[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: 24CFR904.111]

[Page 308-309]
 
                 TITLE 24--HOUSING AND URBAN DEVELOPMENT
 
CHAPTER IX--OFFICE OF ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING, 
               DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
 
PART 904--LOW RENT HOUSING HOMEOWNERSHIP OPPORTUNITIES--Table of Contents
 
               Subpart B--Turnkey III Program Description
 
Sec. 904.111  Nonroutine Maintenance Reserve (NRMR).

    (a) Purpose of reserve. The LHA shall establish and maintain a 
separate NRMR for each home, using a portion of the homebuyer's monthly 
payment. The purpose of the NRMR is to provide funds for the nonroutine 
maintenance of the home, which consists of the infrequent and costly 
items of maintenance and replacement shown on the Nonroutine Maintenance 
Schedule for the home (see paragraph (b) of this section). Such 
maintenance may include the replacement of dwelling equipment (such as 
range and refrigerator), replacement of roof, exterior painting, major 
repairs to heating and plumbing systems, etc. The NRMR shall not be used 
for nonroutine maintenance of common property, or for nonroutine 
maintenance relating to the home to the extent such maintenance is 
attributable to the Homebuyer's negligence or to defective materials or 
workmanship.
    (b) Amount of reserve. The amount of the monthly payments to be set 
aside for NRMR shall be determined by the LHA, with the approval of HUD, 
on the basis of the Nonroutine Maintenance Schedule showing the amount 
likely to be needed for nonroutine maintenance of the home during the 
term of the Homebuyers Ownership Opportunity Agreement, taking into 
consideration the type of construction and dwelling equipment. This 
Schedule shall (1) list each item of nonroutine maintenance (e.g., 
range, refrigerator, plumbing,

[[Page 309]]

heating system, roofing, tile flooring, exterior painting, etc.), (2) 
show for each listed item the estimated frequency of maintenance or 
useful life before replacement, the estimated cost of maintenance or 
replacement (including installation) for each occasion, and the annual 
reserve requirement, and (3) show the total reserve requirements for all 
the listed items, on an annual and a monthly basis. This Schedule shall 
be prepared by the LHA and approved by HUD as part of the submission 
required to determine the financial feasibility of the Project. The 
Schedule shall be revised after approval of the working drawings and 
specifications, and shall thereafter be reexamined annually in the light 
of changing economic conditions and experience.
    (c) Charges to NRMR. (1) The LHA shall provide the nonroutine 
maintenance necessary for the home and the cost thereof shall be funded 
as provided in paragraph (c)(2) of this section. Such maintenance may be 
provided by the homebuyer but only pursuant to a prior written agreement 
with the LHA covering the nature and scope of the work and the amount of 
credit the homebuyer is to receive. The amount of any credit shall, upon 
completion of the work, be credited to the homebuyer's EHPA and charged 
as provided in paragraph (c)(2) of this section.
    (2) The cost of nonroutine maintenance shall be charged to the NRMR 
for the home except that (i) to the extent such maintenance is 
attributable to the fault or negligence of the homebuyer, the cost shall 
be charged to the homebuyer's EHPA after consultation with the HBA if 
the hombuyer disagrees, and (ii) to the extent such maintenance is 
attributable to defective materials or workmanship not covered by 
warranty, or even though covered by warranty if not paid for thereunder 
through no fault or negligence of the homebuyer, the cost shall be 
charged to the appropriate operating expense account of the Project.
    (3) In the event the amount charged against the NRMR exceeds the 
balance therein, the difference (deficit) shall be made up from 
continuing monthly credits to the NRMR based upon the homebuyer's 
monthly payments. If there is still a deficit when the homebuyer 
acquires title, the homebuyer shall pay such deficit at settlement (see 
paragraph (d)(2) of this section).
    (d) Transfer of NRMR. (1) In the event the Homebuyer's Ownership 
Opportunity Agreement is terminated, the homebuyer shall not receive any 
balance or be required to pay any deficit in the NRMR. When a subsequent 
homebuyer moves in, the NRMR shall continue to be applicable to the home 
in the same amount as if the preceding homebuyer had continued in 
occupancy.
    (2) In the event the homebuyer purchases the home, and there remains 
a balance in the NRMR, the LHA shall pay such balance to the homebuyer 
at settlement. In the event the homebuyer purchases and there is a 
deficit in the NRMR, the homebuyer shall pay such deficit to the LHA at 
settlement.
    (e) Investment of excess. (1) When the aggregate amount of the NRMR 
balances for all the homes exceeds the estimated reserve requirements 
for 90 days the LHA shall invest the excess in federally insured savings 
accounts, federally insured credit unions, and/or securities approved by 
HUD. Income earned on the investment of such funds shall be prorated and 
credited to each homebuyer's NRMR in proportion to the amount in each 
reserve account.
    (2) Periodically, but not less often than semi-annually, the LHA 
shall prepare a statement showing (i) the aggregate amount of all NRMR 
balances, (ii) the aggregate amount of investments (savings accounts 
and/or securities) held for the account of the NRMRs, and (iii) the 
aggregate uninvested balance of the NRMRs. A copy of this statement 
shall be made available to any authorized representative of the HBA.