Sec. 2188.7. Procedures for monitoring of projects

(a) With respect to each project to which the agency has allocated or allowed LIHTC, the owner of the project shall be required to execute a regulatory agreement, which outlines the program requirements. The regulatory agreement will be recorded as a restrictive covenant binding all subsequent owners and managing agents of the project.

(b) LIHTC monitoring officer.

All HFA administrative functions related to the operation of qualified low-income buildings shall be the responsibility of the monitoring officer who, unless otherwise designated by the commissioner/CEO, shall be the senior vice president for statewide asset management. The monitoring officer will be responsible for enforcing all regulatory agreements and reporting noncompliance to the IRS. All correspondence and/or legal notices should be addressed to the attention of the low-income housing monitoring officer at HFA’s Office of Housing Operations/Statewide Asset Management.

(c) Section 42(m)(l)(B)(iii) of the code mandates that State housing credit agencies monitor all placed in service tax credit developments for compliance with the provision of section 42. The code also mandates that the State housing credit agencies notify the Internal Revenue Service of any instance of noncompliance through the issuance of IRS form 8823. Although the agency is responsible for monitoring the owner's compliance with the code, it is expressly understood that this responsibility does not and will not make the agency liable in any manner whatsoever for any noncompliance by the owner.

(d) Monitoring fees:

(1) a reasonable annual monitoring fee will be charged by the agency and will vary depending on the type and size of the project;

(2) the monitoring fee for any project financed by HFA shall be included in the agency's normal financing servicing fee for the applicable financing program as specified in the appropriate financing documents; and

(3) if HFA does not provide permanent financing to a project for which it allocates LIHTC, or if the permanent financing of a project is prepaid, or the agency otherwise is no longer entitled to a fee for servicing such financing, the agency shall charge a monitoring fee based on the agency's estimate of the costs associated with monitoring the project. The agency reserves the right to adjust monitoring fees based on administrative or other cost increases to monitor overall compliance.

(e) Required staff training:

(1) the agency mandates applicants to require management staff administering any project which may receive an allocation of LIHTC to complete a certification program from an entity acceptable to the agency on low income housing tax credit compliance before the project is placed in service; and

(2) all project management plans must include a requirement that appropriate staff administering any project containing low income units shall receive training and certification at the commencement of employment and refresher training in LIHTC compliance as necessary, not less than every five years.

(f) Recordkeeping and record retention.

(1) Recordkeeping. The regulatory agreement shall provide that the owner of the project is required to keep records for each building with respect to which LIHTC has been allocated or allowed that show for each year in the compliance period (as defined in code section 42[i][l]):

(i) the total number of residential rental units in each building (including the number of bedrooms and the size in square feet of each residential rental unit);

(ii) the percentage of residential rental units in each building that are low income units (as defined in code section 42[i][3]);

(iii) the rent charged on each residential rental unit in each building (including any utility allowances);

(iv) the low income units vacancies in each building and information that shows when, and to whom, the next such available units were rented;

(v) the annual income certification and recertification of each tenant of a low income unit in the project if a waiver has not been granted under subdivision (h) of this section;

(vi) documentation to support the income certification and recertification made by each tenant of a low income unit (for example, a copy of the tenant's Federal income tax return, form W-2, or verifications of income from third parties such as employers or State agencies paying unemployment compensation), in accordance with section l.42-5(b)(l)(vii) of the applicable IRS regulations;

(vii) the eligible basis (as defined in code section 42[d]) and the qualified basis (as defined in code section 42[c]) of each building, at the end of the first year of the credit period (as defined in code section 42[f][l]), the placed in service date of each building, the applicable fraction chart for each building, list of services and amenities offered to all residential tenants with corresponding fee charges, if any, and a copy of the IRS form 8609;

(viii) the character and use of the nonresidential portion of the building included in the building's eligible basis;

(ix) in a format acceptable to the agency, the data elements specified by the agency, that are necessary for the agency to meet its reporting requirements under section 36, Collection of Information on Tenants in Tax Credit Projects, of title 1 of the United State Housing Act of 1937; and

(x) such other information as the agency may reasonably request from time to time.

(2) Record retention. The regulatory agreement shall provide that the owner of the project shall retain the foregoing records for at least six years after the due date (including any extensions for any filings required to be made by the owner with the Internal Revenue Service or its successor agency) for that year, except that the records for the first year of the credit period shall be retained for at least six years after the due date (including any extensions for any filings required to be made by the owner with the Internal Revenue Service or its successor agency) for the last year of the compliance period.

(3) Inspection record retention. The regulatory agreement shall provide that the owner of the project shall retain the original local health, safety, or building code violation reports or notices that were issued by the State or local government unit responsible for making local health, safety, or building code inspections for the agency's inspection under subdivision (i) of this section. Retention of the original violation reports or notices is required until the later of when the agency reviews the violation reports or notices and completes its inspection under subdivision (i) of this section or when the violation is corrected.

(g) Certification, inspection and review.

(1) Certification period. Annual certifications shall be submitted for all projects for which final credit allocation has been issued and shall be submitted annually for the period during which the project is subject to regulation under the code. The owner of a low-income housing project shall certify annually under the penalty of perjury that the project or building is in compliance with all applicable State and Federal laws, regulations, procedures, policies and contractual obligations in a form approved by HFA.

(2) The project meets the requirements of whichever minimum set-aside test was elected for the project and if applicable to the project, the 15-40 test under IRC section 42(g)(4) and IRC section 142(d)(4)(B) for deep rent skewed projects.

(3) There was no change in the applicable fraction (as defined in IRC section 42[c][1][B]) of any building in the project, or that there was a change, and a description of the change.

(4) The owner has received an annual income certification from each tenant of a low income unit and documentation to support that certification, or, in case of a tenant receiving section 8 housing assistance payments, a statement from a public housing authority described in paragraph (b)(1)(vii) of section 1.42-5 of the IRS regulations if a waiver has not been granted pursuant to subdivision (h) of this section.

(5) Each low income unit in the project is rent restricted within the meaning of IRC section 42(g)(2).

(6) All units in the project are and have been for use by the general public and used on a nontransient basis (except for transitional housing for the homeless provided under code section 42[i][3][B][iii]).

(7) Each building in the project is and has been suitable for occupancy, in compliance with all applicable local health, safety, and building codes and the State or local government unit responsible for making local health, safety, or building code inspections did not issue a violation report for any building or low-income unit in the project. If a violation report or notice was issued by the governmental unit, the owner must either attach a statement describing the nature of the violation(s) or a copy of each violation report to the owner's certification. The owner must also indicate whether the violation has been corrected.

(8) There has been no change in the eligible basis of any building in the project or, if there has been a change, the nature of the change.

(9) All tenant facilities included in the eligible basis of any building in the project, such as swimming pools, other recreational facilities, and parking areas, are provided on a comparable basis without charge to all tenants in the building.

(10) If and when a low income unit in the building became vacant during the year, reasonable attempts were or are being made to rent that unit or the next available unit of comparable or smaller size to a tenant having a qualifying income before any units in the building were or will be rented to tenants not having a qualifying income; except, in the case of a deep rent skewed project, if and when a low income unit in the building became vacant during the year, reasonable attempts were or are being made to rent that unit or the next available low income unit in the building to a tenant having a qualifying income before any low income units in the building were or will be rented to tenants not having a qualifying income.

(11) If the income of the tenant of a low income unit in the building increased above 140 percent of the applicable income limitation elected pursuant to IRC section 42(g)(1), then, pursuant to IRC section 42(g)(2)(D)(ii), the next available unit of comparable or smaller size in the building was or will be rented to a tenant having a qualifying income; except that in the case of a deep rent skewed project, if the income of a tenant of a low income unit increased above 170 percent of the income limitation applicable to the project pursuant to the election made under IRC section 42(g)(1), then the provisions of IRC section 42(g)(2)(D)(ii) with respect to the occupation of any low income unit in the building by a new resident were or will be applied.

(12) An extended low income housing commitment as defined in IRC section 42(h)(6), was in effect (for buildings subject to IRC section 7108[c][1] of the Revenue Reconciliation Act of 1989) which includes the requirement that the owner cannot refuse to lease a unit in the project to an applicant because the applicant holds a voucher or certificate of eligibility under section 8 of the United States Housing Act of 1937.

(13) The project is in compliance with the code, including any treasury regulations, this QAP, all other applicable laws, rules and regulations and, if applicable, with the HFA regulatory agreement.

(14) If applicable, the owner received its credit allocation from the portion of the State ceiling set-aside for the project involving qualified non profit organizations under IRC section 42(h)(5) and its' non profit entity materially participated in the operation of the development within the meaning of section 469(h) of the code.

(15) The owner has not refused to lease a unit in the project to any holder of a voucher or certificate of eligibility under section 8 of the United States Housing Act of 1937 because of the status of the prospective tenant as such a holder.

(16) There has been no finding of discrimination under the Fair Housing Act, 42 U.S.C. 3601-3619, against the project. A finding of discrimination includes an adverse final decision by the Secretary of the Department of Housing and Urban Development (HUD), 24 CFR 180.680, an adverse final decision by a substantially equivalent State or local fair housing agency, 42 U.S.C. 3616a(a)(1), or an adverse judgment from a Federal court.

(h) All owner's certifications shall be reviewed for compliance with the requirements of section 42 and retained by the agency for not less than three years from the end of the calendar year in which the agency receives the certifications.

(i) Waiver of annual tenant income recertification requirement.

Annual tenant income recertifications requirements are waived for any project where all the tenants are income qualified for any year if during such year no residential unit in the project is occupied by a new resident whose income exceeds the applicable income limit. The agency reserves the right, at its discretion, to continue requiring annual income recertifications, or to reinstate annual recertification requirements. All 100 percent tax credit projects monitored under this QAP must seek HFA’s written concurrence prior to implementing waivers of the tenant income recertification requirement. Guidelines and protocols to be followed for obtaining HFA’s concurrence are posted on the agency’s website.

(j) Inspection and review.

The regulatory agreement shall provide that the agency shall have the right to perform inspections and reviews necessary and convenient for project monitoring, and the project owner and the employees and agents thereof shall cooperate with the agency with respect to such inspections and reviews, and shall facilitate audits of the project during and through the end of the compliance period. Such audits may include physical inspection of any building in the project and any individual low income unit in any building in the project. The regulatory agreement shall further provide that the project owner shall include provisions in the lease given to each low income tenant requiring the tenant to permit inspection of the low income unit by the authorized representatives of the agency in compliance with the provisions of the code and this plan. Such audits, site visits, and physical inspections shall be performed at least as often as required by the code, and may be as frequent as deemed necessary and appropriate by the agency in its sole discretion. The audits may also include review of the owner's records as described in the recordkeeping section herein.

(k) In addition to the inspections described above, the regulatory agreement shall provide that HFA shall have the right to perform, upon reasonable notice, an on site inspection of any LIHTC project at least through the end of the compliance period and, to the extent deemed applicable by the agency, the extended use period, in order to implement and/or enforce any provision of this QAP or the code.

(l) Notification of noncompliance.

(1) Notice to owner. The regulatory agreement shall provide that the agency shall notify the owner promptly in writing if the agency does not receive the certification described in subdivisions (f) and (h) of this section, or is not permitted to inspect the tenant income documentation, or discovers by inspection, review, or in any other manner, that the project is not in compliance with the provisions of section 42.

(2) Correction period. The regulatory agreement shall provide that the owner of the project must supply any missing certification required to be supplied to the agency, or correct any noncompliance with the requirements of section 42, within a period (the correction period) of no more than 90 days from the time of notice from the agency to the owner as described in the preceding paragraph. The regulatory agreement shall further provide that the agency may extend the correction period for up to six months, but only if the agency determines that there is good cause for granting the extension.

(3) Notice to internal revenue service. The regulatory agreement shall provide that the agency shall file IRS form 8823, "Low Income Housing Credit Agencies Report of Noncompliance and Building Disposition", with the IRS no later than 45 days after the end of the correction period, whether or not the noncompliance or failure to certify is corrected. The filing and contents of such form 8823 by the agency shall be governed by the applicable income tax regulations or other rules promulgated by the IRS. The regulatory agreement shall provide that the agency shall retain records of any noncompliance or failure to certify reported on any form 8823 filed by the agency for a period of six years from the filing of said form 8823.

(m) Agency retention of records.

HFA shall retain records of noncompliance or failure to certify for six years beyond the agency's filing of the respective form 8823. In other cases DHCR must retain the certifications and records described in subdivisions (f) and (g) of this section for three years from the end of the calendar year the agency receives the certified records.

(n) Compliance with the requirements of the code is the sole responsibility of the owner of the building for which the credit is allowable. HFA's obligation to monitor for compliance with the requirements of the code does not create liability for an owner's noncompliance.

(o) Delegation.

To the extent permitted under applicable law, and determined by the commissioner/CEO of the agency to be advisable, the agency may delegate monitoring functions under this plan to any other housing credit agency or any qualified agent selected by the agency.