Q & A | Apply New Criminal Standards at LIHTC Rehab at a HUD Property?
Sep 21, 2022
Question from a Blog Reader
"Thank you for your answer to my question HERE. I am happy to report that the owner has decided not to evict residents on HUD leases who do not qualify for the new tax credits at our HUD/LIHTC acquisition/rehab and has determined to provide financial incentives. He is also including URA provision-related payments to the households. I cannot believe how much this costs! I am sure the penalties would have been worse for violating the rules, though. He just wants me to ask one more question. We want to apply new criminal background checks that we use at other LIHTC properties, but that the former owner did not apply to this property. Some of our residents will not qualify, and the owner again thinks that we should give them notice to vacate their units. What should we do?"
Answer
Summary: You will have to follow the HUD process if you propose to change the rules and cannot just evict existing residents for not meeting the new criminal background standards.
The same HUD Memo that we cited in the last Q & A also covers this issue. The restriction against evicting households who qualify for HUD units but do not qualify for tax credits at the acquisition of a HUD property also covers any proposed termination for criminal activity, which generally is limited to specified activity during the term of the lease or where an owner discovers there was fraud in the application process. Owners may conduct criminal background checks on existing tenants at recertification for lease enforcement or eviction, but only if permitted by house rules or any legally adopted changes to them. The evictions related to house rule provisions are detailed in the HUD Handbook 4350.3, Chapter 8.
However, in this case, this practice constitutes a change to the existing house rules. The owner must first notify tenants who have completed their initial lease terms, 30 days prior to implementation, of the modifications to the house rules. Notification is accomplished by forwarding a copy of the revised house rules to existing tenants. For those tenants who have not yet completed their initial lease terms, the owner must provide 60 days' notice, prior to the end of their lease terms, of the change in the house rules. In any case, simply evicting households who do not qualify for new criminal background checks is not allowed. At least 30 days (if their initial year lease term is up) or to the end to their lease (if in the first year), must be allowed, and proper 30 or 60 day needs to be given.
Link to Chapter 8 of the HUD Handbook the HUD Memo is below.
HUD Handbook 4350.3, Chapter 8.
HUD Memo on protections for HUD-assisted households in properties with LIHTCs.
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