1.  Why are we requiring a separate Operator Security Agreement and Operator Regulatory Agreement (and Operator’s Attorney’s Opinion) on an owner operated project? (8/27/13)

 

2.  Paragraph 13 of the Healthcare Regulatory Agreement - Operator (HUD-92466A-ORCF) refers to the Management Agent Certification by the wrong title and wrong form number.  The reference should be to "Management Agent Certification – Residential Care Facilities (form HUD-9839-ORCF, or successor form)."   (10/21/13)

 

3.  If we add an AR line post-closing and the new documents are required per the New Document Transition Matrix, should we replace the old operator regulatory agreement (HUD-92466-NHL) with the new version (HUD-92466a-ORCF)?  (12/13/13)

 

4.  Is an owner-operator permitted to change the 60-day period in subparagraph 20(c) of the Operator’s Regulatory Agreement to 90 days, in order to match the corresponding 90-day period in the Borrower’s Regulatory Agreement?  (12/13/13)
 

5.  In the Healthcare Regulatory Agreement – Operator (HUD-92466A-ORCF), the defined term “AR Financing Documents” is bracketed.  However, the term is used throughout the document without brackets.  (12/13/13)

 

6.  On the second page of the Operator's Regulatory Agreement, before the Definitions begin, the line that says: "Covenants.  Borrower and HUD covenant and agree as follows:" should be corrected to say:
"Covenants.  Operator and HUD covenant and agree as follows:".  (1/14/14)

 

7.  Should the bracketed language in Section 21 be included if there is no AR financing?  (6/19/14)

 

8.  On October 10, 2014, a Q&A was published permitting revisions to the reporting time frames in the operator and master tenant regulatory agreements. The posting states for projects that close on or after October 16, 2014, these changes should be made. Would the same be true for change of operator or change of master tenant transactions where the original closing predates the rule?  (2/5/16)

 

1.  Why are we requiring a separate Operator Security Agreement and Operator Regulatory Agreement (and Operator’s Attorney’s Opinion) on an owner operated project?
 

HUD requires a Borrower and an Operator Regulatory Agreement when a borrower is also the operator of the project because each document imposes different legal obligations on the entities.  Similarly, the Borrower Security Instrument and the Operator Security Agreement contain separate requirements.  While there is a high degree of overlap between the collateral descriptions in the Security Instrument and Operator Security Agreement, those descriptions are not identical and thus both documents are required.  In situations where the owner and operator of a project are one and the same, HUD will subject that entity to the same set of requirements that would be in place if the owner and operator were different entities.  To achieve this, owner-operators must sign both Regulatory Agreements (HUD-92466-ORCF and HUD-92466A-ORCF) and both security instruments (HUD-94000-ORCF and HUD-92323-ORCF).  In the 232 document reform process, HUD sought to avoid creating new closing documents that relate only to specific types of transactions (e.g., owner-operator transactions).  The documents are intended to be applicable to all variations of deals and business models, such that the closing process is simplified and standardized to the greatest extent possible.

This standardization is also helpful if, for whatever reason, a separate operator needs to step in to operate the healthcare facility-the owner’s documents could remain intact and the new operator would sign its own regulatory agreement and security agreement.

Finally, please note that the owner-operator transactions require not only the Operator Regulatory Agreement and Security Agreement, but also the Opinion of Operator’s Counsel (HUD-92325-ORCF).

 

2.  Paragraph 13 of the Healthcare Regulatory Agreement - Operator (HUD-92466A-ORCF) refers to the Management Agent Certification by the wrong title and wrong form number.  The reference should be to "Management Agent Certification – Residential Care Facilities (form HUD-9839-ORCF, or successor form)." 

We agree.  The scrivener's error has been corrected, and the corrected document will be posted soon.

 

3.  If we add an AR line post-closing and the new documents are required per the New Document Transition Matrix, should we replace the old operator regulatory agreement (HUD-92466-NHL) with the new version (HUD-92466a-ORCF)?

No, if the project currently has the HUD-92466-NHL version of the Operator Regulatory Agreement, simply amend that version to include the AR Rider found here: /sites/documents/RidertoRegAgmtNH.doc.  Use the new OMB-approved forms (Intercreditor Agreement, AR Financing Certification, Operator's Attorney's Opinion) for the balance of the transaction.

 

4.  Is an owner-operator permitted to change the 60-day period in subparagraph 20(c) of the Operator’s Regulatory Agreement to 90 days, in order to match the corresponding 90-day period in the Borrower’s Regulatory Agreement?  (12/13/13)
 
No, this change would be impermissible without a waiver of HUD regulations.  As specified in paragraph 20 of the Borrower’s Regulatory Agreement, the Borrower’s annual financial report must be audited and submitted to HUD and the lender no later than 90 days after the end of the fiscal year.  By contrast, under paragraph 20(c) of the Operator’s Regulatory Agreement, Operator    year-end reports can generally be operator-certified and must be submitted within 60 calendar days of the end of the fiscal year. The 90-day and 60-day periods come directly from Section 5.801(c) of Title 24 of the Code of Federal Regulations.  Accordingly, changing the 60-day period in the Operator’s Regulatory Agreement to a 90-day period would require a regulatory waiver.  Modifications to the new Section 232 closing documents of this sort must also go through the OGC Procedures for Changes to 232 Closing Document Forms posted on the 232 Document Reform Implementation Committee Sharepoint site.     

It is important to note that HUD’s regulations require separate year-end financial statements from the owner and operator of every healthcare facility with a HUD-insured mortgage, even when the owner and operator are the same entity.  Specifically, 24 CFR Section 5.801(c)(4)(i) provides that “if the operator is also the borrower, then that entity’s obligation to submit an annual audited financial statement (in addition to its obligation as an operator to submit financial information on a quarterly and year-to-date basis) remains and is not obviated.”   
 

 

5.  In the Healthcare Regulatory Agreement – Operator (HUD-92466A-ORCF), the defined term “AR Financing Documents” is bracketed.  However, the term is used throughout the document without brackets.  (12/13/13)

We have removed the brackets surrounding the defined term “AR Financing Documents.”   By including this defined term in all instances, we allow for HUD-approved AR financing to be added post-closing without the need to amend and re-record this Regulatory Agreement.  A corrected document will be posted soon.

 

6.  On the second page of the Operator's Regulatory Agreement, before the Definitions begin, the line that says: "Covenants.  Borrower and HUD covenant and agree as follows:" should be corrected to say:
"Covenants.  Operator and HUD covenant and agree as follows:".  (1/14/14)

 
A corrected document will be posted soon.  Until corrected documents are posted, please correct all scrivener's errors "manually."

 

7.  Should the bracketed language in Section 21 be included if there is no AR financing?  (6/19/14)

The language should only be included if there are governmental receivables, regardless of whether there is AR financing. The omission of the sentence doesn’t hinder an operator’s ability to get AR financing, which is covered in paragraph 22.