HUD Awarded $1.2 Million in Civil Money Penalty due to Housing Assistance Payment Contract Violation

HUD will receive approximately $1.2 million in a civil money penalty after an administrative law judge (ALJ) for HUD’s Office of Hearing and Appeals ordered the penalty to be paid. Apex Waukegan LLC (Apex), a multifamily housing landlord, and its management agent, Integra Affordable Management LLC, were found to be in violation of their Housing Assistance Payment (HAP) contract. In 2019, Apex entered a HAP contract for a 150-unit project-based Section 8 property named Lakeside Tower Apartments in Waukegan, Illinois. The HAP contract detailed specific standards to which Apex was required to adhere, including maintaining decent, safe, sanitary housing units. However, a 2021 onsite review of Lakeside Tower Apartments revealed deplorable conditions, causing HUD to begin administrative action against Apex and Integra for violating the conditions of the HAP contract. After multiple inspections conducted by the City of Waukegan confirmed HUD’s findings, the ALJ also confirmed the agency’s findings and cited the two companies for 34 individual violations of contractually obligated duties.

Lakeside Tower residents frequently complained of issues that had not been addressed, such as water damage, mold, cracked paint, and additional issues that violated the HAP contract’s provision of maintaining decent, safe, and sanitary housing. For example, maintenance personnel would paint over cracks, mold, and stains rather than addressing the underlying water issues. The ALJ also found that Integra was jointly liable, based on an investigation conducted by the HUD Office of Program Enforcement and Office of the Inspector General. Both companies were effectively controlled by the same parties, thus diminishing Apex’s and Integra’s claims that they did not possess shared interests.

HUD General Counsel Damon Smith noted that “HUD takes the health and safety of tenants very seriously and will bring enforcement actions against landlords who fail to live up to their obligations.”

Read HUD’s press release here.