24 C.F.R. § 886.320
§ 886.320 Default under the contract. (24 CFR Part 886)
Operative Text
The contract shall contain a provision to the effect that if HUD determines that the owner is in default under the contract, HUD shall notify the owner of the actions required to be taken to cure the default and of the remedies to be applied by HUD including recovery of overpayments, where appropriate, and that if the owner fails to cure the default within a reasonable time as determined by HUD, HUD has the right to terminate the contract or to take other corrective action, including recission of the sale. When contract termination is under consideration by HUD, HUD shall give eligible families an opportunity to submit written and other comments. Where the project is sold under the arrangement that involves a regulatory agreement between HUD and the owner, a default under the regulatory agreement shall be treated as default under the contract.
Under 24 CFR Part 886 § 886.320, every housing assistance contract must include a default clause spelling out what happens when HUD finds that an owner has failed to meet the contract's requirements. HUD must first notify the owner of what steps are needed to fix the problem and what remedies—such as recovering overpayments—may be applied. If the owner does not correct the default within a timeframe HUD considers reasonable, HUD may terminate the contract or take other corrective actions, which can include rescinding a property sale. Eligible families living in the affected project must be given a chance to submit written or other comments before any contract termination is finalized, and a default under a related regulatory agreement is treated the same as a default under the contract itself.
Plain English — not legal advice.
Owners operating under a housing assistance contract governed by 24 CFR Part 886 § 886.320 are generally expected to maintain full compliance with all contract terms, since HUD retains the authority to declare a default and demand corrective action. A compliant operator typically responds promptly and thoroughly to any HUD notice of default, documenting the steps taken to cure identified deficiencies within the timeframe HUD establishes. Owners who have acquired a project through a sale arrangement that includes a regulatory agreement should be aware that a breach of that agreement carries the same consequences as a direct contract default, up to and including contract termination or rescission of the sale.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
Tenants living in projects covered by 24 CFR Part 886 § 886.320 have a procedural right to participate in the process: before HUD can terminate a housing assistance contract, eligible families must be given an opportunity to submit written comments and other input. This means tenants are not simply passive observers when a contract termination is under consideration—their voices are formally part of the review process. Tenants who believe a default situation is affecting their housing may consider reaching out to a local tenant-rights organization or HUD's regional office to learn more about how the comment process works and what other options may be available under this provision.
General guidance for tenants — not legal advice for your specific situation. Consult a tenant-rights organization or attorney for advice on your case.
Generated September 4, 2026 — auto-generated, not yet human-reviewed. See /transparency for methodology.
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