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

12.1 Calculating Initial Gross Rents

Gross Rent is the overall monthly cost of housing a Qualified Family and is the sum of the Contract Rent and any utility allowance. See 24 C.F.R. § 882.102.

The initial Gross Rent for any Unit must not go beyond the Mod Rehab FMR [12] suitable to the Unit on the date that the AHAP is performed. See 24 C.F.R. § 882.408(a). Note that the following exceptions apply:

(a) Exception Rents. With HUD Field Office approval, the BHA might approve preliminary Gro ¬ ss Rents which exceed the relevant Mod Rehab FMRs by approximately 10% for all Units of an offered size in specified locations where HUD has figured out that the rents for standard Units appropriate for the Existing Housing Program are more than 10% higher than the Existing Housing FMRs. [13] The BHA will send documentation demonstrating the need 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 may approve modifications in the Contract Rent subsequent to execution of the AHAP (see area 5.2) which result in an initial Gross Rent which goes beyond the Mod Rehab FMR applicable to the Unit by up to 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 contains 4 or less SRO Units, the FMR for that size structure (the FMR for a 1-, 2-, 3-, or 4-bedroom Unit, as applicable) need to be utilized to figure out the FMR restriction rather of using the different FMR for each SRO Unit. To identify the FMR constraint for each SRO Unit, the FMR for the structure should be assigned similarly 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 performance Units might be no greater 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 preliminary 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 quantities may be figured out in accordance with the following methods:

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

(b) Base Rent: The base rent should be determined utilizing the lease charged for the Unit or the estimated costs to the Owner of owning, handling and keeping the rehabilitated unit. See 24 C.F.R. § 882.408(c)( 2 ).

(c) Monthly Cost of a Rehabilitation Loan: The month-to-month expense of a rehab loan should be determined utilizing:

1. The actual rate of interest on the part of the rehab costs borrowed by the Owner;

2. The HUD-FHA optimum rates of interest for multifamily housing (or another rate recommended by HUD) for rehabilitation expenses paid by the Owner out of non-borrowed funds; and

3. A minimum of a 15-year loan term, other than that if the overall quantity of rehabilitation is less than $15,000, the real loan term will be used for the portion of the rehab costs obtained by the Owner. (HUD Field Offices might license loan terms which differ from the above in accordance with HUD requirements).

If computing the month-to-month expense of a rehabilitation loan for SRO Units, refer to area 12.3.1 of this Administrative Plan.

The preliminary Contract Rent may in no event surpass: the Mod Rehab FMR or exception lease applicable to the Unit on the date that the AHAP is performed, minus any relevant allowance for energies 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 include the expenses of offering helpful services, transportation, furnishings, or other non-housing costs, as determined by HUD. See 24 C.F.R. § 882.805(d)( 4 ).

12.2.1 Calculating Monthly Cost of a Rehabilitation Loan for SRO Units

In identifying the monthly expense of a rehabilitation loan for SRO Units, a loan regard to a minimum of ten years (instead of 15 years) may be utilized. The exception for utilizing the real loan term if the total quantity 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 rehabilitation that may be included for the function of calculating the amount of the preliminary Contract Rent for any Unit need to not exceed the lower of:

(a) The forecasted cost of rehabilitation; or

(b) The per unit cost restriction that is developed by Federal Register notification, plus the cost of the fire and safety improvements needed by 24 CFR § 882.605(b)( 4 ). [14]

Note that HUD might, however, increase this latter per unit limitation by an amount it determines is reasonable and needed to accommodate special local conditions, such as high construction expenses or strict fire or building regulations. For further 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 initial Contract Rent as determined under area 12.2 will be the Contract Rents on the effective date of the Contract, other than under the following scenarios:

(a) When, throughout rehab, work products (consisting of significant and essential style modifications) which (A) could not reasonably have been expected or are required by a change in local codes or ordinances, and (B) were not listed in the work review ready 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 real cost of the rehab carried out is less than that estimated in the estimation of Contract Rents for the AHAP or the actual licensed expenses are more than approximated due to unanticipated factors beyond the Owner's control (e.g., strikes, weather hold-ups or unexpected delays caused by city governments). See 24 C.F.R. § 882.408(d)(ii).

(c) When the BHA (or HUD) approves modifications in financing. See 24 C.F.R. § 882.408(d)(iii).

(d) When the actual moving payments made by the Owner to momentarily transferred Families differs from the cost estimated in the calculation of Contract Rents for the AHAP. See 24 C.F.R. § 882.408(d)(iv).

(e) When necessary to correct errors in calculation of the base and Contract Rents to abide by the HUD requirements. See 24 C.F.R. § 882.408(d)(v).

Should such circumstances happen throughout rehab (either a boost or decrease), the BHA will approve any necessary modification in work and modification of the work write-up and cost price quote, recalculate the initial Contract Rents, and change the Contract or AHAP, as appropriate, to show the modified leas. See 24 C.F.R. § 882.408(d)( 2 ).

In recalculating the preliminary Contract Rents, the BHA should determine that the resulting Gross Rents do not exceed the Mod Rehab FMR or the exception rent in effect at the time of execution of the AHAP. The FMR or exception rent, as suitable, may only be gone beyond when the BHA identifies in accordance with the above scenarios that it will be required for the revised Gross Rent to go beyond the Mod Rehab FMR or exception rent. Should this decision be made, the BHA will not carry out a revised AHAP or Contract for Gross Rents going beyond the FMRs by more than 10 % till it receives HUD Field Office approval. The HUD Field Office may approve modified Gross Rents which go beyond the FMRs by as much as 20 percent for the situations listed above upon correct justification by the BHA of the requirement for the increase. See 24 C.F.R. § 882.408(d)( 3 ).

12.3.1 Further Limits for SRO Units

In authorizing changes to initial Contract Rents throughout rehabilitation for SRO Units, the modified preliminary Contract Rents might not reflect a typical per unit rehabilitation expense that exceeds the restrictions specified in area 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 an Agreement in which the preliminary Contract Rent was based upon a loan term shorter than 10 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 reduction will be the month-to-month expense of amortization of the rehabilitation loan. This reduction must lead to a brand-new Contract Rent equivalent to the Base Rent plus all subsequent adjustments. See 24 C.F.R. § 882.807(e).

12.5 Rent Increases

12.5.1 AAF Limits to Annual Contract Rent Adjustments

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

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

To get an annual agreement lease modification the Owner need to request the lease boost in writing at least 75 days prior to the anniversary of the HAP agreement. The next area explains cases in which even more "unique adjustments" 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 adjustments might be suggested by the BHA for approval by HUD in the following scenarios:

(a) Increased Ownership/Maintenance Costs - An unique adjustment, to the extent determined by HUD to show increases in the actual and essential expenditures of owning and preserving the Unit which have actually resulted from substantial general increases in genuine residential or commercial property taxes, evaluations, utility rates, may 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, an unique change might also be advised by the BHA for approval by HUD when HUD identifies that a project is situated in a community where drug-related criminal activity is generally common, and not particular to a particular project, and the task's operating, maintenance, and capital repair work costs have actually considerably increased primarily as an outcome of the occurrence of such drug-related activity. HUD may, on a project-by-project basis, supply changes to the optimum month-to-month rents, to a level no greater than 120% of the present gross leas for each Unit size under a HAP contract, to cover the expenses of upkeep, security, capital repair work and reserves needed for the Owner to carry out a strategy acceptable to HUD for attending to the issue of drug-related criminal activity. Prior to approval of a special modification to cover the cost of physical improvements, HUD will perform an ecological evaluation to the degree required by HUD's ecological guidelines at 24 C.F.R. § 50, including the suitable related authorities at 24 C.F.R. § 50.4. See 24 C.F.R. § 882.410(a)( 2 )(i).

The abovementioned special rent modifications will only be approved if and to the level the Owner clearly shows that these basic boosts have actually triggered boosts in the Owner's operating expenses which are not adequately compensated for by yearly adjustments. See 24 C.F.R. § 882.410(a)( 2 )(ii).

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

12.5.3 Further Overall Limitation to Rent Adjustments

Rent changes made might not result in product distinctions in between the leas charged for assisted and similar unassisted Units, as figured out by the BHA (and authorized by HUD, when it comes to adjustments made pursuant to area 12.8.3). This additional constraint will not restrict distinctions in leas between assisted and similar unassisted Units to the level that differences existed with respect to the initial Contract Rents, unless the rents have been changed in accordance with 24 C.F.R. § 882.409 as gone over 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 nearest dollar:

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

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

( 3) If the Family is receiving payments for welfare support from a public company and a part of those payments, changed in accordance with the Family's real housing expenses, is particularly designated by such company 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 obligation.

See area 8.8.5 of the HCVP Administrative Plan.

12.6.5 Reimbursement

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

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

12.7 Down payment

12.7.1 General

An Owner may collect a security deposit at the time of the preliminary execution of the Lease. If a Household leaves the Unit, the Owner, based on Massachusetts and local law, may use the down payment as compensation for any unpaid Tenant Rent or other quantity owed for which the Family owes under the Lease (such as damages beyond normal wear and tear). See 24 C.F.R. § 882.414(a) and (b).

Down payment limitations and procedures used by the BHA follow M.G.L. ch. 186, § 15(b)(i)(iii) and HUD memoranda.

The maximum quantity of the deposit shall be the higher of one month's TTP or $50. Furthermore, this amount will not exceed the optimum amount allowed under Massachusetts or local law. For Units leased in location, down payment collected prior to the execution of a Contract which remain in excess of this maximum quantity do not have to be refunded up until the Family leaves the Unit subject 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 abandons the Unit the Owner shall refund the down payment if required to do so under Massachusetts law.

12.7.3 Interest Accrued on Security Deposits

The Owner will adhere to all Massachusetts and local laws relating to interest payments due Tenants on security deposits. Owners will take any owed interest payments into factor to consider when computing reimbursements for unpaid rent or refunds to Families. See 24 C.F.R. § 882.414(c).