HUD released HUD Compilation Bulletin on August 12, 2014, providing updated guidance to REAC inspectors regarding when certain areas of properties are not to be inspected for REAC purposes and changing the way certain inspection elements will be reviewed. These changes apply to all properties that are subject to HUD REAC inspections, as well as LIHTC properties that are subject to State HFA inspection under the Uniform Physical Condition Standard (UPCS).
Following are the changes owners and managers should be aware of:
1. Commercial Space: Commercial space in projects that are not HUD insured will not be inspected. This should apply for LIHTC properties also since such space may not be included in eligible basis. Examples would be retail shops, rented office space, commercial parking, etc. However, if these spaces share equipment with part of the building that is part of the HUD or LIHTC project, the equipment will be inspected. If there is an issue, it will be reported on REAC inspections as “Other Hazard,” which is a non-scoring category. Since LIHTC inspections are not scored in the same manner as REAC, this may still be reported to the IRS.
2. Building Elements that have been Removed from Service: If a building component has been completely and permanently removed from service, it is not to be inspected. Examples would include trash chutes that are no longer used, as long as the doors have been welded or screwed shut to show an intention to permanently remove from service; property access gates, as long as the gates have actually been removed from the property, etc. If there is any way the item could be brought back to a usable condition, it will be inspected.
3. Model Units: Permanent models will be inspected as common area. Models that are available for rent will be considered “vacant” units.
4. Exposed Bare Wires: These are now defined as “non-insulated high voltage conductors, connectors, and terminals.” Fully insulated and capped wires will not be considered a defect – even if in an open junction box. Junction boxes that show exposed, uninsulated wiring will be cited as exposed wires. Essentially, this means that a junction box with a missing cover is no longer reportable, as long as there are no exposed wires. [It is still recommended that junction boxes have secure covers at all times].
5. Call for Aid Systems: If all pull cords have been removed and only the light fixtures over the doors remain (for auto release door hardware), these items will no longer be evaluated.
While these are some of the major changes that owners and managers should be aware of, anyone responsible for preparing properties for physical inspections that are subject to UPCS should obtain a copy of the HUD Bulletin and review it for all changes.