Frequently Asked Questions (FAQs) - Homeowners

Assuming there are no pre-existing tenants occupying some portion of the premises,site access will be governed by the terms of the ADU construction contract and relevant local ordinances (e.g. 8AM to sundown, M-F, excluding state observedholidays). If construction cranes are required, permitting will further restrict site access due to limitations on use of public roadway.

Post-tenancy access is governed by the property management agreement and state law (e.g. tenant notice) except during an emergency.

3. Are rental agreements required that limit where renters can go on the site?

“Common areas” are defined by the rental agreement; however, due to the nature of the close proximity (in most instances) of the “backyard” ADU to the single family dwelling, enforcement will be problematic and minor transgressions will rarely constitute a sufficient basis to declare a material breach of the rental agreement justifying a termination of the tenancy. The solution here, when practical, are physical barriers/boundary markers between ADU and the single family dwelling that define the tenant’s possessory interest. “Good fences make good neighbors”.

4. Who pays home insurance and is it possible to divide insurance between the owner's dwelling(s) and ADU?

Insurance is always dependent upon who has an “insurable interest”. For example, a stranger cannot insure your house because the stranger does not have an ownership interest in your house. The property owner has the insurable interest in both the SFD and ADU, and is therefore the “insured” on property casualty risks, e.g. fire, natural disaster. Because the ADU will be rented, the property owner-landlord may purchase a landlord’s casualty and liability package for the ADU (separate and distinct from the homeowners policy).

The rental agreement can provide (subject to Section 8 rules when and if applicable) for the pass-through to the tenant of the landlord’s cost of insurance premiums attributable to the ADU; however, pass-throughs of landlord residential property “costs of ownership” to residential tenants, e.g. insurance, taxes, common area maintenance, are uncommon in California (unlike commercial and industrial tenancies). Residential rentals are typically on a “gross” basis, with the landlord paying the costs of property ownership.

The rental agreement should require the tenant to procure, pay and maintain a “renter’s insurance package” including coverage for liability and casualty to tenant’s personal property, with a waiver of subrogation rights. Landlords should be named an additional insured under the tenant’s liability coverage.

5. Is there any other insurance required for the renters, BHI and the owner?

See #4, above. BHI will need comprehensive general liability insurance, a contractor/developer policy package (riders), and a property management policy package (riders).

6. What happens legally if the owner wants to sell his property prior to the end of rental contract or financial agreement with BHI?

This will depend upon the legal relationship(s) between BHI and the property owner, the nature of the financing arrangement, and the BHI business model. Generally, transfers are subject to the previously recorded security interests of lenders, licenses, and covenants “that run with the land”. Provided the previously recorded rights and interests are in and of themselves in proper form and enforceable, a subsequent purchaser will be on notice of, and take the property, subject to any such previously recorded rights and interests. Of course, by agreement or “due on sale or transfer” covenants in the previously recorded security documents, the ADU purchase money financing would need to be paid-off as a condition to the transfer of title. Alternatively, the security documents may provide for subordination to a subsequent purchaser’s purchase money secured loan. In this case, the ADU secured lender’s interest would be junior to the purchase money security interest of a subsequent purchaser’s purchase money lender.

A subsequent purchaser would acquire the property subject to the tenancy. Landlord’s covenants under the rental agreement would be incorporated by reference in the recorded security documents and a memorandum of lease/rental agreement. As a material condition affecting the property, the tenancy, the tenants rights and landlord’s covenants under the rental agreement, would lawfully have to be disclosed in the purchase and sale agreement and Seller’s real property transfer disclosure statement, as well as disclosed by any brokers involved in the purchase and sale transaction

7. What happens if the property owner goes under and the bank takes over?

See #6, above. The lender may require the property owner to execute a tenancy non-disturbance and attornment as a condition to ADU financing and/or commencement of construction. It should be noted that some lender security documents may require the lender’s prior consent to ADU construction and rental of security property

8. What happens if BHI wants to get out of the program prior to the end of contract between parties?

Early termination will be governed by the agreed upon terms of the financing/loan documents and management agreement, if any. Both property owner and BHI should have the ability to exit the relationship upon contractually described circumstances.

9. What happens if the City stops investing in the program? What kind of assurances do we need from the City?

There will be program agreements with every program participant, including the City, which will govern rights and duties upon termination or early exit. We expect the City to want to have a recorded covenant that binds the property owner (and any subsequent purchaser) to rent the ADU only to a specifically defined class of tenants.

10. With regards to item 9 above, under what circumstances BHI can evict a tenant?

The tenancy relationship is between landlord (property owner) and tenant. As property manager/agent for the property owner, and if authorized under the management agreement, BHI would have standing to evict a tenant on behalf of the property owner.

The circumstances giving rise to the right to evict are governed by the rental agreement, program agreements, local rent control ordinances, emergency local and state executive orders and ordinances, state tenancy laws, and in the case of “Section 8” housing, federal law and HUD regulations. This subject requires additional information on the program terms, terms of the rental agreement, and an analysis of applicable laws, ordinances and orders that is beyond the scope of these brief responses.

Relationship between BHI and service providers

BHI will act as the lead contractor and project manager for all aspects of the project including service procurement and provision for both tenants and property owners/landlords.

 

Design

  1. See BHI deck for elevation and conceptual site plan(s) with storage units.
  2. What are the ROM estimates for both model types, including estimated permit
    fees and utility connections?
  • 255 sqft ADU (studio) costs $114k – $153k and includes all associated costs including construction, utility connections, permit fees, solar, furniture, utensils and support around services.
  • 400 sqft ADU (one bedroom) costs $150,000 and includes all associated costs including construction, utility connections, permit fees, solar, furniture, utensils and support around services.
  • 570 sqft ADU (two bedroom) costs $200,000 and includes all associated costs including construction, utility connections, permit fees, solar, furniture, utensils and support around services.

Financing
BHI is financing units with the initial, one-time investment from CA Housing and Community Development Project Homekey funds (American Rescue Plan Act), Section 8 vouchers and LAHSA funded Coordinated Entry System (CES) to build a minimum of 150 units for the pilot. The homeowner will receive up to $1000 monthly which includes support services for the landlords and tenants for up to 15 years. We can provide additional information on our financial model upon request as this
information is proprietary.

Corporate Accountability
See BHI deck for organization chart that illustrates partnership structure, business
model and community engagements.

Prior Experience
What are BHI lead partners’ experience managing large government contracts and
scattered site construction projects?
● Jacob Lipa, the project co-lead was the President of Psomas Engineering, a major engineering firm founded in 1946 with its headquarter in downtown Los Angeles. Psomas provides services to all governmental agencies including major contracts with the City of LA, County of LA, many other cities and counties in California and other states. It also has experience with major federal agencies.
● Richard Xavier Corral, MPP, CEO and Principal Consultant of Corral Consulting, brings over eighteen years of professional experience along with a lifelong commitment to advancing the business of social change among the nonprofit, for profit, corporate, community-based, government and philanthropic organizations with whom he consults. Corral seamlessly integrates his extensive formal studies, passion for building business know-how and big picture problem solving to craft win-win solutions around education, health and wellness, green economies, LGBTQ equality, philanthropy, housing and homelessness and dockless mobility. Corral Consulting’s diverse clientele benefit from a comprehensive set of skills, strategies, content expertise and networks rarely assembled in one firm that are essential to effecting change in today’s fast paced world. What distinguishes Corral Consulting is our ability to empower clients to move from vision to action by crafting workable  solutions that cut across business, community, and policy.
● See BHI one pager for additional bios

Services
Who will provide supportive services and how will the services be financed?
● BHI partners the following Service Planning Area (SPA) 6 service providers to design and budget BHI property owner identification, leasing and property management, tenant identification, and support services:
○ San Gabriel Valley Consortium on Homelesness
  ○ Hopics (SPA 6 CES Lead Agency)
  ○ Union Station Homeless Services (SPA 3 CES Lead Agency)
  ○ Watts Labor Community Action Committee
  ○ SPA 6 Homelessness Coalition


Support services are provided to the landlord and tenant free of charge for up to 15 years. BHI budgets approximately $500k annually for support services:

  • 1 case manager to serve 30 tenants/landlords
  •  150 units = 200 tenants & landlords = 6/7 case managers