The Trainer

March 6, 2012

ITEMIZING DEDUCTIONS FROM SECURITY DEPOSITS; COMPLYING WITH NEW HUD REGS

In this month's feature, we discussed how to withhold all or part of a security deposit to repair damage caused by the departing resident. If you don't itemize your deductions from the security deposit properly, HUD or a court may find that you wrongfully withheld money, and charge you penalties and interest.

ITEMIZING DEDUCTIONS FROM SECURITY DEPOSITS; COMPLYING WITH NEW HUD REGS

In this month's feature, we discussed how to withhold all or part of a security deposit to repair damage caused by the departing resident. If you don't itemize your deductions from the security deposit properly, HUD or a court may find that you wrongfully withheld money, and charge you penalties and interest. And if you repeatedly fail to comply with HUD rules regarding security deposits, you could violate your HAP contract or regulatory agreement, and may even lose your right to participate in HUD programs.

This month we also discussed HUD's new regulations banning discrimination based on sexual orientation or gender identity in HUD-assisted housing programs. The new rules go into effect March 5.

TRAINER'S QUIZ

INSTRUCTIONS: Each of the questions below has only one correct answer. On a separate sheet of paper, write down the number of each question, followed by the answer you have chosen—for example, (1) b, (2) a, and so on. The correct answers (with explanations) follow the quiz. Good luck!

QUESTION #1

As long as you properly document a unit's condition at the move-out inspection, you don't have to allow the resident to accompany you during the inspection. True or false?

  1. True.

  2. False.

QUESTION #2

As long as you provide a detailed itemization of the repair work you had done to the unit, you won't need any other documentation of the damage. True or false?

  1. True.

  2. False.

QUESTION #3

The itemization you give the resident may not include an estimate of the repair or replacement cost—it must list the actual cost. True or false?

  1. True.

  2. False.

QUESTION #4

Even if your security deposit deductions are legitimate, if you don't inform the resident that she has the right to discuss any disagreements she has with your deductions, she'll be entitled to a refund of the full security deposit, plus interest. True or false?

  1. True.

  2. False.

QUESTION #5

When a household's rent increases, you should ask the household for an increased security deposit as well. True or false?

  1. True.

  2. False.

QUESTION #6

The new HUD rules banning discrimination based on sexual orientation and gender identity apply only to applicants, not their household members. True or false?

  1. True.

  2. False.

QUESTION #7

You may not ask applicants about their sexual orientation or gender identity. True or false?

  1. True.

  2. False.

QUESTION #8

HUD's new rule may require you to revise site forms and policies. True or false?

  1. True.

  2. False.

Click To Show/Hide The Quiz Answers

 

ANSWERS & EXPLANATIONS

QUESTION #1

Correct answer: b

False. According HUD Handbook 4350.3, paragraph 6-29(D)(1), a resident who wants to attend the move-out inspection must be allowed to do so. Encouraging residents to attend is a good practice, because you may be able to resolve any disagreements about unit damage up front, without going to court. But if a resident doesn't want to participate, you may do the inspection alone.

QUESTION #2

Correct answer: b

False. In case a resident disputes your decision to withhold part of his security deposit, it's a good practice to document the damage in the resident's unit by taking photographs of the damage and collecting maintenance staff work orders and/or invoices from contractors for repairing the damage.

QUESTION #3

Correct answer: b

False. The itemization may include an estimate of the “reasonable” cost of repair or replacement—in other words, the cost must be based on the going rate for similar repairs or replacements. If it's not, and a resident challenges your estimate, a court may disallow the deduction.

QUESTION #4

Correct answer: a

True. According to HUD Handbook 4350.3, paragraph 6-18(D), if you don't inform the resident of her right to meet with you—or if you don't meet with a resident who wants to meet—you'll have to return the entire security deposit, plus interest.

QUESTION #5

Correct answer: b

False. According to HUD Handbook 4350.3, paragraph 6-15(D), the security deposit for a unit is set when the household moves in, and you can't later adjust the security deposit upward simply because the contract rent for the unit increases. However, if a household transfers to another unit, you may close out the old security deposit on your books, after making any appropriate deduction and refund, and then collect a new deposit appropriate to the new unit.

QUESTION #6

Correct answer: b

False. The final rule clarifies that families who are otherwise eligible for HUD programs may not be excluded because one or more members of the family may be lesbian, gay, bisexual, or transgender (LGBT) or perceived to be LGBT or have an LGBT relationship.

QUESTION #7

Correct answer: a

True. However, HUD has clarified that the new rule doesn't ban voluntary and anonymous reporting of sexual orientation or gender identity pursuant to state, local, or federal data collection requirements.

QUESTION #8

Correct answer: a

True. You should review your tenant selection plan, in particular, to make sure it includes sexual orientation and gender identity in its nondiscrimination statement. If your site is in one of the many states or municipalities that already have laws specifically prohibiting housing discrimination against LGBT individuals, your site's forms and policies may already comply with the new HUD rule, and you may not need to revise them.

See The Lesson For This Quiz

Follow HUD Rules When Itemizing Deductions from Security Deposit
New HUD Regs Ban LGBT Discrimination

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