Comment Submitted by James Schaafsma, Michigan Poverty Law Program

October 4, 2005 Regulations Division Office of the General Counsel Department of HUD 451 Seventh Street, SW, Room 10276 Washington, D.C. 20410-0500 (Also attached) Re: Docket No. FR-4941-P-01; 2005-0015; RIN 2502-AI24 Disposition of Multifamily Housing Projects by HUD; Purchaser?s Compliance with State and Local Housing Laws and Requirements Dear HUD Representative: I write to you on behalf of, and as the housing attorney for the Michigan Poverty Law Program (MPLP). MPLP provides statewide support to legal advocates for Michigan?s low income residents, and is a joint project of the University of Michigan Law School and Legal Services of South Central Michigan, which provides legal assistance to low income residents, including many HUD multifamily housing tenants, in 13 Michigan counties. Thank you for the opportunity to comment on the proposed rule referred to above. Here are our primary issues of concern: Proposed 24 CFR 290.16(b) does not comply with Section 219 language The proposed regulation would limit the scope of coverage of Section 219 in a way that the statutory language does not support. At its proposed new 24 CFR 290.16(b), the proposed regulation would restrict the certification of substantial compliance with housing laws to ?all other properties owned by the potential purchaser, and located in the same city or town as the project being purchased. [emphasis added]?. Section 219 cannot reasonably or legitimately be read to confine the geographic breadth of the certification requirement of substantial compliance to properties ?located in the same city or town as the project being purchased.? There is no plausible justification in the statutory language for this proposed regulatory language, and HUD should and must remove it. A situation in Michigan illustrates the benefits and probable purpose of the geographically broader statutory language. Parkview Apartments, a HUD insured multifamily property in Ypsilanti, was offered for purchase at a foreclosure sale this past May. The successful bidder was Emmanuel Ku/Dakko Properties. To our knowledge, Ku/Dakko has not purchased any other HUD properties in Ypsilanti, or anywhere else in Michigan. But, as we understand it, it has a sizable portfolio of properties in New York which present some property maintenance law compliance concerns. The plain language of Section 219 prescribes that a HUD regulation would make the issue of whether Ku/Dakko was in substantial compliance with New York housing law applicable to his properties there a necessary factor in determining whether Ku/Dakko met the participation and certification requirements for purchase of Parkview Apartments in Ypsilanti. The proposed regulation would not. A probable effect of the proposed regulation is that an owner of property(ies) that are not in substantial compliance would look to new localities for HUD multifamily property purchase opportunities as a way to avoid the substantial compliance requirement, and also effectively export its poor maintenance and repair practices to new places. Having potential purchasers decide whether a violation is ?material? and they are in substantial compliance is poor policy Under the proposed 24 CFR 290.16, a potential purchaser would determine whether a violation of any state or local requirement is material, and whether its properties are in substantial compliance with those requirements. This approach relies too much on the good faith and judgment of the potential purchaser, and is otherwise problematic. There is no uniform definition or standard of materiality or substantial compliance. A better approach would be for owners to list all of their properties for which there are violations. A sensible way to define substantial compliance would be to adopt the definition of ?material non-compliance? used for termination of a HUD subsidized multifamily tenancy ? one or more substantial violations or repeated violations (see 24 CFR 247.3(c). Another measure of substantial compliance could be whether a property has a valid certificate of occupancy, or its equivalent. It is only proper and most consistent with the purpose of Section 219 that HUD, rather than a potential purchaser, actively determine whether properties are in substantial compliance. The proposed language for 24 CFR 290.16(c)(3) is too tepid. This section would give HUD the option of not selling a property if it determines the potential purchaser is not in substantial compliance. A refusal to sell for this reason should be mandatory, rather than permissive. Section 219 puts substantial compliance in the category of participation requirements, not participation considerations, and the regulations must reflect that designation. It cannot be overlooked that most multifamily properties being offered for sale through the disposition or HUD foreclosure processes have significant repair and maintenance needs. Selling a property to an entity which owns properties that have been determined to be not in substantial compliance with state and local housing laws only heightens the probability of perpetuating the repair and maintenance problems of the property being sold. I hope these comments are helpful in your preparation of a final rule. Thank you for your consideration of them. You are welcome to contact me if you have any questions about them. You may reach me at 611 Church St., Suite 4A, Ann Arbor, Michigan 48104; (734) 998-6100, xt 21. Sincerely yours, MICHIGAN POVERTY LAW PROGRAM James E. Schaafsma Comment on FR Doc # 05-15472