Section 8 ask me to pay back 5 year rent for $44,000

Jason Yuan · 2019-12-21T19:08:10-08:00

5 years ago, i advertised my house for rent for $780. a lady said she has a section vouch for $760, but she can pay the difference of $20 from her pocket. so we signed the lease for $780, but she changed the amount to $760 for the copy sent to section 8. the lease between I and the tenant and section 8 was signed by my realtor for $760 because I was not in the States. I was not aware and was not informed that it is not allowed to collect that $20 from the tenant. after 5 years, Section 8 found out about this $20 this month and made a decisions as follows: 1, i have to return all money i received from section 8 for last 5 years for a total of $46,000;2, i have to return all money i received from the tenant for last 5 years for a total of $7,600;3, i am not allowed to rent my house to section 8 tenant for next 5 years.I really do not think it is fair. How could I gave my house to section 8 tenant for 5 years for free, and in the meantime, I had to pay the property tax, maintenance and management. Should I find an attorney to fight their decision?

Jason Yuan

OP

Member since 2019 · 13 posts · 4 votes

6y

@Patti Robertson: don't worry. they already knew everything. i honestly told them all the truth

0 Reply

Matthew Olszak

Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes

6y

Originally posted by @Jay Hinrichs:

Originally posted by @Meg K.:

I do not understand why this happened? www.hud.gov states:

"A family which receives a housing voucher can select a unit with a rent that is below or above the payment standard. The housing voucher family must pay 30% of its monthly adjusted gross income for rent and utilities, and if the unit rent is greater than the payment standard the family is required to pay the additional amount. By law, whenever a family moves to a new unit where the rent exceeds the payment standard, the family may not pay more than 40 percent of its adjusted monthly income for rent."

exactly some section 8 have 100% vouchers but the vast majority have to pay something out of their pocket per month. not sure what is going on here.. but being out of country.. I doubt US can do any thing to them other than lien the house.

In Chicago, there is a limit to the total rent paid based upon comparable units, appliances included, and utilities included. That Fair Market Rentnumber is divided between the Chicago Housing Authority and the tenant (I think the tenant's portion cannot be less than $50) under the Housing Choice Voucher program, based upon the tenant's income.

You can't charge a tenant more than that. You also cannot "waive" the tenant's portion. It sounds like there were some off-the-record payments being made which are expressly prohibited by these programs. The idea being that if the tenant can afford to pay the landlord such amount, then the gov't shouldn't have to, otherwise the gov't would've agreed to pay that full amount in the first place.

3 Reply

Victor N.

Investor · Meriden, CT · Member since 2013 · 201 posts · 145 votes

6y

@Jason Yuan sorry for what's happening to you. I'm a landlord who also accepts section 8 vouchers. Good program but not easy dealing with some housing authorities/ inspection companies. But the worse is having the wrong tenants!

I can see how the $20 extra happened because section tenants always offer to pay the difference between the rent Im asking and the max that the program is willing to pay. Sometimes the difference is very small so I will agree with their rent. But when the difference is significant, I simply decline and look for a market rate tenant. I KNOW that accepting money from the tenant under the table is a big no no and the tenants also do but they are willing to break the rule because 1) if caught, nothing major will happen to them; 2) the landlord will be in trouble; 3) they can use the extra payment under the table to bribe/scare you whenever you have a dispute with them.

In your case I can understand the mistake with the initial lease. But then again the landlord is supposed to KNOW all the section 8 rules, and send the lease with all other docs to the housing authority themselves. Why is the tenant sending the lease to them?

Regardless of the tenant falsifying the lease, the problem you have is that you or your PM signed the section 8 contract with the lower amount as you stated but continued to accept the extra $20 from the tenant. No amount of explaining will satisfy section 8 so your best bet is to hire a good attorney. Maybe the attorney can push back with the fact that they didnt do an annual review as required by law ( strong argument... maybe) and that you also lost potential rent increase for 5 years as a result ( weak argument). Good luck!

3 Reply

Harriet Baldwin

Financial Advisor · Elmira, NY · Member since 2015 · 132 posts · 67 votes

6y

In our area, there is often a bit of back-and-forth prior to move-in before the lease is approved by Section 8. We submit an unsigned lease, they do a calculation and let us know if the maximum allowed rent is lower, call us for a verbal okay, then we submit the signed final lease after the unit clears inspection. The maximum rent allowable applies to the first year only (at least in our region) - after that, any rent "mutually agreeable" between tenant and landlord is okay (although what Section 8 pays is still under their limitations and based on their annual review of tenant's circumstances).

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Harvey LevinPro Member

Property Manager · Indianapolis, IN · Member since 2012 · 209 posts · 162 votes

6y

You might be able to work this out with your local housing authority. If not try your regional HUD office. HUD has a push to become more landlord-friendly. You should be aware that even though you were unaware of the regulations (and the actual contact wording Paragraph 6 of the HAP contract you signed), just like any other contract anyone signs without reading and understanding that is no excuse. I would encourage you to attempt to work it out as they may be more lenient with a discussion.

@Jay Hinrichs @Meg K. That wording is very confusing. The payment standard refers to the maximum standard that each local Housing Authority (PHA) has received approval for annually. The 30-40% refers to the tenant's portion of the APPROVED amount not any amount over the approved amount. However, each tenant and each specific location can have a maximum based on both the tenant's income and market rental value. In any event, no payments may be made over the approved amount. This is stated ion the contract signed by the PHA and the owner. Also, it is important to remember that the HUD guidelines are not always the rules and regulations each PHA follows. Each PHA submits an Administrative Plan annually to HUD for approval to modify the guidelines. There is supposed to be a period of time for the public to obtain a copy of the proposed plan and then an open forum to provide comments. At our PHA the notice is nothing more than a sign on the door for a week or so so if someone isn't going to the PHA weekly they have no way of knowing. (an example of the ineffective process)

I am working with HUD to help develop a more Landlord friendly program and welcome any documented situations of abuse or ineffective processes to my inbox .

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

6y

Originally posted by @Jason Yuan:

@Kyle J. @Jay Hinrichs: the voucher is for $760 which is the section 8 approved amount, and there is no tenant portion of payment because of her low income I guess. my advertised rent is $780, so the tenant did not want to lose the opportunity and voluntarily offered to pay the difference of $20 from her own pocket without letting section 8 knew. the lease between I and the tenant is for $780, the section 8 contract was for $760 and the copy of the lease between me and the tenant sent to section 8 by tenant was changed by the tenant to $760. section 8 never did a review each year for 5 years and the $760 amount was for 5 years and never changed.

sounds like a problem to me.. like others have said section 8 sets the rent pays a portion or 100% you cant charge more than what section 8 sets as rent amount.. sell the house and never come back to the US..

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Karen O.

Knoxville, TN · Member since 2019 · 111 posts · 57 votes

6y

Originally posted by @Jason Yuan:

i will return the $20 portion and after it is returned, i will ask section 8 to reverse their decision. if they refuse, then i will get an attorney. anybody can recommend a good real estate lawyer?

yeah, that's only about $1200. Not the $7600 the tenant was liable for in the rent.

I'd go after the property manager for liability, since they signed the paperwork for you, I assume. The tenant is also liable, in that they entered into the illegal arrangement (and knew it was against the rules - I have them try for this here).

You'll need an attorney if the section 8 folks persist or take it to claims court.

0 Reply

Jason Yuan

OP

Member since 2019 · 13 posts · 4 votes

6y

@Jay Hinrichs: my question is what is the reasonable punishment?

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Jason Yuan

OP

Member since 2019 · 13 posts · 4 votes

6y

@Karen O.: my realtor did not involve in management. since he helped me buying this house, he was just doing my favor helping me to sign the paper because i could not go the States at that time

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

6y

Originally posted by @Jason Yuan:

@Jay Hinrichs: my question is what is the reasonable punishment?

for a US citizen probably pretty severe if they really want to go after you for defrauding the federal government.

for a foreigner doubt they spend the money chasing you internationally. Just my opinion 45k I hardly worth their time in that setting.

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Pat L.

Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes

6y

Originally posted by @Jay Hinrichs:

Originally posted by @Jason Yuan:

@Jay Hinrichs: my question is what is the reasonable punishment?

for a US citizen probably pretty severe if they really want to go after you for defrauding the federal government.

for a foreigner doubt they spend the money chasing you internationally. Just my opinion 45k I hardly worth their time in that setting.

But if it was the IRS they would hunt you down forever !!!

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Karen F.

Investor · San Diego, CA · Member since 2015 · 435 posts · 421 votes

6y

It is clearly stated in Sec 8 paperwork that it is illegal to take more from the tenant than the Sec 8 lease allows. The Sec 8 agreement supercedes any lease you may have with the tenant. That being said, it is extremely common in my area for tenants to pay extra, and for landlords to accept extra. In fact, when looking at occupied multis to buy, I have frequently been shown leases with addendums clearly stating that the tenant is paying an extra, say, $200/month for the unit, above what Sec 8 is paying. The local housing authority is not enforcing the regulation. I won't violate it, but most landlords and tenants are. In fact, a local realtor told me that she had never seen a multi listing with Sec 8 in place where the tenants were NOT paying above and beyond the approved rate.

The housing authority is playing hard ball with you. Five years and you never asked for an increase? IF you had asked for an increase, they would surely have raised the amount well above the 780 you were receiving. The tenant bears no responsibility for having played a part in this? They want you to pay back ALL the rent for 5 yrs? This is ridiculous.

You're never going to be able to rent to Sec 8 again,nor should you, so accept that. Do you still have any units rented to Sec 8? If no, then you could just walk away from them, saying that the tenant perpetrated the fraud, not you. They have no way of collecting from you. But if you have other units rented to Sec 8, or if you ever want to rent to Sec 8 again, you're going to have to straighten this out. Get a lawyer who's familiar with working with the housing authorities to work out a deal. He can point out to them that the rent was never raised for 5 yrs, so the unit was being rented at well below market rates. That you had no way of knowing that the property manager was shady. That you're willing to return the $20/month x 5 yrs to them, to return to the tenant. Don't bother asking for retroactive increases - they won't do it.

1 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

6y

Originally posted by @Karen F.:

It is clearly stated in Sec 8 paperwork that it is illegal to take more from the tenant than the Sec 8 lease allows. The Sec 8 agreement supercedes any lease you may have with the tenant. That being said, it is extremely common in my area for tenants to pay extra, and for landlords to accept extra. In fact, when looking at occupied multis to buy, I have frequently been shown leases with addendums clearly stating that the tenant is paying an extra, say, $200/month for the unit, above what Sec 8 is paying. The local housing authority is not enforcing the regulation. I won't violate it, but most landlords and tenants are. In fact, a local realtor told me that she had never seen a multi listing with Sec 8 in place where the tenants were NOT paying above and beyond the approved rate.

The housing authority is playing hard ball with you. Five years and you never asked for an increase? IF you had asked for an increase, they would surely have raised the amount well above the 780 you were receiving. The tenant bears no responsibility for having played a part in this? They want you to pay back ALL the rent for 5 yrs? This is ridiculous.

You're never going to be able to rent to Sec 8 again,nor should you, so accept that. Do you still have any units rented to Sec 8? If no, then you could just walk away from them, saying that the tenant perpetrated the fraud, not you. They have no way of collecting from you. But if you have other units rented to Sec 8, or if you ever want to rent to Sec 8 again, you're going to have to straighten this out. Get a lawyer who's familiar with working with the housing authorities to work out a deal. He can point out to them that the rent was never raised for 5 yrs, so the unit was being rented at well below market rates. That you had no way of knowing that the property manager was shady. That you're willing to return the $20/month x 5 yrs to them, to return to the tenant. Don't bother asking for retroactive increases - they won't do it.

Karen aren't those deals done like this.. your asking 1k for rent.. but section 8 will only pay 800.. so tenant pays 200. as their portion.. this happens in virtually all section 8 rentals.. unless your saying section 8 sets the market rate and no matter if they pay a % they wont participate if the gross rent is above a certain amount ?

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Karen O.

Knoxville, TN · Member since 2019 · 111 posts · 57 votes

6y

Different Karen, but no. You ask for a certain amount of rent and if the tenant has been approved for a TOTAL voucher at that level or above (amount they are approved at depends on no. of bedrooms and zip code, if any utilities are included and not much else, here), then you can pursue the tedious process of getting them into the unit and a lease signed (I require full deposit up front and the local Sec. 8 office schedules an inspection usually inside 2 weeks, then another 2 to get lease signed at their office - there is no point having the tenant sign anything else, as the lease at that point is what is used; our state section 8, THDA, does everything online, so slightly different process with them).

Now, at that point, there is an amount paid by the agency and an amount paid by the tenant (can be zero, but capped at 30% of their monthly income). If they are approved at $750, for example, their share might be $150 or $450, with the rest paid by the sec. 8 agency, but you can't then charge them $800 and get the other $50 in cash. That $750, btw, is high market rate for a 2br in the area I take sec 8 and I do have some tenants in the program - all tenants pay the same amount, other than two inherited ones that have had increases, but not enough to get them to market rates of the last few years.

And to clarify, that is rate for apts - I have some SFH in same zip code, also 2 bdrm, rent for around $900 and no utilities - section 8 won't approve them at that $$ level, so I don't take it in those units.

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Brian Garlington

Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes

6y

@jason yuan It's been my experience that each year or every other year there is a "review" of the HAP as well as some sort of inspection....so when each of these were reviewed your PM didn't catch this?

"Signed by my Realtor" because I was not in the United States?

"I was not aware and not informed that it is not allowed to collect the extra $20 per month from the tenant?"

Sorry sir, but this sounds fishy at best. I doubt a "Realtor" is going to risk their license to do something like this for you. Also....ALL over the Section 8 paperwork in various forms of legalease it is written that you will NOT collect more than the stipulated amount per month in rent from the tenant. If you try to claim later, "I didn't know" that's like saying being pulled over for going 30 miles per hour in a 25 mile per hour zone and trying ti tell the cop, "I didn't know I couldn't go over the speed limit,...and even if I did it was only by 5 MPH."

No disrespect, but I'm not buying it. You don't need to prove anything to me or anyone else on this board, but it sounds like you and/or your realtor got caught....

3 Reply

Patti RobertsonBusiness Member

Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes

6y

@Jason Yuan - Just to clarify the agent signature issue - are you saying the agent signed her name as your agent - in which she would have had to provided a copy of a management agreement or power of attorney proving she had authority to sign on your behalf. Or are you saying she just signed your name - with your permission I assume. If it is the later, she forged a signature and could be prosecuted for fraud. This scenario us riddled with issues.

757-472-2547

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Karen F.

Investor · San Diego, CA · Member since 2015 · 435 posts · 421 votes

6y

We don't use an agent. We have to sign an agreement annually, that states that the total rent on the unit is X, and that the authority is paying a certain amount, and the tenant a certain amount. It is very clear in all the paperwork that a LL cannot charge more, and a tenant cannot offer to pay more, than the total rent on the unit. This paperwork gets redone annually.

But, as i said, this rule is commonly flouted. I get tenants offering to pay me more to get into a unit, and I hear of landlords getting more than the approved rate. I have never heard of it being enforced - but any LL who agrees to it is an idiot, because then you are at the tenant's mercy. They get mad at you for any reason, they have the power to get you kicked off of Sec 8, and as I now see, the agency might demand every penny of rent back from you!

1 Reply

Account Closed

Lexington, KY · Member since 2018 · 169 posts · 77 votes

6y

@Jason Yuan any updates?

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Section 8 ask me to pay back 5 year rent for $44,000

Section 8 ask me to pay back 5 year rent for $44,000

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