A.5.7.1.1 General

A. A Capital Needs Assessment (CNA) is a due diligence report describing the physical inventory of multifamily property and characterizing the condition and expected durability of that inventory for the purpose of budgeting future capital repairs and replacements. A CNA includes a financial plan or annual schedule of anticipated capital costs and corresponding funding needed to meet expected capital expenses. The period of years covered by the financial plan is called the Estimate Period. The financial plan should be periodically updated and revised to recognize actual results during the life of an asset, and for this reason, a new CNA is required for insured properties at intervals of not greater than 10 years. This “10-year update” requirement applies to all properties insured under Section 223(f) since the first publication of the MAP Guide in 2002 and to properties insured under Sections 220, 221, 223(a)(7), and 231 since the effective date of Mortgagee Letter 2010-21 (Risk Mitigation, September 6, 2010).

B. When prepared for a property to be built as new construction or substantially rehabilitated, a CNA is only an inventory of the proposed construction (buildings, units, components, quantities) and an estimate of the expected durability of the proposed (and existing for substantial rehabilitation) construction components with a corresponding plan to finance future capital needs as they are expected to occur.

C. When prepared for an existing property for which physical changes that are contemplated are considered less than Substantial Rehabilitation, a CNA requires an on-site physical inspection. Accordingly, it is the primary means of identifying immediate physical needs or deficiencies and specifying the nature, location, and expected cost of the repairs, replacements and/or alterations required to address immediate needs.

D. CNAs of existing buildings prepared for HUD must at a minimum meet the requirements of ASTM E2018-15 for the preparation of needs assessments. Numerous additional requirements may apply to particular properties or programs as described herein.