Have you received a HUD letter or notice in the mail because of a failed REAC Inspection? As part of recent changes made by HUD in Notice H 2015-02, there are now "Required Actions for Multifamily Housing Projects Receiving Failing Scores on REAC Inspections." This includes low-income housing tax credit properties that do not meet compliance. Many owners and management agents are finding themselves in the position of having to develop plans for correcting the non-compliance that caused the failing REAC score. More specifically, owners are receiving notice letters from HUD that state that they are in default of the Housing Assistance Payment (HAP) contract (form H 2015-02 Attachment A) and that they have to create a CDE Plan.
According to the HUD letter that is sent out for noncompliance, the property owner needs to take corrective action within 60 days of the date of the receipt of the notice from their HUD office. This will require the owner to:
In short, you have to complete a full inspection of the failing property and then make all of the repairs or put the items on the survey under a contract to be repaired within 60 days. You need to make a plan to get the property completely repaired and in compliance with the HUD physical condition requirements.
If an owner fails to respond and provide a CDE plan, they will be considered in default. This is also true if the CDE plan once implemented and completed, still results in a failing REAC Inspection score. The owner will have to subject to one or more of four different types of enforcement actions. This is outlined in Notice H2015- Attachment C. In this section of the HUD notice, HUD details: the possibility of civil money penalties against the owner (essentially a dollar amount assigned to a certain number of issues found on the REAC re-inspection), an abatement of the HUD Section 8 Contract, the appointment of a receiver to operate the property and make the needed repairs, and the possibility of seeking a judicial order, if necessary, to force the owner to make the needed repairs.
While US Housing Consultants cannot prepare the CDE plan for you, we can walk you through each and every step. Every single Compliance, Disposition, and Enforcement plan is different—some involve extensive inspections, construction contracts, and planning discussions while other CDE plans can simply certify that the property is ready and that the staff is trained on what to expect. For all properties, though, being in the position of needing to prepare a CDE plan can be nerve-racking, and many property managers just want to know that they are doing it right.
If you’ve received a notice letter from HUD warning of noncompliance, you want to make sure that you handle your response properly. This is especially true if such a letter of noncompliance puts your tax credit in danger. Whatever your situation, don't hesitate to contact us. We can assist you through the process and help you get ready for your REAC re-inspection. We are experts that put great focus on the little technicalities so that we can catch any mistakes and prevent costly issues. Call us today at 877-228-0003