Cal. Civ. Code § 0770-03-01-.09

(1) Annual and Special Adjustments.

(a) Contracts Rents will be adjusted as provided in this rule upon submittal to the Agency by the
Owner of a revised schedule of Contracts Rents, provided that the unit is in decent, safe, and
sanitary condition and that the Owner is otherwise in compliance with the terms of the Lease and
Contract. Subject to the foregoing, adjustments of Contract Rents will be as follows:

1. The Annual Adjustment Factors which are published annually by HUD (see 24 CFR Part
888) will be utilized. On or after each anniversary date of the Contract, the Contract
Rents may be adjusted effective with the month following the submittal by the Owner of a
revised schedule of Contract Rents which may be no higher than Rents established by
applying the applicable Annual Adjustment Factor most recently published by HUD to
the Contract Rent minus the monthly amortization amount of the rehabilitation loan, or
the Contract Rent established at the end of the rehabilitation loan term. These increased
Contract Rents must then be examined in accordance with Rule 0770-31-.09 (2) and may
adjusted accordingly. Contract Rents may be adjusted upward or downward, as may be
appropriate; however, in no case may the adjusted rents be less than the Contract Rents
on the effective date of the Contract except as otherwise provided.

2. A special adjustment, subject to HUD approval, to reflect increases in the actual and
necessary expenses of owning and maintaining the unit which have resulted from
substantial general increases in real property taxes, utility rates, assessments and utilities
not covered by regulated rates, may be recommended by the Agency for approval by
HUD but only if and to the extent that the Owner clearly demonstrates that these general
increases have caused increases in the Owner’s operating costs which are not adequately
compensated for by annual adjustments. The Owner must submit financial information to

the Agency which clearly supports the increase. For Contracts of more than twenty units,
the Owner must submit audited financial information.

(2) Overall Limitation.

(a) Notwithstanding any other provisions of this part, adjustments as provided in this section must
not result in material differences between the rents charged for assisted and comparable
unassisted units, as determined by Agency (and approved by HUD in the case of adjustments
under Rule 0770-3-1-.09 (1) (b). However, unless the rents have been adjusted this limitation
should not be construed to prohibit differences in rents between assisted and comparable
unassisted units to the extent that differences existed with respect to the initial Contract Rents.

Authority: T.C.A. §13-23-115 (18). Administrative History: Original rule filed July 13, 1982; effective August 12,
1982.