Section 8 - "failure to pay...is not a violation of the lease"?

Question

This is question is for those of you with The Section 8 experience. If there is a post or article already addressing this, please be so kind as to share the link.

The agreement I'm looking at says: "failure to pay the housing assistance payment to the owner is not a violation of the lease".

How do you deal with this? How does it work out in reality? This is my first Section 8 application (I'm a landlord with 2 duplexes). In my mind the lease is a contract and part of the contract is for the tenant to pay the rent. The application releases the tenant from responsibility for public housing authority's (PHA) portion of the rent money.

Could someone please explain the intent behind this clause and if you have had problems or not with getting rent from the PHA?

Also, in these Covid times, my attorney has recommended month-to-month rather than annual terms. Does Section 8 even allow for MTM terms? What is your experience with this? Perhaps with Section 8 it isn't an issue as with someone who may be at risk losing their primary income from a job.

Thanks in advance!

-Tom

Account Closed · Answer

Just curious, is the the Columbus housing authority? I'm preparing for the city's proposed rule changes requiring landlords to accept section 8 (under the guise of not discriminating against income source), which I can accept --- as long as they don't expect me to sign something as restrictive as Section 8 contracts like that.

Jennifer Donley · Answer

@Tom Raddatz, I have a portfolio of Section 8 properties in the St. Louis area. I love the niche, it's all I do. I'm assuming the verbiage is coming from the HAP contract, which should be the same for all HA's but I can't find that phrase in mine.In any case, I've never had a problem getting rent from the HA. I have had an instance where the tenant didn't send in the required paperwork at renewal (the tenants have to do a re-certification each year where they send in house occupant info and updated income info) and the HA held up payment until it was received. In that time, the Housing Authority told me that the tenant was responsible for the payments until the tenant sent in the paperwork). I helped the tenant get the required paperwork sent in and the HA made up all the back rent.The biggest opportunities for issues arise around changes, in my experience. New tenants, rent increases and tenant/HAP portion changes at renewal are when things get missed and the payments can be wrong, delayed, etc. But they're always fixed in the end, it just requires systems & diligence on my part to make sure everything is being paid as it should be.Regarding the MtM lease, Section 8 requires that the initial lease term must be for 1 year. It can go to MtM after the first year but I just keep mine on annual leases that correspond with the tenant's annual recertification/renewal. I do this because I think it stabilizes my portfolio to some degree & we can submit rent increases 90 days prior to renewal to the Housing Authority. By keeping the leases annual, my PM software reminds me when to submit those increases. I might go with MtM if I didn't have Section 8 tenants and I was worried about payment. But I'm not (I'm currently owed $0 in past due rent - the HA and my tenants are all paying).Section 8 is a great way to go if you screen thoroughly and learn/master the processes of your local PHA. Good luck and let me know if I can help further!

Tom Raddatz · Answer

This property is in Lancaster, OH, so this is Fairfield Metropolitan Housing Authority (FMHA). But they are using HUD forms. I don't have any idea if they are the same or what may be different with them and Columbus. Hope this helps.

Greg Scott · Answer

In my experience each Section 8 housing authority operates a bit differently, so yours may not be exactly the same.The ones I have dealt with, require a 12 month lease followed by MtM beyond that. If you want a rent increase after 12 months, you can petition the housing authority for an increase. We had good luck getting increases. Some times they increased the amount they paid and the amount they required the resident to pay but then told us they don't mind if we later reduced the total so that the resident could remain at their same out of pocket. (Strange, I know)I suspect the language around "failure to pay" is related to how section 8 housing authorities typically work. For example, you should be required to have annual inspections. If you fail on any item, they typically stop paying the rent until you can get it re-inspected and pass. Once passed all the prior rent is paid. That gets a bit goofy when the resident caused the damage. "You must fix that cracked window" "I have pictures that the window was fine when the resident moved in, so they must have caused it" "We don't know who caused it but you won't get paid until it is fixed and we can re-inspect"I've had things like that happen a few times.

Jennifer Donley · Answer

@Tom Raddatz Thanks for the follow up! I think it's worth the risk too and yes, I have had tenants lose their income and submit proof and their portion gets changed so it's a great program. Good luck!

Tom Raddatz · Answer

@Jennifer Donley, Thank you so much for the response! I addressed my question to the HA, and she told me that verbiage was required in case the governmental program was defunded. She said, in that case the tenant would be responsible. I decided that would be worth the slight risk. The issue regarding MtM was due to Covid, and potential job & income loss (on the advice of my attorney). The HA said that in the event the client lost their income they could notify the HA and they would then cover 100%, instead of the partial. That definitely works for me! So, I am moving forward with my first Section 8! Thanks again for your input!

Tom Raddatz · Answer