Owner Didn't Comply with HUD Rules for Charging Market Rent

Facts: A resident was required to recertify by September 1 of each year. Around May 1, 2008, the site owner gave the resident the first reminder notice, followed by a second notice on June 2, 2008, and a third notice on July 1, 2008. Then, in a letter dated July 28, 2008, the owner advised the resident that she had not yet completed recertification. The September 1 deadline passed without the resident's recertifying. In November 2008, the owner sent a final letter to the resident stating that because she failed to complete recertification by the appropriate date, the subsidy had been terminated and her new monthly rent would be $1,311.

On April 1, 2009, after several months of nonpayment, the resident recertified, and the owner subsequently gave her a written notice that her monthly rent was readjusted to $238. But on April 13, 2009, the owner served the resident with a 10-Day Notice of Proposed Termination, followed by a notice stating that the resident owed rental arrears in the amount of $6,730.

The owner sued the resident for nonpayment of rent in district court, claiming that the notices it provided to the resident complied with HUD Handbook provisions. The owner claimed that each notice contained the name and phone number of the individual the resident was to contact to recertify, and stated that the consequences for failing to respond to the reminder notices would be a termination of assistance and an increased rent. The owner claimed that these notices satisfied the HUD requirements, and that it was legally correct in adjusting the resident's rent to the market rate.

The resident argued that the owner did not technically comply with all the notice requirements in the HUD Handbook, so she was not legally bound by the owner's actions adjusting the rent.

Decision: The court sided with the resident, ruling that the owner didn't comply with the HUD Handbook's requirements, the notices were inadequate, and therefore, the owner cannot collect market rent from the resident.

Reasoning: The HUD Handbook was intended to be mandatory rather than merely advisory, the court stated. The HUD regulations are specific as to the content of the second and third reminder notices, the court noted. The second and third reminder notices must include all of the information given in the first reminder notice and must also state that if the resident doesn't respond to the owner by the specified cutoff date, the owner may suspend tenant assistance payments and increase the resident's rent to the full HUD-approved market rent, effective the first rent period commencing after the cutoff date.

The court ruled that the owner didn't fully comply with these HUD requirements. Specifically, the court stated that the owner's first and second notices failed to include the address of the site, hours of availability, and a clause stating that if the resident fails to recertify she will lose her assistance and be forced to pay market rent.

The court stated that the third notice not only failed to include those items, but also failed to specify the amount of rent the resident would be required to pay. The owner's failure to provide all the required information bars it from maintaining a nonpayment action based on the resident's failure to pay the market rent, the court concluded.

• Park Lane Residences v. Boose, March 2010