Archives for 2016

The North Carolina Supreme Court announced its decision on August 19, 2016 in the Eastern Carolina Regional Housing Authority v. Lofton case.  This case was appealed by the Housing Authority from the earlier (2014) Court of Appeals decision entered in favor of the public housing tenant, Ms. Sherbreda Lofton. View the case in this link. Eastern Carolina Regional Housing Authority v. Lofton decision NC Supreme Court 8.19.16 32PA15-1.

The highlight of this decision is that the Court of Appeals went too far in requiring or permitting an unconscionability standard or equitable defense in summary ejectment proceedings.

The Supreme Court said that “unconscionability is not a consideration in summary ejectment proceedings. To prevail in a summary ejectment proceeding under North Carolina law, a landlord must establish by a preponderance of the evidence that a tenant breached the lease.”

And, because this case involves more than a private landlord-tenant relationship, the Supreme Court said that “when the government is the landlord, certain duties arise under applicable law.” In this case, the Supreme Court affirmed the outcome of the Court of Appeals and the trial court decisions ruling against the Housing Authority, “namely that summary ejectment was inappropriate in this case” but “we do so for a different reason. We hold that plaintiff [the Housing Authority] failed to exercise its discretion as required by federal law before pursuing defendant’s eviction.”

The Supreme Court reviewed the federal law and the U.S. Supreme Court’s Rucker decision of 2002, HUD regulations and post-Rucker HUD guidance, emphasizing “the importance of housing officials exercising discretion before pursuing these ‘no-fault’ evictions.”

So, with this decision, Housing Authorities don’t have to prove that their decisions to evict in cases involving drug-related crimes are “not unconscionable” as the Court of Appeals would have required.

But, we do have an affirmation that what has been considered a “one-strike” or “no-fault” eviction rule, if a public housing tenant or her guests have committed drug-related crimes, is NOT the rule of law in North Carolina. With this decision, the North Carolina Supreme Court has ruled that such evictions or summary ejectments must be done only after the Housing Authority exercises its discretion whether an eviction, based upon the actions of third parties, is appropriate in the circumstances — an exercise of discretion in such cases “guided by compassion and common sense.”

The Supreme Court said: “Discretion ‘involve[s] an exercise of judgment and choice, not an implementation of a hard-and-fast rule exercisable at one’s own will or judgment.’”

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina.   Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction leaders and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana and New York.  For assistance in affordable housing, HUD financing, commercial real estate and corporate and business development matters, call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com, Steven Carr at scarr@ellingercarr.com, Heather McDowell at hmcdowell@ellingercarr.com and Sarah Goodin at sgoodin@ellingercarr.com.

Heather McDowell and Steven (Steve) Carr of the Ellinger Carr law firm will be featured speakers in an upcoming program on Real Estate Transactions.

In the National Business Institute continuing legal education program scheduled October 4, 2016, in Raleigh, Heather McDowell will be speaking on the drafting of purchase and sale agreements and deeds.  Steve will be talking about legal ethics in real estate transactions, and reviewing the latest ethics opinions affecting practitioners and their clients in real estate matters.

Ellinger Carr lawyers are frequent speakers and presenters concerning legal issues arising in real estate transactions, including legal descriptions, conditions, covenants and restrictions, title, title insurance and survey matters.

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina.   Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction leaders, and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana and New York.  For assistance in commercial real estate, corporate law and business development matters, please call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com, Steven Carr at scarr@ellingercarr.com, Heather McDowell at hmcdowell@ellingercarr.com, and Sarah Goodin at sgoodin@ellingercarr.com.

The Affordable Housing Group of North Carolina, Inc. (TAHG) will soon be celebrating their 50th Anniversary.

TAHG recently celebrated the grand opening and dedication of their Cypress Court Apartments, a 48-unit affordable housing development in Ahoskie, North Carolina.

TAHG is a non-profit organization established in 1966 (as Low Income Housing and Development Corporation) to develop affordable housing and provide technical assistance to community-based and faith-based organizations in North Carolina. Initially funded through the Ford Foundation and the North Carolina Fund, under the leadership of former Governor Terry Sanford, TAHG’s early efforts were targeted toward small towns and rural communities underserved by other entities.

While TAHG continues to serve its original mandate, they also recognize the increasing need for a wider variety of affordable housing services across all areas of North and South Carolina. In order to meet the growing demand for affordable housing, TAHG has assumed diverse roles in the housing arena. For over 40 years, TAHG has provided an array of services to build the capacity of local groups, and thus expand the number of organizations capable of serving the housing needs of their communities. The result has been the development of thousands of affordable homes and a growing number of local organizations with the motivation, knowledge and skills to address the affordable housing needs of their citizens.

The Ellinger Carr law firm is proud of our friends at TAHG, we are honored to serve as their lawyers, and we join in their celebration of 50 years of providing safe, affordable and energy-efficient housing for seniors and families.

Wake County is growing by 63 people a day, and Wake County Commissioners are meeting with Habitat for Humanity and other nonprofit groups to address a lack of affordable housing, according to Raleigh’s News & Observer in recent news reports and the attached lead editorial published March 21, 2016.

As noted in the editorial, “[t]his chronic problem has been growing in Wake, a strange and painful conundrum as condos and new developments with homes in high hundreds of thousands of dollars range are going up, particularly in Raleigh.  Left behind are veterans trying to start their civilian lives and working people with lower incomes who have a serious challenge in trying to find homes they can afford to rent or buy.”

Ellinger Carr applauds Wake County’s leadership to address this urgent need and continuing challenge here in our community.  Susan Ellinger and our firm have been honored and privileged to serve as legal counsel to the City of Raleigh in support of its ongoing affordable housing and community development activities for many years, including the current work of the City’s Housing and Neighborhoods Department.

Our firm is also proud to sponsor the work and mission of the Community Affordable Housing Equity Corporation (CAHEC, www.cahec.com) and the North Carolina Housing Coalition (www.nchousing.org) and their work to seek new investment in and to secure safe, affordable housing for families, seniors and persons with special needs, including transitional housing for homeless persons and families.

Ellinger Carr provides counsel in matters relating to affordable housing, subsidized housing, community development, tax credits for affordable housing, historic rehabilitation, and renewable energy, bond financing, land use, zoning and municipal law matters.  The firm’s lawyers represent developers, investors and lenders in matters involving nonprofit entities, partnerships, limited liability companies, and housing authorities throughout North Carolina and South Carolina and elsewhere in the United States, from New York to Florida, and in the Gulf Coast in public-private alliances and partnerships, including new multi-family housing built in the recovery from the devastation of Hurricanes Katrina and Rita.  We also serve and advise executive directors of housing authorities in the Carolinas and nationally.

Ellinger Carr lawyers are serving in all types of contract negotiation matters, commercial real estate development, tax credit equity investments, commercial and residential leases, negotiations with local, state, and federal agencies, including North Carolina, South Carolina and other states’ housing finance agencies, cities and counties, the U.S. Department of Housing and Urban Development, and the Internal Revenue Service.

The firm also has extensive experience in HOME loan financing and regulations, HUD loan programs,  Federal Home Loan Bank financing, municipal bond financing of affordable housing, community development block grants, legislation, procurement, HOPE VI, and other state and federal financing sources of affordable housing and community development.

A recent decision of the North Carolina Court of Appeals concluded that in the absence of any evidence of harm to a party to an asset purchase contract which contained a “no-shop clause,” the buyer claiming a breach of that agreement could not recover any damages.  The parties agreed that the buyer had an exclusive right to purchase and that the seller would not talk with or negotiate with others about a sale or purchase, pending the closing of the asset purchase agreement.

The would-be buyer, the party suing for breach of contract, breach of the implied covenant of good faith and fair dealing, and for unfair and deceptive trade practices (UDTP), was not entitled to recover damages for the seller’s alleged breach of the “no-shop clause.”  The facts were undisputed that the defendant seller carried on conversations with other possible buyers before the seller terminated the contract, pursuant to an undisputed termination provision that permitted either party to terminate after a date certain if the sale had not been completed by that date.

The contract also stated:  “if such termination shall result from  . . . a willful breach by any party to the Agreement, such party shall be fully liable for any and all losses, costs, claims or expenses, incurred or suffered by the other parties as a result of such failure or breach.”

The Court of Appeals determined that the disappointed buyer did not produce any evidence of aggravating circumstances attending the breach, in order to sustain the UDTP claim, and ”failed to produce evidence of anything more than a simple breach of contract” and no evidence that the defendant seller’s breach of the no-shop clause caused any harm to the plaintiff buyer.  Buyer argued that it suffered damages in the form of business expenses incurred in pursuing the asset purchase agreement and lost profits.  But the Court said:  “Plaintiff fails to advance a persuasive argument to explain why its ordinary expenses or hypothetical lost profits were ‘damages’ resulting from a wrongful act of defendants, given that the jury found that defendant’s termination of the APA did not result from defendants’ breach of contract.”

The Court also found that the circumstances of this case do not support a claim for violation of the covenant of good faith and fair dealing.  “Good faith,” under the North Carolina Uniform Commercial Code, means “honesty in fact and the observance of reasonable commercial standards of fair dealing.”

The lesson of this case is that not every breach of contract may be compensable in damages claimed by the non-breaching party.  This is so even when the contract states that the breaching party may be “fully liable” for a termination of the agreement which  results from a “willful breach” and the non-breaching party is entitled in those circumstances to recover “any and all losses, costs, claims or expenses resulting from such “failure or [willful] breach.”  In this case, the Court was persuaded that the breach of contract had nothing to do with the proper termination of the agreement, pursuant to its terms, even though the seller had violated its “no-shop clause” covenant.

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina.   Ellinger Carr lawyers are experienced and knowledgeable counselors, transaction specialists and business problem solvers, admitted to practice in North Carolina, South Carolina, Florida, Louisiana and New York.  For assistance in commercial real estate and corporate and business development matters, call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com, Steven Carr at scarr@ellingercarr.com, Heather McDowell at hmcdowell@ellingercarr.com,  and Sarah Goodin at sgoodin@ellingercarr.com.