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May 13

All About Voucher Program Rent, Part 2: Side Payments

Posted on May 13, 2015 at 12:27 pm by Dawn Corrigan

Note: This is the second in a four-part series on voucher program rents. Part One covered Affordability and Rent Reasonableness.

Pensacola Housing keeps a close eye on the local rental market to ensure that the rent reasonableness determinations made for assisted units are truly in line with market-rate rents for unassisted units.

Nonetheless, there will be occasions when the contract rent offered to a landlord, based on the Housing Office’s analysis, doesn’t match the landlord’s expectations.

When this happens, the landlord must make a business decision about whether or not to accept the rent Pensacola Housing has determined is reasonable.

Landlords who disagree with Pensacola Housing’s rent determination are free to rent their property through other means; or, if affordability is the issue, to select a voucher tenant family with more household income. When a landlord declines Pensacola Housing’s proposed rent, our staff will let the tenant know a different unit must be selected. A landlord’s decision to decline a rent offer will never jeopardize the possibility of doing future business with the Housing Office.

However, what the landlord cannot do under any circumstances is ask the tenant to make up the difference between the affordable or reasonable rent, and the rent the landlord requested.

The practice of collecting money from a voucher tenant in excess of the contract rent is known as a “side payment.” Collecting side payments is a violation of the HAP Contract, and when such a violation occurs, HUD stipulates that the only remedy is for the landlord to repay the side payments back to the tenant immediately.

Collecting side payments is also illegal under the Federal False Claims Act. Landlords who are found guilty of violating this law can be ordered to pay penalties ranging from $5,500 to $11,000 per occurrence.

Asking the tenant to cover the gap between a requested rent and an approved rent is one common source of side payments. Other possible scenarios that can lead to side payments include:

  • A landlord initially agrees to provide certain utilities, but then later demands payment toward those utilities from the tenant.

  • A landlord initially agrees to provide certain utilities, but then later asks the tenant to take over those utility accounts without notifying Pensacola Housing in advance.

  • A landlord has certain recurring fees (pet fee, septic tank fee, etc.) built into her standard lease, and attempts to collect them from the tenant, on top of the tenant rent portion.

Remember, a landlord is not generally under obligation to pay for the unit’s essential utilities. It’s perfectly appropriate to structure the lease and HAP Contract such that the tenant is responsible for them, as long as the utilities are separately metered so the tenant controls her own accounts.

However, if the HAP Contract indicates the landlord is paying for certain utilities, then the landlord must pay them without billing the tenant. In addition, Pensacola Housing must be notified in advance if utility assignments will be changed. Per HUD regulations, the Housing Office must then conduct a new inspection, redetermine affordability and reasonableness, and execute a new HAP Contract. If utility assignments are changed without these steps, the HAP Contract is considered breached, and the landlord may have a debt to the Housing Office.

A good rule of thumb for voucher program landlords is that they should not collect any recurring monthly payments from voucher tenants except for the tenant portion of the contract rent. Certain one-time fees, such as application fees and security deposits, are acceptable to collect prior to lease-up, as long as they comply with Florida landlord-tenant law. It is also appropriate to charge reasonable late fees for delayed payment of rent, provide the late fee policy is defined in your lease.

But except for these items, the only money voucher landlords should be collecting from the tenant is the tenant portion of the contract rent, as determined by Pensacola Housing.

You might think of your rent as including certain maintenance or service fees. That’s fine, as long as those fees were built into the lump-sum rent amount you proposed on the RTA, and it was found to be affordable and reasonable. But you cannot propose a rent, have it approved, and then collect additional fees or surcharges from the tenant. Even if such fees are called out in your lease, the Tenancy Addendum voids them and makes them illegal.

Pensacola Housing appreciates the participation of our voucher program landlords. We consider you our valued business partners. But when it comes to side payments, we must ensure that our local program operates within the law at all times.

We’re also aware that voucher tenants are not always innocent victims when it comes to side payments. Some program participants pay them willingly—in fact, in some cases, side payments are the tenant’s idea! We’ll work to hold such tenants equally accountable to the program rules. But landlords should remember that they are violating the HAP Contract and the Federal False Claims Act when collecting side payments. Therefore, it’s always the best business practice to be honest with the Housing Office regarding the contract rent.

And, for voucher tenants: if your landlord suggests or demands side payments, do not pay them, and please contact your housing counselor immediately!

Housing Tip 2Housing Tip: For more information, visit HUD’s OIG website to read about a 2014 court settlement in the Eastern District of Pennsylvania, where a voucher landlord was ordered to pay $19,120 after illegally collecting side payments under the guise of “trash removal fees.”

Part Three in this series reviews 
Utility Assignments. Part Four explains The Importance of the Utility Chart.