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Demolition for an Accidental Loss

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 -   Issues to Keep in Mind

Accidental Losses

Due to the severity and large extent of damage caused by last season's hurricanes, many questions have been raised about demolition to alleviate the damage caused by accidental losses such as fires, storms and other natural disasters. SAC offers the following advice and technical assistance in dealing with accidental losses.

Demolition After an Accidental Loss

The Annual Contributions Contract requires HA's to be insured. Technical assistance on insurance coverage is available from Guidebook 7401.5G, Public and Indian Housing Property/Casualty Insurance Requirements Guidebook. Unless imposed by the ACC, federal regulations or statutes, all "requirements" in the Guidebook are "recommendations." The guidebook is available from hudclips at: http://www.hud.gov/hudclips/.

Section 4 of the Annual Contributions Contract (ACC), HUD 53012A (7/95) allows HAs to take all necessary steps to ensure the safety of its residents, employees and the general public without waiting for approval from the Department. If a structure suffers abrupt damage from an act of God, like a fire, earthquake, storm, or similar accidental naturally occurring non-organic damage, the HA may demolish all or part of the structure and dispose of the debris to the extent needed to maintain the site in a safe condition or to eliminate an attractive nuisance.

Damage caused by termites, mold and mildew takes place over time and therefore does not fall into this category of accidental damage. For those units damaged by termites, mold and mildew, the families must be relocated to other suitable/similar housing and the units secured while the HA decides on an appropriate course of action. Section 18 allows consolidation of occupancy "...to improve living conditions...".

Issues to Keep in Mind Immediately Following an Accidental Loss

If the HA decides to rebuild the structure, any additional demolition required to carry out the repair would not be subject to Section 18.

The HA needs to have a plan in place for the damaged units, either rehab or removal, that is consistent with its funding levels and the realities of the local construction market. The HA should partner with their local HUD office to formulate this plan. Some suggested timeframes:

Local Loss
Large Scale Loss Declared a Disaster Under the Stafford Act, or Similar Local Determination
Formulate plan for units affected 1 month after loss event 3 months after loss event
Submit documentation to formally remove the units from inventory 3 months after loss event 9 months after loss event
Complete rehabilitation/replacement of units 14 months after loss event 22 months after loss event

If the HA decides to not rebuild the structure, then a Section 18 application will have to be submitted to formalize the removal of the units from the inventory because Section 13 of the ACC requires the HA to restore, rebuild or reconstruct a damaged or destroyed project to the extent that insurance proceeds permit, unless HUD authorizes otherwise in writing. It is the Department's position that it will usually not approve Section 18 actions after the fact, except for this one exception.

The review and analysis of actions in cases of an accidental loss will not include any issues related to insurance coverage. Rather, the local field office has oversight responsibility for ensuring adequate insurance coverage as part of a routine operational review of a PHA. Technical assistance and other guidance on HA insurance coverage are available in the previously mentioned Guidebook.

Prior to Section 18 demolition approval, the units will still be in PIC, and subject to REAC's usual review, depending on the unit identification protocols in the current PIC Building & Unit Module instructions.

If structures are demolished due to accidental loss damage, the HA is to retain sufficient records in the form of reports and/or photographs for post audit by HUD and other interested parties.

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