Gather Necessary Documents to Ensure Smooth Management Transition

Taking over the management of an assisted site from its owner or from another management company is a tricky procedure. Unlike at conventional sites, there are many compliance issues at assisted sites that can complicate the transition. You need to get up to speed quickly on how the site is regulated and operated, says management consultant Doug Chasick. And you'll need to show HUD that you know what you're doing, so you can get HUD approval to manage the site.

Taking over the management of an assisted site from its owner or from another management company is a tricky procedure. Unlike at conventional sites, there are many compliance issues at assisted sites that can complicate the transition. You need to get up to speed quickly on how the site is regulated and operated, says management consultant Doug Chasick. And you'll need to show HUD that you know what you're doing, so you can get HUD approval to manage the site.

To manage the site successfully, you need to collect as much documentation as possible, says Chasick. But although you know it's crucial to get off to a good start, it's easy at this busy time to forget to ask for some of the things you'll need.

To help you, we've listed the documents to ask for when taking over a site. We also tell you what to look for in those documents to help you know what's required before you take over the site.

What Documents to Collect

When collecting documents, get everything that the owner or outgoing manager has to give you, says Robert Massey Jr., owner of a Kentucky management company. “If the manager has 10 years of records, take them all,” he says. You can decide later what to keep and what to throw away. In the beginning, the more information you have, the better. Here's what to request:


[ ] Regulatory agreement. This is the agreement signed by the site's owner and HUD that sets out the requirements for operating as a HUD-regulated site. It's used for sites financed under a HUD-insured mortgage program, such as Section 236, and for sites financed under a direct loan or capital advance program, such as Section 202 or 811. The agreement addresses, among other things: the owner's administrative, financial, and reporting requirements; eligibility restrictions; sale and transfer restrictions; security deposit and other special account requirements; and the owner's duty to comply with all HUD rules.


[ ] Housing assistance payments (HAP) contract. HUD uses the HAP contract to regulate all sites that get Section 8 subsidies. The HAP contract spells out the duties of the owner and the contract administrator. For example, it specifies the number of units HUD has agreed to assist, the rules for billing HUD for rent subsidies and vacant units, and the procedures for admitting residents. The HAP contract also requires the owner to comply with nondiscrimination and other federal laws.

The contract includes a rent schedule, which spells out the contract rents and utility allowances and any permitted extra charges, like those for parking or cable. It's important to note that a site may be subject to both a regulatory agreement and a HAP contract if it gets both Section 8 subsidies and other HUD financing.


[ ] Mortgage documentation. If the site is financed with a HUD-insured or other mortgage, you need to get the mortgage documentation. This includes the notes, mortgages, and building loan agreements. These agreements outline the owner's responsibilities to the lender. They may also contain restrictions and reporting requirements beyond those in the regulatory agreement.


[ ] Other funding documentation. Your site may also be getting financial assistance from other government housing programs or other lenders. Or it may be getting grants or tax credits such as the HOME Investment Partnership, the Rural Development 515 programs, Community Development Block Grants, and Low-Income Housing Tax Credits. Be sure to familiarize yourself with what these programs require. If your site fails to meet them, you risk losing the funding the site relies on.

For example, the tax credit program has different—even conflicting—eligibility requirements from the Section 8 program. So make sure you comply with the strictest program rules.


[ ] Affirmative fair housing marketing plan (Form HUD 935.2). The HAP contract requires sites to market their units in accordance with an “affirmative fair housing marketing plan.” The plan, which is prepared by the owner and approved by HUD, describes how the owner will market the site—for example, newspaper ads, brochures, or community contacts. The owner must make efforts to reach all segments of the eligible population, including those least likely to know about or apply for housing at the site.


[ ] Resident files. Each unit should have a file containing the current resident's lease, any riders or amendments, all certification paperwork, copies of any written complaints from or about residents, and records of any lease violations. When reviewing these documents, make sure to check:

  • That all initial certifications and any interim and annual recertifications were performed on time and include all necessary verifications. If you find any incomplete or inaccurate certifications, correct them before HUD audits the site and requires the owner to repay any excess assistance;

  • That all the documents are properly signed and dated;

  • That the amounts that residents are paying—and that the site has been billing HUD for—match not only the amounts on the leases, but the amounts that HUD's rent schedule and Form 50059 say they should be paying; and

  • Whether any residents have caused problems in the past and what, if anything, the owner or outgoing manager has done about them. For instance, a file may indicate that a resident has been the subject of several noise complaints by other residents, but doesn't show that any action was taken against the resident. Ask the owner or outgoing manager why.


[ ] Rent roll. The rent roll is a status report for each unit, explains Chasick. It should state, for each unit: the unit's address; specific type of unit, which includes information about layout and number of bedrooms and bathrooms; the names of the residents; the starting and ending dates of the current lease; the monthly rent; any additional monthly fees; and the amount of the security and other deposits that residents paid.


[ ] Payment receipt ledger. A site's payment receipt ledger contains records of all payments that residents have made. The ledger may be on a spreadsheet or in a software program. If it resides in a program, be sure to obtain backup hard copies and download any data files associated with the software.

Review it carefully to make sure that it matches the rent rolls, says Massey. The comparison will tell you if someone is paying less than he owes. Comparing the payment receipt ledger with the rent roll will give you a good idea of how well the building is run and whether any residents have had significant payment problems.


[ ] House rules and policies. Assisted sites are required to have written policies addressing such important matters as rental criteria, fair housing, pets and assistance animals, eviction procedures, and how to handle troublemakers. You need to become familiar with these policies so that you'll know what the residents expect from you.

You may be able to change these policies later on, but you need to start with what's currently in force. Also, there may be good policies that have not been enforced. You'll need to notify the residents that you'll start enforcing them, says Massey.


[ ] Security deposit records. These records show how much each resident paid and where the deposits are kept, says Massey. For residents who have moved out recently, the resident files should indicate how much of the deposit you must return, where to send it, and how soon you must send it.

It's important to make sure that these records show that the site has complied with HUD security deposit rules spelled out in the regulatory agreement and the HUD Handbook.


[ ] Reasonable accommodation and modification records. Federal fair housing law and HUD rules require owners of assisted sites to consider all requests that residents and applicants with disabilities make for reasonable accommodations and modifications. Get all files containing these requests, including the verification of any disability and need for the accommodation. Also, make sure there's documentation of why the request was granted or denied. You'll need them if an applicant or resident whose request was denied files a complaint with HUD or sues the site for discrimination.


[ ] Litigation files and records. The site may have had to evict residents in the past or had other sorts of legal trouble, such as fair housing complaints or police activity. Get the files for all such cases. If there are any current cases, you'll also need to meet with the attorneys handling them.


[ ] Physical inspection records. An assisted site undergoes several physical inspections from different sources. For example, HUD, the lender, and local or state agencies may each have inspected the site. Get the inspection records for the site going back as many years as possible. The reports can tell you if there are any outstanding inspection findings you'll need to address, the reasons for a decline in physical condition, and where problems tend to occur.


[ ] Maintenance records. You'll need to know what condition the units and their fixtures are in, so get any maintenance records that may exist. They will tell you how much money you can expect to spend on maintaining the building. They'll also tell you if any maintenance work is overdue.

When you review the maintenance records, make sure that they include copies of the manuals and warranties for any appliances or machinery at the building, says Massey. That includes dishwashers, refrigerators, ovens, stoves, HVAC systems, security systems, and anything else that might break down. You'll need the records in case equipment does break down.


[ ] Lead-based paint compliance records. In addition to complying with the same lead paint requirements as conventional sites, assisted sites must comply with HUD lead paint requirements that vary depending on the type of financing and amount of assistance the site gets. Get all records of compliance with these requirements, including all disclosures and notices, the results of lead paint inspections or assessments, records of abatement and other interim controls, and copies of any violations.


[ ] Vendor lists and agreements. The building you're taking over may have service contracts or other relationships with vendors and contractors. You need copies of any such contracts or correspondence. They will tell you who you're dealing with and what your agreements are.


[ ] Utility agreements and records. The site should have copies of its agreements with utility providers, such as electric, gas, water, and trash-hauling companies. Get those agreements and any records showing usage—and prices—in past years, says Chasick. Review these soon after you take over management of the building, and see whether there's any room for cost savings.

For resident-paid utilities, you'll need to review current rates to make sure that the existing utility allowance covers the cost to the resident. If residents can't pay their utilities, the utility company may shut off service, which can lead to dangerous conditions. For example, a resident may cause a fire by using a makeshift stove, candles for light, or the oven for heat.


[ ] Traffic reports. Traffic reports should tell you how many inquiries there have been for the site's units, when they were made, what percentage of those inquiries turned into actual leases, and what the sources of the inquiries were—such as government agencies, churches, or local employers. “Good traffic reports can tell you when the building is busy and when times are slow, how good the staff is at closing leases, and which advertising efforts are paying off,” says Chasick. Comparing traffic reports compiled over the past few months or years will give you a good sense of market trends in the area. If the building doesn't have a consolidated traffic report, get whatever related information you can.


[ ] Advertising records. The owner or outgoing manager should have records of recent advertising efforts. Find out how the owner or manager is advertising, where, how much it costs, how many new leases each ad generated, and the cost per lease. You'll need this information to plan your own advertising campaign. And be sure that the advertising is consistent with the promises the site made in the affirmative fair housing marketing plan.


[ ] Insurance policies. You should require in your contract with the owner that you be named as an additional insured on the owner's insurance policy, says Massey. Get a copy of the site's insurance policies and make sure that the owner has done this. If you're not named, have the owner call its insurance broker and have you named before you begin managing the site.

Also, review the insurance policies to make sure that the site has enough coverage. HUD rules, as well as the regulatory agreements, mortgage documentation, and HAP contract require sites to maintain certain types of insurance. For example, many sites must maintain a specific level of flood insurance. Make sure the site is meeting those insurance requirements.

If you think that the site is underinsured, send the owner and its insurance broker a letter saying so. But don't recommend anything. “If you recommend a certain amount of coverage that turns out to be inadequate to cover a loss, you could be liable for the difference,” says Massey. So don't get involved. If you're not comfortable with the building's coverage, you should reconsider your decision to manage the site, he says.


[ ] Property tax assessments. The owner or outgoing manager should have copies of the site's past tax assessments. Tax assessors frequently overvalue assisted sites because they mistakenly assume that an assisted site's value is similar to that of conventional, unsubsidized sites in the area. But, unlike conventional sites, assisted sites have regulatory restrictions on eligibility, rent, and other factors that affect their income and marketability. If your site has been overvalued, you may want to speak with an attorney about challenging the assessment.


[ ] Landscape and unit layout drawings. Get diagrams of the units, buildings, and property grounds showing the size and number of units, gross and rentable square footage, and amount of land in acres. These diagrams should also show the location of all utility cutoffs and mains. You'll need the unit diagrams both for your marketing efforts and for any modifications you intend to make, says Chasick. You'll need the landscape diagrams if you plan any landscaping or exterior repairs. Also, find out which, if any, units have handicap-accessible modifications.


[ ] Comprehensive needs assessment. Most sites with HUD-insured mortgages, as well as Section 202 sites, have had to submit comprehensive needs assessments (CNAs) to HUD. The CNA analyzes the site's capital needs and estimates repair costs over the next 20 years. It also describes the site's current and future financial, management, social service, and security needs and the financial resources available to meet those needs—such as HUD, state and local governments, and private organizations. Reading the CNA is a great way to get an overall view of the job you'll be facing when you take over the site.


[ ] Payroll and employee data. Get complete employment-related records for all site employees who stayed on after the previous management agent left. If the employees belong to any unions, get copies of any union contracts and any other related paperwork.


[ ] Emergency phone number list. You should keep in several places at the site—and at home—a list of the phone numbers you'll need in an emergency, says Chasick. This includes numbers not only for police, fire, and ambulance services, but also for emergency contractors, such as plumbers and electricians. The site should already have such a list. If it doesn't, make one right away.

Insider Sources

Doug Chasick, CPM: The Apartment Doctor, 180 Heron Dr., Melbourne Beach, FL 32591;

Robert Massey Jr., CPM: President, Robert Massey Co., 2101 Wrocklage Ave., Louisville, KY 40205;