PROPERTY MANAGEMENT MANUAL This Manual outlines the requirements the Borrower is to follow in managing their Georgia Department of Community Affairs financed development. This Manual is organized as follows: I. Property Manager Selection II. Management and Occupancy Plan III. Property Manager Insurance Requirements IV. Property Management Annual Reporting Requirements This Manual is applicable to multifamily projects with 12 or more units and not applicable for projects receiving only Low-Income Housing Tax Credits. This Manual also applies to projects funded by the Housing Trust Fund for the Homeless Commission. Definitions: The following words and terms, when used in this guide, shall have the meanings shown below, unless the context clearly indicates otherwise: "Affirmative Fair Housing Marketing Plan" is a plan to provide information and otherwise attract eligible persons from all racial, ethnic and gender groups who would least likely apply for residence; "DCA" is the Georgia Department of Community Affairs; "Development" means the rental community, i.e. all the apartments and the common areas under one ownership; "Elderly family" is one in which the head of household, spouse or sole member is 62 years of age or older, handicapped or disabled; "Family" is two or more persons sharing residency and related by blood, marriage or operation of law, or who demonstrate a stable relationship over a period of time; "Housing Trust Fund" is an instrumentality of the State of Georgia created by the General Assembly or the State of Georgia to provide financial assistance to sponsors of housing programs and activities which are designed to mitigate the problem of homelessness in the State of Georgia; 2010 Property Management Manual DCA Office of Affordable Housing Page 1 of 9 "Housing for Older Persons" means housing intended and operated for occupancy by persons 55 years of age or older ("Older Persons"). According to Georgia law, such housing must also have significant facilities and service serving the Older Persons population even though the requirement has been eliminated from the federal definition of an elderly project. At least 80% of the total occupied units in such a housing project must be occupied by at least one Older Person. Up to 20% of the units may be occupied by others, including the landlord's employees, the surviving spouses or children of residents who were Older Persons when they died, and caregivers. DCA will monitor the required facilities and services during the applicable Compliance Period or the Period of Affordability whichever is longer. "Household" is one or more persons who share or will share a residence; "HUD" is the United States Department of Housing and Urban Development; "Lease" shall mean the form of agreement between the Borrower and a Tenant under the terms of which said Tenant is entitled to enjoy occupancy of a dwelling unit; "Minority" is a household in which one or more members are Black, Hispanic, American Indian or Asian/Pacific Islander; "Non-Housing Income" shall mean all amounts actually collected by the Manager, other than the rental income from the residential units, including but not limited to (1) vending and laundry machine income, and (2) income received from rental of parking spaces, garage spaces and commercial space; "Rent" shall mean the monthly amount that a Tenant is obligated to pay the Owner pursuant to the terms of a Lease; "Restrictive Covenants" refers to the land use restriction agreement executed by Owner which sets forth certain rent and/or occupancy restrictions; and "Tenant" shall mean a person occupying a dwelling unit in the Development pursuant to a Lease; 2010 Property Management Manual DCA Office of Affordable Housing Page 2 of 9 I. PROPERTY MANAGER SELECTION Management Companies wishing to manage developments financed by DCA must be evaluated and approved by DCA and determined to be experienced and in good compliance standing with DCA and with other state and federal agencies. To facilitate the evaluation, the prospective Property Manager must complete the Management Agent requirements of the 2010 Performance Workbook, which is attached hereto. The management evaluation includes the following areas but is not limited to the following areas: A. Type of property to be managed; B. Principals and employees of the management company; C. Management company portfolio and experience; D. Financial reporting and operating controls; E. Compliance status in GA, with other states and with federal programs. F. Physical condition of sample portfolio properties; and DCA retains the right to obtain credit reports and other pertinent information on the management company, the company principals and employees. Deficiencies in any of the above areas may need to be corrected or explained before DCA will approve the Property Manager. Based on the results of the management evaluation, DCA will either approve or deny the proposed management company. Management Companies may be removed from the DCA Experienced Property Management Company list. Examples of the reasons for removal are: significant changes in the status of management portfolio (as submitted in Performance Workbook), financial reporting or operating irregularities, repetitive physical or administrative non-compliance not cured during the assigned cure period and debarment by and other federal or state agency.. Property Managers are generally eligible to manage all types of DCA-financed developments. In the case where a Property Manager is granted limited approval, applicable conditions will be specified. In those cases where the request for approval is rejected, DCA will state the reasons for rejection, and Property Manager may not be eligible to manage any DCA-financed development until deficiencies are corrected. Consequently, the development team may be required to engage another Property Manager acceptable to DCA. A Property Manager, who received limited approval, or whose request for approval was rejected, may reapply for approval status. DCA will review a request for reapplication if the reasons for rejection are corrected or other significant changes have occurred. The period for 2010 Property Management Manual DCA Office of Affordable Housing Page 3 of 9 reapplying is one year from the date of the decision. Property Managers who intend to resign property management responsibilities must provide the Borrower with no less than 60 days prior written notice. The Borrower must notify DCA Asset Management (in writing) of the resignation decision within two business days after receiving such notice. Following the Property Manager's resignation notice, Borrower shall propose a replacement Property Manager and provide DCA Asset Management with such information as outlined in this section no later than 30 days prior to the proposed takeover by new management company. Failure of the Borrower to notify DCA of a change will be considered a major non-compliance. II. MANAGEMENT AND OCCUPANCY PLAN Prior to the beginning of lease-up, the Borrower (a/k/a Owner) and Manager are to submit a comprehensive property specific Management and Occupancy Plan ("Plan") detailing planned management activities. If the rental housing is assisted with HOME funds, the following procedures must comply with the HOME Final Rule: Income determinations Rents determinations Tenants and participants protections Affirmative marketing; minority outreach program, Fair Housing Any other applicable state and federal requirements. The Plan must be attached as an exhibit to the Management Agreement and all statements contained in the Plan should be incorporated into the Management Agreement. At a minimum, the Plan must address the areas outlined below: A. Relationship between Borrower and Property Manager Items to be addressed in this section of the Plan must include: 1. A description of the Borrower's goals and objectives, including a brief summary of the Borrower's expectations to achieve and sustain lease-up; 2. A description of the legal and corporate relationship between the Borrower and Manager, including a history of all prior services performed by the Manager on the Borrower's behalf; 3. A description of the limitations of management's authority, identifying those requiring the Borrower's prior approval, and the type of authority the Manager has in dealing with emergency situations; and 2010 Property Management Manual DCA Office of Affordable Housing Page 4 of 9 4. A description of the levels of authority for disbursements and Borrower limitations. B. Development Characteristics This section of the Plan must include a description of the project development including location, site, neighborhood characteristics, amenities, type/number of building(s), number of stories, number of units, number of bedrooms/distribution, types of financial subsidy(s) and tenant composition (e.g. family, elderly or mixed). C. Property Manager's Structure of Organization This section of the Plan must include a description of the Property Manager's organization and history. Items to be addressed in this section of the Plan must include: 1. Names and resumes of personnel (if known) responsible for on-site management activities; 2. Job descriptions for both supervisory and on-site personnel, indicating; a. job title; b. scope and purpose of job; c. specific duties and responsibilities associated with the job; d. required qualifications for the position; and e. salary (including benefits) to be charged as a project expense. f. Completion of the Property Management Staffing Breakdown form. 3. Personnel policies relating to fringe benefits (e.g. medical coverage, vacation, sick leave, overtime, etc.), grievance procedure, termination procedure, hiring procedure (e.g. security check and screening) and training and promotion opportunities, and for employee rent-free or reduced-rent units. 4. First year proposed budget for subject property which details the expenses for staff salaries, fringe benefits by position type. This budget must also include the overall management fee charged to the project. Generally, this budget should align with the proposed management fees and staffing proposed in the application budget for the subject property. If items have changed an explanation for those changes must be included. D. Policies and Procedures for Occupancy Items to be addressed in this section of the Plan must include: 1. Plan for advertising (e.g. television, radio, newspapers, signage, etc.); 2. Procedures for implementing an Affirmative Fair Housing Marketing Plan 2010 Property Management Manual DCA Office of Affordable Housing Page 5 of 9 (Form HUD 935.2), including the strategy for marketing the rental units for both initial occupancy and for ongoing occupancy; 3. Policy/procedures for screening and processing applications (including sample of the application and other appropriate forms); 4. Procedures for determining tenant income eligibility; 5. Tenant Selection policy/procedures (including priorities and preferences for admission, limitations on admission for over-income tenants and prohibited conditions for admission); 6. Procedures for income certification, recertification and verification (including sample forms); 7. Procedures for notifying acceptable applicants and rejecting applicants; 8. Procedures for establishing waiting list; 9. Policy/procedures regarding non-discrimination; and 10. Policy/procedures for temporary tenant relocation (if applicable). E. Leasing Policies and Procedures Items to be addressed in this section of the Plan must include: 1. Procedures for "Move-in/Move-out" (including samples forms); 2. Procedures for handling security deposits; 3. Procedures for lease termination and eviction; 4. Policy and enumerating "House Rules" concerning such issues as NSF checks, car repairs in parking lots, loud music/ television, pool conduct, long term visitors, etc, including procedures for enforcing the rules; 5. List of all optional fees 6. List of all non-optional fees 7. Policies and procedures regarding management inspection of units, inspection of common space, HVAC filter change and pest control. 8. Standard lease forms. 9. Procedures to obtain coverage under federal crime insurance (if applicable). F. Rent Collection Policies and Procedures Items to be addressed in this section of the Plan must include: 1. Procedures for rent collection (who, when, where and how); 2. Procedures for collecting late charges and amount charged; 3. Procedures for collecting accounts receivable noting date when delinquent accounts will be referred to an attorney; 4. Samples of collection and other form letters; 5. Collection procedures for laundry and other receivables; and 2010 Property Management Manual DCA Office of Affordable Housing Page 6 of 9 6. Procedures for rental increases (must comply with contractual and regulatory obligations). G. Accounting Policies and Procedures Items to be addressed in this section of the Plan must include: 1. Location of tenant records; 2. Description of the accounting system including the type of software system/program with samples of an income statement, balance sheet and cash flow statement; and 3. Description of internal controls including payables/receivables, cash disbursements; and 4. Statement that the management entity will provide financial statements for the subject project to the Owner and/or DCA annually for Owner and DCA's review. 5. Location of Tenant Credit, Criminal and Tenant/Landlord Verifications. And billing from company providing t the verifications. 6. Copies of all utility provider bills and third party utility billing service documents and invoices H. Maintenance and Security Procedures Items to be addressed in this section of the Plan must include: 1. Procedures for conducting and following-up on regular property inspections; 2. Procedures for conducting unit inspections; (how often; who will be conducting inspections) 3. Procedures and schedules for regular cleaning and maintenance of all project amenities and common areas (e.g. grounds, hallways, clubhouse, gutters, concrete and paving, etc.); 4. Procedures for assessing the need and for scheduling of apartment/exterior painting and other renovations; 5. Procedures for controlling tenant maintenance requests, including samples of work order forms and system used to manage; 6. Procedures and schedules for pest and insect exterminating services and for handling special tenant requests; and documentation of contract. 7. Standard maintenance requirements to be performed by on-site staff and outside contractors; providing copies of all licenses (as required). 8. Procedures and schedules for preventative maintenance programs (mechanical systems); providing documentation of all licenses (as required). 9. Procedures for assessing security needs and resolving safety issues. Also 2010 Property Management Manual DCA Office of Affordable Housing Page 7 of 9 provide policies and procedure for controlling keys, monitoring smoke alarm systems, pull cord systems, fire extinguishers, etc. 10. Policy which states management company's agreement to immediately notify DCA of any reportable incidents that occur on the subject property using DCA Casualty Loss Form. 11. Statement of office days of operation and hours and the days and hours each amenity will be available to tenant. 12. Contact information for Supportive Service Provider (if applicable) 13. Statement that emergency contact number is posted at office along with office hours and contact for management company headquarters (name and direct line). I. Tenant Services Items to be addressed in this section of the Plan must include: 1. Plan and procedures for providing tenant orientation; 2. The role management will take in the tenants' organization, programs, activities and sources of funding (e.g. recreation, social service programs, etc.), if applicable; and evidence that all entities providing service satisfy all local, state and federal licensing requirements. 3. Procedures for handling all types of tenant grievances; 4. Plan for providing proposed social services and activities as presented in the application for the subject property. Plan should include frequency of events, marketing strategies, anticipated participation and staffing required and recording keeping policies. J. Management Fee This section of the Plan should include a description of the management fee designed to compensate the Property Manager for directing and supervising project operations in accordance with DCA, HUD and industry guidelines and standards. The management fee must be quoted as a percentage of rental collections. K. Marketing This section must include a description of the overall marketing strategy and the associated costs of furnishing a model apartment, hiring/training support staff (if applicable),lease-up incentives (staff and tenant) and advertising (e.g. publications, signage, etc.) the subject project. The section must include the annual marketing budget. 2010 Property Management Manual DCA Office of Affordable Housing Page 8 of 9 Note: Any changes to the information must be provided to DCA Asset Management for review. Substantive material changes to the information, such as an adjustment in the management fee, require prior written approval from DCA Asset Management. A detailed explanation of any changes in this information must be submitted along with the Property Management Annual Report. III. PROPERTY MANAGEMENT INSURANCE REQUIREMENTS The Property Management Company shall be required to procure and maintain the insurance coverage in such form and substance specified in the Insurance Guide section of the 2003 Application Manual. The Management Company /Owner shall provide a copy of any claim or notification sent to the Insurance Company to DCA's Multifamily Asset Management Department within 24 hours of the initial correspondence or contact. The Management Company / Owner will continue to provide copies of any correspondence, or communication, between the Insurer and the Management Company /Owner regarding any outstanding issue connected to the property until the issues is resolved. Note: The insurance required to be maintained must be fully paid and shall be issued with appropriate coverage in such amounts, in such form and substance, and with such expiration dates as are acceptable to DCA. Such policies are to provide that the insurer shall give DCA at least thirty (30) days prior written notice of cancellation/termination/material change, and to provide that no action by the insured shall invalidate or diminish the insurance or bond(s) provided to DCA. Refer to the Insurance Requirements section of the DCA 2003 Application Manual, the General Requirements section for details. IV. PROPERTY MANAGEMENT ANNUAL REPORTING REQIREMENTS Effective January 1, 2009 all management companies must complete the DCA Management Report. This report must be completed for all DCA Tax Credit and HOME properties. Tax Credit Properties must complete Section A of the report while Tax Credit/HOME and HOME only properties must complete Sections A and B. These reports are due to DCA Asset Management on July 15 of each year (on or before February 15, 2009 the form will be posted on the Compliance Section of the DCA website in the required forms category). 2010 Property Management Manual DCA Office of Affordable Housing Page 9 of 9