Note that this Chapter details the lease estimations used for Units restored prior to the creation of this current draft of the Mod Rehab Administrative Plan that are still operational, along with the rent computations to be utilized 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 total 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 should not exceed 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 might authorize initial Gro ¬ ss Rents which exceed the appropriate Mod Rehab FMRs by approximately 10% for all Units of a provided size in defined locations where HUD has actually determined that the rents for basic Units ideal for the Existing Housing Program are more than 10% greater than the Existing Housing FMRs. [13] The BHA will submit documentation showing the requirement for such exceptions rents 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 area 5.2) which result in an initial Gross Rent which surpasses the Mod Rehab FMR relevant to the Unit by as much as 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 four or fewer SRO Units, the FMR for that size structure (the FMR for a 1-, 2-, 3-, or 4-bedroom Unit, as suitable) should be used to determine the FMR constraint rather of using the different FMR for each SRO Unit. To figure out the FMR constraint for each SRO Unit, the FMR for the structure should be allocated 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 effectiveness Units may 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 preliminary Contract Rent and Base Rent for each Unit will be computed in accordance with HUD requirements. See 24 C.F.R. § 882.408(c). The quantities might be identified in accordance with the following techniques:

(a) Initial Contract Rent: The preliminary Contract Rent amounts to the base rent plus the regular monthly expense of a rehab loan however not more than the maximum mentioned at the end of this area. See 24 C.F.R. § 882.408(c)( 2 ).

(b) Base Rent: The base lease need to be computed utilizing the lease charged for the Unit or the estimated costs to the Owner of owning, managing and preserving the fixed up system. See 24 C.F.R. § 882.408(c)( 2 ).

(c) Monthly Cost of a Rehab Loan: The month-to-month expense of a rehabilitation loan must be calculated utilizing:

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

2. The HUD-FHA maximum rate of interest for multifamily housing (or another rate prescribed by HUD) for rehabilitation costs 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 rehab is less than $15,000, the actual loan term will be used for the part of the rehabilitation costs borrowed by the Owner. (HUD Field Offices may license loan terms which differ from the above in accordance with HUD requirements).

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

The initial Contract Rent might in no event exceed: the Mod Rehab FMR or exception lease applicable to the Unit on the date that the AHAP is performed, minus any suitable 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 expenses of offering encouraging services, transport, furniture, 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 Rehab Loan for SRO Units

In determining the month-to-month expense of a rehabilitation loan for SRO Units, a loan term of a minimum of ten years (instead of 15 years) might be used. The exception for utilizing the actual loan term if the overall 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 included for the purpose of determining the quantity of the initial Contract Rent for any Unit need to not surpass the lower of:

(a) The forecasted expense of rehabilitation; or

(b) The per unit cost limitation that is developed 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 restriction by an amount it determines is reasonable and required to accommodate special local conditions, such as high building costs or rigid fire or structure 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 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 products (including significant and needed design changes) which (A) might not reasonably have actually been expected or are required by a modification in local codes or regulations, and (B) were not noted in the work review prepared or approved by the BHA, are subsequently needed and authorized by the BHA. See 24 C.F.R. § 882.408(d)(i).

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

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

(d) When the actual moving payments made by the Owner to temporarily transferred 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 essential to right 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 occur during rehab (either a boost or decline), the BHA will approve any essential change in work and amendment of the work review and cost quote, recalculate the preliminary Contract Rents, and amend the Contract or AHAP, as proper, to reflect the modified rents. See 24 C.F.R. § 882.408(d)( 2 ).

In recalculating the preliminary Contract Rents, the BHA must figure out that the resulting Gross Rents do not surpass the Mod Rehab FMR or the exception lease in impact at the time of execution of the AHAP. The FMR or exception rent, as proper, might only be surpassed when the BHA figures out in accordance with the above situations that it will be required for the modified Gross Rent to surpass the Mod Rehab FMR or exception lease. 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 % up until it gets HUD Field Office approval. The HUD Field Office may authorize revised Gross Rents which surpass the FMRs by as much as 20 percent for the circumstances listed above upon appropriate 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 preliminary Contract Rents throughout rehab for SRO Units, the modified preliminary Contract Rents may not show an average per unit rehabilitation expense that exceeds 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 much shorter than ten years, [15], the Contract will attend to decrease of the Contract Rent efficient with the rent for the month following the end of the regard to the rehabilitation loan. The quantity of the reduction will be the regular monthly expense of amortization of the rehabilitation loan. This decrease needs to result in a 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 surpass the amount 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 amounts borrowed to finance the rehabilitation costs 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 treatments as prescribed by HUD, and defined in the Contract. However, any such adjusted Contract Rent may still not exceed the quantity obtained by increasing the AAF by the Contract Rents. See 24 C.F.R. § 882.410(a)( 1 ).

To receive an annual contract rent adjustment the Owner should ask for the lease boost in writing at least 75 days prior to the anniversary of the HAP agreement. The next section describes cases in which even more "unique adjustments" 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 modifications might be advised by the BHA for approval by HUD in the following situations:

(a) Increased Ownership/Maintenance Costs - A special adjustment, to the extent identified by HUD to show boosts in the real and required expenses of owning and keeping the Unit which have arised from substantial general increases in real residential or commercial property taxes, evaluations, utility rates, may be advised 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 change might also be suggested by the BHA for approval by HUD when HUD figures out that a project lies in a neighborhood where drug-related criminal activity is normally prevalent, and not particular to a particular job, and the task's operating, upkeep, and capital repair work expenses have substantially increased primarily as an outcome of the occurrence of such drug-related activity. HUD might, on a project-by-project basis, offer changes to the optimum month-to-month leas, 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 maintenance, security, capital repair work and reserves needed for the Owner to carry out a strategy acceptable to HUD for dealing with the problem of drug-related criminal activity. Prior to approval of a special adjustment to cover the cost of physical improvements, HUD will perform an environmental review to the extent required by HUD's ecological guidelines at 24 C.F.R. § 50, consisting of the relevant associated authorities at 24 C.F.R. § 50.4. See 24 C.F.R. § 882.410(a)( 2 )(i).

The aforementioned special rent changes will just be approved if and to the extent the Owner plainly demonstrates that these general increases have actually triggered increases in the Owner's operating expense which are not sufficiently compensated for by yearly modifications. See 24 C.F.R. § 882.410(a)( 2 )(ii).

The Owner needs to submit monetary information to the BHA which plainly supports the boost. For Contracts of more than twenty (20) units, the Owner needs to send 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 result in material differences in between the leas charged for assisted and similar unassisted Units, as determined by the BHA (and approved by HUD, when it comes to changes made pursuant to area 12.8.3). This further constraint will not forbid differences in leas between assisted and equivalent unassisted Units to the extent that differences existed with respect to the initial Contract Rents, unless the leas 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 amount payable month-to-month 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 list below quantities, 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 income;

( 3) If the Family is receiving payments for welfare assistance from a public agency and a part of those payments, changed in accordance with the Family's actual 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 area 8.8.4 of the HCVP Administrative Plan.

12.6.4 Limit of BHA duty.

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 energies) goes beyond the quantity 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 may collect a down payment at the time of the preliminary execution of the Lease. If a Household abandons the Unit, the Owner, based on Massachusetts and regional law, might utilize the down payment as repayment for any unpaid Tenant Rent or other quantity owed for which the Family owes under the Lease (such as damages beyond typical wear and tear). See 24 C.F.R. § 882.414(a) and (b).

Down payment limits and treatments utilized by the BHA are constant with M.G.L. ch. 186, § 15(b)(i)(iii) and HUD memoranda.

The optimum quantity of the deposit will be the greater of one month's TTP or $50. Furthermore, this amount shall not exceed the maximum amount permitted under Massachusetts or local law. For Units rented in location, security deposits gathered prior to the execution of a Contract which remain in excess of this maximum quantity do not need to be reimbursed until the Family leaves the Unit topic to the Lease terms. The Family is expected to pay down payment 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 will refund the down payment if required to do so under Massachusetts law.

12.7.3 Interest Accrued on Down Payment

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