HUD 232/223(f) – Allowable fees charged at admission / management fees in excess of certified rate

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ID Status Date Public/Private Industry AHACPA Contact
#12761 Closed public Multifamily _General Support
Customer Reply

Two unrelated questions, both dealing with a HUD 232/223(f) Assisted Living Facility:

  1. Facility charges a “community fee” upon admission to the facility.  Ability to realize this fee is based on market conditions.  During low occupancy periods, fee is often discounted or completely waived.  Owner described the “community fee” as a fee to help offset turnover costs (painting, repairs, etc.).  Typical fee is $6,000.  Attached highlighted section from operator regulatory agreement states “Operator shall not charge any resident of the Healthcare Facility an admission fee, key fee, finder’s fee, continuing care retirement community fee, life-care fee or similar payment pursuant to any agreement to furnish residential units or services to persons making such payments.”  We do not feel that the “community fee” is a continuing care fee, but we do feel it could be considered an “admission fee”.  Should these community fees be considered a finding?
  2. HUD approved management fee rate is 5% of gross revenues.  Property is undergoing significant renovations.  Additional $32,000 was paid to management agent (in excess of 5% certified rate) as compensation for managing the renovations project.  There is common ownership between the Assisted Living Facility and the management agent.  Client did not ask HUD for approval of the additional $32,000.  Should this be considered a finding?

 
Les Sparks

David, on the first one, HUD would likely not be too happy with this fee.  As you read, it runs very counter to the Reg Agreement.  Call it what they what, they are going to charge a tenant for the costs to update the unit from the prior tenant…?  This may just be case where the owner reads the agreement and looks at the names of prohibited payments and then designs a new fee under a different name.  These fees are very much against the spirit of the agreement, if not the actual words.  The decision for a findings, is a bit problematic as there is no compliance audit on the operator.  Not sure you can give a finding to the borrower for what the operator is actually doing, despite the related nature.  These questions are always a little difficult.

 

The management fee question is also never directly answered by HUD.  However, such fees are usually not allowed unless approved by HUD>  The client should have a copy of the Management Agent Certification form (9839).  A sample is attached.  Generally, these fees are not allowed.  Once again, the question will be  “Who paid the fees?” If the operator paid them, then it is a finding on the borrower. 

 

The overriding issue that I think you are getting at, is that they are related parties and borrower is still responsible for the actions of the operator.  These transactions allow for quite a bit of potential hanky-panky outside of audit coverage.

 

 

 

Les Sparks

AHACPA

(801) 547-0809

 

From: AHACPA Support <support@ahacpa.org>
Sent: Tuesday, March 17, 2020 1:39 PM
To: les@ahacpa.org
Subject: HUD 232/223(f) – Allowable fees charged at admission / management fees in excess of certified rate [NEW]

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