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defined in Subsection (f)(ii) below) incurred by the Borrower with respect to the Project <br /> (and the equipment thereof) equal or exceed in the aggregate 15% of the cost of acquiring <br /> such building and equipment that is financed with the proceeds. The Borrower covenants <br /> that the Rehabilitation Expenditures for the building(and the equipment thereof) acquired <br /> with proceeds of the Bonds will satisfy the conditions of the preceding sentence. <br /> (ii) For purposes hereof, the term "Rehabilitation Expenditures" means any <br /> amount properly chargeable to capital account that is incurred by the Borrower in <br /> connection with the rehabilitation of a building; in the case of an integrated operation <br /> contained in a building prior to its acquisition, such term includes costs of rehabilitating <br /> existing equipment in such building or replacing such equipment with equipment having <br /> substantially the same function. The term "Rehabilitation Expenditures" does not include <br /> (i) any expenditure described in Section 47(c)(2)(B) of the Code, and (ii) any amount <br /> incurred more than two (2) years after the later of(A) the date on which the building is <br /> acquired by the Borrower, or(B) the date on which the Bonds are issued. <br /> SECTION 4. Rental Restrictions Regarding Affordable Units. The Issuer and the <br /> Borrower hereby declare their understanding and intent that the Project be a "qualified <br /> residential rental project" as described in Sections 142(a)(7) and 142(d) of the Code and agree <br /> that: <br /> (a) Each Available Unit in the Project will be rented or available for rental to the <br /> general public on a continuous basis during the Qualified Project Period and that during such <br /> Qualified Project Period: <br /> (i) The Borrower will rent the Affordable Units to Lower-Income Tenants <br /> such that, at all times during the Qualified Project Period, at least 40% of the Available <br /> Units in the Project will be occupied by Lower-Income Tenants (the "Occupancy <br /> Restrictions"), and the Issuer elects to apply the requirements of Section 142(d)(1)(B) of <br /> the Code to determine the status of the Project as a "qualified residential rental project" <br /> within the meaning of Section 142(d) of the Code. Notwithstanding the foregoing, if at <br /> all times within 60 days after the later of(a) the date the Project is acquired, or (b) the <br /> issue date of the Bonds, occupancy of the Project equals or exceeds ten percent (10%), <br /> the failure to satisfy the Occupancy Restrictions during a period of 12 months beginning <br /> on the issue date of the Bonds (the "Transition Period") will not cause the Project to fail <br /> to be a qualified residential rental project within the meaning of Section 142(d) of the <br /> Code. If the Occupancy Restrictions are not satisfied on the last date of the Transition <br /> Period, such failure will cause the Project to not be a qualified residential rental project <br /> within the meaning of Section 142(d) of the Code as of the issue date of the Bonds unless <br /> all Bonds issued to finance the Project are redeemed as soon as possible, but in no event <br /> later than 18 months after the issue date of the Bonds. <br /> (ii) The Borrower shall submit to the Secretary of the United States <br /> Department of the Treasury (at such time and in such manner as the Secretary shall <br /> prescribe) an annual certification as to whether the Project continues to meet the <br /> requirements of Section 142(d) of the Code, and the Borrower acknowledges that failure <br /> to do so will subject the Borrower to penalties under Section 6652(j) of the Code. <br /> 5 <br />