Note that this Chapter details the rent computations utilized for Units fixed up prior to the creation of this present draft of the Mod Rehab Administrative Plan that are still operational, in addition to the lease estimations 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 overall 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 initial Gross Rent for any Unit should not surpass the Mod Rehab FMR [12] applicable 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 may approve initial Gro ¬ ss Rents which go beyond the appropriate Mod Rehab FMRs by as much as 10% for all Units of a given size in defined areas where HUD has actually determined 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 paperwork showing the requirement for such exceptions leas in the area to the HUD Field Office. See 24 C.F.R. § 882.408(a) and (b).

(b) The BHA may authorize modifications in the Contract Rent subsequent to execution of the AHAP (see section 5.2) which lead to an initial Gross Rent which surpasses 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 consists of four or fewer SRO Units, the FMR for that size structure (the FMR for a 1-, 2-, 3-, or 4-bedroom Unit, as appropriate) should be used to determine the FMR restriction instead of using the different FMR for each SRO Unit. To determine the FMR limitation for each SRO Unit, the FMR for the structure need to be apportioned 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 performance Units might be no greater than for SRO units (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 quantities may be determined in accordance with the following methods:

(a) Initial Contract Rent: The initial Contract Rent is equal to the base lease plus the monthly cost of a rehabilitation loan however 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 lease must be determined utilizing the lease charged for the Unit or the approximated expenses to the Owner of owning, managing and preserving the restored system. See 24 C.F.R. § 882.408(c)( 2 ).

(c) Monthly Cost of a Rehab Loan: The monthly expense of a rehabilitation loan need to be calculated utilizing:

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 expenses paid by the Owner out of non-borrowed funds; and

3. A minimum of a 15-year loan term, except that if the total amount of rehabilitation is less than $15,000, the actual loan term will be used for the part of the rehab costs borrowed by the Owner. (HUD Field Offices may license loan terms which vary from the above in accordance with HUD requirements).

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

The initial Contract Rent may in no event surpass: the Mod Rehab FMR or exception lease suitable to the Unit on the date that the AHAP is performed, minus any applicable 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 include the costs of supplying helpful services, transport, furnishings, or other non-housing expenses, 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 rehab loan for SRO Units, a loan regard to a minimum of 10 years (rather of 15 years) may be utilized. The exception for using the actual loan term if the total quantity of the rehab is less than $15,000 continues to use. See 24 C.F.R. § 882.805(d)( 1 )(i).

In addition, the cost of the rehab that might be included for the purpose of computing the amount of the preliminary Contract Rent for any Unit need to not exceed the lower of:

(a) The predicted expense of rehabilitation; or

(b) The per system cost limitation that is developed by Federal Register notification, plus the cost of the fire and security improvements required by 24 CFR § 882.605(b)( 4 ). [14]

Note that HUD might, nevertheless, increase this latter per unit constraint by a quantity it identifies is reasonable and required to accommodate unique local conditions, such as high building and construction costs or stringent fire or building regulations. 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 determined under section 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 items (including considerable and essential style changes) which (A) might not reasonably have been prepared for or are required by a modification in regional codes or ordinances, and (B) were not noted in the work article ready or authorized by the BHA, are consequently needed and authorized 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 approximated due to unexpected elements beyond the Owner's control (e.g., strikes, weather delays or unexpected hold-ups caused by regional 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 actual relocation payments made by the Owner to temporarily relocated Families varies from the expense approximated in the estimation of Contract Rents for the AHAP. See 24 C.F.R. § 882.408(d)(iv).

(e) When needed to appropriate mistakes in computation of the base and Contract Rents to abide by the HUD requirements. See 24 C.F.R. § 882.408(d)(v).

Should such situations happen during rehabilitation (either a boost or decrease), the BHA will approve any essential change in work and modification of the work review and cost estimate, recalculate the preliminary Contract Rents, and modify the Contract or AHAP, as suitable, to reflect the revised rents. 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 lease in impact at the time of execution of the AHAP. The FMR or exception rent, as appropriate, might just be gone beyond when the BHA determines in accordance with the above scenarios that it will be essential for the revised Gross Rent to go beyond the Mod Rehab FMR or exception rent. Should this determination be made, the BHA will not execute a revised AHAP or Contract for Gross Rents surpassing the FMRs by more than 10 % till it gets HUD Field Office approval. The HUD Field Office might authorize modified Gross Rents which exceed the FMRs by approximately 20 percent for the situations noted above upon correct reason by the BHA of the necessity 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 modified preliminary Contract Rents may not reflect a typical per system rehabilitation expense that goes beyond the constraints 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 provide for reduction of the Contract Rent efficient with the rent for the month following completion of the regard to the rehabilitation loan. The amount of the decrease will be the regular monthly cost of amortization of the rehab loan. This reduction must result in 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 established by increasing HUD's Annual Adjustment Factor ("AAF") [16] by the Base Rents. See 24 C.F.R. § 882.410(a)( 1 ).

If the amounts obtained to finance the rehab expenses or to fund purchase of the residential or commercial property go through a variable rate or are otherwise renegotiable, Contract Rents might be adjusted in accordance with other procedures as prescribed by HUD, and specified in the Contract. However, any such adjusted Contract Rent may still not surpass the quantity obtained by increasing the AAF by the Contract Rents. See 24 C.F.R. § 882.410(a)( 1 ).

To receive a yearly contract rent adjustment the Owner should ask for the rent boost in composing at least 75 days prior to the anniversary of the HAP contract. The next area explains cases in which further "unique 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 lease modifications may be recommended by the BHA for approval by HUD in the following scenarios:

(a) Increased Ownership/Maintenance Costs - A special change, to the level identified by HUD to reflect boosts in the real and needed expenses of owning and keeping the Unit which have arised from significant basic boosts in real residential or commercial property taxes, evaluations, utility 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, an unique modification may also be recommended by the BHA for approval by HUD when HUD identifies that a job is located in a neighborhood where drug-related criminal activity is usually common, and not particular to a specific job, and the project's operating, maintenance, and capital repair expenditures have considerably increased mainly as a result of the occurrence of such drug-related activity. HUD may, on a project-by-project basis, supply changes to the maximum monthly rents, to a level no greater than 120% of the existing gross rents for each Unit size under a HAP agreement, to cover the costs of maintenance, security, capital repair work and reserves required for the Owner to perform a technique appropriate to HUD for dealing with the problem of drug-related criminal activity. Prior to approval of a special adjustment to cover the expense of physical enhancements, HUD will perform an environmental review to the extent required by HUD's environmental policies at 24 C.F.R. § 50, consisting of the applicable associated authorities at 24 C.F.R. § 50.4. See 24 C.F.R. § 882.410(a)( 2 )(i).

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

The Owner should send financial information to the BHA which plainly supports the boost. For Contracts of more than twenty (20) systems, the Owner needs to submit audited monetary details. 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 leas charged for assisted and equivalent unassisted Units, as determined by the BHA (and authorized by HUD, in the case of adjustments made pursuant to area 12.8.3). This additional limitation will not restrict distinctions in rents in between assisted and similar unassisted Units to the degree that distinctions existed with respect to the initial Contract Rents, unless the rents 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 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 highest of the following amounts, rounded to the nearby dollar:

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

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

( 3) If the Family is receiving payments for well-being assistance 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 satisfy 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 obligation.

See area 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) goes beyond the amount of the Total Tenant Payment.

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

12.7 Security Deposits

12.7.1 General

An Owner might collect a down payment at the time of the preliminary execution of the Lease. If a Family leaves the Unit, the Owner, subject to Massachusetts and regional law, might utilize the down payment as compensation for any overdue 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 limits and treatments used 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 quantity will not go beyond the maximum quantity permitted under Massachusetts or local law. For Units leased in location, security deposits collected prior to the execution of a Contract which are in excess of this optimum amount do not have actually to be refunded up until the Family abandons 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 private sources. See 24 C.F.R. § 882.414(a).

12.7.2 Owner's Obligation to Refund

If a Household 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 shall adhere to all Massachusetts and local laws concerning interest payments due Tenants on security deposits. Owners will take any owed interest payments into consideration when calculating reimbursements for overdue lease or refunds to Families. See 24 C.F.R. § 882.414(c).