PART 401-NOTICE TO TENANTS AND CONSIDERATION OF THEIR COMMENTS IN EFFECTING RENT INCREASES

Subpart A-Procedures for Requesting Increases in Maximum Permissible Rents for Certain Subsidized Projects

Sec.

401.1 Applicability of procedures. 401.2 Notice to tenants.

401.3 Materials to be submitted to HUD. 401.4 Request for increase.

401.5 Notification of action on request for increase.

401.6 Section 236 non-insured projects.

AUTHORITY: Sec. 211, 52 Stat. 23 (12 U.S.C. 1715b).

SOURCE: 40 FR 29078, July 10, 1975, unless otherwise noted.

Subpart A-Procedures for Requesting Increases in Maximum Permissible Rents for Certain Subsidized Projects

§ 401.1

Applicability of procedures.

The procedures set forth in this Subpart shall be applicable to all requests for increases in maximum permissible rents due to increases in operating costs or debt service by the mortgagors of multifamily projects (except for cooperative housing mortgagor corporations or associations) subsidized by: (a) below-market interest rates pursuant to section 221(d) (3) and (5) of the National Housing Act; (b) interest reduction payments pursuant to section 236 of the National Housing Act; (c) rent supplement payments under section 101 of the Housing and Urban Development Act of 1965; (d) direct loans at belowmarket interest rates pursuant to section 202 of the Housing Act of 1959; or (e) direct loans at below-market interest rates pursuant to section 401 and 404 (b)(3) of the Housing Act of 1950 (ex

cluding loans cosigned by the beneficia educational institution). Increases maximum permissible rents do not i clude increases in utility charges pa directly by the tenant.

8 401.2 Notice to tenants.

At least thirty (30) days before fill an application with HUD for an increa in the maximum permissible rents, t mortgagor shall notify the tenants of th proposed rent increase. Copies of suc notice shall be: (A) delivered directly by mail to each tenant; or (B) posted i at least 3 conspicuous places within eac structure or building in which the af fected dwelling units are located as we as in a conspicuous place at the addres where the materials in support of th proposed rent increase are to be mad available to tenants pursuant to th provisions of the notice format in thi section. The notice shall contain the fol lowing information in the following for mat or equivalent thereto:

NOTICE TO TENANTS OF INTENTION TO FILE AN APPLICATION TO HUD FOR AN INCREASE IN THE MAXIMUM PERMISSIBLE RENTS

Date of Notice

Take notice that on [date] we plan to file an application for approval of an increase in the maximum permissible rents for [name of apartment complex] with the United States Department of Housing and Urban Development (HUD). The proposed increase is needed for the following reasons:

1.

2.

3.

The rent increases for which we have applied are:

Coples of the materials that we intend to bmit to HUD in support of our application be available during normal business purs at [address] for a period of 30 days om the date of this notice for inspection d copying by tenants of [name of apartent complex] and, if the tenants wish, gal or other representatives acting for them dividually or as a group.

During a period of 30 days from the date this notice, tenants of (name of apartment mplex) may submit written comments on proposed rental increase to us at (ad58). Tenant representatives may assist ants in preparing those comments. (The pection and comment period will be exded to give tenants 5 days to inspect and mment on any materials to be submitted support of the application that are not allable to the tenants during the first 25 of the 30-day period.) These comments be transmitted to HUD, along with our aluation of them and our application for Increase. You may also send a copy of your mments directly to HUD at the following dress: United States Department of Housand Urban Development (address of local D field office with jurisdiction over rent creases for the project], Attention: DirecHousing Management Division. RE: ProjNo. (Name of Apartment Complex]. HUD will approve or disapprove the proed rental increase upon reviewing the plication and comments. When HUD ades us in writing of its decision on our plication, you will be notified at least 80 ys before any allowable increase is put into ct, in accordance with the terms of existleases.

Name of mortgagor or managing agent] The mortgagor shall comply with all presentations made in the Notice.

01.3 Materials to be submitted to HUD.

Simultaneously with the posting or stribution of the Notice, the mortgagor all send to the local HUD office copies the following:

(1) The written Notice to the tenants; (2) The annual Statement of Profit and Loss, Form HUD-92410, audited by an independent public accountant and covering the most recently ended accounting year, and an unaudited accrual Form HUD-92410 for the intervening period since the date of the last annual statement if more than four months have elapsed since that date; and

(3) A narrative statement of the reasons for the requested increase in maximum permissible rents.

§ 401.4 Request for increase.

(a) Upon expiration of the period for tenant comments required in the notice format in § 401.2 and after review of the comments submitted to him, the mortgagor shall submit, in addition to the materials enumerated in § 401.3 and any revisions thereto, his application for an increase in the maximum permissible rents together with the following:

(1) A certification by the mortgagor following the requirements specified in § 401.4(b);

(2) Coples of all written comments submitted by the tenants to the mortgagor; and

(3) The mortgagor's evaluation of the tenants' comments with respect to the application.

(b) The certification of the mortgagor as required by § 401.4(a) (1) shall attest:

(1) That the Notice required by § 401.2 was given pursuant to the provisions of that Section;

(2) That the mortgagor has taken reasonable steps to assure that the substance of the Notice has been conveyed to each resident household, and in cases where the Notice was posted, that the required Notices were maintained intact and in legible form for the specified thirty (30) days;

(3) That the copies of the materials submitted in support of the proposed increase were located in a place reasonably convenient to tenants in the project during normal business hours and that requests by tenants to inspect such materials, as provided for in the Notice, were honored;

(4) That copies of all comments received from the tenants were considered and are being transmitted to HUD together with the certification; and

(5) That "under the penalties and provisions of Title 18, United States Code, section 1001, the statements contained in this application and its attachments have been examined by me and, to the best of my knowledge and belief, are true, correct, and complete."

§ 401.5 Notification of action on application for increase.

After HUD has considered the application for an increase in the maximum permissible rents which meets the requirements of § 401.4 and has made its determination to approve or disapprove the application, it will furnish the mortgagor with a written statement of the reasons for approval or disapproval. The mortgagor shall make known to tenants, by posting or delivery in the manner outlined in the second sentence of § 401.2, the reasons for approval or disapproval. § 401.6 Section 236 non-insured proj.

ects.

With respect to rent increases for § 236

non-insured projects, project owners shall submit tenant comments to the state or local agency, which in turn shall forward the comments to HUD with the request for HUD approval of the increase, after the agency has made its initial determination. Accordingly, for purposes of such projects, the requirements of §§ 401.2-401.5 are modified by substituting the name of the state or local agency assisting the project for "United States Department of Housing and Urban Development” or “HUD” wherever there is a reference to either such name. After the project owner has complied with such provisions as modified by this section and after the state or local agency has made a determination, after full consideration of the tenant comments relating thereto, to approve an increase in maximum approvable rents, the agency shall promptly submit to the appropriate local HUD field office an application for approval of such increase in

AUTHORITY: Sec. 7(d), of the HUD 42 U.S.C. 3535(d).

SOURCE: 40 FR 49318, Oct. 22, 1975, uz otherwise noted.

Subpart A-General Provisions § 403.1 Scope and effect of regulation (a) The regulation of rents for a p ect coming within the scope of “Subpe B-Unsubsidized Insured Projects" preempted under these regulations o when the Department determines the delay or decision of the local control board, or other authority reg lating rents pursuant to state or locall (hereinafter referred to as board) jed ardizes the Department's economic inte est in a project covered by that subpa The regulation of rents for projects com ing within the scope of "Subpart C-Su sidized Insured Projects" is preempte in its entirety by the promulgation these regulations. The regulation of ren for projects coming within the scope "Subpart D-HUD-Owned Projects rests within the exclusive jurisdiction the Department.

(b) Any state or local law, ordinance or regulation is without force and effect insofar as it purports to regulate rents of (i) projects for which a determination of preemption has been made pursuant to Subpart B, or (ii) projects coming within the scope of Subpart C or D. Com

pliance with such law, ordinance, or regulation shall not be required as a condition of, or prerequisite to, the remedy of eviction, and any law, ordinance, or regulation which purports to require such compliance is similarly without force and effect.

(c) It is the purpose of the Department that these regulations shall bar all actions of a board that would in any way frustrate the purpose or effect of these regulations or that would in any way delay, prevent or interfere with the implementation of any increase in rental charges approved by HUD.

(d) These regulations may be offered as a defense to a proceeding by whomever initiated, which may be brought or threatened to be brought against any owner, mortgagor or managing agent of a project subject to these regulations who demands, receives or retains, or seeks to demand, receive or retain, rental charges approved by HUD, or as a basis for declaratory, injunctive or other relief against any person or agency, public or private, who attempts to enforce, or threatens to enforce, any state or local law, ordinance, or regulation which is without force and effect by reason of this regulation.

Subpart B-Unsubsidized Insured Projects § 403.4 Applicability.

This subpart applies to all projects with mortgages insured or held by HUD, except those to which Subpart C applies. § 403.5

Rental charges.

The Department will generally not interfere in the regulation by a local rent control board (hereinafter referred to as board) of rents for unsubsidized projects with mortgages insured or held by HUD. However, HUD will preempt the regulation of rents for such a project when the Department determines that the delay or decision of a board, or other authority regulating rents pursuant to state or local law, jeopardizes the Department's economic interest in the project. § 403.6 Procedures.

(a) The mortgagor shall file its application for approval of increases in rental charges with the appropriate local office of HUD, and simultaneously therewith file an application for approval of those increases with any board in the area in which the project is located. The mortgagor shall also notify the board in writing that it has submitted an ap

plication to HUD for approval of the increases which may be affected by the provisions of the regulations in this subpart.

(b) The local HUD office will process the application for increases in rental charges in accordance with HUD's instructions and procedures promulgated in accordance with the authority contained in the National Housing Act.

(c) The mortgagor shall inform the local HUD office if the rents approved for the project by the board are lower than those approved by HUD, or if the board fails to render a decision on the mortgagor's application for increases in rental charges within a period of thirty (30) days following the filing of the application. The mortgagor shall furnish the local HUD office with any data supplied to the board not previously furnished to the local HUD office, and, if the mortgagor considers that the economic interest in the project is jeopardized by the decision or delay of the board, a statement to that effect together with the reasons therefor.

(d) The local HUD office will review the information submitted by the mortgagor, together with the decision of the board, if any, and shall make a report if it deems the delay or decision of the board jeopardizes the Department's economic interest in the project and the board will not modify its position to the satisfaction of the local HUD office. The report shall be sent to the Office of Loan Management in the Central Office (hereinafter referred to as Office of Loan Management) and shall include appropriate recommendations concerning the action that should be taken by HUD. A copy of the report and recommendations shall be furnished the Regional Office.

(e) The Office of Loan Management will review the report and will consider whether to approve rents higher than those approved by the board, or to approve a rent increase notwithstanding the failure of the board to reach a decision on the application. If the decision of the Office of Loan Management is to approve (1) rents higher than those approved by the board, or (2) a rent increase notwithstanding the delay of the board in reaching a decision, it shall issue a formal certification that it has preempted local rent controls as to such rents in order to protect the Department's economic interest in the project. Copies of the certification shall be trans