| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
|---|---|---|---|---|---|
| #7044 | Closed | public | Multifamily | Les Sparks |
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Three part question. Profit motivated, insurance under Sec 207 pursuant to Sec 223(f). Market rents-no subsidy. Management company doesn’t manage any other HUD properties. 1) Recently changed to charging an admission fee as opposed to collecting security deposits. My plan is to have management company reclass admission income to security deposit. Would this be correct? 2) Second, are security deposits required? 3) Third, property has gate at entrance. Can they charge a gate fee (fee covers cost of maintenance, fobs, etc). |
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From Les Sparks: Here we get to the heart of HUD multifamily auditing. Of course, I am referring to the clients agreement. Which Regulatory Agreement does the client have? Here is the 2002 agreement. Require, as a condition of the occupancy or leasing of any unit in the project, any consideration or deposit other than the prepayment of the first month’s rent plus a security deposit in an amount not in excess of one month’s rent to guarantee the performance of the covenants of the lease. Any funds collected as security deposits shall be kept separate and apart from all other funds of the project in a trust account the amount of which shall at all times equal or exceed the aggregate of all outstanding obligations under said account. Here is the 2011 Agreement: 35.SECURITY DEPOSITS AND OTHER FEES. Borrower shall not require as a condition of occupancy or leasing of any unit in the Project, any consideration or deposit other than the prepayment of the first month’s rent plus a security deposit in an amount not in excess of one month’s rent to guarantee the performance of the lease terms. Borrower may charge certain application processing fees such as credit check or criminal background fees or pet deposits. So, to me it appears that the charging of such a fee is against the rules. Now, if you want to classify this as security deposits, the is fine. However, how does the lease characterize this? Is it refundable? Now there is no requirement to charge a security deposit, so I have clients who do not charge security deposits, but have some other things. However, I believe it is not correct to charge other fees. Les |