2-8. SHORT-TERM CONTRACT RENEWALS

• A. Short-term contract renewals are for less than one year. The phrase “short-term” refers to the term of the contract, not the “type” of contract. The AE/CA should use short-term renewals:

  1. To protect the residents (see Chapter Eleven). For example: in the case of an opt-out when an owner provides the required one-year notice when less than one year remains before the contract expires (e.g., when 8 months remain before contract expiration). In this example, the Contract Administrator and the owner may enter into a short-term contract, not to exceed a term of one year, at current contract rents. In these circumstances the AE/CA must use the Basic Renewal Contract (HUD-9636).

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2. To extend the contract, at current rents, of a project that has been referred to Recap for debt restructuring but has yet to close under a Restructuring Plan after a year. To receive a short-term renewal beyond a year under these conditions at current rents, the owner must request and receive approval from Recap (see 24 CFR Part 401.600).

3. To align the Section 8 contract with the project’s fiscal year end.

4. To align the Section 8 contract with a Use Agreement that expires in less than 12 months.

5. To provide additional time to secure a HUD RCS when one is required.

6. To combine contracts when the later expiring contract is the most restrictive.

• B. Renewal. Regional Center/Satellite Office Directors and CA Directors should use their discretion when determining whether to grant a short-term renewal for the reasons listed in Section 2-8. A. above.

• C. Short-term Contract Execution.

  1. The contract is renewed in increments of months, not days.

  2. The AE/CA must document the need for the short-term renewal in the project file and in iREMS.

• D. The effective date of the new Section 8 contract is the day after the short-term contract expires.

• 2-9. CALCULATING RENTS FOR SHORT-TERM RENEWALS

• A. In cases where the AE/CA/Participating Administrative Entity (PAE) decides as to market rents for the project, the short-term renewal rents will be capped at market.

• B. Section 524 contracts.

  1. If the project is eligible for an OCAF rent adjustment, apply a pro-rated OCAF to the short-term contract instead of a full OCAF.

     • a. The law does not permit the project to receive more than one full OCAF increase within a 12-month period. However, projects entering into MUTM or MUTB in the same year are not receiving an additional OCAF adjustment and, therefore, are exempted from this restriction. However, the preceding statement does not preclude the owner of a project that received a rent adjustment from (1) agreeing to terminate the Renewal Contract within 12 months of the date of the rent adjustment to renew under Option One or Two (assuming eligibility), and (2) receiving a rent increase based on the rent-setting provisions under those options.

     • b. Because the project is entitled to a full OCAF increase at the first anniversary date of a multi-year contract, the OCAF increase for the shortterm initial renewal must be pro-rated.

     • c. Budget-based rent adjustments are not permitted for a short-term renewal.

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2. Calculating a pro-rated OCAF. Divide the rent increase factor (line (R) from HUD Form 9625 by 12 and multiply that number by the number of months needed for the short-term renewal. Example:

The pro-rated rent increase factor to apply to the short-term renewal is 1.67 percent.

After determining the pro-rated rent increase factor, follow the instructions in the OCAF Worksheet, Form HUD-9625, for applying the OCAF to the contract rents for the Section 8 units being renewed.

• C. Exceptions.

Do not use the proration of OCAF for calculating the rents for:

1. Short-term renewals for Section 514(c) contracts (Option Three) which are used for projects that must be processed by Recap. The short-term renewal is at current rent. (See Chapter Five.)

2. Section 524 contract, if used for a project that is subject to an enforcement action. Any short-term renewal is at current rent not to exceed market.

3. Short-term renewals under Option One or Two. The AE/CA will renew the contract at current rents and provide retroactive rents upon completion of the processing.