Article | RD Leases - Current Rules and Upcoming Changes

As part of a federal multi-pronged effort to address tenant rights, it was recently announced that Rural Development will be changing how RD leases will work. To understand this, we will outline how leases are currently developed, and then what changes are coming.

Current RD Leases

Unlike Multifamily HUD programs that provide a model lease that owners must use, RD has taken a different approach. The owner of an RD property is responsible for the development of the tenant lease that will be used at the property. This lease must contain the required items, provisions, and clauses outlined in Attachment 6-E of the RD Handbook HB-2-3560 and must be free of prohibited clauses listed in Attachment 6-F of the Handbook. A compilation of the primary RD Handbook RD lease provisions can be downloaded HERE. The lease must also be in compliance with state and local laws. If there are conflicting requirements between Federal, state, and local laws, the borrower must notify the Agency of the conflict and request guidance.

Once a lease is developed by the owner, the owner's attorney must certify that the lease is in compliance with the requirements of the RD regulation. Specifically, these are found at 7 CFR 3560.156. The provisions of Attachments 6-E and 6-F of the HB-2-3560 must all be included prior to the submission of the lease to the Agency for approval. The Agency must approve prior to the use of the lease. 

Note: although this ensures that the leases used will meet state and local legal requirements, it results in inconsistent leases among RD properties. For instance, the leases may not include strong federal fair housing protections in states that do not prioritize these. 

Coming Soon! An RD Model Lease - and Other Innovations

According to a recent federal announcement, USDA Rural Development will institute a broad set of actions with the goal to advance clear leases and ensure tenants can seek compliance with lease terms without facing retaliation across its portfolio of 400,000 units of multifamily rental housing. Specifically, to accomplish this, RD is taking the following steps:

• RD is developing a clear and fair lease that is similar to the model lease used in HUD Section 8 properties.
• RD will also create a tenant grievance FAQ outlining clear steps for tenants appealing a management decision and will distribute it to owners and management agents, ask for distribution to tenants, and tenant advocacy groups.
• Further, RD is working to create a Tenant Rights and Responsibilities brochure modeled after HUD Multifamily’s brochure for assisted housing residents, increasing consistency between the two agencies and clarifying Rural Development tenants’ rights and responsibilities. USDA will explore updating its regulations to require borrowers with federal credit from the department’s Rural Housing Service to utilize the brochure.

We will keep readers informed of developments on this topic. 

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