Aug. 23, 1996 PRESERVATION LETTER NO. 9 MEMORANDUM FOR: Directors of Housing Multifamily Housing Directors Multifamily Production Chiefs Multifamily Asset Management Chiefs Preservation Coordinators /S/ FROM: Nicolas P. Retsinas, Assistant Secretary for Housing - Federal Housing Commissioner, H SUBJECT: Tenant Protections Owners of Preservation eligible projects have a right to prepay their mortgages or cancel their mortgage insurance contracts. Balancing this right is the Department's commitment to provide tenant notifications and protections. Attached are a series of draft letters for you and the owner. Use the letters to inform the tenants of their rights in this process. We will send you WordPerfect file copies of the letters by CC:MAIL. Most owners recognize HUD's need to provide information to the tenants about their rights. Also, they are giving the local HUD Offices the tenant information needed for Preservation Section 8 Certificates and Vouchers. If the owner fails to notify the tenants, you should do so immediately. Inform them of the rights and collect the necessary information to provide Preservation Section 8 Certificates or Vouchers. (See Preservation Number Letter 6.) In addition, we have revised our policy as stated in Q&A #4 and Q&A #5 of Preservation Letter Number 6 concerning the tenant protections afforded under Section 223c of the Low-Income Housing Preservations and Resident Homeownership Act of 1990 (LIHPRHA). The intent of the Preservation program is to protect moderate- income, low-income and very low-income families as defined by Section 229 of LIHPRHA. Therefore, the protections of Section 223c are not available to market rate families. Share this information with program participants (i.e., the Office of Public Housing, owners, housing consultants, tenant organizations, nonprofit housing organizations, and mortgagees, etc.). If you have any questions, the Preservation Branch telephone number is (202) 708-2300. Attachments REVISED:vct:08/22/96 HMDE1:MULHOLLAND:vct:06/27/96:H\PRESERV\NEWPREZ\PREZLTR.9A:NO CONTROL TICKET HMDE1 HMDE HMD HM OGC MULHOLLAND MAYFIELD CHEATHAM GREER REARDON TO OWNER: INSTRUCTIONS FOR NOTIFICATION TO TENANTS OF AVAILABLE PROTECTION We received notification of your intention to prepay the mortgage for {INSERT PROJECT NAME}, FHA Project Number {INSERT FHA PROJECT NUMBER}. The Preservation statutes require certain tenant protections. Following the instructions below, deliver one of the three form letter attachments to each tenant in your project. The letters tell each tenant of his/her options, rights, and responsibilities. Given the individual nature of the assistance and the complexity of the rules governing timing, amounts, and various other conditions associated with it, HUD has determined that only the owner entity or its duly authorized agent can categorize tenants. It is important that you be familiar with some background and terms used throughout the letters. A. The "date of impact," is: 1. For Unassisted Low- and Very Low-Income tenants (regardless of the Notice of Intent (NOI) filing) living in the project, the mortgage prepayment date or the mortgage insurance cancellation date. You should submit the tenant protection information to the local HUD Asset Management Branch as soon as possible, but no later than 15 days after the date of this letter to enable HUD to get the tenant protections in place before any rent increase occurs. 2. For Moderate Income Tenants or Unassisted Low- and Very Low-Income Tenants whose rents are not raised during the first year following prepayment of the mortgage or cancellation of the mortgage insurance contract located in a low-vacancy area or having special needs the "date of impact" is: a. The date initial NOI is filed. b. If the owner did not file an initial NOI, the mortgage prepayment date or the mortgage insurance cancellation date. 2 Please refer to the chart below for further clarification: Date of Impact Based on Tenant Classification Date of Impact Moderate Income Tenants with Special Needs Or located in Low-Vacancy Area Low- & Very Low- Income Unassisted (Regardless of Special Needs or Low-Vacancy Areas) Date of Initial Notice of Intent (If filed) X X (Special needs or Low-Vacancy areas only) Date Information Describing Impacted Tenants Received by HUD Office (When Initial Notice of Intent Filed) X Mortgage Prepayment Date or the Insurance Cancellation Date (When NO Initial Notice of Intent Filed) X X B. The "effective date of prepayment" is: 1. The prepayment pay off date the mortgagee provides you once you submit your notification of your intent to prepay: or 2. The date the mortgagee cancels the mortgage insurance contract. Please see Preservation Letter Number 6, before submitting your formal notification of your intent to prepay to your Mortgagee. Once you have received the effective date of prepayment from your mortgagee, send each affected tenant the appropriate tenant letter, as described below. 3 TENANT LETTER NUMBER 1 - "Current Tenants With Section 8" Send this letter to the tenants receiving rental assistance either through project-based Section 8, or through tenant-based Section 8 Certificate or Voucher programs who reside in the project on the "date of impact." ---------- TENANT LETTER NUMBER 2 - "Unassisted Low- and Very Low-Income Tenants" Send this letter to the Unassisted Low- and Very Low-Income Tenants who reside in the project on the "date of impact." ---------- TENANT LETTER NUMBER 3 - "Special Needs Tenants or Tenants in Projects in Low-Vacancy Areas " Send this letter to: Moderate Income Tenants Unassisted Low- and Very Low-Income Tenants if you do not plan to raise rents during the first year following prepayment of the mortgage or cancellation of the mortgage insurance contract. A tenant is considered Special Needs if he/she or a family member is: 62 years of age or older; Disabled; or The family requires three or more bedrooms because there are five or more family members. A low-vacancy area is a Metropolitan Statistical Area with vacancies of 3 percent or less. ---------- 4 If you have any questions, please do not hesitate to contact the Preservation Coordinator, at ( ) in the HUD State/Area Office. {INSERT STATE / AREA OFFICE} {CONTACT INFORMATION} FROM: Owner NOTIFICATION TO TENANTS OF AVAILABLE PROTECTION TENANT LETTER NUMBER 1 [Current Tenants receiving Section 8 Assistance] We, the owners of (name of project) have decided to prepay the mortgage or terminate the mortgage insurance on the mortgage insured or held by the Department of Housing and Urban Development (HUD) effective on (the effective date of prepayment). This means your unit may experience an increase in rent. It does NOT necessarily mean that your portion of the rent will go up. There are certain things HUD and we will do to protect you. A. We cannot raise your rent for 60 days after the actual date of prepayment. After 60 days, we have the right to raise the rent if it does not conflict with our current lease terms or Housing Assistance Contract. B. You are currently living in a unit receiving Section 8 rental assistance. You are receiving either: 1. Project-based (LMSA) Section 8 rental assistance (non-certificate or voucher). This aid continues until the expiration of the Section 8 contract. If you move from the project, you will no longer receive any rental aid. 2. Tenant-based Section 8 Certificate or Voucher. a. Section 8 Voucher. This aid will continue. 1) You may remain in your unit under the terms of you current lease. 2) At the end of your lease term, if the owner increases the rent and it exceeds the level of your current assistance: 2 a) You may pay the additional amount; or, b) You may move. If you move, you will retain your Section 8 voucher and may use this assistance to rent a new apartment. You will receive relocation aid. b. Section 8 Certificate. This aid will continue. 1) You may remain in your unit under the terms of you current lease. 2) If at the end of the lease, the owner terminates the lease: a) You must move. b) You will receive relocation aid. c) You will retain your Section 8 certificate and use this assistance to rent a new apartment. We pay 50 percent of your reasonable moving expenses. If you live in a locality that requires us to pay more than 50 percent of your relocation expenses, then the higher relocation assistance reimbursement level applies. Check with the Preservation Coordinator listed below about your rights. If you believe we are not properly identifying you, please contact Preservation Coordinator, at ( ) in the HUD State/Area Office. Sincerely, Owner(s) cc: HUD FROM: Owner NOTIFICATION TO TENANTS OF AVAILABLE PROTECTION TENANT LETTER NUMBER 2 [Current Low- and Very Low-Income Tenants] Not receiving Section 8 Assistance We, the owners of (name of project) have decided to prepay the mortgage or terminate the mortgage insurance on the mortgage insured or held by the Department of Housing and Urban Development (HUD) effective on (the effective date of prepayment). This means your unit may experience an increase in rent. It does NOT necessarily mean that your portion of the rent will go up. There are certain things HUD and we will do to protect you. A. We cannot raise your rent for 60 days after the actual date of prepayment or termination. After 60 days, we have the right to raise the rent if it does not conflict with our current lease terms. B. We submitted tenant information on this project to the HUD State or Area Office. This gives to the HUD State/Area Office information they need to provide tenant protection to unassisted low- and very low- income tenants. C. You have been identified as a low- or very low- income tenant who is currently not receiving any type of Section 8 rental assistance. Because the rent may be increased you may be entitled to rental assistance. Therefore, you should contact (Name of applicable Public Housing Agency). If you believe we are not properly identifying you, please contact Preservation Coordinator, at ( ) in the HUD State/Area Office or the Housing Authority or State Agency. Sincerely, Owner(s) cc: HUD FROM: Owner NOTIFICATION TO TENANTS OF AVAILABLE PROTECTION TENANT LETTER NUMBER 3 Special Needs Tenants or Tenants in Projects in Low-Vacancy Areas [Moderate Income Tenants or Unassisted Low- and Very Low- Income Tenants whose rents will not be raised during the first year following prepayment of the mortgage or termination of the mortgage insurance contract] We, the owners of (name of project) have decided to prepay the mortgage or terminate the mortgage insurance on the mortgage insured or held by the Department of Housing and Urban Development (HUD) effective on (the effective date of prepayment). This means your unit may experience an increase in rent. It does NOT necessarily mean you must pay more rent for your unit. There are certain things HUD and we will do to protect you. A. We submitted tenant information for this project to the HUD State or Area Office. B. You have been identified as a Special Needs Tenant or live in a project located in a Low-Vacancy Area and have been a tenant in the project since at least insert mortgage prepayment date or the insurance cancellation date (for projects where there was no Initial Notice Intent (NOI)), or date of NOI, if it exists. 1. Special Needs Tenants are tenants that are: 62 years of age or over; Handicapped; or Large families (three or more bedrooms with five or more occupants). 2. A Low-Vacancy Area is a Metropolitan Area with vacancies of 3 percent or less (Computed by the HUD Office). 2 D. You may remain in your unit. 1. For 3 years your rent will not increase, except to cover necessary increases in operating costs. 2. You may be asked to move. The owner and you must come to a written agreement about the move. a. You may receive incentives to voluntarily move before the end of the 3 years. b. The agreement must say: 1) Your portion of the rent in the new unit can't be more than you would have paid if you had not moved. 2) We will pay the necessary portion of the new rent, to keep your payment the same as it is now. c. The agreement may include relocation costs (moving expenses) that we will pay. If you believe we are not properly identifying you, or you would like further information please contact Preservation Coordinator, at ( ) in the HUD State/Area Office. Sincerely, Owner(s) cc: HUD