HUD-9638 Renewal Contract

Attachment 12

U.S. Department of Housing and Urban Development
Office of Housing

PROJECT-BASED SECTION 8

HOUSING ASSISTANCE PAYMENTS
RENEWAL CONTRACT
FOR MARK-UP-TO-MARKET PROJECT
OMB Control #2502-0587
Exp. (09/30/2014)
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valid OMB control number. No confidentiality is assured.”

PREPARATION OF CONTRACT
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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

Attachment 12

Reference numbers in this form refer to notes at the end of the contract text. These
endnotes are instructions for preparation of the Renewal Contract. The instructions are
not part of the Renewal Contract.

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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

Attachment 12

RENEWAL HAP CONTRACT
FOR SECTION 8 MARK-UP-TO-MARKET PROJECT1
1

CONTRACT INFORMATION2

PROJECT
Section 8 Project Number:
Section 8 Project Number of Expiring Contract:
FHA Project Number (if applicable):
Project Name:
Project Description:3

Check this box if the project is a Section 236 project or a
Section 221(d)(3) below market interest rate (BMIR) project at the
beginning of the Renewal Contract term.
PARTIES TO RENEWAL CONTRACT
Name of Contract Administrator4

Name of Owner

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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

Attachment 12

2

3

TERM AND FUNDING OF RENEWAL CONTRACT
5

a

The Renewal Contract begins on
6
of
years.

and shall run for a period

b

Execution of the Renewal Contract by the Contract Administrator is
an obligation by HUD of $
,7 an amount sufficient to provide
8
housing assistance payments for approximately
months of
the first annual increment of the Renewal Contract term.

c

HUD will provide additional funding for the remainder of the first
annual increment and for subsequent annual increments, including
for any remainder of such subsequent annual increments, subject
to the availability of sufficient appropriations. When such
appropriations are available, HUD will obligate additional funding
and provide the Owner written notification of (i) the amount of such
additional funding, and (ii) the approximate period of time within the
Renewal Contract term to which it will be applied.

RENEWAL CONTRACT
a

b

Parties
(1)

This contract (“Renewal Contract”) is a housing assistance
payments contract (“HAP contract”) between the contract
administrator and the owner of the housing.

(2)

If HUD is the contract administrator, HUD may assign the
Renewal Contract to a public housing agency (“PHA”) for the
purpose of PHA administration of the Renewal Contract, as
contract administrator, in accordance with the Renewal
Contract (during the term of the annual contributions contract
(“ACC”) between HUD and the PHA). Notwithstanding such
assignment, HUD shall remain a party to the provisions of
the Renewal Contract that specify HUD’s role pursuant to
the Renewal Contract, including such provisions of section 8
(applicable requirements), section 9 (statutory changes
during term), section 10 (distributions) and section 11 (PHA
default) of the Renewal Contract.

Statutory authority
The Renewal Contract is entered pursuant to section 8 of the
United States Housing Act of 1937 (“Section 8”) (42 U.S.C. 1437f),
and section 524(a) of the Multifamily Assisted Housing Reform and
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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

Attachment 12

Affordability Act of 1997 (MAHRA) ** (Title V of Public Law
No.105-65, October 27, 1997, 111 Stat. 1384), as amended.

c

Expiring Contract
Previously, the owner entered into a Housing Assistance Payments
Contract ("Expiring Contract") with HUD or a PHA to make Section
8 housing assistance payments to the owner for eligible families
living in the project. The term of the Expiring Contract has expired
or will expire prior to the beginning of the term of the Renewal
Contract.

d

Purpose of Renewal Contract
The purpose of the Renewal Contract is to renew the Expiring
Contract for an additional term. During the term of the Renewal
Contract, the contract administrator will make housing assistance
payments to the owner in accordance with the provisions of the
Renewal Contract. Such payments shall only be made for contract
units occupied by eligible families ("families") leasing decent, safe
and sanitary units from the owner in accordance with HUD
regulations and other requirements.

e

Contract units
The Renewal Contract applies to the project contract units identified
in Exhibit A by size and applicable contract rents.

4

EXPIRING CONTRACT – PROVISIONS RENEWED
a

Except as specifically modified by the Renewal Contract, all
provisions of the Expiring Contract are renewed (to the extent such
provisions are consistent with statutory requirements in effect at the
beginning of the Renewal Contract term).

b

Any provisions of the Expiring Contract concerning any of the
following subjects are not renewed, and shall not be applicable
during the renewal term:
(1)

The amount of the monthly contract rents;

(2)

Contract rent adjustments;
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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

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(3)

c
5

Project account (sometimes called “HAP reserve” or “project
reserve”) as previously established and maintained by HUD
pursuant to former Section 8(c)(6) of the United States
Housing Act of 1937 (currently Section 8(c)(5) of the Act, 42
U.S.C. 1437f(c)(5)). Section 8(c)(5) does not apply to the
Renewal Contract, or to payment of housing assistance
payments during the Renewal Contract term.

The Renewal Contract includes those provisions of the Expiring
Contract that are renewed in accordance with this section.

CONTRACT RENT
a

Initial contract rents
At the beginning of the Renewal Contract term, and until contract
rents for units in the project are adjusted in accordance with section
5b, the contract rent for each bedroom size (number of bedrooms)
shall be the initial contract rent amount listed in Exhibit A, which is
attached to and made a part of the Renewal Contract. The initial
contract rent amounts listed in Exhibit A have been increased to
market levels under the HUD Mark-Up-to-Market Option.

b

Contract rent adjustments
(1)

OCAF adjustment
Except for adjustment of the contract rents to comparable
market rents at the expiration of each 5-year period (as
provided in paragraph 5b(2) of this section) (“fifth year
adjustment”), during the term of the Renewal Contract the
contract administrator shall annually, on the anniversary of
the Renewal Contract, adjust the amounts of the monthly
contract rents in accordance with HUD requirements, using
an operating cost adjustment factor (OCAF) established by
HUD. Such adjustments by use of the OCAF shall not result
in a negative adjustment (decrease) of the contract rents.
The OCAF shall not be used for a fifth year adjustment.

(2)

Fifth year adjustment (comparability adjustment at
expiration of each 5-year period, if applicable)
(a)

This section 5(b)(2) is only applicable if the term of
the Renewal Contract is longer than five (5) years
(from the first day of the term specified in section 2a).
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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

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(3)

(b)

At the expiration of each 5-year period of the Renewal
Contract term, the contract administrator shall
compare existing contract rents with comparable
market rents for the market area. At such anniversary
of the Renewal Contract, the contract administrator
shall make any adjustments in the monthly contract
rents, as reasonably determined by the contract
administrator in accordance with HUD requirements,
necessary to set the contract rents for all unit sizes at
comparable market rents. Such adjustments may
result in a negative adjustment (decrease) or positive
adjustment (increase) of the contract rents for one or
more unit sizes.

(c)

To assist in the redetermination of contract rents, the
contract administrator may require that the owner
submit to the contract administrator a rent
comparability study prepared (at the owner’s
expense) in accordance with HUD requirements.

Procedure for rent adjustments during renewal term
To adjust contract rents during the term of the Renewal
Contract (in accordance with paragraph 5b(1) or paragraph
5b(2)), the contract administrator shall give the owner notice
of the revised Exhibit A. The revised Exhibit A shall specify
the adjusted contract rent amount for each bedroom size as
determined by the contract administrator in accordance with
paragraph 5b(1) or paragraph 5b(2). The notice shall specify
when the adjustment of contract rent is effective. The notice
by the contract administrator of the revised Exhibit A
constitutes an amendment of the Renewal Contract.

(4)

No other adjustments
Except for contract rent adjustments in accordance with
paragraph 5b, there shall not be any other adjustments of
the contract rents during the term of the Renewal Contract.
Special adjustments shall not be granted.

6

OWNER WARRANTIES
a

The owner warrants that it has the legal right to execute the
Renewal Contract and to lease dwelling units covered by the
contract.
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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

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b

7

8

The owner warrants that the rental units to be leased by the owner
under the Renewal Contract are in decent, safe and sanitary
condition, as defined by HUD, and shall be maintained in such
condition during the term of the Renewal Contract.

OWNER NOTICE
a

Before termination of the Renewal Contract, the owner shall
provide written notice to the contract administrator and each
assisted family in accordance with the law and HUD
requirements.

b

If the owner fails to provide such notice in accordance with the law
and HUD requirements, the owner may not increase the tenant rent
payment for any assisted family until such time as the owner has
provided such notice for the required period.

APPLICABLE REQUIREMENTS
The Renewal Contract shall be construed and administered in accordance
with all statutory requirements, and with all HUD regulations and other
requirements, including amendments or changes in HUD regulations and
other requirements during the term of the Renewal Contract. However,
any changes in HUD regulations and requirements which are inconsistent
with the provisions of the Renewal Contract, including the provisions of
section 5 (contract rent) and section 10 (distributions), shall not be
applicable.

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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

Attachment 12

9

STATUTORY CHANGES DURING TERM
If any statutory change during the term of the Renewal Contract is
inconsistent with section 5 or section 10 of the Renewal Contract, and if
HUD determines, and so notifies the contract administrator and the owner,
that the contract administrator is unable to carry out the provisions of
section 5 or section 10 because of such statutory change, then the
contract administrator or the owner may terminate the Renewal Contract
upon notice to the other party.

10

DISTRIBUTIONS
During the term of the Renewal Contract, neither HUD nor the PHA may
impose any additional limitations on distributions of project funds other
than any distribution limitations specified in Exhibit B, which is attached to
and made a part of this Renewal Contract.

11

12

PHA DEFAULT
a

This section of the Renewal Contract applies if the contract
administrator is a PHA acting as contract administrator pursuant to
an annual contributions contract (“ACC”) between the PHA and
HUD. This includes a case where HUD has assigned the Renewal
Contract to a PHA contract administrator, for the purpose of PHA
administration of the Renewal Contract.

b

If HUD determines that the PHA has committed a material and
substantial breach of the PHA’s obligation, as contract
administrator, to make housing assistance payments to the owner
in accordance with the provisions of the Renewal Contract, and that
the owner is not in default of its obligations under the Renewal
Contract, HUD will take actions HUD determines necessary for the
continuation of housing assistance payments to the owner in
accordance with the Renewal Contract.

SECTIONS 236 AND 221(D)(3) BMIR PROJECTS -- PREPAYMENT
a

This section of the Renewal Contract shall be applicable if the
project is a Section 236 project or a 221(d)(3) BMIR project (See
the check-box at section 1 of the Renewal Contract).

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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

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b

13

14

During the term of the Renewal Contract, the owner shall not
prepay any FHA-insured mortgage on the project, except where
HUD, in its sole discretion, approves the prepayment as a
component of a transaction whereby the project is preserved as
affordable housing.

EXCLUSION OF THIRD-PARTY RIGHTS
a

The contract administrator does not assume any responsibility for
injury to, or any liability to, any person injured as a result of the
owner's action or failure to act in connection with the contract
administrator’s implementation of the Renewal Contract, or as a
result of any other action or failure to act by the owner.

b

The owner is not the agent of the contract administrator or HUD,
and the Renewal Contract does not create or affect any relationship
between the contract administrator or HUD and any lender to the
owner or any suppliers, employees, contractors or subcontractors
used by the owner in connection with implementation of the
Renewal Contract.

c

If the contract administrator is a PHA acting as contract
administrator pursuant to an annual contributions contract (“ACC”)
between the PHA and HUD, the contract administrator is not the
agent of HUD, and the Renewal Contract does not create any
relationship between HUD and any suppliers, employees,
contractors or subcontractors used by the contract administrator to
carry out functions or responsibilities in connection with contract
administration under the ACC.

WRITTEN NOTICES
Any notice by the contract administrator or the owner to the other party
pursuant to the Renewal Contract must be in writing.

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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

Attachment 12

SIGNATURES
Contract administrator (HUD or PHA)
Name of Contract Administrator

By:
Signature of authorized representative

Name and official title
Date ________________________

U.S. Department of Housing and Urban Development
By:
Signature of authorized representative
Name and official title
Date ________________________
Owner
Name of Owner

By:
Signature of authorized representative

Name and title
Date _________________________

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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

Attachment 12

EXHIBIT A

IDENTIFICATION OF UNITS ("CONTRACT UNITS")
BY SIZE AND APPLICABLE CONTRACT RENTS

Section 8 Contract Number:
FHA Project Number (if applicable):
Effective Date of the Rent Increase (if applicable):

Number
of Contract Units

Number
of Bedrooms

Contract
Rent

Utility
Allowance

Gross
Rent

NOTE:
This Exhibit will be amended by contract administrator notice to the owner to specify
adjusted contract rent amounts as determined by the contract administrator in
accordance with section 5b(3) of the Renewal Contract.
Comments:

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Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09

EXHIBIT B

DISTRIBUTION LIMITATIONS

FOR PROJECT NOT SUBJECT TO DISTRIBUTION LIMITATIONS:
If the project is not subject to any limitations on distribution of project funds,
either pursuant to an FHA Regulatory Agreement or pursuant to the Expiring
Contract, neither HUD nor the PHA may impose any additional limitations on
distribution of project funds during the term of the Renewal Contract.
FOR PROJECT SUBJECT TO DISTRIBUTION LIMITATIONS:
If the project is subject to any limitations on distribution of project funds pursuant
to an FHA Regulatory Agreement or pursuant to the Expiring Contract, such
limitations on distribution shall continue to be applicable during the term of the
Renewal Contract, provided that the owner may take an increased distribution in
accordance with the Section 8 Renewal Policy Guidance for Renewal of ProjectBased Section 8 Contracts, (the "Guidebook").
However, owners of Section 8 properties must maintain the property in good
condition, as demonstrated by a REAC score of 60 or higher, in order to take
increased distributions.
The owner shall comply with the distribution limitations. The maximum
distribution to the owner shall be equal to the total of:
1

The limited distribution permitted pursuant to the FHA Regulatory
agreement or the Expiring Contract, plus

2

Any increased distribution as approved by HUD in accordance with the
Guidebook.

Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
REV 10/09
Page 1

INSTRUCTIONS FOR PREPARATION OF RENEWAL CONTRACT
The following instructions are not part of the Renewal Contract.
Endnote numbers are keyed to references in the text of the Renewal Contract.

1

This form of Renewal Contract is only to be used to renew an expiring Section 8
project-based HAP contract for a Section 8 project whose rents are increased to
market under the HUD Mark-Up-to-Market Option. The Renewal Contract shall
be entered in accordance with Section 524 of MAHRA and HUD requirements.
Section 2 of the Renewal Contract specifies the contract term.
2

To prepare the Renewal Contract for execution by the parties, fill out all contract
information in section 1 and section 2.
3

Enter a description of the housing that will be covered by the Renewal Contract.
The description must clearly identify the housing by providing the address or
other description of project location, and any other information necessary to
clearly designate the covered housing.
If necessary, attach an exhibit with a site plan or other descriptive information.
Enter a reference to the attached exhibit.
4

Enter the name of the contract administrator that executes the Renewal
Contract. If HUD is the contract administrator, enter “United States of America –
Department of Housing and Urban Development (HUD)”. If the contract
administrator is a public housing agency (PHA), enter the full name of the PHA.
5

The Renewal Contract must be entered before expiration of the Expiring
Contract. Enter the date of the first day after expiration of the term of the
Expiring Contract.
6

Enter a whole number of five or more years.

7

Enter the amount of funding obligated.

8

Enter a whole number of months.

Form HUD-9638
Renewal Contract -- Mark-Up-to-Market
Endnotes: INSTRUCTIONS FOR PREPARATION OF RENEWAL CONTRACT
REV 10/09
Page 1