Avoid Penalties by Complying with "Tenant Participation Rule"

December 24, 2013

HUD has issued two notices in the past three years that outline the penalties that owners or managers of HUD-assisted sites may face if they violate tenant participation requirements. HUD’s tenant participation rule requires certain owners to let organizers canvass residents and allow them to establish and operate tenant organizations. In fact, according to the Code of Federal Regulations, HUD’s policy is to promote resident participation and the active involvement of residents in all aspects of a housing authority’s mission and operation (24 CFR 964.11).

HUD has issued two notices in the past three years that outline the penalties that owners or managers of HUD-assisted sites may face if they violate tenant participation requirements. HUD’s tenant participation rule requires certain owners to let organizers canvass residents and allow them to establish and operate tenant organizations. In fact, according to the Code of Federal Regulations, HUD’s policy is to promote resident participation and the active involvement of residents in all aspects of a housing authority’s mission and operation (24 CFR 964.11). Residents have a right to organize and elect a resident council to represent their interests. HUD’s last notice on the topic, Notice H 2012-21, was issued on Oct. 17, 2012, and it doesn’t have an expiration date. It remains in effect until it’s amended, superseded, or rescinded.

The participation requirements are provided in 24 CFR Part 245 of the regulations, which pertain to residents at sites assisted by project-based Section 8, Section 202, Section 811, and various other older programs. Part 245 doesn’t pertain to public housing or Housing Choice Vouchers. If the tenant participation rules apply to your site, it’s important to know how to comply with the rules because the penalties are stiff.

The most severe penalty is debarment, which is exclusion from conducting business with any federal agency, typically for three years. A suspension is similar to debarment, but for a shorter period of time. Another possible penalty is a Limited Denial of Participation, which is exclusion from participating in a specific HUD program area, generally for one year. In addition, HUD may levy a fine of up to $37,500 for each offense. The actual amount will depend on a variety of factors, such as the gravity of the offense, an owner’s history of prior offenses, the degree of injury to the public, and the owner’s ability to pay.

To help you know what you may and may not do when dealing with tenant organizations, we’ll go over the specific rights of residents and tenant organizations and specific actions by owners and managers that are impediments to the right to organize.

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 Meetings

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, these meeting spaces must be accessible to persons with disabilities, unless this is impractical for reasons beyond the owner or manager’s control.

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.

Editor’s Note: 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.

 

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