Ground Lease Project Requirements
Summary
CTCAC has revised requirements for projects developed under a ground lease. Starting January 1, 2026, CTCAC will no longer be using the Lease Rider Agreement (LRA) for projects developed under a long-term lease, with limited exception.
Key Changes for Ground Lease Projects
In 2017, CTCAC implemented the LRA process for projects developed under leasehold interests. On December 10, 2025, CTCAC adopted amendments to its regulations and revised the contracting requirements for these projects. (Cal. Code Regs., tit. 4, § 10337, subd. (a)(1).)
Under the revised process, instead of executing and recording a separate LRA between the lessee, lessor, and CTCAC, the lessor will become a limited signatory to the regulatory agreement and sign the regulatory agreement, acknowledging and agreeing solely to the following provisions:
- To consent and approve the terms of the regulatory agreement to the extent such consent and approval is reasonably necessary or required under the long-term lease;
- To waive any provisions of the long-term lease which would prevent the Owner’s compliance with the Regulatory Agreement;
- To, except as provided in (D), provide CTCAC with written notice of long-term lease termination, subordination, cancellation, surrender, amendment, or modification and CTCAC shall be deemed to have consented to any such noticed variation if CTCAC fails to consent, deny or request clarification within 30 days of delivery of such notice;
- To terminate the long-term lease after Owner’s default only after both expiration of any grace period given to the Owner to cure a default and providing CTCAC written notice specifying each default, the methods of cure, and a reasonable amount of time, but no less than 90-days starting the date CTCAC is provided written notice of default, to cure the default; and
- To, upon reasonable request, promptly provide CTCAC a written statement declaring, to the best of lessor’s knowledge, any information relating to the condition of the property and the long-term lease reasonably requested by CTCAC.
Temporary Use of the Existing LRA
Through December 31, 2026, projects may request use of the existing CTCAC LRA, if they can demonstrate that commitments or contracts with the ground lessor were executed before January 1, 2026, and those agreements assumed use of the CTCAC LRA.
Regulatory Agreement Process for Ground Lease Projects
The Regulatory Agreement approval process will generally follow the same procedures currently outlined on the CTCAC website, except as noted here. Once prepared, CTCAC will send the CTCAC regulatory agreement to the development team to be reviewed by all parties. After CTCAC completes its final review and approval, it will circulate the final regulatory agreement for signatures.
It is the development team’s responsibility to obtain the lessor’s review and signature if the lessor is not directly engaged with CTCAC on the project. Please review the Placed in Service Package and Tax Form(s) Request webpage for more information on the placed-in-service process.
IRS Form 8609 and/or FTB Form 3521A will not be issued until the Regulatory Agreement is executed and recorded in the county where the project is located. (Cal. Code Regs., § 10322, subd. (i)(2).)
Exhibit A provides an example regulatory agreement showing the lessor provisions (Section 27), signature block, and corresponding edits to align the regulatory agreement with incorporation of the lessor provisions. This language will be standardized across regulatory agreements involving leasehold interests.
Questions?
For additional questions, contact your placed-in-service analyst or program managers at 916-654-6340.