U.S. District Court Rules that Right of First Refusal Doesn’t Force LIHTC Property Sale

Wednesday, September 2, 2020 - 11:45am

The U.S. District Court for the Eastern District of New York ruled that a Section 42(i)(7) right of first refusal (ROFR) granted to a nonprofit does not compel the property owner to sell, absent the common law conditions precedent. In its ruling in Riseboro Community Partnership Inc. vs. Sunamerica Housing Fund 682 the Court noted that defendants argued that 420 Stockholm Street Associates, L.P. (the property owner) isn’t required to sell the property to the nonprofit until the Partnership is willing to sell and a third-party has made a bona fide offer to buy. Riseboro contended that the ROFR required that the apartment owner sell the property after the 15-year compliance period. The ruling said “the partners granted Riseboro a right of first refusal, not an option.”  The ruling stated that the “’right of first refusal’ … [in the agreement] operates by the New York common law definition of right of first refusal.”