HUD Housing Notice § 2016-05

                         U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                                       WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSING-
FEDERAL HOUSING COMMISSIONER




    Multifamily Regional Center/Hub Directors
                                                              NOTICE H 2016-05
                                                              Issued: March 31, 2016
    Multifamily Program Center Directors
    Multifamily Operations Officers                           Expires:      This notice remains in effect
    Multifamily Directors of Project Management                              until amended, superseded,
    Multifamily Field Counsel                                                or rescinded.
    Multifamily Owners and Management Agents
                                                              Cross References: HUD Handbook
                                                              4381.5 REV-2 The Management Agent
                                                              Handbook




Subject: Revision of Tenant Participation Requirements in accordance with 24 CFR Part 245

    A. Purpose

        This notice restates requirements issued through Notice H 2014-12 and revises penalties for
    non-compliance. Specifically, the revisions expand the property types that may be assessed civil
    money penalties to additionally include non-insured projects that have a project-based Section 8
    contract that has been renewed under the Multifamily Assisted Housing Reform and
    Affordability Act of 1997 (MAHRA). In addition, the notice expands discussion of accessible
    meeting space and clarifies the role of HUD-initiated conciliation in resolving tenant complaints.
    All other sections of Notice H 2014-12 are incorporated herein with minor or no revisions.

         The Department of Housing and Urban Development’s regulations governing tenant
     participation in multifamily housing projects are found at 24 CFR Part 245 Subpart B. These
     regulations reflect the Department’s commitment to tenant participation, individually and
     through legitimate tenant organizations as defined in 24 CFR 245.110. The Department believes
     that tenant participation is an important element to maintaining sustainable projects and
     communities. This Notice addresses available sanctions and the use of civil money penalties as
     tools to enforce the Department’s commitment to tenant participation.

    B. Applicability

        Except as otherwise expressly limited in this section, this part applies in its entirety to a
     mortgagor or owner of any multifamily housing project that meets any of the following:

        1. For a project that is subject to a HUD insured or Secretary-held mortgage under the
           National Housing Act. The project has a mortgage that:

             a. has received final endorsement on behalf of the Secretary and is insured or held by
                the Secretary under Title II of the National Housing Act; and
             b. is assisted under:
                                     www.hud.gov       espanol.hud.gov
      i.   Section 236 of the National Housing Act (12 U.S.C. 1715z–1);

     ii.   The Section 221(d)(3)/(d)(5) Below Market Interest Rate (BMIR) Program 12
           U.S.C. 1715(d)(3)/(d)(5);

    iii.   The Rent Supplement Program (12 U.S.C. 1701s); or

    iv.    The Section 8 Loan Management Set-Aside Program (LMSA) following
           conversion to such assistance from the Rent Supplement Program
           assistance.

2. Formerly HUD-owned project. The project, before being acquired by the
   Secretary was assisted under:

   a. Section 236 of the National Housing Act (12 U.S.C. 1715z–1);

   b. The Section 221(d)(3)(d)(5) BMIR Program (U.S.C. 1715(d)(3)/(d)(5));

   c. The Rent Supplement Program (12 U.S.C. 1701s); or

   d. The Section 8 LMSA Program following conversion to such assistance
      from assistance under the Rent Supplement Program, and

   e. Was sold by the Secretary subject to a mortgage insured or held by the
      Secretary and includes an agreement to maintain the low- and moderate-
      income character of the project.

3. State or local housing finance agency projects. The project receives assistance
   under Section 236 of the National Housing Act (12 U.S.C. 1715z-1) or the Rent
   Supplement Program (12 U.S.C. 1701s) administered through a state or local
   housing finance agency, but does not have a mortgage insured under the National
   Housing Act or held by the Secretary.

4. The project receives project-based assistance under Section 8 of the United
   States Housing Act of 1937 (this regulation does not cover tenant
   participation in Public Housing Authority(s) (PHAs) that administer such
   project-based assistance).

5. The project receives enhanced vouchers under the Low-Income Housing
   Preservation and Resident Homeownership Act of 1990, the provisions of the
   Emergency Low-Income Housing Preservation Act of 1987, or the Multifamily
   Assisted Housing Reform and Affordability Act of 1997, as amended.

6. The project receives assistance under the Section 202 Direct Loan program or the
   Section 202 Supportive Housing for the Elderly Program.

7. The project receives assistance under the Section 811 Supportive Housing for
   Persons with Disabilities Program.



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         8. Cooperative mortgagors are not subject to the provisions of 24 CFR 245
            Part B

C. Rights of Tenants and Tenant Organizations

      1. Rights of tenants to organize

         a. 24 CFR 245.100 provides tenants of a covered multifamily housing project the right
            to establish and operate a tenant organization for the purpose of addressing issues
            related to their living environment as well as activities related to housing and
            community development. A tenant organization is considered legitimate if it has
            been established by the tenants of a multifamily housing project covered under
            Section 245.10 for the purpose described above, and meets regularly, operates
            democratically, is representative of all residents in the development, and is
            completely independent of owners, management, and their representatives. The
            definition of legitimate tenant organization includes “organizing committees” newly
            formed by residents, and does not require specific structures, written by-laws,
            elections, or resident petitions.

         b. A link1 to this Notice will connect the reader to a brochure entitled “Resident Rights
            & Responsibilities” which addresses tenant rights to organize. Owners and/or
            management agents are required to provide the head of household with a copy of this
            brochure at move-in and annually at recertification (Ref: HUD Handbook 4350.3
            REV-1: Occupancy Requirements of Subsidized Multifamily Housing Programs,
            Chapter 6-27, Paragraph B.1.i.). This brochure is provided in accessible formats, as
            necessary, to ensure effective communication with persons with disabilities and those
            who are limited English proficient.

      2. Protected activities

         a. 24 CFR 245.115 identifies activities that owners and management agents must allow
            tenants and tenant organizers to conduct related to establishment or operation of a
            tenant organization. These activities include:

             i.   distributing leaflets in lobby and common areas, under tenants' doors, posting
                  information on bulletin boards,

             ii. initiating contact with tenants, conducting door-to-door surveys to ascertain
                 interest in establishing a tenant organization, and to offer information about the
                 tenant organization,

             iii. offering assistance for tenants to participate in tenant organization activities, and

             iv. convening tenant organization meetings on-site in a manner that is fully
                 independent of management representatives. In order to preserve the
                 independence of tenant organizations, management representatives may not
                 attend such meetings unless invited by the tenant organization.

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b. Tenants also have the right to be notified of and to formulate responses to

   i. owners' requests for budget-based rent adjustments,

   ii. partial payment of claims,

   iii. conversion from project paid utilities to tenant-paid utilities,

   iv. a reduction in tenant utility allowances,

   v. converting units to non-residential use, cooperative housing, or
      condominiums,

   vi. major capital additions, and

   vii. loan prepayments.

3. Meeting space

   a. Owners and management agents of covered projects must reasonably make
      available the use of any community room or other available space appropriate
      for meetings when requested by tenants or the tenant organization for activities
      related to the operation or establishment of the tenant organization, or to address
      issues related to their living environment collectively. Owners must give priority
      to meeting spaces that provide physical access for individuals with disabilities in
      accordance with the regulations implementing Section 504 of the Rehabilitation
      Act of 1973 (Section 504) and Titles II and III of the Americans with
      Disabilities Act of 1990 (ADA), as applicable. All programs or activities must
      be held in accessible locations unless the owner can demonstrate that doing so
      would result in a fundamental alteration of the program or an undue financial
      and administrative burden. The owner must take any action that would not
      result in such an alteration or such burden but would ensure that individuals with
      disabilities receive the benefits and services of the program or activity.
      Individuals with disabilities must receive services in the most integrated setting
      appropriate to their needs. In addition, if owners and management agents of
      covered projects organize or facilitate such meetings, then the owners and
      management agents of covered projects must take appropriate steps to ensure
      effective communication with individuals with disabilities through the provision
      of appropriate auxiliary aids and services as applicable and required by Section
      504 and/or the ADA. Similarly, owners and management agents of covered
      projects must make reasonable accommodations for individuals with disabilities.

   b. An owner may charge a reasonable fee, approved by HUD and received into the
      project’s account, as may normally be imposed for use of such facilitates in
      accordance with procedures prescribed by HUD. An owner may elect to waive
      this fee and is not required to charge a HUD-approved fee. An owner does not
      need HUD approval to waive this fee.



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          c. The process of obtaining HUD approval for a fee will proceed according to
             the following:

             i.   Owner/management agents will submit a request, with supporting
                  documentation (such as rates for similar areas of space from similar projects in
                  near proximity), to charge a tenant organization/committee a reasonable fee for
                  using community space or facilities.

            ii.   Hub/PC staff will approve the fee, if reasonable, as evidenced by supporting
                  documentation.

           iii.   If such charges are recurring, owner/management agents are not required to
                  request HUD approval for each charge.

           iv.    Any HUD-approved fee must be documented in the monthly accounting
                  reports and/or Annual Financial Statements (AFS), depending on the
                  frequency of the charge.

       4. Tenant Organizers

          a. 24 CFR 245.125 defines a “tenant organizer” as a tenant or non-tenant who assists
             other tenants in establishing and operating a tenant organization, and who is not
             an employee or representative of current or prospective owners, managers, or their
             agents, owners and management agents must allow tenant organizers to assist
             tenants in establishing and operating tenant organizations.

          b. A non-tenant, “tenant organizer” must be accompanied by a tenant while on the
             property of the multifamily housing project only in cases where the project has a
             consistently enforced, written policy against canvassing. Where there is such a
             non-canvassing policy, non-tenant organizers must be afforded the same rights
             and privileges as other uninvited outside parties. Where there is no such policy
             against canvassing, the project shall be treated as if it has a policy favoring
             canvassing.

D. Impediments to residents or resident associations attempting to exercise their rights

   1. HUD Handbook 4381.5 (REV-2), The Management Agent Handbook, Chapter 4
      “Working with Residents” Section 4.8d identifies specific actions by owners and
      management agents that constitute impediments to residents or resident associations
      attempting to exercise their rights. These include:

       a. Unreasonable denial of accessible meeting space to residents;

       b. Repeatedly sending management representatives to resident meetings when
          residents have requested management not to attend;

       c. Evicting, threatening to evict, withholding entitlements, or otherwise penalizing
          residents for organizing or asserting their rights;


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      d. Attempting to form a competing resident organization under the control of the
         management company or the owner; and

      e. Running for office or otherwise serving as a member of the resident organization.

E. Enforcement options

   1. Owners, management agents, principals, or affiliates of projects with an insured and
      assisted mortgage described in 24 CFR Section 245.10(a)(1) who violate any provision of
      24 CFR Part 245, Subpart B, may be liable for one or more of the following sanctions:

      a. Debarment – an exclusion of an individual, organization and its affiliates from
         conducting business with any Federal Agency government-wide. Debarment is the
         most serious compliance sanction and is typically imposed for a three-year period.
         See Title 2 CFR Part 2424.

      b. Suspension – a temporary action with the same effect as debarment. See 2 CFR
         Parts 180 and 2424.

      c. Limited Denial of Participation (LDP) – an action that excludes a party from
         further participation in a certain HUD program area. The scope of the LDP may
         also be limited to a certain geographic area, and generally expires in one year. See
         2 CFR Part 2424.

      d. Civil Money Penalties – fines which may be imposed on owners, principals of
         owners, and management agents who knowingly and materially fail to comply with
         any provision of 24 CFR Part 245, Subpart B, and, therefore, fail to provide
         management for the project acceptable to the Secretary, or fail to administer the
         subsidy contract in accordance with HUD regulations and requirements. By
         adjustment under the Federal Civil Penalties Inflation Adjustment Act of 1990, the
         maximum civil money penalty for each offense is currently $42,500, but the actual
         amount of the penalty is determined by applying the factors listed in 24 CFR Section
         30.80. These include, among other things, the gravity of the offense, the owner's
         history of prior offenses, injury to the public resulting from the violations, the owner's
         culpability for the violations, and the owner's ability to pay the penalty. As these will
         vary from case to case, there is no schedule of Civil Money Penalty amounts. The
         actual amount sought in any particular case depends on the Departmental
         Enforcement Center's (DEC) analysis of the factors as they apply to each case.

   2. Owners, management agents, principals, affiliates of projects assisted under provisions
      described in 24 CFR Section 245.10(a)(2)-(7) who violate any provision of 24 CFR Part
      245, Subpart B, may be liable for one or more of the above sanctions except for civil
      money penalties.

      However, civil money penalties, as described in Section E.1.d of this Notice, may be
      imposed in relation to non-insured properties that have a project-based Section 8 contract
      that has been renewed under MAHRA.



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F. Enforcement Process

   1. A tenant or tenant organization may file a written complaint with the local HUD office,
      with copies to the owner/management agent, alleging a consistent pattern of violations of
      HUD program requirements. A tenant or tenant organization may file a written complaint
      citing a single violation describing conditions that cause serious injury to tenants or the
      public.

      a. The written complaint must include factual evidence presented in support of the
         complaint. Evidence supporting the complaint may be:

          i. signed statements from tenants who have observed violations of 24 CFR 245
             Subpart B or other program obligations,

          ii. documents from owners expressing opposition to tenant organizing activities,

          iii. documents denying the use of facilities for purposes of organizing an
               association or holding meetings, and

          iv. any other form of documentation may be considered when providing
              evidence supporting the complaint.

      b. The Regional or Satellite Office Director must attempt to bring the parties
         together to endeavor to achieve conciliation with respect to every tenant
         complaint. If both parties agree to participate in a conciliation process and are
         able to reach an agreement that would correct the alleged violations, they will
         execute a conciliation agreement outlining the terms for such correction. The
         Regional or Satellite Office Director will approve and sign the agreement but
         only if it thoroughly ensures that the conditions or circumstances underlying the
         tenant complaints have been addressed. If either party breaches the agreement, the
         Regional or Satellite Office Director can reopen the case and pursue enforcement
         action.

      c. The choice to participate in conciliation is voluntary on the part of both parties. If
         either party refuses to participate in conciliation, or if the conciliation effort does
         not result in a mutually acceptable agreement, the Regional or Satellite Office
         Director will conduct a thorough investigation into the alleged violations. If,
         upon completion of the investigation, he or she finds no reasonable cause to
         believe that a violation has occurred, the Regional or Satellite Office Director
         will issue a determination of "no reasonable cause" and close the case.
         Notification of the determination must be provided to the complainant, owner,
         and management agent.

      d. If, after conducting a thorough investigation, the Regional or Satellite Office
         Director determines that the owner has committed one or more violations of the
         requirements contained in 24 C.F.R. Part 245, the Regional or Satellite Office
         Director will provide written notice of the violations to the owner. The notice
         will describe the violations and direct the owner to correct them within 30 days.
         If the applicable regulatory agreement and/or HAP contract requires the owner to
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          provide management for the project that is acceptable to HUD, the Regional or
          Satellite Office Director’s notice will further inform the owner that its violations
          of 24 C.F.R part 245 constitute unacceptable management and, therefore, are also
          violations of the regulatory agreement and/ or the HAP contract.

       e. If the owner fails to respond, or the response does not satisfactorily address the
          violations alleged in the Regional or Satellite Office Director’s letter, then an
          elective referral will be sent by the Regional or Satellite Office Director or
          designee to the Department Enforcement Center (DEC), and the owner must be
          flagged in the Active Partners Participation System (APPS).

   2. A complainant who disagrees with the decision of “no reasonable cause” from the
      Regional or Satellite Office Director can request reconsideration of the case by
      sending a letter to the Director of the Office of Asset Management and Portfolio
      Oversight, 451 7th Street, SW, Room 6180, Washington, DC 20410.

       a. Upon receipt of a request for reconsideration, the Office of Asset Management and
          Portfolio Oversight (OAMPO) will notify all of the parties that the request has
          been received and invite them to submit any additional evidence pertinent to the
          investigation.

       b. OAMPO will review all of the materials from the investigation and any
          additional evidence that the parties provide and make a final determination.

       c. If the OAMPO determination results in a finding of reasonable cause HUD will issue
          a determination of "reasonable cause", which will include an explanation of the basis
          for the determination, and pursue the enforcement remedies described in Section E
          herein. HUD will send a copy of the charge to each party in the case.

G. Paperwork Reduction Act

The information collection requirements contained in this document have been approved by the
Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44
U.S.C. 3501-3520) and assigned OMB control numbers 2502-0324 and 2502-0601. In
accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person
is not required to respond to, a collection of information unless the collection displays a
currently valid OMB control number.

If you have questions regarding this Housing Notice, you may contact your Account Executive in
the Field Asset Management Division, Office of Asset Management and Portfolio Oversight,
Headquarters.




                                                              Edward P. Golding
                                                              Principal Deputy Assistant
                                                              Secretary for Housing
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