PHA Not Liable for Unpaid Subsidy Payments

Facts: Under a housing assistance payments (HAP) contract with a site owner, a local PHA is barred from making a monthly Section 8 payment to the owner for a unit that doesn’t meet the minimum housing quality standards (HQS) established by federal law. During the inspection of one of the owner’s units on Oct. 18, 2010, the PHA identified four “serious” HQS violations: (1) the living room window didn’t stay up; (2) large holes were found in the kitchen wall; (3) the handle of the kitchen faucet was either nonfunctioning or missing; and (4) severe mildew/mold was found in the bathroom.

Upon receiving notice of the failed inspection, the owner claimed that it took prompt action to correct the conditions and that on Nov. 1, 2010, it faxed to the PHA a copy of the Certification of Completed Repairs in which one of its representatives certified that the “life threatening and/or other serious HQS violations” were corrected on Oct. 29, 2010. The “Tenant Certifications” section was left blank, and a note attached to the Certification indicated that the “work is done [but the] tenant refuses to sign.” At the top of the Certification, a “reinspection date” was listed as Nov. 12, 2010.

The PHA suspended its Section 8 payments to the owner for the unit as of Nov. 30, 2010. When the owner’s staff asked why the subsidy hadn’t been reinstated even though the Certification of Completed Repairs was turned in, the PHA responded that the subsidy would be reinstated only upon a satisfactory inspection of the unit. But according to the owner, the PHA didn’t reinspect the unit until April 11, 2011. At the April 11, 2011, inspection, PHA staff once again identified several “serious” HQS violations.

The owner sued the PHA for unpaid Section 8 rent subsidies for the period of December 2010 to December 2011. The PHA asked the court to dismiss the case because the owner initiated the lawsuit after the four-month time limit to file a complaint.

Ruling: A New York court agreed with the PHA and dismissed the owner’s complaint.

Reasoning: There was no dispute between the parties as to the information provided to the owner in the notice of failed inspection: that if both the owner and the tenant certified that the repairs had been made within 20 days, then payments wouldn’t be suspended. But if the owner certified that repairs had been made but the tenant did not, then the PHA would have to reinspect the unit. Because the tenant didn’t sign the certification and the PHA hadn’t yet reinspected the unit, the payments were suspended as of Dec. 1, 2010.

The time to file a lawsuit began to run when the PHA suspended the owner’s Section 8 payments, just as the owner had been warned would happen by the notice. Since the owner didn’t file a complaint within four months, the law prevents the court from hearing the case.

• 193 Realty, LCC v. New York City Housing Authority, September 2012