What is the Land Use Restriction Addendum (LURA) for HUD Homes and when is it required?

The Land Use Restriction Addendum (LURA) is a legally binding contractual agreement between HUD and the Governmental Entities or nonprofits imposing restrictions on the resale of a HUD Home that the nonprofit organization or Governmental Entity purchased at a discount of 10 percent or greater.
 
Governmental Entities and HUD-approved Nonprofits participating in the HUD Homes program must execute the LURA as part of the FHA sales contract for any Property purchased at a 10 percent or greater discount. The LURA terminates five years from the date of execution.
 
The LURA requires the purchaser to expand affordable housing opportunities by complying with the following requirements:
  • The purchaser must complete needed repairs to bring the Property into compliance with local housing code followed by resale, lease, or lease-purchase only to a person who intends to occupy the Property as his or her Principal Residence and whose income is at or below 115 percent of the median income in the area, when adjusted for family size, or state, Governmental Entity, tribe, or agency thereof.
  • If sold, the purchaser must resell the Property for an amount not in excess of 110 percent of the Net Development Costs (NDC). The NDC are the total HUD-allowable costs to purchase, rehabilitate, and resell the Property.
  • The Property may not be occupied by or resold to any of the purchaser's officers, directors, elected or appointed officials, employees, or business associates, either during their tenure or for one year thereafter, or to any individual who is related by blood, marriage, or law to any of the above.
  • There may be no conflict of interest with individuals or firms that may provide acquisition or rehabilitation funding; management, sales or rehabilitation services; or other services associated with the Property.
EXCEPTION:
Discounted homes purchased through the Dollar Homes Sales to Local Governments, Good Neighbor Next Door (GNND) and Asset Control Areas (ACA) programs are not subject to the LURA restrictions.
 
For additional information see Handbook 4000.1 I.B.4.c.iii(E) at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
 
The  FHA-approved Nonprofits web page is available at https://www.hud.gov/program_offices/housing/sfh/np

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-04584