March 20, 2002

SUBJECT:     Approval of New Management Agent             

            TO:     Program Directors

                        MFH Rural Development Specialists

USDA, Rural Development, Washington

PURPOSE/INTENDED OUTCOME:

To establish policies for the approval of new management agents in the multi-family housing programs in Washington State. 

COMPARISON WITH PREVIOUS AN:

This AN replaces Washington AN 844 (1930-C) dated January 29, 2001 that expired January 29, 2002.

IMPLEMENTATION RESPONSIBILITIES:

The Borrower is responsible for seeking out and selecting a management agent, but the selection is subject to the review and approval by this agency.  USDA Rural Housing Service (RHS) reviews management agent performance, experience and capabilities to protect the public and our own interest.  A management agent’s contract is with the project owner.  RHS will not unreasonably withhold approval of the proposed agent for a property.

This AN establishes the policies and procedures to be used in the approval of new management agents for Washington State, USDA Rural Housing Service (RHS) financed properties.  For this purpose, a new management agent is defined as:

1)      An existing or newly formed professional real estate management firm/entity proposing to manage a RHS financed multi-family housing property.  

Or

2)      Owners of RHS multi-family housing properties proposing to owner/manage their own RHS multi-family housing property.

Examples of entities eligible to apply to be an approved management agent are:  professional real estate management firms, housing authorities, non-profit organizations, individual proprietorships, or other entities with the legal capacity and proven experience and expertise to carry out the proposed management operations.  All applicants must demonstrate previous acceptable background and experience in managing multi-family housing properties such as conventional multi-family properties, HUD properties, tax credit properties, or other similar state or federally funded multi-family housing properties.  

The following documents are required to be submitted for RHS review to be considered for approval. 

1.                  A written notice, at least 30 days in advance, to RHS from the owner (or appropriate owner representative) indicating the plan to change management companies and the proposed effective date.

2.                  Completed Identity of Interest Forms – RD-1944-30 and RD 1944-31

3.                  Previous Participation Certification – Form RD 1944-37

4.         Outline for Prospective Management Agent – RD Instruction 1930-C, Exhibit B-4 or B-5

as appropriate.  The information may be submitted in resume format as long as all the information in Exhibit B-4 or B-5 is included.  The information must also include a description of experience and expertise to carry out the proposed management activities and knowledge of Rural Development requirements.

5.         Proposed Management Plan – see RD Instruction 1930-C, Exhibit B-1 for Guidelines

6.                  Proposed Management Agreement, if applicable – see RD Instruction 1930-C, Exhibit

B-2 and B-3 for Guidelines and Requirements.

7.         Copies of proposed forms and documents that will be used in project operations including lease, waiting list, occupancy standards, house rules and regulations, application form, verification and release forms for tenant certification, tenant notices for non-payment of rent and eviction and similar documents.

8.         Affirmative Fair Housing Marketing Plan – form HUD-935.2.  Include copies of advertising efforts, brochures and letters, a photograph of the project sign, and a description of staff training plans.

9.         Copies of lender inspection reports for other properties managed, or a written lender’s recommendation or an evaluation by a lender or property owner regarding conditions of properties managed that demonstrate management agent skill and qualification.

10.       Other information as determined necessary by RHS to evaluate the experience, ability, and qualifications of proposed management agent.

RHS Actions

The Servicing Official will review the above information to evaluate the qualifications and experience of the proposed management agent.  As part of the Previous Participation review, contact will be made with other federal agencies, such as Housing and Urban Development, to verify the proposed management agent’s performance with that agency.

If after a careful evaluation of the proposed management agent’s experience, qualifications, and past performance the proposed agent cannot be approved, a denial letter will be prepared and sent to the management agent.  This letter will clearly describe the basis for our denial.

If the qualifications, experience and past performance of the proposed management agent are acceptable, the management agent will receive full approval or conditional approval as described below.  The Servicing Official may arrange a meeting with the management agent representatives to discuss RHS requirements and the information submitted, if needed.

Approval

When the qualifications, experience, training and past performance of the proposed management agent show a thorough understanding of RHS requirements related to management, maintenance, occupancy, and reporting, the management agent will be approved.  The necessary management documents will be signed by RHS and appropriate copies provided to the borrower and management agent.

Conditional Approval

If RHS determines that the proposed management agent does not have sufficient experience, qualifications or training to clearly show it has the capabilities to successfully carry out the management requirements of RHS properties without additional training and experience, conditional approval may be granted.

If Conditional Approval is granted, the conditional approval period will be no less than 12 months or more than 24 months, at the discretion of RHS. During the Conditional Approval period, RHS may, at its discretion, limit the total number of properties managed by the new management agent to reasonable quantities commensurate with experience and performance.

Quarterly reports must be submitted for at least the first year to ensure the new management agent is operating the project in accordance with all regulations and all project accounts are being properly funded.  Quarterly reports may be required in the second year at the discretion of the Rural Housing Service. 

An initial visit to the property by the Servicing Official will be made within 90 days after the management agent begins operations to review general office organization including establishment of the waiting list, tenant files, and sign postings.  During the conditional approval period, the Servicing Official will monitor the management agent’s performance, including a visit to the property at the end of 12 months of operation.  During this visit, the adequacy of project maintenance will be determined and an evaluation of office operations including tenant certifications, waiting lists and tenant files will be made.  A sampling of tenants may be interviewed to determine the degree of management agent responsiveness to tenant concerns.

At the end of the probationary period, the Servicing Official will evaluate the overall performance of the management agent and their demonstrated ability to effectively operate and manage the property.  If needed, a management agent review and visit to the property may be completed.

If the management agent’s performance is determined to be inadequate in any respect, the approval of the management agent will be rescinded and the owner notified of the need to find acceptable management.

If the management agent’s performance has been acceptable, the owner and management agent will be notified and the management agreement will start on a routine three-year basis.

/s/                                

JACKIE. J. GLEASON

State Director