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Change in Property Ownership
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Powerpoint TPA Presentation A full
Transfer
of Physical Assets (TPA) is a property sales transaction involving the
assumption of a HUD-insured loan. Transactions which do not involve a complete
change in ownership may be eligible for a Modified TPA. Transactions
involving Section 8, HAP Contracts and/or Preservation or other use agreements
may have additional considerations (see below).
An Assignment or Assumption
of Housing Assistance Payments (HAP) Contract is required when the property
being sold is subject to a HAP contract, with or without mortgage insurance. The
HAP rents are set by a variety of factors, so it's important to understand how
the rents may change from year to year before purchasing a property. Section 8
Contract Renewals and rent increase procedures are outlined in
the Section
8 Contract Renewal Policy Guide. The renewal guide is consistently being updated.
Certain HUD properties
also have "Use Agreements" which must be assumed by a purchaser. These
agreements may also limit rents, so it's important to understand these before
agreeing to a sales price. Each "Use Agreement" is unique, so it's
important to read these thoroughly to understand which provisions will remain in
effect. Transactions involving "Preservation Use Agreements" will have
additional considerations.
Modified Transfer of Physical Assets (TPA)
Change in Property Ownership
When
the transaction does not involve a complete change in ownership, the Modified
TPA Review must be used. These transactions may include:
-
Single transfer of in excess of 50 percent of the
interest of a partnership/mortgagor which does not cause a dissolution of
the existing partnership/mortgagor under state law
-
Substitution of one or more of the general partners
-
Single transfer of an amount in excess of 50 percent
of the corporate stock of the corporate mortgagor or a single transfer of an
amount less than 50 percent of the total corporate stock of the corporate
mortgagor where such transfer results in a change in control of the
corporate mortgagor
-
An assignment/transfer of a portion of or all of the
beneficial interest in a passive trust when there is no change in control of
the project
-
Single transfer of an amount in excess of 50 percent
of the corporate stock of corporate General Partner or a single transfer of
an amount less than 50 percent of the corporate stock of a corporate General
Partner
-
Any transaction which does not fall within any of the
other categories but which, nevertheless, results in a change of control of
the mortgagor.
Additional documentation
may be required if there are physical, management, financial or other issues at
the property, or if secondary financing is involved.
If the transfer
involves 50 percent or more of the corporate entity, corporate General Partner,
Partnership or Beneficial trust, the applicant must also provide:
-
A letter addressing HUD
Determinative Criteria.
(Required for Full &
Modified TPAs)
-
Copies of any proposed amendments to the existing
partnership agreement and/or additional financing documents.
-
An attorney's opinion that the transfer does not cause
dissolution of the partnership under applicable state law, if the applicant
is a partnership.
If the transfer
involves substitution or addition of one or more general partners the applicant
must provide:
If the transfer involves less than 50 percent of the
corporate stock, which results in a change in control of the corporate mortgagor
or corporate general partner, the stock purchaser (s) must meet with HUD staff
to discuss:
-
The project's physical and financial condition. If the
project is suffering physical, management or financial deficiencies, a plan
for remedying the deficiencies will be discussed. All parties will agree to
a target date for delivery of a written plan for correcting all physical and
financial problems.
-
The duties of the owner (stockholders) under the
Regulatory Agreement and the mortgage documents.
A Capital Needs Assessment (CNA) and full Reserve for Replacement Analysis (R4R)
to identify the remaining useful life of building components and the amount
needed in the R4R account. This analysis is often forgotten.
I am not an attorney, but can
provide consultation on preparing HUD TPAs . You can realize a savings by using
my services and just use your attorney to prepare legal documents Contact
me by phone 301-277-3465 or by email at
alvinl.sutherlin@verizon.net
and we can discuss the status of your project.
Date Updated:
09/27/2023 03:40:50 AM |
