Regulatory Issues

Certification Of Buildings Under The “Implementing Recommendations Of The 9/11 Commission Act of 2007”
Banks of Mailboxes
Americans With Disabilities Act of 1990
Americans of Disabilities Act of 1990: Revised Standards
Federal Ownership and Leasing of Public Buildings
Government Intervention, Regulation and Control
Financial Entities' Involvement in Real Estate
Civil Asset Forfeiture
HUD Reforms: Civil Penalties
HUD Reforms: Excess Income
HUD Reforms: Bankruptcy
OSHA Reform Legislation
International Building Codes

 

Certification Of Buildings Under The “Implementing Recommendations Of The 9/11 Commission Act of 2007”

Background and Objectives: 
On August 16, 2007, President Bush signed into law the “Implementing Recommendations of 9/11 Commission Act of 2007” (H.R. 1), which includes a provision that requires the Department of Homeland Security (DHS) by spring, 2008, to set up a program for certifying private sector entities as meeting a “voluntary” national standard for emergency preparedness. The legislation was in fact the 9/11 Commission Report allowing it to move quickly through the Senate for final passage with no debate or hearings.   

The law mandates DHS adopt a voluntary private sector accreditation and certification standard that promotes emergency preparedness, that may be customized to fit the unique characteristics of various industries within the private sector, including real estate.  In order to carry out its certification program, DHS is required to select a qualified nongovernmental entity to accredit qualified third parties who will actually perform the certification of real estate.  DHS is expected to adopt the National Fire Protection Association (NFPA) 1600 standard or a similar standard.

The NFPA 1600 Standard on Disaster/Emergency Management and Business Continuity Programs, 2007 edition, as written, is of minimal impact to real estate owners and managers and lacks specifics.   However, IREM is concerned that during the rule-making process third-parties will be influential in writing regulations that expand the NFPA 1600.  Additionally, IREM is concerned that the third-party or parties selected to certify real estate will charge real estate owners and managers a fee to be certified.

Although the new law is voluntary, the law could lead to several end results.  It may become the market and legal standard of care in the real estate industry. Most importantly for real estate practitioners, the standard may allow for the insurance and credit-rating industries to look closely at a company’s compliance with the NFPA 1600 standard or any other DHS selected standard in evaluating its insurability and creditworthiness. 

IREM position:
IREM will have membership review and comment on the DHS regulation which will implement H.R. 1.  In regards to the voluntary certification standard that DHS is to adopt, IREM opposes mandatory certification for real estate owners and managers for a fee.  IREM supports voluntary standards that are not onerous on real estate professionals.  After IREM provides comments and reviews the subsequent final rule, the LPP Committee will prepare a plan for further action. 

(October, 2007)

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Banks of Mailboxes

Background and Objective: 
The U.S. Postal Service (USPS) provides standards governing mail receptacles, including those installed in apartments and other buildings. Apartments and other multiple-family dwelling must install and maintain mail receptacles that are approved by the USPS in the interest of promoting USPS efficiency, safety and mail security. Standard STD-4B, created in 1975, set forth the detailed requirements concerning the manufacture and testing levels for receptacles. In 2006, Standard 4C went into effect and replaced the previous standard.

In 2003, the USPS proposed a new mailbox standard to accommodate the growing volume and improve mail safety and security. The USPS used a consensus process to revise the federal apartment mailbox standard. IREM participated in the Consensus Committee convened by the USPS. IREM was very satisfied with the agreed-to recommendations that were incorporated into the proposed rule.

The “Standards Governing the Design of Wall-Mounted Centralized Mail Receptacles” final rule was released on September 3, 2004. The new standard created a new form factor and increased the minimum size requirement by 50% to 12 x 15 x 3. Additionally, the standard requires parcel lockers at a ratio of 1:10. The standard also introduced suggested design types, while eliminating the vertical form. Security requirements for the entire receptacle were strengthened.

Most important, the standard applies only to new construction and substantial rehabilitation. Existing buildings are encouraged to replace existing boxes at the end of their useful life with the new mailbox standard, but there is no requirement. The standard went into effect on September 3, 2006.

IREM Position:
IREM urges caution in requiring retrofitting of mailboxes and modes of delivery in all property types where banks of mailboxes are required or will be required. There are many buildings which may not have space to comply with the new size and/or configuration of the mailboxes. All modifications to mailboxes and modes of delivery must comply with related federally mandated accessibility standards. IREM would like to be involved in any future discussions regarding proposals to modify the existing standard or create a new standard.

(4/03, updated 10/08)

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Americans with Disabilities Act of 1990

Background and Objective:
In the summer of 1990 the ADA (Americans With Disabilities Act) was signed by President Bush. The regulations implementing this legislation were originally written in 1991, but continue to be refined. Standards on administrative and procedural requirements, and design and construction compliance, are expressed in the Americans with Disabilities Act Accessibility Guidelines (ADAAG). ADAAG covers Titles II and III of the ADA, which relate to accessibility guidelines for buildings and facilities and nondiscrimination by public accommodations and in commercial facilities.

Currently, new construction must be fully accessible, in compliance with applicable provisions of ADAAG. Alterations must observe ADAAG new construction criteria, where technically feasible. Existing facilities must achieve a level of usability which balances user needs, the constraints of the existing conditions, and the resources available for remedial work.

In addition, the ADA doesn't allow plaintiffs to collect damages for violations to the law. Only attorneys representing the plaintiff's suit are allowed to collect compensation from accessibility decisions to cover court costs. In some instances, this stipulation has been abused and individuals have used the ADA as a means to file frivolous lawsuits against commercial property owners to collect compensation for court costs.

IREM Position:
In continuing with its commitment to provide and encourage equal opportunity to all people, IREM heartily endorses an end to discrimination against individuals with disabilities, which is also the stated purpose of the Americans with Disabilities Act of 1990. We encourage the regulatory agencies charged with the responsibility of enforcing the Act to adopt fair and workable regulations to ensure and facilitate timely compliance by public accommodations.

To this end, the Institute of Real Estate Management encourages further definition of the terms "undue hardship," "readily achievable," and "maximum extent feasible," to better reflect the degree of responsibility of employers, property owners and managers in complying with the ADA.

While market pressures and honorable initiative have already resulted in expanded accessibility, we recognize the necessity to create a significant obligation for the private sector to join in ending discrimination. However, we cannot deny that employers and businesses often exist and operate under precarious economic conditions. Congress realized this and included factors to consider in determining the extent of private sector obligation under the Act in order to protect businesses from overwhelming financial burdens. Currently the term "technically feasible" does not include a cost factor. Only under some circumstances will cost be considered as an exception to compliance with ADA requirements. This could place a prohibitive cost on the private sector, causing a financial hardship. We recommend including "financial burden" as a reasonable criteria when determining any obligation of compliance with ADAAG for existing facilities and alterations.
The philosophy behind the ADA is to make places and opportunities accessible to those with disabilities. We support legislation and public policy that would provide a notice and cure provision in ADA regulations whereby those facing possible sanctions under the law would be entitled to written notice of the alleged violation in combination with a reasonable time to rebut and/or cure the alleged violation before facing economic sanctions and/or litigation, except in the most grievous of circumstances involving a repeat pattern and practice of actual violations. This would allow these properties to make necessary corrections if violations exist, without incurring substantial litigation costs, allowing available monies to be preserved and used for compliance, and not litigation costs. To be successful, and to achieve its programmatic and legislative intent, the ADA needs to refocus from the litigation arena to barrier removal. Legislation providing ample notice and time for business owners to make necessary modifications prior to facing economic sanctions and litigation would allow businesses to correct violations of the ADA and provide the intended level of access to disabled persons required in the legislation.

(11/90, updated 07/00, 10/07)

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Americans of Disabilities Act of 1990: Revised Standards

Comments on regulations for the Americans of Disabilities Act of 1990 (ADA) and the Architectural Barriers Act of 1968 (ABA) are due May 31, 2005.  Published September 30, 2004, the ADA regulation document contains information on guidelines, implementation and revised standards.

The ADA requires the Department of Justice (Civil Rights Division) to adopt standards that are “consistent with the minimum guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board”.  These regulations are not effective to the public until the Department of Justice adopts a final ruling on the revised ADA standards.

Question 1.  Should the effective date of the proposed revised ADA Standards be modeled on the effective date used to implement the current ADA Standards – eighteen months after publication of the final rule – or a shorter period?

IREM Response:  Neither.  It is almost imperative that the effective date of the proposed new rule allow a minimum of eighteen months and possibly even more time depending upon the “triggering event” after the publication of the final rule.  It is not uncommon for the project design time to span 18-24 months from inception to permit submittal, with additional time, 6-18 months, for the building permit process, and then an additional 24-36 months to complete the construction.  Any time period set by DOJ needs to take into consideration the immense amount of time needed up front to get a project designed, permitted and then finally built.  Any changes in the plans after the building permit has been applied for adds considerable to the project cost because of the need to go back, redesign and revise plans that have been completed.  It is even more difficult to incorporate changes when the building is already under construction.  IREM does realize that designers need to be aware of potential changes and IREM does provide notification to members so they can anticipate and be aware of upcoming changes.  However even with that knowledge, it is very difficult to anticipate compliance for a final rule that takes years to develop and then has no specific schedule for when it will be published.  DOJ needs to be reasonable in setting compliance time frames allowing sufficient time for the changes to be incorporated into the project during the design phase.

Effective Date: Triggering Event

Question 2: The Department is asking the public to identify any facilities for which the current triggering events might prove unworkable.  Are there facilities covered by the revised ADA Standards that are subject to Title III for which first occupancy/physical alteration do not apply in the new construction/alteration context?

IREM Response - New Construction:  The effective “triggering event” for current the Access Board’s revised ADA Accessibility Guidelines (ADAAG) is the major issue that created the problem in obtaining compliance with the current ADAAG and for that matter Fair Housing Accessibility Guidelines (FHAG).  For new construction a “triggering event” based on “first occupancy” or even “first use” is quite unrealistic based on the time frame involved in getting a project to the point of “first occupancy” or “first use.”  From project inception to “first occupancy” or “first use” may be four years or more with the minimum being as discussed in IREM’s response to Question 1.  18-24 months for the design phase, 6-18 months for the permitting stage, and then 2-3 years for the construction phase before the building is ready for “first occupancy” or “first use.”  The 18 month time period proposed as the “time period” for compliance will require developers to redesign buildings that are already under construction.  Mandating changes to buildings already approved for construction and already being built places a very unfair burden on developers.  It is even more difficult to comply with a rule that can be published at anytime without constraints to meeting any schedule.  At minimum the rule for new construction should be 18 months before the application for the building permit.  Designers would then be on notice early in the design stage at a time when they can make changes while the plans are still being developed.

IREM Response – Existing Buildings:  The “triggering activity” for existing buildings can be different than the “triggering activity” for new construction.  However, it needs to take into consideration the issues being addressed in Question 3 concerning “safe harbor”, and it needs to be responsive to what has or has not been done to the existing building for compliance with current ADAAG.

Existing Buildings That Comply With Current ADA Standards:  Building that have been designed and constructed to comply with current ADAAG or that have been modified to comply with current ADAAG should be grandfathered and not be required to update to the new ADAAG.  The exception being any new work or changes in the portions of the building that comply with current ADDAG, must comply with the new updated ADAAG.  The 18-month “triggering event” for buildings that comply with current ADAAG can be based, as it is now, on the commencement of the alteration or construction.

Existing Buildings That Do Not Comply With Current ADA Standards:  Buildings that do not comply should be required to be updated to the new ADAAG requirements as they are currently required to be updated to ADAAG.

Safe Harbor

Question 3.  Should the Department provide any type of safe harbor so that elements of facilities already in compliance with the current ADA Standards need not comply with the revised ADA Standards?

IREM Response:  A very definite YES.  A “safe harbor” should be granted to any and all buildings, facilities, or elements that comply with current ADAAG as long as they are not modified or changed.  Modifications and changes should be done in accordance with the new ADAAG.  The concept of grandfather or “safe harboring” for existing buildings is well established and is the basis for determining if building complies with the appropriate building, fire or other construction code.  Building, Fire, and other codes specifically apply to new construction, alterations, or modifications made after the effective adoption date of the code.  Buildings in existence at the time of the adoption of the new code are grandfathered as long as they comply with the code in existence at the time they were construction.  The enforcement date for a new building, fire and other code is published well in advance by the adopting governmental agency, and it is not uncommon for the actual enforcement date to be 6, 12 or even, in the case of places like California, 3 years later. 

Buildings under construction with a valid building permit are allowed to be constructed to the code being enforced at the time the building permit was issued.  Buildings under construction are not required to be redesigned or required to meet the requirements of the newly adopted code.  The same should be true for ADAAG compliance and thus the reason for the comments under “triggering event” in response to Question 2 and that the “trigger event” should be based on the application for the building permit.

(4/05)

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Federal Ownership and Leasing of Public Buildings

Background and Objective:
In the past, the Institute of Real Estate Management expressed its concern regarding legislative attempts to reduce the amount of space the federal government leases, through the General Services Administration (GSA), from the private sector. Data now shows GSA has continued to lease increasing amounts of space from the private sector. The majority of the growth in GSA’s inventory has been in leased space. Since 1964, the leased square footage has more than tripled, growing from under 50 million square feet to over 164 million square feet in 2004. Over the same time period, GSA’s owned inventory has remained relatively stable. If the trend continues as expected, GSA should have more leased square footage than owned within the next ten years.

GSA operates under legislative authority, as granted by the Public Buildings Act, to house Federal tenants in appropriate space and provide related services to allow those tenant agencies to conduct business and achieve their missions. GSA frequently evaluates its inventory, to ensure that it contains the right types of properties to house the agencies that come to GSA for space solutions.

In addition, the GSA works closely with stakeholders, including the Office of Management and Budget, and Congress through the annual appropriation process and authorization of funds to operate, lease and build Federal structures.

The GSA Public Buildings Service has thoroughly reviewed its building inventory and is working to align its real estate portfolio with its mission and customer needs. This initiative is part of an overall strategy to restructure this portfolio so that limited resources are more efficiently and effectively utilized.

IREM Position:
Members of the Institute of Real Estate Management continue to support the maintenance of the existing check and balance system, which is the cornerstone of our nation's democratic form of government. It is important that our elected officials retain authority over the Executive Branch infrastructure. While GSA has a fiduciary responsibility to manage and maintain building assets under their custody and control on behalf of the American people, GSA cannot spend any significant funds on construction or rehabilitation without Congressional approval.

We would encourage the GSA to continue to function in a manner more characteristic of private sector business, to be both accountable for expenditures and to maintain a level of cost-consciousness.

The Institute supports GSA’s efforts to meet Federal office space needs using commercial leased space from the private sector to the maximum extent practicable. Further, the Institute supports GSA’s efforts to construct new buildings using lease construction to meet much of the Federal government’s need for general-purpose space requirements not available in the commercial real estate market. When GSA does construct new buildings, those are predominantly special purpose buildings such as courthouses or in markets where available space insufficient or not practical for meeting the government’s needs. In recent years, GSA has only occasionally built general-purpose office buildings. GSA’s annual new construction program is made up of almost entirely of special purpose space, courthouses and border stations, with requirements that are not readily available in the market place.

The Institute supports GSA’s portfolio strategy approach to managing Federal real property that should lead the agency to a lean and profitable inventory of property from which to meet the needs of Federal tenants.

We are also pleased to see that GSA is not expanding out-leasing efforts in vacant space. In the past, we were also concerned about whether the GSA might expand this program. However, out-leasing remains a minor part of GSA’s program. As of September 2004, less than 1% (3.0 million RSF) of its total RSF (344.3 million RSF) was out-leased to the private sector and GSA’s largest out-leases are driven by Federal legislation.

We applaud GSA’s efforts to utilize space available from the commercial market and support their efforts to construct Federal space only when the type and quantity of space needed is not commercially available.
(11/87, updated 4/05, 10/08)

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Government Intervention, Regulation and Control

We support broad regulatory reform such as that pursued by Congress and the concept of greater accountability of agency rule makers to elected officials and support a viable substitute to the legislative veto considered unconstitutional by the Supreme Court. Further, we endorse the need to shift the burden of proof in justifying agency regulations toward the agency.

(6/86, updated 11/04,10/09) 

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Financial Entities' Involvement in Real Estate

IREM opposes changes or interpretations in present federal regulations which would permit any banks or bank holding companies or subsidiaries to enter the field of property management beyond properties owned by these institutions. In principal, IREM supports the elimination of unnecessary or counter-productive government regulations.

However, in the case of banks, bank holding companies or subsidiaries and thrift institutions which hold a unique position in the business and financial world, we are opposed to changes or interpretations in the present federal regulations which would, for example, permit their entry into certain activities.

We further urge the appropriate regulators to use their authority to restrain the expansion of real estate activity by state financial entities and their federal counterparts. The Institute continues to support and encourage the omission of the following from any list of governmental or regulatory-approved financial institution real estate activities::

• providing residential, commercial (and facility) property management services for third parties;
• management of owners' associations for condominiums, cooperatives, planned unit developments and commercial projects;
• acquiring improved commercial real estate to be held for rental; and
• acquiring improved commercial real estate for remodeling, renovating or demolishing and rebuilding for sale or rental.

Practices of this nature will remove the "safe haven" character of the institutions and compromise their fiduciary position, having a traumatic effect on the business of third-party independent property management by depriving this industry of its rights to compete in the marketplace without undue influence by banking and/or financial service entities.

(6/86, updated 11/04, 4/09)

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Civil Asset Forfeiture

Background and Objective:
Civil Asset Forfeiture laws are being used to combat drug dealing and in the past these laws have been revised. The old laws allowed the government to take your property without indictment, hearing or trial. They needed only show that there was 'probable cause' to think that an illegal activity occurred on the property, or the property was gained from the proceeds of an illegal act. To contest a seizure, a property owner had only 10-20 days to file a claim, and was required to pay $5000 or 10% of the value of the property as bond. Further, if you could not afford an attorney, one was not being provided for you. These laws required a property owner to prove his/her innocence, while our country is founded on the principal of "innocent until proven guilty".

The Civil Asset Forfeiture Reform Act of 2000, introduced by Congressman Henry Hyde (R-IL), and signed into law by President Bill Clinton was designed to reform the aforementioned laws and enacted the following changes:

• Places the burden of proof on the government by requiring them to show a "preponderance of the evidence";
• Allows for the appointment of counsel to indigents;
• Allows for the recovery of attorney’s fees;
• Ensures that property owners who took reasonable steps to prevent illegal activities on or with their property cannot be subject to forfeiture;
• Eliminates the cost bond requirement from owners;
• Gives a property owner up to 30 days to contest a forfeiture;
• Allows innocent property owners the right to sue for negligence or loss of property due to forfeiture; and
• Allows the property to be returned to the owner pending final disposition, if hardship would otherwise result.

IREM Position:
Illegal drugs are a most serious national problem. The Institute of Real Estate Management supports the swift, timely eviction of drug dealers. However, seizure of rental property where there may be an innocent owner constitutes a taking of private property without just compensation. IREM urges that the federal government, when enacting seizure procedures, require proof of owner complicity in the illegal drug activity before authorization for seizure of real property can be granted. The government should not be allowed to seize property without clear and convincing proof of that property owner's involvement in the crime. Further, those owners whose property is seized must be given time to contest the forfeiture and access to legal counsel. If found innocent, a property owner must have the ability to receive compensation for negligence or loss of property due to seizure.

(11/01)

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HUD Reforms: Civil Money Penalties

Background and Objective:
One of the reforms proposed by HUD would grant the Secretary the authority to impose civil money penalties against general partners and certain managing agents of multifamily mortgagors in addition to the current language (Section 537) of imposing civil money penalties on multifamily mortgagors. The current law in Section 537 authorizes the imposition of civil money penalties for certain violations of (A) an agreement entered into as a condition of a transfer of physical assets, a flexible subsidy loan, a capital improvement loan, a modification of the mortgage terms, or a work-out agreement; or (B) the regulatory agreement executed by the mortgagor.

HUD regulation 24 CFR Part 30 provides guidance on procedures for civil money penalties. The regulation states that a mortgagor may respond to a notice from HUD of possible penalty and, subsequent to the response, a review of the notice by the Housing Civil Penalties Panel may occur. A hearing process before an administrative law judge would occur next if a penalty was suggested by a majority vote of the Housing Civil Penalties Panel. A mortgagor may appeal the administrative law judge's decision to the Secretary. After the Secretary's final decision, judicial review is possible.
Prior to the penalty, the mortgagor may request an administrative hearing which is appealable to the U.S. Court of Appeals. Under the existing law, a civil money penalty may not exceed $25,000.

IREM Position:
The Institute of Real Estate Management is aware that there are cases of "recalcitrant owners and managing agents" that HUD must address. However, the Institute believes that adding managing agents to the proposed civil penalties authority represents overkill on the part of HUD and is an inappropriate response to these problems for the following reasons:

A. General Comments:
Present remedies available to HUD adequately address these cases. Such remedies include HUD's current ability to initiate receivership hearings on a property. The Institute believes that placing a property in receivership is an extreme measure and a sufficient tool for HUD to use in extreme cases. Addressing managing agents, administrative sanctions such as suspension, termination, and debarment are current available options.

Use of this authority could be arbitrary. Adequate proof standards for administrative review must be assured. Due process should be afforded before civil money penalties are enforced on general partners or managing agents. During due process it must be determined which party is actually in control of making a specific decision. In most cases, managing agents take direction from general partners or mortgagors.

The application of civil penalties as proposed is open to abuse. The possibility exists that a difference of opinion could be deemed a "violation" by HUD and penalized. What constitutes a reasonable, proper, or necessary expense may be subject to interpretation or conflict between HUD and managing agents or owners, and may even vary from one HUD region to another. At a minimum, there should be ample notice to those deemed to be in violation to give them an opportunity to correct problems. Also, the Institute believes that it is difficult for HUD to keep informed of the current professional management practices needed for sophisticated decision-making given the shortage of staff.

Nothing in the proposed reform requires HUD to perform its responsibility for the well-being of the properties. Some questions to be raised are:

Have rent increases been requested, and has HUD responded to these requests in an adequate manner?

Have the owners or management met with HUD, suggesting a plan of action?

Has HUD responded to the proposals in an adequate and timely fashion?

B. Specific comments to the proposed changes to include managing agents in the Civil Money Penalties provision:
If the managing agent identifies a problem that is under the control of the owner or general partner and, the managing agent documents that problem and informs HUD of that potential problem, the managing agent should be held harmless and civil money penalties should not be imposed on that managing agent. The managing agent shall only be liable for his or her own gross acts of unlawful misconduct or negligence.

The "identification of problem" action will build ill-will between the owner and agent and will provide for a negative working relationship and possible lawsuits against the managing agent.

When actions occur that may be questionable, the managing agent shall get written approval from HUD before the action is pursued. However, it’s unclear as to when and under what situations this procedure needs to be followed.
Any civil money penalties imposed should stay with the property and be used for the benefit of the property. When civil money penalties are imposed, where do the funds go?

When civil money penalties are imposed, they should not be punitive. The penalties should be only compensatory to recoup the cost of damages and, as stated above, should be used for the benefit of the property. In the case of the managing agent, punitive damages are, in essence, applied to the managing agents by potential loss of the management contract.

C. Specific comments to 24 CFR Part 30 and the proposed changes to include managing agents
IREM believes that objectivity is of primary importance at each stage of the civil money penalties process including the deliberations of the Housing Civil Penalties Panel (HCPP). According to 24 CFR Part 30, the panel is composed of four individuals at the Assistant Secretary or Deputy Assistant Secretary level or their designees. With the composition of the panel only coming from this level of HUD employees, where is the objectivity? Is this a "preaching to the choir" situation? IREM feels that this panel will lack objectivity and that, under the current selection process, there is no way to make the panel objective.

The following comments refer to SS 30.325, "Under this subsection, the HCPP also may propose civil money penalties on any project mortgagor who knowingly and materially violates its regulatory agreement by:"

"Paying out any funds except for reasonable operating expenses and necessary repairs, without the prior written approval of the Secretary."

Under this part, who determines reasonable and necessary? These terms are unclear, are too broad, and interpretation by HUD tends to be extremely subjective.

"The interest of any general partner in any right to manage or receive the rents and profits from the mortgaged property, without the prior written approval of the Secretary."

Some general partner interests in a property are extremely small and, consequently, insignificant. Under current operating procedures at HUD, the Department is not a consenting party to the contract between the owner and the managing agent. Under this section, the verbiage implies that HUD is a consenting party. With this said, the right to manage now starts to get clouded. IREM's viewpoint is that HUD should be concerned in situations where the general partner has majority interests in the property.

"Remodeling, adding to, reconstructing, or demolishing any part of the mortgaged property or subtracting from any real or personal property of the project, without the prior written approval of the Secretary."

IREM does not understand the intent of this section because general remodeling and, to some extent, reconstruction are normal processes in operating a property and are done on a weekly or even daily basis. Will a new process be required by HUD to provide written approval for every remodeling or reconstruction done to the property?

"Paying for services, supplies, or materials which exceed $500 and substantially exceed the amount ordinarily paid for such services, supplies, or materials in the area where the services are rendered or the supplies or materials furnished."
The key words here are "ordinarily paid." Who at HUD will determine what is ordinarily paid?

"Failing to maintain at any time the mortgaged property, equipment, buildings, plans, offices, apparatus, devices, books, contracts, records, documents, and other related papers (including failure to keep copies of all written contracts or other instruments) in reasonable condition for proper audit and for examination and inspection at any reasonable time by the Secretary or any duly authorized agents of the Secretary."

Many managing agents could be in violation of one or more of these items.

For example, it is nearly impossible to find a set of "as-built plans" for a given property. With the number of mechanical equipment or apparatus requirements on a given property, someone could find one or more that aren't properly maintained. This item appears to be a "catch all" category to provide a greater degree of subjective discrimination for HUD.

"Failing to furnish the Secretary, by the expiration of the 60-day period beginning on the first day after the completion of each fiscal year, with a complete annual financial report based upon an examination of the books and records of the mortgagor prepared and certified to by an independent public accountant or a certified public accountant and certified by an officer of the mortgagor unless the Secretary has approved an extension of the 60-day period in writing which extension shall be granted the mortgagor demonstrates that failure to comply is due to events beyond its control."

The managing agent has influence but no control over the auditor. Where it is clear that the audit will be late, a managing agent can ask for an extension, however, HUD could still rule that the managing agent is in violation. Again, this is a situation where a managing agent has responsibility but no control.

(11/93)

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HUD Reforms: Excess Income

Background and Objective:
HUD's current system for reporting and filing excess income allows the excess income to be used to offset uncollectible rents in Section 236 Projects. This has been very beneficial to operators of the 236 projects who are particularly affected by uncollectible rents. The problem of uncollectible rents is compounded by HUD regulations which require an additional ten days to be given to a tenant before evicting the tenant for unpaid rent.

During this time, expenses for the operator continue but there is still no rent being collected. Higher basic rents also add to the problem. HUD is considering changing the procedures regarding excess income in response to abuses by operators who have not reported excess income or who have failed to remit reported excess income.

IREM Position:
The Institute recommends that HUD make no changes to the existing policy dealing with Section 236 "Excess Income." At the same time, the Institute further recommends that all existing statutes and regulations continue to be enforced to see that all excess income is remitted to HUD in a timely fashion.

(11/90)

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HUD Reforms: Bankruptcy

Background and Objective
Past proposals to amend Section 105 and 362 of the Bankruptcy Code (Title 11 of the United States Code, as recodified by the Bankruptcy Reform Act of 1978) have attempted to exempt from the automatic stay provisions of the Bankruptcy Code those acts taken by the Secretary of HUD or Agriculture toward foreclosure (including acts to obtain possession or for the appointment of the receiver) on multifamily projects with liens that are insured or held by the Secretary of Housing and Urban Development, or by the Secretary of Agriculture pursuant to title V of the Housing Act of 1949. Past proposals also would have excluded other acts to protect the Secretaries' financial position or interest in bankruptcy situations relating to these projects from the automatic stay where a right (for example, to offset funding otherwise due to a debtor) is provided for under contract, regulatory agreement, regulation, or statute.

Such amendments to Section 105 would make clear that the acts covered by these changes to Section 362 are not subject to a bankruptcy court's discretion to issue stay orders.

IREM Position:
IREM finds such proposals to amend section 105 and 362 of the Bankruptcy Code (Title 11 of the United States Code as recodified by the Bankruptcy Reform Act of 1978) unacceptable for several reasons as follows:

The proposal could in fact be unconstitutional because it does not provide for due process.

The existing bankruptcy law has withstood the test of time and has in the past allowed for the due process of law; therefore, it should remain intact.

The Institute believes that the examples that HUD gives to support its proposed reform are isolated incidents and represent aberrations rather than the norm.

(11/89, updated 1/91)

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OSHA Reform Legislation

Background and Objective:
The Occupational Safety and Health Act was enacted in 1970 as the centerpiece of a national commitment to end the human and economic toll caused by workplace injuries and illnesses and "to assure so far as possible every working man and woman in the nation safe and healthful working conditions." OSHA was created during an atmosphere of work place accidents and fatalities caused, in many instances, by unscrupulous employers. Since the passage of this legislation, much progress has been made in providing Americans with safer and healthier jobs. The occupational fatality rate has decreased by one-half of what it was in 1970, even as the number of workers has increased by one-half.

OSHA Reform legislation is currently working its way through Congress. Improved workplace safety and health is an important aspect of the government’s commitment to better jobs for all Americans resulting in a more productive and profitable economy.  Some believe that tougher OSHA standards will achieve such results. OSHA reform legislation threatens harsh new penalties, both civil and criminal.

Critics maintain that existing OSHA standards are enforced unevenly due to a lack of adequate agency resources. Thus, companies with good safety records are regularly inspected while poorly performing companies are never visited. Critics also contend that OSHA's regulations, when they are completed at all, are lengthy, complicated, and nitpicky. Enforcement of OSHA regulations is sometimes more concerned with the number of citations and the amount of penalties than with injury rates. A recent survey of medium to small businessmen by the National Association of Manufacturers cited OSHA regulations, along with product liability reform, at the top of the list in terms of government actions that were impeding economic growth and job creation.

IREM Position:
IREM believes employers have a responsibility to provide workers with a safe and healthy work environment, and to eliminate hazards and prevent injuries and illnesses due to employment to the best degree practicable. Workers, in turn, also have a responsibility to provide a safe and healthy working environment for themselves and their co-workers. While the Institute recognizes that safe and healthful working conditions and practices are in the best interest of both employers and employees, we are opposed to certain specific aspects of OSHA Reform legislation due to their negative effect on the real estate industry.

In many instances, OSHA has served as an enforcement tool to ensure that employee health and safety is not ignored. But for the vast majority of employers, existing government resources can be better utilized by providing expertise, consultation services, and training and by encouraging employers and employees to make safety and health a priority in the work place. Marketplace business incentives already exist to ensure proper working conditions. Skyrocketing insurance premiums for workers' compensation insurance, the expense of training new workers, and the fact that risky jobs demand higher pay ensures worker safety and health issues are paramount in the minds of all employers.

IREM opposes any legislation that will unduly add, without a corollary benefit, to the regulatory burden that is already choking businesses, especially small- and medium-sized businesses, and will be onerous to property managers and owners.

(11/93, revised 4/03, 10/08)  

  

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International Building Codes

Background and Objective:
In 1994, the International Code Council (ICC) was formed to draft a comprehensive and coordinated set of model new construction codes to replace the three regional codes used by most jurisdictions - the National Codes developed by the Building Officials and Code Administrators International (BOCA), the Standard Codes developed by the Southern Building Code Congress International (SBCCI) and the Uniform Codes, developed by the International Conference of Building Officials (ICBO).  These codes are generally developed on a regional basis, resulting in widely varying guidelines and an inconsistent set of regulations.

Representatives of these three organizations came together to form the ICC with a goal of replacing the three regional codes with a single set of International Codes.  Released in 2000, the International Codes include new editions of the International Building Code, International Fire Code, International Residential Code, International Mechanical Code, International Fuel Gas Code, International Energy Conservation Code, International Property Maintenance Code, International Plumbing Code, International Private Sewage Disposal Code, ICC Electrical Code and the International Zoning Code.

In March 2000, HUD issued a final report identifying the variances between the design and construction standards for handicapped accessibility required by the Fair Housing Act and the new International Codes.  In its report, HUD said the model building codes reflect the majority of the technical requirements of the Fair Housing Act.

The ICC International Codes are maintained yearly through a public hearing and review process.

IREM Position:
IREM supports the concept of one uniform model building code to establish consistency and uniformity across the nation.

We encourage the International Code Council to continue an open dialog with the real estate community and other interested organizations through the annual review process, insuring the most up to date and timely codes and issues are addressed and adopted.  IREM also encourages HUD to continue to maintain an open dialog and monitor future updates of the Codes to ensure they are consistent with the Fair Housing Act and ADA’s accessibility requirements.  Building officials’ incorporation of Fair Housing accessibility standards into local building codes, and equal enforcement of those standards, will reduce the risk of introduction of non-accessible housing into the market and the dislocation that non-accessibility creates.

(11/00, updated 11/01, 10/07)

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