Link to an amendment published at 87 FR 11282, Mar. 1, 2022.

1. (a) Agency approval. Borrowers must use a lease approved by the Agency. The lease must be consistent with Agency requirements and the requirements of all programs participating in the housing project. Prior to submitting the lease to the Agency for approval, borrowers must have their attorney certify that the lease complies with state and local laws, Agency requirements, and the requirements of all programs participating in the housing project. If there are conflicting requirements the borrower shall notify the Agency of the conflict and request guidance. Borrowers must execute their Agency approved lease with each tenant household prior to tenant occupancy of a rental unit.

2. (b) Lease requirements.

   1. (1) All leases must be in writing.
   2. (2) Initial leases must be for a 1-year period.
   3. (3) If the tenant is not subject to occupancy termination according to § 3560.158 and § 3560.159, a renewal lease or lease extension must be for a 1-year period.
   4. (4) In areas with a concentration of non-English speaking populations, leases (including the occupancy rules) must be available in both English and the non-English language.
   5. (5) Leases must give the address of the management agent to which tenants may direct complaints.
   6. (6) Leases must include a statement of the terms and conditions for modifying the lease.

3. (c) Required items and provisions.

   1. (1) Leases for tenants who hold a Letter of Priority Entitlement (LOPE) issued according to § 3560.655(d) and are temporarily occupying a unit for which they are not eligible must include a clause establishing the tenant's responsibility to move when a suitable unit becomes available in the housing project.
   2. (2) Leases must contain a clause permitting escalation in the tenant contribution when there is an Agency-approved change in basic or note rate rents prior to the expiration of the lease. The escalation clause also must specify that the tenant contribution may be changed prior to expiration of the lease if the change is due to changes in tenant status, as documented on the tenant certification form, or the tenant's failure to properly recertify.
   3. (3) Leases must specify that no change in the tenant contribution will occur due to monetary or non-monetary default or when rental assistance or interest credit, is suspended, canceled, or terminated due to the borrower's fault. For information on tenant contributions when a borrower prepays the Agency loan, refer to subpart N of this part.
   4. (4) Leases must contain a requirement that tenants make restitution when unauthorized assistance is received due to applicant or tenant fraud or misrepresentation and a statement advising tenants that submission of false information could result in legal action.
   5. (5) Leases must include a statement that the housing project is financed by the Agency and that the Agency has the right to further verify information provided by the applicant.

   6. (6) Leases must state that the housing project is subject to:

      1. (i) Title VI of the Civil Rights Act of 1964;
      2. (ii) Title VIII of the Fair Housing Act;
      3. (iii) Section 504 of the Rehabilitation Act of 1973; and
      4. (iv) The Age Discrimination Act of 1975.
   7. (7) Leases must establish the tenant's responsibility according to the housing project's occupancy rules to move to the next available appropriately sized rental unit if the household becomes over housed or under housed in the unit they occupy.
   8. (8) Leases must include provisions that establish when a guest will be considered a member of the household and be required to be added to the tenant certification.
   9. (9) Leases must include a provision stating that tenancy continues until the tenant's possessions are removed from the housing either voluntarily or by legal means, subject to state and local law.
   10. (10) Leases must include a requirement that tenants who are no longer eligible for occupancy under the housing project's occupancy rules or do not meet the criteria set forth in § 3560.155(c) and (e) must vacate the property within 30 days of being notified by the borrower that they are no longer eligible for occupancy or at the expiration of their lease, or whichever is greater, unless the conditions cited in § 3560.158(c) exist;
   11. (11) Leases for rental units receiving rental assistance must include clauses that specify that the tenant's monthly tenant contribution and a description of the circumstances under which the tenant's contribution may change.
   12. (12) Leases must include a requirement that tenants notify borrowers when changes occur in their income or assets, their qualifications for adjustments to income, their citizenship status, or the number of persons living in the unit.
   13. (13) A requirement that tenants agree to fulfill the tenant income verification and certification requirements established under § 3560.152.
   14. (14) Leases for tenants living in Plan II interest credit rental units must include provisions establishing the net monthly tenant contribution.

   15. (15) Leases, including renewals, must include the following language:

       “It is understood that the use, or possession, manufacture, sale, or distribution of an illegal controlled substance (as defined by local, State, or federal law) while in or on any part of this apartment complex or cooperative is an illegal act. It is further understood that such action is a material lease violation. Such violations (hereafter called a “drug violation”) may be evidenced upon the admission to or conviction of the use, possession, manufacture, sale, or distribution of a controlled substance (as defined by local, state, or Federal law) in any local, state, or Federal court. The landlord may require any lessee or other adult member of the tenant household occupying the unit (or other adult or non-adult person outside the tenant household who is using the unit) who commits a drug violation to vacate the leased unit permanently, within timeframes set by the landlord, and not thereafter to enter upon the landlord's premises or the lessee's unit without the landlord's prior consent as a condition for continued occupancy by the remaining members of the tenant's household. The landlord may deny consent for entry unless the person agrees to not commit a drug violation in the future and is either actively participating in a counseling or recovery program, complying with court orders related to a drug violation, or has successfully completed a counseling or recovery program. The landlord may require any lessee to show evidence that any non-adult member of the tenant household occupying the unit, who committed a drug violation, agrees not to commit a drug violation in the future, and to show evidence that the person is either actively seeking or receiving assistance through a counseling or recovery program, complying with court orders related to a drug violation, or has successfully completed a counseling or recovery program within timeframes specified by the landlord as a condition for continued occupancy in the unit. Should a further drug violation be committed by any non-adult person occupying the unit the landlord may require the person to be severed from tenancy as a condition for continued occupancy by the lessee. If a person vacating the unit, as a result of the above policies, is one of the lessees, the person shall be severed from the tenancy and the lease shall continue among any other remaining lessees and the landlord. The landlord may also, at the option of the landlord, permit another adult member of the household to be a lessee. Should any of the above provisions governing a drug violation be found to violate any of the laws of the land the remaining enforceable provisions shall remain in effect. The provisions set out above do not supplant any rights of tenants afforded by law.”

   16. (16) Leases for rental units accessible to individuals with disabilities occupied by those not needing the accessibility features must establish the tenant's responsibility to move to another unit when an appropriate unit becomes available or when the unit is needed by an eligible individual with disabilities. Additionally, the lease clause must require the borrower to provide tenants written notification of the date by which they must move to another unit in the project.
   17. (17) If loan prepayment occurs and the housing project is subject to restrictive use provisions, leases and renewals must be amended to include a clause specifying the tenant protections required under subpart N of this part.

   18. (18) All leases must contain the following information and provisions:

       1. (i) The name of the tenant, any co-tenants, and all members of the household residing in the rental unit;
       2. (ii) The identification of the rental unit;
       3. (iii) The amount and due date of monthly tenant contributions, any late payment penalties, and security deposit amounts;
       4. (iv) The utilities, services, and equipment to be provided for the tenant;
       5. (v) The tenant's utility payment responsibility;
       6. (vi) The certification process for determining tenant occupancy eligibility and contribution;
       7. (vii) The limitations of the tenant's right to use or occupancy of the dwelling;
       8. (viii) The tenant's responsibilities regarding maintenance and consequences if the tenant fails to fulfill these responsibilities;
       9. (ix) The agreement of the borrower to accept the tenant contribution toward rent charges prior to payment of other charges that the tenant owes and a statement that borrowers may seek legal remedy for collecting other charges accrued by the tenant;
       10. (x) The maintenance responsibilities of the borrower in buildings and common areas, according to state and local codes, Agency regulations, and Federal fair housing requirements;
       11. (xi) The responsibility of the borrowers at move-in and move-out to provide the tenant with a written statement of rental unit's condition and provisions for tenant participation in inspection;
       12. (xii) The provision for periodic inspections by the borrower and other circumstances under which the borrower may enter the premises while a tenant is renting;
       13. (xiii) The tenant's responsibility to notify the borrower of an extended absence;
       14. (xiv) A provision that tenants may not assign the lease or sublet the property;
       15. (xv) A provision regarding transfer of the lease if the housing project is sold to an Agency-approved buyer;
       16. (xvi) The procedures that must be followed by the borrower and the tenant in giving notices required under terms of the lease including lease violation notices;
       17. (xvii) The good-cause circumstances under which the borrower may terminate the lease and the length of notice required;
       18. (xviii) The disposition of the lease if the housing project becomes uninhabitable due to fire or other disaster, including rights of the borrower to repair building or terminate the lease;
       19. (xix) The procedures for resolution of tenant grievances consistent with the requirements of § 3560.160;
       20. (xx) The terms under which a tenant may, for good cause, terminate their lease, with 30 days notice, prior to lease expiration; and
       21. (xxi) The signature and date clause indicating that the lease has been executed by the borrower and the tenant.

4. (d) Prohibited provisions. Borrowers are prohibited from including any of the following clauses in the lease:

   1. (1) Clauses prohibiting families with children under 18;
   2. (2) Clauses requiring prior consent by tenant to any lawsuit that borrowers may bring against the tenant in connection with the lease;
   3. (3) Clauses authorizing borrowers to hold any of a tenant's property until the tenant fulfills an obligation;
   4. (4) Clauses in which tenants agree not to hold borrowers liable for anything they may do or fail to do;
   5. (5) Clauses in which tenants agree that borrowers may institute suit without any notice to the tenant that the suit has been filed;
   6. (6) Clauses in which tenants agree that borrowers may evict the tenant or sell their possessions whenever borrowers determine that a breach or default has occurred;
   7. (7) Clauses authorizing the borrower's attorneys to appear in court on behalf of the tenant, and to waive the tenant's right to a trial by jury;
   8. (8) Clauses authorizing the borrower's attorneys to waive the tenant's right to appeal or to file suit; and
   9. (9) Clauses requiring the tenant to agree to pay legal fees and court costs whenever the borrower takes action against the tenant, even if the court finds in favor of the tenant.

5. (e) Housing projects and units receiving HUD assistance.

   1. (1) In housing projects receiving Section 8 project-based assistance, borrowers may use the HUD model lease. The provisions of the HUD model lease will prevail, unless they conflict with Agency lease requirements in accordance with this section. If there is conflict between HUD requirements and Agency requirements, the provision that will be enforced will be the one that is most favorable to the tenant.

   2. (2) For units occupied by Section 8 certificate and voucher holders, borrowers may use:

      1. (i) A standard HUD-approved lease;
      2. (ii) A HUD-approved lease that includes a number of modifications from the standard HUD-approved lease; or
      3. (iii) An Agency-approved lease may be used if acceptable by HUD or the local housing authority.

6. (f) State and local requirements. Borrowers must use a lease that is consistent with state and local requirements.

   1. (1) If any lease provision is in violation of state or local law, the lease may be modified to the extent needed to comply with the law, but any changes must be consistent with the provisions established in paragraph (c) of this section.

   2. (2) Leases must include a procedure for handling tenant's abandoned property, as provided by state or local law.

      Effective Date Note:At 70 FR 8503, Feb. 22, 2005, in § 3560.156(c)(12), implementation of the words “* * * their citizenship status, * * *” was delayed indefinitely.