Wednesday, August 26, 2020

11th Circuit signals strong support for nonprofit housing developers this summer

The 11th Circuit recently ruled on a case which might prove relevant on a far larger scale. On July 7th this summer, Judge William Thomas held that the Opa-Locka Community Development Corporation’s (Opa-Locka) right of first refusal could be exercised against the attempted sale of Aswan Village, an affordable housing project that Opa-Locka financed as a nonprofit corporation. The controversy of the case revolved primarily around whether an affiliate of HallKeen Management, the owner of Aswan Village, triggered Opa-Locka’s right of first refusal and thus had to allow Opa-Locka to purchase the housing project at well-below fair market value by sending a letter to Opa-Locka indicating their intent to sell Aswan Village to a third party. Under IRC 42(i)(7) of the United States Code, a qualified nonprofit corporation such as Opa-Locka can automatically insert itself into the sale of an affordable housing project ahead of other interested buyers. The 11th Circuit held that, absent more specific language in Opa-Locka’s contract containing its right of first refusal for Aswan Village, HallKeen’s indication of its intent to sell via a letter was sufficient to trigger Opa-Locka’s right of first refusal.

The immediate case is interwoven into a far broader national tapestry: demand for affordable housing options is high, and the availability of that housing could come under threat as for-profit companies seek to capitalize on market values for these areas which have risen steadily higher. Whether the 11th Circuit’s stance strongly favoring nonprofit corporations’ defense of these low or fixed income housing areas will stand remains to be seen, as the firm representing HallKeen filed a motion in Miami-Dade circuit court at the end of July to have the order set aside.

For information on the case and its potential broader implications, see: https://www.prnewswire.com/news-releases/local-court-win-is-a-victory-for-affordable-housing-communities-nationwide-301091845.html

 

By David A. Brennen, Professor of Law at the University of Kentucky 

https://lawprofessors.typepad.com/nonprofit/2020/08/11th-circuit-signals-strong-support-for-nonprofit-housing-developers-this-summer-1.html

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