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12. Property Management of HOME -Assisted Unit. Developer shall maintain the Development in <br />compliance with all applicable housing quality standards and local code requirements for the <br />duration of this Regulatory Agreement. <br />13. Occupancy Procedures. Developer shall adopt written tenant selection policies and criteria for <br />the HOME- Assisted Unit that: <br />a. Is consistent with the purpose of providing housing for Very Low -Income <br />Households; <br />b. Is reasonably related to program eligibility and the applicants' ability to perform the <br />obligations of the lease; and <br />C. Provides for: <br />(1) The selection of tenants from a written waiting list in the chronological order <br />of their application, insofar as is practicable; and <br />(2) The prompt written notification to any rejected applicant of the grounds for <br />any rejection. <br />14. Security Deposits. Any security deposits collected by Developer or Developer's agent shall be <br />kept separate and apart from all other funds of the Development in a trust account with depository <br />insured by the Federal Deposit Insurance Corporation, or other comparable federal deposit insurance <br />program, and shall be held and disbursed in accordance with California law. The balance of such <br />amount shall at all times equal or exceed the aggregate of all outstanding obligations under said <br />account, plus accrued interest thereon. <br />15. Restrictions on Sale, Encumbrance, and Other Acts. <br />a. Except for leases to tenants in the ordinary course of business, Developer shall not <br />make, or allow, any sale, encumbrance, hypothecation, assignment, pledge, conveyance, or transfer <br />in any form of the Development or of any of its interest therein, except as permitted pursuant to the <br />Loan Agreement, or with the prior written approval of the City. <br />b. The City may approve a sale, transfer or conveyance provided that all of the <br />following conditions are met: <br />(1) Developer is in compliance with this Regulatory Agreement or the sale, <br />transfer or conveyance will result in the cure of any existing violations of the Regulatory Agreement; <br />(2) The successor -in -interest to Developer agrees to assume all obligations of <br />Developer pursuant to this Regulatory Agreement and the HOME Program; <br />(3) The successor -in -interest demonstrates to the City's satisfaction that it can <br />own and operate the Development in full compliance with all HOME Program requirements; and <br />2220342.1 Page 5 <br />