Texas Administrative Code › Title 10 - COMMUNITY DEVELOPMENT › Part 1 - TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS › Chapter 11 - QUALIFIED ALLOCATION PLAN (QAP) › Subchapter D - UNDERWRITING AND LOAN POLICY › Section 11.306 - Scope and Cost Review Guidelines

Current through Reg. 49, No. 28; July 12, 2024
(a) General
				  Provisions. The objective of the Scope and Cost Review Report (SCR) required
				  for Rehabilitation Developments (excluding Reconstruction) and Adaptive Reuse
				  Developments is to provide a self-contained report that provides a
				  comprehensive description and evaluation of the current conditions of the
				  Development and identifies a scope of work for the proposed repairs,
				  replacements and improvements to an existing multifamily property or identifies
				  a scope of work for the conversion of a non-multifamily property to multifamily
				  use. The SCR author must evaluate the sufficiency of the Applicant's scope of
				  work and provide an independent review of the Applicant's proposed costs. The
				  report must be in sufficient detail for the Underwriter to fully understand all
				  current conditions, scope of work and cost estimates. It is the responsibility
				  of the Applicant to ensure that the scope of work and cost estimates submitted
				  in the Application is provided to the author. The SCR must include a copy of
				  the Development Cost Schedule submitted in the Application. The report must
				  also include the following statement, "any person signing this Report
				  acknowledges that the Department may publish the full report on the
				  Department's website, release the report in response to a request for public
				  information and make other use of the report as authorized by law."
(b) For Rehabilitation Developments, the SCR
				  must include analysis in conformity with the ASTM "Standard Guide for Property
				  Condition Assessments. Baseline Property Condition Assessment Process (ASTM
				  Standard Designation: E 2018, or any subsequent standards as published)" except
				  as provided for in subsections (f) and (g) of this section.
(c) The SCR must include good quality color
				  photographs of the subject Real Estate (front, rear, and side elevations,
				  on-site amenities, interior of the structure). Photographs should be properly
				  labeled.
(d) The SCR must also
				  include discussion and analysis of:
(1)
				  Description of Current Conditions. For both Rehabilitation and Adaptive Reuse,
				  the SCR must contain a detailed description with good quality photographs of
				  the current conditions of all major systems and components of the Development
				  regardless of whether the system or component will be removed, repaired or
				  replaced. For historic structures, the SCR must contain a description with
				  photographs of each aspect of the building(s) that qualifies it as historic and
				  must include a narrative explaining how the scope of work relates to
				  maintaining the historic designation of the Development. Replacement or
				  relocation of systems and components must be described;
(2) Description of Scope of Work. The SCR
				  must provide a narrative of the consolidated scope of work either as a
				  stand-alone section of the report or included with the description of the
				  current conditions for each major system and components. Any New Construction
				  must be described. Plans or drawings (that are in addition to any plans or
				  drawings otherwise required by rule) and that relate to any part of the scope
				  of work should be included, if available;
(3) Useful Life Estimates. For each system
				  and component of the property the SCR must estimate its remaining useful life,
				  citing the basis or the source from which such estimate is derived;
(4) Code Compliance. The SCR must document
				  any known violations of any applicable federal, state, or local codes. In
				  developing the cost estimates specified herein, it is the responsibility of the
				  Applicant to ensure that the SCR adequately considers any and all applicable
				  federal, state, and local laws and regulations which are applicable and govern
				  any work and potentially impact costs. For Applications requesting Direct Loan
				  funding from the Department, the SCR author must include a comparison between
				  the local building code and the International Existing Building Code of the
				  International Code Council;
(5)
				  Program Rules. The SCR must assess the extent to which any systems or
				  components must be modified, repaired, or replaced in order to comply with any
				  specific requirements of the housing program under which the Development is
				  proposed to be financed, the Department's Uniform Physical Condition Standards,
				  and any scoring criteria including amenities for which the Applicant may claim
				  points. It is the responsibility of the Applicant to inform the report author
				  of those requirements in the scope of work; for Direct Loan Developments this
				  includes, but is not limited to the requirements in the Lead-Based Paint
				  Poisoning Prevention Act (42
				  USC §§
												4821-4846), the Residential
				  Lead- Based Paint Hazard Reduction Act of 1992 (42 USC §§
												4851-4856), and implementing regulations,
				  Title X of the 1992 Housing and Community Development Act at 24 CFR Part 35
				  (including subparts A, B, J, K, and R), and the Lead: Renovation, Repair, and
				  Painting Program Final Rule and Response to Children with Environmental
				  Intervention Blood Lead Levels ( 40 CFR Part 745 );
(6) Accessibility Requirements. The SCR
				  report must include an analysis of compliance with the Department's
				  accessibility requirements pursuant to Chapter 1, Subchapter B and §
											11.101(b)(8) of
				  this title (relating to Site and Development Requirements and Restrictions) and
				  identify the specific items in the scope of work and costs needed to ensure
				  that the Development will meet these requirements upon Rehabilitation
				  (including conversion and Adaptive Reuse);
(7) Reconciliation of Scope of Work and
				  Costs. The SCR report must include the Department's Scope and Cost Review
				  Supplement (SCR Supplement) with the signature of the SCR author. The SCR
				  Supplement must reconcile the scope of work and costs of the immediate physical
				  needs identified by the SCR author with the Applicant's scope of work and
				  costs. The costs presented on the SCR Supplement must be consistent with both
				  the scope of work and immediate costs identified in the body of the SCR report
				  and the Applicant's scope of work and costs as presented in the Application.
				  Variations between the costs listed on the SCR Supplement and the costs listed
				  in the body of the SCR report or on the Applicant's Development Cost Schedule
				  must be reconciled in a narrative analysis from the SCR provider. The
				  consolidated scope of work and costs shown on the SCR Supplement will be used
				  by the Underwriter in the analysis to the extent adequately supported in the
				  report; and
(8) Cost Estimates. The
				  Development Cost Schedule and SCR Supplement must include all costs identified
				  below:
(A) Immediately Necessary Repairs and
				  Replacement. For all Rehabilitation developments, and Adaptive Reuse
				  developments if applicable, immediately necessary repair and replacement should
				  be identified for systems or components which are expected to have a remaining
				  useful life of less than one year, which are found to be in violation of any
				  applicable codes, which must be modified, repaired or replaced in order to
				  satisfy program rules, or which are otherwise in a state of deferred
				  maintenance or pose health and safety hazards. The SCR must provide a separate
				  estimate of the costs associated with the repair, replacement, or maintenance
				  of each system or component which is identified as being an immediate need,
				  citing the basis or the source from which such cost estimate is
				  derived.
(B) Proposed Repair,
				  Replacement, or New Construction. If the development plan calls for additional
				  scope of work above and beyond the immediate repair and replacement items
				  described in subparagraph (A) of this paragraph, the additional scope of work
				  must be evaluated and either the nature or source of obsolescence to be cured
				  or improvement to the operations of the Property discussed. The SCR must
				  provide a separate estimate of the costs associated with the additional scope
				  of work, citing the basis or the source from which such cost estimate is
				  derived.
(C) Reconciliation of
				  Costs. The combined costs described in subparagraphs (A) and (B) of this
				  paragraph should be consistent with the costs presented on the Applicant's
				  Development Cost Schedule and the SCR Supplement.
(D) Expected Repair and Replacement Over
				  Time. The term during which the SCR should estimate the cost of expected repair
				  and replacement over time must equal the lesser of 30 years or the longest term
				  of any land use or regulatory restrictions which are, or will be, associated
				  with the provision of housing on the Property. The SCR must estimate the
				  periodic costs which are expected to arise for repairing or replacing each
				  system or component or the property, based on the estimated remaining useful
				  life of such system or component as described in paragraph (1) of this
				  subsection adjusted for completion of repair and replacement immediately
				  necessary and proposed as described in subparagraphs (A) and (B) of this
				  paragraph. The SCR must include a separate table of the estimated long term
				  costs which identifies in each line the individual component of the property
				  being examined, and in each column the year during the term in which the costs
				  are estimated to be incurred for a period and no less than 30 years. The
				  estimated costs for future years should be given in both present dollar values
				  and anticipated future dollar values assuming a reasonable inflation factor of
				  not less than 2.5% per annum.