Section 6211.82. Rental costs

(a) Space that is justified by the program is allowable.

(b) Leasing or rental costs for buildings is allowable if parties are unrelated and the facility demonstrates that the rental or lease is an arm’s length transaction and continues as such.

(c) Exceptions to subsection (b) are allowed only upon advance approval from the Deputy Secretary for the Office of Developmental Programs or a designee. Approval will be based on a fair market rental appraisal as outlined in subsection (e), or documented costs of ownership, except that return on equity is not permitted. The provider is permitted to include documented mortgage interest charges and depreciation.

(d) The provider shall maintain adequate documentation to substantiate rental costs. Documentation shall include copies of the Deputy Secretary’s approval specified in subsection (c), the lease, and bills for taxes, insurance, and interest.

(e) The facility shall maintain documentation of a fair market rental appraisal for all rental properties, from an individual who holds at least one of the following designations awarded by the Society of Real Estate Appraisers:

(1) Senior Real Property Appraiser.

(2) Senior Residential Appraiser.

(3) Senior Real Estate Analyst.

(4) Member of the American Institute of Real Estate Appraisers.

(f) A maximum allowable annual rental shall be computed in the following manner:

(1) The property value is based upon the documented market value of three similar properties including land in the same geographic area.

(2) Net equity is obtained by reducing the property value by the estimated selling costs and any outstanding debt.

(3) The rate for return on equity capital as contained in Section 5782 of HIM-15, for the beginning of the current fiscal year, will be applied to net equity.

(4) The actual cost of real estate taxes, insurance and interest on any debt, for the current fiscal year, are included.

(5) The maximum annual rental may not exceed the sum of paragraphs (3) and (4).

(g) Providers shall maintain documentation related to subsection (f).

(h) Rent is allowable up to the maximum allowable reimbursement for annual rental value.

(i) If there is a multiple year lease, rentals are determined by new appraisals or by updating the existing appraisals using the HIM-15, interest rate, current costs for taxes, insurance, and interest.

(j) Facilities certified on or before July 1, 1984, shall comply with this section beginning July 1, 1987, or at the expiration of the current lease agreement, whichever occurs first. Facilities certified after July 1, 1984, shall comply with this section as of the initial date of certification.

The provisions of this § 6211.82 amended June 8, 2012, effective July 1, 2011, in accordance with section 403.1(e) of the code, 42 Pa.B. 3261. Immediately preceding text appears at serial pages (213329) to (213330).

Notation

Authority

The provisions of this § 6211.82 amended under sections 201(2), 403(b) and 403.1 of the Public Welfare Code (code) (62 P. S. § § 201(2), 403(b) and 403.1), as amended by the act of June 30, 2011, (P. L. 80, No. 22) (Act 22).