**CHAPTER 5 SPECIAL CLAIMS FOR UNPAID RENT, TENANT DAMAGES, AND OTHER
CHARGES**

**Section 5-1 CONCEPT**

A special claim for unpaid rent, tenant damages and other charges due
under the lease is reimbursement to a property owner for a former
tenant's failure to pay the monthly rent, other charges due under the
lease, or for damages caused by the negligence or abuse of the former
tenant.

**Section 5-2 ELIGIBILITY REQUIREMENTS**

A.  Project/Contract types:

> Section 8, Section 202/8, Section 202 PAC, Section 202 PRAC or Section
> 811 PRAC.

B.  The owner is eligible to submit a special claim for unpaid rent,
    other charges due under the lease and damages if:

> The former tenant was receiving rental assistance at move-out; or if
> the rental assistance had been terminated prior to move-out, the
> assistance was terminated based upon the tenant's failure to comply
> with his/her responsibilities to fulfill
>
> program requirements, such as:

-   Failure to provide the needed information relating to family
    composition and income.

-   Failure to provide social security numbers.

-   Failure to sign consent forms and or verification forms.

-   Failure to sign the form HUD-50059.

-   Failure or inability to establish citizenship or eligible
    immigration status.

-   Failure to move to a different-sized unit within 30 days after the
    owner notifies him/her that the unit of the required size is
    available.

> Note: Owners cannot submit a special claim for the unit when
> termination of
>
> rental assistance was based on the tenant's income increasing to where
> he/she no longer qualifies for assistance.

C.  In projects that are partially assisted, if a tenant's assistance is
    terminated or a tenant moves out of a unit and the assistance is
    given to a tenant in another unit effective the day after the
    termination or move out, the owner is not entitled to a special
    claim for unpaid rent, tenant damages, or other charges.

> For example, in a partially assisted Section 236 project the tenant in
> Unit 26 who is receiving Section 8 assistance moves-out on July 26.
> The owner gives the Section 8 assistance to the tenant in Unit 30
> effective July 27. The owner is not entitled to receive a special
> claim for unpaid rent, tenant damages, or other charges for Unit 26.

D. Other requirements for unpaid rent and other charges due under the
lease:

1.  The owner/agent collected the appropriate security deposit from the
    tenant. If the owner/agent did not collect the appropriate security
    deposit from the tenant, the claim will be reduced by the amount of
    the security deposit the owner [should]{.underline} have collected
    from the tenant.

> Note: If the security deposit held by the owner met the rules in
> effect at the time the deposit was collected, or if the owner was not
> previously required to collect a security deposit under program
> requirements, the special claim will not be reduced because a security
> deposit wasn't collected or where the deposit does not match the
> current rules.

2.  By signing form HUD-52671-A, the owner/agent certifies they have
    billed the tenants for unpaid rent and have taken all reasonable
    steps to collect the debt:

> a\. A certified letter has been sent to the tenant detailing the
> unpaid rent and other charges, the disposition of the security
> deposit, demanding payment, and advising the tenant that failure to
> pay the sums due will result in the owner/agent hiring a collection
> agency to collect the debt. The letter must include a notice to the
> tenant that they have a right to discuss the charges with the
> owner/agent.
>
> b\. If the tenant did not make payment on the monies owed, other
> efforts were attempted to collect the monies (i.e., engaging a
> collection agency).
>
> 3\. State and local law must permit such amounts to be deducted from

the tenant's security deposit.

> 4\. "Other charges" due under the lease are to be included with unpaid
> rent.

a.  Allowable "other charges" due under the lease include:

> \(1\) Failure to return keys.
>
> \(2\) Late fees, if allowable under the lease and state or local

law, or

3.  Any charges for damages during tenancy that the tenant was
    previously billed for and that were still unpaid at

> move-out.

b.  Not allowable "other charges" due under the lease include:

> \(1\) Legal fees.
>
> \(2\) Collection agency fees.

3.  Unpaid utility bills left by the tenant.

> \(4\) Cost of photographing unit to prove tenant damage.

c.  Section 202/8, Section 202 PAC, Section 202 and Section 811 PRAC
    leases do not allow for charges for late fees, returned checks or
    unreturned keys therefore these charges are not allowable as special
    claims.

> E. Other requirements for tenant damages:
>
> 1\. By signing form HUD-52671A the owner/agent certifies they have

determined the damage claim was due to the tenant's negligence or abuse.

> 2\. Only extraordinary repairs and/or replacements should be claimed.
> See

Appendix 5C, " Tenant Damages versus Normal Wear and Tear."

> 3\. The owner/agent cannot request reimbursement on the damage claim
> for
>
> items where reimbursement was made from the Reserve for Replacements
> or Residual Receipts accounts or by insurance coverage. An owner/agent
> should be encouraged to apply for insurance reimbursement prior to
> submitting a claim to HUD. However, it is important to note, if an
> owner receives special claims reimbursement for damage covered by the
> owners insurance after HUD has already paid, the owner is required to
> repay HUD.

4\. Any damages, other than those billed during tenancy, found and
billed at

> move-out are claimed as damages on the claim form.
>
> 5\. Failure to provide the tenant with an itemized listing of damages
> will result
>
> in the denial of the claim.

**Section 5-3 OWNER/AGENT CLAIM SUBMISSION REQUIREMENTS**

The owner/agent must submit the following:

A.  Claim forms:

> HUD-52670-A Part 2, Schedule of Special Claims
>
> HUD-52671-A, Special Claims for Unpaid Rent/Damages

B.  Submit forms to:

> HUD or CA

C.  Supporting documentation for unpaid rents and other charges due
    under the lease:

    1.  Refer to Section 1-5 for the general requirements that are part
        of the claim process.

    2.  Evidence that the owner/agent took all reasonable steps to
        collect the debt. Such information must include:

        a.  A copy of the signed form HUD-50059 completed at move-in
            which shows the amount of security deposit that was
            required.

> b\. Documentation that the appropriate security deposit was
>
> collected from the tenant: for example, a copy of the original lease,
> a copy of the tenant's rent ledger card, a copy of the receipt(s) for
> security deposit.
>
> c\. Copy of the certified letter sent to the tenant detailing the
> unpaid
>
> rent and other charges due under the lease, the disposition of the
> security deposit, demanding payment, and advising the tenant that
> failure to pay the sums due will result in the owner/agent hiring a
> collection agency to collect the debt. The letter must include a
> notice to the tenant that they have a right to discuss the charges
> with the owner/agent. (See Security Deposit Disposition Notice 3-3.C
> 4).

a.  Documentation that the matter was turned over to a collection agency
    for collection and that the collection agency has attempted to
    collect the debt (i.e., copy of the agency's first demand letter).

> e\. Documentation for other charges that were due under the lease
>
> that demonstrates the charges were approved by HUD.

D. Supporting documentation for a damage claim:

> 1\. Evidence that the owner/agent took all reasonable steps to collect
> the
>
> debt (see item C.2 above for documentation requirements).
>
> 2\. The owner/agent must certify the submitted claim is not the result
> of
>
> normal wear and tear or routine maintenance. See Appendix 5C,
>
> Examples of "Tenant Damage versus Normal Wear and Tear".
>
> 3\. Copies of the move-in and move-out inspection reports.
>
> 4\. A copy of the security deposit disposition notice provided to the
> tenant
>
> which indicates the move-out date, amount of security deposit
>
> collected, amount of security deposit returned and any charges
> withheld
>
> from the deposit for unpaid rent, tenant damages or other charges due
>
> under the lease.
>
> 5\. A repair cost breakdown that must include at least one of the
> following:
>
> \(1\) Invoices
>
> \(2\) Receipts
>
> \(3\) Owner/agent certification
>
> \(4\) Other documentation acceptable to HUD or the CA
>
> The owner/agent must determine the useful life expectancy of
> replaceable items that have been damaged by the tenant. Refer to
> Appendix 5D for a sample "Life Expectancy Chart" to determine the
> predicted life expectancy of replaceable items.
>
> Example: In 2000 new carpeting was installed in a unit. The
> owner/agent determines that the carpet had a life expectancy of five
> years and would not have expected to replace the carpet until 2005. In
> 2001, a family moved into the unit and then moved out in 2003. At
> move-out, the entire carpet had to be replaced two years earlier than
> expected. The family should not be charged more than 2/5 of the cost
> of the new carpeting. If the carpeting had been in service for five or
> more years at the time the family moved-out, none of the cost of
> replacing the carpet would have been charged to the family.
>
> E. If a claim is also being made for unpaid rent and other charges due
> under the lease

for the same unit and tenant, the claim for tenant damages must be
calculated on

the same form HUD-52671-A and filed as one claim.

F. Checklist:

> A checklist of required documentation must be used and submitted with
> the claim forms. See Appendix 5B for a sample "Checklist- Special
> Claims for Unpaid Rent/Damages.

A.  TRACS requirements:

> The move-out or unit transfer for the tenant who owes the unpaid rent
> or who was responsible for the damages must be viewable in TRACS.

B.  Claim Amount:

    1.  The total claim for unpaid rent and damages for any Section 8
        units may not exceed the monthly contract rent in effect when
        the tenant vacated the unit (or at the time the tenant's rental
        assistance was terminated), minus the security deposit, plus
        interest earned and amounts collected from the tenant or other
        sources to cover the unpaid rent and damages.

> Example: \$65.00 is held by the owner, which includes the security
> deposit and interest earned. The tenant left the unit owing \$300.00
> in unpaid rent and \$200.00 in damages. The owner/agent is unable to
> collect payment from the tenant for the unpaid rent or damages. The
> contract rent at the time the tenant moved-out is \$400.00. HUD will
> pay up to \$335.00 (contract rent minus the security deposit and
> interest).

2.  For the LMSA program the total claim limit is the security deposit
    and the remainder of one month's contract rent.

3.  For the PD program the limit is two month's rent less the security
    deposit collected or potentially collected.

**Section 5-4 OWNER/AGENT CLAIM TIMELINES**

A.  Submission deadline:

> The claim forms must be received by HUD or the CA within 180 calendar
> days from the date the vacated unit is available for occupancy.

B.  Start Date: N/A

C.  Ending date: N/A

D.  Length of claim period: N/A

**Section 5-5 HUD OR CA CLAIM REVIEW PROCESS**

In addition to the general review requirements in Section 1-6, the
reviewer must:

A.  Review all calculations on HUD-52671-A for accuracy.

B.  Confirm that the appropriate security deposit was collected from the
    tenant. If the owner/agent did not collect the appropriate security
    deposit from the tenant, the claim will be reduced by the amount of
    the security deposit the owner/agent did not collect.

C.  Confirm that any other charges due under the lease are allowed under
    the lease for the project.

D.  If the tenant did not make payment, confirm that the owner/agent
    pursued the debt through a collection agency and the collection
    agency attempted to collect the debt.

E.  Review the owner/agent breakdown of costs to repair the damages and
    confirm that the costs are reasonable for the work described.

F.  Confirm that the damage charges were not due to normal wear and tear
    but were for extraordinary repairs and/or replacements. Appendix 5C
    provides guidance on the distinction between allowable claims for
    tenant damages and normal wear and tear on a unit and may be
    provided to an owner/agent for clarification on this matter.

G.  Verify that the owner/agent used the life expectancy for replaceable
    items to calculate how much, if any, of the replacement cost should
    be charged to the tenant.

**Section 5-6 REIMBURSEMENT OF SPECIAL CLAIMS PAYMENTS**

A. Any reimbursement from HUD received by the owner must be applied
first

toward any unpaid rent due under the lease.

1.  No reimbursement may be claimed for unpaid rent for the period after
    termination

> of tenancy.

2.  If the tenant reimburses the owner/agent for the monies owed after a
    claim has been paid for unpaid rent, other charges due under the
    lease, or tenant damages, the owner/agent must refund the tenant's
    payment to HUD.