"Qualified Contract Application" - Arizona

Qualified Contract Application is a legal document that was released by the Arizona Department of Housing - a government authority operating within Arizona.

Form Details:

  • Released on April 6, 2020;
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Qualified Contract Application
Please complete and submit the required documentation through
the Asset Management Portal on the ADOH website
Please remit the required fees through the ADOH Payment Portal or to:
Arizona Department of Housing
Attention: Asset Manager
1110 West Washington Street, Suite 280
Phoenix, AZ 85007
Revised: 04/06/2020
Qualified Contract Application
Please complete and submit the required documentation through
the Asset Management Portal on the ADOH website
Please remit the required fees through the ADOH Payment Portal or to:
Arizona Department of Housing
Attention: Asset Manager
1110 West Washington Street, Suite 280
Phoenix, AZ 85007
Revised: 04/06/2020
WHAT IS A QUALIFIED CONTRACT?
All Qualified Low-Income Housing Projects allocated Low Income Housing Tax Credits (“LIHTC”) in the
1990 tax year or later must comply with all LIHTC requirements for the duration of the Extended Use
Period, a period of not less than thirty (30) years after the project is placed in service. However, the Land
Use Restriction Agreement (LURA), Section 42 (h)(6)(E) of the Internal Revenue Code (IRC), allows the
extended use period to terminate after the original fifteen (15) year compliance period by applying to the
State Tax Credit allocating agency for a Qualified Contract, provided the owner did not waive such
rights. Section 42(h)(6)(I) of the Internal Revenue Code provides that Project owners may apply to the
state Tax Credit allocating agency for a Qualified Contract after the fourteenth year of the Compliance
Period.
A Qualified Contract is a bona fide contract to acquire an LIHTC project for the sum of the existing debt,
adjusted investor equity and other capital contributions, less project cash distributions as set forth in IRC
§42(h)(6)(F). The “Qualified Contract Price” will establish the minimum price which is required by IRC
Section 42. Under the Qualified Contract process, the State Tax Credit allocating agency has one year
from the date of application to procure a qualified buyer to purchase the project at the Qualified Contract
Price. If the agency fails to do so, it may release the project from the requirements of the LIHTC subject to
the three-year deregulation period required by IRC § 42(h)(6)(E)(ii).
THE QUALIFIED CONTRACT APPLICATION PROCESS
This Qualified Contract Application describes the process and the requirements for requesting that the
Arizona Department of Housing (“ADOH”) procure a Qualified Contract buyer to purchase a Qualified
Low Income Housing Project from the owner. This application implements the Qualified Contract
process described by IRC § 42(h)(6)(F). Only Qualified Low-Income Housing Projects (i.e. LIHTC
properties with no outstanding I.R.S. 8823 forms) after the fourteenth year of the Compliance Period or
later are eligible to apply for a Qualified Contract. By executing this application, the applicant agrees to
the Qualified Contract process described below. To initiate the ADOH Qualified Contract Application
Process the property owner must submit the following items through the ADOH Asset Management
Portal:
1) Cover letter describing the project and its eligibility for a Qualified Contract;
2) Completed application forms (parts A, B and C);
3) All documents and materials listed in part D - “Documents and Supporting Materials”;
4) Signed Owner’s Warranties and Representations (part F);
5) Calculation of the Qualified Contract Price (part G) as of a date within ninety (90) days of the date
of application.
In addition, the fees described below must be paid through the ADOH Payment Portal or by delivering
them to the ADOH office:
A non-refundable Administrative Fee in the amount of $5,000.00; and
A Professional Service Fee may be required in accordance with ADOH requirements.
Upon submittal of a Qualified Contract Application, the Owner will be provided with a “LURA
Amendment Options Form”. This Form will afford the Owner an opportunity to amend the existing
Land Use Restriction Agreement (LURA) recorded against the Property to increase the rent and income
restrictions identified in the LURA to 50% or 60% AMI through the remainder of the Extended Use
Period in accordance with the initial election of the project. In other words, a unit currently restricted to
20% AMI, 30% AMI, or 40% AMI would be restricted to 50% or 60% AMI, as applicable when the LURA
is amended (“LURA Amendment”). This is the only change that would be permitted to the LURA. The
LURA Amendment shall only be available to Owner if a Qualified Buyer is not identified during the one-
year qualified contract period according to the Qualified Contract procedures identified herein.
ADOH Qualified Contract Application (revised 04/06/2020)
Page 2
If Owner elects to pursue a LURA Amendment, the Project will be marketed according to
the Qualified Contract procedures identified herein. If a Qualified Buyer presents an offer
during the Qualified Contract period accepting the LURA as-is (with the existing rent and
income restrictions below 50% or 60% AMI as applicable), the Buyer will be considered to
be presenting a Qualified Contract, which may be accepted by the Owner. If the Owner
does not accept the Qualified Contract presented by the Buyer, this action by the Owner
voids the LURA Amendment Option and the Owner will be required to maintain the
original rent and income restrictions for the remainder of the Extended Use Period.
If the Owner does not elect to pursue a LURA Amendment, the Project will be marketed to
potential Buyers during the Qualified Contract period. A potential Buyer who presents a
Qualified Contract would be afforded the option to pursue a LURA Amendment. If a
Buyer presents a Qualified Contract accepting the LURA as-is (i.e., with the existing rent
and income restrictions), that Buyer’s Qualified Contract supersedes a Qualified Contract
requesting a LURA Amendment. If the Owner does not accept the Qualified Contract from
the Buyer, the Owner will be required to maintain the original rent and income restrictions
for the remainder of the Extended Use Period.
More specifically, to pursue a LURA Amendment, the Owner must agree to the following:
Allow the property to be marketed for the qualified contract period
Comply with the terms of the existing LURA throughout the qualified contract period
Execute a LURA Amendment to take effect at the end of the qualified contract period with
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
Allow existing tenants with existing rent and income restrictions below 50% or 60% AMI as
applicable, to remain in their units with the existing rent and income restrictions for a
three-year deregulation period beginning at the end of the qualified contract period. Once
the LURA Amendment is in effect, the Owner would be permitted to lease vacant units to
new tenants at the 50 or 60% AMI rent and income restrictions, as applicable.
Tender 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
If Owner foregoes a LURA Amendment and no Buyer presents an offer to purchase the Project as-
is (i.e. with the existing rent and income restrictions), a Buyer opting to pursue a LURA
Amendment must agree to the following:
Tender a qualified contract
Execute a LURA Amendment at the time the LURA is assigned and assumed by the
Qualified Buyer with language that holds the Department harmless as a result of any
changes to the income restrictions that take effect at the close of the qualified contract
period
Allow existing tenants with existing rent and income restrictions below 50% or 60% AMI,
as applicable to remain in their units with the existing rent and income restrictions for a
three-year deregulation period. Once the LURA Amendment is in effect, the Buyer would
be permitted to lease vacant units to new tenants at the 50% or 60% AMI rent and income
restrictions, as applicable.
Tender a Legal Opinion from Buyer’s counsel holding ADOH harmless as a result of any
changes to the rent and income restrictions pursuant to the LURA Amendment
ADOH Qualified Contract Application (revised 04/06/2020)
Page 3
The Department will use the Professional Fee Deposit to cover the costs of an appraisal prepared by a
State-certified general appraiser and other third party reports as deemed necessary. In the event that the
Professional Fee Deposit is not sufficient to cover the cost of third party reports, ADOH will invoice
applicant for any additional amount. The Qualified Contract Application will not be reviewed until the
Administrative Fee and Professional Fee Deposit are received. Failure of applicant to remit any
additional amounts requested by ADOH within thirty (30) calendar days will result in the suspension of
further action on the Qualified Contract by ADOH and the property will remain affordable through the
term of the LURA. Copies of any professional reports or opinions commissioned will be provided to the
applicant upon request when they are available to ADOH.
ADOH will review the third party reports and other available information. Upon acceptance of the third
party reports ADOH will offer the project for sale to the general public, based upon reasonable efforts, at
the determined Qualified Contract Price. This includes, at minimum, advertising the availability of the
property on its website, issuing an information bulletin to its mailing list and continuing its efforts until a
Qualified Contract is presented to the owner or the one (1) year period has expired. The Department may
disqualify prospective purchasers who have failed to demonstrate the experience and capacity to manage
the project in accordance with IRC § 42, its implementing regulations and the Arizona Qualified
Allocation Plan.
In the event that the owner fails to cooperate with ADOH in the marketing of the property, ADOH may
suspend the one (1) year Qualified Contract period or deem the project ineligible for a Qualified Contract
and the owner will be required to comply with the full term of the Extended Use Period of the LURA.
Failure to cooperate shall include, but not be limited to, Owner’s failure to complete the application,
respond to any ADOH request for documentation, delay or refuse to allow inspections of the property by
prospective purchasers.
The Owner is not required to accept any purchase offers presented through ADOH; however, if the
Owner rejects an offer at or above the Qualified Contract Price, the development will remain affordable
throughout the term of the LURA recorded against the property.
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). If there are
any compliance issues at the property, ADOH would delay or consider revoking the Partial Release until
such time as the issues are corrected.
The execution of a Qualified Contract or passing of the one (1) year Qualified Contract term shall not
result in the termination of any restrictive covenant or other regulatory agreement related to a source of
funding other than the Low Income Housing Tax Credit program.
ADOH Qualified Contract Application (revised 04/06/2020)
Page 4
Qualified Contract Application
On behalf of
[Name of Owner], pursuant to § 42(h)(6)(E)(ii)
and (F) of the Internal Revenue Code the undersigned hereby applies for the Arizona Department of
Housing (ADOH) to present a Qualified Contract for the purchase of the project listed below:
A. PROJECT IDENTIFICATION
Project Name:
LIHTC TC #:
Address:
City, State, Zip:
First Year of Credit Period:
B. OWNER INFORMATION
1. Owner Contact Information
Owner Legal Name:
Owner Contact Person:
Owner Mailing Address:
City, State, Zip:
Phone:
Fax:
E-mail:
If Owner’s “Physical Address” is different from the “Mailing Address”, provide the physical address
below:
Owner Physical Address:
City, State, Zip:
Is the Owner in good standing with the State of Arizona?
Yes
No
2. Applicant Contact Information (if different than the Owner)
Applicant Legal Name:
Applicant Contact Person:
Applicant Mailing Address:
City, State, Zip:
Phone:
Fax:
E-mail:
If Applicant’s “Physical Address” is different from the “Mailing Address”, provide the physical address
below:
Applicant Physical Address:
City, State, Zip:
Relationship of Applicant to Owner:
ADOH Qualified Contract Application (revised 04/06/2020)
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