HUD-52522b Housing Assistance Payments II

Part II of the

U.S. Department of Housing and
Urban Development

Housing Assistance Payments
Contract

Office of Multifamily Housing Programs
OMB Control #2502-0587

Section 8 Housing Assistance Payments Program
Section 8 Project Number:

FHA Project Number (if applicable):

2.1 OWNER'S WARRANTIES; AMENDMENTS.
(a) Legal Capacity. The Owner warrants that it has the legal right to execute this Contract and to lease
dwelling units covered by this Contract.
(b) Completion of Work. The Owner warrants that the project as described in section 1.1 is in good
and tenantable condition. The Owner further warrants that it will remedy any defects or omissions
covered by this warranty if called to its attention within 12 months of the effective date of this
Contract.
2.2 FAMILIES TO BE HOUSED; CONTRACT ADMINISTRATOR (CA) ASSISTANCE.
(a) Families to Be Housed. The Contract Units are to be leased by the Owner to eligible Low-Income
Families (Families) for occupancy by such Families solely as private dwellings and as their principal
place of residence.
(b) CA Assistance.
(1) The CA hereby agrees to make housing assistance payments on behalf of Families for the
Contract Units, to enable the Families to lease decent, safe, and sanitary housing pursuant to
section 8 of the Act.
(2) If there is a Utility Allowance and if the Allowance exceeds the total Family contribution, the
Owner shall pay the Family the amount of the excess. The CA will pay funds to the Owner in
trust solely for the purpose of making this payment. Any pledge by the Owner of payments
properly payable under this Contract shall not be construed to include payments covered by this
paragraph (b)(2). (See 24 CFR section 880.501(e).)
2.3 HOUSING ASSISTANCE PAYMENTS TO OWNERS.
(a) Housing Assistance Payments on Behalf of Families.
(1) Housing assistance payments shall be paid to the Owner for units under lease for occupancy by
Families in accordance with the Contract. The housing assistance payment will cover the
difference between the Contract Rent and that portion of the rent payable by the Family as
determined in accordance with the HUD-established schedules and criteria.
(2) The amount of housing assistance payment payable on behalf of a Family and the amount of
rent payable by the Family shall be subject to change by reason of changes in Family Income,

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Family composition, extent of exceptional medical or other unusual expenses or program rules
in accordance with the HUD-established schedules and criteria; or by reason of a change in any
applicable Utility Allowance approved or required by the CA. Any such change shall be effective
as of the date stated in a notification of the change to the Family, which need not be at the end
of the Lease Term.
(b) Vacancies During Rent-Up. If a Contract Unit is not leased as of the effective date of the Contract,
the Owner is entitled to housing assistance payments in the amount of 80 percent of the Contract
Rent for the unit for a vacancy period not exceeding 60 days from the effective date of the Contract,
provided that the Owner (1) commenced marketing, (2) has taken and continues to take all feasible
actions to fill the vacancy, including, but not limited to, contacting applicants on its waiting list, if any,
requesting the PHA and other appropriate sources to refer eligible applicants, and advertising the
availability of the unit in a manner specifically designed to reach eligible Families, and (3) has not
rejected any eligible applicant, except for good cause acceptable to the CA.
(c) Vacancies after Rent-Up. If an eligible Family vacates a unit, the Owner is entitled to housing
assistance payments in the amount of 80 percent of the Contract Rent for the first 60 days of
vacancy if the Owner:
(1) Certifies that it did not cause the vacancy by violating the lease, the Contract or any applicable
law or by moving a Family to another unit;
(2) Notified the CA of the vacancy or prospective vacancy and the reasons for it immediately upon
learning of the vacancy or prospective vacancy;
(3) Has fulfilled and continues to fulfill the requirements specified in paragraphs (b)(1), (2), and (3)
of this section; and
(4) Certifies that any eviction resulting in a vacancy was carried out in compliance with section 2.8.
(d) Vacancies for Longer than 60 Days. If an assisted unit continues to be vacant after the period
specified in paragraph (b) or (c) of this section, the Owner may apply to receive additional payments
for the vacancy period in an amount equal to the principal and interest payments required to
amortize that portion of the debt service attributable to the vacant unit (see Exhibit 2) for up to 12
additional months for the unit if:
(1) The unit was in decent, safe and sanitary condition during the vacancy period for which
payments are claimed;
(2) The Owner has fulfilled and continues to fulfill the requirements specified in paragraph (b) or (c)
of this section, as appropriate; and
(3) The Owner has demonstrated to the satisfaction of HUD that:
(i) For the period of vacancy, the project is not providing the Owner with revenues at least
equal to project expenses (exclusive of depreciation), and the amount of payments
requested is not more than the portion of the deficiency attributable to the vacant unit; and
(ii) The project can achieve financial soundness within a reasonable time.
(e) Prohibition of Double Compensation for Vacancies. The Owner is not entitled to payments for
vacant units to the extent it can collect for the vacancy from other sources (such as security
deposits, other amounts collected from the Family, payments from the CA under section 2.7(b), and
governmental payments under other programs). If the Owner collects any of the Family's share of
the rent for a vacancy period in an amount which, when added to the vacancy payment, results in
more than the Contract Rent, the excess must be reimbursed as HUD directs.

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(f) CA Not Obligated for Family Rent. The CA has not assumed any obligation for the amount of rent
payable by any Family or the satisfaction of any claim by the Owner against any Family other than
in accordance with section 2.7(b) of this Contract. The financial obligation of the CA is limited to
making housing assistance payments on behalf of Families in accordance with this Contract.
(g) Owner's Monthly Requests for Payments.
(1) The Owner shall submit monthly requests to the CA or as directed by the CA for housing
assistance payments. Each request shall set forth: (i) the name of each Family and the address
and/or number of the unit leased by the Family; (ii) the address and/or the number of each unit,
if any, not leased to Families for which the Owner is claiming payments; (iii) the Contract Rent
as set forth in Exhibit 1 for each unit for which the Owner is claiming payments; (iv) the amount
of rent payable by the Family leasing the unit (or, where applicable, the amount to be paid the
Family in accordance with section 2.2(b)(2)); and (v) the total amount of housing assistance
payments requested by the Owner.
(2) Each of the Owner's monthly requests shall contain a certification by it that to the best of its
knowledge and belief (i) the dwelling units are in decent, safe, and sanitary condition, (ii) all the
other facts and data on which the request for funds is based are true and correct, (iii) the
amount requested has been calculated in accordance with the provisions of this Contract and is
payable under the Contract, (iv) none of the amount claimed has been previously claimed or
paid under this Contract, and (v) the Owner has not received and will not receive any payments
or other consideration from the Family, the PHA, HUD, or any other public or private source for
the unit beyond that authorized in this Contract and the lease.
(3) If the Owner has received an excessive payment, the CA (or HUD where the CA is a PHA), in
addition to any other rights to recovery, may deduct the amount from any subsequent payment
or payments.
(4) The Owner's monthly requests for housing assistance payments are subject to penalty under 18
U.S.C. 1001, which provides, among other things, that whoever knowingly and willfully makes or
uses a document or writing containing any false, fictitious, or fraudulent statement or entry, in
any matter within the jurisdiction of any department or agency of the United States, shall be
fined not more than $10,000 or imprisoned for not more than five years, or both.
2.4 MAINTENANCE, OPERATION AND INSPECTION.
(a) Maintenance and Operation. The Owner agrees to maintain and operate the Contract Units,
unassisted units, if any, and related facilities to provide decent, safe, and sanitary housing,
including the provision of all the services, maintenance and utilities set forth in section 1.1(d), in
accordance with HUD’s Physical Condition Standards and inspection Requirements, currently
codified in 24 C.F.R. Part 5 Subpart G, and HUD’s Physical Condition Standards for Multifamily
Properties, currently codified in 24 C.F.R. Part 200 Subpart P. The Owner also agrees to comply
with the lead-based paint regulations at 24 C.F.R. Part 35. If the CA determines that the Owner is
not meeting one or more of these obligations, the CA shall have the right to take action under
section 2.19(b).
(b)

Inspection.
(1) Prior to occupancy of any Contract Unit by a Family, the Owner and the Family shall inspect the
unit and both shall certify, on forms prescribed or approved by the CA, that they have inspected
the unit and have determined it to be decent, safe, and sanitary in accordance with the criteria

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provided in the forms. The Owner shall keep copies of these reports on file for at least three
years.
(2) The CA shall inspect or cause to be inspected the Contract Units and related facilities at least
annually and at such other times (including prior to initial occupancy and rerenting of any unit)
as may be necessary to ensure that the Owner is meeting its obligation to maintain the units in
decent, safe, and sanitary condition including the provision of the agreed-upon utilities and other
services. The CA shall take into account complaints by occupants and any other information
coming to its attention in scheduling inspections and shall notify the Owner and the Family of its
determination.
(c) Units Not Decent, Safe, and Sanitary. If the CA notifies the Owner that it has failed to maintain a
dwelling unit in decent, safe, and sanitary condition and the Owner fails to take corrective action
within the time prescribed in the notice, the CA may exercise any of its rights or remedies under the
Contract, including reduction or suspension of housing assistance payments, even if the Family
continues to occupy the unit. If, however, the Family wishes to be rehoused in another dwelling unit
with section 8 assistance and the CA does not have other section 8 funds for such purposes, the
CA may use the abated housing assistance payments for the purpose of relocating or rehousing the
Family in another dwelling unit. If the Family continues to occupy the unit, it will do so in accordance
with the terms of its lease, including the termination date and amount of rent payable by the Family.
(d) Notification of Abatement. Any reduction or suspension of housing assistance payments shall be
effective as provided in written notification to the Owner. The Owner shall promptly notify the Family
of any such abatement.
(e) Overcrowded and Underoccupied Units. Where the CA determines a unit is larger or smaller
than appropriate for an eligible Family, the Owner agrees to correct the situation in accordance with
HUD regulations and requirements in effect at the time of the determination.
2.5 FINANCIAL REQUIREMENTS.
(a) Submission of Financial and Operating Statements.
The Owner agrees to comply with HUD’s Uniform Financial Reporting Standards, currently codified
in 24 C.F.R. Part 5 Subpart H.
(b) Use of Project Funds. (Not applicable to Partially-assisted projects.)
(1) Project funds must be used for the benefit of the project, to make mortgage payments, to pay
operating expenses, to make required deposits to the replacement reserve in accordance with
paragraph (c) of this section and to provide distributions to the Owner as provided in paragraph
(d). To the extent HUD determines that project funds are more than needed for these purposes,
the surplus project funds must be deposited with the mortgagee or other HUD-approved
depository in an interest-bearing residual receipts account. Withdrawals from this account will
be made only with the approval of HUD and for project purposes, including the reduction of
housing assistance payments. Upon termination of the Contract, any excess funds must be
remitted to HUD.
(2) In the case of HUD-insured projects, the provisions of this paragraph (b) will apply instead of the
otherwise applicable mortgage insurance requirements, except in the case of Partially-assisted
projects, which are subject to the applicable mortgage insurance requirements.
(c) Replacement Reserve. (Not applicable to Partially-assisted projects.)
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(1) The Owner shall establish and maintain a replacement reserve in an interest-bearing account to
aid in funding extraordinary maintenance and repair and replacement of capital items in
accordance with applicable regulations.
(i) The obligation of the Owner to deposit into the replacement reserve shall commence upon
the effective date of the Contract. For staged projects, the obligation shall commence on a
pro rata basis for units in each stage on the effective date of the Contract for that stage.
The amount of the deposit to the replacement reserve will be adjusted each year by the
amount of the automatic annual adjustment factor. See 24 CFR Part 888.
(ii) The reserve must be built up to and maintained at a level determined by HUD to be
sufficient to meet projected requirements. Should the reserve achieve that level, the rate of
deposit to the reserve may be reduced with the approval of HUD.
(iii) All earnings including interest on the reserve must be added to the reserve.
(iv) Funds will be held by the mortgagee or trustee for the bondholders, and may be drawn
from the reserve and used only in accordance with HUD guidelines and with the approval
of, or as directed by, HUD.
(v) In the event the project is not subject to any financing, funds will be held by the Owner, and
may be drawn from the reserve account and used only in accordance with HUD guidelines
and with the approval of, or as directed by, HUD.
(vi) The Owner shall not fund extraordinary maintenance and repair and/or replacement of
capital items out of project funds without the prior written consent of HUD.
(2) In the case of HUD-insured projects, the provisions of this paragraph (c) will apply instead of the
otherwise applicable mortgage insurance requirements, except in the case of Partially-assisted
projects, which are subject to the applicable mortgage insurance requirements.
(d) Limitation on Distributions. (Paragraph (d)(2)-(4) are not applicable to Small or Partially-assisted
Projects.)
(1) Nonprofit owners are not entitled to distributions of project funds.
(2) For the life of the Contract, project funds may only be distributed to profit-motivated owners at
the end of each fiscal year of project operation following the effective date of the Contract after
all project expenses have been paid, or funds have been set aside for payment, and all reserve
requirements have been met. The first year's distribution may not be made until cost
certification, where applicable, is completed. Distributions may not exceed the following
maximum returns:
(i) For projects for elderly families, the first year's distribution will be limited to 6 percent on
equity. HUD may provide for increases in subsequent years' distributions in accordance with
applicable HUD regulations and requirements.
(ii) For projects for nonelderly families, the first year's distribution will be limited to 10 percent on
equity. HUD may provide for increases in subsequent years' distributions in accordance with
applicable HUD regulations and requirements.
(3) For the purpose of determining the allowable distribution, an Owner's equity investment shall be
computed in accordance with HUD regulations and requirements.
(4) Any short-fall in return may be made up from surplus project funds (see paragraph (b)(1)) in
future years.
(5) In the case of HUD-insured projects, the provisions of this section will apply instead of the
otherwise applicable mortgage insurance program regulations, except in the case of Small or
Partially-assisted projects, which are subject to the applicable mortgage insurance regulations.
2.6 RENT ADJUSTMENTS.
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(a) Funding of Adjustments. Housing Assistance payments will be made in amounts commensurate
with Contract Rent adjustments under this section.
(b) Annual Adjustments.
(1) Upon request from the Owner to the CA, Contract Rents will be adjusted on the anniversary
date of the Contract in accordance with 24 CFR 888 and this Contract. See, however,
paragraph (d).
(2) Contract Rents may be adjusted upward or downward, as may be appropriate; however, in no
case shall the annual adjustment result in Contract Rents less than the Contract Rents on the
effective date of the Contract.
(c) Special Additional Adjustments. Special additional adjustments shall be granted, when approved
by HUD, to reflect increases in the actual and necessary expenses of owning and maintaining the
Contract Units which have resulted from substantial general increases in real property taxes, utility
rates, assessments, and utilities not covered by regulated rates. The Owner must demonstrate that
such general increases have caused increases in the Owner's operating costs which are not
adequately compensated for by annual adjustments. The Owner shall submit to HUD supporting
data, financial statements and certifications which clearly support the increase. See, however,
paragraph (d).
(d) Overall Limitation. Notwithstanding any other provision of this Contract, adjustments after Contract
execution or cost certification, where applicable, shall not result in material differences between the
rents charged for assisted and comparable unassisted units, as determined by HUD; except to the
extent that the differences existed with respect to the Contract Rents set at Contract execution or
cost certification, where applicable.
(e) Incorporation of Rent Adjustment. Any adjustment in Contract Rents shall be incorporated into
Exhibit 1 by a dated addendum to the exhibit establishing the effective date of the adjustment.
2.7 MARKETING AND LEASING OF UNITS.
(a) Compliance with Equal Opportunity Requirements. Marketing of units and selection of Families
by the Owner shall be in accordance with the Owner's HUD-approved Affirmative Fair Housing
Marketing Plan (if required), shown as an exhibit, and with all regulations relating to fair housing
advertising. Projects shall be managed and operated without regard to race, color, religion, sex,
disability, familial status or national origin.
(b) Security Deposits. The Owner agrees to comply with applicable section 8 regulations and other
requirements, as revised from time to time, regarding security deposits and to comply with all State
and local law.
(c) Eligibility, Selection and Admission of Families.
(1) The Owner shall be responsible for determination of eligibility of applicants, selection of
Families from among those determined to be eligible, computation of the amount of housing
assistance payments on behalf of each selected Family and of total Family contributions and
recordkeeping in accordance with applicable HUD regulations and requirements.
(2) The Owner shall not charge any applicant or assisted Family any amount in excess of the total
Family contribution except as authorized by HUD.

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(3) In the renting of the Contract Units, the Owner must comply with the income eligibility
requirements of section 16(c)(2) of the Act [42 U.S.C. § 1437n(c)(2)] and 24 C.F.R. §
5.653(d)(2). The Owner must further comply with the income targeting requirements of section
16(c)(3) of the Act [42 U.S.C. § 1437n(c)(3)] and 24 C.F.R. § 5.653(c). Sections 16(c)(4) – (6)
of the Act [42 U.S.C. § 1437n(c)(4) – (6)] shall also apply.
(4) The Lease entered into between the Owner and each selected Family shall be on the form of
Lease approved by HUD.
(5) (i) The Owner shall make a reexamination of Family income, composition, and the extent of
medical or other unusual expenses incurred by the Family at least as often as required by HUD
regulations or other requirements, and appropriate redeterminations shall be made by the
Owner of the amount of Family contribution and the amount of housing assistance payment, all
in accordance with applicable HUD regulations and requirements.
(ii) If a Family reports a change in income or other circumstances that would result in a
decrease of total Family contribution between regularly scheduled reexaminations, the
Owner, upon receipt of verification of the change, must promptly make appropriate
adjustments in the total Family contribution. The Owner may require in its lease that Families
report increases in income or other changes between scheduled reexaminations.
(iii) In connection with the reexamination, the Owner shall determine what percentage of
Families in occupancy are Very Low-Income Families and what the average Family income
is. If there are fewer than 30 percent Very Low- Income Families in occupancy, or the
average income is below 40 percent of the median, the Owner shall report the fact to HUD
and shall adopt appropriate changes in its admission policies.
(iv) A Family's eligibility for housing assistance payments continues until the total Family
contribution equals the total housing expense for the unit it occupies. The termination of
availability at this point will not affect the Family's other rights under the lease nor preclude
resumption of payments as a result of later changes in income or other circumstances during
the term of this Contract.
(6) Where fewer than 100 percent of the units in the project are covered by this Contract, assisted
Families shall be dispersed throughout. At initial rent-up, the Owner shall lease the units
identified in Exhibit 1 to eligible Families. Thereafter, the Owner may lease other units of
appropriate size and type to eligible Families in accordance with Exhibit 1. For projects with
units for both elderly and non-elderly Families, the respective family types may be grouped
together.
(7) The Owner shall maintain as confidential all information relating to section 8 applicants and
assisted Families, the disclosure of which would constitute an unwarranted invasion of personal
privacy.
(d) Rent Redetermination after Adjustment in Utility Allowance. In the event that the Owner is
notified of a CA determination approving or requiring an adjustment in the Utility Allowance
applicable to any of the Contract Units, the Owner shall promptly make a corresponding adjustment
in the amount of rent to be paid by the affected Families and the amount of housing assistance
payments.
(e) Processing of Applications and Complaints. The Owner shall process applications for
admission, notifications to applicants, and complaints by applicants in accordance with applicable
HUD and PHA regulations and requirements and shall maintain records and furnish such copies or
other information as may be required by HUD or the PHA.

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(f) Review: Incorrect Payments. In making housing assistance payments to Owners, the PHA or
HUD will review the Owner's determinations under this section. If as a result of this review, or other
reviews, audits or information received by the PHA or HUD at any time, it is determined that the
Owner has received improper or excessive housing assistance payments, the PHA or HUD shall
have the right to deduct the amount of such overpayments from any amounts otherwise due the
Owner, or otherwise effect recovery.
2.8 Termination of Tenancy or Section 8 Assistance by the Owner.
The Owner agrees not to terminate any tenancy of or assistance on behalf of an assisted Family except
in accordance with all HUD regulations and other requirements in effect at the time of the termination, and
any State and local law.
2.9 Reduction of Number of Units for Failure to Lease to Eligible Families.
(a) Limitation on Leasing to Ineligible Families. The Owner may not at any time during the term of
this Contract lease more than 10 percent of the assisted units in the project to families which are
ineligible under section 8 requirements at initial occupancy without the prior approval of HUD.
Failure on the part of the Owner to comply with this prohibition is a violation of the Contract and
grounds for all available legal remedies, including specific performance of the Contract, suspension
or debarment from HUD programs and reduction of the number of units under the Contract, as set
forth in paragraph (b) of this section. (See also section 2.19.)
(b) Reduction for Failure to Lease to Eligible Families—New and Rehab Projects. If, at any time
beginning six months after the effective date of the Contract, the Owner fails for a continuous period
of six months to have at least 90 percent of the assisted units leased or available for leasing by
Families eligible under section 8 requirements at initial occupancy, HUD (or the PHA at the direction
of HUD, as appropriate) may, on at least 30 days' notice, reduce the number of units covered by the
Contract. HUD or the PHA may reduce the number of units to the number of units actually leased or
available for leasing plus 10 percent (rounded up). This reduction, however, will not be made if the
failure to lease units to eligible Families is permitted in writing by HUD under paragraph (a) of this
section.
(c) Restoration. HUD will agree to an amendment of the ACC or the Contract, as appropriate, to
provide for subsequent restoration of any reduction made pursuant to paragraph (b) or (c) of this
section if:
(1) HUD determines that the restoration is justified by demand;
(2) The Owner otherwise has a record of compliance with its obligations under the Contract; and
(3) Sufficient appropriations are available to support the funding of the units to be restored.
2.10 NONDISCRIMINATION.
(a) General. The Owner shall not in the selection of Families, in the provision of services, or in any
other manner, discriminate against any person on the grounds of race, color, religion, sex, disability,
familial status, or national origin.
(b) Members of Certain Classes. The Owner shall not automatically exclude anyone from participation
in, or deny anyone the benefits of, the Housing Assistance Payments Program because of

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membership in a class, such as unmarried mothers, recipients of public assistance, and disabled
persons.
(c) The Fair Housing Act. The Owner shall comply with all requirements imposed by the Fair Housing
Act, which prohibits discrimination in the sale, rental, financing and advertising of housing on the
basis of race, color, religion, sex, handicap, familial status, or national origin, and any related rules
and regulations.
(d) Title VI of the Civil Rights Act of 1964 and Executive Order 11063. The Owner shall comply with
all requirements imposed by Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d. et seq.; the
HUD Regulations issued thereunder, 24 C.F.R. Part 1; the HUD requirements pursuant to these
regulations; and Executive Order 11063 and the regulations and requirements issued thereunder at
24 C.F.R. Part 107 to the end that, in accordance with that Act, Executive Order 11063, and the
regulations and requirements of HUD, no person in the United States shall, on the grounds of race,
color, religion (creed), sex, or national origin, be excluded from participation in, or be denied the
benefits of, the Housing Assistance Payments Program, or be otherwise subjected to discrimination.
This provision is included pursuant to HUD’s implementing regulations for Title VI at 24 C.F.R. Part
1, the implementing regulations for Executive Order 11063 at 24 C.F.R. Part 107, and the HUD
requirements pursuant to the regulations. The obligation of the Owner to comply therewith inures to
the benefit of the United States of America, HUD, and the PHA (where the CA is a PHA), any of
which shall be entitled to invoke any remedies available by law to redress any breach or to compel
compliance by the Owner.
(e) Section 504 of the Rehabilitation Act of 1973. The Owner shall comply with all the requirements
imposed by section 504 of the Rehabilitation Act of 1973, as amended, 29 U.S.C. 794 et seq., and
HUD regulations issued thereunder at 24 C.F.R. Part 8. Section 504 provides that no qualified
individual with a disability shall, on the basis of disability, be excluded from participation in, be
denied the benefits of, or otherwise be subjected to discrimination under any program or activity
which receives or benefits from Federal financial assistance. Accordingly, the Owner (1) shall not
discriminate against any qualified individual with a disability on the basis of disability, and (2) shall
cause to be incorporated into all contracts executed in connection with this project a provision
requiring compliance with rules and regulations issued pursuant to section 504.
(f) Employees of Owner.
(1) In carrying out the obligations under this Contract, the Owner will not discriminate against any
employee or applicant for employment because of race, color, creed, religion, sex, disability,
familial status, or national origin. The Owner will take affirmative action to ensure that applicants
are employed, and that employees are treated during employment, without regard to race, color,
creed, religion, sex, disability, familial status, or national origin. Such action shall include, but
not be limited to, the following: employment, upgrading, demotion, or transfer; recruitment or
recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and
selection for training, including apprenticeship.
(2) The Owner agrees to post in conspicuous places, available to employees and applicants for
employment, notices to be provided by HUD setting forth the provisions of this
nondiscrimination clause. The Owner will in all solicitations or advertisements for employees
placed by or on behalf of the Owner state that all qualified applicants will receive consideration
for employment without regard to race, color, creed, religion, sex, disability, familial status, or
national origin. The Owner will incorporate the foregoing requirements of this paragraph in all of
its contracts for project work, except contracts for standard commercial supplies or raw
materials, and will require all of its contractors for such work to incorporate such requirements in
all subcontracts for project work.
(g) Age Discrimination Act of 1975. The Owner shall comply with any rules and regulations issued or
adopted by HUD under the Age Discrimination Act of 1975, 42 U.S.C. 6101 et seq. at 24 C.F.R.
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Part 146, which prohibits discrimination on the basis of age in programs and activities receiving
Federal financial assistance.
2.11 COOPERATION IN EQUAL OPPORTUNITY COMPLIANCE REVIEWS.
The Owner and the PHA (where the CA is a PHA) agree to cooperate with HUD in the conducting of
compliance reviews and complaint investigations pursuant to or permitted by all applicable civil rights
statutes, Executive Orders, and rules and regulations.
2.12 TRAINING, EMPLOYMENT AND CONTRACTING OPPORTUNITIES FOR BUSINESS AND
LOWER INCOME PERSONS. The project assisted under this Contract is subject to the requirements of
Section 3 of the Housing and Urban Development Act of 1968, 12 U.S.C. 1701u. Section 3 requires that,
to the greatest extent feasible, opportunities for training and employment be given lower-income residents
of the project area and contracts for work in connection with the project be awarded to business concerns
which are located in, or owned in substantial part by persons residing in, the area of the project.
(a) Notwithstanding any other provision of this Contract, the Owner shall carry out the provisions of
section 3 and the regulations issued by HUD as set forth in 24 CFR Part 135, and all applicable
rules and orders of HUD issued thereunder prior to the execution of this Contract. The
requirements of the regulations include, but are not limited to, development and implementation of
an affirmative action plan for utilizing business concerns located within, or owned in substantial part
by persons residing in, the area of the project; the making of a good faith effort, as defined by the
regulations, to provide training, employment, and business opportunities required by section 3; and
incorporation of the “section 3 clause” specified by section 135.120(b) of the regulations and
paragraph (d) of this section in all contracts for work in connection with the project. The Owner
certifies and agrees that it is under no contractual or other disability which would prevent it from
complying with these requirements.
(b) Compliant with the provisions of section 3, the regulations set forth in 24 CFR Part 135, and all
applicable rules and orders issued by HUD thereunder prior to the execution of this Contract, shall
be a condition of the Federal financial assistance provided to the project, binding upon the Owner,
its contractors and subcontractors, its successors and assigns. Failure to fulfill these requirements
shall subject the Owner, its contractors and subcontractors, its successors, and assigns to the
sanctions specified by this Contract, and to such sanctions as are specified by 24 CFR § 135.135
(c) The Owner shall incorporate or cause to be incorporated into any contract or subcontract for work
pursuant to this Agreement in excess of $50,000 cost, the following clause:
EMPLOYMENT OF PROJECT AREA RESIDENTS AND CONTRACTORS
A. The work to be performed under this Contract is on a project assisted
under a program providing direct Federal financial assistance from HUD
and is subject to the requirements of section 3 of the Housing and Urban
Development Act of 1968, as amended, 12 U.S.C. 1701u Section 3
requires that, to the greatest extent feasible, opportunities for training
and employment be given lower-income residents of the project area,
and contracts for work in connection with the project be awarded to
business concerns which are located in, or owned in substantial part by
persons residing in, the area of the project.

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B. The parties to this Contract will comply with the provisions of section 3
and the regulations issued pursuant thereto by HUD as set forth in 24
CFR Part 135, and all applicable rules and orders of HUD issued
thereunder prior to the execution of this Contract. The parties to this
contract certify and agree that they are under no contractual or other
disability which would prevent them from complying with these
requirements.
C. The contractor will send to each labor organization or representative of
workers with which he has a collective bargaining agreement or other
contract of understanding, if any, a notice advising the labor organization
or workers’ representative of his commitments under this section 3
clause, and will post copies of the notice in conspicuous places available
to employees and applicants for employment or training.
D. The contractor will include this section 3 clause in every subcontract for
work in connection with the project and will, at the directions of the
applicant for a recipient of Federal financial assistance, take appropriate
action pursuant to the subcontract upon a finding that the subcontractor
is in violation of regulations issued by HUD, 24 CFR Part 135. The
contractor will not subcontract with any subcontractor where it has notice
or knowledge that the latter has been found in violation of regulations
under 24 CFR Part 135, and will not let any subcontract unless the
subcontractor has first provided it with a preliminary statement of ability
to comply with the requirements of these regulations.
E. Compliance with the provisions of section 3, the regulations set forth in
24 CFR Part 135, and all applicable rules and orders of HUD issued
thereunder prior to the execution of the Housing Assistance Payments
contract, shall be a condition of the Federal financial assistance provided
to the project, binding upon the Owner, its contractors and
subcontractors, its successors, and assigns. Failure to fulfill these
requirements shall subject the Owner, its contractors and subcontractors,
its successors, and assigns to those sanctions specified by the Housing
Assistance Payments Contract and to such sanctions as are specified by
24 CFR § 135.135.
(d) The Owner agrees that it will be bound by the above section 3 clause with respect to its own
employment practices when it participates in federally assisted work.
2.13 FLOOD INSURANCE (See section 1.4 for applicability.) The Owner agrees that the
project will be covered, during the life of the property, regardless of transfer of ownership,
by flood insurance in an amount at least equal to its development or project cost (less
estimated land cost) or to the maximum limit of coverage made available with respect to
the particular type of property under the National Flood Insurance Act of 1968, whichever
is less.
2.14 REPORTS AND ACCESS TO PREMISES AND RECORDS.
(a) The Owner shall furnish any information and reports pertinent to this Contract as reasonably may be
required from time to time by HUD and the PHA (where the CA is a PHA).

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(b) The Owner shall permit HUD and the PHA (where the CA is a PHA) or any of their duly authorized
representatives to have access to the premises and, for the purpose of audit and examination, to
have access to any books, documents, papers and records of the Owner that are pertinent to
compliance with this Contract, including the verification of information pertinent to the housing
assistance payments.
2.15 DISPUTES.
(a) Private-Owner/PHA Projects.
(1) Any dispute concerning a question of fact arising under this Contract which cannot be resolved
by the PHA and the Owner may be submitted by either party to the HUD Field Office which will
promptly make a decision and furnish a written copy to the Owner and the PHA.
(2) The decision of the Field Office will not be reviewable unless, within 30 calendar days from the
date of receipt of the Field Office's determination, either party mails or otherwise furnishes to
HUD a written appeal with written justification addressed to the Secretary of Housing and Urban
Development. Both parties shall proceed diligently with the performance of the Contract and in
accordance with the decision of the Field Office pending resolution of the appeal.
(b) Private-Owner/HUD or PHA-Owner/HUD Projects. Any dispute concerning a question of fact
arising under this Contract which cannot be resolved by agreement between the HUD Field Office
and the Owner may be submitted by the Owner to the Secretary of Housing and Urban
Development. Both parties shall proceed diligently with the performance of the Contract and in
accordance with the decision of the Field Office, pending resolution of the appeal.
2.16 INTEREST OF MEMBERS, OFFICERS, OR EMPLOYEES OF PHA, MEMBERS OF LOCAL
GOVERNING BODY, OR OTHER PUBLIC OFFICIALS:
(a) No person or entity in the following clauses shall have an interest, direct or indirect, in this
Agreement or in any proceeds or benefits arising from it, during his or her tenure or for one year
thereafter.
(1) any member or officer of the PHA (where it is the CA or the Owner), except where his or her
interest is as a tenant;
(2) (i) any employee of the PHA (where it is the CA or the Owner) who formulates policy or
influences decisions with
respect to the section 8 project;
(ii) any other employee of the PHA (where it is the CA or the Owner), except where his or her
interest is as a
tenant;
(3) any member of the governing body or the executive officer of the locality (city or county) in
which the project is situated;
(4) any member of the governing body or executive officer of the locality (city or county) in which
the PHA (where it is the CA or the Owner) was activated;
(5) any other State or local public official (including State legislators), who exercise any functions or
responsibilities with respect to the section 8 project;
(6) any PHA (which is not the CA), where any of its members, officers, or employees has a
personal interest in the project, including an interest by reason of membership on the board of
the PHA which is the CA (except an employee who does not formulate policy or influence
decisions with respect to the section 8 project may have an interest as a tenant).

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(b) Members of the classes described in paragraph (a) who involuntarily acquire an interest in the
section 8 program or in a section 8 project, or who had acquired prior to the beginning of their
tenure any such interest, must disclose any interest or perspective interest to the PHA (where it is
the CA or the Owner) and the HUD Field Office, and may, with appropriate justification, if consistent
with State law, apply to the HUD Field Office (through the PHA where it is the CA) for a waiver. Any
other requests for waivers of paragraph (a) must be referred to HUD Headquarters, with appropriate
recommendations from the Field Office, for a determination of whether a waiver will be granted.
(c) No person to whom a waiver is granted shall be permitted (in his or her capacity as member of a
class described in paragraph (a)) to exercise responsibilities or functions with respect to an
Agreement or a Contract executed, or to be executed, on his or her behalf, or with respect to an
Agreement or a Contract to which this person is a party.
(d) The Owner shall insert in all contracts, subcontracts, and arrangements entered into in connection
with the project or any property included or planned to be included in the project, and shall require
its contractors and subcontractors to insert in each of the subcontracts, the provisions of paragraphs
(a) through (d).
(e) The provisions of paragraphs (a) through (d) of this section shall not apply to a utility service if the
rates are fixed or controlled by a governmental agency or applicable to the Depositary Agreement.
2.17 INTEREST OF MEMBER OR DELEGATE TO CONGRESS.
No member of or delegate to the Congress of the United States of America or resident commissioner
shall be admitted to any share or part of this Contract or to any benefits which may arise from it.
2.18 ASSIGNMENT, SALE OR FORECLOSURE.
(a) The Owner agrees that it has not made and will not make any sale, assignment, or conveyance or
transfer in any fashion, of this Contract, the Agreement, the ACC (if applicable), or the project or any
part of them or any of its interest in them, without the prior written consent of HUD. However, in the
case of an assignment as security for the purpose of obtaining financing of the project, HUD shall
consent in writing if HUD has approved the terms of the financing.
(b) The Owner agrees to notify HUD (and the PHA where it is the CA) promptly of any proposed action
covered by paragraph (a) of this section. The Owner further agrees to request the prior written
consent of HUD (and the PHA where it is the CA).
(c) (1) For purposes of this section, a sale, assignment, conveyance, or transfer includes but is not
limited to one or more
of the following:
(i) A transfer by the Owner, in whole or in part,
(ii) A transfer by a party having a substantial interest in the Owner,
(iii) Transfers by more than one party of interests aggregating a substantial interest in the
Owner,
(iv) Any other similarly significant change in the ownership of interests in the Owner, or in the
relative distribution of interests by any other method or means, and

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(v) Any refinancing by the Owner of the project.
(2) An assignment by the Owner to a limited partnership, in which no limited partner has a 25
percent or more interest and of which the Owner is the sole general partner, shall not be
considered an assignment, conveyance, or transfer. An assignment by one or more general or
limited partners of a limited partnership interest to a limited partner, who will have no more than
a 25 percent interest, shall not be considered an assignment, conveyance, or transfer.
(3) The term "substantial interest" means the interest of any general partner, any limited partner
having a 25 percent or more interest in the organization, any corporate officer or director, and
any stockholder having a 10 percent or more interest in the organization.
(d) The Owner and the party signing this Contract on behalf of the Owner represent that they have the
authority of all of the parties having ownership interests in the Owner to agree to this provision on
their behalf and to bind them with respect to it.
(e) Except where otherwise approved by HUD, this Contract, the Agreement, and the ACC (if
applicable) shall continue in effect and housing assistance payments will continue in accordance
with the terms of the Contract in the event:
(1) Of assignment, sale, or other disposition of the project or this Contract, the Agreement, or the
ACC,
(2) Of foreclosure, including foreclosure by HUD,
(3) Of assignment of the mortgage or deed in lieu of foreclosure,
(4) The PHA or HUD takes over possession, operation or ownership,
(5) The Owner prepays the mortgage.
2.19 DEFAULTS BY PHA AND/OR OWNER.
(a) Rights of Owner if PHA Defaults under Contract (for Private-Owner/PHA Projects).
(1) Events of Default. The occurrence of any of the following events, if the Owner is not in default,
is defined as a default under the ACC:
(i) If the PHA fails to perform or observe any term or condition of this Contract;
(ii) If the Contract is held to be void, voidable, or ultra vires;
(iii) If the power or right of the PHA to enter into the Contract is drawn into question in any legal
proceeding; or
(iv) If the PHA asserts or claims that the Contract is not binding upon the PHA for any such
reason.
(2) Owner Request for HUD Determination of Default. If the Owner believes that an event as
specified in paragraph (a)(1) has occurred, and the Owner is not in default, the Owner may,
within 30 days of the initial occurrence of the event:
(i) Notify HUD of the occurrence of the event;
(ii) Provide supporting evidence of the default and of the fact that the Owner is not in default;
and
(iii) Request HUD to determine whether there has been a default.
(3) HUD Determination of Default and Curing of Default. HUD, after notice to the PHA giving it a
reasonable opportunity to take corrective action, or to demonstrate that it is not in default, shall
make a determination whether the PHA is in default and whether the Owner is not in default. If
HUD determines that the PHA is in default and that the Owner is not, HUD shall take
appropriate action to require the PHA to cure the default. If necessary for the prompt
continuation of the project, HUD shall assume the PHA's rights and obligations under the
Contract, including any funds. HUD shall continue to pay annual contributions with respect to
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the units covered by this Contract in accordance with the ACC and this Contract until
reassigned to the PHA. All rights and obligations of the PHA assumed by HUD will be returned
as constituted at the time of the return: (i) when HUD is satisfied that all defaults have been
cured and that the project will thereafter be administered in accordance with all applicable
requirements, or (ii) when the Contract is at an end, whichever occurs sooner.
(4) Enforcement by Owner. The provisions of this paragraph (a) are made for the benefit of the
Owner, the lender, the PHA where it is the lender and then only in its capacity as lender, and
the Owner's other assignees, if any, who have been specifically approved by HUD prior to the
assignment. These provisions shall be enforceable by these parties against HUD by suit at law
or in equity.
(b) Rights of PHA and HUD if Owner Defaults under Contract.
(1) Events of Default. A default by the Owner under this Contract shall result if:
(i) The Owner has violated or failed to comply with any provision of, or obligation under, this
Contract or of any Lease, including failure to correct any deficiencies identified by the CA in
connection with any annual or other inspection; or
(ii) The Owner has asserted or demonstrated an intention not to perform some or all of its
obligations under this Contract or under any Lease; or
(iii) For projects with mortgages insured by HUD or loans made by HUD, the Owner has violated
or failed to comply with the regulations for the applicable insurance or loan program, with the
insured mortgage, or with the regulatory agreement; or the Owner has filed any false
statement or misrepresentation with HUD in connection with the mortgage insurance or loan.
(2) CA Determination of Default. Upon a determination by the CA that a default has occurred, the
CA shall notify the Owner and the lender, with a copy to HUD where the CA is a PHA, of
(i) The nature of the default,
(ii) The actions required to be taken and the remedies to be applied on account of the default
(including actions by the Owner and/or the lender to cure the default), and
(iii) The time within which the Owner and/or the lender shall respond with a showing that all the
required actions have been taken.
If the Owner and/or lender fail to respond or take action to the satisfaction of the CA (and HUD
where the CA is a PHA), the CA shall have the right to take corrective action to achieve
compliance, in accordance with paragraph (b)(3) or to terminate this Contract with HUD
approval, in whole or in part, or to take other corrective action to achieve compliance in its
discretion, or as directed by HUD (where the CA is a PHA).
(3) Corrective Actions. Pursuant to paragraph (b)(2) of this section the CA, in its discretion or as
directed by HUD (where the CA is a PHA), may take the following corrective actions either
directly or in conjunction with or acting through a PHA:
(i) Take possession of the project, bring any action necessary to enforce any rights of the
Owner growing out of the project operation, and operate the project in accordance with the
terms of this Contract until such time as HUD determines that the Owner is again in a
position to operate the project in accordance with this Contract. If the CA takes possession,
housing assistance payments shall continue in accordance with the Contract.
(ii) Collect all rents and charges in connection with the operation of the project and use these
funds to pay the necessary expenses of preserving the property and operating the project
and to pay the Owner's obligations under the note and mortgage or other loan documents.
(iii) Apply to any court, State or Federal, for specific performance of this Contract, for an
injunction against any violation of the Contract, for the appointment of a receiver to take over
and operate the project in accordance with the Contract, or for such other relief as may be
appropriate. These remedies are appropriate since the injury to the PHA and/or HUD arising
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from a default under any of the terms of this Contract could be irreparable and the amount of
damage would be difficult to ascertain.
(iv) Reduce or suspend housing assistance payments.
(v) Recover any overpayments.
(4) HUD Rights. (For Private-Owner/PHA projects where the PHA is the lender.)
(i) Notwithstanding any other provisions of this Contract, in the event HUD determines that the
Owner is in default of its obligations under the Contract, HUD shall have the right, after
notice to the Owner, the trustee, if any, and the PHA giving them a reasonable opportunity to
take corrective action, to proceed in accordance with paragraph (b)(3).
(ii) In the event HUD takes any action under this section, the Owner and the PHA hereby
expressly agree to recognize the rights of HUD to the same extent as if the action were
taken by the PHA. HUD shall not have the right to terminate the Contract except by
proceeding in accordance with paragraphs (b)(1), (2), and (3) of this section and with the
ACC.
(c) Remedies Not Exclusive and Non-Waiver of Remedies. The availability of any remedy under this
Contract or the ACC, where applicable, shall not preclude the exercise of any other remedy under
this Contract or the ACC or under any provisions of law, nor shall any action taken in the exercise of
any remedy be considered a waiver of any other rights or remedies. Failure to exercise any right or
remedy shall not constitute a waiver of the right to exercise that or any other right or remedy at any
time.
2.20 EXCLUSION OF THIRD PARTY RIGHTS.
(a) A Family that is eligible for housing assistance under the Contract is not a party to or a third party
beneficiary of the Contract.
(b) Nothing in the Contract shall be construed as creating any right of any third party to enforce any
provision of the Contract, or to assert any claim against HUD or the PHA (where the CA is a PHA),
under the Contract.
2.21 NO AGENCY RELATIONSHIP BETWEEN HUD AND THE PHA (WHERE THE CA IS A PHA). If
the CA is a PHA under ACC with HUD, the PHA is not the agent of HUD, and the Contract does not
create any relationship between HUD and any suppliers, employees, contractors, or subcontractors
used by the PHA to carry out functions or responsibilities in connection with administration of the
Contract under the ACC.

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