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

12.1 Calculating Initial Gross Rents

Gross Rent is the overall month-to-month expense of housing a Qualified Family and is the sum of the Contract Rent and any energy allowance. See 24 C.F.R. § 882.102.

The preliminary Gross Rent for any Unit need to not go beyond 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 apply:

(a) Exception Rents. With HUD Field Office approval, the BHA might authorize preliminary Gro ¬ ss Rents which exceed the relevant Mod Rehab FMRs by as much as 10% for all Units of a given size in defined areas where HUD has figured out that the rents for basic Units suitable for the Existing Housing Program are more than 10% greater than the Existing Housing FMRs. [13] The BHA will send paperwork showing the need for such exceptions leas 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 section 5.2) which result in an initial Gross Rent which exceeds the Mod Rehab FMR suitable 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 contains 4 or fewer SRO Units, the FMR for that size structure (the FMR for a 1-, 2-, 3-, or 4-bedroom Unit, as applicable) should be used to determine the FMR restriction instead of using the different FMR for each SRO Unit. To figure out the FMR constraint for each SRO Unit, the FMR for the structure must 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 lease for efficiency 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 determined in accordance with the following methods:

(a) Initial Contract Rent: The preliminary Contract Rent is equal to the base lease plus the monthly expense of a rehab loan but not more than the maximum specified at the end of this section. See 24 C.F.R. § 882.408(c)( 2 ).

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

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

1. The real interest rate 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 costs paid by the Owner out of non-borrowed funds; and

3. At least a 15-year loan term, except that if the total quantity of rehab is less than $15,000, the actual loan term will be utilized for the portion of the rehab costs borrowed by the Owner. (HUD Field Offices may authorize loan terms which vary from the above in accordance with HUD requirements).

If computing the month-to-month cost of a rehab loan for SRO Units, describe area 12.3.1 of this Administrative Plan.

The preliminary Contract Rent may in no occasion surpass: the Mod Rehab FMR or exception rent appropriate to the Unit on the date that the AHAP is executed, minus any suitable 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 costs of offering supportive services, transportation, furnishings, or other non-housing costs, 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 determining the regular monthly expense of a rehab loan for SRO Units, a loan regard to at least 10 years (rather of 15 years) might be utilized. The exception for utilizing the real loan term if the total quantity of the rehabilitation is less than $15,000 continues to use. See 24 C.F.R. § 882.805(d)( 1 )(i).

In addition, the cost of the rehabilitation that might be consisted of for the purpose of computing the quantity of the initial Contract Rent for any Unit must not surpass the lower of:

(a) The forecasted expense of rehab; or

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

Note that HUD might, however, increase this latter per system restriction by an amount it identifies is sensible and required to accommodate unique regional conditions, such as high building and construction 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 initial Contract Rent as determined under area 12.2 will be the Contract Rents on the efficient date of the Contract, other than under the following situations:

(a) When, during rehab, work products (consisting of significant and necessary style modifications) which (A) might not reasonably have actually been anticipated or are required by a change in regional codes or regulations, and (B) were not listed in the work article prepared or approved by the BHA, are subsequently needed and approved by the BHA. See 24 C.F.R. § 882.408(d)(i).

(b) When the real cost of the rehabilitation carried out is less than that estimated in the computation of Contract Rents for the AHAP or the real certified costs are more than estimated due to unexpected factors beyond the Owner's control (e.g., strikes, weather delays or unforeseen hold-ups brought on by city governments). See 24 C.F.R. § 882.408(d)(ii).

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

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

(e) When required to correct 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 circumstances happen throughout rehabilitation (either an increase or decrease), the BHA will authorize any required modification in work and amendment of the work write-up and expense estimate, recalculate the initial Contract Rents, and amend the Contract or AHAP, as suitable, to show the modified leas. See 24 C.F.R. § 882.408(d)( 2 ).

In recalculating the initial Contract Rents, the BHA needs to figure out 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 just be exceeded when the BHA determines in accordance with the above circumstances that it will be required for the revised Gross Rent to go beyond the Mod Rehab FMR or exception rent. Should this determination be made, the BHA will not carry out a revised AHAP or Contract for Gross Rents surpassing the FMRs by more than 10 % until it gets HUD Field Office approval. The HUD Field Office may authorize modified Gross Rents which surpass the FMRs by as much as 20 percent for the scenarios noted above upon proper validation by the BHA of the requirement 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 during rehab for SRO Units, the revised preliminary Contract Rents may not reflect a typical per system rehabilitation cost that surpasses the restrictions defined 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 an Agreement in which the initial Contract Rent was based upon a loan term shorter than 10 years, [15], the Contract will supply for decrease of the Contract Rent efficient with the rent for the month following completion of the regard to the rehab loan. The amount of the decrease will be the month-to-month expense of amortization of the rehabilitation loan. This decrease must result in a 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 quantity of any rent increase can not surpass the quantity 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 expenses or to finance purchase of the residential or commercial property go through a variable rate or are otherwise renegotiable, Contract Rents might be changed in accordance with other procedures as recommended by HUD, and defined in the Contract. However, any such adjusted Contract Rent might 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 an annual agreement lease modification the Owner must request the lease boost in writing a minimum of 75 days prior to the anniversary of the HAP agreement. The next section explains cases in which further "special changes" may 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 rent changes might be suggested by the BHA for approval by HUD in the following circumstances:

(a) Increased Ownership/Maintenance Costs - A special modification, to the level identified by HUD to show increases in the real and required costs of owning and preserving the Unit which have resulted from substantial basic increases in real residential or commercial property taxes, assessments, energy rates, may be suggested 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 adjustment might likewise be suggested by the BHA for approval by HUD when HUD figures out that a job lies in a community where drug-related criminal activity is generally prevalent, and not particular to a particular job, and the job's operating, upkeep, and capital repair work costs have substantially increased mostly as a result of the occurrence of such drug-related activity. HUD might, on a project-by-project basis, provide adjustments to the optimum regular monthly rents, to a level no higher than 120% of the current gross leas for each Unit size under a HAP contract, to cover the costs of maintenance, security, capital repairs and reserves required for the Owner to carry out a method appropriate to HUD for attending to the problem of drug-related criminal activity. Prior to approval of a special modification to cover the cost of physical enhancements, HUD will perform an ecological review to the extent required by HUD's environmental guidelines at 24 C.F.R. § 50, consisting of the suitable related authorities at 24 C.F.R. § 50.4. See 24 C.F.R. § 882.410(a)( 2 )(i).

The aforementioned unique rent adjustments will just be authorized if and to the level the Owner clearly demonstrates that these general boosts have actually triggered boosts in the Owner's operating expenses which are not adequately compensated for by annual adjustments. See 24 C.F.R. § 882.410(a)( 2 )(ii).

The Owner should send financial info to the BHA which plainly supports the increase. For Contracts of more than twenty (20) units, the Owner must submit audited monetary info. See 24. C.F.R. § 882.410(a)( 2 )(iii).

12.5.3 Further Overall Limitation to Rent Adjustments

Rent changes made may not lead to material differences between the leas charged for assisted and similar unassisted Units, as identified by the BHA (and approved by HUD, when it comes to modifications made pursuant to section 12.8.3). This further constraint will not restrict differences in rents between assisted and similar unassisted Units to the level that differences existed with respect to the preliminary Contract Rents, unless the leas have actually been changed in accordance with 24 C.F.R. § 882.409 as talked about in area 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 amount payable regular monthly by the Family to the Owner and amounts 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 list below quantities, rounded to the closest dollar:

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

( 2) 10 percent (10%) of the Family's month-to-month income;

( 3) If the Family is getting payments for well-being support from a public company and a part of those payments, adjusted in accordance with the Family's actual housing expenses, is specifically designated by such firm to meet the Family's housing expenses, 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 responsibility.

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 energies) exceeds the quantity 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 down payment at the time of the initial execution of the Lease. If a Household abandons the Unit, the Owner, based on Massachusetts and local law, might utilize the security deposit as repayment for any overdue Tenant Rent or other quantity 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 treatments utilized by the BHA are consistent with M.G.L. ch. 186, § 15(b)(i)(iii) and HUD memoranda.

The optimum quantity of the deposit shall be the higher of one month's TTP or $50. Furthermore, this quantity will not exceed the optimum quantity allowed under Massachusetts or local law. For Units leased in location, down payment collected prior to the execution of an Agreement which remain in excess of this optimum quantity do not have to be refunded till the Family vacates the Unit subject to the Lease terms. The Family is anticipated to pay security deposits and utility deposits from its resources and/or other public or personal sources. See 24 C.F.R. § 882.414(a).

12.7.2 Owner's Obligation to Refund

If a Family leaves the Unit the Owner shall reimburse the down payment if needed to do so under Massachusetts law.

12.7.3 Interest Accrued on Down Payment

The Owner will abide by all Massachusetts and local laws regarding interest payments due Tenants on down payment. Owners shall take any owed interest payments into factor to consider when computing reimbursements for overdue rent or refunds to Families. See 24 C.F.R. § 882.414(c).