[GHM-0029 (Index
3.346)](http://www.hud.gov/offices/adm/hudclips/lops/GHM-0029LOPS.doc)

TPAs and Preservation

Legal Opinion: GHM-0075

Index: 3.346, 3.375

Subject: TPAs and Preservation

March 12, 1993

Oliver Chami, Esq.

Hampstead Financial

Investment Division

1205 Prospect St., Suite 400-D

La Jolla, CA 92037

Dear Mr. Chami:

This is in response to your December 16, 1992 letter to Susan

Sturman and myself concerning a possible transfer of physical

assets (\"TPA\") of a project that is currently eligible to file a

notice of intent under the Low Income Housing Preservation and

Resident Homeownership Act of 1990 (\"LIHPRHA\").

In your letter, you question whether an owner may effect a

transfer of physical assets immediately prior to filing a notice

of intent under LIHPRHA or during the LIHPRHA process. The

proposed TPA would not comply with the sale requirements of

LIHPRHA, but would transfer the property from the current owner to

a trust created for the benefit of the current owner\'s children.

You also question whether this transfer can be accomplished through

a modified TPA, rather than by conformance with the Department\'s

full TPA requirements.

LIHPRHA establishes a specific framework for transferring

project ownership in conjunction with a plan of action to receive

incentives. Under LIHPRHA, an owner who has submitted a notice of

intent and intends to sell must give preference to priority

purchasers who may be interested in buying the project, namely,

resident councils and community-based nonprofit organizations.

The owner would be required to hold the project open for sale for

specified time periods and would not be permitted to accept a bona

fide offer to purchase the property from anyone except priority

purchasers during that statutory marketing period for priority

purchasers. Once that time has expired, the owner may sell the

project to any qualified purchaser which is not a \"related party,\"

as that term is defined in LIHPRHA. To permit an owner to transfer

his ownership interest to his children during the LIHPRHA process,

would effectively circumvent the sales procedures established by

Congress in enacting LIHPRHA.

An owner who has not yet submitted a notice of intent under

LIHPRHA, may transfer his ownership interest in the project by

complying with the Department\'s TPA instructions published in

Chapter 13 of HUD Handbook 4350.1, \"Multifamily Asset Management

and Project Servicing,\" published September 22, 1992. Because the

owner has not begun the LIHPRHA process, the owner need not comply

with the LIHPRHA sales procedures. However, the TPA must be

approved by HUD before the new owner may submit a notice of intent

under LIHPRHA.

A Modified TPA should only take place when a relatively simple

ownership modification is contemplated, such as the admission of

a co-general partner for tax planning purposes. From the

information provided in your letter it is not possible to answer

definitively how an application for transfer to the trust you

describe would be considered. However, generally HUD looks at the

transfer from the standpoint of ownership control following the

transfer. In this regard, even a minority transfer can sometimes

trigger a full review requirement. In either case, you should be

aware that the HUD \"determinative criteria\" contained in Handbook

4350.1, Chapter 13, Section 3, must be met or exceeded as a result

of the transfer. A complete copy of this Handbook can be obtained

from your local HUD field office.

If you have any further questions regarding this matter,

please contact Susan M. Sturman at 202-708-3667.

Very sincerely yours,

Donald A. Franck

Chief Attorney

Loan Management and Property

Disposition Section