Low REAC Score? Brace For HUD’s Wrath

Monday, December 03, 2018

Why winning an appeal doesn’t really mean you’ve won

If your multifamily property earns a failing (below 60) Real Estate Assessment Center (REAC) physical inspection score, you can now expect a default notice and continued enforcement --- even if you’ve appealed successfully. The U.S. Department of Housing and Urban Development (HUD) recently handed down this and many other REAC inspection changes. Here’s what you need to know.

Prepare for Tighter Physical Inspection Parameters

Beware: Among the many changes, perhaps the most disturbing revision to the REAC inspection process is the new provision to issue a default notice 15 days after a failing REAC score -- and that field offices may continue to enforce on multifamily owners even after a successful appeal of that default notice. “HUD staff may also provide default notices based not on the numerical and objective REAC criteria but on undefined opinions and findings by other government agencies,” warned partner attorney Richard Michael Price in a Nov. 1 blog posting for Nixon Peabody LLP.

HUD issued Notice H2018-08 on Oct. 29, ramping up its scrutiny of multifamily housing property physical condition scoring and providing new guidance to HUD field staff. The notice specifically addresses actions that field staff may take when a property has other indicators of unsatisfactory physical conditions that don’t require a technical REAC “fail,” according to Colleen


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