For Project Development and Preservation

Richard Silverblatt Associates, Inc.
Fund Reservation

A fund reservation is issued to Sponsors whose applications in response to the Notification of Funding Availability (NOFA) have been approved for funding. HUD issues a Fund Reservation Letter to the Sponsor which contains very important information about the HUD program process in general and specific requirements and conditions to be met by the Sponsor. Perhaps the most important information is that the fund reservation expires within a time period indicated in the letter. If the Sponsor and development team cannot conclude an Initial Closing within the period indicated in the Fund Reservation Letter, HUD will take steps to cancel the fund reservation.

A Fund Reservation Letter typically comprises the following elements and it is important for the Sponsor and the development team to understand all the conditions of the HUD approval :

• Number of units approved, or number of beds in the case of a Section 811 group home

• HUD project number

• Proposed project location

• Capital Advance Authority, i.e., the amount that has been reserved for your project

• The annual amount of the Project Rental Assistance Contract (PRAC) and the amount based on the number of years of the term of the PRAC.

• The term of the PRAC. Currently, it is three years.

• HUD will indicate that the amount of the PRAC is based upon 75% of the current operating cost standards applicable to Section 202 or Section 811 in the jurisdiction of the NY HUB Office.

• The date by which all funding made available by HUD be obligated and any funds not disbursed (obligated) by a specified date will be recaptured.

• The Sponsor will be requested to indicate whether or not a housing consultant will be used.

• The Fund Reservation Letter specifies terms and conditions that will be applicable:

• Restrictions on sale or transfer of the HUD fund reservation, except to an approved single-purpose Owner organized by it.

• Fund Reservation will be cancelled if the construction, rehab or acquisition has not begun within 18 months from the date of the HUD Notification, unless extensions of up to 24 months have been granted by HUD.

• If the Sponsor had submitted an 811 application without site control, or if the Sponsor of a 202 or 811 project has lost site control or changes a site with HUD approval, then the Fund Reservation will be cancelled if the Sponsor/Owner fails to demonstrate ownership or control of a suitable site within one year after the date of the HUD Fund Reservation Letter. If applicable, see requirements for obtaining Section 811 site control approval.

• The awarded HUD Capital Advance and PRAC funds can only be used for this project.

• The Fund Reservation will be subject to cancellation if HUD determines that there is a pre-existing or current conflict of interest involving the project on the part of officers or directors of either the Sponsor or Owner, including affiliates.

• Filing for real estate tax exemption pursuant to Article XI of the New York State Private Housing Finance Law and Section 422 of the Real Property Tax Law or Article 75 of the New York State Mental Hygiene Law shall be mandatory.

• Restrictions on HUD amendment of awarded Fund Reservation Capital Advance and requirements for front-end money by Sponsor or Owner if necessary.

• HUD will also list any Special Conditions or Requirements which typically include:

• Requirement to form an approved single-purpose Owner corporation within 30 days of the date of the HUD Fund Reservation Letter.

• Requirement that the Owner cover costs that HUD will not pay for, such as the Minimum Capital Investment, start-up costs, excess land costs, ineligible amenities, excessive construction costs, etc.

• The Owner must show control of the project site at the time of submission of the Firm Commitment application.

• Previous Participation Certification, Form HUD-2530, for all officers and directors of the Owner within 90 days of the date of the HUD Fund Reservation Letter.

• Credit investigation clearance of the Owner's officers.

• An application for a Firm Commitment will be submitted within 180 days from the date of the HUD Fund Reservation Letter.

• Requirements for the submission of Conflict of Interest and Disclosure Certifications by each officer and board member of the Sponsor and Owner.

• Guidelines for the submission of an appraisal within 30 days from the date of the Agreement (see requirements in the Guide)

• If the site is a leasehold, the lease must conform to the HUD Lease Addendum and if approved by HUD, the lease may be varied only to conform to local law.

• Compliance with HUD's policy with respect to salary limitations for consultants.

• Requirement to provide a drug-fee workplace.

• Prohibitions on HUD funding to the Sponsor and Owner and related organizations that are presently disbarred or suspended or proposed from same from doing business with the government. Also to Sponsors and Owners with principals who have specific legal charges against them named in the Agreement.

• Other prohibitions or requirements for the Sponsor and Owner regarding lobbying, reporting to HUD on the results achieved in the proposed Logic Model submitted with the Fund Reservation application, use of a GC construction contract Cost Plus.

• List of other conditions relative to your specific project.
Home>Fund Reservation Description

Development Milestones

Fund Reservation

State/Local Approvals

Firm Commitment Application

Pre-Construction Conference

Initial Closing

Construction Period

Rent-Up and Marketing

Pre-Cost Certification Conference

Cost Certification

Project Rental Assistance Contract

Occupancy Requirements

Final Closing


Developing a Strategy for Project

Applying for a Contract Rent

Reviewing Replacement Reserves

Refinancing a Section 202 Direct Loan

Preparing for REAC Inspections

Establishing a Project Library


HUD Bookletters

HUD Forms

HUD Handbooks

HUD Information & Web Sources

HUD Notices

HUD NY HUB Handouts

Practical Guide to 202/811 Terms