16-1. BACKGROUND, APPLICABILITY AND OVERVIEW

This Chapter provides guidance for owners of Section 8 projects that are subject to the “old regulation” State Housing Finance Agency (“HFA”) form of HAP contract for New Construction or Substantial Rehabilitation projects, i.e. , the November 1975 version of HUD-52645A (“1975 HAP Form”), for which the original, permanent financing provided by an HFA (“Financing”) was prepaid in full or that will be prepaid in full.

There is a small number of HAP contracts issued by HFAs which lack the HUD-52645A form number, but have the key provisions of this form retyped in a different format. HAP contracts that contain the same key provisions but lack the HUD-52645A form number are also covered by the provisions of the this Chapter.

HUD has determined that the 1975 HAP Form contains language that causes it to terminate automatically upon full prepayment of the original, permanent financing (financing). Consequently, any project that is subject to the 1975 HAP Form for which the Financing has been fully prepaid has been operating since the date of prepayment with no written HAP contract in place. HUD has further determined, however, that where the owner and the HFA have continued, after prepayment, to discharge their respective contractual roles and responsibilities as if the written contract were still in place, their conduct gives rise to an implied contract, the terms of which are identical to those of the written but now expired HAP contract. Section 16-2 provides three options to owners for which the Financing has been fully prepaid. In issuing this guidance, HUD endeavors to establish an orderly process for the continuation of housing assistance payments to owners of affected projects who choose to continue participating in the Section 8 program.