Home Work: Building Affordable Housing in Wake County and North Carolina; Renters at Risk

North Carolina and Wake County are continuing to keep pace and to set the pace of residential real estate development in spite of months of coronavirus pandemic, and we are bucking the reported slowdown of affordable housing construction elsewhere in the United States, as reported by a recent Bloomberg News article (July 30, 2020), “COVID-19 is Killing Affordable Housing, Just as It’s Needed Most.”


The Raleigh News & Observer reported in mid-July 2020 on a number of upcoming and proposed residential developments in Wake County, including both market-rate and affordable housing properties.    The article notes that the Raleigh City Council approved a rezoning request from Raleigh affordable housing developer DHIC and senior home developer Presbyterian Homes to redevelop the closed Memorial Presbyterian Church at 1950 New Bern Avenue in east Raleigh.  Construction is expected to commence in early 2021 with 150 units for seniors making 60% or less of area median income.

The Crenshaw Trace development is another senior affordable housing development in Wake Forest, slated to begin construction later this summer by the Taft-Mills Group, a Greenville, North Carolina developer, with 68 units (36 one-bedroom and 32 two-bedroom units) for residents over 55 making 30% to 80% of area median income.  Rents will range from $476 to $1,086, according to the N&O report, and will be supported by a Wake County loan of $731,000.  Wake County Commissioners approved loan funding of up to $12.6 million last April for the building of affordable housing, including the Crenshaw Trace development.

The Taft-Mills Group also expects to commence construction later this summer of the Walnut Trace development, a 180-unit development in 6 buildings on Rock Quarry Road in southeast Raleigh, serving families with 60% of area median income.   The Walnut Trace development will be financed by low income housing tax credit equity funding, Raleigh Housing Authority tax exempt and taxable multifamily housing revenue bonds up to $23 million, and an affordable housing loan of $2,250,000 from the City of Raleigh.

The Taft-Mills Group also recently closed and will commence construction of the Farrington Trace development in Greenville, Pitt County, 80 apartment units serving families with incomes at 60% or less of area median income.  This development is financed with 9% low income housing tax credit equity financing, and loans from the North Carolina Housing Finance Agency.

Renters at Risk

According to the National Low Income Housing Coalition and their Out of Reach 2020 Report, 35% of nearly 4 million households in North Carolina are renters’ households.  The Report states that the North Carolina worker earning an average renter wage of $15.92 per hour could afford a rent of $828 per month, but the fair market rent for a two-bedroom apartment is $919, and thus “out of reach” for many North Carolinians.

According to the Bloomberg News article, affordable housing advocates are also concerned that the COVID-19 pandemic will not only slow down construction of new affordable housing units, but that many people now unemployed due to the pandemic face eviction because they can’t pay the rent.  Pending legislation currently being debated and negotiated in Congress may extend the CARES Act eviction moratorium, which expired on July 25, and provide additional housing and financial assistance to unemployed and other struggling Americans, and to State and local governments to continue funding affordable housing initiatives.   One estimate is that as many as 40% of Americans may be at risk of eviction for non-payment of rent if the eviction moratorium is not extended and renters are unable to return to work.

Ellinger Carr lawyers are affordable housing advocates and we are honored and proud to serve our nonprofit and for-profit developer clients, and as counsel in support of affordable housing and community development initiatives for the City of Raleigh and the City of Greensboro, and other housing professionals and organizations.

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 and corporate and business development matters, call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com, Heather McDowell at hmcdowell@ellingercarr.com,  Sarah Goodin at sgoodin@ellingercarr.com and Steven Carr at scarr@ellingercarr.com.


Business Acquisitions from Start to Finish – helping clients buy and sell businesses

Steven Carr, one of the Ellinger Carr lawyers, will be a featured speaker and presenter at an upcoming seminar designed for lenders, loan officers, accountants, paralegals and lawyers on the topic of business acquisitions and helping clients buy and sell businesses.  The program is sponsored by the National Business Institute and will be conducted at the Holiday Inn North-Midtown in Raleigh on Monday, December 16.  For more information about the seminar, or to register for this program, call NBI at 800-930-6182 or log in at www.nbi-sems.com, or contact our office about how to register for the program.

Steven will be leading the discussions on structuring and drafting the acquisition agreement, both for equity interest purchases and asset purchases, and on the ethics of business acquisitions.

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, Virginia and New York.  For assistance in buying and selling a business, starting up a new business, acquiring commercial real estate and other corporate and business development matters, call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com, Steven Carr at scarr@ellingercarr.com, Sarah Goodin at sgoodin@ellingercarr.com, and Heather McDowell at hmcdowell@ellingercarr.com.


Let’s be reasonable – the meaning of reasonableness – part 1


Let’s Be Reasonable – part 1

by Steven Carr

The happiness of your life depends upon the quality of your thoughts: therefore, guard accordingly, and take care that you entertain no notions unsuitable to virtue and reasonable nature. —Marcus Aurelius

Lawyers often use and encounter the words “reasonable” and “reasonably” in their drafts of contracts and in their arguments whether a party’s conduct or behavior met the standard of reasonableness under the circumstances, in matters of civil wrongdoing or criminal misconduct.  But what does it mean to be reasonable, or to act reasonably?

Years ago, when I proposed to use the word “reasonable” in a contract clause, a client accused me that this was just a lawyer’s meaningless “weasel” word, intended to be purposefully vague or indefinite, and to put off to a later day and to a later negotiation what the parties to a contract should discuss and decide to resolve a potential issue or problem.  The client was partly right.  If “weasel words” are a colloquial term for words or phrases used to avoid being forthright, or words that are inconclusive or vague, then I assured my client that the word is not a weasel word, and that I never intend to include words in contracts that are vague, unclear, or dishonest.  But, it is perfectly appropriate to use the word “reasonable” as a standard and a basis for future negotiations to resolve a problem that may arise, or a problem that the parties agree that they cannot resolve when they first come to a meeting of the minds on other contract terms and conditions, and they choose to discuss and resolve that problem later.

I sometimes borrow the joke, as I am reading other drafters’ words, that certain contract provisions “may be sufficiently vague as to be theologically significant.” Lacking formal seminary education, I don’t strive for theological significance or soul salvation in my contract drafting or negotiation efforts.  Instead, I seek clarity and choose plain, ordinary and simple words to achieve the client’s legal objectives, to clearly state contract duties and benefits, and to unambiguously allocate contract risks and responsibilities.

I rely on my learned pastor for theology, religious instruction, and often for new insights gained from her skillful use of words.  In one of her recent sermons, she noted that “to be reasonable is to be logically consistent.” That rings true. But what does “logically consistent” mean?  Logic is defined as a branch of philosophy concerned with analyzing the patterns of reasoning by which a conclusion is properly drawn from a set of premises, or a system or principles of argument or reasoning.  The word derives from the Greek logikos, concerning speech or reasoning.  The root of logikos is logos, the Greek word for “word” and, in theological uses the word logos, as used in the first chapter of the Gospel of John describes the divine word – or reason incarnate.  An online dictionary reports that the word is akin to legein – to choose, gather, recount, tell over, or speak.    Thus, to be reasonable is to choose words carefully and to draw good conclusions from an agreed upon set of facts or premises.

And “to reason” means “to think logically” and “to draw logical conclusions from facts or premises” and “to urge or seek to persuade by reasoning.”

So, why is “reasonable” a good and clear word to choose, and use, in contracts? In North Carolina, the legal standards for contracts include the exercise of discretion “in a reasonable manner based upon good faith and fair play.”  All contracts in North Carolina contain “an implied covenant of good faith and fair dealing that neither party will do anything [that] injures the right of the other to receive the benefits of the agreement.”  And, this requirement:  “[A] party who enters into an enforceable contract is required to act in good faith and to make reasonable efforts to perform his obligations under the agreement.”  Banyan GW, LLC v. Wayne Preparatory Academy Preparatory School, Inc., 822 S.E. 2d 791 (Table) (N.C. App. 2019) (citations omitted).

These legal standards hint at what reasonable means, but do not define it, except by reference to “good faith and fair dealing.”  “Good faith” is defined in the Uniform Commercial Code as “honesty in fact.” So, reasonable is generally understood to be action or conduct that is guided by honesty, fairness and the facts and circumstances of the particular situation.  In the Banyan case, the Court of Appeals was asked to analyze and determine what the parties meant by their use of the term “reasonable efforts” and whether the parties had made a “reasonable estimate of damages that would likely result from a default” if those efforts failed.  In Banyan, the Court noted that whether a liquidated damages amount agreed upon by the parties is a reasonable estimate of damages resulting from a default is a question of fact, and a party who seeks to invalidate a liquidated damages provision bears the burden of showing that the provision is unenforceable and unreasonable – because it is instead a penalty.

The Court of Appeals, following a “modern trend” enunciated by the North Carolina Supreme Court, and a long-standing fundamental principle of the freedom of contract in North Carolina jurisprudence, upheld the lower court’s summary judgment and an award to the plaintiff service provider of $500,000, the agreed liquidated damages amount stated in the contract.  The Court majority wrote, citing a 1917 decision:  “[T]he parties [to a contract], being informed as to the facts and circumstances, are better able than any one else to determine what would be a fair and reasonable compensation for a breach[.]”  The majority further noted:

[T]his Court does not possess the authority to save a party from a contract that — in hindsight — may seem ill-advised. Indeed, it is axiomatic that courts may not “relieve one who can read and write from liability upon a written contract, upon the ground that he did not understand the purport of the writing, or that he has made an improvident contract, when he could inform himself and has not done so.” . . . Parties are equally free to enter into agreements both wise and unwise. Courts have the power to declare contracts unenforceable only in rare circumstances — none of which exist in the present case.

One judge dissented on the liquidated damages holding, contending that the defendants had made a sufficient showing of facts and argument to show a finder of fact (the jury) that the stipulated damage clause was a penalty because the estimate of damages would not have been difficult to calculate because of indefiniteness or uncertainty.    The dissenter cited to pattern jury instructions:

First, that the damages which the plaintiff and the defendant might reasonably anticipate from a breach of their (name contract) were, at the time they entered into (name contract), difficult to ascertain because of their indefiniteness or uncertainty.

Second, that the amount of damages stipulated by the plaintiff and the defendant was either a reasonable estimate of the damages which probably would be caused by a breach or is reasonably proportionate to the damages which have actually been caused by the breach.

N.C.P.I. – Civ. 503.94 (footnote omitted). (Emphasis added.)

The judge wrote:  “The second question involves a ‘reasonableness’ determination. In my view, when credible conflicts in documentary evidence in the written contract is [sic] adduced at the summary judgment stage, it is sufficient to raise a material question of fact, and then summary judgment is inappropriate. I would reverse and remand this matter to the trial court for a jury determination on both the availability of liquidated damages and the amount, if any.”  (Emphasis added.)

Note that this dissenter is making the argument that the case should have been decided by a jury, and not by the court, after a reasonableness determination about the damages that the majority had concluded had already been made and agreed upon by the parties to the contract, because the parties are better able to determine for themselves what is fair and – well, reasonable.  And, note that this determination is one based on what the parties might “reasonably anticipate” and “reasonabl[y] estimate” as damages which are “reasonably proportionate.”  And, note that all of this thinking is done without a clear statement or definition of what “reasonable” or “reasonably” mean.  Just some hints that all involved – the parties, the court and the jury – should examine the facts, think logically, and make a judgment call.

And, the Banyan dissenter proves the old adage that “reasonable minds may differ.”  Sometimes, Court of Appeals judges also declare that the parties can’t decide for themselves what is reasonable in their contract provisions, and that those decisions are made by the judges, as a matter of law.  We will talk more about that in part 2.

Financings, closings for affordable housing top $335 million

housing with rising arrow - imagesCA39EVKBOver the past twelve months, Ellinger Carr lawyers have counseled and assisted with the closings of more than 20 complex commercial transactions for the investment of more than $335 million in equity and debt financings of multifamily affordable housing apartment complexes.  These closings provided for tax credit financing, including tax credits allocated by the North Carolina Housing Finance Agency and similar housing finance agencies in other states, for commercial real estate developments in affordable and senior communities in North and South Carolina, and in Florida, Georgia, Louisiana, Tennessee, Texas and Virginia.

Ellinger Carr is presently advising and assisting public housing authorities, other public housing agencies and other clients with implementation of the Rental Assistance Demonstration (RAD) program of the United States Department of Housing and Urban Development (HUD).  RAD is similar to previous HUD mixed finance initiatives, like the HOPE VI program used for redevelopment of public housing communities, including recent HOPE VI project closings and financings that Ellinger Carr lawyers assisted with in Charlotte, Greensboro, Raleigh and Wilmington, North Carolina and Richmond, Virginia.  Our firm’s lawyers also have counseled and assisted with special bond financings under the HUD Capital Fund Financing Program (CFFP).  The lawyers have closed multiple CFFP transactions providing more than $30 million in capital investments and improvements to public housing units in the Carolinas and elsewhere in the United States.  Laurel Street Residential housing photo imagesCANN2ZAF

Ellinger Carr is a business law and commercial real estate law firm based in Raleigh, North Carolina.  Providing safe, affordable housing for families, seniors and developmentally disabled persons has long been a part of the work of the Ellinger Carr law firm, in communities in the Carolinas, the Southeast and elsewhere in the United States.  The firm’s 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 affordable housing, HUD financing, commercial real estate and corporate/business development matters, call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com or Steven Carr at scarr@ellingercarr.com.


Grand Opening for Affordable Multifamily Apartments in Greenville, North Carolina

Winslow PointeThe NRP Group celebrated a grand opening and ribbon-cutting for its latest addition to the NRP Group’s portfolio of affordable multifamily housing, the Winslow Pointe community, in Greenville, North Carolina.

On March 20, NRP co-founder and principal, Alan F. Scott, hosted Mayor Allen Thomas and Mayor Pro-Tem Rose Glover and other guests from Greenville to announce the completion and lease-up of the Winslow Pointe community, serving 84 families with one-, two- and three-bedroom apartments, representing a $10.9 million investment in safe, affordable housing and fully-equipped kitchens with Energy Star appliances,  and a community clubhouse with a community room, Internet access, fitness center and playground facilities.

The Winslow Pointe community is the NRP Group’s latest North Carolina affordable housing community, financed in part with Federal and State affordable housing tax credits and permanent loan financing.  The Ellinger Carr law firm served as counsel to the construction lender, Bank of America, for the initial construction phase of the project.

NRP Group has built more than 18,000 housing units since its founding in 1995, and it manages 96 communities encompassing more than 10,000 market rate and tax credit family and senior apartment properties in North Carolina, Ohio, Michigan, Virginia, Texas, Indiana, New Mexico, Florida and Arizona.  It soon will begin construction on its latest North Carolina tax credit property in north Raleigh, North Carolina.

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.PPC_2919

Among more recent transactions, on April 18, 2013 Ellinger Carr, serving as counsel to the construction lender, Bank of America, concluded a $21.9 million construction and equity financing closing for rehabilitation and new construction of a 95-unit affordable housing property in New Port Richey, Florida.

For assistance in commercial real estate and corporate and business development matters, call 919-785-9998 or email Susan Ellinger at sellinger@ellingercarr.com or Steven Carr at scarr@ellingercarr.com.

Start Up with an LLC? What Does Your Operating Agreement Say?

It’s fairly easy to start up and to organize your limited liability company (LLC) with the filing of articles of organization with the North Carolina Secretary of State’s office.  Many clients file the articles themselves.  The LLC has become one of the most popular forms of business entity among new businesses being formed.

Owners of an LLC are called members. Members may include individuals, corporations, other LLCs, and even foreign entities. There is no maximum number of members. Most states, including North Carolina also permit “single-member” LLCs, those having only one owner.  However, because of significant potential liabilities, and both legal and tax consequences, if your LLC has more than one member or owner, we advise our clients to think about and to write and agree on a clear and unambiguous operating agreement.  There are also securities law requirements and considerations if you have multiple members investing equity capital in your LLC.

The operating agreement works like a partnership agreement, as the owners/members are treated for tax purposes like partners, or like a shareholders’ agreement in a closely held corporation.  A written operating agreement is not required by North Carolina law, but the absence of a clear understanding and written agreement on key points of the business between the members leaves much to chance and may lead to potential disputes and headaches later.

What details should the operating agreement cover? Well, some fundamentals include the following questions you and your fellow members should discuss and agree on:

  • How much capital do we need for our start up?  How much is each member investing for a percentage ownership interest?
  • Will the LLC need to borrow money, from members or third parties?
  • Who is the manager, and who selects the manager?
  • When the LLC earns income, how will distributable cash be distributed, and when, or how will money earned be reinvested in the business?
  • How will major decisions of the LLC be made? Do we need the members to agree unanimously or by some supermajority vote requirement on the big issues?
  • What happens if the members can’t agree, or become deadlocked?  How are disputes resolved, or should we include a buy/sell provision if we can’t work out our differences?
  • Can the members compete with each other and with the business of the LLC?
  • Can the members bring a legal action or arbitration to resolve a dispute or to sue for breach of the operating agreement or a member’s failure to make a capital contribution?

These questions and other issues unique to your LLC’s business and your business plan should be discussed and agreed on by the members who are bringing their capital, their talents and labor to the new business, and memorialized in a writing prepared by your lawyer, along with advice about tax and accounting- related provisions from your accountant and tax advisor.