Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) If a
Children's Hospital proposes to use Grant funds for a Project other than
equipment acquisition on property where the Children's Hospital or the
California nonprofit corporation of which the Children's Hospital is an
operating entity is a lessee under a lease agreement, the following
requirements shall be satisfied prior to any release of Grant funds pursuant to
Sections 7045 or
7046:
(1) The lease agreement shall provide the
Children's Hospital or the California nonprofit corporation of which the
Children's Hospital is an operating entity, as lessee, full access to the site
to carry on its healthcare purposes.
(2) The term of the lease agreement must meet
one of the following:
(A) The term of the
lease agreement shall be at least as long as the useful life of the Project
under the Grant.
(B) If the
landlord under the lease agreement is an Affiliate, the Term of the lease
agreement must be at least 74% of useful life of the Project under the
Grant.
(3) A current
title report on the site, brought up to date as of the effective date of the
lease agreement shall be provided to the Authority. The title report shall show
all of the following:
(A) No delinquent taxes
or assessments or, if there are delinquent taxes or assessments, these are
being contested in good faith and the Children's Hospital has set aside on its
books adequate reserves to pay these taxes or assessments.
(B) No easements, exceptions or restrictions
on the use of the site that will interfere with or impair the operation of the
Project.
(C) No superior liens
(deeds of trust or other rights) in the property. If there are any superior
liens, they shall be subordinated to the lease agreement. The lease agreement
shall provide that any subsequent encumbrance on the property (e.g. deed of
trust) or sale of the property shall be subject to the lease
agreement.
(4) Any one of
the following shall be satisfied:
(A) The
lease agreement shall provide for a nominal rent (e.g. $1 per year).
(B) Full rent under the lease agreement shall
be paid in a lump sum up front.
(C)
The Children's Hospital or the California nonprofit corporation of which the
Children's Hospital is an operating entity shall covenant in the Grant
Agreement to budget for payment of rent each year.
(5) The lease agreement shall provide that
the only remedy for any default, including failure to pay rent, by lessee
Children's Hospital or the California nonprofit corporation of which the
Children's Hospital is an operating entity is suit for rent or specific
performance to remedy any specific breach. The landlord's remedies for any
default by lessee Children's Hospital or the California nonprofit corporation
of which the Children's Hospital is an operating entity may not include
cancellation of lease agreement, retaking of property or eviction of the
lessee.
(6) The lease agreement
shall provide for either one of the following:
(A) The lessee Children's Hospital or the
California nonprofit corporation of which the Children's Hospital is an
operating entity is obligated to pay all taxes and assessments on the
property.
(B) The landlord will
provide the lessee Children's Hospital or the California nonprofit corporation
of which the Children's Hospital is an operating entity with notice of any
failure to pay taxes or assessments on the property and an opportunity for the
lessee Children's Hospital or the California nonprofit corporation of which the
Children's Hospital is an operating entity to cure the
failure.
(7) The landlord
shall demonstrate that the lease agreement is legally authorized and has been
properly approved and executed and enforceable against the landlord. The
landlord shall provide a legal opinion of qualified counsel to this effect that
is acceptable to the Authority.
(8)
The lessee Children's Hospital shall demonstrate that the lease agreement is
legally authorized and has been properly approved and executed and enforceable
against the lessee Children's Hospital or the California nonprofit corporation
of which the Children's Hospital is an operating entity. Lessee Children's
Hospital shall provide a legal opinion of qualified counsel to this effect that
is acceptable to the Authority,
(9)
(A) Except as provided in (9)(B), the
Children's Hospital shall provide a legal opinion that either:
1. the landlord is a special purpose entity
which cannot enter bankruptcy proceedings under the federal Bankruptcy Code,
or
2. the lease agreement will not
be an executory contract and cannot be rejected by the landlord in the event of
bankruptcy. The legal opinion shall be acceptable to the
Authority.
(B) For so
long as the landlord is an Affiliate of lessee Children's Hospital or the
California nonprofit corporation of which the Children's Hospital is an
operating entity, the requirements of (9)(A) do not apply.
(10) The Grant Agreement shall provide that
if the lease agreement terminates prior to the end of the useful life of the
Project under the Grant and the property that was subject to the lease
agreement is not simultaneously re-leased under a new lease agreement that
complies with the requirements of this Section
7047 or fee title to the property
that was subject to the lease agreement is not simultaneously transferred to
the Children's Hospital, the Authority is entitled to recover the Grant funds
pursuant to Section
7049.
(11) When a Project on leased property
includes improvements to any common areas that are shared with other tenants or
areas that are not leased by the lessee Children's Hospital or the California
nonprofit corporation of which the Children's Hospital is an operating entity
under the lease agreement, the Grant funds shall be limited only to the
proportionate costs of the Project which exclude the costs related to such
areas.
(12) Prior to approval of
the Grant by the Authority, the Applicant shall submit the proposed lease
agreement for review and demonstrate compliance with all of the above
conditions and any other conditions required by the
Authority.
(b) For
purposes of this section, "Affiliate" means an entity which, directly or
indirectly through one or more intermediaries, is controlled by or is under
common control with the lessee Children's Hospital or the California nonprofit
corporation of which the Children's Hospital is an operating entity.
1. New section
filed 2-11-2005 as an emergency; operative 2-11-2005 (Register 2005, No. 6). A
Certificate of Compliance must be transmitted to OAL by 6-13-2005 or emergency
language will be repealed by operation of law on the following
day.
2. New section refiled 5-26-2005 as an emergency; operative
5-26-2005 (Register 2005, No. 21). A Certificate of Compliance must be
transmitted to OAL by 9-23-2005 or emergency language will be repealed by
operation of law on the following day.
3. Certificate of Compliance
as to 5-26-2005 order, including renumbering of former section
7047 to section
7048 and new section
7047, transmitted to OAL 9-14-2005
and filed 10-27-2005 (Register 2005, No. 43).
4. Change without
regulatory effect amending subsections (a)(9)(A)-(B) filed 8-13-2014 pursuant
to section 100, title 1, California Code of
Regulations (Register 2014, No. 33).
Note: Authority cited: Sections
1179.22,
1179.24
and
1179.32,
Health and Safety Code. Reference: Sections
1179.22,
1179.24
and
1179.25,
Health and Safety Code.
