How to Comply with Updated Tenant Participation Requirements

April 15, 2016

Tenant participation has the potential to improve the overall management of a site in both quality and cost effectiveness, to protect resident interests, to create community and a social support system on-site, to empower residents as a group and individually, and to give to individual residents the opportunity to build marketable skills based on their participation. For these reasons, HUD encourages and supports tenant organizations and has implemented rules protecting the right of residents to organize and advocate for their best interests.

Tenant participation has the potential to improve the overall management of a site in both quality and cost effectiveness, to protect resident interests, to create community and a social support system on-site, to empower residents as a group and individually, and to give to individual residents the opportunity to build marketable skills based on their participation. For these reasons, HUD encourages and supports tenant organizations and has implemented rules protecting the right of residents to organize and advocate for their best interests.

The participation requirements are provided in 24 CFR Part 245 of the regulations, which require owners of privately owned, HUD-assisted multifamily housing to recognize tenant organizations. Recently, HUD’s Office of Multifamily Housing Programs issued Notice H 2016-05. The new notice restates the requirements in Notice H 2014-12, but with three changes: First, the notice adds to the list of property types that may be assessed civil monetary penalties. Second, the requirement pertaining to meeting spaces is substantially amended to address accessibility requirements. The third change clarifies the role of HUD-initiated conciliation in resolving tenant complaints.

We’ll go over applicability, the specific rights of residents and tenant organizations, the specific actions by owners and managers that are impediments to the right to organize, HUD’s enforcement process, and penalties for noncompliance.

Applicability

The tenant participation rules apply to the following sites:

HUD-insured or HUD Secretary-held mortgage under the National Housing Act. If your site has a mortgage that has received final endorsement on behalf of the HUD Secretary and is insured or held by the Secretary under Title II of the National Housing Act, and is assisted under Section 236 of the National Housing Act, the Section 221(d)(3)/(d)(5) Below Market Interest Rate (BMIR) Program, the Rent Supplement Program, or the Section 8 Loan Management Set-Aside Program (LMSA) following conversion to such assistance from the Rent Supplement Program assistance, the tenant participation rule applies.

Formerly HUD-owned sites. The rules apply if the site, before being acquired by the Secretary was assisted under Section 236 of the National Housing Act, the Section 221(d)(3)(d)(5) BMIR Program, the Rent Supplement Program, or the Section 8 LMSA Program following conversion to such assistance from assistance under the Rent Supplement Program, and was sold by the Secretary subject to a mortgage insured or held by the Secretary and includes an agreement to maintain the low- and moderate-income character of the project.

State or local housing finance agency projects. The rules apply if the site receives assistance under Section 236 of the National Housing Act or the Rent Supplement Program administered through a state or local housing finance agency, but does not have a mortgage insured under the National Housing Act or held by the Secretary.

Section 8 project-based assistance. If your site receives Section 8 project-based assistance, the rules apply. But note that this regulation does not cover tenant participation in PHAs that administer project-based assistance.

Enhanced vouchers. If your site receives enhanced vouchers under the Low-Income Housing Preservation and Resident Homeownership Act of 1990, the provisions of the Emergency Low-Income Housing Preservation Act of 1987, or the Multifamily Assisted Housing Reform and Affordability Act of 1997, as amended, the tenant participation rule applies.

Section 202. The rules apply if the site receives assistance under the Section 202 Direct Loan program or the Section 202 Supportive Housing for the Elderly Program.

Section 811. If your site provides supportive housing for people with disabilities who are very low-income under the Section 811 Supportive Housing for Persons with Disabilities Program, the rules apply.

Rule Protects ‘Legitimate Tenant Organizations’

The rule protects the right of residents to organize and operate legitimate tenant organizations “for the purpose of addressing issues relating to their living environment as well as activities related to housing and community development.” To be considered “legitimate,” an organization must:

  • Meet regularly;
  • Operate democratically;
  • Represent all residents at the site; and
  • Be completely independent of owners, management, and their representatives.

The definition of “legitimate tenant organization” includes “organizing committees” newly formed by residents, and it doesn’t require specific structures, written bylaws, elections, or resident petitions.

Protected Activities

24 CFR 245.115 identifies activities that owners and managers must allow residents and resident organizers to conduct related to the establishment or operation of a tenant organization. These activities include:

  • Distributing leaflets in lobbies, common areas, and under residents’ doors, and posting information on bulletin boards;
  • Initiating contact with residents, conducting door-to-door surveys to ascertain interest in establishing a tenant organization, and to offer information about the tenant organization;
  • Offering assistance for residents to participate in tenant organization activities; and
  • Convening tenant organization meetings on-site in a manner that’s fully independent of management representatives. To preserve the independence of tenant organizations, management representatives may not attend such meetings unless invited by the tenant organization to a specific meeting to discuss a specific issue.

Residents also have the right to formulate responses to:

  • Rent increases;
  • Partial payment of mortgagees’ claims;
  • Conversion from site-paid utilities to tenant-paid utilities;
  • A reduction in resident utility allowances;
  • Converting units to nonresidential use, cooperative housing, or condominiums;
  • Major capital additions; and
  • Loan prepayments.

Tenant Organization Meeting Space Requirements

The rule also gives tenant organizations the right to hold regularly scheduled meetings on site premises. Owners and managers of covered sites must reasonably make available the use of any community room or other available space appropriate for meetings when requested by residents or the tenant organization for activities related to the operation or establishment of the tenant organization or to collectively address issues related to their living environment.

In addition, owners must give priority to meeting spaces that provide physical access for individuals with disabilities in accordance with the regulations implementing Section 504 of the Rehabilitation Act of 1973 (Section 504) and Titles II and III of the Americans with Disabilities Act of 1990 (ADA), as applicable. All programs or activities must be held in accessible locations unless the owner can demonstrate that doing so would result in a fundamental alteration of the program or an undue financial and administrative burden. The owner must take any action that would not result in such an alteration or such burden but would ensure that individuals with disabilities receive the benefits and services of the program or activity.

Individuals with disabilities must receive services in the most integrated setting appropriate to their needs. In addition, if owners and management agents of covered projects organize or facilitate such meetings, then the owners and management agents of covered projects must take appropriate steps to ensure effective communication with individuals with disabilities through the provision of appropriate auxiliary aids and services as applicable and required by Section 504 and/or the ADA. Similarly, owners and management agents of applicable sites must make reasonable accommodations for individuals with disabilities.

The rule permits you to charge a “reasonable, customary and usual” fee, which HUD has previously approved, for the use of the space. This means that you can’t charge a higher fee to tenant organizations or charge them at all if you don’t charge other groups for the use of the space. An owner may elect to waive this fee and isn’t required to charge a HUD-approved fee. An owner doesn’t need HUD approval to waive this fee.

The process of obtaining HUD approval for a fee starts with the owner or manager submitting a request, with supporting documentation such as rates for similar areas of space from similar projects in near proximity, to charge a tenant organization/committee a reasonable fee for using space or facilities at the site. The Multifamily Hub or Program Center staff will approve the fee, if reasonable, as shown by supporting documentation. If such charges are recurring, owners and managers aren’t required to request HUD approval for each charge. Also, any HUD-approved fee must be documented in the monthly accounting reports and/or Annual Financial Statements (AFS), depending on the frequency of the charge.

Canvassing by Tenant Organizers

You must permit tenant organizers, including those who aren’t residents at the site, to help residents organize and operate a tenant organization. 24 CFR 245.125 defines a “tenant organizer” as a tenant or non-tenant who assists other tenants in establishing and operating a tenant organization, and who isn’t an employee or representative of current or prospective owners, managers, or their agents.

You may, however, require that a tenant organizer who doesn’t live at the site be accompanied by a resident, but only if your site has a written policy against canvassing and enforces it consistently. If you don’t have such a policy, or if you have a policy that permits canvassing, then you must give nonresident organizers the same access and canvassing privileges you give other nonresidents.

If you decide to have a policy, your policy should set conditions for how and when tenant organizations can canvass residents about establishing or operating a tenant organization. These may include requiring organizers who don’t live at the building to be accompanied by a resident at all times while on the premises and banning organizers from canvassing residents more than once. Although organizers have the right to canvass residents, residents also have a right to be left alone after they’ve been canvassed once.

Specific Impediments to Tenant Association Rights

HUD Handbook 4381.5 (REV-2), The Management Agent Handbook, Chapter 4, “Working with Residents,” Section 4.8d identifies specific actions by owners and managers that constitute impediments to residents and tenant associations attempting to exercise their rights. Be sure to avoid these actions when dealing with residents and tenant associations. These include:

  • Unreasonable denial of accessible meeting space to residents;
  • Repeatedly sending management representatives to resident meetings when residents have requested management not to attend;
  • Evicting, threatening to evict, withholding entitlements, or otherwise penalizing residents for organizing or asserting their rights;
  • Attempting to adversely influence resident leaders by offering individual inducements such as employment, preferential transfers, rent abatements, favored repairs, or other benefits not available to all residents at the site;
  • Attempting to form a competing tenant organization under the control of the management company or the owner; and
  • Running for office or otherwise serving as a member of the tenant organization.

Penalties

Owners, management agents, principals, or affiliates of applicable sites who violate any provision of the tenant participation regulations may be liable for one or more of the following sanctions:

Debarment: Exclusion of an individual, organization, and its affiliates from conducting business with any federal agency government-wide. Debarment is the most serious compliance sanction and is typically imposed for a three-year period.

Suspension: A temporary action with the same effect as debarment.

Limited denial of participation: This is an action that excludes a party from further participation in a certain HUD program area. The scope of this action may also be limited to a certain geographic area, and generally expires in one year.

Civil money penalties: Fines that may be imposed on owners, principals of owners, and management agents who knowingly and materially fail to comply with the tenant participation rule. By adjustment under the Federal Civil Penalties Inflation Adjustment Act of 1990, the maximum civil money penalty for each offense is currently $42,500, but the actual amount of the penalty is determined by applying the factors listed in 24 CFR Section 30.80.

These include, among other things, the gravity of the offense, the owner’s history of prior offenses, injury to the public resulting from the violations, the owner’s culpability for the violations, and the owner’s ability to pay the penalty. The most recent HUD notice points out that these civil money penalties may be imposed in relation to non-insured properties that have a project-based Section 8 contract that has been renewed under Multifamily Assisted Housing Reform and Affordability Act of 1997.

Enforcement Process

A tenant or tenant organization may file a written complaint with the local HUD office, with copies to the owner/management agent, alleging a consistent pattern of violations of HUD program requirements or the written complaint may cite a single violation describing conditions that cause serious injury to tenants or the public.

According to HUD, the Regional or Satellite Office Director must attempt to bring the parties together to endeavor to achieve conciliation with respect to every tenant complaint. If both parties agree to participate in a conciliation process and are able to reach an agreement that would correct the alleged violations, they will execute a conciliation agreement outlining the terms for such correction. The Regional or Satellite Office Director will approve and sign the agreement but only if it thoroughly ensures that the conditions or circumstances underlying the tenant complaints have been addressed. If either party breaches the agreement, the Regional or Satellite Office Director can reopen the case and pursue enforcement action.

HUD notes that the choice to participate in conciliation is voluntary on the part of both parties. If either party refuses to participate in conciliation, or if the conciliation effort does not result in a mutually acceptable agreement, the Regional or Satellite Office Director will conduct a thorough investigation into the alleged violations. If, upon completion of the investigation, he or she finds no reasonable cause to believe that a violation has occurred, the Regional or Satellite Office Director will issue a determination of “no reasonable cause” and close the case.

However, if, after conducting a thorough investigation, the Regional or Satellite Office Director determines that the owner has committed one or more violations of the tenant participation requirements, the Regional or Satellite Office Director will provide written notice of the violations to the owner. The notice will describe the violations and direct the owner to correct them within 30 days. If the applicable regulatory agreement and/or HAP contract requires the owner to provide management for the project that is acceptable to HUD, the Regional or Satellite Office Director’s notice will further inform the owner that its violations constitute unacceptable management and, therefore, are also violations of the regulatory agreement and/ or the HAP contract.

If the owner fails to respond, or the response does not satisfactorily address the violations alleged in the Regional or Satellite Office Director’s letter, then an elective referral will be sent by the Regional or Satellite Office Director or designee to the Department Enforcement Center (DEC), and the owner will be flagged in the Active Partners Participation System (APPS).

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