How to Get Reimbursed for Damage Caused by Resident Negligence or Abuse

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1 Incorporating Assisted Housing Financial Management Insider February 2013 inside this issue Certification: How to Respond to Recertification Requests from Newly Elderly Households Model Memo: Inform Staff of Elevator Breakdown Procedures Recent Court Rulings Applicant Can t Appeal PHA s Decision PHA Allowed to Evict Vacationing Resident Owner Didn t Give Resident Proper Notice Owner Needn t Show Good Cause to Evict Resident After Lease Expired Resident s Sons Don t Qualify for Unit Succession The Trainer HUD Downgrades Troubled SF Housing Authority HUD recently declared the San Francisco Housing Authority (SFHA) a troubled agency and dispatched agents to review the agency s finances and management failures. The team of experts from HUD began to review SFHA s books on Jan. 7. The decision to downgrade the agency came in an Oct. 31 letter to the city s Housing Authority Board, with a copy to San Francisco Mayor Ed Lee. In addition to the troubled status for public housing, SFHA already faced stepped-up monitoring of its Section 8 program that provides rental assistance for program participants in privately owned units. The agency scored zero points in its Section 8 program because it failed to submit its report. San Francisco s troubled status was due to low scores for management of the agency and its finances. On financials, SFHA (continued on p. 2) feature How to Get Reimbursed for Damage Caused by Resident Negligence or Abuse When households move out of a unit, they may leave behind damage that s expensive to repair. For example, a household may damage the carpeting so badly, it must all be replaced. Although you can deduct this cost from the household s security deposit, the security deposit may not be big enough to cover the full cost of the repairs. Or there may not be enough of it left the household may have moved out owing back rent, so you may have already applied the security deposit to the unpaid rent. Fortunately, there s a way you can recover the cost of repairing certain damage caused by a household. To do so, you must file what s known as a special claim for damages with HUD. But for this claim to be successful, you must follow the rules set out in HUD Handbook And you must submit certain documents to your contract administrator or local HUD office to show that the claim meets the handbook s requirements. Dealing with Households (continued on p. 2) Train Staff How to Respond When Passenger-Filled Elevator Breaks Down If your site has an elevator, it s important that your staff know the proper steps to take when a passenger-filled elevator breaks down. If your staff doesn t take the proper steps and passengers get injured during the breakdown, you could get sued, warns risk management consultant Rose Kugler. In 2008, a tragedy occurred at a New York City Housing Authority (NYCHA) housing complex where residents had complained of recurring problems with the elevators. A 5-year-old boy had fallen down an elevator shaft after the elevator had become lodged between floors. The boy had tried to escape through the opened elevator door by jumping to the floor below, but he lost his footing and fell to the bottom of the shaft. Since the accident, NYCHA has committed to an (continued on p. 6)

2 2 Assisted HOUSING MANAGEMENT INSIDER February 2013 BOARD OF ADVISORS Get Reimbursed (continued from p. 1) Daniel A. Bancroft, Esq. Broderick, Bancroft & Goldberg Newton, MA Colleen Bloom LeadingAge Washington, DC George Caruso, CPM, NAHP Edgewood Management Member, NAHMA Board of Directors Germantown, MD Doug Chasick LeaseHawk Melbourne Beach, FL Mark Chrzanowski Gene B. Glick, Co. Indianapolis, IN Charles J. Durnin Jr. Interstate Realty Mgmt. Co. Marlton, NJ Karen Graham, CPM HCCP Karen A. Graham Consulting, LLC Cincinnati, OH Editor: Eric Yoo Executive Editor: Heather Ogilvie Kay McIlmoil, CPM, NAHPe IMC Inspections Locust Grove, VA Denise B. Muha National Leased Housing Assn. Washington, DC Production Director: Kathryn Homenick Director of Operations: Michael Koplin Richard M. Price, Esq. Partner Nixon Peabody LLP Washington, DC Greg Proctor Windsor Consulting Lexington, KY Johrita Solari, SCHM, NAHPe, HCCP Solari Enterprises, Inc. Orange, CA Gwen Volk, HCCP LBK Management Services Irving, TX Charles S. Wilkins Jr. The Compass Group, LLC Washington, DC Assisted Housing Management Insider [ISSN X (print), X (online)] is published by Vendome Group, LLC, 6 East 32nd Street, New York, NY Volume 20, Issue 1 Subscriptions/Customer Service: To subscribe or for assistance with your subscription, call or go to our Web site, com. Subscription rate: $455 for 12 issues. To Contact the Editor: Call: Eric Yoo at (212) Fax: (212) To Place an Advertisement: Please Erin Tyler, or call (216) Disclaimer: This publication provides general coverage of its subject area. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The publisher shall not be responsible for any damages resulting from any error, inaccuracy, or omission contained in this publication by Vendome Group, LLC. All rights reserved. No part of Assisted Housing Management Insider may be reproduced, distributed, transmitted, displayed, published, or broadcast in any form or in any media without prior written permission of the publisher. To request permission to reuse this content in any form, including distribution in educational, professional, or promotional contexts, or to reproduce material in new works, please contact the Copyright Clearance Center at or (978) For custom reprints, e-prints, or logo licensing, please contact Donna Paglia at (216) or We ll tell you what you must do to comply with the handbook s requirements for these damage claims, and the types of documents your contract administrator or local HUD office might require before approving a claim. Damage Claim Basics A special claim for damages is reimbursement to an owner for a former household s failure to pay for the damages caused by the negligence or abuse of the former household. Which units qualify. HUD will pay damage claims only for Section 8, Section 202/8, Section 202 PAC/PRAC, and Section 811 PRAC subsidized households [Handbook , par. 9-14(C)(1)]. Covered damages. HUD will pay for damage to a unit that was caused by the household s negligence and abuse [Handbook , par. 9-14(C)(2)(d)]. HUD won t pay for ordinary wear and tear or routine maintenance. For example, a contract administrator or local HUD office might approve a payment for a hole in the ceiling left after a household removed a permanent light fixture, but it might reject a claim for faded carpet. Keep in mind that contract administrators and local HUD offices may differ on what they consider normal wear and what they consider damage caused by a household s negligence and abusive behavior. If you re not sure if a particular type of damage is covered, ask your contract administrator or local HUD office for guidance. Amount HUD will pay. HUD caps the amount it will pay you per unit for a damage claim [Handbook , par. 9-14(C)(3)(b)]. HUD will pay you no more than the unit s contract rent when the household moved out of the unit. This is the amount that the household and HUD paid you each month as of the date the household moved out. But HUD will deduct the unit s security deposit and interest earned on the security deposit from the contract rent, as well as any money you collected from the household or other sources to cover unpaid rent and damages [Handbook , par. 9-14(C)(3)(b)]. For example, let s say the owner holds $65, which includes the security deposit and interest earned. The resident leaves owing $300 in unpaid rent and $200 in damages. The owner is unable to collect payment from the resident for rent or damages. The contract rent at the time of the move-out is $400. HUD will pay up to $335 (contract rent minus the security deposit and interest). HUD Downgrades (continued from p. 1) scored five points out of a possible 30, and on management it scored 12 points out of a possible 25. On physical conditions, SFHA barely made it above the cut-off with 27 out of 40 points. The agency s total score was 54 out of a possible 100. The score was a drop from score of 75 the prior year by Vendome Group, LLC. Any reproduction is strictly prohibited.

3 February 2013 Assisted HOUSING MANAGEMENT INSIDER 3 Submit Claim on Time HUD requires that you submit damage claims within 180 days of the date the unit becomes available for occupancy by a new household [Handbook , par. 9-14(C)(4) (a)]. To show the date the unit was ready for occupancy and that you met the deadline, your contract administrator or local HUD office might require you to include the following documentation when you submit your claim: Unit reconditioning log. This log normally records the movein and move-out dates for a unit, the maintenance performed on the unit, the start and finish dates of that maintenance, and the date that the unit was ready for occupancy. Owner statement. Some contract administrators and local HUD offices will instead accept a letter from you saying when the unit was ready for occupancy. Since contract administrators and local HUD offices vary greatly in the documents they require with a damage claim, it s best to consult your contract administrator or local HUD office for specifics. Some contract administrators and local offices will send you a checklist of required forms. Submit HUD Forms Submit damage claims to your contract administrator or local HUD office using one or both of the following HUD forms: HUD Form A. You must submit a HUD form A, Section 8 Special Claims for Unpaid Rent/Damages, for each unit for which you re submitting a damage claim. So if you re submitting damage claims for three units, you must fill out three forms, one for each unit. You can find this form at hudclips/forms/files/52671-a.pdf. The form asks for basic information relating to the claim, including the unit number, amount of security deposit, total amount of damage, and so on. It also has a section for unpaid rent claim information. So if you re also requesting reimbursement for unpaid rent, include this amount on the form and submit backup documentation for it. When submitting the form, be sure to: Include the head of household s name and correct unit number on the form; Submit originals (not photocopies of the form); and Sign and date the certification on the bottom left-hand corner of the form. HUD form A, Pt. 2. If you re submitting damage claims for two or more units, your contract administrator or local HUD office may require you to submit HUD form A Pt. 2, Special Claims Schedule. You must submit this form if, in addition to a damage claim, you re also submitting at least one vacancy claim. You can find this form at www. hud.gov/offices/adm/hudclips/forms/ files/52670a-2.pdf. This form summarizes the types and amounts of all special claims you may be making. On this form, you list all the units that you re submitting special claims for and all the types of claims you re submitting for the units listed on the form. For example, you might list a damage claim and vacancy claim for one unit and list an unpaid rent claim for another unit. At the bottom of the form, you total the claims by claim type. Meet Seven Key Requirements HUD requires that your damage claim meet the following seven key requirements. We ve also described some of the documents your contract administrator or local HUD office may require you to submit with your damage claim to prove you ve met these requirements. 1. Security deposit collected. HUD will reimburse a damage claim only if you collected the maximum allowable security deposit from the household that caused the damage [Handbook , par. 9-14(C)(2)(a)]. That means you collected the amount that the handbook says in Figure 6-6 you should collect for your type of site. So if you agreed to accept the security deposit on an installment basis and the household hasn t finished paying it, you can t submit a claim for the unpaid amount. You may also have to document any interest the security deposit earned, and that you followed HUD s rules when returning the security deposit. Your contract administrator or local HUD office may require you to submit some or all of the following documents: Household s original lease. The original lease lists the amount of the security deposit. Letters or forms sent to household. The handbook requires that sites either return a household s full security deposit and accrued interest within 30 days of when the household moves out, or provide the household with an itemized list of unpaid rent, damages to the unit, an estimated cost of repair, and a statement of the household s rights under state and local laws [Handbook , par. 6-18(C)]. (continued on p. 4)

4 4 Assisted HOUSING MANAGEMENT INSIDER February 2013 Get Reimbursed (continued from p. 3) Any site security deposit forms. Some sites use forms to keep track of security deposits. The form, such as a security disposition form, might record how much the household paid for a security deposit, when the household paid it, if the site owner or manager withheld part of it and why, and so on. Security deposit receipts. These are receipts sites give households to acknowledge and record how much the household paid for a security deposit. Ledger. A site might have a ledger that reflects how much a household paid toward its security deposit. Some contract administrators or local HUD offices may want to review the ledger if the household paid the security deposit in installments, says Linda Beeler, an expert in special claims at move-in. The form contains a household s certification or recertification information. It will show the household s original security deposit. Interest documentation. This is documentation (for example, bank records) that records how much interest the household s security deposit earned. 2. Damage caused by household s negligence and abuse. HUD reimburses only for damage that a household caused by its negligence or abuse [Handbook , par. 9-14(C)(2)(d)]. As proof that the damage wasn t normal wear and tear, your contract administrator or local HUD office might require: Move-in and move-out inspection reports. A contract administrator or local HUD office might want to compare the two reports to make sure that the damage on your claim wasn t there before the household moved in, says Beeler. And some contract administrators and local HUD offices deny claims for damage not listed on the moveout inspection report, she adds. Copy of replacement policy. Some sites have a policy on when they paint units and replace carpets and appliances. A contract administrator or local HUD office might want to review this policy to make sure that you re not asking for a repair that you normally perform when you get the unit ready for a new household. Documentation of damaged item s original value and/or date last replaced. This documentation might include the original purchase invoice for a damaged item such as an appliance or carpet, or a maintenance record showing when the item was last replaced. While your contract administrator or local HUD office most likely doesn t require photographs of damage, it s a good idea to submit them, especially if you re requesting reimbursement for an item that s often considered routine maintenance like cleaning the unit, recommends Beeler. 3. Costs substantiated. Nearly all contract administrators and local HUD offices will require some proof of your repair costs. For example, they may require you to submit: Invoices, receipts, and estimates. Invoices, receipts, and estimates show the cost of repairing the damage or buying replacements. Work orders and maintenance records. Work orders and other maintenance records can show what repairs your site staff and outside contractors performed in a unit and the costs or enough information to gauge costs. Published list of repair costs. Some sites have lists showing how much it costs to repair common types of damage to units and the costs of items that are frequently replaced, such as mini-blinds. 4. Attempts made to collect debt. HUD will pay damage claims only if you ve taken reasonable steps to collect the debt [Handbook , par. 9-14(C) (2)(e)]. Contract administrators and local HUD offices differ on what steps they want you to take and what backup documentation they want of those steps. You may need to submit one or both of the following: Demand letter. This is a letter you send to the household asking it to pay for the damage. Some contract administrators and local HUD offices want to see more than one demand letter. And some require you to send at least one demand letter by certified mail, return receipt requested. Proof of referral to collection agency. This proof can take a number of forms. For example, you could provide a copy of your site s contract with a collection agency listing the household account, or a signed receipt from the collection agency stating that you turned the debt over to the agency for collection and that it has begun collection efforts. 5. Claim not covered by reserve for replacement. HUD won t pay for a claim if you withdrew an amount for the same item from your reserve for replacement account [Handbook , par. 9-14(C)(4)(a)]. For example, say you made a withdrawal to replace all

5 February 2013 Assisted HOUSING MANAGEMENT INSIDER 5 refrigerators at your site. But right before you re about to replace the refrigerators, a household leaves having destroyed the unit s refrigerator. HUD rules don t permit you to put in a damage claim for the refrigerator because you already withdrew money from the reserve for replacement account for a refrigerator for the unit, explains Beeler. 6. Deductions permitted by state and local law. HUD will pay a damage claim only if your state and local law allow you to deduct amounts from the security deposit to repair damage to units [Handbook , par. 9-14(C)(2) (c)]. Ask your attorney if the state where your site is located permits these deductions. 7. Household has moved out. HUD reimburses for damage only if the household has moved out of the site. To prove this date, some contract administrators and local HUD offices require a print-out through TRACS of the household s at move-out. Get Response from HUD Your contract administrator or local HUD office will review and process your claim within 30 calendar days of receipt of the claim [Handbook , par (A) (1)]. In particular, it will confirm that you submitted the required documents and that your claim(s) meets HUD s requirements. After that, your contract administrator or local HUD office will either: Approve your claim. Acceptable claims will be approved and Special Claim ID numbers assigned. A copy of the approved claim forms will be sent to the owner. Deny your claim. Unacceptable (for example, not allowed or unsupported) claims will be marked as denied and returned to the owner. If a claim is denied or reduced, the owner will be notified in writing of the reason(s) for denial or reduction, the right to appeal the decision, and the name and address of the person to whom the appeal should be made. Submit Appeal You can appeal the denial of all or part of your damage claim within 30 calendar days of when you get the response on your damage claim [Handbook , par. 9-14(A)(3)]. When you submit your appeal, say why you think the contract administrator or local HUD office mistakenly denied your claim. And submit proof to back up your explanation. For example, if your contract administrator or local HUD office denied your claim because you didn t provide any invoices, provide them when you submit the appeal, Beeler explains. It s also a good idea to ask for advice from the person who made the denial decision about documentation you can provide that might help your appeal, she advises. Insider Source Linda Beeler: Loss Mitigation Specialist, Kentucky Housing Corp., 1231 Louisville Rd., Frankfort, KY 40601; Certification How to Respond to Recertification Requests from Newly Elderly Households Sometimes a household will alert your management office that it now qualifies as elderly. For example, the head of the household may have reached age 62 and the household now wants the additional allowances that elderly households are entitled to. Such requests may take some managers by surprise, leaving them unsure how to respond. HUD rules require you to do an interim recertification, upon request, under these circumstances. As with other interim recertifications, you ll need to verify all new facts relating to the change in household status and the additional allowances to which the household is entitled. Elderly Household Basics Under HUD rules, a household qualifies as elderly based on either age or disability. The occupancy handbook defines an elderly household as a household in which the head, co-head, or spouse is either disabled or age 62 or older [Handbook , Fig. 3-6]. The definition of disabled that applies in this instance is the same one that s used to determine eligibility to live at the site [Handbook , Fig. 3-6]. Households may not designate new or different members as their household heads, co-heads, or spouses for purpose of qualifying as elderly households. (continued on p. 6)

6 6 Assisted HOUSING MANAGEMENT INSIDER February 2013 Certification (continued from p. 5) When Is Interim Recertification Required? HUD requires you to do an interim recertification whenever there s an increase in the number of allowances to which a household is entitled [Handbook , par. 7-10(B)(2)]. This would include a newly elderly household because an elderly household is entitled to two allowances that other households aren t a $400 elderly household allowance and a medical expense allowance [Handbook , par. 5-10(D),(E)]. Note, however, that HUD doesn t require newly elderly households to inform you of this change and HUD doesn t require you to do an interim recertification unless you re informed. What to Do When a household informs you that it now qualifies as elderly, the only information you must verify to process the interim recertification are the facts relating to the household s new status and new allowances. There are only two circumstances that would cause a household to qualify for the first time as an elderly household the household head, co-head, or spouse (1) has reached age 62; or (2) has become disabled [Handbook , par. 5-9(B)(2)]. For the first circumstance, you need only verify the birthdate of the member in question, and then only if you haven t done so in the past. You can obtain a copy of a birth certificate, baptismal certificate, census record, official record of birth or other authoritative document; or a copy of the receipt of Social Security retirement benefits. For the second circumstance, you must verify the disability, as well as the household s medical expenses, because it now qualifies for the medical expense allowance. Dealing with Households (continued from p. 1) extensive elevator modernization program to rehabilitate and install new elevators at select developments citywide. But even with an increased emphasis on safety, accidents involving elevators can still occur. As recently as Dec. 30, 2012, an elderly man in a NYCHA development in East Harlem suffered injuries when an elevator door closed on him. At the very least, you can minimize problems by training your staff on how to handle an elevator breakdown involving passengers. We ll give you a Model Memo: Inform Staff of Elevator Breakdown Procedures, which you can adapt and use at your site. Use Memo to Train Staff First, develop elevator breakdown procedures, if you haven t already done so, says Kugler. Then, choose staff members to be contact people for elevator breakdown situations, she adds. Because contact people will only be calling the elevator service company and keeping in contact with passengers, any staff member could be a contact person. (If your staff members work in shifts, choose a staff member from each shift to be a contact person.) Train these staff members on how to handle an elevator breakdown by giving them a memo spelling out your procedures for such a situation. Kugler recommends that you give copies of the memo to all staff members. That way, if a designated contact person isn t available when an elevator breaks down, other staff members can help, she explains. Your memo, like our Model Memo, should spell out the following procedures: Call elevator service company. Say that upon finding out about an elevator breakdown, the contact person should immediately call the elevator service company to notify it of the problem, advises Kugler. Instruct the contact person to tell the elevator service company your site s address, the location of the broken-down elevator, the apparent nature of the problem, and, if applicable, that there are passengers stuck inside the elevator, she says. And instruct them to ask the service company when a technician will arrive. Include the service company s telephone number in your memo so that the contact person has easy access to it, she adds. Also tell the contact person not to try to fix the elevator on his own, warns Kugler. Elevators are complex machines that even your maintenance staff members probably aren t trained to fix, she explains. If a staff member tries to fix the elevator, he could make the problem worse or violate the service contract you have with your elevator service company, she points out [Memo, par. 1].

7 February 2013 Assisted HOUSING MANAGEMENT INSIDER 7 Reassure passengers. Tell the contact person to promptly try to communicate with passengers stuck in the elevator, suggests Kugler. Usually, the contact person can communicate with passengers by using the elevator s telephone or intercom system. If your elevators don t have a telephone or intercom or if the telephone or intercom doesn t work, the contact person should go to the floor nearest to where the elevator is stuck and speak loudly to the passengers. Instruct the contact person to tell the passengers that a technician from the service company is on his way and when he s expected to arrive, says Kugler. Also instruct him to assure passengers that they re safe, she adds. People who are stuck in elevators can become anxious and suffer heart attacks or other serious medical problems, she notes. If your contact person assures passengers in a calm yet assertive way that the situation is under control, they ll feel calmer, she explains. And they ll have little reason later to claim that you exacerbated the problem, she adds [Memo, par. 2]. If your elevator has a telephone, program it to call the management office or your site s security guard, Kugler suggests. Also, consider programming the telephone to call the elevator service company or an answering service after hours, she adds. And have your maintenance staff regularly check the telephones or intercoms to make sure they work, she recommends. Warn passengers not to fix or exit elevator. Tell your contact person to warn passengers stuck in the elevator not to try to fix it themselves. And tell your contact Inform Staff of Elevator Breakdown Procedures Here s a Model Memo spelling out elevator breakdown procedures that you can adapt and give your staff members. Address this memo to the staff members whom you ve designated to be contact people, but distribute copies of the memo to your entire staff. That way, if a contact person isn t available when an elevator breaks down, another staff member can help. To: cc: From: Date: PROCEDURES FOR ELEVATOR BREAKDOWNS [insert contact persons names] STAFF MANAGEMENT, ABC SITE [insert date] Model Memo Here are procedures for handling an elevator breakdown at our site. Please read this memo carefully and keep it handy for future use. If you have any questions, contact [insert name] in the management office at [insert tel. #]. 1. Call elevator service company. Immediately notify the elevator service company of the breakdown at the following number: [insert tel. #]. Make sure you tell the service company the site s address, the location of the brokendown elevator, the apparent nature of the problem, and, if applicable, that there are passengers stuck inside the elevator. Also, ask how long it will take a technician from the service company to arrive. Don t try to fix a broken-down elevator yourself, and don t let other staff members on the scene try to fix the elevator. 2. Reassure passengers. Promptly communicate with passengers, using the elevator s [telephone/intercom system]. If this doesn t work, go to the floor nearest to where the elevator is stuck and speak loudly. Tell passengers you know they re stuck, that you ve called the service company, when a technician is expected to arrive, and that they re safe. 3. Warn passengers not to fix, exit elevator. Warn passengers not to try to fix a broken-down elevator or try to force open the doors to get out of it. Remind them that they can get injured if the elevator suddenly starts moving while they re trying to exit. 4. Give passengers frequent updates. Give passengers frequent reports on the progress of the elevator repair. For example, tell the passengers when the service company technician arrives and how long the technician expects the repair to take. person that if the elevator has broken down with its doors partially open, he should warn the passengers not to try to force open the doors, Kugler says. Also, instruct the contact person to inform passengers that they could get seriously injured if the elevator starts moving while they re trying to get out, she says [Memo, par. 3]. Give passengers frequent updates. Instruct the contact person to keep the passengers updated on the status of the repair. Keeping passengers in the loop will make them feel confident that the situation is under control, Kugler explains [Memo, par. 4]. Insider Source Rose Kugler: President, Risk Innovations, 1202-N 75th St., #253, Downers Grove, IL 60516; (630) ;

8 8 Assisted HOUSING MANAGEMENT INSIDER February 2013 Recent Court Rulings Applicant Can t Appeal PHA s Decision Facts: An applicant sued a local PHA for denying her application for low-income housing. The PHA had denied the application due to her prior conviction for involuntary manslaughter. Under the PHA s stated admissions and occupancy policy, an applicant with a conviction for involuntary manslaughter is ineligible, and is denied participation in the program for life. The applicant appealed the denial, and the PHA held a grievance hearing. The hearing officer upheld the denial of her application. When she tried to appeal the decision in court, the judge dismissed her case on the basis that it lacked jurisdiction. She then appealed the trial court s decision. Ruling: The Pennsylvania appeals court agreed with the lower court s decision. Reasoning: The court ruled that there was a distinction between individuals making an application for public housing and those who already were public housing tenants who possess a property interest entitling them to due process protection or certain procedures before depriving them of housing. In other words, the applicant didn t have a right to the low-income housing for which she applied, so she wasn t entitled to an appeal or judicial review of her application. McKinley v. Housing Authority of the City of Pittsburgh, December 2012 PHA Allowed to Evict Vacationing Resident Facts: A PHA resident lived in a unit with her three daughters. Before traveling abroad, she gave her adult son a key to check on the apartment. While the resident was away, firefighters entered her unit and found a dog tied to a radiator near a stove, which had all four burner knobs on, but with only one lit pilot. A maintenance worker had notified the fire department of a noxious odor coming from the resident s unit, and the resident conceded that the dog probably turned the stove s knobs on while trying to free itself. The fire captain testified that the unit s gas meter readings were so high that an explosion could have occurred. He further testified that the dog appeared panicked and had to deal with low oxygen levels because of the alarming amount of gas in the air. The captain also ordered the building s other residents to remain in their units for half an hour. The following month the PHA sent the resident an eviction notice and eventually sued to evict her on the basis of negligent damages to the premises, violation of rules, and violation of lease covenants. The trial court ruled for the PHA. The resident appealed on the basis that the son wasn t a covered person under the lease and no actual damage had occurred. Ruling: A New Jersey appeals court agreed with the lower court s decision. Reasoning: The resident s son was a covered person according to the lease. The lease defines a covered person as an umbrella term including, in addition to the tenant, guests, members of the tenant s household, and other persons under the tenant s control. Also, a criminal conviction or arrest isn t necessary for the lease to be terminated. The court stated that criminal activity alone is cause for eviction. The resident s son was the only person with a key to enter the resident s unit, and he committed animal cruelty by depriving a dog of adequate oxygen, which put the dog in a hyperactive state. In turn, this criminal activity threatened the health or safety of other residents or their right to peaceful enjoyment of the premises. Housing Authority of the City of Bayonne v. Hernandez, December 2012 Owner Didn t Give Resident Proper Notice Facts: A project-based Section 8 housing owner entered into an agreement to rent a unit with a resident in April The agreement, based on the HUD model lease, required the owner, with the resident s cooperation, to conduct a recertification of the resident s household income and composition at least once a year. In anticipation of the 2011 recertification, the owner gave the resident the necessary reminder notices. The resident attended her recertification interview and provided all the information and signatures that the owner required to calculate her rent. She responded before her April 1 anniversary date. On March 29, the manager sent her a typed letter captioned Lease Amendment, which informed the resident that she owed rent of $0, effective April 1, 2011, based upon the recently completed review of her income and household composition, and that

9 February 2013 Assisted HOUSING MANAGEMENT INSIDER 9 she wasn t due for recertification until April 1, The manager also informed her that he had attached a copy of the Form Owner s Certification of Compliance with HUD s Tenant Eligibility and Rent Procedures and applicable worksheet(s) and that she should substitute these forms in place of the previous and worksheet(s), which are attached to your lease. Finally, in this letter the manager informed the resident that she was to sign on the bottom of the notice to acknowledge her receipt of this information. The manager also testified that he wrote a note on the top right corner of the notice that stated: Please come to the office to sign your annual recertification paperwork. The manager then sent a second copy of the letter on April 12, 2011, after the resident failed to respond to the earlier letter. Nothing in either letter expressly informed the resident that the recertification was incomplete without her signature on the Form or that her rent would increase to $710 on May 1, On May 6, the owner notified the resident that her tenancy was being terminated for material noncompliance with the lease since she failed to complete the annual recertification process. After receiving the notice, the resident immediately contacted the manager and signed the Form and became recertified on May 20, with her anniversary date remaining on April 1. On May 27, 2011, the owner pursued an eviction action for failure to pay rent and damages for back rent. The trial court ruled for the owner, finding that the resident, who had completed the recertification process for multiple years, became liable for market rent in May 2011 and failed to pay it. The resident appealed. Ruling: An Ohio appeals court reversed the trial court s ruling. Reasoning: The court ruled that the resident wasn t properly notified. The model language in Exhibit 7-6 of the HUD Handbook is an appropriate way to obtain a resident s outstanding signature. It clearly informs the resident of the need to go to the rental office to sign the Form within seven days. In contrast, the owner s notice informed her that her recertification was complete, and it never mentioned that she needed to sign the form, only that it was included and that she should substitute it for the previous year s form. The owner also provided no evidence that the letter it sent to the resident on March 29 and resent on April 12 was based on a HUD model form, and nothing in the handbook suggests that it was. Therefore, the owner s notice didn t properly inform the resident of her obligation to sign the Form Hidden Meadows Townhomes v. Ross, December 2012 Owner Needn t Show Good Cause to Evict Resident After Lease Expired Facts: An owner sent her Section 8 resident a notice to vacate. In the notice, the owner stated that the lease had been on a month-to-month basis since the end of March She further stated that she wanted the resident to vacate the unit by the end of November 2011 because she didn t wish to renew the lease for another month. The resident didn t vacate the unit, and the owner sued to evict her. The trial court ruled for the owner, and the resident appealed on the basis that, according to a housing assistance payment (HAP) contract signed with the local PHA, the owner needed to prove good cause in order to evict her. Ruling: A Louisiana appeals court agreed with the lower court s ruling. Reasoning: The resident offered no proof that the owner had agreed to an extension term of the lease, thereby extending the good cause requirement included in the HAP contract. The evidence presented established only the existence of a month-to-month lease between the owner and the resident after the initial lease term expired. As such, the owner was entitled to possession of the unit after that date, without giving any reason or showing good cause, after providing the resident with the 30-day notice of non-renewal. Sauer v. Johnson, December 2012 Resident s Sons Don t Qualify for Unit Succession Facts: During a resident s tenancy, she lived with several family members until those individuals left the household and she was the sole remaining occupant. Two months before her death, she submitted a permission form to add her two sons to her permanent household. This request was disapproved by letter on the grounds that both individuals failed the criminal background check. The resident died five days after the letter was issued. (continued on p. 12)

10 10 Assisted HOUSING MANAGEMENT INSIDER February 2013 THE TRAINER We ll review the compliance issues raised in this month s articles. Then we ll give you a quiz to test your understanding of the issues discussed. Getting Reimbursed for Unit Damage; Recertifying Newly Elderly Households In this month s feature, we discussed how to get reimbursed when former households leave behind unit damage that s expensive to repair. If the security deposit isn t big enough to cover the repair costs, you can submit a special claim for damages to HUD. But for your claim to be approved, you must follow certain rules. In our certification article, we discussed how to respond to a recertification request from a household that newly qualifies as elderly. We explained when an interim recertification is required and what to do. THE TRAINER QUESTION #1 HUD will pay damage claims for households subsidized by any assisted housing program. True or false? a. True. b. False. TRAINER S QUIZ INSTRUCTIONS: Each of the questions below has only one correct answer. On a separate sheet of paper, write down the number of each question, followed by the answer you have chosen for example, (1) b, (2) a, and so on. The correct answers (with explanations) follow the quiz. Good luck! any money you collected from the household to cover unpaid rent and damages. b. The unit s contract security deposit, if the collected security deposit wasn t enough to cover the damage. c. The full reasonable costs of restoring the unit to occupancy standards, as HUD defines reasonable. QUESTION #2 HUD will pay for damage to a unit that was caused by the household s negligence and abuse, but won t pay for ordinary wear and tear or routine maintenance. True or false? a. True. b. False. QUESTION #3 HUD caps the amount it will pay you per unit for a damage claim. HUD will pay you no more than: a. The unit s contract rent when the household moved out of the unit, less the unit s security deposit and QUESTION #4 Which of the following requirements must you meet before HUD will approve your damage claim? a. You have proof that you collected a security deposit. b. You can prove that the damage was caused by the household s negligence and abuse. c. You can substantiate your costs with invoices, receipts, work orders, etc. d. You can prove you attempted to collect the debt. e. All of the above. f. None of the above.

11 February 2013 Assisted HOUSING MANAGEMENT INSIDER 11 TRAINER S QUIZ QUESTION #5 If HUD denies your special claim for damages, you can appeal the denial within 60 days. True or false? a. True. b. False. QUESTION #6 HUD requires households to inform you when a member turns 62 so you can do an interim recertification. True or false? a. True. b. False. QUESTION #7 Under HUD rules, a household qualifies as elderly based on either age or disability. True or false? a. True. b. False. ANSWERS & EXPLANATIONS QUESTION #1 Correct answer: b False. HUD will pay damage claims only for Section 8, Section 202/8, Section 202 PAC/PRAC, and Section 811 PRAC subsidized households [Handbook , par. 9-14(C)(1)]. QUESTION #3 Correct answer: a For example, an owner holds $65, which includes the security deposit and interest earned. The resident leaves owing $300 in unpaid rent and $200 in damages. The owner is unable to collect payment from the resident for rent or damages. The contract rent at the time of the move-out is $400. HUD will pay up to $335 (contract rent minus the security deposit and interest). QUESTION #4 Correct answer: e In addition to fulfilling the requirements of answers a through d, HUD also requires that: (1) you didn t tap your reserve for replacement account to pay for the unit repairs; (2) the household has moved out; and (3) your state and local law permit you to deduct amounts from the security deposit to repair damaged units. QUESTION #5 Correct answer: b False. You can appeal the denial, but you have only 30 days in which to do so. QUESTION #6 Correct answer: b False. HUD doesn t require newly elderly households to inform you of this change, and HUD doesn t require you to do an interim recertification unless you re informed. THE TRAINER QUESTION #2 Correct answer: a True. But note that contract administrators and local HUD offices may differ on what they consider normal wear and what they consider damage caused by a household s negligence and abusive behavior. If you re not sure if a particular type of damage is covered, ask your contract administrator or local HUD office for guidance. QUESTION #7 Correct answer: a True. If the household qualifies as elderly based on a member s disability, you must verify the disability as well as the household s medical expenses, because it now qualifies for the medical expense allowance.

12 12 Assisted HOUSING MANAGEMENT INSIDER February 2013 Recent Court Rulings (continued from p. 9) The following month the manager met with the two sons and concluded that neither of them was an authorized member of the deceased resident s household, and as such they weren t entitled to a lease. At the hearing, the PHA asserted that the sons were ineligible for public housing. One son had several criminal convictions, and the other son had a robbery conviction. In her decision, the hearing officer found that management denied the resident s request for her sons to reside with her permanently, and even if the requests had been promptly approved, the sons would nevertheless be unable to show the required oneyear period of authorized residence, and hence aren t residual tenants as defined by the PHA s regulations. The sons then asked a court to review the hearing officer s decision. Ruling: A New York court denied the sons request and dismissed the case. Reasoning: The sons couldn t show that the PHA s decision was arbitrary or an abuse of discretion. The evidence showed that neither son became an authorized occupant of his mother s unit prior to her death in June. Gaining succession as a remaining family member requires an occupant to move lawfully into the unit and qualify as a specified relative of the tenant of record and remain continuously in the unit for at least one year immediately before the date the tenant of record vacates the unit or dies, and be otherwise eligible for public housing in accordance with the PHA s rules and regulations. Here, the sons were expressly denied permission to join their mother s household and, as such, they knew that they were unauthorized occupants. Mere unauthorized occupancy, without management s written permission, is insufficient to transfer tenancy rights. Ruiz v. New York City Housing Authority, December 2012 TAX CREDIT HOUSING MANAGEMENT INSIDER Has your property recently been refinanced using Low-Income Housing Tax Credits? Get plain-english explanations of how to comply with IRS and HUD rules, and avoid compliance mistakes that could jeopardize some or even all of your site s tax credits! With a subscription to Tax Credit Housing Management Insider, you ll get the monthly newsletter and ealerts sent right to your inbox, as well as 24/7 access to our Web site archive, filled with five years worth of how-to articles and downloadable Model Forms, Notices, and Lease Clauses. Here are just a few of our recent feature articles: How to Raise Rents When Households Go Over-Income Take Four Steps if Household Member Claims Zero Income Use Tough Notice to Get Unauthorized Occupants on Lease or Off Site How to Hire Qualified Employees to Manage Your Tax Credit Site How to Avoid Noncompliance After Realizing You ve Overcharged Rent Calculating Income of Temporarily Absent Family Members in the Military How to Use the Averaging Convention to Determine First-Year Tax Credits Go to Or call and Subscribe Today! i n s i d e t h i s i s s u e In the News for 2012 LIHTC Allocation Model Lease Language: Bar Households from Tampering with Utilities Annual Index HUD Releases Income Limits IRS Distributes Unused 2011 f e a t u r e A LEGAL COMPLIANCE GUIDE FOR THE LOW-INCOME HOUSING TAX CREDIT COMMUNITY Missouri house Rejects expiration dates for state tax Credit Program J a n u a r y Five Compliance differences Between Managing Mixed-income and 100 Percent Buildings Every tax credit building you manage is either a mixed-income building or a 100 percent building. If it s a mixed-income building, you can rent units to both low-income and market-rate households. However, if your building is a 100 percent building or, in other words, your first-year fraction is 100 percent you must rent all the units in your building to qualified low-income households. Recently, the Missouri House rejected an attempt to end tax credits for the developers of low-income housing and historic buildings. House members defeated an amendment to an economic development bill that would have placed a July 2018 expiration date on the two programs. Instead, they adopted an amendment allowing lawmakers to consider a measure in 2016 that would prohibit the tax credits. Low-income housing is the state s most expensive tax credit, costing the treasury about $143 million a year, up from $12 million just a decade ago. Senate leaders insist the programs must have an expiration date. House leaders said that would make it too easy for a single senator to block the program s renewal in the future. Missouri is one of 13 states that offer such credits, which developers pair with a federal credit to generate construction funds. Missouri is second to Georgia in state credits awarded, or second to Hawaii if the credits are analyzed on a per-capita basis. HUD s List of Sources of Income Model Form: Require Member to Sign Zero-Income Affidavit Q&A Calculating Income of Temporarily Absent Family Members in the Military In the News New Legislation Could Preserve Affordable Housing Funding IRS Issues Repair Regulations Managing a 100 percent site or building is simpler than managing a mixed-income site. As the U.S. credit market opens up and owners leverage a number of different funding sources for new developments, mixed-income projects will become more common. The mixed-income aspect of a building will make it a more sustainable endeavor for owners than 100 percent buildings, because residents paying market rates subsidize the lower rents, allowing the building to be financially sustainable. B e s t P r a c t i c e s i n s i d e t h i s i s s u e social security Benefit increases 3.6% for 2012 Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 60 million Americans will increase 3.6 percent in 2012, the Social Security Administration recently announced The 3.6 percent cost-of-living adjustment (COLA) will begin with benefits that nearly 55 million Social Security beneficiaries receive in January Information about Medicare changes for 2012 haven t been announced yet. For some beneficiaries, their Social Security increase may be partially or completely offset by increases in Medicare premiums. (continued on p. 2) how to discourage electricity theft by households A LEGAL COMPLIANCE GUIDE FOR THE LOW-INCOME HOUSING TAX CREDIT COMMUNITY One way households may steal electricity is by stealing from the building supply. Households may tamper with wiring and hook up directly to your building s metered electricity supply. A resident who does this taps into power that you re paying for. Another way to steal electricity is directly from other households. In this case, a household may tap into a neighboring household s metered electricity supply. While this type of tampering may not happen often at your building, it can cause big problems when it does. And your lease may not give you the legal backing you need to evict the household, says New York attorney Peter Schwartz. (continued on p. 6) One course of action is to add a clause to your lease giving you the right to take strong action, including eviction, against households who tamper with utilities. It s important to bar tampering with all utilities, F e a t u r e take Four steps if household Members Claim Zero income F e b r u a r y Occasionally a household member will tell you that she has no income in order to reduce the household s total income and qualify it for the unit. Or a tax credit household that s also subject to Section 8 subsidies may claim that the entire household has no income so as to reduce the portion of the rent that the household must pay. Dealing with zero-income families is one of the most common complaints of managers of affordable housing projects, especially those with rental assistance, says tax credit consultant A.J. Johnson. According to IRS rules, it s up to you to properly verify the income claims of each household. Your state agency auditors will immediately look for proper verification in your files whenever they see household members who claim no income. If you don t show the auditors how you verified these claims, they ll report the owner to the IRS for noncompliance, and this could threaten the tax credits on the site. b e s t P r a c t i c e s how to Prove Abandonment, decide When to Change Locks i n s i d e t h i s i s s u e Model Form: Have Residents Fill Out Application Before Using Unit for Business Purpose Model Policy: Create Reasonable Guidelines for Business Use of Units Q&A: Basing Rent on Number of Bedrooms higher tax Credit Caps Proposed for states hit by storms Congressman Christopher Gibson and Tom Reed of New York recently introduced H.R. 3769, the Irene and Lee Tax Relief Storm Recovery Act. If the bill passes, states that were hit last year by Hurricane Irene or Tropical Storm Lee may receive disaster rebuilding assistance in the form of increased lowincome housing tax credit (LIHTC) caps. The bill would raise the LIHTC ceiling of each state that includes any portion of the Irene-Lee disaster area for calendar years 2012 through The 10 flood-damaged states would get an additional 50 percent of their annual LIHTC allocation. In addition, properties located in the disaster area that are placed in service during those years would be treated as difficult development areas under the bill. (continued on p. 2) Some of your residents may be affected by layoffs and persisting unemployment. These residents may be eager to break their lease if they can no longer afford the rent. But under a written lease, residents are responsible for the entire term of the lease provided that there are no legal reasons to break the lease. Unemployment isn t a reason for breaking the lease with no repercussions. Instead of arranging something with you, some of these residents may decide to disappear without letting you know where they ve gone and whether they re coming back. If they ve abandoned their unit, you need to try to re-rent it as soon as possible. Each day you wait, you lose money; and the resident may never come back. But you don t want to make an impulsive decision to go in, clean up, and list the unit for rent. If you change the locks too soon, the resi- (continued on p. 5) A LEGAL COMPLIANCE GUIDE FOR THE LOW-INCOME HO how to Control B of tax Credit unit According to U.S. Census data rel half 51.6 percent of all the coun the 2007 Survey of Business Owner homes or other noncommercial spac compiled before the recession began i that there has been a sharp increase in then. At your site, you may have a few resi finding employment, who are considering ness. While some site owners may be reluc to run businesses in their units, allowing so businesses may help you to keep qualified h pros and cons of allowing home-based busin If you choose to disallow home-based bus give you a Model Lease Clause that you can ad handling Lead-Based Paint Post-disaster Repair M a i n t e n a n c e Last year, the IRS sent out numerous notices granting income housing tax credit properties relief from specif requirements to provide emergency housing relief need of devastation caused by some sort of natural disaster. M ly, the IRS issued such notices for devastation caused by Iowa from May to August 2011; for New York, Pennsylva Vermont, which had to cope with Hurricane Irene; and for North Dakota, and Missouri, which had to deal with some tions of storms, flooding, and tornadoes during the first hal If your site is located in areas prone to natural disasters, y to know how to quickly and safely address any damage done t buildings. Natural disasters such as tornadoes, hurricanes, or f f (continued