The Trainer

SPECIAL CLAIMS

Our feature article this month, “Make Residents Clean Units That Fail Inspection,” discusses what you, as a site owner or manager, can do when residents don't keep their units clean while living at your site. But what happens when residents move out, leaving you with a mess to clean up? How can you recover damages and unpaid rent from HUD?

HUD's Special Claims Processing Guide addresses these questions. Apart from the checklists, the Guide offers two significant benefits to site owners and managers. First, an owner can now file a special claim for unpaid rent/damages, even if the owner was unable to collect a resident's entire security deposit. Second, an owner can file special claims for existing market-rate residents whose assistance was terminated in compliance with HUD Handbook 4350.3, Rev. 1.

PRACTICAL POINTER: HUD's Special Claims Processing Guide took effect in August 2006. The guide tells site owners how to apply to HUD to recover costs for special claims, which include claims for unpaid rent and resident damages. For background information, see “HUD Issues New Special Claims Processing Guide” in the October 2006 issue of the Insider, p. 8.

Filing Claim for Unpaid Rent/Damages

The Guide lets owners file a claim for unpaid rent/damages, even if they haven't collected the “maximum allowable” security deposit, as previously required [Handbook 4350.3, Rev-1, par. 9-14 B]. However, an owner will forfeit any security deposit that's not collected (which is a good reason to make sure residents pay up in advance). But the Guide did not change HUD's special claims form, which groups together unpaid rent and damages to the unit.

Proving You Tried to Collect Debt

The Guide makes it a little harder to prove that you tried to collect the debt. Prior to the release of the Guide, HUD would reimburse a claim for unpaid rent/damages if you could show that you took “reasonable steps” to collect the debt [Handbook 4350.3, par. 9-14(B)(4)(b)(2)]. Those steps included informing the household that if it didn't pay the debt, you would turn the matter over to a collection agency. And you had to give HUD a receipt from the collection agency as proof that you had turned over the debt. But now, according to the Guide's sample checklist in the section on “Unpaid Rent/Damages,” you must provide a copy of the letter the collection agency sends to the household, seeking to collect the debt.

Filing Claim When Household No Longer Gets Assistance

Prior to the release of the Guide, you were prohibited from filing a claim if the resident wasn't getting assistance. But the Guide says that if you terminate a household for “other good cause—that is, for an income increase or a regulatory violation, and you terminate the household's assistance, you can file a claim for unpaid rent/damages. This is true even after assistance has been terminated. The Guide outlines a procedure for filing a claim even when the resident isn't receiving assistance.

Filing Special Claim for Vacancy

You can also file a special claim for a unit's vacancy once a resident moves out. If HUD accepts your special claim, it will pay the subsidy portion on your vacant unit even if the resident was living at another assisted site during that period. However, HUD will not pay you the subsidy portion at the same rate that it would have if the resident had remained in your unit. HUD will pay you at the rate of 80 percent of the contract rent, beginning on the date that the unit becomes available for reoccupancy. This vacancy payment will be only 50 percent of contract rent for Section 202 and 811 PRAC properties, and for a maximum of 60 days’ rent. Owners may not submit a special claim for vacancy until after the claim period has ended, and they must submit the claim within 180 days of the unit's availability date.

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

The site manager tells you that the Jones household moved out, leaving unpaid rent and damages to the unit. He says that the 2006 Special Claims Processing Guide requires him to submit a separate form for the unpaid rent and another form for damages to the unit left by the Joneses. Is he correct?

1. Yes.

2. No.

Question #2

The Jones household's starting total tenant payment (TTP) was $225, with a security deposit equal to one month's TTP (also $225). The owner agreed to accept an initial payment of $100 on the Joneses’ security deposit and to collect the balance in future installments of $25 per month. But the Joneses never paid off the balance, and vacated their unit without paying the last month's rent. The owner may file a claim for unpaid rent/damages, even though he didn't collect the entire amount of the security deposit. True or false?

1. True.

2. False.

Question #3

Assuming that the owner files for unpaid rent/damages, HUD will reimburse him the entire amount of unpaid rent owed to him by the Joneses. True or false?

1. True.

2. False.

Question #4

In the Jones’ example above, HUD is liable only for the amount of unpaid rent and resident damages to the unit minus the remaining maximum allowable security deposit. True or false?

1. True.

2. False.

Question #5

After the Joneses move out and the unit becomes available, the owner has up to a year to file a special claim for vacancy with HUD. True or false?

1. True.

2. False.