Upon the determination by the Commissioner of Housing of the termination of the acute shortage of moderate rental housing in the locality or upon the determination by the Commissioner of Housing and the developer owning a moderate rental housing project that it is in the best interest of the state and such developer, such project or any part thereof may be sold by the developer upon terms and conditions approved by the Commissioner of Housing.

(a) Such project or any part of such project sufficiently separable from other property retained by the developer, unless the developer deems it advisable to sell such project as individual one-family or two-family dwelling units, shall be sold, in accordance with regulations adopted by said commissioner which shall establish the order of priorities among the following eligible purchasers: A cooperative or condominium association, membership in which is open to any tenants of the project or part of the project to be sold, the United States Department of Housing and Urban Development or a private sponsor, provided any such purchaser shall agree to use such project for purposes of housing for persons or families of moderate income for as long as a need for such housing continues to exist, as determined by said commissioner, and provided further no tenant occupying a dwelling unit of the project at the time of sale shall be evicted except for cause.

(b) In the sale of a one-family or two-family dwelling unit in a project, or of shares in a cooperative or condominium association purchasing a project or part of a project, preference shall be given to buyers in accordance with the following schedule: (1) First preference shall go to persons who are tenants of the project at the time of sale and whose incomes are below the levels for continued occupancy in the project; (2) second preference shall go to persons who are tenants of the project at the time of sale other than those tenants specified in subdivision (1) of this subsection; (3) third preference shall go to applicants who are residents of the community on the waiting list for admission to moderate rental housing projects in the community and whose incomes are below the maximum limits for admission to such moderate rental housing projects; (4) fourth preference shall go to veterans who are residents of the community and whose incomes are below the maximum limits for admission to occupancy of such moderate rental housing projects in the community; (5) fifth preference shall be given to other residents of the municipality, including occupants of publicly-assisted housing projects whose incomes are below the levels for continued occupancy in moderate rental housing projects in the community. No sale or lease of one-family or two-family dwelling units, or of a share in a cooperative or condominium association owning a housing project, originally purchased from the authority according to this section, shall be made to any person who does not meet the qualifications of one or more of the above categories without the approval of the Commissioner of Housing and any deed conveying such dwelling units or housing project shall state this restriction, which shall run with the land until released by written instrument in recordable form executed by said commissioner, and which may be enforced by said commissioner.

(c) The purchase price of a project or any part thereof may be payable by a purchase money note only when the cost of the project was financed with a loan or deferred loan by the state. Each purchase money note shall provide for its complete amortization by periodic payments within a period not exceeding forty-one years from its date, shall bear interest at a rate to be determined by the State Bond Commission and shall be secured by a first mortgage on the dwelling unit purchased, provided when the sale is to a tenant of the project or to a cooperative or condominium association, membership in which is open to any tenants of the project or part of the project to be sold, the commissioner may set an interest rate on such purchase money note commensurate with the amount by which the income of any such individual tenant purchaser or of any tenant member of a cooperative or condominium association exceeds the maximum limits permitted for continued occupancy of such project, but in no case shall such interest rate be set below the minimum determined by the State Bond Commission.

(d) In the event that the original purchaser of a one-family or two-family dwelling unit sells, assigns, transfers or otherwise conveys any interest in such unit, the entire unpaid principal balance of the note, with interest thereon, shall become due and payable. In the event that the original purchaser of a one-family or two-family dwelling unit ceases to occupy said unit, the entire unpaid principal balance of any loan, made pursuant to this section on and after April 9, 1976, with interest thereon, may become due and payable at the discretion of the commissioner. If such sale, assignment, transfer or conveyance takes place within seven years of the original purchase, the state, acting by and in the discretion of the commissioner, may recapture a portion of the assistance it provided to finance the purchase of the unit, to be determined as follows: The original purchaser shall pay to the state an amount equal to the sum of (1) additional interest representing the difference between the actual interest paid by the original purchaser on the permanent mortgage loan and the interest that the original purchaser would have paid had the terms of the mortgage loan required interest at a rate of eight per cent per annum, from the date of execution of the mortgage loan to the date of prepayment of the mortgage loan; and (2) fifty per cent of the net appreciation if the unit is resold in the first, second or third year, thirty per cent of the net appreciation if the unit is resold in the fourth or fifth year and twenty per cent of the net appreciation if the unit is resold in the sixth or seventh year following the original purchase. Notwithstanding the provisions contained in this subsection, the total amount of such recapture shall not exceed the net gain realized upon the resale of the unit. Permanent mortgage documents provided to original purchasers on and after July 1, 1987, shall contain provisions necessary to fulfill the requirements of this subsection.

(e) The proceeds of any sale of any project, or of any part thereof, the cost of which was financed with a loan or deferred loan by the state to a housing authority, after payment of all necessary expenses incident to such sale, shall be applied to liquidate the outstanding balance of such loan or deferred loan. To this end, the authority shall endorse each purchase money note received by the authority in payment of the purchase price to the order of the state without recourse and shall deliver such note, together with a duly executed assignment of the mortgage securing the same, to the Commissioner of Housing, and the State Treasurer shall credit the face amount of such note as having been paid upon such loan. If the proceeds of the sale of such project or of any part thereof, including as such proceeds the face amount of any purchase money note received by an authority and endorsed and delivered by it to the Commissioner of Housing, as aforesaid, are more than sufficient to liquidate the outstanding balance of such loan, such proceeds shall be applied toward the outstanding balance, if any, on any loan or deferred loan made pursuant to this part on any other project owned and operated by such authority. If any balance remains after all such loans or deferred loans have been liquidated, an amount equal to one-half of any balance remaining shall be retained by or paid over to the state and an amount equal to the remaining one-half of such balance shall be retained by or paid over to the authority for payment by it to the municipality in which the project is located. The proceeds of the sale of any project the cost of which was financed by notes or bonds issued by the authority and guaranteed by the state, or of any part thereof, after payment of all necessary expenses incident to such sale, shall be applied so far as practicable to the redemption of all such outstanding notes or bonds. If such proceeds are more than sufficient to redeem all such outstanding notes and bonds, one-half of any balance remaining shall be paid over to the state and the remaining one-half of such balance shall be paid over to the authority for payment by it to the municipality in which the project is located. If such proceeds are insufficient for complete redemption of such notes and bonds, any balance remaining after redemption of the largest possible amount thereof shall be paid over to the state. No such sales shall affect the obligation of the authority upon such notes or bonds or the obligation of the state on its guarantee thereof. The proceeds of the sale of any project, or any part thereof, the cost of which was financed, wholly or partially, by a grant, after payment of all necessary expenses incident to such sale, shall first be used for the repayment of such grant to the state.

(f) The proceeds of any sale of any project, or of any part thereof, the cost of which was financed with a loan or deferred loan by the state to a nonprofit corporation, after payment of all necessary expenses incident to such sale, shall be applied to liquidate the outstanding balance of such loan or deferred loan. To this end, the nonprofit corporation shall endorse each purchase money note received by the nonprofit corporation in payment of the purchase price to the order of the state without recourse and shall deliver such note, together with a duly executed assignment of the mortgage securing the same, to the Commissioner of Housing, and the State Treasurer shall credit the face amount of such note as having been paid upon such loan or deferred loan. If any balance remains after the loan or deferred loan has been liquidated, such balance shall be paid over to the state for deposit to the credit of the General Fund. The proceeds of the sale of any project, or any part thereof, the cost of which was financed, wholly or partially, by a grant, after payment of all necessary expenses incident to such sale, shall first be used for the repayment of such grant to the state. If any balance remains after the grant has been repaid, such balance shall be paid over to the state for deposit to the credit of the General Fund.