How to Get Cooperation on Household Transfers, Avoid Noncompliance

It’s not unusual for a household to request a transfer to a new unit at a tax credit site. The household may want to get away from noisy neighbors, want a bigger unit, or have a better view. Or there may be a change in household composition or a reasonable accommodation request for a unit that would meet the needs of a disabled household member better than the current one. Also, the Violence Against Women Act (VAWA) requires tax credit sites to have emergency transfer plans in place for victims of covered VAWA violence.

But, if households come to expect that you’ll move them whenever something better comes along, you and your staff will be burdened with administrative duties. And, if you grant a household’s transfer request without proper thought, you may wind up violating the tax credit law and costing the owner tax credits.

To avoid overburdening your staff and keep the owner’s tax credits safe, consider creating a transfer policy for your site and incorporate it as part of your lease. This way, you’re likely to lower the number of transfer requests. And you’ll be in a better position to get households to cooperate with you after you agree to transfer them.

The degree of cooperation you’ll need from households may vary with each transfer. But at the very least, you should require the transferring household to sign a form acknowledging that the transfer doesn’t affect its obligations under the lease and the tax credit law. We’ll give you a Model Form: Have Households Acknowledge Transfer, Continuation of Responsibilities that you can use to get these acknowledgments.

How Transfers Affect Credits

Before you agree to transfer a household to a new unit at your tax credit site, make sure you and your staff understand how such transfers affect tax credits. This way, you can avoid making a mistake that could cost the owner its credits.

Transfer to unit in same building. When you transfer a household to a different unit in the same building, the transfer won’t affect the household’s eligibility. That’s because the two units just swap status with each other. In other words, the transfers aren’t prohibited and households aren’t required to qualify under current income limits to transfer as if they were new move-ins. Especially if a building consists of 100 percent tax credit units, these transfers don’t affect tax credit building compliance because the applicable fraction is still 100 percent.

For example, if a household’s income increases to more than 140 percent of the maximum allowable income (or 170 percent, in the case of deep rent-skewed units) by the time it moves, the new unit will become over-income. And the old unit will take on the status that the new unit had—empty, vacant, low-income, or market-rate—before the household moved into it.

However, because units in buildings with market-rate units also switch status upon transfer, you may need to be mindful of how the transfer may affect the building’s applicable fraction. A building’s applicable fraction may be negatively affected if you’re transferring a household into a formerly market-rate unit of differing size. If the new unit is smaller than the old unit, the fraction could go down, which could prevent the owner from claiming all its credits. So make sure you recalculate your applicable fraction or check with your accountant or tax credit consultant before you agree to any transfers.

Transfer to unit in different building. If you have more than one building at your tax credit site, you may transfer a household to a unit in a different building as long as both buildings are considered to be part of a multiple building project. If you are unsure whether a building is included in the project, it’s important to check with the owner to see what was elected. Owners must commit to their decision when they file IRS Form 8609. Make sure you get one Form 8609 for each building at the site, then review this form to confirm certain key elections your site owner made.

If the owner checked “yes” on line 8b of both forms, then both buildings are part of a multiple building project. In this case, households may transfer to a different building in the same project as long as their income doesn’t exceed 140 percent of the maximum income limit for the site, based on their most recent income certification. This is part of the available unit rule.

However, for households residing in 100 percent projects, according to the IRS, owners and managers may transfer households between buildings within the site even if they don’t know the household’s current income.

If “no” is checked on line 8b for either one of the buildings, then the owner has chosen to treat the buildings as separate projects and transfers between the two buildings can’t take place. Instead, the household will need to be considered as a new move-in, and must qualify again for the LIHTC program.

Fair housing violations. When you consider transfer requests, be careful not to violate fair housing law. In a recent case, the Housing Authority of the City of Dallas, Texas (DHA) got in trouble because it was found to have discriminated against a tenant. The tenant asked for a reasonable accommodation to move to a ground-floor unit after a car accident severely limited her ability to climb the stairs to her second-floor apartment. The housing authority denied her request and the tenant was forced to crawl up and down the stairs to access or leave her home, causing her physical pain, injury, and humiliation. HUD also found that DHA retaliated against the tenant after she requested a ground-floor unit by refusing to accept her rental payments and then evicting her.

The Fair Housing Act prohibits discrimination in housing because of disability. This includes refusing to provide reasonable accommodations for persons with disabilities when necessary. This also means that you’re not required to make an exception to your site’s rules, policies, or services unless it’s necessary for a person with a disability to have an equal opportunity to use and enjoy the dwelling.

The law considers a requested accommodation to be necessary when there is some identifiable relationship between the requested accommodation and the individual’s disability, according to HUD guidelines. Suppose you receive a transfer request from a household asserting that they need a quiet unit to protect their mental health. In the request, it was never made clear precisely how the transfer request was linked to or made necessary by their disabilities. If the disability isn’t obvious, then you may request reliable disability-related information to verify that the person meets the FHA’s definition of disability. And unless the link between the disability and the requested accommodation is readily apparent, you may seek information necessary to evaluate whether the requested accommodation is needed because of a disability. And any disability-related information must be kept confidential, unless disclosure is required by law.

How Lease Clause Helps

Using a lease clause like our Model Lease Clause: Get Households to Cooperate with Unit Transfers will benefit you in two ways:

Keep transfer requests to a minimum. If you don’t have a tough transfer policy at your site, everyone will want to transfer to a better unit when one becomes available. Dealing with so many transfer requests can be an administrative burden. And the more requests you get, the greater the risk that you’ll grant a request that doesn’t comply with tax credit rules. Our lease clause helps prevent these problems by getting households to agree to follow your household transfer policy, beginning when they sign their lease. If households understand that transfers aren’t automatic or easily granted, they won’t be as quick to request them.

Get households to cooperate with transfers. Our lease clause also gets households to promise to cooperate by giving you any information, documentation, or interviews that you may need before a transfer to keep your site in compliance. For example, if you’re transferring a household to a unit in a different building at your site, you’ll need to redo its initial certification to see whether they’re eligible. By letting households know what may be needed of them, and by requiring them to comply when they sign the lease, you’ll have the right to prevent transfer if households don’t cooperate.

Get Signed Acknowledgment at Time of Transfer

Although what you’ll need from households after transfer may vary, at a minimum, households should sign a form acknowledging the transfer and the continuation of their responsibilities under the lease and the tax credit law. Having each household sign and date an acknowledgment on the day they transfer will help you in two ways:

Give you proof of transfer. By having households fill out a form like ours on the day of transfer, you’ll have proof of the transfer, which you can show the IRS or your state housing agency during an audit. For example, you can use the form to prove you transferred a household to a unit in the same building, and therefore, didn’t have to redo their initial certification. Make sure your acknowledgment has all the information you need to prove the transfer.

Get households to acknowledge continuing responsibilities. Our form requires households to acknowledge that their responsibilities under the lease and the tax credit law are still binding even though they transferred. It also gets households to acknowledge that the date of their annual recertification hasn’t changed. By including these acknowledgments, you’ll protect yourself if a household later argues that a particular lease restriction or tax credit requirement doesn’t apply to it because it transferred. Remember to have each household member who signed the lease sign and date the form when completed.