[Code of Federal Regulations] [Title 24, Volume 4] [Revised as of April 1, 2005] From the U.S. Government Printing Office via GPO Access [CITE: 24CFR970.13] [Page 549-553] TITLE 24--HOUSING AND URBAN DEVELOPMENT CHAPTER IX--OFFICE OF ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PART 970_PUBLIC HOUSING PROGRAM_DEMOLITION OR DISPOSITION OF PUBLIC HOUSING PROJECTS--Table of Contents Sec. 970.13 Resident organization opportunity to purchase. (a) Applicability. (1) This section applies to applications for demolition or disposition of a development which involve dwelling units, nondwelling spaces (e.g. administration and community buildings, maintenance facilities), and excess land. (2) The requirements of this section do not apply to the following cases which it has been determined do not present appropriate opportunities for resident purchase: (i) The PHA has determined that the property proposed for demolition is an imminent threat to the health and safety of residents; (ii) The local government has condemned the property proposed for demolition; (iii) A local government agency has determined and notified the PHA that units must be demolished to allow access to fire and emergency equipment; (iv) The PHA has determined that the demolition of selected portions of the development in order to reduce density is essential to ensure the long term viability of the development or the PHA (but in no case should this be used cumulatively to avoid Section 412 requirements); (v) A public body has requested to acquire vacant land that is less than 2 acres in order to build or expand its services (e.g., a local government wishes to use the land to build or establish a police substation); or (vi) PHA seeks disposition outside the public housing program to privately finance or otherwise develop a facility to benefit low-income families (e.g., day care center, administrative building, other types of low-income housing). (3) In the situations listed in paragraph (a) of this section, the PHA may proceed to submit its request to demolish or dispose of the property, or the portion of the property, to HUD, in accordance with Section 18 of the United States Housing Act of 1937 and 24 CFR [[Page 550]] part 970 without affording an opportunity for purchase by a resident organization. However, resident consultation would be required in accordance with Sec. 970.4(a). The PHA must submit written documentation, on official stationery, with date and signatures to justify paragraphs (a)(2)(i), (ii), (iii), (iv), and (v) of this section. Examples of such documentation include: (i) A certification from a local agency, such as the fire or health department, that a condition exists in the development that is an imminent threat to residents; or (ii) A copy of the condemnation order from the local health department. If, however, at some future date, the PHA proposes to sell the remaining property described in paragraphs (a)(2)(i) through (iii) of this section, the PHA will be required to comply with this section. (b) Opportunity for residents to organize. Where the affected development does not have an existing resident council, resident management corporation or resident cooperative at the time of the PHA proposal to demolish or dispose of the development or a portion of the development, the PHA shall make a reasonable effort to inform residents of the development of the opportunity to organize and purchase the property proposed for demolition or disposition. Examples of ``reasonable effort'' at a minimum include one of the following activities: convening a meeting, sending letters to all residents, publishing an announcement in the resident newsletter, where available, or hiring a consultant to provide technical assistance to the residents. The Department will not approve any application that cannot demonstrate that the PHA has allowed at least 45 days for the residents to organize a resident organization. The PHA should initiate its efforts to inform the residents of their right to organize as an integral part of the resident consultation requirement under Sec. 970.4(a). (c) Established Organizations. Where there are duly formed resident councils, resident management corporation, or resident cooperative at the affected development, the PHA shall follow the procedures beginning in paragraph (d) of this section. Where the affected development is fully or partially occupied, the residents must be given the opportunity to form under the procedures in paragraph (b) of this section. (d) Offer of sale to resident organizations. (1) The PHA shall make the formal offer for sale which must include, at a minimum, the information listed in this paragraph (d). All contacted organizations shall have 30 days to express an interest in the offer. The PHA must offer to sell the property proposed for demolition or disposition to the resident management corporation, the resident council or resident cooperative of the affected development under at least as favorable terms and conditions as the PHA would offer it for sale to another purchaser: (i) An identification of the development, or portion of the development, in the proposed demolition or disposition, including the development number and location, the number of units and bedroom configuration, the amount of space and use for non-dwelling space, the current physical condition (e.g., fire damaged, friable asbestos, lead- based paint evaluation results), and occupancy status (e.g., percent occupancy). (ii) In the case of disposition, a copy of the appraisal of the property and any terms of sale. (iii) A PHA disclosure and description of plans proposed for reuse of land, if any, after the proposed demolition or disposition. (iv) An identification of available resources (including its own and HUD's) to provide technical assistance to the resident management corporation, resident council or resident cooperative of the affected development to enable the organization to better understand its opportunity to purchase the development, the development's value and potential use. (v) Any and all terms of sale that the PHA requires for the Section 18 action. (If the resident management corporation, resident council or resident cooperative of the affected development submits a proposal that is other than the terms of sale (e.g., purchase at less than fair market value with demonstrated commensurate public benefit or for the purposes of homeownership), [[Page 551]] the PHA may consider accepting the offer). (vi) A date by which the resident management corporation, resident council or resident cooperative of the affected development must respond to the HA's offer to sell the property proposed for demolition or disposition, which shall be no less than 30 days from the date of the official offering of the PHA. The response from the resident management corporation, resident council or resident cooperative of the affected development shall be in the form of a letter expressing its interest in accepting the PHAs written offer. (vii) A statement that the resident council, resident management corporation, and resident cooperative of the affected development will be given 60 days to develop and submit a proposal to the PHA to purchase the property and to obtain a firm financial commitment. It shall explain that the PHA shall approve the proposal from the resident council, resident management corporation or resident cooperative of the affected development, if it meets the terms of sale. However, the statement shall indicate that the PHA can consider accepting an offer from the resident council, resident management corporation or resident cooperative of the affected development that is other than the terms of sale; e.g., purchase at less than fair market value with demonstrated commensurate public benefit or for the purposes of homeownership. The statement shall explain that if the PHA receives more than one proposal from a resident council, resident management corporation or resident cooperative at the affected development, the PHA shall select the proposal that meets the terms of sale. In the event that two proposals from the affected development meet the terms of sale, the PHA shall chose the best proposal. (2) After the 30 day time frame for the resident council, resident management corporation, or resident cooperative of the affected development to respond to the notification letter has expired, the PHA is to prepare letters to those organizations that responded affirmatively inviting them to submit a formal proposal to purchase the property. The organization has 60 days from the date of its affirmative response to prepare and submit a proposal to the PHA that provides all the information requested in paragraph (g) of this section and meets the terms of sale. (e) PHA Review of Proposals. The PHA has up to 60 days from the date of receipt of the proposal(s) to review them and determine whether they meet the terms of sale set forth in its offer. If the resident management corporation, resident council or resident cooperative of the affected development submits a proposal that is other than the terms of sale (e.g., purchase at less than the fair market value with demonstrated commensurate public benefit or for the purposes of homeownership), the PHA may consider accepting the offer. If the terms of sale are met, within 14 days of the PHA's final decision, the PHA shall notify the resident management corporation, resident council or resident cooperative of the affected development of that fact and that the proposal has been accepted or rejected. (f) Appeals. The resident management corporation, resident council or resident cooperative of the affected development has the right to appeal the PHA's decision to the HUD field office. A letter requesting an appeal has to be made within 30 days of the decision by the PHA. The request should include copies of the proposal and any related correspondence. The field office will render a final decision within 30 days. A letter communicating the decision is to be prepared and sent to the PHA and the resident management corporation, resident council or resident cooperative of the affected development. (g) Contents of Proposal. (1) The proposal from the resident management corporation, resident council or resident cooperative of the affected development shall at a minimum include the following: (i) The length of time the organization has been in existence; (ii) A description of current or past activities which demonstrate the organization's organizational and management capability or the planned acquisition of such capability through a partner or other outside entities; (iii) A statement of financial capability; [[Page 552]] (iv) A description of involvement of any non-resident organization (non-profit, for profit, governmental or other entities), if any, the proposed division of responsibilities between these two, and the non- resident organization's financial capabilities; (v) A plan for financing the purchase of the property and a firm commitment for funding resources necessary to purchase the property and pay for any necessary repairs; (vi) A plan for the use of the property; (vii) The proposed purchase price in relation to the appraised value; (viii) Justification for purchase at less than the fair market value in accordance with Sec. 970.9, if appropriate; (ix) Estimated time schedule for completing the transaction; (x) The response to the PHA's terms of sale; (xi) A resolution from the resident organization approving the proposal; and (xii) A proposed date of settlement, generally not to exceed six months from the date of PHA approval of the proposal, or such period as the PHA may determine to be reasonable. (2) If the proposal is to purchase the property for homeownership under 5(h) or HOPE 1, then the requirements of Section 18 of the United States Housing Act of 1937 and 24 CFR part 970 do not apply, but the applicable requirements shall be those under the HOPE 1 guidelines, as set forth at 57 FR 1522, or the section 5(h) regulation, as set forth in parts 905 and 906 of this chapter. In order for a PHA to consider a proposal to purchase under section 412, using homeownership opportunities under section 5(h) or HOPE 1, the resident council, resident management corporation or resident cooperative of the affected development shall meet the provisions of this rule, including paragraphs (g)(1)(i) through (g)(1)(xii) of this section. (3) If the proposal is to purchase the property for other than the aforementioned homeownership programs or for uses other than homeownership, then the proposal must meet all the disposition requirements of Section 18 of the United States Housing Act of 1937 and 24 CFR part 970. (h) PHA obligations. (1) Prepare and disperse the formal offer of sale to the resident council, resident management corporation and resident cooperative of the affected development. (2) Evaluate proposals received and make the selection based on the considerations set forth in paragraph (b) of this section. Issuance of letters of acceptance and rejection. (3) Prepare certifications, where appropriate, as discussed in paragraph (i)(3) of this section. (4) The PHA shall comply with its obligations under Sec. 970.4(a) regarding tenant consultation and provide evidence to HUD that it has met those obligations. The PHA shall not act in an arbitrary manner and shall give full and fair consideration to any qualified resident management corporation, resident council or resident cooperative of the affected development and accept the proposal if it meets the terms of sale. (i) PHA application submission requirements for proposed demolition or disposition. (1) If the proposal from the resident organization is rejected by the PHA, and either there is no appeal by the organization or the appeal has been denied, the PHA shall submit its demolition or disposition application to HUD in accordance with Section 18 of the United States Housing Act of 1937 and part 970 of this chapter. The demolition or disposition application must include complete documentation that the requirements of this section have been met. PHAs must submit written documentation that the resident council, resident management corporation and tenant cooperative of the affected development have been apprised of their opportunity to purchase under this section. This documentation shall include: (i) A copy of the signed and dated PHA notification letter(s) to each organization informing them of the PHA's intention to submit an application for demolition or disposition, the right to purchase; and (ii) The responses from each organization. (2) If the PHA accepts the proposal of the resident organization, the PHA shall submit a disposition application in accordance with Section 18 of the United States Housing Act of 1937 and [[Page 553]] part 970 of this chapter, with appropriate justification for a negotiated sale and for sale at less than fair market value, if applicable. (3) HUD will not process an application for demolition or disposition unless the PHA provides the Department with one of the following: (i) Where no resident management corporation, resident council or resident cooperative exists in the affected development and the residents of the affected development have not formed a new organization in accordance with paragraph (b) of this section, a certification from either the executive director or the board of commissioners stating that no such organization(s) exists and documentation that a reasonable effort to inform residents of their opportunity to organize has been made; or (ii) Where a resident management corporation, resident council or resident cooperative exists in the affected development one of the following, either paragraph (i)(3)(ii)(A) or paragraph (i)(3)(ii)(B) of this section: (A) A board resolution or its equivalent from each resident council, resident management corporation or resident cooperative stating that such organization has received the PHA letter, and that it understands the offer and waives its opportunity to purchase the project, or portion of the project, covered by the demolition or disposition application. The response should clearly state that the resolution was adopted by the entire organization at a formal meeting; or (B) A certification from the executive director or board of commissioners of the PHA that the thirty (30) day timeframe has expired and no response was received to its offer. (Approved by the Office of Management and Budget under control number 2577-0075) [60 FR 3721, Jan. 18, 1995, as amended at 64 FR 50229, Sept. 15, 1999]