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Oregon Complex Returned to Rural Development Inventory
Seacrest Apartments, a 20-unit Rural Development (RD) property that was prepaid and taken out of the Section 515 program over 6 years ago, was returned to the RD inventory on November 30, 2009.
The development was returned to the Section 515 program pursuant to a settlement agreement reached by the parties in Goldammer v. Vilsac, No. 03-1749 (D. Or. Nov. 25, 2009). Under the settlement agreement, DBSI TRI IV Limited Partnership (DBSI), the owner who prepaid the RD loan, sold Seacrest to Northwest Real Estate Capital Corp. (Northwest), an Idaho-based nonprofit, which will rehabilitate and then operate Seacrest for the next 30 years. RD financed the sale and part of the rehabilitation and will provide a deep subsidy to all the elderly low-income residents of the development. The balance of the rehabilitation costs are being financed under the Low Income Housing Tax Credit Program (LIHTC). The loan closing brought an end to 12 years of litigation between DBSI and RD and over 6 years of litigation between the Seacrest residents, DBSI and RD.
The plaintiff residents will now be returned to the RD Rental Assistance Program, as will all other eligible residents living at Seacrest. They will also be entitled to all RD resident protections, which include a tenant grievance and appeals process. Only low-income, RD-eligible residents will be admitted to the development for the next 30 years. Seacrest will undergo major rehabilitation, which will require residents to be relocated for a short time. The settlement agreement ensures that the residents will receive relocation and other assistance during that period.
Significantly, the Ninth Circuit’s earlier decision in Goldammer, 465 F.3d 1031 (9th Cir. 2006), has laid to rest RD owners’ claims that they can circumvent the Section 515 prepayment restrictions, which were imposed by the Emergency Low Income Housing Preservation Act of 1987, by making an offer to prepay their loans and, when RD does not accept their offer, that they can pursue a quiet title action that removes the RD security and regulatory lien from the property. See Schroeder v. United States, 569 F.3d 956 (9th Cir. 2009).
The Seacrest residents were represented by Art Schmidt of the Oregon Law Center, who was assisted by the staff of the National Housing Law Project. The Oregon Law Center and NHLP also settled their Equal Access to Justice Act attorney’s fees claim as part of the settlement agreement with RD.