Construction & Lease-Up
Timely completion of construction is key to ensuring the delivery of projected tax credits. The general partner is ultimately responsible for ensuring that the project is constructed or rehabilitated and placed in service in accordance with the timelines and basis amounts set forth in the limited partnership agreement (LPA) and associated projections. Enterprise Community Asset Management monitors progress through reports received during construction and is available for consultation as needed. When construction is complete, Enterprise reviews the cost certification, 8609s and other key documentation prior to finalization.
Processing Capital Requests
As each operating partnership submits its required capital payment draw request, Enterprise reviews the package to ensure it is complete and has appropriate support, that sources and uses are reasonable and that construction progress is proceeding as expected. Information generally provided in a draw request package includes the following:
- AIA forms (G702-703)
- Lien waiver from the general contractor
- A calculation of projected and actual completion
- Independent inspection report
- Soft cost invoices (for all amounts over $10,000 unless otherwise required by the Investor)
- Unified draw schedule showing sources and uses, amounts funded to date by each funder, and amount of the requested draw to be funded by each funder
- Other items as required per the LPA
The cost certification report should be completed by an independent Certified Public Accountant which details total development costs and eligible basis. It is used by the allocating state agency to determine the amount of credits that will be reflected on the Form 8609. Enterprise reviews the draft certifications prior to submission to the state agency. The following information should be included:
- Total project costs
- Detail of permanent sources to equal total project costs
- Calculation of eligible basis for acquisition, new/rehabilitation, historic tax credits, state credits and energy credits (if applicable)
- Calculation of credits by credit type
- If financed by tax exempt bonds, the 50-percent test must be included
Once the cost certification report has been approved and the allocating state agency issued Form 8609(s) have been received (signed by the state agency), Enterprise Community Asset Management reviews the full 8609 (including the completed part II) prior to filing with the IRS. Any errors in the completion of the Form 8609(s) are difficult, costly and time consuming to correct and could have a serious impact on the project’s achievement of tax credits. Therefore, it is essential that all parties are in agreement on the cost certification report, application and completion of the 8609s to avoid any issues.
The General Partner is responsible for ensuring that tenants in tax credit units meet certain income eligibility requirements. A tenant’s income must be certified and verified prior to signing a lease for tax credit units. In order to facilitate the lease up process, ensure tax credit compliance and confirm unit qualification dates, Enterprise requires copies of the initial tenant files for every unit in the project. In addition, Enterprise requires the Unit Tracking Sheet be submitted on a monthly basis throughout the lease‐up process.
Since the initial tenant files for a property are of critical importance, we strongly recommend that General Partners store copies of the initial files off‐site, as well. Listed below is the link to the state agency website which will have information you will need in regards to compliance in your state. We strongly recommend that you go to the state website to be sure that you are using the most recent compliance manuals, forms, income and rent limits and subscribe to updates, newsletters, etc.
Complete, initial tenant files should include the following:
- TIC (Tenant Income Certification)
- Interview Checklist/Questionnaire
- Student Status Affidavit
- Under $5k Asset Cert (if applicable)
- No Asset or Asset Disposed of Form
- Income & Asset Worksheet showing how you calculated the household’s income
- Sources of Income Verifications
- Sources of Assets Verifications ‐
- Non Employment Affidavit or Cert of Zero Income (if applicable)
- Child Support Verifications/Statements (if applicable)
- Child Support Documentation (court orders, etc.)
- Lease Agreement
- Lease Addendum (if applicable)
Also, please include one copy of the following documents:
- Blank lease
- Blank Application
- Income Limits (current and prior year)
- Rent Limits (current and prior year)
- Utility Allowance (current and prior year, if applicable)
- Rent Roll
Additional Recommendations for Acquisition/Rehab Properties that had a prior LIHTC Allocation:
- The TIC and paperwork that originally qualified the unit under the prior Extended Use Agreement (EUA) should be included in the initial tenant file for the new LIHTC allocation.
- If the property is mixed‐income, the most recent recertification paperwork should be copied and placed in the initial tenant file.
- Residents should complete a certification (within 120 days of acquisition or within 120 days of the credit delivery period) stating household composition and student status.