HUD-9642 Full Market to Market Renewal Contract

Attachment 16

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

Project-based Section 8
HOUSING ASSISTANCE PAYMENTS

FULL MARK-TO-MARKET RENEWAL CONTRACT

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Exp. (09/30/2014)
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PREPARATION OF CONTRACT
Reference numbers in this form refer to notes at the end of the contract text.
These endnotes are instructions for preparation of the Full Mark-To-Market
Renewal Contract. The instructions are not part of the Renewal Contract

Full Mark-To-Market Renewal Contract form HUD-9642
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TABLE OF SECTIONS

1 CONTRACT INFORMATION

1

PROJECT

1

TYPE OF RENEWAL

2

2 TERM AND FUNDING OF RENEWAL CONTRACT

2

3 DEFINITIONS

3

4 RENEWAL CONTRACT

4

a Parties

4

b Statutory authority

4

c Expiring Contract

5

d Purpose of Renewal Contract

5

e Contract units

5

5 EXPIRING CONTRACT – PROVISIONS RENEWED

5

6 CONTRACT RENT

6

a Initial contract rents

6

b Contract rent adjustments

6

(1) OCAF

6

(2) Procedure for rent adjustments during renewal term

6

(3) No other adjustments

8

7 OWNER WARRANTIES

9

8 OWNER TERMINATION NOTICE

9

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9 PHYSICAL CONDITION AND FINANCIAL REPORTING
REQUIREMENTS

9

10 HUD REQUIREMENTS

10

11 STATUTORY CHANGES DURING TERM

10

12 PHA DEFAULT

10

13 EXCLUSION OF THIRD-PARTY RIGHTS

10

14 WRITTEN NOTICES

11

SIGNATURES

12

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

Project-based Section 8

HOUSING ASSISTANCE PAYMENTS
FULL MARK-TO-MARKET RENEWAL CONTRACT1

1

CONTRACT INFORMATION2

PROJECT
Section 8 Project Number:
Section 8 Project Number of Expiring Contract:
FHA Project Number (if applicable):
Project Name:
Project Description3

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TYPE OF RENEWAL
Check this box for a project renewed under Section 515(a) of MAHRA
PARTIES TO RENEWAL CONTRACT
Name of Contract Administrator4

Address of Contract Administrator

Name of Owner5

Address of Owner

2

TERM AND FUNDING OF RENEWAL CONTRACT
6

a

The Renewal Contract begins on
7
of
years.

and shall run for a period

b

Execution of the Renewal Contract by the Contract Administrator is
an obligation by HUD of $
,8 an amount sufficient to provide
9
housing assistance payments for approximately
months of
the first annual increment of Renewal Contract term.

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c

3

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.

DEFINITIONS
ACC. Annual contributions contract.
Anniversary. The annual recurrence of the date of the first day of the
term of the Renewal Contract.
Contract units. The units in the Project which are identified in Exhibit A
by size and applicable contract rents.
Contract rent. The total monthly rent to owner for a contract unit,
including the tenant rent (the portion of rent to owner paid by the assisted
family).
HAP contract. A housing assistance payments contract between the
Contract Administrator and the Owner.
HUD. The United States Department of Housing and Urban Development.
HUD requirements. The Restructuring Commitment, HUD regulations
and other requirements, including amendments to the Restructuring
Commitment and changes in HUD regulations and other requirements
during the term of the Renewal Contract.
MAHRA. The Multifamily Assisted Housing Reform and Affordability Act of
1997 (Title V of Public Law No.105-65, October 27, 1997, 111 Stat. 1384),
as amended.
OCAF. An operating cost adjustment factor established by HUD.
PHA. Public housing agency (as defined and qualified in accordance with
the United States Housing Act of 1937. 42 U.S.C. 1437 et seq.).
Project. The housing designated in section 1 of the Renewal Contract.
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Restructuring Commitment. That certain executed Restructuring
Commitment previously entered into by Owner and Contract Administrator
in connection with the Owner’s participation in the Mark-to-Market
Program.
Section 8. Section 8 of the United States Housing Act of 1937 (42 U.S.C.
1437f).
Renewal Contract. This contract, including applicable provisions of the
Expiring Contract (as determined in accordance with section 5 of the
Renewal Contract).
4

RENEWAL CONTRACT
a

b

Parties
(1)

The Renewal Contract is a housing assistance payments
contract (“HAP Contract”) between the Contract
Administrator and the Owner of the Project (see section 1).

(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
10 (HUD requirements), section 11 (statutory changes
during term) and section 12 (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 (42 U.S.C. 1437f), and section
515(a) of the MAHRA.

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c

Expiring Contract
Previously, the Contract Administrator and the Owner had entered
into a HAP Contract ("expiring contract") to make Section 8 housing
assistance payments to the Owner for eligible families living in the
Project. The term of the expiring contract will expire or terminate
prior to the beginning of the term of the Renewal Contract.

d

e

Purpose of Renewal Contract
(1)

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 shall make
housing assistance payments to the Owner in accordance
with the provisions of the Renewal Contract.

(2)

Housing assistance payments shall only be paid to the
Owner for contract units occupied by eligible families leasing
decent, safe and sanitary units from the Owner in
accordance with statutory requirements, and with all HUD
regulations and other requirements. If the Contract
Administrator determines that the Owner has failed to
maintain one or more contract units in decent, safe and
sanitary condition, and has abated housing assistance
payments to the owner for such units, the Contract
Administrator may use amounts otherwise payable to the
Owner pursuant to the Renewal Contract for the purpose of
relocating or rehousing assisted residents in other housing.

Contract units
The Renewal Contract applies to the Contract units.

5

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 and all provisions of the Expiring Contract concerning any of
the following subjects are not renewed, and shall not be applicable
during the renewal term:
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c
6

(1)

Identification of contract units by size and applicable contract
rents;

(2)

The amount of the monthly contract rents;

(3)

Contract rent adjustments; and

(4)

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 5.

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
6b, 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, by this reference, is hereby made a part of the
Renewal Contract.

b

Contract rent adjustments
(1)

OCAF
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 by
using an OCAF.

(2)

Procedure for rent adjustments during renewal term
(a) To adjust contract rents during the term of the Renewal
Contract, the Contract Administrator shall give the Owner

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notice with a revised Exhibit A that specifies the adjusted
contract rent amounts.
(b) The revised Exhibit A shall specify the adjusted contract
rent amount for each bedroom size as determined by the
Contract Administrator in accordance with this section.
The adjustment notice by the Contract Administrator to
the Owner shall specify when the adjustment of contract
rent is effective.
(c) If this box is checked , the initial contract rent, as
stated in Exhibit A, constitutes an exception rent based
on the actual and projected costs of operating the
Project, as provided under section 514(g)(3) of MAHRA.
Actual market rents are:
bedroom:
bedroom:
bedroom:
bedroom:
bedroom:
bedroom:
bedroom:
bedroom:

Should the Project anytime during the term of the
Renewal Contract receive other government assistance,
including but not limited to any loan, grant, credit, tax
benefit, or any other form of direct or indirect assistance
such as tax credits under Federal, State or local law, the
Owner shall provide HUD with written notice, no more
than 30 days following receipt of notification from the
governmental authority issuing the assistance that such
assistance has been or will be awarded. The written
notice will identify the type and amount of the assistance
awarded, the government entity providing such
assistance, and the date of the award. HUD will review
the underwriting projections resulting from the receipt of
other government assistance, and if HUD determines that
Project operating expenses, debt service, and/or required
replacement reserve contributions will decrease as a
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result of the Project’s receipt of other government
assistance, HUD may adjust the contract rents downward
to the greatest of the following:
Actual market rents as noted above, adjusted
upwards using the appropriate OCAF adjustment
factor, compounded annually from the origination
date of the renewal contract, per HUD
guidelines;
Revised exception rent after applying the other
government assistance, which is determined to
decrease operating expenses, debt service,
and/or required replacement reserve
contribution; and
Market rents that reflect improvements to the
Project (as improved rents) resulting from the
application of the additional government
assistance, not to exceed the contract rent then
in effect. The owner must submit to HUD a rent
comparability study (RCS) prepared (at the
owner’s expense) in accordance with HUD
requirements. HUD will have sole discretion to
review and adjust the rents provided in the RCS
to eliminate upward adjustments attributable to
improvements that exceed the M2M Program’s
non-luxury standard. The rent comparability
study must be submitted to HUD along with the
notification of the award of the other
governmental assistance.
If the additional government assistance is provided in
conjunction with a transaction requiring prior HUD
approval, such as, an assumption/subordination of Markto-Market debt, a TPA, or the approval of a new FHA
insured first mortgage, the owner must notify the HUD
official approving that transaction of the requirements of
this Section. No additional notification of HUD or the
Section 8 Contract Administrator staff will be required.

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If new secured debt and/or tax credit equity is involved,
the owner shall submit pro-forma estimates of the
operating expenses, debt service, and replacement
reserves that will be required after the application of the
additional government assistance. These estimates will
be reviewed by HUD in its process of determining a
possible contract rent adjustment.
(d) Notice of rent adjustment by the Contract Administrator to
the Owner shall automatically constitute an amendment
of the Renewal Contract.
(3)

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

7

8

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.

b

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 and determined in accordance with HUD
regulations and procedures), and shall be maintained in such
condition during the term of the Renewal Contract.

OWNER TERMINATION 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 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.

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9

10

PHYSICAL CONDITION AND FINANCIAL REPORTING
REQUIREMENTS
a

The Owner shall comply with HUD’s Physical Condition Standards
and Inspection Requirements of 24 CFR part 5, subpart G,
including any changes in the regulations and related Directives. In
addition, the Owner shall comply with HUD’s Physical Condition
Standards of Multifamily Properties of 24 CFR part 200, subpart P,
including any changes in the regulation and related Directives. This
obligation shall apply both during the current term of the HAP
contract and during each successive renewal term.

b

The Owner shall comply with HUD’s Uniform Financial Reporting
Standards of 24 CFR, part 5, subpart H, including any changes in
the regulation and related Directives. This obligation shall apply
during the current term of the HAP contract and for each
successive renewal term.

c

This section 9 of the Renewal Contract shall not be construed to
limit the requirements referred to in section 10 of the Renewal
Contract.

HUD REQUIREMENTS
The Renewal Contract shall be construed and administered in accordance
with all statutory requirements, the Restructuring Commitment, and with all
HUD regulations and other requirements, including changes in HUD
regulations and other requirements during the term of the Renewal
Contract. However, any changes in HUD requirements that are
inconsistent with the provisions of the Renewal Contract, including the
provisions of section 6 (contract rent), shall not be applicable.

11

STATUTORY CHANGES DURING TERM
If any statutory change during the term of the Renewal Contract is
inconsistent with section 6 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 6 because of such statutory change, then the Contract
Administrator or the Owner may terminate the Renewal Contract upon
notice to the other party.
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12

13

PHA DEFAULT
a

This section 12 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 shall take any action HUD determines necessary for
the continuation of housing assistance payments to the Owner in
accordance with the Renewal Contract.

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.
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14

WRITTEN NOTICES
a

Any notice by the Contract Administrator or the Owner to the other
party pursuant to the Renewal Contract shall be given in writing.

b

A party shall give notice at the other party’s address specified in
section 1 of the Renewal Contract, or at such other address as the
other party has designated by a contract notice. A party gives a
notice to the other party by taking steps reasonably required to
deliver the notice in ordinary course of business. A party receives
notice when the notice is duly delivered at the party’s designated
address.

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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 ____________________________
EXHIBIT A
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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 6b of the Renewal Contract.

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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 must be used for initial and subsequent
renewals of an expiring Section 8 project-based HAP contract in accordance with
HUD requirements and Section 515(a) of MAHRA.
This form may not be used for: Interim Mark-To-Market Renewals; Watch List
Renewals; Basic Renewals; Mark-Up-To-Market Renewals; nor Portfolio
Reengineering Demonstration or Preservation Renewals.
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 Project by providing the
Project’s name, street address, city, county, state and zip code, block and lot
number (if known), and any other information necessary to clearly designate the
covered Project.
If necessary, attach an exhibit with a site plan, legal description 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 legal name of the
PHA.
5

Enter the full legal name of the Owner. For example: “ABC Corporation, Inc., a
Maryland corporation.”
6

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.
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7

Enter a whole number of years.

8

Enter the amount of funding obligated.

9

Enter a whole number of months.

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