| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
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| #7094 | Closed | public | Multifamily | Les Sparks |
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I wanted to get a second opinion from my own on an issue related to Section 232 projects. We have a client who is the Borrower and leases it’s facility to the Operator, who is under common ownership. Our client has no employees. Instead all back office administration duties are carried out by a Company separate from the Borrower and Operator, but also under common ownership. I am interpreting section 8.3 in the attached file to say that a “Management Agent” is strictly related to the day-to-day operations of the Operator(Nursing Facility). It is my contention that simply providing back office support (accounting, secretarial, etc.) for the Borrower does not make that Company a “management agent.” Would you agree with this interpretation, and if not, could you direct me towards the research that may help contradict my assessment? |
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From Les Sparks: As far as I know all management agents should be approved by HUD. This applies whether they support the operator or the borrower. This is listed below in Section 8.3. It applies to both. In most cases for the borrower, all that the agent does is provide back office support. Les A “Management Agent” for purposes of projects insured under Section 232 of the National Housing Act, is an entity that directs the day-to-day functions of a healthcare project as a contracted agent for either the Borrower or the Operator. A Management Agent performs its duties under the oversight of either the Borrower or Operator, as applicable, and is thereupon limited in powers and project authority to the levels expressed by the Borrower and/or Operator in accordance with a negotiated “management agreement.” The Management Agent must be approved by ORCF prior to participation, and the management agreement must be approved by HUD prior to execution. A Management Agent is regulated by the management agreement and by the terms of a Management Certification-Residential Care Facility. The specific duties and restrictions of the Management Agent must be described in the HUD approved management agreement negotiated between the Borrower and/or the Operator, and such Management Agent. A Management Agent is typically paid a negotiated fee for services provided, often in an amount based on a percentage of gross receipts of the project. All such fees must be sufficiently described in the management agreement. A Management Agent’s authority to make expenditures from project accounts must also be defined in the management agreement. From Client: A few additional questions. 1) Attached is the “Lender Narrative” for the client described initially. In every instance within the narrative the lender noted that the Management Agent information was N/A. In addition, no management agreement is in place related to these services and no fees are charged to the borrower in connection with them. Does this provide sufficient evidence that our client does not have a management agent or do we need to report a finding associated with them participating as an Agent without approval from ORCF? 2) We have noticed some inconsistencies in the way we are reporting Management Agent certifications between the financial statements and the REAC. Based on the attached “Management Agent” file: a. On the REAC, who should be listed as the “Name of the Property Manager?” We have been listing the Management Agent but are wondering if this should be the Operator instead. b. Should the financial statement certification be from the Project Manager or the Management Agent? 3) We have a client that had a minor change in ownership percentages. No new owners were admitted and no existing owners were removed. Should the change have been reported to HUD? |