Chapter VI: Initial Contracts
Section J: Lease Requirements
- Obtain Lease
- The Owner must provide an executed Lease Agreement.
1. Required Items on Lease
Required Items on Lease
- Owner name
- Tenant Name
- Address of unit including an apartment number
- Term of the lease. The lease begin date must be present with a specific end date or specified (i.e. one year or twelve months) stated.
- Renewal provisions. If none stated, assume month-to-month.
- Utilities and appliances provided by the owner and tenant
- Rent amount
- Tenancy Addendum must be attached (or the entire Tenancy Addendum document included in the lease)
- Signatures
- The Lease Agreement cannot be altered in any way unless all parties initial the change. 'Strike outs' are only allowed if properly initialed by all parties
- Signed by Landlord and Tenant
- The HA never signs or initials the Lease.
2. Lease Term
3. Lease Terms of Less Than One Year for any Subsidized Development and Cooperative Housing
Pursuant to HUD regulations [CFR 982.309(a)], MSHDA may approve a shorter initial lease term if both of the following conditions apply:
- A shorter term would improve housing opportunities for the tenant, and
- Shorter terms are the prevailing market practice.
MSHDA has determined the above conditions apply to subsidized and cooperative housing. Therefore, initial (i.e. first year) lease/contract terms of less than one year are allowed for subsidized and cooperative housing. Note: Do not utilize this practice if the landlord will sign a one-year agreement and postpone the increase in Contract Rent until the anniversary date associated with the tenant (versus development). For example, a subsidized or cooperative housing anniversary date (rent increase date) is normally January 1 of each year. A HCV tenant moves in on May 1. If the landlord refuses to enter into a one-year agreement, in order to coordinate with the rent increase date of the Subsidized/Cooperative housing, the initial lease contract term can be May 1 through December 31.
The following conditions apply to initial lease/contract terms of less than one year:
- The minimum initial lease term is one month.
- Part D of the MSHDA 51b must contain a ‘yes’ in the subsidized unit box OR a HA notation of 'cooperative' housing' (whichever is applicable).
- The landlord’s lease and the HAP Contract (HUD 52641 - Part A #5) dates must reflect the initial lease/contract term dates of less than one year.
- The Case Data Summary (MSHDA 1344-E) comment area must contain a notation confirming 'subsidized/cooperative housing' (whichever is applicable).
- The participant must be informed that their portion of rent will (most likely) increase (due to the Contract Rent increase) at the end of the initial lease term (i.e. in less than one year) and a new lease may be required.
- An annual re-examination for the participant effective as of the initial lease term end date (i.e. development anniversary date) is required. A HQS inspection is required and new income verifications may also be necessary.
4. Lease Terms of Less than One Year due to Applicant being already in Place
When an applicant receives the opportunity for a HCV (name just pulled from the waiting list) and has just recently signed a one-year lease but the landlord refuses to sign a new lease to coincide with a one-year HAP Contract, the HA should discuss with the landlord the benefits of a new lease and HAP Contract; i.e., remind the landlord that the new lease term will benefit the tenant by preventing the hardship of moving, HAP Contract ensures payment to the landlord. If the landlord agrees to a new 12-month lease, the landlord and tenant must strike out the begin date of the existing lease and insert the new lease effective date (date HAP contract begins) and both parties must initial the portion of the lease document where it states the lease dates were changed.
If the landlord refuses to enter into a new 12-month lease and HAP Contract, the applicant must move.
5. Lease Term Promotions of More than One Year
When an applicant finds a unit where the owner is offering a promotion of a month of free rent to new tenants who enter into a 12-month lease, the one-month of free rent must be prorated over a 12-month period thus lowering the contract rent so no overpayment of the HAP results. For example, if the one free month of rent amounts to $600, the owner would recalculate the monthly contract rent for a 12-month period, factoring in the $600 in free rent. The monthly contract rent for the 12 months would become $550 rather than $600.
Section 202, Section 236 (Insured and Non-Insured), Section 221(d)3, and Section 515 Rural Development Complexes
- When executing a new Contract at a subsidized development (i.e., listed above), the HA and landlord determines whether to execute the initial lease/contract term for:
- One year with an interim re-examination required when the Contract rent increases; or (this method could require multiple interims with the same effective date)
- Less than one year to coincide with the development anniversary date (this method could require multiple annual re-examinations with the same effective date).
SEMAP does not allow for late transactions. Regardless of potential delays, the HA must complete transactions by the cut-off date. For SEMAP purposes, a late interim is less detrimental than a late re-examination.
The HA advises the participants who reside (or wish to reside) in a subsidized development, the Contract rent (and possibly their rent portion) may increase during the initial lease term. The HA notifies the family of the most recent Contract Rent increase effective date so they can plan accordingly. Basic (not market) rent equals the Contract Rent.
Print and forward a Family Report (HUD 50058) to the development upon request.
Refer to Exhibit 2 for a description of eligible subsidized rent increase development programs.
6. Separate Agreements
- Owners and families may execute separate agreements for services, appliances (other than range and refrigerator) and other items that are not included in the lease if the agreement is in writing and approved by MSHDA. The HAP Contract prohibits families and owners from agreeing on side payments for additional rent, or for items normally included in the rent of unassisted families, or for items not shown on the approved lease.
- The family is not liable under the lease for unpaid charges for items covered by separate agreements and nonpayment of these agreements cannot be cause for eviction.
- Any appliances, services, or other items which are routinely provided to unassisted families as part of the lease (such as air conditioning, dishwasher, or garage) or are permanently installed in the unit, must be included in the lease. In a separate agreement, the family must have the option of not utilizing the service, appliance, or other item (i.e. carport).
- If the family and owner have come to a written agreement on the amount of allowable charges for a specific item, so long as those charges are reasonable and not a substitute for higher rent, they are allowed.
- All agreements for special items or services must be attached to the lease approved by MSHDA. If agreements are entered into at a later date, they must be approved by MSHDA and attached to the lease.
7. Conflicts of Interest
MSHDA cannot approve HAP Contracts when any of the following persons have a current interest or will have an interest in the unit for one year thereafter:
- A current or former member or officer of MSHDA (except a participant commissioner);
- An employee of MSHDA or any contractor, subcontractor, or agent of MSHDA who formulates policy or influences decisions related to the program;
- Any public official, member of a governing body, or State or local legislator who exercises functions or responsibilities related to the programs; or
- A member of the U.S. Congress. The HUD Field Office may waive the conflict of interest requirements (except for members of Congress) for good cause.
8. Tenant Capacity to Sign
At least one family member must have the legal capacity as defined by State law to enter into a lease agreement (i.e. at least 18 years of age or a legally declared an emancipated minor).
Minors who are not ‘emancipated’ may not be a party to the Lease agreement.
- ‘Emancipation’ occurs by operation of the law or a court order. Documentation is required to confirm the status of an emancipated minor. Documentation is commonly called a declaration, judgment, or order and demonstrates that the emancipation has been approved by a judge or other court official.
Operation of law occurs when (1) a person reaches 18 years of age; or (2) during the period when a minor is on active duty with the armed forces of the United States.
Court order pursuant to a petition filed by a minor with the probate court. The court may issue an ‘Emancipation Order’ if it determines that emancipation is in the best interest of the minor. A copy of the Order is required to confirm that the minor is emancipated.
Note: The act of marriage does not emancipate a minor.
9. Relative Prohibition
Legislation prohibits the use of Vouchers in units owned by a prohibited relative of the tenant unless approving the unit would provide ‘reasonable accommodation” for a disabled family member. A MSHDA 16 or other disability documentation must be on file for the disabled family member.
- Prohibited Relatives include parent, child, grandparent, grandchild, sister, or brother of any member of the participant family.
A certification that the owner is not related to the family is included on the MSHDA 51b.
10. Security Deposits
- State law establishes a security deposit limit; it is current one and one-half month's rent. Although State law allows this amount, the most common security deposit amount is one month’s rent.
- An owner cannot require a greater security deposit from a HCV tenant than from an unassisted tenant for a similar unit.
- When a tenant vacates the unit, the owner may use all or part of the security deposit, including interest on the deposit, in accordance with State and local law.
- The HA will review the lease to verify that the deposit for a new move-in does not exceed state law.
11. Zero HAP
An initial HAP Contract cannot be executed if it results in a zero HAP payment(i.e. MSHDA payment equals zero).