| (a) Ownership Transfer Notification. All multifamily
Development Owners must provide written notice and a completed Ownership
Transfer packet, if applicable, to the Department at least 45 calendar
days prior to any sale, transfer, or exchange of the Development or
any portion of or Controlling interest in the Development. Except
as otherwise provided herein, the Executive Director's prior written
approval of any such transfer is required. The Executive Director
may not unreasonably withhold approval of the transfer requested in
compliance with this section.
(b) Exceptions. The exceptions to the ownership transfer
process in this subsection are applicable.
(1) A Development Owner shall be required to notify
the Department but shall not be required to obtain Executive Director
approval when the transferee is an Affiliate of the Development Owner
with no new Principals or the transferee is a Related Party who does
not Control the Development and the transfer is being made for estate
planning purposes.
(2) Transfers that are the result of an involuntary
removal of the general partner by the investment limited partner do
not require advance approval but must be reported to the Department
as soon as possible due to the sensitive timing and nature of this
decision. In the event the investment limited partner has proposed
a new general partner or will permanently replace the general partner,
a full Ownership Transfer packet must be submitted.
(3) Changes to the investment limited partner, non-Controlling
limited partner, or other non-Controlling partners affiliated with
the investment limited partner do not require Executive Director approval.
A General Partner's acquisition of the interest of the investment
limited partner does not require Executive Director approval, unless
some other change in ownership is occurring as part of the same overall
transaction.
(4) Changes resulting from foreclosure do not require
advance approval but acquiring parties must notify the Department
as soon as possible of the revised ownership structure and ownership
contact information.
(5) Changes resulting from a deed-in-lieu of foreclosure
do not require Executive Director approval. However, advance notification
must be provided to both the Department and to the tenants at least
30 days prior to finalizing the transfer. This notification must include
information regarding the applicable rent/income requirements post
deed in lieu of foreclosure.
(c) General Requirements.
(1) Any new Principal in the ownership of a Development
must be eligible under §11.202 of Subchapter C (relating to Ineligible
Applicants and Applications). In addition, Persons and Principals
will be reviewed in accordance with Chapter 1, Subchapter C of this
title (relating to Previous Participation and Executive Award Review
and Advisory Committee).
(2) Changes in Developers or Guarantors must be addressed
as non-material amendments to the application under §10.405 of
this Subchapter.
(3) To the extent an investment limited partner or
its Affiliate assumes a Controlling interest in a Development Owner,
such acquisition shall be subject to the Ownership Transfer requirements
set forth herein. Principals of the investment limited partner or
Affiliate will be considered new Principals and will be reviewed as
stated under paragraph (1) of this subsection.
(4) Simultaneous transfer or concurrent offering for
sale of the General Partner's and Limited Partner's control and interest
will be subject to the Ownership Transfer requirements set forth herein
and will trigger a Right of First Refusal, if applicable.
(5) Any initial operating, capitalized operating, or
replacement reserves funded with an allocation from the HOME American
Rescue Plan (HOME-ARP) and Special Reserves required by the Department
must remain with the Development.
(d) Transfer Actions Warranting Debarment. If the Department
determines that the transfer, involuntary removal, or replacement
was due to a default by the General Partner under the Limited Partnership
Agreement, or other detrimental action that put the Development at
risk of failure or the Department at risk for financial exposure as
a result of non-compliance, staff will refer the matter to the Enforcement
Committee for debarment consideration pursuant to §2.401 of this
title (relating to Enforcement, Debarment from Participation in Programs
Administered by the Department). In addition, a record of transfer
involving Principals in new proposed awards will be reported and may
be taken into consideration in accordance with Chapter 1, Subchapter
C of this title (relating to Previous Participation and Executive
Award Review and Advisory Committee), prior to recommending any new
financing or allocation of credits.
(e) Transfers Prior to 8609 Issuance or Construction
Completion. Prior to the issuance of IRS Form(s) 8609 (for Housing
Tax Credits) or the completion of construction (for all Developments
funded through other Department programs), an Applicant may request
a change to its ownership structure to add Principals. The party(ies)
reflected in the Application as having Control must remain in the
ownership structure and retain Control, unless approved otherwise
by the Executive Director. A development sponsor, General Partner
or Development Owner may not sell the Development in whole or voluntarily
end their Control prior to the issuance of 8609s.
(f) Nonprofit Organizations. If the ownership transfer
request is to replace a nonprofit organization within the Development
ownership entity, the replacement nonprofit entity must adhere to
the requirements in paragraph (1) or (2) of this subsection.
(1) If the LURA requires ownership or material participation
in ownership by a Qualified Nonprofit Organization, and the Development
received Tax Credits pursuant to §42(h)(5) of the Code, the transferee
must be a Qualified Nonprofit Organization that meets the requirements
of §42(h)(5) of the Code and Tex. Gov't Code §2306.6706,
if applicable, and can demonstrate planned participation in the operation
of the Development on a regular, continuous, and substantial basis.
(2) If the LURA requires ownership or material participation
in ownership by a nonprofit organization or CHDO, the Development
Owner must show that the transferee is a nonprofit organization or
CHDO, as applicable, that complies with the LURA. If the transferee
has been certified as a CHDO by TDHCA prior to 2016 or has not previously
been certified as a CHDO by TDHCA, a new CHDO certification package
must be submitted for review. If the transferee was certified as a
CHDO by TDHCA after 2016, provided no new federal guidance or rules
concerning CHDO have been released and the proposed ownership structure
at the time of review meets the requirements in 24 CFR Part 92, the
CHDO may instead submit a CHDO Self-Certification form with the Ownership
Transfer package.
(3) Exceptions to paragraphs (1) and (2) of this subsection
may be made on a case by case basis if the Development (for MFDL)
is past its Federal Affordability Period or (for HTC Developments)
is past its Compliance Period, was not reported to the IRS as part
of the Department's Nonprofit Set Aside in any HTC Award year, and
follows the procedures outlined in §10.405(b)(1) - (5) of this
subchapter. The Board must find that:
(A) The selling nonprofit is acting of its own volition
or is being removed as the result of a default under the organizational
documents of the Development Owner;
(B) The participation by the nonprofit was substantive
and meaningful during the full term of the Compliance Period but is
no longer substantive or meaningful to the operations of the Development;
and
(C) The proposed purchaser is an affiliate of the current
Owner or otherwise meets the Department's standards for ownership
transfers.
(g) Historically Underutilized Business (HUB) Organizations.
If a HUB is the general partner or special limited partner of a Development
Owner and it determines to sell its ownership interest, after the
issuance of IRS Form(s) 8609, the purchaser of that partnership interest
or the general or special limited partner is not required to be a
HUB as long as the LURA does not require it or the procedure described
in §10.405(b)(1) of this chapter (relating to Non-Material LURA
Amendments) has been followed and approved. The removal of a HUB requirement
prior to filing of IRS Form(s) 8609 is subject to the procedure described
in §10.405(b)(2) of this Chapter (relating to Material LURA Amendments).
(h) Documentation Required. A Development Owner must
submit documentation requested by the Department to enable the Department
to understand fully the facts and circumstances pertaining to the
transfer and the effects of approval or denial. Documentation must
be submitted as directed in the Post Award Activities Manual, which
includes but is not limited to:
(1) A written explanation outlining the reason for
the request;
Cont'd... |
