News

Sign Posting Requirements

Every few years I like to remind clients of the various requirements relating to the sign posting requirements for companies in the property management business. Failure to post the signs can cost as much as $10,000 per violation, so it is a good idea to stay up to date on the issue. This update relates to federal requirements; your state may have additional requirements, so check with your State s Department of Labor.   Federal Minimum Wage Sign: Must be posted by anyone with one or more employees. The sign must be posted in a conspicuous place where employees are likely to see it. The July 2007 revision of the poster is still valid and may be obtained from the DOL at 866-487-2943. Equal Employment Opportunity Sign: Must be posted by anyone with 15 or more employees. The sign must be posted in a conspicuous place where employees are likely to see it. The penalty for failure to post this sign is up to $100 per violation. The sign may be obtained from the DOL at the above number and the most recent version is dated November 2009. Job Safety and Health Protection Sign: Must be posted if you have one or more employees. The sign must be posted in a conspicuous place where employees are likely to see it. Copies may be obtained from OSHA at 800-321-6742 and the most recent version says "OSHA 3165-12-06R" in the lower right hand corner. Employee Polygraph Protection Act Sign: Must be posted if you have one or more employees. The sign must be posted in a conspicuous place where employees are likely to see it. Civil penalties of up to $10,000 per violation are possible. The sign may be obtained from the DOL at the number shown above. The June 2003 version is the most recent. Family and Medical Leave Act Sign: Must be posted by anyone with 50 or more employees. DOL can impose fines of up to $100 per violation. It can be obtained from the DOL and the most recent edition is dated January 2009. Uniformed Services Employment and Reemployment Rights Act Sign: Must be posted by employers of service members returning from a period of uniformed service, including those called up by the reserves or National Guard. A copy may be obtained from the DOL at 866-487-2365 and the latest version is dated October 2008.    

HUD Publishes Revised REAC Scoring Protocol

HUD has made a number of changes in the way REAC inspections will be scored, beginning with inspections on or after January 1, 2013. The changes are noted in Compilation Bulleting Revision 2.3.   HUD has added a "point loss cap" to limit the impact of a single deficiency in reducing an overall property score. Each of the five inspectable areas will have a cap that prevents the scoring value of any individual defect from exceeding a defined number.   Key changes were also made to the Dictionary of Definitions: Infestation/Insects: the inspector must now see a live roach in order to score a defect - not a dead roach or roach droppings; Hazards/Sharp Edges: resident owned items, such as broken mirrors or missing fan covers, will now fall under "Hazards/Other," and will be non-scoring; Fire Extinguishers: resident-owned fire extinguishers will be non-scoring "Hazards/Other"; and Windows: all cited building exterior windows will now be non-scoring, but window screen defects for common areas and units have increased in importance.   When we introduce our new service of pre-MOR reviews in 2013, these will be areas that we will review as part of the pre-MOR inspection.   Please feel free to contact me with any questions on this issue.

HUD Implements New Rental Assistance Demonstration Program

On July 26, 2012, HUD published a Final Notice in the Federal Register implementing the Rental Assistance Demonstration (RAD) Program. The program offers new opportunities to public housing agencies and some private owners of affordable housing projects. The program is designed to test new methods to put public housing projects and certain HUD-assisted multifamily properties on a sound economic footing , as well as make it easier to obtain private debt and equity for renovations. The program has two components - "competitive," and "non-competitive." Under the competitive program, PHAs may apply to HUD to convert public housing projects to either project-based Section 8 or project-based vouchers, with contracts of up to 20-years. This same choice is available to owners of Section 8 Moderate Rehabilitation. The non-competitive component is open to owners of the HUD "orphan" subsidy programs - mod rehab, Rent Supplement, and the Section 236 Rental Assistance (RAP) program. In this program, owners may apply to HUD to convert tenant protection vouchers to project-based vouchers, with terms of 15-20 years. Owners who are selected for participation in the RAD program will be obtaining a more reliable, long-term source of rent subsidies, giving the properties a better chance to obtain long-term debt and equity. It is likely that many RAD deals will utilize the LIHTC as the source of equity. Obtaining the long-term rental assistance is likely to make tax credit investors more comfortable about participating in some of these deals, which to date, have attracted very little interest from the LIHTC investment industry.

GAO Report on RHS Subsidy Errors

The U.S. Government Accountability Office (GAO) completed a study in 2012 that examined improper RA payments by the Rural Housing Service (RHS). The study found that between 2007 and 2010, RHS made from $15 million to $35 million in errors regarding RA payments. To assist in reducing this error rate, GAO has recommended that Congress consider authorizing RHS access to the HHS New Hires Data Base and to the SSA benefits database. This proposal could lead to RHS participation in the EIV program, although there is no indication that this will happen anytime soon.

Possession of Drug Related Paraphernalia May Not be Reason for Application Denial

Management companies wishing to make possession of drug related paraphernalia a violation of criminal screening policies should carefully examine the definition of "drug-related criminal activity" contained in their screening procedures. The Housing Authority of Indiana County (HAIC), PA, denied a voucher to an applicant for a possession of drug paraphernalia conviction one month prior to applying for a voucher. The applicant appealed, but the hearing officer upheld the voucher denial. However, the decision of the hearing officer was overturned by both the trial and appeals court. HAIC argued that the possession of drug paraphernalia is inextricably linked to drug use, but, using the HUD definition of "drug related criminal activity" as contained in 24 CFR 5.982.553(a)(2)(ii)(A)(1), the courts ruled otherwise. HUD s definition of "drug related criminal activity" is "The illegal manufacture, sale, distribution, or use of a drug, or the possession of a drug with intent to manufacture, sell, distribute or use the drug." Possession of drug paraphernalia is not part of the HUD definition. As stated by the court, while possession of drug paraphernalia may be a crime, "the elements of the crime of possessing drug paraphernalia do not require actual possession of a drug." "A conviction for drug related criminal activity requires the possession of a controlled substance; possession of drug paraphernalia does not." Owners and agents wishing to make possession of drug paraphernalia part of a property s criminal screening policy for which tenancy can be denied should include such a statement in their criminal screening policy.

Dealing with Reverse Mortgages on Affordable Housing Properties

Dealing with Reverse Mortgages on Affordable Housing Properties   While not common on affordable housing properties such as LIHTC, Section 8 or Section 515, occasionally, an applicant with a reverse mortgage will turn up, and staff must know how to deal with the valuation of this particular asset. It is much easier than most managers think, and if they know how to deal with regular real estate valuation, they will have no problem with a reverse mortgage. First, some basic information on what a reverse mortgage is.   A reverse mortgage is a loan that lets older homeowners convert part of the equity in their home into cash that does not have to be paid back as long as they live in the home. To be eligible, the homeowner must be at least age 62, own the home outright (or have a very small balance on their loan), and live in the home. The homeowner may receive the cash either as a lump sum, a line of credit, regular monthly checks, or a combination of these. The homeowner still owns the home - not the bank. Repayment is due when the borrower dies, sells the home, or lives someplace else for 12 months. At that point, the loan must be repaid (money borrowed plus accrued interest and fees) either with the proceeds from the home sale, or with money from another source, in which case the owner retains ownership of the property.   For purposes of establishing the value of a home with a reverse mortgage, it should be treated exactly like any real estate with a mortgage. Establish the fair market value of the property with an assessment, appraisal, broker statement, contract, etc. Deduct a reasonable cost of sale (commissions, closing costs, etc.), and deduct the payoff amount of the reverse mortgage. The result is the cash value of the home, and that is what should be used to show the value of the asset. Also, while someone with a reverse mortgage normally will not rent the home when they move-out, it could happen, so be sure to ask about and verify any rental income. This should be considered income from the asset.

Use of Residual Receipts to Offset HAP Payments (Notice H-2012-14)

HUD Notice H-2012-14 was published on August 2, 2012 requiring the use of "New Regulation" Section 8 Housing Assistance Payments (HAP) Contracts residual receipts to offset project-based Section 8 HAP payments. This Notice applies to Section 8 New Construction/Substantial Rehabilitation projects and projects that are subject to both a Section 202 Direct Loan and a new regulation Section 8 HAP contract. The Notice does not apply to Section 202 and 811 PRAV and PAC projects. The requirements in the Notice apply for all HAP vouchers submitted after October 2, 2012. The purpose of this requirement is to lower the amount of Section 8 subsidy required by projects that have significant amounts of available residual receipts. Owners will be allowed an initial reserve ("Retained Balance") of $250 per unit for project purposes. Residual receipt balances in excess of $250 per unit must be applied on a monthly basis to offset Section 8 HAP payments. Offsets will continue until the Residual Receipts account reaches the Retained Balance level of $250 per unit. Owners with balances at or below the $250 per unit level will voucher for the full monthly HAP payment as they have in the past. At the end of the project s fiscal year, all surplus cash remaining after payment of any permitted distributions must be deposited into the Residual Receipts account. Owners who believe they may be subject to the requirements of this Notice should obtain the Notice and review it carefully. Questions regarding applicability should be directed to the Project Manager in the HUB/Program Center with jurisdiction over the project or the Desk Officer in the Office of Asset Management, HUD Headquarters.

HUD Eliminates Two Income Exclusions and Adds Others

HUD Amends List of Income Exclusions On July 24, 2012, HUD published in the Federal Register additional types of income that are excluded from income for purposes of determining eligibility for HUD housing programs. These exclusions also apply to the LIHTC program. Two exclusions have been repealed by Congress, and have thus been removed from the list of excluded income: Payments received under programs funded in whole or in part under the Job Training Partnership Act. When the Workforce Investment Act was enacted in 1998, it automatically repealed the JTPA. (See #1 below for the current exclusion). Any allowance paid to a child suffering from spina bifida who is the child of a Vietnam veteran. This source of income would now be included in income. The exclusions that are being added are as follows: Allowances, earnings and payments to individuals participating in programs under the Workforce Investment Act of 1998; Any amount received under the School Lunch Act and Child Nutrition Act of 1966, including reduced-price lunches and food under the Special Supplemental Food Program for Women, Infants and Children (WIC); Payments, funds or distributions authorized, established, or directed by the Seneca Nation Settlement Act of 1990; Payments from any deferred Department of Veterans Affairs disability benefits that are received in a lump sum amount or in prospective monthly amounts as provided by an amendment to the definition of annual income in the U.S. Housing Act of 1937 by Section 2608 of the HERA of 2008; Compensation received by or on behalf of a veteran for service-connected disability, death, dependency, or indemnity compensation as provided by an amendment by the Indian Veterans Housing Opportunity Act of 2010 to the definition of income applicable to programs authorized under the Native American Housing Assistance and Self-Determination Act of 1996; and A lump sum or a periodic payment received by an individual Indian pursuant to the Class Action Settlement Agreement in the case entitled Elouise Cobell et al v. Ken Salazar et al., United States District Court, District of Columbia, as provided in the Claims Resolution Act of 2010.