Property Management &

Tax Credit Compliance

LIHTC NUTS & BOLTS III

Tera L. Lockley

Virginia Community Development Corporation

Linda Moss

Virginia Community Development Corporation

Presentation Goal

To provide an overview of property management, compliance and asset management activities for life after the allocation of the tax credits: Property Management Expectations Asset Management definition and

expectations and Compliance from the Beginning to End

Property Management Requirement

In completion of the tax credit application, VHDA has a section that applies to the plans for the property management of the property.

VHDA mandates that every property that receives a tax credit allocation must obtain their Certified Property Management Agent designation.

If awarded their designation, VHDA awards terms from 1 year to a maximum of 3 years. The terms are renewable and require completion of an application each time.

All management entities must have this designation. So need to decide whether to self-manage or to acquire a 3rd party management company off of VHDA’s approved management list.

Property Management Basics:Self-manage or 3rd party

management agent

On-site property manager needs to have tax credit experience

Or have extensive tax credit training(Basic, Income/Assets, Intermediate, Fair Housing, etc.)

Developing a Marketing Plan Model Lease & Resident Selection Criteria Lease-up activities Rent Collections Financial Reporting Operating Budget process Preventive Maintenance

Marketing Plan(requested/reviewed by

VHDA)Should Include Property Description Lease-up Goals Targeted Geographic Area Marketing Strategy

Newspaper/Internet Advertising, Flyers, Brochures, etc.

Community Outreach Resident Referrals Open Houses Lease-up Specials Property Signage

Model Lease & Resident Selection Criteria

Lease Form

Conform With State LTA Requirements Should Be Workable, Lawful, Enforceable Have Attorney Review

Typical Resident Selection Criteria* Employment History Prior Landlord History Credit Review Criminal Background Check

*Other criteria may apply depending upon project financing (ex: LIHTC, Section 8, HOME, Bond Program Financing)

Lease-up Activities

Implement Marketing plan and review periodically for what’s working and what’s not

Track Lease-up goals to ensure that on target

Meet often during the process to discuss the above bulleted items

Rent Collections

Develop Rent Collection Policy & Forms, if self-managing or

Review Management Agent’s Rent Collection Policy & Forms

Enforce!

Financial Reporting

Should develop or receive monthly financial reports to monitor the performance of the property

Reports should include: Profit & Loss statement/Income statement, Balance Sheet, Rent Roll, Accounts Payable and Accounts Receivable reports

Should understand or be able to explain any variances

Operating Budget Process

Who Should Be Involved? Should Include A Budget Narrative Includes: Income, Expenses & Debt

Svc, Reserves, Capital Improvements

Information To Consider Current YTD Performance compared to

Development pro forma Market Conditions Maintenance needs

Preventive Maintenance Plan

Benefits Enhances Marketability & Resident

Retention Increases Cost Effectiveness Extends Useful Life Of Equipment Cost Savings To Resident (ex:

lower utility costs)Frequency

Monthly, Quarterly, Semi-Annually, Annually

Fair Housing & Uniform Residential LTA

Fair Housing Amendments Act laws provide a critical way to deter and counteract housing discrimination (ex: family composition, discrimination based on race, religion, steering, etc.)

VRLTA Landlord Tenant Act governs the rental of residential property. It is composed primarily of state statutory and common law which spells out common rights and obligations of the landlord and resident.

Section 504 Rehabilitation Act of 1973 & ADA of 1990

Need For Continuing Education

Who Needs It?Property Management StaffMaintenance Staff

Asset Management definition and activities

Asset management involves monitoring the financial, physical, and compliance performance of a property

The Equity Partner/Syndicator you choose to work with will be involved in the approval of the management agent and may request additional information or trainings for the staff

They will also work with the management staff on tracking the lease-up goals and activities to ensure timely delivery of tax credits

Will review the financial reports on a monthly/quarterly basis to monitor the property’s performance and will ask periodic questions concerning any change in property performance, such as decrease in rental income, increase in vacancies, increase in expenses, etc.

Asset Management activities contd.

Will review and in most cases, approve the annual budget

Will inspect the property on a scheduled basis and will ask questions about maintenance activities, plans and long range maintenance needs

Asset management is an ongoing process for the next 15 years of operations of the property

This ongoing process enables the Developer and Equity Partner/Syndicator to establish a solid working relationship that prepares the parties for a discussion about the status of the property after year 15, i.e. continue to operate as an affordable housing property or a candidate for re-syndication

Low Income Housing Tax Credit

Program Basics--Compliance Minimum Set Asides(Federal &

Owner’s contract with State) Rent & Income Limits LIHTC Compliance Period Original Resident Record Retention Utility Allowances Subsidy Layering Restrictions Approval of Lease Agreement and

Verification forms

Minimum Set Asides

Federal Minimum Set Aside Requirements 20% of units @ 50% of AMI 40% of units @ 60% of AMI

Stricter Occupancy Requirements Subject To Owner’s Contract With State Agency

(Ex: 100% @ 60%)

Rent & Income Limits

Must Adhere To LIHTC Program Rent & Income Limits

Hold Harmless/HERA Income Limits

Available For Each Virginia Locality At www.vhda.com.

Sample Rent Table

Sample Income Table

LIHTC Program Compliance Period

Time Frame For Complying With LIHTC Program Requirements

Minimum Term Of 15 Years

Can Be Extended Beyond 15 Years

Importance of Original Resident Files Record

Retention

First Year Original Resident Files Kept 6 Years Beyond Compliance Period

Maintain Secure Storage for Original Resident Files along with Electronic Back-Up

Utility Allowances

6 available options in Virginia

HUD rent schedule

RD approved budget

PHA(Public Housing Authority)

Utility Company

HUD Utility Model

Engineer

Utility Allowances

Evaluated annually

90 days to implement, after publish date

Utility allowance figure is subtracted from the gross rent

Subsidy Layering Restrictions

Other Program Restrictions

Project Based Section 8HOME Program FundingBond FinancingRural Development

Must Meet All Program Regulations

Approved Lease Agreement and Verification Forms Lease Agreement and Application Documents

Should be approved by the Equity Partner/Syndicator

Verification Forms

Approved Forms available on VHDA Website or

Submitted to Equity Partner/Syndicator for approval

Overview of Project Lease-Up Phase

Pre-Lease-Up Planning

Approval of Original Resident Files

Lease-Up Phase for a New Construction Project

Additional Compliance Challenges for an Acquisition/Rehab Project

Pre-Lease-Up Plan

Management and Equity Partner/Syndicator will meet to discuss the pertinent aspects of Lease-Up, including timely credit delivery

Identify projected timing for completion of the lease-up and the beginning of credit flow for the project

Identify the number of BINs(Buildings) and best strategy for occupying the buildings

Market and Qualify applicants prior to completion of the construction

Approval of Original Resident Files

The move-in of a tax credit eligible household is what allows tax credits to begin to flow for that unit.

The Equity Partner/Syndicator will normally require approval of all original resident files prior to their move-in to a unit

Lease-Up Phase – New Construction Project

Beginning of Lease-Up

Tax Credit Documentation is valid for 120 days

Application processing can begin when construction for a building is projected to be complete within that timeframe

Qualified Occupancy – New construction

Each household has been approved as a tax credit eligible household prior to move-in

A unit is qualified on the date the household signs the certification of their total income/assets at move-in

Acquisition/Rehab: Additional Compliance Challenges for

Management If a project has existing residents, a Relocation

Plan is required

During Rehab, Tracking of Relocation of current residents within the project may be necessary

Strategic Planning is involved for the timing of qualifying the existing residents

Ongoing Compliance During the 15 years

VHDA will conduct a File Audit and Physical Inspection within the 1st year after Lease-Up completion, and then every 3 years thereafter

Equity Partner/Syndicator will conduct a File Audit and Physical Inspection Annually

LIHTC Compliance Training Options

A.J. Johnson Consulting – 757.599.3964

Elizabeth Moreland Consulting – 1.800.644.0390

TheoPro Compliance & Consulting Inc. 1.877.783.1133

Quadel Consulting – 1.800.987.2581 Spectrum Consulting – 207.767.8000 National Center For Housing Mgt. –

1.800.368.5625

Helpful Resources

VHDA – www.vhda.com

Institute of Real Estate Management – www.irem.org

Mid-Atlantic AHMA – www.midatlanticahma.org

Novogradic – www.novogradic.com