| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
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| #6888 | Closed | public | Multifamily | Les Sparks |
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I have a section 202 Project which has 159 units of which only 63 receive section 8 Subsidy. Recently I became aware that when a subsidized unit becomes available, many times an existing tenant is moved into the subsidized unit form a non-subsidized unit. Since they are an existing tenant, the managing agent just transfers the existing security deposit from the old unit to the new unit. My question is that since the monthly rent is more in the non-subsidized unit, the existing security deposit usually exceeds the amount of security deposit calculated on the HUD form 50059-A. Is the Project required to refund the excess security deposit or can they leave the exiting amount on deposit even though it is more than the amount calculated on the HUD-50059-A? Thanks for you help. |
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From Les Sparks: I have a few questions first. Is this a 202 direct loan or a capital advance? Second, if this is a capital advance does it have tax credits in building? The reason for the questions is that there are different rules under each scenario. If this is a senior building for all 159 units, but only 63 receive subsidy, the only concern for compliance is to follow each agreement for those units. If they move from a non-subsidized unit to a subsidized unit, a security deposits are reduced, the client has the option of refunding the money or keeping it if the room has been damaged. However, just transferring it and then taking the excess as project cash will likely get them in trouble. This might be a serious concern if their security deposits are small int he subsidized units, (for instance $25 minimum). I think in that case taking the excess is an issue. If it a capital advance and there are just different units and I am luck enough to get subsidy, the owner could just transfer the balance to the new unit. Because they have a liability to return the deposit, it should stay in liabilities regardless of the amount, Just make sure the new lease records the correct security deposit amount. In all cases the HUD REAC system allows the owner to remove excess security deposits from cash. It simply does so by listing the security deposit cash and reducing for the security deposit liability. This effectively allows access to excess security deposits in the surplus cash calculation. of course, Non-profit amounts go to residual receipts. Les From client: This is a 202 direct loan building with all senior apartments. Maybe I was not clear in my initial email, the Project does not take the excess security deposit, it remain in the security deposit bank account in a sub account in the tenant’s name since they remain a tenant. My concern was the amount on deposit does not agree with the amount calculated and listed on Form 50059-A. An example would be, a tenant moves into a non-subsidized apartment and pays a security deposit of $577 which is deposited into the security deposit bank account in a subaccount in their name. Subsequently a subsidized apartment becomes available and they are moved into that apartment. A new security deposit is calculated based on the reduced rent which calculates to $274. The tenant already has the $577 in the security deposit account. The Project is just keeping the $577 as the security deposit on the new subsidized apartment. Should they be refunding the difference between the $577 and the $274? From Les Sparks: Well, I think my answer remains about the same. If they do nothing and leave the full deposit in cash and leave the liability the same as the old one so that ultimately they have to repay the entire amount, then I do not know if there is a problem. If they keep the cash and change the liability, then the result will be will be that the deposit was removed from cash. I do not have a large issue with the actual deposit being different from the lease itself. If they want to refund the difference, so much the better. |