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Owner Update "Question Of The Month"

Q: TMHA has asked me to negotiate a lower rent for a tenant in order to put the unit under HAP Contract. Can I charge the tenant "on the side" for the rent amount I had to drop?

Answer: NO! NO! NO!, a thousand times, NO! We call this a "side deal for rent," and it is strictly prohibited by HUD regulation.

Why, you say, when it seems like a good solution to the situation, and the tenant is willing? Here are the reasons:

The practice violates the HAP Contract, which states what the rent is, and stipulates what amount is paid by tenant and what is subsidized by the housing authority. Therefore, a side deal violates a Federal contract.

The practice violates the relationship between the tenant and owner defined in the lease, which is governed in Ohio under ORC Tenant-Landlord Law.  In a landlord-tenant dispute, evidence that the owner pressed the tenant to do a side deal opens the owner to dire consequences. What started out as say a routine court eviction for non-payment of rent, becomes a case where the owner not only loses the eviction, but owes rent back to the tenant, along with perhaps punitive damages.

Any astute lawyer for the tenant will jump on the side deal issue like a crow on a June bug, and take it as far as possible. Even if the owner claims the tenant agreed, be sure that when problems occur, that side deal will become the tenant's - he made me do it - ace in the hole.

The side rent deal compromises the tenant's ability to pay the rent. The premise of negotiating the rent is that it gives the tenant an affordable amount that doesn't exceed 40% of their income. The side rent deal ignores that point. It puts the tenant into a position of not being able to pay the rent even with TMHA's help.

So, what should you do when TMHA asks you to negotiate a lower rent? If you cannot lower the rent, say NO. We will understand your position, but we want to give you the option first. We will attempt to help that tenant find a less expensive unit, and you will seek a tenant with a higher income who can afford the asking rent, or just decide that the rent for that particular unit is too high for the Section 8 program.

When TMHA discovers a side deal, we must act to remedy it. We must take action to end the HAP Contract on the unit, and if we find that the owner takes a habit of charging side deals, prohibit that owner from working with the program. We also have the right to terminate the tenant from the program for suggesting/agreeing to a side rent deal. When we execute the leases and HAP Contracts, we ask both the tenant and the owner to verify that no side deal for rent has been made. When the parties then engage in a side deal, they both incriminate themselves and commit fraud in a Federally subsidized program.

ACCEPTABLE SIDE PAYMENTS:

Having said all of the above, there are some acceptable side payments for other-than-rent situations. For example, the owner might offer the use of an on-site washer and dryer or storage building for a certain charge per month. Inform TMHA of this charge, and keep the payments for this amenity separate from the rent.

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