CHAPTER 5 

RENT AND LEASE REQUIREMENTS 

5.1 INTRODUCTION 

AHP rent and lease requirements can be summarized in 

three key points: 

1.	 There are two sets of rent limits, VLI and LI, which are 

applied to units occupied by VLI and LI tenants, 

respectively, and which vary by unit size. 

2.	 Rent limits act as rent ceilings for shelter rent, along 

with prevailing market rents. Actual rents charged 

may be less than the maximums, depending on 

market conditions and the need to make units 

affordable to occupants. 

3.	 Once owners determine income eligibility and set the 

rent for a QU, execute a lease containing two 

mandatory lease provisions with each eligible 

household. The lease also must conform with local, 

state, and federal laws pertaining to dwelling leases. 

This chapter explains the application of AHP maximum 

rents. It also provides guidance regarding the contents of 

dwelling leases, and direction regarding federal statutes 

that pertain to property owners. 

5.2 AHP RENT LIMITS 

To assure that units made available to Low and Very Low 

Income tenants are affordable to these households, the 

LURA establishes maximum rents that owners can charge 

for these units. 

The maximum rent limits are set at levels considered to be 

affordable to Low and Very Low Income households, and 

are based on annual HUD calculations of the median 

income for the area in which the property is located. 

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OBTAINING RENT LIMITS 

Owners should obtain copies of the rent limits for their 

properties from their state monitoring agency. The 

agency will update and disseminate updated limits each 

year as area income figures are revised. Contact the 

monitoring agency to verify the date of the current 

limits. 

The rent limits for each type of QU will vary by unit size. 

The table below is a hypothetical examples of the 1997 

rent limits for Hometown, USA, by unit size. 

SAMPLE RENT LIMITS 

Hometown, USA - 1992 

Unit Size VLI Rent Limit LI Rent Limit 

Efficiency $248 $328 

1 - Bedroom $286 $378 

2 - Bedroom $322 $426 

3 - Bedroom $374 $499 

4 - Bedroom $435 $577 

The method used to establish the rent limits that apply to 

AHP properties is set forth in Exhibit B of the LURA and is 

the same for all properties: 

¤	 The VLI rent limits are established at 30 percent of the 

adjusted monthly income1

 for a household at 50 

percent of area median income, adjusting household 

size for different unit sizes; and 

As established under Section 3 of the United States Housing Act of 1937 and defined by HUD under the 

Section 8 program. See Chapter 3. 

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¤	 The LI rent limits are similarly computed, but at 65 

percent of area median income. 

Rent limits are adjusted annually when HUD publishes it 

median income figures each year. 

SPECIAL NOTE: AHP rent limits apply to the total 

contract rent (including assistance payments) if tenants 

receive Section 8 Existing Housing payments or other 

rental assistance. The share of the unit rent paid by 

tenants receiving rental assistance will vary, depending on 

the level of subsidy provided to the tenant. 

If rent limits are increased during the middle of the lease 

period due to the annual adjustment of the limits, the 

owner may raise the unit rent up to the revised applicable 

rent limit, subject to the lease and state and local law. 

If the rent limits for a QU decrease during the middle of 

the lease period, check with your State Monitoring Agency 

to determine how rents are to be adjusted. 

Properties Receiving Other
 

Public Assistance
 

Some properties may receive other forms of assistance 

such as Low Income Housing Tax Credits, HOME 

funds, or other types of financing that also impose rent 

limits. The rent limits for the programs may be different 

from AHP limits. In such cases, the most stringent 

(i.e., lowest) rent limit among the programs will prevail 

as the maximum rent that can be charged for those 

AHP units. 

In other words, just because AHP rent limits might be 

higher than the limits of the other program, owners still 

must adhere to the other program limits. Similarly, 

even when other programs set higher maximum rents, 

the maximum unit rent permitted for AHP units may not 

exceed the applicable AHP rent limit. 

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5.3 CHANGES IN THE STATUS OF QUs 

When the status of a QU changes due to a change in the 

eligibility of the tenant in that unit, the rent limits for that 

unit must be adjusted accordingly.2 

If a VLI-QU is re-designated as a LI-QU due to a change 

in the income of the tenant, the applicable rent limit for 

that unit is now the LI rent limit. For example, if a twobedroom VLI-QU in a property located in Hometown, USA 

becomes a LI-QU the rent limit changes from $322 to 

$426 (see chart above). 

Likewise, if an owner must re-designate a LI-QU as a VLIQU because the LI tenant's income has fallen beneath the 

latest VLI income limits, then the rent for that unit must 

now comply with the VLI rent limit. Using the example of 

a property in Hometown, USA, if a three-bedroom LI-QU is 

re-designed as a VLI-QU the rent limit changes from $499 

to $374. 

As discussed in Section 3.5, if a tenant of a QU is 

determined to be over the income limits (including the 

140% LI limit for recertification) at time of recertification, 

the rent for that unit is no longer restricted by AHP rent 

limits. Owners must follow the NAU replacement rules to 

remain in compliance with AHP guidelines. 

5.4 UTILITIES 

Utilities are not taken into account in the calculation of 

maximum rents. The AHP rent limits apply only to 

"contract rent” , i.e., the amount payable under the 

dwelling lease attributable to shelter. Unlike some other 

Federal housing assistance programs, the maximum 

permissible rent need not be adjusted for tenant-paid 

utilities. 

In addition, if provided for in the lease, owners may pass 

along owner-paid utility costs under the following 

conditions: 

 Any increases in rent resulting from these actions must conform with the dwelling lease and local tenantlandlord law. 

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�	 These costs must be passed on through separate 

assessments using an allocation method that 

equitably distributes these charges among all units, 

both restricted and unrestricted. 

�	 These assessments must reflect customary charges 

and must be based on reliable estimates or actual 

costs. 

At the discretion of the State Monitoring Agency, owners 

may be required to provide documentation of the above, 

including dwelling leases for unrestricted as well as 

restricted units. Such monitoring action in no way 

reduces a tenant's right to seek relief through regular legal 

channels if he or she suspects that utility assessments are 

not in compliance with this section. 

5.5 DWELLING LEASE REQUIREMENTS 

A. Background 

AHP does not specify a model dwelling lease to be used 

by owners. Owners have flexibility in determining the 

format, duration, and most other aspects of their lease 

documents, subject of course to state and local laws. 

Leases for QUs must specify the amount of rent being 

charged for shelter (e.g., the "contract" rent) and any 

additional charges, such as a surcharge for owner-paid 

utilities, as well as the two required provisions identified 

below. 

B. Term of Lease 

There is no prescribed term for dwelling leases, but each 

QU must have a lease at the time the unit is officially 

designated. Designation is "official" when a unit is noted 

as a VLI or LI QU on the property's unit listing and a TIC 

has been signed and dated by both parties. 

In order to simplify record-keeping, owners may wish to 

place QU tenants on annual lease terms which 

correspond to their recertification dates. However, 

owners will need to weigh other considerations in setting 

lease terms, such as whether one-year leases affect their 

flexibility to raise 

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rents if the published rent limits are increased during the 

lease term. 

C.	 Required Lease Provisions 

As specified in the LURA, owners must execute a lease 

agreement or lease addendum with tenants occupying 

QUs that contain the following two provisions establishing 

the obligations of their tenancy: 

(i)	 The lessee certifies the accuracy of the 

information provided in connection with the 

examination or re-examination of the Annual 

Income of the household of the lessee. 

(ii)	 The lessee agrees that the Annual Income and 

other eligibility requirements shall be deemed 

substantial and material obligations of his or 

her tenancy, that he or she will comply 

promptly with all requests for information with 

respect thereto from the lessor, FDIC, or FDIC's 

monitoring agency. The lessee's failure to 

provide accurate information regarding such 

requirements (regardless of whether such 

inaccuracy is intentional or unintentional) or 

refusal to comply with a request for information 

thereto shall be deemed a violation of 

substantial obligation of his or her tenancy and 

constitute cause for immediate termination 

thereof. 

The purpose of these clauses is to provide a legal basis 

for an owner to take action to terminate a tenancy for a 

tenant who refuses to comply in the future. Such actions 

must be in compliance with state and local laws. 

Owners may incorporate these two clauses verbatim 

either in the lease or in an addendum to the lease which is 

initialed by the parties. 

D.	 Prohibited Lease Provisions 

Lease provisions not allowed under other federally-related 

affordable housing programs are also prohibited under 

AHP. The following provisions may not appear in the 

dwelling lease for any QU: 

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¤	 Agreement to be sued. Agreement by the tenant to 

be sued, admit guilt, or to a judgment in favor of the 

owner in a lawsuit brought in connection with the 

lease. 

¤	 Treatment of property. Agreement by the tenant 

that the owner may take, hold or sell personal property 

of household members without notice to the tenant 

and a court decision on the rights of the parties. This 

prohibition, however, does not apply to an agreement 

by the tenant concerning disposition of personal 

property remaining in the unit after the tenant has 

moved out. The owner may dispose of this personal 

property in accordance with State law. 

¤	 Excusing the owner from responsibility. 

Agreement by the tenant not to hold the owner or the 

owner's agents legally responsible for actions or 

failure to act, whether intentional or negligent. 

¤	 Waiver of notice. Agreement by the tenant that the 

owner may institute a lawsuit without notice to the 

tenant. 

¤	 Waiver of legal proceedings. Agreement by the 

tenant that the owner may evict the tenant or 

household members without instituting a civil court 

proceeding in which the tenant has the opportunity to 

present a defense or before a court decision on the 

rights of the parties. 

¤	 Waiver of a jury trial. Agreement by the tenant to 

waive any right to a jury trial. 

¤	 Waiver of right to appeal court decision. 

Agreement by the tenant to waive the tenant's right to 

appeal or otherwise challenge in court a decision in 

connection with the lease. 

¤	 Tenant chargeable with cost of legal actions 

regardless of outcome. Agreement by the tenant to 

pay attorney fees or other legal costs even if the 

tenant wins the court proceeding by the owner against 

the tenant. The tenant, however, may be obligated to 

pay costs if the tenant loses. 

The purpose of prohibiting these clauses is to ensure that 

tenants are not required to waive their rights in advance. 

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These clauses should be removed or stricken from the 

lease form used for all AHP Qualified Units. Removal of 

these clauses does not prohibit owners from pursuing 

such actions by legal means to enforce provisions of the 

lease when lease violations occur. 

5.6	 APPLICABLE FEDERAL STATUTES 

This section is intended to inform owners of federal 

statutes which, although not AHP requirements, are 

nonetheless important. This information is provided in 

the spirit of ensuring that owners are aware of relevant 

(non-AHP) requirements. 

Please note that this section is not a complete listing of all 

non-AHP requirements with which owners may need to 

comply, and is provided as illustration only. Further 

information should be obtained from the monitoring 

agency, the local HUD office and/or legal counsel. 

State monitoring agencies are not required to monitor 

owners' degree of compliance with non-AHP 

requirements, such as those listed below: 

Fair Housing Provisions 

All owners of rental property in the U.S. must comply with 

applicable provisions of federal Fair Housing legislation. 

See Title VIII of the 1968 Civil Rights Act, commonly 

known as the Fair Housing Act (42 USC 3601). 

Monitoring agencies can provide basic information and 

referrals to other departments as appropriate. 

Americans with Disabilities Act (ADA) 

All owners of real property in the U.S. must comply with 

applicable provisions of the Americans with Disabilities Act 

(ADA), which went into effect on July 26, 1992. 

Monitoring agencies can provide basic information and 

referrals to other departments as appropriate. 

5.7	 CONFLICTS WITH STATE AND LOCAL 

STATUTES 

FDIC anticipates that there will be few instances where 

the requirements of the LURA will conflict with state or 

local statutes. Should a conflict occur, the state or local 

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statutes generally will take precedence. However, 

owners should consult with the monitoring agency in order 

to confirm whether such a conflict actually exists, based 

on the agency's interpretation of the statutes and the 

property's LURA. 

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