for
every capital advance. If bracketed documents are not used in a
particular capital advance transaction, then delete such documents from
the list in the actual Opinion. Each document executed in connection
with the Capital Advance must be listed by its correct title. It is
imperative that care must be taken to compile a list that accurately
and completely reflects the transaction prior to submission to HUD of
the initial draft. After HUD review of the initial draft, the opinion
may have to be modified, as necessary, to satisfy HUD.
All documents executed in connection with the Capital Advance must
be listed regardless of whether the document is required by HUD. The
appropriate HUD or FHA form number, if applicable, must be indicated in
parens after each document.
All of the Documents must be reviewed. The following HUD guidelines
should be followed in preparing or reviewing the Documents.
1. HUD Handbook 4571.5, Supportive Housing for the Elderly--
Conditional Commitment--Final Closing, dated July 1992, should be
followed. This Handbook provides copies of most of the Documents
required by HUD to be used in the 202 Program Closings.
2. All 202 Owners must adopt the model Certificate of Incorporation
(HUD-91732-A-CA) except for Field Counsel modifications related to
State law or modifications required by the Internal Revenue Service.
All other modifications must be approved by HUD.
3. The HUD field counsel have not been consistent in requiring HUD
to be named in the Financing Statements as a secured party or as its
interests may appear; consequently, the requirement that HUD be so
named is now being standardized. This should be clarified through
appropriate language in the Security Agreement. The purpose is to
clarify that, under certain circumstances, HUD may assert some rights
in the personalty arising under the Regulatory Agreement which would
precede an assignment of the mortgage. This is desirable in the event
HUD exercises some of its remedies under the Regulatory Agreement in
cases where the mortgage has not been assigned to HUD. It will not be
necessary for HUD to consent to every UCC termination, renewal,
assignment, etc. until HUD's rights as a secured party are established.
HUD is being named ``as its interests
[[Page 8766]]
appear'' so that, for example, where HUD obtains a court order, HUD
will be able to establish a paramount interest in the Project income
stream, and other personalty pursuant to the Regulatory Agreement.
4. UCC searches: The UCC Search can be conducted by either the
title insurance company, a reputable document search firm, the counsel
to the Owner or any other attorney licensed in the jurisdiction. One or
more UCC searches performed not more than 30 days prior to the date of
the opinion of Owner's counsel must be made and retained by the field
counsel in the Capital Advance file.
5. Flood insurance receipt: Arguments have been made that this
document is not necessary. Flood plain maps change. HUD must know
whether the property is located in an area where flood insurance is
required and, if so, whether the insurance is in effect. HUD would not
necessarily have the data on file, and it was determined that this is a
matter which counsel could confirm near the end of the Guide. Note that
no opinion is required, and the factual determinations necessitated by
the Guide are considered within the usual duties of counsel.
6. Title Insurance Policy: Currently the 1992 ALTA Format (with
appropriate endorsements) is required by HUD in most jurisdictions.
7. Evidence of zoning compliance: The evidence of zoning compliance
will vary depending on the circumstances. The evidence should establish
that the building, if constructed according to plans and circumstances,
will comply with all zoning requirements. The evidence may be in the
form of a letter or certificate from the appropriate local official
stating that, if the building is constructed according to the plans and
specifications submitted for review, the building will comply with all
zoning requirements. If the locality has no zoning ordinance, a letter
should be submitted from the chief executive stating such. In those
circumstances, it may be necessary to obtain a letter from the local
planning body of the county in which the project is located, that the
proposed development is compatible with the county's comprehensive
plan. If the zoning approval is based upon a variance or other special
action, the closing may have to be delayed until the time for appeals
has run. In extremely complex cases, an opinion may need to be obtained
from legal counsel specializing in local zoning matters. Such letter
must be attached as an exhibit and referenced in the appropriate
paragraphs of the Opinion.
8. Building permit(s): If no building permit is required, this
document is not applicable and should be deleted from the Opinion. This
would also be true with respect to occupancy permits unless new permits
are required under local law.
9. Permits required for the operation of the project: Several
practitioners have argued that the documentation is unnecessary. HUD is
concerned that any permits required for the continued operation of the
project be proper and in place such that an opinion can be rendered. If
no such permits are required, the Opinion should be amended
accordingly. This is a matter which counsel to the Owner, as a
specialist in the property jurisdiction, should be able to ascertain.
10. Surveyor's plat or survey: The survey must be signed, sealed
and dated within 90 days of the closing.
11. Surveyor's Report: There needs to be a surveyor's certificate
indicating that nothing has changed since the last survey with respect
to encroachments, lot line violations, construction activity, etc. As
an alternative to a surveyor's certificate, the Owner's attorney could
rely upon an appropriate certificate from a qualified architect and
insert appropriate language in the Opinion.
12. Owner-architect Agreement: This document should only be
indicated (where the Guide indicates ``[Insert Design and or
Construction Architect''] in cases involving new construction or
substantial rehabilitation.
13. Certificate issued by architect or other professional: Normally
such a document would not be necessary and should be deleted unless
those circumstances mentioned under the last sentence in paragraph 11,
above, make the certificate appropriate. Note that ``Certificate'' is a
defined term and that the Certificate can come from ``an architect or
other professional.'' Consequently, there is no form for the
Certificate and HUD field counsel should defer to HUD administrators
specializing in architectural and engineering matters in determining
the acceptability of the Certificate. It is referenced in Paragraph 9
of the Opinion and should not be confused with the Zoning Certificate
which is also a defined term and is referenced in Paragraph 8.
14. Docket search: The Docket Search can be conducted by either the
title insurance company, a reputable document search firm, the counsel
to the Owner or any other attorney licensed in the jurisdiction.
Opinions
1. This paragraph requires an opinion regarding the organization of
the Owner. Care should be taken to ensure that the requisite
information is inserted correctly. Any Certificate of Good Standing or
equivalent document issued by the applicable governmental authority
must be dated no more than 30 days prior to the date of the Opinion of
Owner's counsel. If the Property jurisdiction is not the State of
formation for the Owner, counsel must also opine that the Owner is
qualified to transact business in the Property jurisdiction. Such
opinion may be made solely on the basis of a certificate from the
applicable governmental authorities of the Property jurisdiction, and
if counsel is relying on such certificate(s), then the opinion must
expressly identify those certificate(s) and they must be attached to
the Opinion as an exhibit.
2. This paragraph provides, among other things, that the Owner
possesses all the necessary governmental certificates, permits,
licenses, qualifications and approvals to own and operate the Property.
Field counsel have discretion to permit a modification in which Counsel
to the Owner itemizes those local governmental requirements which have
been evaluated and indicates that, after due diligence inquiry and
insofar as the attorney is aware, these local requirements comprise the
entire universe of such requirements. The Opinion should further state
that, based upon such itemized local requirements and compliance
therewith (with all permits, certificates, etc. being itemized), the
Owner possesses the power and authority necessary to own and operate
the Property and to carry out all of the transactions required by the
Documents and to comply with applicable federal statutes and
regulations of HUD in effect on the date of the FHA commitment. In most
instances involving new construction, a certificate of occupancy will
not have been obtained by the time of closing. In such instances, field
counsel have discretion to permit an appropriate clarification with
respect to that particular instrument.
11. If the Owner is involved in any litigation, all such litigation
matter(s) must be disclosed in writing to HUD field counsel. If the
litigation involves HUD's compliance with civil rights requirements, it
must immediately be brought to the attention of appropriate Fair
Housing and Equal Opportunity personnel.
13. If any UCC Financing Statements have been filed on the
Personalty in conjunction with any transaction other
[[Page 8767]]
than the Capital Advance, they must be identified to the HUD field
counsel as well as details with respect to how such Financing
Statements will be terminated at the time of closings. One or more UCC
searches performed not more than 30 days prior to the date of the
Opinion must be made and attached to the Opinion.
Acceptability of Counsel
Owner's counsel must opine as to the law of the Property
jurisdiction and the State of Owner's organization, if different from
the Property jurisdiction. HUD requires that Owner's counsel be
admitted to practice law in each jurisdiction in which such admission
is required by the laws or ethical considerations of the bar to be able
to give the opinion. If multiple jurisdictions are involved, two
opinions may be required: one with respect to the organization of the
owner and another with respect to the real property and loan issues. A
combination of the Owner's regular counsel and special local counsel
may be required to satisfy this requirement. If counsel's satisfaction
of these requirements is not evident from the letterhead of the firm,
the counsel should include a written explanation in the Washington
docket. In all events, each provision in the Guide must be addressed
whether one or more opinions is required to do so.
Signatures
The Opinion may be signed by an authorized person of the
law firm, in that person's name.
Owner's Certification
A form of Owner's Certification is attached. The form
represents the minimum amount of information that should be obtained
from the Owner (but additions, revisions and rephrasings are acceptable
so long as the Owner is certifying as to factual matters and not legal
conclusions). The Owner's Certification must be dated the same date as
the Capital Advance Documents.
Identity of Interest
Numerous issues have been raised with respect to the
confirmation in (d) of the penultimate paragraph of the Guide. A
decision was made that the attorney signing the Opinion could not have
an identity of interest with the Owner. No waivers are possible in such
instance. In instances where other members of the firm have an interest
in the Owner entity, such interest must be disclosed and such interest
must be acceptable to field counsel based upon the ethics rules of the
applicable bar. Furthermore, any interest must be administratively
acceptable to HUD and 2530 clearance must be obtained. In addition,
there appears to be an increasing trend wherein FHA mortgagees are
insisting upon using counsel to the mortgagee to handle many aspects of
the transaction even though the Opinion is being signed by a separate
attorney. There have been some instances where counsel to the mortgagee
has asked to represent the mortgagor in whole or in part and to provide
all or a part of the Opinion. Confirmation (d) in the penultimate
paragraph has been clarified to reflect the intent of HUD from the
inception of the Opinion that any such representation of both parties
is not permitted.
Liens
Paragraph (f), which is in the penultimate paragraph of
the Opinion, contains a statement that there are no liens or
encumbrances against the Property. Several attorneys have objected to
making the statement because they indicate that, at the time of
closing, there may be liens that have actually not been released even
though the title company has received funds and/or release documents to
do so and intends to process the release after the closing. Unless
authorized by HUD, as in cases involving secondary loans, there cannot
be any liens and encumbrances on the property when HUD makes a capital
advance. As a result, there cannot be any liens outstanding which would
prime the mortgage. Hence, Paragraph (f) should not be changed.
Reliance on Other Opinions
The issue of proper wording and format has probably
surfaced most often in cases where counsel to the Owner is relying on
opinions issued by other attorneys. This has occurred most often in
cases involving a separate opinion for property jurisdiction vs.
organizational jurisdiction, zoning, etc. In this area, it is
imperative that counsel to the Owner specifically reference and attach
the additional opinion(s) and that such opinions track the language of
the guide as close as is practical under the circumstances. HUD field
counsel should exercise discretion in this area, taking the unique
circumstances into account.
For use in the Section 202, Supportive Housing for the Elderly
Program
EXHIBIT A TO OPINION OF OWNER'S COUNSEL
CERTIFICATION OF OWNER
This Certification of Owner is made the ____________ day of
____________, 19____, by ________________, (the ``Owner'') for reliance
upon by ____________ (the ``Owner's Counsel'') in connection with the
issuance of an opinion letter dated of even date herewith (the
``Opinion Letter'') by (``Owner's Counsel'') as a condition for the
making of a capital advance by the Department of Housing and Urban
Development (``HUD'') in the amount of $________ (the ``Capital
Advance'') to the Owner. In connection with the Opinion Letter, the
Owner hereby certifies to Owner's Counsel for its reliance, the truth,
accuracy and completeness of the following matters:
1. The Organizational Documents are the only documents creating the
Owner or authorizing the Capital Advance, and the Organizational
Documents have not been amended or modified except as stated in the
Opinion Letter.
2. The terms and conditions of the Capital Advance as reflected in
the Capital Advance Documents have not been amended, modified or
supplemented, directly or indirectly, by any other agreement or
understanding of the parties or waiver of any of the material
provisions of the Capital Advance Documents.
3. All tangible personal property of the Owner in which a security
interest is granted under the Capital Advance Documents [other than
off-site construction materials and/or accounts or goods of a type
normally used in more than one jurisdiction and/or additional
collateral personality] is located at the Property (as defined in the
Opinion Letter) and the Owner's [Chief Executive Office] [only place of
business] [residence] is located in
----------------------------------------------------------------------
4. The execution and delivery of the Capital Advance Documents will
not (i) cause the Owner to be in violation of, or constitute a default
under the provisions of any agreement to which the Owner is a party or
by which the Owner is bound, (ii) conflict with, or result in the
breach of, any court judgment, decree or order of any governmental body
to which the Owner is subject, and (iii) result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever
upon any of the property or assets of the Owner, except as specifically
contemplated by the Capital Advance Documents.
5. There is no litigation or other claim pending before any court
or administrative or other governmental body or threatened against the
Owner, the Property, or any other properties of the Owner [, except as
identified on Exhibit ____, List of Litigation, in the Opinion Letter.]
[[Page 8768]]
6. There is no default under the Public Entity Agreement (as
defined in the Opinion Letter) nor have events occurred which with the
passage of time will result in a default under the Regulatory
Agreement.
Note: All capitalized terms not defined herein shall have the
meanings set forth in the Opinion Letter.
In Witness Whereof, the Owner has executed this Certification of
Owner effective as of the date set forth above.
OWNER:
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[FR Doc. 97-4685 Filed 2-25-97; 8:45 am]
BILLING CODE 4210-01-M
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.