HUD HCV Guidebook § 4.3

The PHA must21 pay the housing assistance payment promptly to the owner. The HAP contract
provides for penalties against the PHA for late payments after the first two calendar months of the
HAP contract term. For the penalties to take effect, all of the following circumstances must22 apply:
    Penalties imposed are in accordance with generally accepted local rental market practices
       and law governing penalties for late payment of rent by a tenant;
    It is the owner’s normal business practice to charge such penalties for assisted and
       unassisted tenants; and
    The owner also normally charges such penalties against the tenant for late payment of family
       rent to owner.

The PHA may add HAP contract provisions that define when the housing assistance payment by the
PHA is deemed received by the owner. For example, receipt of payment may be defined as “upon
mailing by the PHA” or “upon actual receipt by the owner.”23 The PHA may only use administrative
fee income or the administrative fee reserves for the program to pay a late payment penalty. The
PHA may not use other program receipts for this purpose.

The PHA does not have to pay any late payment penalty if HUD determines that the late payment was
due to factors beyond the PHA’s control24. Nor does the PHA have to pay a late payment penalty if
the payment was intentionally delayed, abated, denied due to an owner breach of the HAP contract.