Note that this Chapter information the rent computations used for Units fixed up prior to the production of this present draft of the Mod Rehab Administrative Plan that are still operational, along with the lease calculations to be utilized when it comes to the rehabilitation of brand-new SRO Units under 24 C.F.R. part 882, subpart H.

12.1 Calculating Initial Gross Rents

Gross Rent is the total regular monthly expense of housing a Qualified Family and is the amount of the Contract Rent and any utility allowance. See 24 C.F.R. § 882.102.

The preliminary Gross Rent for any Unit should not surpass the Mod Rehab FMR [12] relevant to the Unit on the date that the AHAP is performed. See 24 C.F.R. § 882.408(a). Note that the following exceptions use:

(a) Exception Rents. With HUD Field Office approval, the BHA might approve initial Gro ¬ ss Rents which go beyond the relevant Mod Rehab FMRs by approximately 10% for all Units of a provided size in specified areas where HUD has identified that the rents for standard Units appropriate for the Existing Housing Program are more than 10% greater than the Existing Housing FMRs. [13] The BHA will submit documents showing the necessity for such exceptions rents in the location to the HUD Field Office. See 24 C.F.R. § 882.408(a) and (b).

(b) The BHA might authorize modifications in the Contract Rent subsequent to execution of the AHAP (see area 5.2) which result in an initial Gross Rent which exceeds the Mod Rehab FMR relevant to the Unit by approximately 20%. See 24 C.F.R. § 882.408(a) and (d).

12.1.1 FMR for Structures Containing Four or Fewer SRO Units

If a structure consists of 4 or less SRO Units, the FMR for that size structure (the FMR for a 1-, 2-, 3-, or 4-bedroom Unit, as relevant) need to be utilized to determine the FMR limitation rather of using the separate FMR for each SRO Unit. To identify the FMR limitation for each SRO Unit, the FMR for the structure need to be allocated equally to each SRO Unit. See 24 C.F.R. § 882.805(d)( 3 ).

12.1.2 FMR Limits for Efficiency Units

The gross rent for effectiveness Units may be no higher than for SRO systems (i.e., 75 % of the 0-bedroom Mod Rehab Fair Market Rent). See 24 C.F.R. § 882.805(d)( 4 ).

12.2 Calculating Initial Contract Rents

The initial Contract Rent and Base Rent for each Unit will be calculated in accordance with HUD requirements. See 24 C.F.R. § 882.408(c). The amounts might be determined in accordance with the following methods:

(a) Initial Contract Rent: The preliminary Contract Rent is equivalent to the base lease plus the monthly cost of a rehabilitation loan but not more than the optimum stated at the end of this section. See 24 C.F.R. § 882.408(c)( 2 ).

(b) Base Rent: The base lease must be computed using the rent charged for the Unit or the estimated costs to the Owner of owning, managing and keeping the restored system. See 24 C.F.R. § 882.408(c)( 2 ).

(c) Monthly Cost of a Rehabilitation Loan: The regular monthly cost of a rehabilitation loan need to be determined utilizing:

1. The actual rates of interest on the part of the rehab costs obtained by the Owner;

2. The HUD-FHA maximum rate of interest for multifamily housing (or another rate prescribed by HUD) for rehab expenses paid by the Owner out of non-borrowed funds; and

3. At least a 15-year loan term, except that if the overall amount of rehab is less than $15,000, the real loan term will be used for the part of the rehab costs obtained by the Owner. (HUD Field Offices might authorize loan terms which differ from the above in accordance with HUD requirements).

If determining the regular monthly expense of a rehab loan for SRO Units, describe section 12.3.1 of this Administrative Plan.

The preliminary Contract Rent may in no occasion go beyond: the Mod Rehab FMR or exception lease relevant to the Unit on the date that the AHAP is carried out, minus any appropriate allowance for utilities and other services attributable to the Unit. See 24 C.F.R. § § 882.408(a) and (c)( 1 ).

Contract Rents for SRO Units will not consist of the costs of offering encouraging services, transport, furniture, or other non-housing expenses, as figured out by HUD. See 24 C.F.R. § 882.805(d)( 4 ).

12.2.1 Calculating Monthly Cost of a Rehab Loan for SRO Units

In figuring out the month-to-month cost of a rehabilitation loan for SRO Units, a loan term of a minimum of ten years (rather of 15 years) may be used. The exception for utilizing the actual loan term if the total amount of the rehabilitation is less than $15,000 continues to apply. See 24 C.F.R. § 882.805(d)( 1 )(i).

In addition, the expense of the rehab that may be consisted of for the purpose of determining the quantity of the preliminary Contract Rent for any Unit must not go beyond the lower of:

(a) The forecasted cost of rehab; or

(b) The per system expense constraint that is established by Federal Register notification, plus the cost of the fire and safety enhancements required by 24 CFR § 882.605(b)( 4 ). [14]

Note that HUD may, however, increase this latter per unit limitation by an amount it identifies is sensible and required to accommodate unique regional conditions, such as high building costs or strict fire or building codes. For additional requirements see 24 C.F.R. § § 882.805(d)( 1 )(i)(B) and (d)( 1 )(ii)

12.3 Changes in the Initial Contract Rents During Rehabilitation

In accordance with 24 C.F.R. § 882.408(d), the preliminary Contract Rent as calculated under section 12.2 will be the Contract Rents on the effective date of the Contract, other than under the following situations:

(a) When, during rehab, work items (including substantial and required style changes) which (A) might not reasonably have been anticipated or are demanded by a change in local codes or regulations, and (B) were not noted in the work article prepared or authorized by the BHA, are consequently required and approved by the BHA. See 24 C.F.R. § 882.408(d)(i).

(b) When the actual expense of the rehab carried out is less than that approximated in the estimation of Contract Rents for the AHAP or the real certified expenses are more than estimated due to unanticipated elements beyond the Owner's control (e.g., strikes, weather hold-ups or unanticipated delays triggered by regional federal governments). See 24 C.F.R. § 882.408(d)(ii).

(c) When the BHA (or HUD) authorizes changes in funding. See 24 C.F.R. § 882.408(d)(iii).

(d) When the actual relocation payments made by the Owner to temporarily relocated Families differs from the cost estimated in the estimation of Contract Rents for the AHAP. See 24 C.F.R. § 882.408(d)(iv).

(e) When required to proper errors in calculation of the base and Contract Rents to comply with the HUD requirements. See 24 C.F.R. § 882.408(d)(v).

Should such scenarios take place during rehab (either a boost or reduction), the BHA will approve any necessary change in work and modification of the work article and cost estimate, recalculate the initial Contract Rents, and amend the Contract or AHAP, as proper, to show the revised leas. See 24 C.F.R. § 882.408(d)( 2 ).

In recalculating the preliminary Contract Rents, the BHA should identify that the resulting Gross Rents do not go beyond the Mod Rehab FMR or the exception rent in effect at the time of execution of the AHAP. The FMR or exception lease, as appropriate, may only be gone beyond when the BHA determines in accordance with the above scenarios that it will be essential for the modified Gross Rent to exceed the Mod Rehab FMR or exception lease. Should this determination be made, the BHA will not execute a revised AHAP or Contract for Gross Rents going beyond the FMRs by more than 10 % up until it gets HUD Field Office approval. The HUD Field Office might authorize modified Gross Rents which go beyond the FMRs by as much as 20 percent for the circumstances noted above upon appropriate validation by the BHA of the need for the boost. See 24 C.F.R. § 882.408(d)( 3 ).

12.3.1 Further Limits for SRO Units

In approving modifications to preliminary Contract Rents throughout rehab for SRO Units, the revised preliminary Contract Rents may not reflect an average per unit rehab expense that goes beyond the limitations specified in section 12.2.1 of this Administrative Plan. See 24 C.F.R. § 882.805(d)( 2 ).

12.4 Contract Rents at End of Rehabilitation Loan Term

For a Contract in which the preliminary Contract Rent was based upon a loan term much shorter than ten years, [15], the Contract will offer reduction of the Contract Rent reliable with the rent for the month following completion of the regard to the rehabilitation loan. The quantity of the decrease will be the monthly expense of amortization of the rehabilitation loan. This decrease should result in a brand-new Contract Rent equivalent to the Base Rent plus all subsequent changes. See 24 C.F.R. § 882.807(e).

12.5 Rent Increases

12.5.1 AAF Limits to Annual Contract Rent Adjustments

The amount of any rent boost can not exceed the amount developed by increasing HUD's Annual Adjustment Factor ("AAF") [16] by the Base Rents. See 24 C.F.R. § 882.410(a)( 1 ).

If the quantities borrowed to finance the rehab costs or to fund purchase of the residential or commercial property undergo a variable rate or are otherwise renegotiable, Contract Rents might be changed in accordance with other treatments as prescribed by HUD, and defined in the Contract. However, any such adjusted Contract Rent may still not exceed the amount obtained by multiplying the AAF by the Contract Rents. See 24 C.F.R. § 882.410(a)( 1 ).

To receive a yearly agreement lease modification the Owner must request the lease increase in composing at least 75 days prior to the anniversary of the HAP contract. The next section explains cases in which even more "unique modifications" might be made with HUD approval. See 24 C.F.R. § 882.410(a)( 2 ).

12.5.2 Special Rent Adjustments Subject to HUD Approval

Special lease changes might be suggested by the BHA for approval by HUD in the following scenarios:

(a) Increased Ownership/Maintenance Costs - An unique change, to the level figured out by HUD to show boosts in the real and needed expenditures of owning and preserving the Unit which have resulted from significant general boosts in genuine residential or commercial property taxes, evaluations, utility rates, might be recommended by the BHA for approval by HUD. See 24 C.F.R. § 882.410(a)( 2 )(i).

(b) Drug-related Criminal Activity Prevalent - Subject to appropriations, a special modification may likewise be recommended by the BHA for approval by HUD when HUD determines that a task lies in a community where drug-related criminal activity is normally prevalent, and not particular to a particular task, and the job's operating, maintenance, and capital repair costs have substantially increased mostly as an outcome of the frequency of such drug-related activity. HUD may, on a project-by-project basis, offer adjustments to the optimum regular monthly leas, to a level no greater than 120% of the existing gross leas for each Unit size under a HAP contract, to cover the costs of maintenance, security, capital repair work and reserves required for the Owner to perform a strategy appropriate to HUD for resolving the issue of drug-related criminal activity. Prior to approval of a special change to cover the cost of physical improvements, HUD will carry out an environmental review to the degree required by HUD's environmental guidelines at 24 C.F.R. § 50, consisting of the applicable related authorities at 24 C.F.R. § 50.4. See 24 C.F.R. § 882.410(a)( 2 )(i).

The previously mentioned special rent modifications will only be authorized if and to the level the Owner clearly shows that these general increases have triggered increases in the Owner's operating expense which are not effectively made up for by annual adjustments. See 24 C.F.R. § 882.410(a)( 2 )(ii).

The Owner must send financial details to the BHA which clearly supports the boost. For Contracts of more than twenty (20) systems, the Owner must submit audited monetary information. See 24. C.F.R. § 882.410(a)( 2 )(iii).

12.5.3 Further Overall Limitation to Rent Adjustments

Rent adjustments made might not lead to product differences in between the rents charged for assisted and similar unassisted Units, as identified by the BHA (and authorized by HUD, when it comes to modifications made pursuant to area 12.8.3). This more limitation will not restrict distinctions in rents in between assisted and similar unassisted Units to the degree that differences existed with respect to the preliminary Contract Rents, unless the leas have been adjusted in accordance with 24 C.F.R. § 882.409 as discussed in section 12.5 of this Administrative Plan. See 24 C.F.R. § 882.410(b).

12.6 Tenant Share of Rent

12.6.1 Determination of Tenant Rent

Tenant Rent is the quantity payable month-to-month by the Family to the Owner and is equivalent to the Total Tenant Payment minus any Utility Allowance. See 24 C.F.R. § 5.634(a).

12.6.2 Total Tenant Payment

In accordance with 24 C.F.R. § 5.628, the Total Tenant Payment will be the greatest of the following amounts, rounded to the nearby dollar:

( 1) 30 percent (30%) of the Family's monthly adjusted income; [17];

( 2) 10 percent (10%) of the Family's monthly income;

( 3) If the Family is getting payments for welfare support from a public agency and a part of those payments, changed in accordance with the Family's real housing costs, is specifically designated by such firm to fulfill the Family's housing costs, the portion of those payments which is so designated;

12.6.3 Tenant Payment to Owner

See section 8.8.4 of the HCVP Administrative Plan.

12.6.4 Limit of BHA duty.

See section 8.8.5 of the HCVP Administrative Plan.

12.6.5 Utility Reimbursement

In accordance with 24 C.F.R. § 5.632(b)( 1 ), the BHA will pay an Utility Reimbursement if the Utility Allowance (for tenant-paid utilities) exceeds the amount of the Total Tenant Payment.

The BHA will pay the Utility Reimbursement straight to the Family.

12.7 Security Deposits

12.7.1 General

An Owner might collect a security deposit at the time of the preliminary execution of the Lease. If a Family abandons the Unit, the Owner, subject to Massachusetts and local law, might use the down payment as reimbursement for any unpaid Tenant Rent or other amount owed for which the Family owes under the Lease (such as damages beyond regular wear and tear). See 24 C.F.R. § 882.414(a) and (b).

Security deposit limitations and procedures utilized by the BHA follow M.G.L. ch. 186, § 15(b)(i)(iii) and HUD memoranda.

The maximum quantity of the deposit will be the higher of one month's TTP or $50. Furthermore, this amount will not exceed the optimum amount permitted under Massachusetts or local law. For Units leased in place, security deposits gathered prior to the execution of a Contract which are in excess of this maximum quantity do not need to be refunded up until the Family vacates the Unit topic to the Lease terms. The Family is expected to pay security deposits and utility deposits from its resources and/or other public or private sources. See 24 C.F.R. § 882.414(a).

12.7.2 Owner's Obligation to Refund

If a Family vacates the Unit the Owner shall refund the security deposit if required to do so under Massachusetts law.

12.7.3 Interest Accrued on Security Deposits

The Owner will abide by all Massachusetts and local laws concerning interest payments due Tenants on down payment. Owners will take any owed interest payments into factor to consider when determining repayments for unsettled lease or refunds to Families. See 24 C.F.R. § 882.414(c).