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New HUD Rules for REAC Scores Less Than 60

 New HUD Rules for REAC Scores Less Than 60

HUD released Notice H2015-02 on February 24, 2015; this memorandum discusses new rules and procedures for properties that receive a score of less than 60 on a REAC Inspection. This memo codifies many of the practices of Multifamily Housing Field Offices that have been underway for the past few years, and also establishes very specific rules and procedures about enforcement on "second consecutive REAC fails". The memorandum is very extensive and covers all of the rules, procedures, and steps for what should and should not occur once a property scores below 60, as well as when there are consecutive scores less than 60.

While failing a REAC Inspection is never something owners/agents plan for, and it is certainly not enjoyable in any way - these new rules do create a defined path for getting out of noncompliance and back in good standing with HUD. If you should find yourself with a failing score, there are very specific and relatively easy steps to take after you receive your failing score.

Major points of the HUD Notice H2015 memo:
  1. Second Consecutive Failed REAC Inspections –One of the most significant changes in H2012-02 is the specifically established "first fail date", which is January 17, 2014. The rules outlined in the memo state that enforcement actions will take place on properties that have two or more fails after this date. This represents a significant change, as previously there were properties that had prior failing scores but for a variety of reasons, there was a delay in the re-inspection.
  2. Owners can now notify the HUD Project Manager for their property of their intent to file an appeal, and during the time that the owner/management agent waits for a response from the HUD REAC appeals office – all enforcement action will be suspended. If the response on the appeal is returned and the result does not change the score to a 60 or higher result, then the 60 days provided to the owner will start from the date of the response date of the REAC appeal response.
  3. HUD is required to notify the owner and provide them an opportunity to respond within 30 days of the date of the inspection release or the date of the REAC appeal response. This notice will explain the ability for the owner/agent to file an appeal, and provide an outline of the options if an appeal is not possible.
  4. If an appeal is not filed or is filed and does not result in a passing score, then the HUD office will create a Compliance, Disposition, and Enforcement Plan (herein, CDE), with a specified timetable for correcting all deficiencies. This plan for correction will include (a) 100% inspection of all parts of the property (not limited to the areas/units covered in the REAC inspection) and (b) repair of all of the items found to be deficient in the 100% inspection, or submit a plan of corrective action to HUD outlining how and when the issues will be corrected. Once the property has been inspected and fully corrected of all UPCS Deficiencies, the owner will execute a certification that the project is fully compliant with UPCS standards.
  5. One of the new requirements is that the Owner notify all tenants of the Owner's non-compliance and the existence of a corrective action plan. There is a specific form included in the memo that would need to be used to notify the tenants called the "Notice of Compliance, Disposition, and Enforcement (CDE) Plan".
  6. For first time fails, re-inspections will occur one year after the date of the last inspection, assuming that the CDE plan or corrective actions have been completed within the 60 day period and accepted by HUD. If the requirements of the CDE is not completed, then the owner/agent would remain flagged in APPS and HUD would then attempt to schedule another inspection as soon as possible. It is strongly recommended that the all requirements of the CDE plan be completed within the time period. Relying on the possibility of a re-inspection leaves the owner/agent flagged in non-compliance and there is no guarantee that a re-inspection will occur in a timely fashion.
  7. Any property with a score of 30 or lower, or two fails after January 17, 2014, will be referred to the Departmental Enforcement Center (DEC). The DEC will then decide upon the type of enforcement to be applied. Enforcement could include imposing civil money penalties, abatement or partial abatement of the HAP contract, or reassignment of management or ownership. The DEC may also choose to seek a judicial appointment of a receiver or judicial order to cure all project deficiencies. Upon initiating the chosen enforcement actions, HUD staff will issue a "Notice of Enforcement Action" to the owner/agent.

Certification of Repairs on Scores less than 60 - As part of the 2014 HUD Appropriations bill, HUD now requires owner/agents to certify repairs on scores less than 60 with a Compliance, Disposition, and Enforcement Plan (CDE). Failure to do can result in foreclosure, reassignment of ownership or management, or civil money penaltes. See more about the new implications of HUD REAC Inspections.

Actions for a REAC score below 60

The first step, is to contact our office and discuss your options for an appeal. We can help you determine if there is legitimate grounds for an appeal and the ability to achieve a score of 60 or greater with an appeal. In some cases, the ability to receive a passing score by way of an appeal may be limited or impossible, but this should always be step one. If an appeal is not likely to achieve a passing score, contact us and we can assist with completing the 100% survey of your property and assisting with responding to the Corrective Action Plan as required.

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