California Code of Regulations
Title 25 - Housing and Community Development
Division 1 - Housing and Community Development
Chapter 7 - Department of Housing and Community Development Programs
Subchapter 14 - California Housing Rehabilitation Program for Owner-Occupied Housing
Article 2 - Program Requirements
Section 8046 - Construction Requirements

Universal Citation: 25 CA Code of Regs 8046

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a) The local entity shall determine the rehabilitation work to be performed on the property by conducting an initial property inspection. Upon such inspection, the local entity shall:

(1) prepare a work write-up which accurately describes the existing conditions and the necessary repairs and improvements consistent with the rehabilitation standards adopted by the local entity and approved by the department. The work write-up shall indicate which items are code violations, incipient code violations, handicapped accessibility improvements, and general property improvements; and

(2) prepare a cost estimate for the rehabilitation work, building permits, government fees and the costs of architectural and engineering services directly related to the rehabilitation work.

(b) The local entity shall ensure that the rehabilitation work funded pursuant to this subchapter shall be performed in a competent, professional manner at the lowest reasonable cost consistent with current market conditions. Except as outlined in subsection (g), the local entity shall solicit, at a minimum, three written bids based on a bid package distributed to potential contractors. Such bid package shall include:

(1) the work write-up which details the rehabilitation performance specifications;

(2) bid instructions which describe the local program requirements for construction;

(3) a bid proposal form which incorporates the work write-up; and

(4) a sample construction contract which has been approved by the department.

(c) The local entity shall evaluate submitted bids in relation to its cost estimate. If three written bids are not received, or the bids received are higher than its cost estimates, the local entity shall include an explanation in the deferred payment loan file documenting the process employed to determine the reasonableness of costs. The local entity shall review all bids with the borrower, and the borrower shall select a bid which would result in the work being performed in a competent, professional manner at the lowest reasonable cost consistent with current market conditions and the local entity's cost estimate.

(d) The local entity may include a contingency amount, not to exceed 10 percent of the selected bid amount or the maximum loan amount established pursuant to section 8048(a), to be used for unforeseen costs incurred in order to complete the rehabilitation as defined in this subchapter. Any unused contingency funds shall be returned to the department for deposit to the account, and shall be treated as a borrower payment to the deferred payment loan.

(e) The local entity shall ensure that all general contractors and subcontractors selected by the borrower are licensed by the California State Contractors Licensing Board and that they maintain Worker's Compensation and Employer's Liability insurance to the extent required by State law. The contractor selected shall complete the work in accordance with a construction contract executed between the contractor and the borrower and approved by the local entity. The construction contract shall, at a minimum, contain provisions which:

(1) require that the contractor complete the work in accordance with the contractor's bid, work plans and specifications, and applicable local, State, and Federal laws, regulations, and building codes;

(2) require the contractor to proceed with and complete the work in accordance with the approved work schedule;

(3) specify a total contract price consistent with the approved contractor's bid;

(4) provide for a method of payment to the contractor consistent with program requirements which may include progress payments and payment retentions;

(5) provide for a contractor contingency amount, if any;

(6) permit the local entity and the department and their designated agents and employees the right to inspect the property and all books, records and documents maintained by the contractor in connection with the work;

(7) obligate the contractor to warrant the work for a period of not less than one year;

(8) require that the contractor provide all lien releases and pay all amounts when due for labor, materials, supplies and equipment provided for completing the work; and

(9) provide for liquidated damages.

(f) The local entity shall monitor construction for compliance with the construction contract and program requirements, and establish practices to ensure that payments to the contractor are properly expended by, or on behalf of, the borrower. Such practices shall include:

(1) conducting on-site inspections of the rehabilitation work; and

(2) preparing progress inspection reports which authorize the issuance of payments to borrowers and contractors.

(g) The borrower may perform all or a part of the labor, or provide materials, necessary to rehabilitate his or her property if all of the following conditions are met:

(1) the cost of the rehabilitation work for the portion to be performed by the borrower is less than 90 percent of the local entity's cost estimate, exclusive of profit and overhead for the general contractor;

(2) proceeds from the deferred payment loan shall not be used to pay for materials for which no paid receipt is provided or for any borrower or non-contracted worker's labor;

(3) the borrower has entered into a written contract pursuant to subdivision (e) of this section with any subcontractor retained by the borrower; and

(4) the local entity has demonstrated to the department that it has the capacity to manage and supervise rehabilitation projects utilizing borrower labor or that it will contract with a consultant or other entity that has demonstrated the capability to operate borrower-performed rehabilitation activities. Prior to the approval of the first deferred payment loan utilizing borrower-performed rehabilitation activities, the local entity shall submit the following to the department for approval of its ability to ensure that the requirements of this program will be met when borrower-performed rehabilitation is involved:

(A) the extent of the local entity's past involvement in borrower-performed rehabilitation activities;

(B) evidence of local entity administrative funding in an amount adequate to ensure proper management of borrower-performed rehabilitation activities;

(D) the accounting system used for purchasing materials, disbursing loan funds, and conducting inspections of the rehabilitation work;

(E) provisions for completing the rehabilitation if a borrower fails to complete the project.

1. New section filed 11-30-89 as an emergency; operative 11-30-89 (Register 89, No. 49). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed by operation of law on 3-30-90.
2. New section refiled 3-26-90 as an emergency; operative 3-30-90 (Register 90, No. 16). A Certificate of Compliance must be transmitted to OAL within 120 days or emergency language will be repealed by operation of law on 7-30-90.
3. New section filed 7-26-90 as an emergency; operative 7-26-90 (Register 90, No. 38). A Certificate of Compliance must be transmitted to OAL by 11-23-90 or emergency language will be repealed by operation of law on the following day.
4. Amendment of subsection (a) filed 8-27-90 as an emergency; operative 8-27-90 (Register 90, No. 42). A Certificate of Compliance must be transmitted to OAL by 12-26-90 or emergency language will be repealed by operation of law on the following day.
5. New section refiled 11-16-90 as an emergency; operative 11-16-90 (Register 90, No. 51). A Certificate of Compliance must be transmitted to OAL by 3-18-91 or emergency language will be repealed by operation of law on the following day.
6. Readoption of 8-27-90 order filed 12-21-90 as an emergency; operative 12-21-90 (Register 91, No. 7). A Certificate of Compliance must be transmitted to OAL by 4-22-91 or emergency language will be repealed by operation of law on the following day.
7. Certificate of Compliance as to 11-30-89 order, readopted and operative on 3-30-90, 7-26-90 and 11-16-90, including amendment of subsections (b), (c), (d), (e), and (g) transmitted to OAL 11-30-90 and filed 12-31-90 (Register 91, No. 7).

Note: Authority cited: Section 50668.5(g), Health and Safety Code. Reference: Sections 50668(a), 50668.5 and 50668.5(b), Health and Safety Code.

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