such fact and it may proceed in accordance with § 1276.207(b) (4). A copy of any notification to the owner/ rehabilitator required in paragraphs (d) (2), (d) (3) and (d) (4) of this section shall be sent to the HUD field office. § 1276.212 Notification of approval of final proposal. (a) Notification by LHA. Upon receipt by the LHA of HUD approval, the LHA shall notify the owner/rehabilitator of the approval of his Final Proposal, using the prescribed form of letter (Notification of Approval) shown as Appendix VIII. Upon acceptance of the Notification by the owner/rehabilitator, the LHA shall immediately transmit a copy of the accepted Notification to the HUD field office together with a copy of the LHA's resolution approving the Final Proposal. If the owner/rehabilitator does not accept the Notification by the date specified, the LHA may rescind the Notification and proceed in accordance with § 1276.207(b) (4). (1) If the estimate of relocation payments provided in the Proposal (see § 1276.208(b) (7)) is determined by HUD to be inaccurate, the owner/rehabilitator shall be advised in the Notification of Approval as to the correct amount. (2) If the services of a registered architect are to be used, the Notification of Approval to the owner/rehabilitator shall advise him that before the LHA may obtain an ACC from HUD or enter into an Agreement, the owner/rehabilitator shall submit to HUD and the LHA the architect's certification required in the Notification. Such certification shall be prepared by the architect responsible for the preparation of final working drawings and specifications. If the owner/rehabilitator fails to submit the certification by the date specified in the letter, the LHA shall rescind the Notification (and it may proceed in accord with § 1276.207(b)(4)) unless it determines that a reasonable extension of time should be granted. A copy of the letter of extension or recision shall be transmitted to HUD. (b) Availability of LHA analysis of final proposals. The LHA analysis of each approved Final Proposal shall be held available for public inspection in the LHA office for at least three years following the Notification of Approval. § 1276.213 Annual Contributions Con tract. After receipt of a copy of the accepted Notification and the architect's certification, where such certification is required, the HUD field office shall prepare the Annual Contributions Contract, shown as Appendix X. The Annual Contributions Contract shall be transmitted to the LHA for execution and return to HUD. This transmittal shall advise the LHA that it must simultaneously submit for HUD approval its Initial Estimate of Required Annual Contributions (Preliminary Costs) and an Estimate of Total Required Annual Contributions for HUD approval (see § 1276.105 (a)). § 1276.214 Agreement to enter into housing assistance payments contract. (a) Preparation of agreement. The Agreement shall be prepared by HUD at the time the Annual Contributions Contract is prepared (see § 1276.213), utilizing the prescribed form shown in Appendix XI to this Part. The Agreement shall include but not be limited to, the following: (1) A description of the property and the rehabilitation to be accomplished. (2) An attachment of the proposed Contract, complete in all respects except for execution, which shall specify the amount of rent to owner and conform to the prescribed form shown as Appendix XII to this Part. (3) Rehabilitation initiation and completion dates, including initiation and completion dates of stages if staged completion is agreed to. (4) How completion of rehabilitation shall be evidenced (see § 1276.215(a)). (5) A provision that the owner may not: (i) Make any sale, assignment, or conveyance or transfer in any other form of his interests in the Agreement or the housing except: (A) With the prior consent of the LHA and HUD; or (B) To a financial institution for the purpose of obtaining financing. (ii) Change to a different rehabilitator from the one named in the Agreement without prior consent of the LHA and HUD. An assignment by the owner to a limited partnership of which the owner is the general partner shall not be considered an assignment hereunder. (6) Provisions that the owner shall comply with relocation requirements as set forth in applicable HUD issuances, HUD Equal Opportunity (including equal employment opportunity) requirements as set forth in applicable HUD issuances and regulations, and the requirements of section 3 of the Housing and Urban Development Act of 1968 and regulations issued pursuant thereto in regard to providing opportunities for training and employment to lower income residents of the project area, and in regard to awarding contracts to business concerns located in, or owned in substantial part by residents of, the project area. (b) Execution of agreement. After receipt of the LHA-executed ACC, accompanied by the Estimates of Required Annual Contributions, HUD shall review the Estimates and, if approved, execute the ACC. HUD shall then transmit a fully executed copy of the ACC to the LHA, together with four copies of the unexecuted Agreement. After execution of the Agreement by the LHA and the owner, a copy shall be returned to HUD. (c) Rehabilitation work. Upon execution of the Agreement, the owner/rehabilitator shall promptly proceed with rehabilitation work as provided in the Agreement. In the event the work is not so commenced and/or diligently continued, the LHA shall have the right to cancel the Agreement, subject to HUD approval. Where the financing is secured by a HUD-insured mortgage, required HUD inspection procedures shall be followed. § 1276.215 Completion of rehabilitation. (a) Notification of completion. Upon completion of the rehabilitation, the owner shall notify the LHA and HUD that the work is completed and shall submit to the LHA the evidence of completion described in paragraph (b) of this section. (b) Evidence of completion. Completion of the rehabilitation shall be evidenced by the following: (1) A certificate of occupancy and/or other official approvals necessary for occupancy; (2) A certification by the owner, supported by the owner's warranty in section 1.1c of the Contract, and a separate certification by the registered architect (if working drawings and specifications for the work were prepared and certified to by a registered architect), that: (i) All work has been completed in accordance with the requirements of the Agreement; (ii) The rehabilitated housing is in good and tenantable condition; (iii) There are no defects or deficiencies other than ordinary punchlist items. If there are punchlist items, the owner shall (as agreed to by the LHA, the owner and HUD) make a deposit in escrow to cover such items. In such case, if the owner fails to complete the punchlist items within a reasonable time to the satisfaction of the LHA, the LHA may, upon 30 days notice and with the approval of HUD, terminate the Housing Assistance Payments Contract. (c) HUD inspection. (1) Within ten working days of the receipt of the owner's notification of completion, the LHA representative, accompanied by a HUD representative, shall inspect the property and review the evidence of completion listed in paragraph (b) of this section. As promptly as possible HUD shall notify the LHA as to whether or not the rehabilitation has been satisfactorily completed and whether the requirements of § 1276.216(a) have been complied with. (2) If it is determined that the rehabilitation has not been satisfactorily completed, HUD shall notify the LHA and advise it of the corrective action needed. (3) In the event the owner disputes HUD's finding, he may submit the controversy to third-party arbitration, at his expense, provided that the arbitration is advisory only. (4) Prior to authorizing execution of the Housing Assistance Payments Contract, HUD shall verify that appropriate corrective action has been taken. (d) Staged completion. If the rehabilitation is to be completed in stages, the procedures of paragraphs (a), (b), and (c) of this section shall apply to each stage. § 1276.216 Execution of housing assist ance payments contract. (a) Prior to HUD's authorization of execution of the Housing Assistance Payments Contract, the owner must certify in writing that there has been no change in the evidence of management capability, or in the proposed management program (if one was required), as specified in his proposal other than changes approved in writing by the LHA and HUD in accordance with section 1.3 of the Agreement. (b) If HUD determines that the rehabilitation has been satisfactorily completed in accordance with the provisions of § 1276.215 and approves such certification and the changes, if any, as to the evidence of management capability and management program, HUD shall authorize execution of the Contract. (c) Upon receipt of authorization from HUD, the LHA shall execute the Housing Assistance Payments Contract with the owner and transmit a copy of the executed Contract to the HUD field office for approval. If the Contract is found approvable, an approved copy shall be returned to the LHA. If the Contract is not approvable, the LHA shall be notified by HUD as to the necessary changes to be made before the Contract can be approved. § 1276.217 Project operation. (a) Occupancy. Marketing by the owner and determinations of family eligibility and approval of owner-family leases by the LHA shall begin no later than 60 days prior to completion of rehabilitation and be accomplished so as to achieve rapid occupancy. (b) Compliance with equal opportunity requirements and applicable LHA admission regulations. If the owner was required to submit an Affirmative Fair Housing Marketing Plan (see § 1276.205 (c) (3)), marketing of units and selection of families by the owner shall be in accordance with the owner's HUD-approved Affirmative Fair Housing Marketing Plan. In all cases, such marketing and selection of families shall be in accordance with all regulations relating to fair housing advertising including use of the equal opportunity logotype, statement, and slogan in all advertising, and with applicable LHA regulations establishing admission policies, including policies, if any, carrying out its responsibility for rehousing displaced families. Projects shall be managed and operated without regard to race, color, creed, religion, sex, or national origin. (c) Selection of families for participation. The owner shall be responsible for selection of families, subject to certification of eligibility by the LHA. The owner shall request the LHA, in accordance with procedures to be agreed upon by the owner and the LHA, to certify the eligibility of a selected family and to approve the proposed owner-family lease. Such request shall be made by submitting to the LHA the Determination of Family Eligibility and Lease Approval, shown as Appendix XIII to this Part. The owner and the family shall complete Part I of the form, Request for Determination, and submit, with the request, the proposed owner-family lease, complete except for execution and the amount of rent payable by the family. (d) LHA Determination of family eligibility and lease approval. Within the time period specified in the Agreement and the Contract, the LHA shall return a copy of Part II of Appendix XIII, Authority Determination, to the owner and the family indicating one of the following: (1) That additional, specified information is required from the owner to enable the LHA to make its determination. (2) That the family is eligible, as evidenced by a Certificate of Family Participation (Part III of Appendix XIII) issued and signed by the LHA, and that the dwelling unit specified in the lease and the lease itself meet program requirements and are approved. (See paragraph (e) of this section for lease requirements.) The owner shall thereupon notify the family that it may occupy the leased unit on a stated date after signing the Certificate and after execution of the lease and the Security Deposit Agreement, if any, shown as Appendix XVI. A copy of each signed document shall be returned to the LHA by the owner. (3) That the request cannot be approved because the family is not eligible or the dwelling unit or the proposed lease does not meet program requirements. Records on applicant and certified families shall be maintained by the LHA SO as to provide HUD with racial and ethnic data. (e) Lease requirements. The ownerfamily lease shall contain all required provisions specified in Section 1.11 of the Contract and none of the prohibited provisions listed in paragraph (e) (2) of this section and shall otherwise conform to the terms of the Contract and the provisions of this Part. (1) Term of lease. The term of the lease shall be for not less than one year and shall generally be for not more than one year, but may contain a provision permitting termination upon 30 days advance written notice by either party. The specified lease term, including specified renewal options, if any, shall in no case exceed five years or the term of the Housing Assistance Payments Contract (see Section 1.5 of Contract, whichever is shorter. (2) Prohibited provisions. Lease clauses which fall within the classifications listed below shall not be included in any ownerfamily lease. (i) Confession of judgment. Constitutes prior consent by tenant to any lawsuit the landlord may bring against him in connection with the lease and to a judgment in favor of the landlord. (ii) Distraint for rent or other charges. Agreement by tenant that landlord is authorized to take property of the tenant and hold it as a pledge until the tenant performs the obligation which the landlord has determined the tenant has failed to perform. (iii) Exculpatory clauses. Agreement by tenant not to hold the landlord or landlord's agents liable for any acts or omissions whether intentional or negligent on the part of the landlord or the landlord's authorized representatives or agents. (iv) Waiver of legal notice by tenant prior to actions for eviction or money judgments. Agreement by tenant that the landlord may institute suit without any notice to the tenant that the suit has been filed, thus preventing the tenant from defending against the lawsuit. (v) Waiver of legal proceedings. These clauses authorize the landlord to act to evict the tenant or hold or sell the tenant's possessions whenever the landlord determines that a breach or default has occurred, without notice to the tenant or any determination by a court of the rights and liabilities of the parties. (vi) Waiver of jury trial. These clauses authorize the landlord's lawyer to appear in court for the tenant and waive the right to a trial by jury. (vii) Waiver of right to appeal judicial error in legal proceedings. These clauses authorize the landlord's lawyer to waive the right to appeal for judicial error in any suit or the right to file a suit in equity to prevent the execution of a judgment. (viii) Tenant chargeable with costs of legal actions regardless of outcome. These clauses provide that the tenant agrees to pay attorney's fees or other legal costs whenever the landlord decides to take action against the tenant even though the court determines that the tenant prevails in the action. (Omission of such clause does not mean that the tenant as a party to a lawsuit may not be obligated to pay attorney's fees or other costs if he loses the suit.) (f) Continued family participation. A family must continue to occupy its approved unit to remain eligible for participation in the Housing Assistance Payments Program except under the following conditions. If the family (1) wishes to vacate its unit at the end of the lease term (or prior thereto but in accordance with the provisions of the lease) in order to move to another approvable unit, or (2) is required to move for reasons other than violation of the lease on the part of the family (as determined by the LHA), and wishes to move to another approvable unit, the family shall be given a new Certificate of Family Participation providing for housing assistance payments for occupancy of such other unit, if: (i) The family provides reasonable notice (at least 30 days) to the LHA of its intention to vacate; (ii) The LHA determines that the family is in compliance with the provisions of the lease, including provisions requiring notice to the owner, if applicable; (iii) The LHA determines that the family continues to be eligible for such assistance; (iv) The LHA determines that the family is meeting its obligations for repayment of security deposits, if any; and (v) The LHA has sufficient funds under its Annual Contributions Contract. (g) Inapplicability of low-rent public housing model lease and grievances procedures. Model lease and grievances procedures estabilshed by HUD for LHAowned low-rent public housing are not applicable to the section 23 Housing Assistance Payments Program. (h) Units not leased to eligible families. (1) If at any time, beginning three months after the execution of the Contract, the owner fails for a continuous period of three months to have at least 80 percent of the Contract units leased by eligible families, the LHA shall refer to the owner available eligible families interested in leasing his units. If the LHA makes such referrals to the owner and the owner refuses to accept such families without good reason, in the judgment of the LHA, the LHA, with HUD approval, may on 30 days notice reduce the number of units under the Contract to not less than the number of units under lease by eligible families; provided, however, that an additional 11 percent of the number of such leased units may be allowed if the number of such leased units is 10 or more. (2) As of the end of the initial term of the Contract and of each renewal term, the LHA, with HUD approval, may reduce the number of units under the Contract to not less than (i) the number of units under lease by eligible families at that time or (ii) the average number of units so leased during the last year, whichever is the greater number; provided, however, that an additional 11 percent of the number (or average number as the case may be) of such leased units may be allowed if the number of such leased units is 10 or more. (3) Whenever the LHA has grounds for taking action to reduce the number of units under the Contract pursuant to paragraphs (h) (1) or (h) (2) of this section, the LHA shall promptly report the circumstances to the HUD field office with its recommendation, and the LHA shall thereafter take such action as HUD may approve or direct. (4) In the event of any reduction in the number of units under the Contract, in accordance with this paragraph, the LHA and HUD shall amend the ACC to reduce the amount of annual contributions payable thereunder to an amount commensurate with the lower number of units covered by the Contract. § 1276.218 HUD review of contract compliance. No later than 6 months after execution of the Housing Assistance Payments Contract for the project, HUD shall review project operations to ensure that the owner and the LHA are in full compliance with the terms and conditions of the Contract. Subsequent reviews shall be scheduled as necessary. § 1276.219 LHA reporting requirements [Reserved]. NOTE.-Appendices I, II, and III, which relate to internal HUD processing procedures, are not included herein, but do appear in the HUD Substantial Rehabilitation Program Handbook. Detailed guidelines, standards and procedures and the deadline date for submission of Proposals are contained in a Rehabilitation Program Packet which may be obtained by interested owners and rehabilitators from the Housing Authority, whose address is APPENDIX V-MANAGEMENT AND PROPOSED MANAGEMENT PROGRAM Owners are required to submit the following information with their proposals to enable the LHA and HUD to evaluate the management capability of the owner and/or management agent. 1. Name and location of proposed project. 2. Information on owner: a. Name and address of owner. b. Name, address and telephone number of person on owner's staff who would be responsible for planning and carrying out owner's overall management responsibilities for the proposed project. c. List all HUD-assisted projects (including public housing and subsidized and unsubsidized HUD-insured projects) currently or previously owned and/or managed by the owner. For each such project state: (1) Name and location of project. 1 Enter legal name of Local Housing Authority. 2 Enter maximum gross rents approved by HUD by unit size and structure type. |