Code of Maine Rules › 99 - INDEPENDENT AGENCIES › 346 - MAINE STATE HOUSING AUTHORITY › Chapter 16 - LOW-INCOME HOUSING TAX CREDIT RULE › Appendix 346-16-E - THRESHOLD REQUIREMENTS FOR PURCHASE OPTIONS/RIGHTS OF FIRST REFUSAL

Current through 2024-29, July 17, 2024
I. The Purchase Options must:
1) grant to one or more of the general partner, managing
				  member, developer or sponsor an irrevocable option to purchase the Project at a
				  purchase price not more than the greater of: (a) its fair market value as
				  encumbered by the Extended Use Agreement and any other restrictions of record;
				  and (b) the sum of: (i) the outstanding debt secured by the Project, (ii) the
				  amount of the limited partner's or non-managing member's federal, state and
				  local tax liability resulting from the sale of the Project, and (iii) all
				  amounts owed to the limited partner or non- managing member under the limited
				  partnership agreement or limited liability company operating agreement (the
				  "Project Option Price");
2) grant to one or more of the general partner, managing
				  member, developer or sponsor an irrevocable option to purchase the interest of
				  the limited partner(s) or non-managing member(s) in the Project ownership
				  entity ("Ownership Interest") at a purchase price not more than the amount the
				  limited partner(s) or non-managing member(s) would have received on an
				  after-tax basis if the Project had been sold at the Project Option Price and
				  the proceeds distributed pursuant to the terms of the limited partnership
				  agreement or limited liability company operating agreement;
3) be exercisable beginning at the earlier of: (a) the
				  expiration of the Compliance Period; or (b) the exit of or change of
				  controlling interest in the limited partner or non-managing member occurring
				  after the expiration of the Credit Period;
4) expire no earlier than 36 months after the expiration of
				  the Compliance Period; and
5) give the holder of the option a minimum of 12 months to
				  close on the purchase of the Project or the Ownership Interest after exercise
				  of the option or such longer period required by any lender(s) or other party
				  whose consent to the transfer is required.
II. The right of first refusal (ROFR) must:
1) grant to a Qualified Nonprofit Organization an irrevocable
				  and exclusive ROFR to purchase the Project at the lesser of: (a) its fair
				  market value as encumbered by the Extended Use Agreement and any other
				  restrictions of record; and (b) the Minimum Purchase Price as defined in
				  Section 42(i)(7) of the Code but in no event less than the outstanding debt
				  secured by the Project, excluding any indebtedness incurred within the 5-year
				  period ending on the date of the sale pursuant to the ROFR (the "ROFR
				  Price");
2) be exercisable beginning at the expiration of the
				  Compliance Period;
3) expire no earlier than 36 months after the later of: (i)
				  the public offer of the Project for sale by the general partner or managing
				  member; and (ii) the expiration of the Compliance Period;
4) give the holder of the ROFR a minimum of 90 days to
				  exercise its ROFR and a minimum of 12 months to close on the purchase of the
				  Project after exercise of the ROFR or such longer period required by any
				  lender(s) or other party whose consent to the transfer is required; and
5) not require more than a nominal earnest money deposit in
				  order to exercise the ROFR.
III. The Project owner's limited partnership agreement or
				  limited liability company operating agreement must provide that:
1) the holder of the ROFR may assign the ROFR to a
				  governmental unit, tenant organization or resident management corporation of
				  the Project, or another Qualified Nonprofit Organization without the consent of
				  the limited partner(s) or non-managing member(s);
2) the general partner or managing member may elect to do any
				  of the following:
a) subject to the consent of the limited partner(s) or
				  non-managing member(s), which consent shall not be unreasonably withheld,
				  conditioned, or delayed, sell the Project to the holder of the ROFR in
				  connection with the exercise of the ROFR (the limited partner(s) or
				  non-managing member(s) may not withhold consent for a non-material breach of
				  the Project owner's organizational documents);
b) at its discretion, without the consent of the limited
				  partner(s) or non-managing member(s), sell the Project to the holder of the
				  ROFR in connection with the exercise of the ROFR following the general
				  partner's or managing member's receipt of a bona fide third party offer to
				  purchase the Project, which offer may be solicited by the general
				  partner/managing member or the holder of the ROFR; or
c) at its discretion, without the consent of the limited
				  partner(s) or non-managing member(s), offer the Project for sale publicly at
				  any time following the expiration of the Compliance Period and thereafter
				  accept an offer from the highest bidder to purchase the Project, as long as the
				  sale price is not less than the ROFR Price, and provided such acceptance is
				  subject to the rights of the holder of the ROFR to exercise the ROFR and
				  purchase the Project at the ROFR Price;
3) the general partner or managing member is directed and
				  authorized to execute all documents necessary to effect the sale of the Project
				  pursuant to the ROFR or Purchase Options;
4) the limited partner(s) or non-managing member(s)
				  affirmatively agree not to challenge: (i) the sale of the Project pursuant to
				  the terms of the ROFR by the general partner or managing member to the holder
				  of the ROFR even if the holder of the ROFR is affiliated with the general
				  partner or managing member; (ii) the general partner's or managing member's
				  acceptance of an offer from the highest bidder in response to the general
				  partner's or managing member's public offer of the Project for sale, provided
				  the offer price is not less than the ROFR Price, and/or the exercise of the
				  ROFR by the holder of the ROFR after any such acceptance; and (iii) the
				  exercise of the Purchase Options by the holder(s) thereof pursuant to the terms
				  of the Purchase Option;
5) in the event Section 42(i)(7) of the Code is amended to
				  permit a Qualified Nonprofit Organization to hold a purchase option after the
				  expiration of the Compliance Period, and only to the extent permitted under
				  such revised Section 42(i)(7) of the Code, the holder of the ROFR shall be
				  entitled to purchase the Project, or at its option, all of the interests in the
				  owner, in either case at the ROFR Price, in lieu of exercising the ROFR;
6) neither the ROFR or Purchase Options will be adversely
				  affected or limited by any other rights of the limited partner(s) or
				  non-managing member(s), or any owner of any interest in any limited partner or
				  non-managing member, such as forced sale rights, and there are no conditions to
				  the exercise of the ROFR or Purchase Options except as explicitly identified in
				  the limited partnership agreement or limited liability company operating
				  agreement; and
7) any amendment that would modify any term or condition
				  related to the ROFR or Purchase Options requires the prior written consent of
				  MaineHousing.