HUD Released new rules for inspectors participating in the Reverse Auction Program in a document titled "UPCS Inspection Services Purchase Order Terms and Conditions". These new rules will go into effect on March 25, 2019. Much of the document deals with federal contractor payment and performance requirements for REAC Inspectors, but there are elements of this document which directly affect owners and agents of Multifamily and Public Housing Properties.
- Scheduling Methodology: REAC Inspectors will create a schedule of properties and the dates that the inspectors have assigned the properties prior to notifying any of the owner/agents. One of those dates will be fourteen days from the initial notification date and the second date will be a final date within seven days of the first inspection date if the first inspection is unsuccessful.
- Notification Procedure: REAC Inspectors must
callthe owner/agent exactly 14 calendar days prior to the inspection to notify the owner/agent of the inspection date and then send an email confirmation as well. A confirmation by the owner/agent is not required to proceed with the scheduled date. If there is a holiday, the contractor should notify the property the day proceeding or following the holiday, thus providing a 13-day or 15-day notification to the property.
- Non-Compliance with Scheduling: If prior to the first inspection date, the owner/agent informs the contractor that they will not allow the inspection to go forward, the contractor will record the rejection and then should provide the second inspection date which was recorded in the schedule sent to REAC. If the owner/agent agrees to the date, the contractor should then send a new confirmation. If both inspections are refused or unsuccessful as the result of the owner/agent, the inspector is to report this to HUD, and the property will receive a score of zero, and this will be the inspection of record.
- Exceptions for Extraordinary Circumstances: If the owner/agent refuses the inspection dates because they are undergoing substantial rehabilitation, the REAC Inspector should inform them that unless they have received an approved waiver/postponement from HUD prior to the scheduled inspection date that the inspection must go forward as scheduled.
- REAC Inspector Non-Disclosure: Inspectors must sign a nondisclosure agreement and cannot disclose any information about any properties which are proposed for inspection. Though not explicitly stated, it appears that the list of properties that are part of the Reverse Auction Program will no longer be public. If any person(s) attempts to share information with you about the contents of any upcoming or current auctions, you should not accept the information.
- Conflict of Interest of REAC Inspectors
: Thelanguage around licensed REAC Inspectors using performing consulting services was strengthened to include the following "An inspector may not inspect a property where there is any other condition, situation or relationship that exists where the objectivity of the inspector or contractor may be called into question." REAC Inspectors are also not permitted to "repair any conditions found during inspections, or endorse, recommend, or otherwise advise the use of specific individuals or business firms for such repair work". (All employees of US Housing Consultants are not currently licensed REAC Inspectors to ensure we have no conflicts of interest).
The last point reinforces a message which we frequently tell our clients - REAC Inspections are not intended to be training for owners/agents and should not be viewed as a "learning experience". Inspections should be proof of existing knowledge and good performance and not a chance to learn what is permitted and prohibited.
The document contains a lot of additional information for those who are interested, the items included above are simply the high points which will most directly affect owners/agents. Please let us know should you have any questions or comments.