[Code of Federal Regulations]
[Title 24, Volume 4]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 24CFR902.79]

[Page 280-282]
 
                 TITLE 24--HOUSING AND URBAN DEVELOPMENT
 
CHAPTER IX--OFFICE OF ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING, 
               DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
 
PART 902--PUBLIC HOUSING ASSESSMENT SYSTEM--Table of Contents
 
                 Subpart G--PHAS Incentives and Remedies
 
Sec. 902.79  Substantial default.

    (a) Events or conditions that constitute substantial default. The 
following events or conditions shall constitute substantial default.
    (1) HUD may determine that events have occurred or that conditions 
exist that constitute a substantial default if a PHA is determined to be 
in violation of Federal statutes, including but not limited to, the Act, 
or in violation of regulations implementing such statutory requirements, 
whether or not such

[[Page 281]]

violations would constitute a substantial breach or default under 
provisions of the relevant ACC.
    (2) HUD may determine that a PHA's failure to satisfy the terms of a 
memorandum of agreement entered into in accordance with Sec. 902.75, or 
to make reasonable progress to execute or meet requirements included in 
a memorandum of agreement, are events or conditions that constitute a 
substantial default.
    (3) HUD shall determine that a PHA that has been designated as 
troubled and does not show substantial improvement, as defined in 
Sec. 902.75(g)(2), is in substantial default.
    (4) HUD may declare a substantial breach or default under the ACC, 
in accordance with its terms and conditions.
    (5) HUD may determine that the events or conditions constituting a 
substantial default are limited to a portion of a PHA's public housing 
operations, designated either by program, by operational area, or by 
development(s).
    (b) Notification of substantial default and response. If information 
from an annual assessment or audit, or any other credible source 
(including but not limited to the Office of Fair Housing Enforcement, 
the Office of the Inspector General, a judicial referral or a referral 
from a mayor or other official) indicates that there may exist events or 
conditions constituting a substantial breach or default, HUD shall 
advise a PHA of such information. HUD is authorized to protect the 
confidentiality of the source(s) of such information in appropriate 
cases. Before taking further action, except in cases of apparent fraud 
or criminality, and/or in cases where emergency conditions exist posing 
an imminent threat to the life, health, or safety of residents, HUD 
shall afford the PHA a timely opportunity to initiate corrective action, 
including the remedies and procedures available to PHAs designated as 
troubled PHAs, or to demonstrate that the information is incorrect.
    (1) Form of notification. Upon a determination or finding that 
events have occurred or that conditions exist that constitute a 
substantial default, the Assistant Secretary shall provide written 
notification of such determination or finding to the affected PHA. 
Written notification shall be transmitted to the Executive Director, the 
Chairperson of the Board, and the appointing authority(ies) of the 
Board, and shall include, but is not limited to:
    (i) Identification of the specific covenants, conditions, and/or 
agreements under which the PHA is determined to be in noncompliance;
    (ii) Identification of the specific events, occurrences, or 
conditions that constitute the determined noncompliance;
    (iii) Citation of the communications and opportunities to effect 
remedies afforded pursuant to paragraph (a) of this section;
    (iv) Notification to the PHA of a specific time period, to be not 
less than 10 calendar days, except in cases of apparent fraud or other 
criminal behavior, and/or under emergency conditions as described in 
paragraph (b)(4) of this section, nor more than 30 calendar days, during 
which the PHA shall be required to demonstrate that the determination or 
finding is not substantively accurate; and
    (v) Notification to the PHA that, absent a satisfactory response in 
accordance with paragraph (b) of this section, HUD will refer the PHA to 
the Enforcement Center, using any or all of the interventions specified 
in Sec. 902.83, and determined to be appropriate to remedy the 
noncompliance, citing Sec. 902.83, and any additional authority for such 
action.
    (2) Receipt of notification. Upon receipt of the notification 
described in paragraph (b)(1) of this section, the PHA must demonstrate, 
within the time period permitted in the notification, factual error in 
HUD's description of events, occurrences, or conditions, or show that 
the events, occurrences, or conditions do not constitute noncompliance 
with the statute, regulation, or covenants or conditions to which the 
PHA is cited in the notification.
    (3) Waiver of notification. A PHA may waive, in writing, receipt of 
explicit notice from HUD as to a finding of substantial default, and 
voluntarily consent to a determination of substantial default. The PHA 
must concur on the

[[Page 282]]

existence of substantial default conditions which can be remedied by 
technical assistance, and the PHA shall provide HUD with written 
assurances that all deficiencies will be addressed by the PHA. HUD will 
then immediately proceed with interventions as provided in Sec. 902.83.
    (4) Emergency situations. In any situation determined to be an 
emergency, or in any case where the events or conditions precipitating 
the intervention are determined to be the result of criminal or 
fraudulent activity, the Secretary or the Secretary's designee is 
authorized to intercede to protect the residents' and HUD's interests by 
causing the proposed interventions to be implemented without further 
appeals or delays.

[65 FR 1738, Jan. 11, 2000, as amended at 65 FR 36046, June 6, 2000]