ulations, and requirements issued pursuant thereto.

(0) Davis-Bacon Wage Rates. Not less than the wages prevailing in the locality, as predetermined by the Secretary of Labor pursuant to the Davis-Bacon Act (49 Stat. 1011), shall be paid to all laborers and mechanics employed in the development of any substantial rehabilitation project with nine or more assisted units.

(p) Types of financing. Any type of financing may be utilized, including, but not limited to, the types listed below.

(1) Conventional loans from commercial banks, savings banks, savings and loan associations, pension funds, insurance companies or other financial institutions.

(2) Mortgage insurance programs under the National Housing Act (see Sec. 1277.207). (With respect to any obligation secured by a mortgage insured under section 221(d) (3) of the National Housing Act and issued by a public agency as mortgagor in connection with the financing of a project assisted under Section 8, the interest paid on such obligation shall be included in gross income for purposes of Chapter I of the Internal Revenue Code of 1954.)

(3) Home Improvement Loans under Title I of the National Housing Act.

(4) Section 202 of the Housing Act of 1959.

(5) Title V of the Housing Act of 1949. (6) Financing by tax-exempt bonds or other obligations. Where the financing is by a non-profit corporation which is an agency or instrumentality of a PHA, the project will be considered a PHA-Owner Project.

(q) Use of contract as security for financing. (1) An Owner may pledge, or offer as security for any loan or obligation, an Agreement or Contract entered into pursuant to this Part; provided, however, that such security is in connection with a project rehabilitated pursuant to this Part, and the terms of the financing or any refinancing have been approved by HUD. It is the Owner's responsibility to request such approval in sufficient time before he needs the financing to permit review of the method and terms of the financing and the instrument of pledge, offer or other assignment that HUD is requested to approve. Where the methods and terms of financing require, the Contract Rents may be reduced in accordance with Sec. 1277.103(f) (2).

(2) Any pledge of the Agreement, Contract, or ACC, or payments thereunder, shall be limited to the amounts payable under the Contract or ACC in accordance with its terms.

(3) In the event of foreclosure, including foreclosure by HUD, and in the event of assignment or sale agreed to by HUD or made to HUD, housing assistance payments shall continue in accordance with the terms of the Contract.

(r) Security and utility deposits. (1) An Owner may require Families to pay a security deposit in an amount equal to one month's Gross Family Contribution. If a Family vacates the unit, the Owner may utilize the deposit as reimbursement for any unpaid rent or damage caused by the Family. If the Family has provided a security deposit, and it is insufficient for such reimbursement, the Owner may claim reimbursement from HUD or the PHA, as appropriate, not to exceed an amount equal to the remainder of one month's Contract Rent. If a Family vacates the unit owing no rent and causing no damage to the unit or if the amount of unpaid rent and/or damage is less than the amount of the security deposit, the Owner shall refund the full amount or the unused balance, as the case may be, to the Family.

(2) In those jurisdictions where interest is payable by the Owner on security deposits, the refunded amount shall include such interest. All security deposit funds shall be deposited by the Owner in a segregated bank account, and the balance of this account, at all times, shall be equal to the total amount collected from tenants then in occupancy, plus any accrued interest. The Owner must comply with all State and local laws regarding interest payments on security deposits.

(3) Families shall be expected to obtain the funds to pay security and utility deposits, if required, from their own resources and/or other private or public

sources.

(s) Establishment of income limit schedules; 30 percent occupancy by very low-income families. (1) HUD will establish schedules of income limits for defining Lower-Income Families and Very

Low-Income Families.

(2) In the initial renting of Contract units, the Owner shall lease at least 30 percent to Very Low-Income Families and shall thereafter exercise his best efforts to maintain at least 30 percent oc

PART II-AUTHORITY DETERMINATION

(To be sent to the Owner and to the Family) (Check Applicable Boxes)

1. Additional information required. To enable this Authority to make a determination regarding the eligibility of the Family headed by the following additional information is required from the Owner:

After the Owner has submitted the required information he will be notified by this Authority of its determination within the time period specified in his Agreement or Contract with this Authority.

2. Determination of eligibility. This Authority has determined that the Family headed by. ---- is eligible for participation in the Housing Assistance Payments Program of this Authority as set forth in a Certificate of Family Participation issued and signed by this Authority. In addition, this Authority has determined that the proposed lease and the dwelling unit meet the program requirements, and they are hereby approved.

Returned herewith are (a) the Certificate of Family Participation, attached as Part III, and (b) the proposed lease, completed by the Authority with respect to the portion of the lease rental which the Family shall be obligated to pay to the Owner. The Certificate shall be signed by the Family and the lease shall be signed by the Owner and the Family. A copy of each signed document shall be returned to the Authority.

Attached is a Security Deposit Agreement signed by this Authority, which shall be signed by the Owner and the Family and returned to the Authority.

Yes

No

(Name of Local Housing Authority)

By:

(Signature and Title of LHA Representative)

PART III-CERTIFICATE OF FAMILY PARTICIPATION (To be sent to the Owner and the Family) 1. Certification. The undersigned Authority hereby certifies that the Family headed by is authorized to participate in the Section 23 Housing Assistance Payments Program of this Authority by leasing a unit consisting of ------ bedrooms and located at: (Street Address and Apartment Number, if any).

Under this program, the Authority makes housing assistance payments on behalf of participating families toward their rents for decent, safe, and sanitary dwelling units.

2. Rent. Under the rules and regulations of the Housing Assistance Payments Program, the Family will be obligated to pay toward the monthly lease rental; provided that this amount will be reduced by the LHA-determined allowance for any utilities to be paid directly by the Family, and such reduced amount will be specified in the lease. The amount of the Family's payment is subject to change by reason of changes in the income or composition of the Family.

3. Conditions. The Family agrees to perform all its obligations under the Housing Assistance Payments Program including the obligations to (a) provide such Family income information and records as may be required in the administration of the program; (b) permit inspections of its dwelling unit at reasonable times and with reasonable advance notice; and (c) give at least 30 days notice to the Authority of the Family's intention to vacate the unit.

Deposit to Lessor

Deposit to____

Deposit to__.

Total amount of deposits

1

$

1 $. $

2. On or before the effective date of the lease to be entered into between the Family and the Lessor, the Family agrees to pay $ to the Housing Authority as a first installment toward repayment of the total amount for security and/or utility deposits stated in item 1 above, leaving a balance of $---

3. The Family agrees to repay the stated balance by paying monthly installments of $---3 to the Lessor acting on behalf of the Housing Authority. These payments shall begin on the first day of the second month of the lease, and they shall be in addition to the Family's regular monthly rental payments to the Lessor.

4. The Lessor agrees to collect from the Family the monthly amounts specified in item 3 above and remit them to the Housing Authority, with the understanding, however, that failure on the part of the Family to pay such amounts shall not affect the Lessor's rights to housing assistance payments otherwise payable to him by the Housing Authority.

(Date)

(Signature of LHA Representative)

(Signature of the Family Head) (Signature of the Lessor Representative)

(Date)

1 Insert name of utility company to which deposit is paid.

Insert an amount equal to the lesser of (a) one-twelfth of the Total Amount of Deposits stated in Item I above or (b) one month's gross family contribution.

Insert monthly amount to be paid by the Family, generally in the amount of oneeleventh of the balance due. This amount may subsequently be adjusted by the Housing Authority be reason of changes in income or rent-paying ability of the Family by amendment of this Agreement.

Project operation.

HUD review of contract compliance.

1277.220 PHA reporting requirements [Reserved]

APPENDICES

NOTE-Various prescribed forms which relate to internal HUD processing procedures are not included herein, but will appear in the HUD Substantial Rehabilitation Handbook.

I. Agreement to enter into housing assistance payments contract-private-owner or PHA-owner project.

II. Housing assistance payments contractprivate-owner or PHA-owner project.

III. Annual contributions contract-private-owner/PHA project.

IV. Agreement to enter into housing assistance payments contract-private-owner/PHA project.

V. Housing assistance payments contract— private-owner/PHA project.

AUTHORITY: Sec. 7(d), Department of Housing and Urban Development Act (42 U.S.C. 3535(d)); sec. 5(b) of the U.S. Housing Act of 1937 (42 U.S.C. 1437c(b); sec. 8 of the U.S. Housing Act of 1937 (42 U.S.C. 14371).

SOURCE: 39 FR 45132, Dec. 30, 1974, unless otherwise noted.

Subpart A-Applicability, Scope and Basic

Policies

§ 1277.101 Applicability and scope.

(a) The policies and procedures contained herein are applicable to the making of housing assistance payments on behalf of Eligible Families leasing substantially rehabilitated housing pursuant to the provisions of Section 8 of the U.S. Housing Act of 1937 ("Act").

(b) For the purpose of this Part, "substantially rehabilitated housing" shall mean housing requiring substantial rehabilitation (See Sec. 1277.102 (bb)) for which, prior to the start of rehabilitation, an Agreement to Enter into Housing Assistance Payments Contract is executed between the Owner and the Department of Housing and Urban Development ("HUD") or the Public Housing Agency. However, housing already undergoing rehabilitation may be eligible for participation if all subsequent actions are in compliance with this Part and if the Owner certifies and demonstrates to the satisfaction of HUD that:

(1) At the date of application to HUD, a substantial amount of rehabilitation (generally at least 25 percent) remains to be completed; and

(2) At the date of applications HUD, the project cannot be completed without a commitment for assistance under this Part; and

(3) At the time rehabilitation was initiated, all of the parties reasonably expected that the project would be completed without assistance under this Part.

(c) Conversions of Section 23 projects to the Section 8 program will be permitted where appropriate, provided that all parties (including HUD) agree to the terms and conditions.

ment"). (1) In the case of a PrivateOwner Project or a PHA-Owner Project, a written agreement between the Owner and HUD that, upon satisfactory completion of the rehabilitation in accordance with the HUD-approved Final Proposal, HUD will enter into a Housing Assistance Payments Contract with the Owner. (See Appendix I.)

(2) In the case of a Private-Owner/ PHA Project, a written agreement between the private Owner and the PHA, approved by HUD, that, upon satisfactory completion of the rehabilitation in accordance with the HUD-approved Final Proposal, the PHA will enter into a Housing Assistance Payments Contract with the private Owner. (See Appendix IV.)

(b) Allowance for Utilities and Other Services ("Allowance"). An amount determined or approved by HUD as an allowance for the cost of utilities (except telephone) and charges for other services payable directly by the Family. In the case of a proposal under which the Families must pay directly for one or more utilities or services, the amount of the Allowance is deducted from the Gross Rent in determining the Contract Rent and is included in the Gross Family Contribution.

(c) Annual Contributions Contract ("ACC"). In the case of a PrivateOwner/PHA Project, a written agreement between HUD and the PHA to provide annual contributions to the PHA with respect to the project. (See Appendix III.)

(d) Contract Rent. The rent payable to the Owner under his Contract including the portion of the rent payable by the Family in the case of a cooperative, the term "Contract Rent" means charges under the occupancy agreements between the members and the cooperative.

(e) Decent, Safe, and Sanitary. Housing is Decent, Safe, and Sanitary at completion of rehabilitation if the dwelling units and related facilities are accepted by HUD as meeting the requirements of the Agreement. (See Sec. 1277.216.) Housing continues to be Decent, Safe, and Sanitary if it is being maintained in a condition substantially the same as that on acceptance in all pertinent respects, including the following:

(1) Condition of the exterior (including the grounds) and the interior of the structure and of the housing unit;

(2) Operating condition of sanitary facilities and of solid and liquid waste disposal facilities;

(3) Operating condition of kitchen facilities, including range and refrigerator, sink, and space for storage of food and for storage of utensils and dishes;

(4) Operating condition of heating, lighting and ventilating equipment and/ or other facilities; and

(5) Size, number of rooms, and furnishability in relation to the size and type of Family in occupancy in accordance with any applicable State or local codes.

(f) Eligible Family ("Family"). A Family which qualifies as a Lower-Income Family and which meets the other requirements of the Act and this Part. The term Family includes an elderly, disabled, handicapped, or displaced person and the remaining member of a tenant family as defined in section 3(2) of the Act. A Family's housing assistance payment may continue until its Gross Family Contribution equals the Gross Rent for the dwelling unit it occupies, but the termination of housing assistance payments at such point shall not affect the family's other rights under its Lease nor shall such termination preclude resumption of payments as a result of subsequent changes in income or other relevant circumstances during the term of the Contract.

(g) Fair market rent. (1) The rent which is determined by HUD as the Fair Market Rent for new construction projects under Section 8 of Act. This Fair Market Rent is the rent, including utilities (except telephone), ranges and refrigerators, parking, and all maintenance, management and other services, which, as determined at least annually by HUD, would be required to be paid in order to obtain privately developed and owned, newly constructed rental housing of modest (non-luxury) nature with suitable amenities and sound architectural design meeting the objectives of the HUD Minimum Property Standards.

(2) Separate Fair Market Rents will be established for dwelling units by various sizes (number of bedrooms) and types (e.g., elevator, row, detached; housing designed for the elderly or handicapped shall be a separate type for this purpose).

(3) The Fair Market Rents will be published in the FEDERAL REGISTER, and, in order to allow for the period of rehabilitation, computation of the published

39-082-75-25

Fair Market Rents will include HUD's estimate of anticipated rent increases during an appropriate future period as stated in the publication. Accordingly, for any given project for which the scheduled time for rehabilitation will be less than such future period, an appropriate reduction will be made in determining the approvable Contract Rent.

(4) The Fair Market Rent, minus the amount of any applicable Allowance for Utilities and Other Services payable directly by the Family, shall be the maximum amount that can be approved as the Contract Rent, except that the maximum approvable amount may be lower as stated in paragraph (g)(3) of this Section and may be higher or lower as provided in Sec. 1277.103 (f).

(h) Final proposal. A proposal to provide substantially rehabilitated housing submitted in response to a HUD notification of section of Preliminary Proposal. (See Secs. 1277.204 and 1277.2081277.210.)

(i) Gross family contribution. The portion of the Gross Rent payable by an Eligible Family, i.e., the difference between the amount of the housing assistance payment payable on behalf of the Family and the Gross Rent.

(j) Gross rent. The Contract Rent plus any Allowance for Utilities and Other Services.

(k) HCD Act. The Housing and Community Development Act of 1974.

(1) Housing Assistance Payments Contract ("Contract"). (1) In the case of a Private-Owner Project or a PHAOwner Project, a written contract between the Owner and HUD for the purpose of providing housing assistance payments to the Owner on behalf of Eligible Families. (See Appendix II.)

(2) In the case of a Private-Owner/ PHA Project, a written contract between the private Owner and the PHA, approved by HUD, for the purpose of providing housing assistance payments to the Owner on behalf of Eligible Families. (See Appendix V.)

(m) Housing assistance payments on behalf of eligible family. The amount of housing assistance payment on behalf of an Eligible Family determined in accordance with schedules and criteria established by HUD. (See Sec. 1277.103 (t).)

(n) HUD. The Department of Housing and Urban Development or its designee.

(0) Income. Income from all sources of each member of the household as de