What Inspectors Can and Cannot Do During REAC Inspections

IRS Revenue Procedure 2016-15 provides that the REAC protocol is among the inspection protocols that satisfy both Section 1.42-5(d) and the physical inspection requirements of Section 1.42-5T(c)(2)(ii) and (iii). According to Revenue Procedure 2016-15, one of the qualifications for an inspection to be considered as being performed under the REAC protocol is if the inspection is performed by HUD REAC inspectors (or inspectors certified by HUD).

To get a better sense of what REAC inspectors can and cannot do, we’ll go over HUD Inspector Notice No. 2015-02 issued in February 2016, which created new business rules for active REAC inspectors. This set of REAC Inspector Business Rules is an update to the existing inspector business rules dated Jan. 20, 2006. The memorandum sets forth basic rules of behavior, a Code of Conduct, and instructions to REAC inspectors on how to handle situations that may arise.

The major changes to the REAC Inspector Business Rules that will affect owners and managers relate to updates to the Code of Conduct. Here’s the section of the notice that relates to what REAC inspectors can and cannot do:

Inspectors must:

• Display the REAC-issued photo identification card throughout the entire inspection;
• Respect resident privacy. For example, inspectors must not attempt to open a closed door in a residence; they defer to the property representative;
• Comply with reasonable requests from residents and project representatives during the inspection;
• Defer all questions from residents regarding the property to the property representative accompanying the inspector; and
• Defer all questions from third parties about the inspection or the results to the property owner or representative.

Inspectors must not:

• Express opinions or comment about the nature or condition of the property or residents;
• Make representations or promises to residents or property representatives or staff that items will be repaired based on inspection results;
• Attend an inspection, or participate in an inspection in any capacity, that is being conducted by another HUD-certified UPCS inspector while providing independent consulting services of any kind on behalf of the property owner or representative. There are some firms that may utilize active REAC inspectors to conduct shadow inspections to assist owners and managers on the day of the inspection, and this practice is no longer be permitted;
• Include in attendance or participation during a UPCS inspection any unauthorized person, including family, friends, or UPCS certified/decertified inspectors;
• Use any facility on a property, property owner’s office, housing agency office, or HUD field office to conduct personal business;
• Use profanity or other offensive language prior to, during, or after an inspection;
• Engage in fraudulent activities, such as, but not limited to, falsifying an inspection;
• Conduct an inspection under the influence of alcohol or drugs;
• Smoke anywhere on a property;
• Threaten, verbally or in writing, residents, inspection participants, property representatives, or any other individual with whom the inspector comes in contact;
• Carry a firearm or weapon of any kind, or any other object that could be construed as a weapon, on a property;
• Commit theft or intentional damage to property;
• Cancel an inspection due to a Quality Assurance review;
• Threaten or engage in violence against any person while conducting an inspection; and
• Engage in sexual misconduct or any other type of unwanted conduct.