After closing
The HUD regulatory agreement: what owners sign at closing and live with after
The regulatory agreement (form HUD-92466M) is the recorded contract between the owner and HUD that comes with every FHA-insured apartment loan. It governs the reserve for replacements, surplus cash and distributions, books and annual audits, management and leases, and the actions that need HUD's prior written approval. It lasts as long as HUD insures or holds the note and ends automatically when the loan is paid off.
What it is
Every FHA-insured apartment loan closes with a regulatory agreement between the borrower and HUD, recorded against the property with the same formalities as a deed. The current form, HUD-92466M, covers loans under Sections 207, 220, 221(d)(3), 221(d)(4), 223(a)(7), 223(f) and 231, processed under MAP or TAP. It replaced several older forms (HUD-92465, HUD-92466, FHA-1730 and 1733), so loans closed decades ago carry older wording. Read the agreement recorded on your property, not a generic copy.
The agreement runs as long as HUD owns, holds or insures the note and terminates automatically when the note is satisfied, although the owner stays responsible for violations that happened before then.
What it controls, section by section
| Area | What the agreement requires (form HUD-92466M, 6/18) |
|---|---|
| Reserve for replacement (s. 10) | Fund it monthly; held by the lender; draws only with HUD consent; reserve use analysis at least every 10 years. See replacement reserves |
| Project funds (s. 11) | All rents and receipts in the project’s name; spent only on reasonable operating expenses, permitted distributions and approved items; no other business |
| Security deposits (s. 12) | Kept separate, in interest-bearing trust accounts where state law requires, fully funded |
| Surplus cash (s. 13) | Calculated at fiscal year end, and mid-year if allowed. See surplus cash |
| Distributions (s. 14) | Only from surplus cash; none in default, under forbearance or with unresolved repair notices |
| Owner advances (s. 15) | Repaid only with HUD approval or from surplus cash |
| Books (s. 16-17) | Posted at least monthly, open to HUD; undocumented expenses are ineligible |
| Annual report (s. 18) | Audited statement within 90 days of year end. See annual financial statements |
| Condition (s. 19) | No waste; repair promptly; keep the property decent, safe, sanitary and in good repair. See NSPIRE inspections |
| Management (s. 21) | A management agreement acceptable to HUD; HUD’s rights prevail; HUD can require a change of manager |
| Contracts (s. 22) | Goods and services at reasonable, customary cost |
| Leases (s. 26-27) | Residential leases of 30 days to 3 years, no transient or hotel use; commercial leases need HUD approval |
| Prior approvals (s. 35) | Listed below |
| Enforcement (s. 36-39) | Notice, cure period, default and remedies |
| Non-recourse (s. 50) | The Section 50 addendum |
Actions that need HUD’s prior written approval
Section 35 lists what the owner may not do without HUD’s written consent. The ones that come up most:
- Selling or encumbering the property or any interest in it, or transferring an interest in the owner that creates or removes a principal. This is the Transfer of Physical Assets process. Foreclosure, bankruptcy by operation of law and inheritance are carved out.
- Borrowing or taking on liabilities other than for reasonable operating expenses.
- Paying principals any compensation except from permitted surplus cash.
- Management: entering into or changing management agreements except as program rules allow.
- Physical changes: remodeling, adding, demolishing or reconstructing, other than replacing worn items with equal or better ones and minor alterations that do not hurt the security.
- Use: any use other than the one approved, more commercial space, a zoning change that alters permitted use, a condo or co-op regime, or a change in unit configuration or count.
- Organizational documents: material amendments, including adding a member who triggers previous participation review or changing who can bind the owner. Executed amendments go to HUD within ten days.
Violation, default and remedies
Any breach of the agreement, fraud or material misstatement in reports to HUD, or a forfeiture action against the property is a violation. HUD sends written notice; if the owner has not fixed it to HUD’s satisfaction within 30 days (or the period in the notice), HUD may declare a default. To protect tenants’ health and safety, HUD may declare a default at any time without prior notice.
After a default HUD can require the lender to accelerate the loan and foreclose or assign it to HUD, collect rents and pay the property’s obligations, take possession and operate it, ask a court for specific performance, an injunction or a receiver, and recover attorney fees. HUD’s forbearance is not a waiver.
Where recourse comes in
HUD loans are non-recourse, and the Section 50 addendum spells out the exceptions. The named individuals and entities are not personally liable for payments on the note and mortgage, for reserve deposits, or for matters outside their control. They are personally liable for:
- project funds or property that come into their hands which they are not entitled to keep;
- authorizing a sale, transfer, pledge or encumbrance of the property or an interest in it without HUD’s approval; and
- their own acts, or acts they authorize, in violation of the addendum.
Those obligations survive foreclosure, a deed in lieu, termination of the agreement and release of the mortgage.
Monthly distribution election
Loans endorsed after Mortgagee Letter 2022-16 (September 7, 2022) can carry an election, inserted near the front of the agreement, for monthly surplus cash distributions, with a replacement section 13. Only owners with no project-based Section 8 contract or HUD-held note can elect it, and HUD will not amend agreements on loans closed before the letter. The conditions are in the surplus cash guide.
Other documents that ride alongside
The regulatory agreement is not the only recorded restriction a HUD property may carry. LIHTC land use restriction agreements, RAD use agreements, Section 8 HAP contracts, 223(f) use agreements and Mark-to-Market notes each have their own terms and may outlast the insured loan. See LIHTC and HUD, RAD and Section 8 HAP refinancing.
Sources
- Form HUD-92466M, Regulatory Agreement for Multifamily Projects (6/18)
- HUD Mortgagee Letter 2022-16, modification of section 13 for monthly surplus cash distributions (Sept. 7, 2022)
- 24 CFR 5.801, Uniform financial reporting standards
- HUD MAP Guide, Handbook 4430.G, 2020 edition, section 3.1.3 (non-recourse)
- HUD Handbook 4350.1 REV-1, chapter 13, Transfer of Physical Assets
Checked against these sources on October 30, 2026. HUD changes program rules by Mortgagee Letter and Federal Register notice; the lender's commitment governs any loan.
Short answers
What is a HUD regulatory agreement for a multifamily property?
It is the recorded agreement between the borrower and HUD, signed at closing in exchange for HUD insuring the loan. It sets the rules for how the property's money, management, leases and physical condition are handled for as long as the loan is insured, and it is enforceable by HUD directly, not only through the lender.
How do you get a release of a HUD regulatory agreement?
The agreement says it continues while HUD owns, holds or insures the note and terminates automatically when the note is satisfied. In practice that happens with the payoff; ask the lender and the title company what needs to be recorded in your county to clear it from title. Use agreements, LIHTC restrictions or Section 8 contracts are separate documents and may survive.
Are HUD apartment loans non-recourse?
Yes, with carve-outs. The Section 50 addendum says the named parties are not personally liable for the note, the mortgage or reserve deposits. They are personally liable for project funds they receive and are not entitled to keep, for authorizing a transfer of the property or an interest without HUD's approval, and for their own acts in violation of the addendum.
What needs HUD's prior written approval under the regulatory agreement?
Among others, selling or encumbering the property or an interest that changes a principal, borrowing other than for reasonable operating expenses, paying principals except from surplus cash, entering or changing management agreements, remodeling or demolishing (beyond like-for-like replacement and minor alterations), changing the use or the number of units, creating a condo or co-op regime, and material amendments to the owner's organizational documents.
What happens if an owner breaks the regulatory agreement?
HUD sends written notice. If the violation is not fixed within 30 days, or another period HUD sets, HUD may declare a default. It can then have the lender accelerate the loan, collect rents, take possession, seek a receiver or an injunction, and recover attorney fees. To protect tenants' health and safety, HUD may declare a default without prior notice.