ALJDEC decisions subject to certification as final
20F-AAATC0218-ADH · Arizona State Department of Housing · 2021-03-12
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
Quail Run Apartments Limited Partnership,
Appellant,
v.
ARIZONA DEPARTMENT OF HOUSING,
Appellee.
No. 20F-AAATC0218-ADH
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: Hearing sessions on August 20, 2020; August 21, 2020; and December 1, 2020, with record held open for post-hearing review; conclusion of review on February 22, 2021.
APPEARANCES: Nicole M. Goodwin, Esq. and Matthew P. Hoxsie, Esq. for Quail Run Limited Partnership. Ryan J. Regula, Esq., Marx Schultz, Esq., and Jay Jetter, Esq. for Arizona Department of Housing.
ADMINISTRATIVE LAW JUDGE: Kay A. Abramsohn
_____________________________________________________________________
The Administrative Law Judge has considered the entire hearing record including the testimony and the admitted exhibits, and now makes the following Findings of Fact, Conclusions of Law, and Decision that, based on the hearing record, ADOH appropriately determined that the ReNUE February 2020 Offer was a qualified contract and inappropriately determined that Quail Run rejected or failed to act on the February 2020 Offer.
FINDINGS OF FACT
Quail Run Apartments Limited Partnership (“Quail Run”) is an Arizona limited partnership located at 1103 West Ninth Place, in Mesa, Arizona in the Zip Code area of 85201. Quail Run owns and manages the Quail Run Apartments (the “Property”) located at 13868 North 79th Avenue, in Peoria, Arizona in the Zip Code area of 85381. See QR Exh. 3 at 13. The Property is a 156 unit residential rental housing property.
In 2001, prior to the Property being constructed, Walling Development, Inc., submitted an application to the Arizona Department of Housing (“ADOH”) for an allocation of the then-available federal low-income housing tax credits (“LIHTC”). See ADOH Exhibit 2 at 12-15. That application identified Quail Run as the owner of the proposed multifamily housing project. The Quail Run Apartments project was constructed and the Property was placed in service in 2003. See QR Exh. 3 at 3.
On October 2, 2001, Quail Run received a Certificate of Reservation for LIHTC tax credits for the construction of the Property. See ADOH Exh. 3 at 17-18. Of the 156 units, 139 units were rent restricted while 17 were unrestricted.
Once LIHTC are awarded, the project is deemed to be “affordable” housing and, as such, the owner is required to maintain the project as affordable, one requirement of which is maintaining a cap on the rents charged to tenants for certain units at certain designated levels for a period of thirty years. The entire thirty years of the LURA are considered to be the “extended use Period. At the end of the fourteenth year of the LURA, an owner may seek to sell its low-income project by submitting a written request, here to ADOH, to locate a buyer to acquire the owner’s interest in the project.
On October 12, 2005, the ADOH and Quail Run entered into a Declaration of Affirmative Land Use and Restrictive Covenant agreement, commonly known as a land use restrictive agreement (“LURA”). See QR Exh. 5. Under this LURA and its Attachment II, Quail Run was obligated to maintain 139 units as “low-income units” with certain specific rent restrictions pursuant to IRC § 42. Id., Attachment II, at 13-17. The parties’ LURA contained a specific term by which the LURA could be amended. LURA Section 12, Amendment, provided as follows:
This Agreement may be amended with the prior written approval of the [ADOH] to correct factual errors contained herein or to reflect changes in pertinent law, Section 42 of the Code and any ruling promulgated thereunder. No amendment to this Agreement may be made without the prior written approval of the [ADOH]. The Owner hereby expressly agrees to enter into all amendments hereto which, in the opinion of [ADOH]’s legal counsel, are reasonably necessary or desirable to correct factual errors of for maintaining compliance under Section 42 of the Code.
Id. at 10.
The qualified contract process in IRC § 42(h)(6)(F) allows the ADOH a one-year period to locate a buyer. In the event the ADOH would be unable “to present ... a qualified contract” to an owner during that one-year period, the thirty-year extended use period would be terminated and the owner would no longer be required to maintain the low-income rent restrictions.
A “qualified contract” is defined through its requisite parameters, found at IRC § 42(h)(6)(F) and in IRC Regulation § 1.42-18, effective May 3, 2012. A qualified contract is a bona fide contract to acquire an existing low-income residential rental project within a reasonable time period for the qualified contract amount; the qualified contract amount is a certain calculated, formulaic, contract price.
ADOH has administrative discretion “in evaluating and acting upon an owner’s request to find a buyer to acquire” the project. IRC Regulation § 1.42-18(d)(1). In the event that the one-year period for the agency to find a buyer has begun, the agency has discretion to “determine whether a failure to follow one or more of the requirements suspends the running of [the one-year] period.” A further example of the agency discretion is “specifying other conditions applicable to the qualified contract consistent with section 42 ...”
On or about March 21, 2019, Quail Run submitted to the ADOH its Qualified Contract Application (“Application”) requesting that the ADOH find a buyer for the Property. See ADOH Exh. 7.
The ADOH Application in effect at the time of Quail Run’s Application states, in Section F. Owner’s Warranties and Representations at #4, states:
The applicant agrees for itself and on behalf of the ownership entity and all of its constituent partners, limited partners, special limited partners, members, special members, to indemnify and hold ADOH, its officers, employees and the State of Arizona harmless against all losses, costs, damages and liabilities of any nature directly or indirectly resulting from, arising out of or relating to ADOH’s acceptance, consideration, approval or disapproval of this Application.
See QR Exh. 1 at 10; see also QR Exh. 3 at 13-15.
The ADOH’s Asset Management Handbook in effect at the time of Quail Run’s Application states:
The Application for Qualified Contract can be found on the ADOH website at: https://housing.az.gov/documents-links.forms/asset-management. By executing this application, the applicant agrees to the Qualified Contract process described below . . . . If ADOH fails to present a Qualified Contract to purchase the project property by the end of the one (1) year Qualified Contract period, ADOH may issue a Partial Release and Release of Declaration of Affirmative Land Use Restriction Covenants Agreement (“Partial Release”). This document terminates and releases the Land Use Restriction Agreement except as required by IRC § 42(h)(6)(E)(ii).
See QR Exh. 2 at 6-8.
In its Application, Quail Run had indicated a qualified contract price of $13,644,385. See QR Exh. 8.
In its Application, Quail Run executed Owner’s Warranties and Representations which stated, in paragraph #9:
If ADOH finds a prospective purchaser willing to present an offer to purchase the project for an amount equal to or greater than the “Qualified Contract” price, applicant agrees to enter into a commercially reasonable form of earnest money agreement or other contract of sale for the project which will allow prospective purchaser a reasonable period of time to undertake additional, customary due diligence prior to closing the purchase. Applicant further understands that if it fails to enter into a commercially reasonable form of earnest money agreement with the prospective purchaser, then ADOH will have presented a Qualified Contract for the purchase of the project and the project will remain subject to the requirements of the Extended Use Agreement for the full extended use period described in the LURA.
See QR Exh. 4 at 2-3.
As part of the qualified contract process, ADOH sought an appraisal that reflected “[t]he fee simple ‘as-is’ market value of all 156 units with the rent restrictions in place on the applicable units”; “[a] separate valuation of the 17 unrestricted units”; and “[a] separate valuation of the underlying land, without improvements.” See QR Exh. 6; see also QR Exh. 7 (Appraisal Report).
ADOH executed an engagement letter with Davis Valuation Group dated April 5, 2019 for an appraisal of the property. The engagement letter states:
INTEREST VALUED
In preparation of the appraised value, the property being appraised is subject to a Land Use Restriction Agreement (“LURA”), thus the Appraiser is instructed to value the Property in its “As-Is” condition assuming that the rental rates are limited to the maximum allowable by the Tax Credit or other affordability or tenancy restriction statutes and regulations, as applicable.
See QR Exh. 7 at 134.
HYPOTHETICAL CONDITIONS, EXTRAORDINARY ASSUMPTIONS
As noted above, the property is currently operated as a 156-unit LIHTC project with rent restrictions on all units. The applicant has requested that ADOH grant approval for a qualified contract since the property has met the criteria of affordable housing during its initial compliance period of 15 years. A qualified contract would allow applicant, if approved, to sell the property to another party who would keep the rent restrictions in place for the remainder of the extended use period. Thus, ADOH is seeking an “as-is” fee simple restricted rent valuation of the property to assist in establishing a prospective value/price.
See QR Exh. 7 at 135.
Accordingly, Davis Valuation Group prepared an appraisal of the property dated April 22, 2019 using the 20%, 30%, 40%, 50%, and 60% rent restrictions [See QR Exh. 7 at 88-89] and valued the property with the rent restrictions in the LURA at $8,650,000. See QR Exh. 7 at 4.
ADOH reviewed the calculations made by Quail Run’s CPA and found them acceptable up to the low-income portion of the qualified contract price of $9,574,385. See QR Exh. 8; see also QR Exh. 9.
On May 2, 2019, ADOH notified Quail Run that the final qualified contract price was $15,004,385. See QR Exh. 9. In its notification, ADOH also stated:
The Department will market the property in good faith, mainly on its website and possibly through other LIHTC industry channels. The Department will have until March 21, 2020 to find a party that is willing to pay at least the Qualified Contract Price. If such a party is identified and the owner is not willing to sell the property to them, the use restrictions will remain in place th[r]ough the full term of the extended use period in the LURA. Should the Department not be able to identify such a party, we will issue a Partial Release of the LURA at the end of the one year period, March 21, 2020.
On May 6, 2019, ADOH published Information Bulletin No. 16-19 (Notice of LIHTC Property Seeing a Qualified Contract), stating in pertinent part:
“ADOH is providing notice that . . . [Quail Run] is seeking a Qualified Contract for acquisition from a buyer(s) who will continue to operate the property as affordable through the extended use period in accordance with the Land Use Restriction Agreement and Section 42 of the Internal Revenue Code.”
See QR Exh. 10 (emphasis added).
On May 6, 2019 ADOH also posted a list of the Active Arizona Qualified Contract Requests listing Quail Run, its qualified contract price of $15,004,385, and its appraised value of $8,650,000 with the rent restrictions in the LURA. See QR Exh. 11.
ReNUE Properties Arizona, Inc., (“ReNUE”) is an Arizona corporation located at 8900 E. Bahia Drive #105, Scottsdale, Arizona 85260, with its sole officer and shareholder as Michael Christiansen.
On May 3, 2019, ReNUE had inquired of John Juarez at ADOH if there was a qualified contract price for Quail Run. See QR Exh. 12.
On May 7, 2019, ReNUE submitted to ADOH a purchase agreement with a purchase offer of $15,005,000, which was above the ADOH determined contract price of $15,004,385. See QR Exh. 13; see also QR Exh. 3 at 3. With its electronic submission to ADOH, ReNUE indicated to ADOH that its offer was the same as the contract it “used on [the] Tierra Antigua [property] which was deemed commercially acceptable by AIG and the ADOH.” Id.; see also QR Exhs. 15 and 16.
ADOH forwarded the ReNUE offer to Quail Run on May 7, 2019. See ADO ADOH QR ADOH Exh. 11. ADOH noted that if Quail Run chose not to accept the ReNUE offer, that the rental limitations would have to remain in place through the 15-year extended period. Id.
ReNUE provided the following terms and conditions in its May 7, 2019 offer:
23. Tax Credits.
(a) Tax Credits and Affordability Requirements. Seller acquired, owned and operated the Property as a project intended to generate tax credits (“Tax Credits”), including, without limitation, low-income housing tax credits under Section 42 of the [Internal Revenue] Code and the Treasury Regulations promulgated thereunder (collectively, “Section 42”). The Property is subject to regulatory and other agreements relating to income, rent or other affordable housing restrictions (collectively referred to as the “Regulatory Agreements”). In order to maintain and preserve the Tax Credits, and otherwise comply with the Tax Credit Laws and other obligations under the Regulatory Agreement, the Property must be operated in compliance with the Regulatory Agreements and all applicable rules, procedures, regulations, guidelines and other requirements under Section 42 and all other applicable federal, state or local affordable housing laws, regulations and other requirements relating to the Property (collectively, the “Tax Credit Laws”). Buyer acknowledges that the failure to operate the Property in compliance with the Regulatory Agreements and Tax Credit Laws may cause the recapture (and/or related liability) of all or a portion of such Tax Credits and/or result in other significant damages and economic loss related to the Tax Credits.
(b) Covenants. Buyer hereby covenants to Seller that, from and after Closing:
(i) Buyer, at its sole cost and expense and for the duration of all applicable time periods, shall (x) assume, undertake and cause to be performed all of the obligations under the Regulatory Agreements and the Tax Credit Laws applicable to the Property, including, without limitation, all ownership and operating restrictions and all tenant qualification and rent restrictions applicable to the Property, and (y) make timely, accurate and complete submissions of all reports to governmental agencies and any other reports reasonably required to be delivered with respect to the Property pursuant to the Tax Credit Laws, the Regulatory Agreements and any other documents or regulations related to the Tax Credits (including, without limitation, any applicable Housing Authority monitoring requirements)[.]
See QR Exh. 3 at 46-48.
On June 14, 2019, Quail Run responded to ReNUE’s offer with proposed negotiable terms and conditions. See ADOH Exh. 12.
On June 18, 2019, ReNUE responded, essentially, that it stood firm on its presented offer to purchase the Property at the terms in its offer. See QR Exh. 3 at 77-82; see also QR Exh. 17 at 1-5. According to Quail Run, the parties’ disputes centered around the earnest money deposit, the due diligence period/requirement, escrow procedures, closing costs, and whether the purchase would be “as is” or include the parties’ representations and warranties.
On June 25, 2019, ReNUE sent an email to Quail Run (and copied ADOH) which stated: “The state can decide if our offer fits the definition of a Commercially Reasonable contract and we can move forward from there.” See QR Exh. 3 at 77; see also QR Exh. 17 at 1.
On July 3, 2019, Quail Run sent an email to ADOH stating in pertinent part:
ReNUE apparently submitted a form “agreement” to ADOH on the first day that Quail Run was announced and could not have done any due diligence on the property by that time. ReNUE has since declined to conduct any diligence, has not offered any hard deposit, and would not be obligated to purchase the property. We cannot imagine that ADOH would view ReNUE’s so-called “offer” terms as a Qualified Contract, especially in light of our proposed terms, but please let me know if otherwise.
See QR Exh. 3 at 76; see also QR Exh. 17 at 1.
On July 23, 2019, ReNUE’s Chief Investment Officer, James Barlow, emailed Mr. Juarez asking for an update on the Quail Run project. See QR Exh.18.
On September 12, 2019, ReNUE wrote to Mr. Juarez asking “have you had a chance to force Quail Run to either accept our offer or remove it from the QC site?” See QR Exh.19.
On September 13, 2019, Mr. Juarez wrote to ReNUE, noting:
With respect to Quail Run, some time ago Michael wanted to discuss the Department’s willingness to change all of the AMI and rent levels to 60%. At the time, we said that we would entertain such a request if and when the property changed hands. The Department has revisited this matter and has decided not to entertain a request to change the AMI or rent levels on that property. Therefore, if you still wish to pursue Quail Run, the existing rent and income restrictions would remain in place.
See QR Exh.20 (emphasis added).
Mr. Barlow emailed Mr. Juarez for updates at least twice more between his first update request and October 10, 2019. Mr. Juarez finally responded on October 11, 2019 stating they were working on it. See QR Exhs. 21 and 22.
Quail Run’s Jeff Sussman met with Mr. Juarez and Andrew Rael (of ADOH) on November 7, 2019. Mr. Sussman asked if Mr. Juarez had heard from ReNUE since June 2019. Mr. Juarez stated he hadn’t. Mr. Sussman and Mr. Juarez discussed the process involved in terminating the LURA; it had been six months since the Quail Run Active Qualified Contract Request was announced and no other prospective buyers had submitted an offer. See QR Exh. 23. On November 11, 2019, Mr. Juarez emailed Mr. Sussman regarding further conversations about a partial release of the LURA. Id.
On November 27, 2019, the ADOH issued a letter in response to both Quail Run and ReNUE having expressed multiple and various concerns. See ADO Ex 13. H H Exh. 13; see also QR Exh. 3 at 1-8.
In its November 27, 2019 letter, ADOH specified that “there would be no adjustment to the income levels set forth in the Land Use Restriction Agreement if [ReNUE] were to acquire the Property.” ADOH Exh. 13 at 5-6; see also QR Exh. 3 at 4-5. Further, the ADOH explained that, as to certain other terms to which each party objected, those provisions could be modified and the contract would be considered to be a “Qualified Contract” if: (a) ReNUE’s requested credits to be applied to the purchase price at closing (such as title policy costs, escrow fees), pro-rations for rent ready adjustments, and insurance deductibles would be removed) to assure that Quail Run received the “qualified contract price;” and, (b) the required Deposit would be in a mid-range amount between “0.02% – 7.6% of the purchase price.” As to the remaining provisions of concern, the ADOH indicated that those terms were “commercially reasonable.” ADOH advised that, in the event Quail Run and ReNUE did not come to a written agreement by December 27, 2019, the ADOH would proceed to determine whether the Property would remain within the Qualified Contract request process for the remainder of the one-year period. See ADOH Exh. 13; see also QR Exh. 3 at 8.
After receiving ADOH’s November 27, 2019 email, ReNUE emailed the ADOH, and copied Quail Run, stating it was “still very willing and able to proceed with the purchase” noting that it would increase its deposit to the mid-range of the percentages that ADOH had proposed. See QR Exh. 24.
On December 5, 2019, Mr. Juarez spoke with Mr. Christiansen, who had indicated to him that “he could not agree to a non-refundable deposit clause since the issue of changing the income set asides was still an issue for them.” See QR Exh. 27. ADOH told Mr. Christiansen that their position was the income set asides could not be changed.
On December 16, 2019, ADOH advised Quail Run as follows:
If the transaction fails to close because the buyer fails to perform, and the QC Period has not expired, then the project would remain in the QC period to await any other offers. If no other offers are forthcoming that constitute a “qualified contract,” then at that time the project will be relieved of the affordability restrictions.
See QR Exh. 28 at 1-2.
On December 27, 2019, Quail Run and ReNUE executed their revised Purchase and Sale Agreement (the “December 2019 Purchase Agreement”) in accordance with ADOH’s qualified contract process. See QR Exh. 31. Thus, Quail Run had accepted ReNUE’s offer at the qualified contract price.
The December 2019 Purchase Agreement provided:
8. Title; Property Files; Buyer’s Inspection Rights.
* * *
(d) Buyer’s Termination Right; Indemnity. If Buyer is not satisfied, for any reason or no reason, in its sole discretion as to the suitability of the Property for Buyer’s intended uses, Buyer shall deliver written notice of its election to terminate this Agreement (“Notice of Termination”) to Seller on or before the expiration of the Contingency Expiration Date. If Buyer does deliver to Seller a Notice of Termination prior to the expiration of the Contingency Expiration Date, this Agreement shall terminate . . . and neither party shall have any further obligation hereunder. (Emphasis added)
20. Default. If either party defaults in its obligation to complete the transaction contained in this Agreement, the parties agree to the following remedies:
* * *
(b) Breach by Buyer. IF BUYER BREACHES ANY OF THE TERMS AND/OR CONDITIONS OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, (1) BUYER’S FAILURE TO TIMELY PERFORM ANY OF ITS OBLIGATIONS UNDER THIS AGREEMENT, OR (2) IF THE CLOSING AND THE CONSUMMATION OF THE TRANSACTION HEREIN CONTEMPLATED DO NOT OCCUR AS HEREIN PROVIDED BY REASON OF A BREACH OF ANY OF THE TERMS OF THIS AGREEMENT BY BUYER, WHICH BREACH IS NOT CURED WITHIN TEN (10) BUSINESS DAYS AFTER BUYER RECEIVES WRITTEN NOTICE THEREOF FROM SELLER, SUCH BREACH SHALL CONSTITUTE A DEFAULT UNDER THIS AGREEMENT AND SELLER SHALL BE RELEASED FROM ITS OBLIGATION TO SELL THE PROPERTY TO BUYER. BUYER AND SELLER AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH SELLER MAY SUFFER AS A RESULT OF SUCH BREACH. THEREFORE BUYER AND SELLER DO HEREBY AGREE THAT A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT SELLER WOULD SUFFER IN THE EVENT OF SUCH BREACH IS AND SHALL BE, AS SELLER’S SOLE AND EXCLUSIVE REMEDY (WHETHER AT LAW OR IN EQUITY), THE AMOUNT OF THE DEPOSIT. . . .
See QR Exh. 31 [(Section 20(b) (emphasis added)]
* * *
23. Tax Credits.
(a) Tax Credits and Affordability Requirements. Seller acquired, owned and operated the Property as a project intended to generate tax credits (“Tax Credits”), including, without limitation, low-income housing tax credits under Section 42 of the Code and the Treasury Regulations promulgated thereunder (collectively, “Section 42”). The Property is subject to regulatory and other agreements relating to income, rent or other affordable housing restrictions (collectively referred to as the “Regulatory Agreements”). In order to maintain and preserve the Tax Credits, and otherwise comply with the Tax Credit Laws and other obligations under the Regulatory Agreement, the Property must be operated in compliance with the Regulatory Agreements and all applicable rules, procedures, regulations, guidelines and other requirements under Section 42 and all other applicable federal, state or local affordable housing laws, regulations and other requirements relating to the Property (collectively, the “Tax Credit Laws”). Buyer acknowledges that the failure to operate the Property in compliance with the Regulatory Agreements and Tax Credit Laws may cause the recapture (and/or related liability) of all or a portion of such Tax Credits and/or result in other significant damages and economic loss related to the Tax Credits.
* * *
(g) Covenant Regarding Change of Status. Buyer hereby covenants that it shall not, prior to Closing, contact any federal, state or local governmental or quasi-governmental authority, tenant, tenant association, tenant’s rights group, or similar person or organization, regarding the feasibility or possibility of changing the status of the Property from an affordable housing project as currently operated, or modifying any Regulatory Agreement, whether any such change would occur prior to or after the expiration of the Tax Credits, or in any way indicate the intention to do the same. Any breach of this covenant by Buyer, whether occurring before or after the date of this Agreement, shall constitute a default hereunder by Buyer, in which event Seller may elect to terminate this Agreement by delivering notice to Buyer and Escrow Agent of such election, whereupon this Agreement shall be terminated and the Deposit shall be retained by Seller (and the other provisions of Paragraphs 9(c) and 20(b) of this Agreement shall govern).
See QR Exh. 31 [Section 23] (emphasis added).
Despite the terms and conditions in Section 23(g) of the December 2019 Purchase Agreement, on December 27, 2019, ReNUE contacted ADOH to set up a meeting regarding a “Quail Run Kick off Meeting,” indicating that it wanted “to make sure we are all on the same page.” See QR Exh. 30. The meeting was subsequently set for January 6, 2020.
On December 27, 2019, ReNUE wrote to First American Title that the state “might” allow ReNUE to switch to 60% units. See QR Exh. 32 at 4.
On December 31, 2019, ReNUE contacted First American Title seeking a sample quote on the assumption it could convert all Quail Run Apartments’ units to 60% on “day one.” See QR Exh. 32 at 3.
Despite having executed the December 2019 Purchase Agreement to purchase Quail Run Apartments subject to the existing LURA, ReNUE wrote to ADOH on January 2, 2020, proposing “3 solutions that ReNUE has come up with to keep Quail Run Affordable,” to “preserve this deal and keep it in the program.” See QR Exh. 36. ReNUE indicated its willingness to “walk [ADOH] through the rationale behind [their] solutions.” See QR Exh. 35.
ReNUE’s second proposed solution was:
Amending LURA to change all 156 Units in the Project to 60% Units. As a concession to this consideration by the state we would include the [17] Market Rate Units in the project effectively creating additional affordable housing in Arizona and allow the deal to pencil as a viable investment.
See QR Exh. 36.
While the rental value of the Property had been valued at $8,669,161 with the then-existing rent restrictions, or $16,800,729 without any restrictions, ReNUE valued the rental value of the property at $12,634,172 subject to its offered solution (raising each unit to 60%). See QR Exh. 33.
On January 2, 2020, Mr. Christiansen formed “Quail Run Apartments Phoenix LLC,” and registered it with the Arizona Corporations Commission, with Michael Christiansen as its sole member.
On January 6, 2020, ReNUE met with ADOH requesting a LURA amendment to raise all affordable rent levels to 60% [area median income (AMI)]. See QR Exh. 40.
As a result of the meeting and the ReNUE request, ADOH requested that ReNUE provide a legal opinion from ReNUE legal counsel in response to ADOH’s concerns. See QR Exh. 41; see also QR Exh. 48.
On January 16, 2020 ReNUE submitted new documents to ADOH, seeking confirmation on switching Quail Run Apartments’ units to 60% AMI. See QR Exhs. 43, 44 and 45 at 1.
On January 17, 2020, ReNUE emailed ADOH that ReNUE was making progress on Quail Run Apartments, had finished physical, roof, plumbing, electrical and pest inspections, and was receiving financing offers dependent on Quail Run Apartment units being raised to 60% AMI. See QR Exh. 47 at 7.
On January 27, 2020, ADOH contacted ReNUE seeking a legal opinion regarding ADOH’s liability if it amended the LURA:
In the event that ReNUE transfers, sells or conveys the property after taking ownership, the future owner of a project which has an amended LURA might claim damages if that future owner is required to rent according to the original LURA rather than the amended LURA. In this case, how will the ADOH be protected?
See QR Exh. 47 at 3-4.
ReNUE responded on January 28, 2020 with a summarized legal advisement that the LURA could be amended and that the tenants would not be able to sue. See QR Exhs. 46 and 48. Additionally, by letter dated February 3, 2020, ReNUE’s counsel opined that the LURA could be amended, that the low-income tenants were not intended and direct beneficiaries of the LURA and thus could not pursue ADOH as to any claims alleging a LURA breach, and that the proposed LURA amendment mirrored the mandates of a LURA extended use period termination to not raise the rents for a 3-year period.
On Thursday, January 30, 2020, ADOH emailed Mr. Sussman asking to discuss the qualified contract. See QR Exh. 49. Reginald Givens then spoke with Mr. Sussman regarding a potential change to the qualified contract process which would allow a LURA amendment option. Mr. Givens suggested to Mr. Sussman that if Quail Run was interested in awaiting the policy change, ReNUE might give Quail Run the option to terminate the December 2019 Purchase Agreement. Mr. Givens requested that Mr. Sussman advise Mr. Givens by Monday [February 3, 2020] if Quail Run wanted to seek to terminate the December 2019 Purchase Agreement. See QR Exh. 49.
Mr. Givens informed his ADOH colleagues of the conversation with Mr. Sussman in an email dated January 30, 2020:
I spoke with Jeff Sussman regarding their potential option. They are to inform us on Monday of their decision to retain the property subject to a policy change by ADOH or continue with the sale of the property. I spoke with Michael Christiansen to update him on my conversation with Jeff. He seems confident Jeff will elect to continue with the sale.
See QR Exh. 49 at 1.
On February 2, 2020, Mr. Sussman emailed Mr. Givens requesting information or written materials regarding the new LURA policy ADOH was considering. See QR Exh. 50.
On February 3, 2020, Mr. Givens responded to Mr. Sussman stating “[t]here [was] no written information to be shared at [the] time. The primary objective (point of consideration) would be the revision to the rent restrictions to 60% AMI as applicable.” See QR Exh. 50.
That same day, ReNUE emailed Mr. Givens for an update:
I just wanted to follow up if you heard back from Sussman today? Our contingency period expires on Wednesday so we need to work with the state tomorrow to finalize everything with regards to the LURA amendment as that is a condition of our financing with Enterprise bank. Can we schedule a call for tomorrow to go over everything?
See QR Exh. 47 at 1.
After reviewing IRC § 42 and its regulation, the ADOH Asset Management Handbook and existing Qualified Contract Application, the LURA, and the ReNUE Legal Opinion, ADOH determined that it had the authority to proceed with a LURA amendment. ADOH further determined to give Quail Run a right of first refusal on the proposed LURA amendment, which would allow Quail Run to retain ownership in the Property at the IRC § 42 rates.
On February 4, 2020, ReNUE elected to terminate the December 27, 2019 Purchase Agreement (pursuant to Section 8(d)) and ReNUE requested a refund of its escrow deposit. See QR Exh. 51.
On February 5, 2020 at 3:53 PM, ADOH emailed ReNUE:
Dear Mr. Christiansen:
The Arizona Department of Housing (the “Department”) has reviewed ReNUE Properties Arizona (“ReNUE”) request for approval through the Department’s Qualified Contract Program, to purchase Quail Run Apartments (TC-218).
Based on our review of the Material Change request package, ReNUE has satisfied the requirements set forth in the Procedures for Ownership Change guidelines, with one noted caveat. In ReNUE’s request for approval, ReNUE requested that the Department afford them the opportunity, upon purchase, to increase all rent restricted units to 60% AMI. This request is under review by the Department, in conjunction with a Proposed Qualified Contract Policy and Procedure Change (“Policy Change”). If adopted by the Department, the Policy Change would afford the opportunity for ReNUE to increase all rent restricted units to the 60% AMI level. Please note; however, that the current Owner of the property is afforded this same opportunity under the Policy Change, before the new Owner has the right to invoke it and is therefore an open issue before the Department.
In the meantime, a DRAFT of the Policy Change is attached hereto for your reference. The DRAFT is subject to confidentiality provisions invoked by the Department and should not be disseminated beyond the intended recipient.
Once the Policy Change is adopted, and the current Owner informs the Department of their decision to utilize or not the Policy Change, we will follow up with you removing the caveat stated above and formally providing the Department’s approval.
See QR Exh. 54 at 1.
On February 5, 2020, ADOH notified Quail Run of the draft “Proposed Qualified Contract Policy and Procedure under consideration by the Arizona Department of Housing (the ‘Department’)” (“Policy Change”). See QR Exh. 53. ADOH further indicated:
If adopted by the Department, the Policy Change would afford you (the current Owner of the property) an opportunity under the Policy Change to retain and maintain the property in the program before a new Owner has the right to invoke it.
Id.
The proposed Policy Change suggested the following changes:
A property owner requesting a qualified contract will be offered the opportunity to amend the LURA only to change the rent restrictions to 60% AMI across the board in exchange for keeping the property in the program for the extended use period.
Provided the property owner does elect to amend the LURA, the property will be marketed with no option to amend the LURA to change the rent restrictions to 60% AMI across the board in exchange for a qualified contract. If such a contract is presented the property sale and transfer will be completed according to the qualified contract process.
Provided the property owner does not elect to amend the LURA the property will be marketed with the option to amend the LURA only to change the rent restrictions to 60% AMI across the board in exchange for a qualified contract.
See QR Exh. 53 at 4.
On February 6, 2020, ReNUE emailed ADOH asking whether ADOH received “a final answer” from Quail Run. See QR Exh. 55. ReNUE further indicated that it was ready to finalize a new purchase and sales agreement.
On February 6, 2020, ADOH emailed Quail Run, stating as follows:
Given the fact that you have not requested to amend the LURA and retain the property in the program, in accordance with our conversation from last week, we will allow for a qualified contract making the request.
See QR Exh. 51 at 3.
On February 7, 2020, ReNUE submitted to Quail Run a revised offer to purchase Quail Run, the Real Estate Purchase and Sale Agreement with Escrow Instructions (the “February 2020 Offer”). See QR Exh. 57. In its email, ReNUE wrote:
Now that the timeline for right of first refusal for the LURA amendment proposed by the state has lapsed we are formally offering to purchase the building with the new policy change that the state is offering.
See QR Exh. 58 at 8.
The February 2020 Offer materially departed from the December 2019 Purchase Agreement in the following ways, among others: it deleted the buyer’s right to elect to terminate the agreement, it waived inspection rights; it included reference to an “amendment to the Regulatory Agreement (as described in Section 23)”; it deleted the former Section 23(g), Covenant Regarding Change of Status provision; and it changed the closing date but allowed an option for ReNUE to extend closing until May 15, 2020. See QR Exh. 57.
Regarding the existing LURA, the February 2020 Offer mandated the parties’ acknowledgment of notice that ADOH would amend the existing LURA and added:
The parties agree that receipt of the amendment from the ADOH to the Existing LURA in a form reasonably acceptable to Buyer and ready to be recorded (the ‘LURA Amendment’) is a condition to Closing.
See QR Exh. 57 at 29.
The ADOH Asset Management Handbook, applicable at the time of ReNUE’s February 2020 Offer, did not provide for any LURA amendment and did not provide any additional time for obtaining a LURA amendment.
On February 14, 2020, ReNUE demanded a response from Quail Run on the offer and further indicated that it was requesting ADOH to “enforce” its offer as a qualified contract and either (a) remove the Property from the ADOH posted qualified contract request list and keep the LURA intact for the extended use period, or (b) compel Quail Run to accept ReNUE’s offer [with the amended LURA]. See QR Exh. 58 at 7.
On February 20, 2020, attorneys for Quail Run discussed the matter with ADOH. In an email dated February 21, 2020, Quail Run confirmed several points from the discussion with ADOH as follows:
ADOH intended to adopt “as-is” the February 5 [2020] “Proposed Qualified Contract Policy and Procedures” draft;
Adoption of the Policy Change would occur through an ADOH publication on the ADOH website “without public hearings or a public notice/comment process;”
ADOH intended to apply the policy to all existing properties in the Qualified Contract process and that the qualified contract request list would be updated to that effect.
See QR Exh. 59.
On February 25, 2020, attorneys for Quail Run notified ReNUE that Quail Run considered that ReNUE had materially breached the December 2019 Purchase Agreement through its contacts with ADOH in violation of Section 23(g). See QR Exh. 58 at 4.
On February 28, 2020, Quail Run sent ADOH a demand letter explaining that ReNUE had breached the December 2019 Purchase Agreement by seeking an amendment to Quail Run’s LURA, that ReNUE had unilaterally terminated the agreement, that ReNUE should be disqualified from any further involvement with the Quail Run qualified contract process and further argued that ReNUE’s new February 2020 Offer should not be considered either bona fide or to constitute a qualified contract. See QR Exh. 60. Nevertheless, Quail Run also confirmed with ADOH that Quail Run reserved its rights and defenses, had “not rejected” the February 2020 Offer, and had “not otherwise failed to act upon such offer.” Id.
In its letter to Quail Run dated March 11, 2020, ADOH determined ReNUE’s February 2020 Offer constituted a “qualified contract,” indicating that there were no material changes between the December 27, 2019 Purchase Agreement and the February 2020 Offer. See ADOH Exh. 20. ADOH reiterated that, as stated in its November 27, 2019 letter, “the $15,005,000 purchase price offered exceeds the $15,034,000 amount computes pursuant to the provisions of IRC § 42(h)(6)(F).” ADOH also noted:
Furthermore, the ‘Regulatory Approval’ language contained in the February 2020 Offer, in Section 23 Tax Credits (f), is the result of a request by the Offeror to ADOH and approved by ADOH subject to the Owner being given a first right of refusal to amend the LURA in the same manner and retain the Property and its affordable status through the extended use period. The details of which, were communicated to you immediately after the request was made by the Offeror to ADOH.
Id. at 3.
On March 21, 2020, attorneys for Quail Run sent ADOH a second detailed letter setting forth multiple reasons why it believed that ADOH’s determination that ReNUE’s February 2020 Offer constituted a “qualified contract” was erroneous. See QR Exh. 62. Quail Run noted that the one-year period expired for ADOH to present a qualified offer for the Property from a buyer who would continue to operate the Property in accordance with the Property’s existing LURA and that, therefore, Quail Run had a “contractual, statutory, and regulatory with to an immediate partial release” of the Property’s existing LURA.
In its March 21, 2020 letter, Quail Run also expressly reserved all rights to compel issuance of a termination of the Property’s existing LURA:
Quail Run does not believe that ADOH has the legal right to deny issuing a partial release of the LURA, and Quail Run will suffer substantial economic harm in the event ADOH fails to issue a partial release. Nevertheless, because ADOH is apparently unwilling to provide a partial release of the LURA and because ADOH is requiring that Quail Run agree by March 21, 2020 to enter into an amended LURA or be required to operate the property in accordance with the existing LURA, Quail Run is forced to reserve its right to partially mitigate that harm by agreeing to enter into your proposed LURA amendment, which will presumably raise the affordability restrictions on all of the restricted units are [sic] the property to 60% of area median income across the board. It is only because of ADOH’s imminent threat that Quail Run is agreeing to enter into an amended LURA. Quail Run would not agree to enter into an amended LURA if ADOH was willing to provide Quail Run with a Partial Release of LURA as required. The foregoing reservation of rights in no way limits Quail Run’s right to pursue all of its contractual, statutory, and regulatory legal rights and remedies to compel the issuance of a partial termination of the existing LURA.
See QR Exh. 62 (emphasis added).
On March 21, 2020, the final day of the one-year period, Quail Run advised ADOH that it was, in mitigation of the disputed process, “agreeing to enter into your proposed LURA amendment...”
Quail Run’s one-year qualified contract period expired on March 21, 2020.
Prior to March 21, 2020, ADOH did not present to Quail Run any offers for the Property other than the ReNUE May 7, 2019 offer and the ReNUE February 2020 Offer.
In order to pursue an appeal, Quail Run had submitted a March 25, 2020 public records request in order to determine the creation and enforcement of the Policy Change, as well as ADOH’s communications with third parties such as ReNUE. See QR Exh. 71.
The parties failed to come to a mutual informal resolution of the matter.
On March 27, 2020, ADOH issued a Notice of Appealable Agency Action (“Notice”) in response to Quail Run’s March 11, 2020 and March 21, 2020 objection letters. See ADOH Exh. 22. ADOH determined that, within the applicable one-year period, it had complied with the Quail Run March 21, 2019 request to find a buyer for the Property, evidenced by the ReNUE February 2020 Offer. ADOH determined that the ReNUE February 2020 Offer constituted a “qualified contract” pursuant to IRC § 42(h)(6)(F) and that Quail Run had “rejected, or ... otherwise failed to act upon” the ReNUE February 2020 Offer, with the result that the Property would remain subject to October 2005 LURA for the remainder of the extended use period, i.e., until December 31, 2035.
The Notice further stated, in part:
The Department compared ReNUE’s purchase and sale contract with other contracts submitted in the LIHTC Program. In particular, the Department reviewed the other contracts to ascertain whether terms and conditions contained in ReNUE’s form of contract were generally accepted terms and conditions used in the purchase and sale of affordable multi-family housing projects. The Department’s comparison of ReNUE’s form of contract revealed that its terms are consistent with those found in the other contracts submitted in the LIHTC Program.
........
The Department’s position is that the ReNUE offer fulfills [the affordability requirements] by attesting that the project would continue to operate under the existing LURA, with an adjustment to area median income levels, but only in the event that Quail Run declined the option to amend the LURA in a consistent manner. The goal of the Department here, consistent with its fundamental missions, is to keep the project in its affordable housing portfolio as opposed to allowing it to deregulate to market rate.
See ADOH Exh. 22 at 5
ADOH’s March 27, 2020 Notice also included a proposed amendment to the Quail Run LURA which required Quail Run to hold ADOH harmless should any person or tenant sue ADOH as a result of the LURA amendment. See ADOH Exh. 22 at 8-15.
On April 6, 2020, ADOH issued a revised Asset Management Handbook and a revised Qualified Contract Application, including the LURA amendment option and procedures. See QR Exh. 65. The April 6, 2020 revision also requires, as a condition to pursuing a LURA amendment, that the Owner include “language that holds ADOH harmless as a result of any changes to the rent and income restrictions that take effect at the close of the qualified contract period,” and that the Owner “[t]ender a Legal Opinion from Owner’s counsel holding ADOH harmless as a result of any changes to the rent and income restrictions pursuant to the LURA Amendment.” Id. at 8; see also QR Exh. 66 at 3.
On April 6, 2020, ADOH published its “LURA Amendment Request Option” form. See QR Exh. 67.
On April 9, 2020, ADOH issued a public Information Bulletin regarding “Revisions to Asset Management Handbook and Qualified Contract Application Process.” See QR Exh 68. The Information Bulletin stated that ADOH has “implemented changes” and that the “new procedures” could be found online at ADOH’s website. The new policy does not state that it pertains to properties in the qualified contract process at that time; properties in the qualified contract process at that time could not comply as the Policy Change requires an election during the submission of a qualified contract application.
On April 24, 2020, Quail Run filed its notice of appeal. See QR Exh. 69.
On May 7, 2020, Quai Run followed up on its appeal with a more expanded explanation of its appeal issues and arguments. See QR Exh. 70.
Quail Run’s position is that ADOH erroneously determined that the ReNUE February 2020 Offer was a “qualified contract” in a deviation from the applicable federal provisions, the Quail Run LURA, and ADOH’s policies and publications. Further, that ADOH had no administrative authority, or precedent, to determine that an offer, contingent on ADOH approving a LURA amendment “reasonably acceptable” to the buyer” was a “qualified contract.” Further, that even if such a proposed LURA amendment was permissible, ADOH may not require Quail Run to indemnify ADOH against any third-party claims as a condition to receive an amended LURA. Finally, Quail Run argues that absent ADOH having presented a “qualified contract” within the one-year period, Quail Run had a contractual, statutory, and regulatory right to an immediate partial release of the Quail Run LURA.
ADOH has not issued a partial release of the LURA pending this Appeal.
Quail run has continued renting its units under the existing LURA pending this Appeal.
CONCLUSIONS OF LAW
1. The federal LIHTC Program was established by the Tax Reform Act of 1986 to encourage construction and rehabilitation of low-income rental housing. The Tax Credit Program grants to those who invest in low-income housing an allocation of federal tax credits.
2. ADOH is the state housing credit agency (“HCA”) designated to allocate these federal tax credits for the State of Arizona. A project owner that is awarded the LIHTC is required to keep the project affordable through a cap on the rents charged to tenants at certain designated income levels for a minimum period of thirty years after the project is placed in service.
3. The first fifteen years of the thirty-year affordability period is referred to as the “compliance period.” IRC § 42(i)(1). The second fifteen years is referred to as the “extended use period.” IRC § 42(h)(6)(D)(ii). While “affordability” is expected for a period of thirty years, IRC § 42(h)(6)(E)(i)(II) permits the owner – at the end of the fourteenth year of the compliance period – to submit a written request to the housing credit agency for a “qualified contract,” i.e., to find a buyer to acquire the owner’s interest in the housing project at a specified price within a one-year period (i.e.,, the “Qualified Contract Period”). If and when a buyer is found, that buyer is required to keep the housing project affordable during the extended use period. If a buyer is not located within one year or the buyer does not offer the purchase price established under § 42, the HCA issues a partial release of the LURA, thereby allowing the rent restrictions to be lifted (after a three-year deregulation period).
4. The obligation to keep the project affordable is memorialized in a LURA that is recorded in the official records of the county in which the property is situated. Once the election is made, it is irrevocable. However, in this case, the parties’ October 5, 2005 LURA allowed amendment to correct “factual errors,” to “reflect changes in pertinent law, [IRC § 42] . . . and any ruling promulgated thereunder.”
5. Most of the facts in this matter are undisputed. There is no dispute that Quail Run appropriately submitted its Qualified Contract Application and, in response, ADOH published/posted the qualified contract request on May 6, 2019. There is no dispute that ReNUE made an offer to purchase Quail Run on May 7, 2019.
6. The hearing record demonstrates that, in some manner, ReNUE was aware prior to the Application and prior to the ADOH posting that Quail Run was about to make such a request.
7. The parties negotiated revisions to the offer with some guidance from ADOH and the parties executed a December 27, 2019 Purchase Agreement (“Revised Agreement”). The Revised Agreement contained a Default provision, Section 20(b), that a breach “of any of the terms and/or conditions” by ReNUE would “constitute a default” and Quail Run would be released from any obligation to sell the Property. Regarding the LIHTC on the Property, the Revised Agreement contained a covenant that ReNUE “shall not, prior to Closing, contact any federal, state or local governmental authority ... regarding the feasibility or possibility of changing the status of the Property from an affordable housing project as currently operated, or modifying any Regulatory Agreement, whether such change would occur prior to or after the expiration of the Tax Credits, or in any way indicate the intention to do the same.”
8. The hearing record demonstrates that ReNUE contacted ADOH for the purpose of changing the status of the Property from an affordable housing project as currently operated to a variant affordable status. While there may have been additional purposes for future applications to other projects, the evidence demonstrates the series of ReNUE contacts and communications with ADOH and, thus, a default. Thus, Quail Run could have taken a position that ReNUE defaulted on the Revised Agreement and could have elected to terminate the Revised Agreement.
9. The ensuing discussions about a LURA amendment did not result in an outcome tenable to ReNUE by the date on which it had requested its financing for the purchase, and on February 4, 2020, ReNUE elected to terminate the Revised Agreement.
10. Following discussions about a new policy for qualified contract requests but prior to implementing such policy, on February 5, 2020, the ADOH offered Quail Run the opportunity to invoke the proposed policy as to the Property. The proposed Policy Change would have allowed Quail Run to amend the LURA to change the existing rent restrictions to a 60% AMI as to all units in exchange for keeping the Property in low-income housing status for the remainder of the LURA’s extended use period.
11. Quail Run did not immediately advise ADOH whether it would invoke the proposed policy. However, only one day later, on February 6, 2020, ADOH advised Quail Run that it would proceed to allow a qualified contract to make a request to amend the LURA.
12. Such an ADOH determination regarding the proposed policy was not extended to the public regarding projects then-listed for a qualified contract request; however, on February 10, 2020, ADOH notified the management company of Riverwood Apartments of the new policy. See QR Exh. 85 at 2-3; see also QR Exhs. 73 and 74.
13. On February 7, 2020, ReNUE submitted a new offer to purchase the Property invoking one of the provisions of the new policy. However, the hearing record demonstrates that ADOH did not publish the new policy until April 6, 2019.
14. A “qualified contract” is defined through its requisite parameters, found at IRC § 42(h)(6)(F) and in IRC Regulation § 1.42-18, effective May 3, 2012. A qualified contract is a bona fide contract to, within a reasonable period of time, acquire an existing low-income residential rental project for the qualified contract amount, which is a calculated, formulaic, contract price.
15. Quail Run argued that the February 2020 Offer is not a bona fide contract due to the preceding circumstances, ReNUE’s actions in breach and then termination of the [December 27, 2019] Revised Agreement.
16. IRC Regulation § 1.42-18(d)(1) gives the ADOH administrative discretion “in evaluating and acting upon an owner’s request to find a buyer to acquire” the project. In the event that the one-year period for the agency to find a buyer has begun, the agency has discretion to “determine whether a failure to follow one or more of the requirements suspends the running of [the one-year] period.” Pursuant to the Regulation, the ADOH may suspend the one-year period for “failures”; while it is implied, failures is not stated to be by the Owner. ADOH may determine how many more requests to find a buyer may be submitted when a prior request was either rejected or failed to be acted on by the owner. Finally, ADOH may “[specify] other conditions applicable to the qualified contract consistent with section 42 ...”
17. The hearing record demonstrates that the February 2020 Offer was an offer at the qualified contract price that ADOH had set on May 2, 2019, posted on May 6, 2019, and reiterated on November 27, 2019 and March 11, 2020. See QR Exhs. 3 at 3, 9, 11, and 61 at 2.
18. Quail Run argued that, because the February 2020 Offer contained material changes and sought a LURA amendment, the February 2020 Offer does not comply with either the Quail Run LURA or IRC § 42.
19. The ADOH May 6, 2019, Information Bulletin No. 16-19, noticing the Quail Run qualified contract request, states, in part:
ADOH is providing notice that . . . [Quail Run] is seeking a Qualified Contract for acquisition from a buyer(s) who will continue to operate the property as affordable through the extended use period in accordance with the Land Use Restriction Agreement and Section 42 of the Internal Revenue Code.
See QR Exh. 10. A purchaser of a low-income project must continue to operate the project in an affordable status, under the LURA and pursuant to IRC § 42. IRC § 42(g) sets forth various parameters by which a project might qualify as a low-income project.
The hearing record demonstrates that the method by which Quail Run was determined/qualified to be low-income was either that set forth in IRC § 42(g)(1)(A) or some other agreement the parties had arrived at in October of 2005. The February 2020 Offer appears to propose to amend the LURA in a manner that would maintain the Project’s affordability through the method set forth in IRC § 42(g)(1)(B).
20. In this vein, Quail Run argued that the February 202 Offer cannot be considered to be a “qualified contract” because it did not specify that ReNUE would continue to operate the property as affordable through LURA or in accord with IRC § 42, but merely indicated that ADOH would amend the LURA “in a form reasonably acceptable to Buyer.” See QR Exh. 57 at 29.
21. Based on the hearing record, the Administrative Law Judge concludes that
IRC Regulation § 1.42-18(d)(1) gave the ADOH the administrative discretion to “[specify] other conditions applicable to the qualified contract consistent with section 42 ...”. Neither the ADOH Asset Management Handbook nor the ADOH Qualified Contact Application are administrative rules. The guidance for the qualified contract process exists through ADOH policy, and ADOH has discretion under IRC Regulation § 1.42-18(d) to specify other conditions, consistent with IRC § 42, applicable to a qualified contract. The Administrative Law Judge concludes that ADOH appropriately determined that the February 2020 Offer was a “qualified contract.”
22. Based on the hearing record, the Administrative Law Judge concludes that, in response to its qualified contract request process, on March 21, 2020, Quail Run agreed to the LURA amendment option as offered in the ADOH Proposed Policy Change in lieu of the February 2020 Offer.
RECOMMENDED ORDER
IT IS ORDERED the Director of the Arizona Department of Housing deny Quail Run’s appeal and affirm the ADOH determination that the February 2020 Offer was a “qualified contract” and reverse the ADOH determination that Quail Run “rejected, or has otherwise failed to act upon, the terms” of the February 2020 Offer.
Done this day, March 12, 2021.
/s/ Kay A. Abramsohn
Administrative Law Judge
Transmitted electronically to:
Carol Ditmore, Director
Arizona Department of Housing