1. Property Management & Tax Credit Compliance
LIHTC NUTS & BOLTS III
Tera L. Lockley
Virginia Community Development Corporation
Linda Moss

2. 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

3. 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.

4. 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

5. 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

6. 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)

7. 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

8. Rent Collections
Develop Rent Collection Policy & Forms, if self-managing or
Review Management Agent’s Rent Collection Policy & Forms
Enforce!

9. 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

10. 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

11. 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

12. 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 Staff
Maintenance Staff

13. 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.

14. 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

15. 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

16. Minimum Set Asides Federal Minimum Set Aside Requirements
20% of 50% of AMI
40% of 60% of AMI
Stricter Occupancy Requirements
Subject To Owner’s Contract With State Agency (Ex: 60%)

17. Rent & Income Limits Must Adhere To LIHTC Program Rent & Income Limits
Hold Harmless/HERA Income Limits
Available For Each Virginia Locality At

18. Sample Rent Table

19. Sample Income Table

20. LIHTC Program Compliance Period
Time Frame For Complying With LIHTC Program Requirements
Minimum Term Of 15 Years
Can Be Extended Beyond 15 Years

21. 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

22. Utility Allowances 6 available options in Virginia HUD rent schedule
RD approved budget
PHA(Public Housing Authority)
Utility Company
HUD Utility Model
Engineer

23. Utility Allowances Evaluated annually
90 days to implement, after publish date
Utility allowance figure is subtracted from the gross rent

24. Subsidy Layering Restrictions
Other Program Restrictions
Project Based Section 8
HOME Program Funding
Bond Financing
Rural Development
Must Meet All Program Regulations

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. LIHTC Compliance Training Options
A.J. Johnson Consulting –
Elizabeth Moreland Consulting –
TheoPro Compliance & Consulting Inc
Quadel Consulting –
Spectrum Consulting –
National Center For Housing Mgt. –

33. Helpful Resources VHDA – www.vhda.com
Institute of Real Estate Management –
Mid-Atlantic AHMA –
Novogradic –