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Joint Development Agreements Using FTA Funds or FTA-Funded Assets (2021)

Chapter: APPENDIX D. SELECTED MODEL PROVISIONS

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Suggested Citation:"APPENDIX D. SELECTED MODEL PROVISIONS." National Academies of Sciences, Engineering, and Medicine. 2021. Joint Development Agreements Using FTA Funds or FTA-Funded Assets. Washington, DC: The National Academies Press. doi: 10.17226/26268.
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Suggested Citation:"APPENDIX D. SELECTED MODEL PROVISIONS." National Academies of Sciences, Engineering, and Medicine. 2021. Joint Development Agreements Using FTA Funds or FTA-Funded Assets. Washington, DC: The National Academies Press. doi: 10.17226/26268.
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Suggested Citation:"APPENDIX D. SELECTED MODEL PROVISIONS." National Academies of Sciences, Engineering, and Medicine. 2021. Joint Development Agreements Using FTA Funds or FTA-Funded Assets. Washington, DC: The National Academies Press. doi: 10.17226/26268.
×
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Suggested Citation:"APPENDIX D. SELECTED MODEL PROVISIONS." National Academies of Sciences, Engineering, and Medicine. 2021. Joint Development Agreements Using FTA Funds or FTA-Funded Assets. Washington, DC: The National Academies Press. doi: 10.17226/26268.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

TCRP LRD 56 21 12101, et seq., as amended (prohibiting discrimination based on disability and requiring compliance with the ADA. C. Other Laws, Regulations and Ordinances Tenant, at its sole cost and expense, shall promptly comply with all present and future applicable laws, regulations and ordi- nances not specifically addressed in this Article and shall cause its Subtenants to do so, except that matters covered by Article __ shall be governed by that Article. To the extent that Tenant’s compliance shall require the cooperation and participation of Landlord and Landlord is so Notified by Tenant, Landlord agrees to so cooperate and participate; provided that in no event shall Transit Agency as Landlord be required to incur any out- of-pocket expense, impose a significant burden on its person- nel, or impose significant usage burdens on the Transit Agency Facilities in so cooperating, the determination of a significant burden being a Transit Agency Unconditional Approval Matter. Said cooperation and participation shall include the right, but not the obligation, of Landlord to cause or attempt to cause such public authorities to waive or revoke the request for a specific action, at no cost to Landlord, upon the request of Tenant. D. Davis-Bacon Act Tenant agrees that all TRANSIT AGENCY Replacement Facilities that Tenant or its Affiliates constructs must be and shall be built in compliance with the Davis-Bacon Act, 40 USC §276a, et seq. The foregoing requirement does not apply to the Tenant Improvements. E. Right to Contest After Notice to the other party, each party shall have the right to contest by appropriate legal proceedings diligently conducted in good faith, in its name and without cost or expense to the other party, the validity or application of any law, regulation or ordinance. The other party may participate at its own expense. No such contest shall diminish, abrogate or otherwise affect any of the contesting party’s obligations under this Ground Lease. Notwithstanding the foregoing, Tenant may not contest if the contest may (i) unreasonably burden or otherwise cause any portion of the Leased Premises or any interest of Landlord or Tenant to be in danger of being forfeited or lost or (ii) place either Landlord or Tenant, or any director, officer, partner, member, shareholder, other principal, or employee thereof in danger of being criminally or civilly fined, penalized or subject to other sanction. F. Transit-Oriented Development. Tenant covenants that the Tenant Improvements shall con- stitute Transit-Oriented Development. This requirement shall remain in effect throughout the Term. [Landlord acknowledges that the initial Tenant Improvements, if constructed and oper- ated in accordance with the Tenant Improvements Plans and Specifications, constitute Tenant-Oriented Development for purposes of this Section.] APPENDIX D. SELECTED MODEL PROVISIONS The following section details selected model provisions in areas which warrant separate attention from the model agree- ments. All of these provisions are contained in the Appendix C – Joint Development Model Agreements, and some are refer- enced in the table in Appendix E. These selected provisions are not all inclusive and were prepared and negotiated based on a specific property and commercial arrangement, at a location of a project site, in a specific applicable jurisdiction with regu- lations and state law that would apply. Any of the example or model provisions should be developed with the benefit of legal advice from local counsel familiar with local laws and regula- tions which would apply. Federal Transit Administration (FTA) Provisions A. Americans with Disabilities Act Tenant Improvements and Transit Agency Replacement Facilities. All Tenant Improvements and, to the extent designed and/or constructed by Tenant or an Affiliate of Tenant, Transit Agency Replacement Facilities shall comply with Titles II and III of the Americans with Disabilities Act, 42 USC §12101, et seq., as amended, or any successor or comparable Federal, State or local law hereafter adopted, and any regulations promulgated thereunder (“ADA”). If directly and solely as a result of the Tenant Improvements or, to the extent designed and/or con- structed by Tenant or an Affiliate or Tenant, the initial Transit Agency Replacement Facilities, or any subsequent alteration, addition or modification to the Tenant Improvements (but not any subsequent alteration, addition or modification of the Tran- sit Agency Replacement Facilities), ADA-related improvements to the Metro Station or other Transit Agency Facilities are re- quired by law, Tenant shall be solely responsible for the cost of all such improvements except as provided in Section ___. Notwithstanding the above, Tenant shall not be respon- sible for any ADA- related improvements to the Metro Station whose need predates the date of Final Completion of the Ten- ant Improvements or any Transit Agency Replacement Facilities and which would be required to be made to the Metro Station regard less of the Tenant Improvements or Transit Agency A Replace ment Facilities or which Transit Agency is implement- ing at Metrorail stations in general as part of system-wide im- provements or alterations. B. Civil Rights Act At all times hereafter with respect to the Leased Premises (other than any Transit Agency Reserved Areas), including in connection with construction or operation by Tenant and/or Tenant’s employees, agents and contractors of any Tenant Im- provements or facilities (other than Transit Agency Facilities) on the Leased Premises, Tenant will comply and will cause its employees, agents and contractors to comply with Title VI of the Civil Rights Act of 1964, 42 U.S.C. §200d, et seq., (prohibit- ing discrimination based on race, color or national origin), and as applicable 49 C.F.R. §§23.7 and 27.9(b), and 42 U.S.C. Sec.

22 TCRP LRD 56 less and until the FTA’s approval or concurrence is obtained) terminate this Ground Lease by Notice to the other party. If this Ground Lease is terminated under this subsection, the parties shall be released from any and all obligations and liabilities that might thereafter arise under this Ground Lease except those that relate to actions to be taken by the parties upon the expira- tion of termination of the Term and/or this Ground Lease and those that by their terms survive the expiration or termination of this Ground Lease. Selected Transit Agency Requirements A. No Waiver of Sovereign Immunity Nothing in this Ground Lease shall be deemed or con- strued to constitute a waiver of TRANSIT AGENCY’s sovereign immunity. B. Anti-Deficiency Clause All obligations of TRANSIT AGENCY under this Ground Lease that directly or indirectly require the expenditure by TRANSIT AGENCY of any of its funds are subject to the appro priation and availability of funding through TRANSIT AGENCY’s budgetary procedures. C. Transit Agency Officials Not to Benefit No officer, board member, or employee or agent of TRANSIT AGENCY or any member of any such person’s family (which term “immediate family” shall, for purposes of this Section, mean the parent, spouse, sibling, child, grandparent, or grand- child of any of the foregoing persons), directly or through a third party, has or will have during his tenure with TRANSIT AGENCY or within one (1) year thereafter any financial or other interest in, or in common with, Tenant or any of its Affiliates. Tenant will comply, and will contractually obligate each of its third-party contractors at any tier to comply, with the provisions of Executive Orders 12549 and 12689, “Debarment and Suspension,” 31 USC §6101 note, and U.S. Department of Transportation regulations on Debarment and Suspension at 49 CFR Part 29, as they may be amended, supplemented, replaced or otherwise modified from time to time. Tenant shall include the requirements of the preceding sentence in each Sublease, license, or contract for work on the Leased Premises, and shall require each sublessee, licensee, or contractor for work on the Leased Premises to require compliance with those requirements and include them in any lower tier subcontract. D. Public Officials Not to Benefit No member (i.e., Representative or Senator) of or delegate to Congress, or any similar official, or the President or Vice Presi- dent of the United States, or any member of such person’s fam- ily (as defined above), shall be admitted to any share or part of this Ground Lease, or to any benefit that may arise therefrom, but this provision shall not apply if this Ground Lease is made with a corporation or other entity with which such official or family member has only a de minimis contractual or ownership interest. Tenant warrants, represents, and agrees that as of the G. Satisfactory Continuing Control Tenant acknowledges that TRANSIT AGENCY is the recipi ent of Federal grant moneys through the FTA and that those grant moneys funded, in whole or in part, TRANSIT AGENCY’s acquisition of the Leased Premises. Tenant fur- ther acknowledges that, pursuant to FTA grant requirements, TRANSIT AGENCY must demonstrate and retain “satisfactory continuing control,” as defined by the FTA from time to time, over the Leased Premises. Tenant agrees that this Ground Lease will be subject to any such requirement now or here after ap- plicable and, in furtherance but not in limitation of the fore- going, Tenant will not exercise any right given to it under this Ground Lease in a manner that compromises or diminishes TRANSIT AGENCY’s ability to retain “satisfactory continuing control” over the Leased Premises. For purpose of information, under current FTA regulations “satisfactory continuing con- trol” is defined as the legal assurance that FTA-funded property will remain available for use for its originally intended purpose throughout its useful life until disposition [; for this Overall Site, the originally intended purpose is as a Metrorail station and related transit functions]. H. The Federal Interest Tenant acknowledges the Federal interest in the Leased Premises and agrees that it will take no action which compro- mises or otherwise diminishes such interest. I. Other Federal Laws Tenant acknowledges that TRANSIT AGENCY must comply with various Federal statutes, regulations, orders, certifications, assurances and other laws, including those set forth in the FTA Master Agreement (available on the FTA’s website) governing transit projects supported by Federal assistance awarded through the FTA. Tenant agrees that it will take no action that could cause TRANSIT AGENCY to be out of compliance with such obliga- tion, and that Tenant will take no action permitted by State or local law to the extent such laws conflict with Federal law. J. FTA Approval or Concurrence Tenant acknowledges that this Ground Lease may be sub- ject to FTA’s approval or concurrence. If so, it shall be TRANSIT AGENCY’s obligation to obtain such approval or concurrence, and Tenant shall reasonably cooperate therein. [Such approval or concurrence shall be prima facie evidence that the FTA has agreed that TRANSIT AGENCY is retaining “satisfactory con- tinuing control” under the FTA’s current standards for purposes of Section ___ above.] Tenant also acknowledges that FTA’s ap- proval or concurrence may require Tenant’s compliance with certain laws, regulations and other requirements of the FTA im- posed upon TRANSIT AGENCY. If such approval or concur- rence is denied, this Ground Lease shall automatically terminate and be of no further force and effect upon receipt of notice of denial. If such approval or concurrence is neither obtained nor denied within [six (6) months] after the Effective Date, either party may, by Notice to the other, at any time thereafter (un-

TCRP LRD 56 23 Project, including current rents, forfeited tenant security depos- its applied to current rents, receipts from tenants for services, and amounts received from tenants for reimbursement of op- erating expenses, pass throughs and in settlement of their lease obligations (“Participating Rent”). Participating Rent shall be paid to TRANSIT AGENCY annually no later than April 1 of each calendar year. The payment of Participating Rent shall be accompanied by a copy of the financial statement required by Section ___. Fair Market Rental Value. Each owner and ground lessee of the TRANSIT AGENCY Joint Development Site and its man- agement agent shall use commercially reasonable business efforts to lease all space at the Project available for rent at the then-current fair market value rate for similar properties and uses in the Local Jurisdiction. If an owner or ground lessee of the TRANSIT AGENCY Joint Development Site fails to do so, any space that is not so leased shall be deemed to be leased at the then-current fair market value rent for purposes of calculating Participating Rent. Any space that an owner or ground lessee or its Affiliates may occupy shall not result in any reduction in Participating Rent payable; in the event an owner or ground lessee or its Affiliates shall occupy the TRANSIT AGENCY Joint Devel opment Site in whole or in part, they shall be treated as if they are paying fair market rent and Participating Rent shall be calculated accordingly. B. Capital Rent Payment. Each owner and ground lessee of the TRANSIT AGENCY Joint Development Site shall pay TRANSIT AGENCY “Capital Rent” equal to fifteen percent (15%) of that owner’s or ground lessee’s share of the net proceeds of Capital Events. As used in this Declaration, the net proceeds are the full (gross) transaction revenues to an owner or ground lessee of the TRANSIT AGENCY Joint Development Site (and any Affiliate receiving transaction revenues from such Capital Event) (i) less any reasonable and customary transactional costs incurred by that owner or ground lessee in connection with that Capital Event and documented on a settlement statement, including Im- positions customarily payable at such a Capital Event, transfer and recording taxes or similar documentary stamp taxes, charges for recording documents in the land records, title and survey costs, reasonable legal fees payable to outside counsel, and refi- nancing commissions and fees (but excluding operating expenses and expenditures from any reserve fund funded by amounts in- cluded in operating expenses or for which any offset or deduction was previously taken), and (ii) less repayment of that owner’s or ground lessee’s remaining Project debt secured by a Mortgage to the extent such repayment is actually made. TRANSIT AGENCY has the right to audit all revenues, expenses, and other payments asso ciated with such Capital Event. Capital Event Notices. Each owner and ground lessee of the TRANSIT AGENCY Joint Development Site shall deliver to TRANSIT AGENCY Notice of an anticipated Capital Event promptly following the execution of a contract, loan commit- ment or other binding agreement in anticipation of such an- ticipated Capital Event and no less than thirty (30) days prior to Effective Date no person described in this subsection, nor any Affiliate of such person, had any such interest in Tenant. Tenant must forthwith deliver written Notice to TRANSIT AGENCY of any breach of the foregoing warranty, representation, and agree- ment, and must make reasonable inquiries from time to time to determine whether any such breach has occurred. E. Gratuities In connection with this Ground Lease, or any amendments or modifications of this Ground Lease, the giving of, or offer- ing to give, gratuities (in the form of entertainment, gifts or other wise) by Tenant or any consultant, agent, representative, or other person deemed to be acting on behalf of Tenant or any consultant, agent, contractor, subcontractor or supplier furnish- ing material to or performing work under this Ground Lease, or any agent, representative, or other person deemed to be act- ing on behalf of such supplier or subcontractor, to any director, officer or employee of TRANSIT AGENCY, or to any direc- tor, officer, employee or agent of any of TRANSIT AGENCY’s agents, consultants or representatives, with a view toward secur- ing an agreement or securing favorable treatment with respect to the awarding or amending, or the making of any determina- tions with respect to performance under, this Ground Lease or any agreement that will be negotiated, is expressly forbidden. The terms of this Section will be broadly construed and strictly enforced. Any violation of this provision will constitute an Event of Default and will not be subject to cure. F. Noise, Light, Vibrations, Stray Electrical Current No claims shall be made by Tenant or any Subtenant against TRANSIT AGENCY arising from noise, light, vibration or stray electrical current caused from TRANSIT AGENCY’s operations. Tenant shall include a provision to this effect in its form Sub- leases and shall use Commercially Reasonable Business Efforts to ensure that such a provision is included in each executed Sub- lease; Tenant shall Notify TRANSIT AGENCY of any executed Sublease that does not include such a provision. Tenant shall de- fend, indemnify and hold TRANSIT AGENCY harmless from and against noise-related, light-related, vibration-related and stray current-related complaints, claims, demands, suits, actions and proceedings made or brought by owners, Subtenants or users of the Leased Premises and/or the Tenant Improvements and any damages, liabilities, costs and expenses arising there- from. The provisions of this Section will be in addition to any and all obligations and liabilities Tenant may have to TRANSIT AGENCY at common law and will survive the expiration or termina tion of this Ground Lease. Example Revenue Sharing Provisions A. Participating Rent Payable. Each owner and ground lessee of the TRANSIT AGENCY Joint Development Site shall pay TRANSIT AGENCY annually rent equal to ____ percent (_%) of all receipts re- ceived by that owner or ground lessee from the opera tion of the

24 TCRP LRD 56 subject to the requirements of the applicable development regulations (the “Affordable Housing Covenant”). Such ap- plicable development regulations include, without limita- tion, the City Land Use Code generally and, in particular, [Regulation citation] which significantly restricts residen- tial use of the street level portion of any development of the Property. As such, the Affordable Housing Covenant shall not prohibit use of the Property for street level non- residential uses as may be required by applicable develop- ment regulations. [Regulation citation] defines “ Affordable Housing” to mean “long-term housing for persons, fami- lies, or unrelated persons living together whose adjusted income is at or below [eighty] percent of the median in- come, adjusted for household size, for the county where the housing is located.” This restriction shall last for a period of not fewer than [fifty (50) years]. Developer shall execute an Affordable Housing Covenant Agreement, in a form ap- proved by Agency and Developer, which approvals shall not be unreasonably conditioned, delayed or withheld, and which Affordable Housing Covenant shall be recorded in the real property records of County binding upon Devel- oper, any mortgagee, and their respective successors and assigns. B. If the Property has been subjected to a condominium declara tion pursuant to Section [ ] hereof, and if the afford- able housing requirements of the Fundamental Project Ele- ments will be satisfied in fewer than all of the Units created, then those Units not needed to satisfy such affordable hous- ing requirements may be exempted or otherwise released by Agency from the Affordable Housing Covenant. C. The terms and conditions of this Section [___] shall ex- pressly survive the Closing, shall not merge with the pro- visions of the Bargain and Sale Deed, or any other closing documents. D. Events of Default (See Appendix A-4, Article 23: Default Provisions). These provisions are quite extensive and will not be repeated here. Suffice it to say these are critical provi- sions in protecting the Transit Agency as well as the Federal interest in the context of a long-term lease. the scheduled closing date of the anticipated Capital Event. The Notice shall set forth each owner’s or ground lessee’s prelimi- nary estimate of the gross proceeds, net proceeds and Capital Rent anticipated therefrom. The Notice shall be for informa- tional purposes only, and shall not create an expectation of, nor entitle TRANSIT AGENCY to rely upon, the closing of such anticipated Capital Event or the amount of Capital Rent there- from; TRANSIT AGENCY shall be entitled to Capital Rent only upon the occurrence of a Capital Event and only in the amount based upon the actual net proceeds of such Capital Event. C. Density Bonus. If, during the fifteen (15)-year period following the Ef- fective Date, an owner or ground lessee of the TRANSIT AGENCY Joint Development Site obtains new or modified zon- ing, land use or other approvals allowing the gross square feet of floor area in improvements entitled to be developed on the TRANSIT AGENCY Joint Development Site to be increased over the amount approved as of the Effective Date (“Additional Approvals”), that owner or ground lessee shall pay TRANSIT AGENCY the Additional Approvals Fair Market Value of each gross square foot of floor area added or approved (the “Density Bonus”), pursuant to the following: (a) Give Notice. Each owner and ground lessee of the TRANSIT AGENCY Joint Development Site shall deliver written Notice to TRANSIT AGENCY of the granting of Additional Approvals within ten (10) days of receiving such Additional Approvals. (b) Appraisal Process. The market unit value for the gross square feet of floor area of all improvements approved for the TRANSIT AGENCY Joint Development Site by the Addi tional Approvals (the “Additional Approvals Fair Market Value”), expressed as dollars per square foot of floor area, shall be determined as set forth in this subsection. (c) Payment Due. The Density Bonus shall be paid within sixty (60) days after the determination of Additional Approvals Fair Market Value. D. Recharacterizing Gross Income or Net Proceeds An owner or ground lessee of the TRANSIT AGENCY Joint Development Site shall not take any action to recharacterize, or the effect of which is to recharacterize, rents, receipts, revenues, costs or expenses of the Project so as to result in a diminution in Participating Rent, Capital Rent, Density Bonus or any other sum payable under this Declaration to TRANSIT AGENCY. Affordable Housing Covenants The sale of the Property shall be subject to the following Covenants: A. Agency will reserve and retain from its conveyance of the fee estate an exclusive and irrevocable covenant, restriction and/or right of use limiting the residential use of the Prop- erty to affordable housing, [in compliance with statute and]

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In the United States, transit oriented development (TOD) is now recognized as a critical element in the planning, development, and execution of transit projects. Recent legislation has been designed to streamline the approval processes for new transportation projects, focus more on safety, and establish new programs to advance critical freight projects.

The TRB Transit Cooperative Research Program's TCRP Legal Research Digest 56: Joint Development Agreements Using FTA Funds or FTA-Funded Assets aims to clarify the Federal Transit Administration (FTA) assisted joint development process and attempts to separate public perceptions (and misperceptions) about TOD from reality. It is an update to TCRP Legal Research Digest 12:The Zoning and Real Estate Implications of Transit-Oriented Development.

Appendix C incudes sample model agreement forms, developed from Washington Area Transit Authority’s Office of Real Estate and Station Planning Templates.

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