that he is under no contractual or other disability which would prevent him from complying with these requirements.

c. Compliance with the provisions of section 3, the regulations set forth in 24 CFR, Part 135, and all applicable rules and orders of the Secretary issued thereunder prior to approval by the Government of the application for this Contract, shall be a condition of the Federal financial assistance provided to the project, binding upon the Owner, his successors and assigns. Failure to fulfill these requirements shall subject the Owner, his contractors and subcontractors, his successors, and assigns to the sanction specified by this Contract, and to such sanctions as are specified by 24 CFR Section 135.135.

d. The Owner shall incorporate or cause to be incorporated into any contract or subcontract for work pursuant to this Contract in excess of $50,000 cost, the following clause: "EMPLOYMENT OF PROJECT AREA RESIDENTS AND CONTRACTORS

"A. The work to be performed under this Contract is on a project assisted under a program providing direct Federal financial assistance from the Department of Housing and Urban Development and is subject to the requirements of section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u. Section 3 requires that, to the greatest extent feasible, opportunities for training and employment be given lower-income residents of the project area and contracts for work in connection with the project be awarded to business concerns which are located in, or owned in substantial part by persons residing in, the area of the project.

"B. The parties to this Contract will comply with the provisions of said section 3 and the regulations issued pursuant thereto by the Secretary of Housing and Urban Development set forth in 24 CFR, Part 135, and all applicable rules and orders of the Department issued thereunder prior to the execution of this Contract. The parties to this Contract certify and agree that they are under no contractual or other disability which would prevent them from complying with these requirements.

"C. The contractor will send to each labor organization or representative of workers with which he has a collective bargaining agreement or other contract or understanding, if any, a notice advising the said labor organization or workers' representative of his commitments under this section 3 clause and shall post copies of the notice in conspicuous places available to employees and applicants for employment or training.

"D. The contractor will include this section 3 clause in every subcontract for work in connection with the project and will, at the direction of the applicant for or recipient of Federal financial assistance, take appropriate action pursuant to the subcontract upon a finding that the subcontractor is in

violation of regulations issued by the Secretary of Housing and Urban Development, 24 CFR, Part 135. The contractor will not subcontract with any subcontractor where it has notice or knowledge that the latter has been found in violation of regulations under 24 CFR, Part 135, and will not let any subcontract unless the subcontractor has first provided it with a preliminary statement of ability to comply with the requirements of these regulations.

"E. Compliance with the provisions of section 3, the regulations set forth in 24 CFR, Part 135, and all applicable rules and orders of the Department issued thereunder prior to the execution of the Contract, shall be a condition of the Federal financial assistance provided to the project, binding upon the applicant or recipient for such assistance, its successors, and assigns. Failure to fulfill these requirements shall subject the applicant or recipient, its contractors and subcontractors, its successors, and assigns to those sanctions specified by the grant or loan agreement or contract through which Federal assistance is provided, and to such sanctions as are specified by 24 CFR Section 135.135."

e. The Owner agrees that he will be bound by the above Employment of Project Area Residents and Contractors clause with respect to his own employment practices when he participates in federally assisted work. 2.3 Cooperation in equal opportunity compliance reviews. The PHA and the Owner shall cooperate with the Government in the conducting of compliance reviews and complaint investigations pursuant to all applicable civil rights statutes, Executive Orders, and rules and regulations pursuant thereto.

2.4 Flood insurance. If the project is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and if the sale of flood insurance has been made available under the National Flood Insurance Act of 1968, the Owner agrees that the project will be covered, during its anticipated economic or useful life, by flood insurance in an amount at least equal to its development or project cost (less estimated land cost) or to the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less.

2.5 Clean Air Act and Federal Water Pollution Control Act.2 In compliance with regulations issued by the Environmental Protection Agency ("EPA"), 40 CFR, Part 15, 39 F.R. 11099, pursuant to the Clean Air Act, as amended ("Air Act"), 42 U.S.C. 1857, et seq., the Federal Water Pollution Control Act, as amended ("Water Act"), 33 U.S.C.

2 Strike this Section if the Contract Rents on the effective date of this Contract, over the maximum total term of this Contract, are $100,000 or less.

1251, et seq., and Executive Order 11738, the Owner agrees that:

a. Any facility to be utilized in the performance of this Contract or any subcontract shall not be a facility listed on the EPA List of Violating Facilities pursuant to section 15.20 of said regulations;

b. He will promptly notify the PHA of the receipt of any communication from the EPA indicating that a facility to be utilized for the Contract is under consideration to be listed on the EPA List of Violating Facilities;

c. He will comply with all the requirements of section 114 of the Air Act and section 308 of the Water Act relating to inspection, monitoring, entry, reports, and information, as well as all other requirements specified in section 114 and section 308 of the Air Act and the Water Act, respectively, and all regulations and guidelines issued thereunder; and

d. He will include or cause to be included the provisions of this Section in every nonexempt subcontract, and that he will take such action as the Government may direct as a means of enforcing such provisions.

2.6 Reports and access to premises and records. a. The Owner shall furnish such information and reports pertinent to the Contract as reasonably may be required from time to time by the PHA or the Government.

b. The Owner shall permit the PHA or the Government or any of their duly authorized representatives to have access to the premises and, for the purpose of audit and examination, to have access to any books, documents, papers and records of the Owner that are pertinent to compliance with this Contract, including the verification of information pertinent to the monthly requests for housing assistance payments.

2.7 Default by the owner. a. A default by the Owner under this Contract shall result if:

(1) The Owner has violated or failed to comply with any provision of, or obligation under, this Contract or of any Lease; or

(2) The Owner has asserted or demonstrated an intention not to perform some or all of his obligations under this Contract or under any Lease,

b. Upon a determination by the PHA that a default has occurred, the PHA, with approval of the Government, shall notify the Owner of the nature of the default of the actions required to be taken on account of the default (including the curing of the default by the Owner, the abatement of housing assistance payments in whole or in part, where appropriate, or any combination of actions), and of the time within which the Owner shall respond with a showing that he has taken all the actions required of him. If the Owner fails to respond or take action to the satisfaction of the PHA and the Government, the PHA shall take appropriate actions as directed or approved by the Government, to achieve compliance or to terminate the Contract in whole or in part.

-2.8 Default by the PHA. The ACC states that the ACC provisions quoted in this Section are made with, and for the benefit of, the Owner or his assignees who will have been specifically approved by the Government prior to such assignment, and that to enforce the performance of these provisions, the Owner and such assignees shall have the right to proceed against the Government by suit at law or in equity. Upon the determination by the Government that a default by the PHA has occurred, the following provisions of the ACC (which is hereby made a part of this Contract), shall be applicable:

"(b) Failure or Inability of PHA to Comply with Contract. In the event of failure of the PHA to comply with the Contract with the Owner, or if such Contract is held to be void, voidable or ultra vires, or if the power or right of the PHA to enter into such Contract is drawn into question in any legal proceeding, or if the PHA asserts or claims that such Contract is not binding upon the PHA for any such reason, the Government may, after reasonable notice to the PHA, determine that the occurrence of any such event, if the Owner is not in default, constitutes a Substantial Default hereunder. In such case, the Government will assume the PHA's rights and obligations under such Contract, and the Government shall, for the duration of such Contract, continue to pay Annual Contributions for the purpose of making housing assistance payments with respect to dwelling units under such Contract, shall perform the obligations and enforce the rights of the PHA, and shall exercise such other powers as the Government may have to cure the Default.

*

"(d) Return of Rights and Obligations to PHA. All rights and obligations of the PHA assumed by the Government pursuant to this Section 2.17 will be returned as constituted at the time of such return (1) when the Government is satisfied that all defaults have been cured and that the Project will thereafter be administered in accordance with all applicable requirements or (2) when the Housing Assistance Payments Contract is at an end, whichever occurs sooner."

2.9 Remedies not exclusive and nonwaiver of remedies. The availability of any remedy under this Contract shall not preclude the exercise of any other remedy under this Contract or under any provisions of law, nor shall any action taken in the exercise of any remedy be deemed a waiver of any other rights or remedies. Failure to exercise any right or remedy shall not constitute a waiver of the right to exercise that or any other right or remedy at any time.

2.10 Disputes. a. Except as otherwise provided herein, any dispute concerning a question of fact arising under this Contract which is not disposed of by agreement of the PHA and the Owner may be submitted by either party to the Department of Housing and Urban Development field office director who shall make a decision and shall mail or

otherwise furnish a written copy thereof to the Owner and the PHA.

b. The decision of the field office director shall be final and conclusive unless, within 30 days from the date of receipt of such copy, either party mails or otherwise furnishes to the Government a written appeal addressed to the Secretary of Housing and Urban Development. The decision of the Secretary or his duly authorized representative for the determination of such appeals shall be final and conclusive, unless determined by a court of competent jurisdiction to have been fraudulent, or capricious, or arbitrary, or so grossly erroneous as necessarily to imply bad faith, or not supported by substantial evidence. In connection with any appeal proceeding under this Section, the appellant shall be afforded an opportunity to be heard and to offer evidence in support of his appeal. Pending final decision of a dispute hereunder, both parties shall proceed diligently with the performance of the Contract and in accordance with the decision of the field office director.

c. This Section does not preclude consideration of questions of law in connection with the decisions rendered under paragraphs a and b of this Section; Provided, however, That nothing herein shall be construed as making final the decision of any administrative official, representative, or board, on a question of law.

2.11 Interest of members, officers, or employees of PHA, members of local governing body or other public officials. No member, officer, or employee of the PHA, no member of the governing body of the locality (city and county) in which the project is situated, no member of the governing body of the locality in which the PHA was activated, and no other public official of such locality or localities who exercises any functions or responsibilities with respect to the project, during his tenure or for one year thereafter, shall have any interest, direct or indirect, in this Contract or in any proceeds or benefits arising therefrom.

2.12 Interest of member of or delegate to Congress. No member of or delegate to the Congress of the United States of America or resident commissioner shall be admitted to any share or part of this Contract or to any benefits which may arise therefrom.

2.13 Nonassignability, a. The Owner agrees that he has not made and will not make any sale, assignment, or conveyance or transfer in any other form, of this Contract or the project or any part thereof or any of his interest therein, without the prior consent of the PHA and the Government; Provided, however, That in the case of an assignment as security for the purpose of obtaining financing of the project, the PHA and the Government shall consent in writing if the terms of the financing have been approved by the Government. An assignment by the Owner to a limited partnership of which the Owner is the sole general partner shall not be considered an assignment herein.

b. The Owner agrees to notify the PHA and the Government promptly of any proposed action covered by paragraph a of this Section. The Owner further agrees to request the written consent of the PHA and the Government in regard thereto, except in the case of an assignment as security as provided in paragraph a of this Section.

c. For the purpose of this Section, a transfer of stock in the Owner in whole or in part, by a party holding ten percent or more of the stock of said Owner, or a transfer by more than one stockholder or the Owner of ten percent or more of the stock of said Owner, or any other similarly significant change in the ownership of such stock or in the relative distribution thereof, or with respect to the parties in control of the Owner or the degree thereof, by any other method or means, whether by increased capitalization, merger with another corporation, corporate or other amendments, issuance of new or additional stock or classification of stock or otherwise, shall be deemed an assignment, conveyance, or transfer with respect to this Contract on the project. With respect to this provision, the Owner and the party signing this Contract on behalf of said Owner, represent that they have the authority of all of the existing stockholders of the Owner to agree to this provision on behalf of said stockholders and to bind them with respect thereto.

VI. Lease Provisions Required for Participation in the Housing Assistance Payments Program

Attachment: Guide for Lease Provisions for Maintenance and Security Services-Existing Housing

IX. Housing Assistance Payments Contract XI. Security Deposit Agreement

AUTHORITY: Sec. 7(d), Department of Housing and Urban Development Act (42 U.S.C. 3535 (d)); sec. 10(b) of the U. S. Housing Act of 1937 (42 U.S.C. 1410(b)); sec. 23 of the U.S. Housing Act of 1937 (42 U.S.C. 1421 (b)).

SOURCE: 39 FR 17187, May 13, 1974, unless otherwise noted.

Subpart A Applicability, Scope, and Basic Policies

§ 1274.101

Applicability and scope.

(a) The policies and procedures contained herein are applicable to the making of housing assistance payments on behalf of eligible low-income families leasing privately owned, existing, decent, safe, and sanitary housing pursuant to the provisions of section 23 of the U.S. Housing Act of 1937.

(b) For purposes of this part, "existing housing" means housing whose original construction and/or rehabilitation was completed without the execution of any contract between a Local Housing Authority (LHA) and an owner for the subsequent leasing or the making of housing assistance payments for occupancy by eligible low-income families. "Existing housing" may include housing which requires minor repairs, improvements or rehabilitation to put it into decent, safe, and sanitary condition, provided that such work is performed prior to the execution of a Housing Assistance Payments Contract and without execution of any contract as described above.

(c) The policies and procedures contained herein shall apply to all section 23 projects for existing housing placed under Annual Contributions Contract after the effective date of this Part. With respect to projects placed under Annual Contributions Contracts prior to the effective date of this part, these policies and procedures may be applied if the LHA and owners of units under lease agree to do so.

(d) This part (1) covers policies and procedures relating to the roles and responsibilities of HUD, the LHA, and the owner and the application and leasing processes and (2) contains contracts, leases, and other documents.

§ 1274.102 Definitions.

(a) Decent, safe, and sanitary housing. For the purposes of this program, housing is considered to be decent, safe, and sanitary if a certificate of occupancy or other similar certification, if required by law, has been issued by the authorized governmental official, and if the following minimum standards are met:

(1) The housing has been determined by the LHA to be decent, safe, and sanitary within the meaning of the U.S. Housing Act based upon all pertinent factors, including, but not limited to, the following:

(i) The condition of the exterior and interior of the structure and the housing unit;

(ii) Adequacy and operating condition of sanitary facilities, which must be private, and adequacy of solid and liquid waste disposal facilities;

(iii) Adequacy and operating condition of kitchen facilities, which must (a) contain a range and refrigerator (except in localities where it is normal practice that tenants provide these items), a sink, space for storage of food and for storage of utensils and dishes, and (b) be private except where authorized as congregate housing meeting HUD requirements for such housing;

(iv) Adequacy and operating condition of heating, lighting and ventilating equipment and/or facilities;

(v) Size, number of rooms, and furnishability to accommodate adequately the size and type of family to be housed.

(2) The owner shall provide either (i) a certification from the authorized local government official or a qualified laboratory that exposed interior and exterior surfaces are free of lead based paint hazards, or (ii) a certification by the owner that those surfaces have been adequately treated or covered, all in accordance with the applicable HUD regulations issued pursuant to the Lead Based Paint Poisoning Prevention Act, 42 U.S.C. 4801.

(3) The site shall not be subject to serious, adverse environmental conditions, natural or manmade, such as instability, flooding, septic tank backups, sewage hazards, or mudslides; abnormal air pollution, smoke or dust; excessive noise, vibration or vehicular traffic; rodent or vermin infestation; or fire hazards. The neighborhood shall not be seriously detrimental to family life, and substandard dwellings or other undesirable elements should not predominate

unless there is actively in progress a concerted program to upgrade the neighborhood.

(b) Fair market rent and gross rent. Fair market rent is the gross rent (including utilities, ranges and refrigerators, and all maintenance and management services) for dwelling units of varying size (number of bedrooms), which, as determined at least annually by HUD, would be required to be paid in each housing market area in order to obtain privately owned, existing, decent, safe, and sanitary housing of modest (nonluxury) nature. Gross rent includes all utilities (except telephone) whether or not paid directly to the utility company by the family.

(c) Gross family contribution. The portion of the rent to owner payable by a family plus the utility allowance established by the LHA for any utilities (except telephone) payable directly by the family. In no event shall the gross family contribution exceed one-fourth of the family's adjusted income as defined by HUD.

(d) Utility allowance. An amount, determined by the LHA and approved by HUD as an allowance for the cost of tenant-purchased utilities, which is deducted from the fair market rent for purposes of determining the rent to owner and is included in the gross family contribution.

(e) Annual contributions contract (ACC). A written agreement between HUD and an LHA to provide annual contributions to the LHA for participation in the Housing Assistance Payments Program. (See Appendix IV.)

(f) Housing assistance payments contract ("Contract"). A written Contract between an LHA and an owner for the purpose of providing housing assistance payments on behalf of eligible families. (See Appendix IX.)

(g) Eligible families. Those families determined by the LHA to meet the requirements for admission into housing assisted hereunder. Families shall not be eligible for housing assistance payments when the LHA determines that 25 percent of adjusted family income (as defined by HUD) equals or exceeds the gross rent for the unit leased. The ineligibility of such families for housing assistance payments shall not affect the family's other rights under its lease.

(h) Certificate of family participation. The certificate issued by an LHA to an applicant family declaring it to be eligi

(a) "Finders-keepers" policy. Eligible families shall be responsible for finding decent, safe, and sanitary units on the private market so as to maximize choice. LHAS may provide assistance in finding units to those families who, for age, handicap, discrimination, or other reasons, are unable to locate suitable units. An LHA may provide housing assistance payments to an eligible family already leasing decent, safe, and sanitary housing, provided it has been issued a Certificate of Family Participation in accordance with the policies and procedures of the LHA and a completed Request for Lease Approval (Part II of Appendix V) has been submitted to the LHA.

(b) Annual contributions. (1) The maximum annual contribution that may be contracted for in the Annual Contributions Contract for a project shall be: (1) The total of the applicable fair market rents for all the units in the project plus (2) an allowance for the cost of administration. The allowance for the preliminary costs of administration and an amount for security and utility deposits (see § 1274.103 (j)) shall be payable out of this total.

(2) A project account, which shall at no time exceed an amount equal to 10 percent of the maximum annual contribution, may be established and maintained out of amounts by which the maximum annual contributions for any years are not otherwise payable in such years. This account shall be established and maintained by the LHA or by HUD, as determined by HUD, as a specifically identified and segregated account, and payment shall be made therefrom, as approved by HUD, only for the following purposes:

(i) increases in housing assistance payments;

(ii) increases in the allowance for LHA administrative expenses;

(iii) increases in fund requirements for security and utility deposits; and

(iv) other expenditures specifically authorized or approved by the Secretary.