[Code of Federal Regulations]

[Title 24, Volume 4]

[Revised as of April 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 24CFR904.111]



[Page 315-316]

 

                 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, 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



[[Page 316]]



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.