[Link to
GCH-0004](http://www.hud.gov/offices/adm/hudclips/lops/GCH-0004LOPS.doc)

[Link to GCH-0033 (Index
2.300)](http://www.hud.gov/offices/adm/hudclips/lops/GCH-0033LOPS.doc)

[Link to
GCH-0037](http://www.hud.gov/offices/adm/hudclips/lops/GCH-0037LOPS.doc)

[Link to
GCH-0082](http://www.hud.gov/offices/adm/hudclips/lops/GCH-0082LOPS.doc)

[Link to
GCH-0083](http://www.hud.gov/offices/adm/hudclips/lops/GCH-0083LOPS.doc)

[Link to
GCH-0074](http://www.hud.gov/offices/adm/hudclips/lops/GCH-0074LOPS.doc)

Legal Opinion: GCH-0067

Index: 2.375, 2.300, 2.155, 2.296

Subject: Applic. of Sec. 18 to Mutual Help and Turnkey III

July 23, 1992

MEMORANDUM FOR: Dominic A. Nessi, Director

Office of Indian Housing, PI

FROM: Robert S. Kenison, Associate General Counsel, Office of

Assisted Housing and Community Development, GC

SUBJECT: Applicability of Section 18 to the Mutual Help

and Turnkey III Homeownership Programs

On March 11, 1992, we sent you a memorandum concerning the

applicability of section 18 of the U.S. Housing Act of 1937

(\"Act\") to damaged or destroyed units in both the public housing

rental program and the Mutual Help Homeownership program. Our

opinion stated that Section 18 did not apply to the voluntary or

involuntary demolition of Mutual Help homeownership units. In

response to our memorandum, you sent an April 3, 1992 memorandum

requesting clarification of our opinion. As a result of your

request we have had occasion to reconsider the advice that we

gave on the inapplicability of section 18 to the Mutual Help

Homeownership program and have determined that our earlier

opinion was too broad.

The Mutual Help Homeownership program is designed to provide

that upon completion of certain obligations the homebuyer will

obtain legal title to the unit and will become a homeowner. The

conveyance of the homeownership unit to the homebuyer in

accordance with the requirements of the homeownership program,

does not trigger the applicability of the section 18 demolition

and disposition requirements. 24 CFR 905, Subpart M, Disposition

and Demolition of Projects, contains the regulatory provisions

relating to the demolition and disposition of Indian housing

projects. 24 CFR 905.921(b) states that the requirements of the

subpart are inapplicable to the \" c onveyance of Indian housing

for the purpose of providing homeownership opportunities for

lower income families under section 21 of the Act, the Turnkey

III or Mutual Help Homeownership Opportunity programs, or any

other homeownership programs established under section 5(h),

6(c)(4)(D), or title II of the Act.\"

However, any other action by an IHA to dispose of or

demolish an Indian Housing project is subject to the requirements

of section 18 and 24 CFR Subpart M. As indicated in our March

11, 1992 opinion, this includes any voluntary demolition of a

unit after it has been damaged by fire or other casualty. Where

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a unit has been substantially destroyed such that it is clear

that the unit is incapable of being repaired, the requirements of

section 18 are inapplicable. However, where the damages caused

by the external forces are not so severe as to eliminate the

possibility of repair, any decision by the IHA to demolish the

unit is subject to the requirements of section 18.

With respect to the issues raised in your memorandum of

April 3, 1992, once it is determined that section 18 is

inapplicable to a given situation, none of the requirements of

section 18, including the replacement housing requirements, must

be satisfied. On the other hand, once it is determined that

section 18 is applicable to a given situation, all of the

requirements of section 18, including the replacement housing

requirements, must be satisfied by the demolition or disposition.

The IHA cannot decide that vacancy rates or other reasons are

sufficient to decide not to replace a unit. Of course the IHA is

not required to replace the demolished or disposed of unit with

another Mutual Help homeownership unit on the same site. The IHA

has the full range of replacement housing options set forth at

24 CFR 905.935 for a replacement housing plan.

With respect to other provisions of the regulations or the

ACC bearing on the damage or destruction of units, they must be

read in conjunction with the requirements of section 18 and the

implementing regulations. For instance, 24 CFR 905.452(b)(2)

requires that an IHA must consult with an affected homebuyer with

respect to the decision to repair or rebuild a damaged or

destroyed unit, and that any dispute between the IHA and the

homebuyer will be submitted to HUD for final determination.

There is nothing in this provision that is inconsistent with the

demolition and disposition requirements. This provision requires

an IHA to repair or rebuild a unit unless there is good reason

for not doing so; it further provides a specific procedure for

consultation with the homebuyer on the determination as to

whether a damaged or destroyed unit is capable of being repaired.

Once that determination is made section 18 is or is not

applicable depending upon the ultimate determination. In the

event that you find an actual inconsistency between applicable

statutory, regulatory, or contractual provisions, we will provide

you with any legal advice necessary to resolve the conflicts or

inconsistencies.

Finally, you have asked whether the provisions of 24 CFR

905.925 on the relocation of displaced tenants apply in the

situation where a unit is destroyed by external forces so as not

to be subject to the requirements of section 18. Since the cited

relocation provisions are in furtherance of implementation of

section 18 requirements, they are not applicable to a situation

in which section 18 itself is inapplicable. However, any

displaced tenant would be entitled to applicable Federal

preferences in any application for assistance to the IHA.

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We trust that this memorandum has clarified our March 11,

1992 memorandum and has responded to all the questions raised in

your April 3, 1992 memorandum. If you have any questions or need

additional information please contact Michael Reardon.