Early Intervention to Address Property Distress

In spite of best efforts to underwrite successful projects that remain financially viable over the long term, there are circumstances when properties fail. Typically, the earliest signs of problems are financial. Financial distress leads to physical distress because cash is insufficient to perform ongoing maintenance or address capital needs. Once a property fails to be maintained, it becomes harder for a property to retain and attract good tenants. This results in increasing tenant and possibly staff turnover. As the distress cycle progresses, it becomes more and more difficult and resource-intensive for the PJ to intervene and get the property back on track.

The earlier these property issues are addressed, the more likely the property can recover and become financially successful again. While initial signs of property distress may be financial, if left unaddressed, it becomes increasingly difficult for the property manager to operate the property in compliance with the affordability requirements.

If a HOME-LIHTC project shows signs of fiscal distress, it is important for the PJ to consult with the state allocating agency about appropriate interventions. In the first 15 years of the property’s operations, in particular, the LIHTC investor is highly motivated to ensure that the property remains financially viable and in compliance with the LIHTC rules. The PJ and state allocating agency should work together to address the specific needs of the project.

For detailed information on what to do when a HOME-assisted property suffers financial distress, see the HUD publication Compliance in HOME Rental Projects: A Guide for PJs (HUD-2009 HOME Rental PJ, issued March 2009). This publication is available on the HOME Program website at http://www.hud.gov/homeprogram/.

Consulting Services We Provide

  • Review public works preconstruction contracts
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  • Audit labor classification for each worker employed
  • Review DIR pre-DAS 140/142 submissions
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  • Review DIR Fringe Benefits Statement PW-26
  • Monitor DIR wage determinations
  • Audit fringe benefits allowances
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  • Audit DIR travel & subsistence requirements
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  • Los Angeles Unified School District Labor Compliance
  • Federal Davis-Bacon Project Monitoring
  • Federal DBE Implementation & Review
  • Federal FAA AIP Goal Setting
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or legal opinions on any specific facts or circumstances.

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