Opinion ID: 2981321
Heading Depth: 2
Heading Rank: 1

Heading: The Limited Partnership (LP) Agreements

Text: Under the LP agreements, the General Partners were required to construct the housing projects by an agreed-upon completion date and to lease them.2 Specifically, the General Partners were to “cause Rental Achievement” by September 30, 2005. “Rental Achievement” was defined as follows: [T]he date that all of the following conditions have been fulfilled: (I) the Conversion Date [the date on which the “Permanent Loan” converted from “an interest only construction loan to an amortizing term loan” according to terms defined in the parties’ Construction Loan Agreement] shall have occurred; (ii) all governmental approvals necessary for legal occupancy of all units . . . have been obtained; and (iii) ninety percent (90%) [o]ccupancy of the [a]partment [c]omplex has occurred during each of three consecutive months . . . . The General Partners were also required to pay off all loans and liens on the properties. In return, the GPs would receive 80% of the net proceeds when the projects were re-financed or sold. The parties provided for two types of damages in the event of a breach of contract: Development Deficits and rescission damages. Development Deficits were defined as the any amount beyond the sum of: “the proceeds of the Permanent Loan, operating income of the Apartment Complex . . ., that portion . . . of the Investor Limited Partner Contribution payable at or prior to the Conversion Date and . . . the proceeds of the Bridge Loan . . .” that would be required to complete 2 Alliant, as the limited partner, agreed not to participate in the management or control of the business of the partnership. Alliant’s agreement not to be involved in the management or control is consistent with the role of a limited partner under Kentucky law, which states that a limited partner does not have the right to bind the partnership. KEN . REV . STAT . (K.R.S.) § 362.2-302. In exchange, limited partners are relieved of personal liability on partnership obligations. K.R.S. § 362.2-303. -3- No. 10-5454 Alliant Tax Credit Fund 31-A, Ltd., et al. v. Murphy the construction, pay off the “bridge loan,”and pay partnership expenses up to that date. The General Partners were responsible for any Development Deficits on the project. Rescission damages were defined as the return of Alliant’s capital contribution, with interest at a rate of the “greater of twelve percent (12%) per annum or the Interest Rate3 from the respective dates on which the various installments of the contributions were made.” Alliant could elect rescission for a number of reasons: if the project was not completed on time; the General Partners defaulted on the Permanent Loan or the Bridge Loan, so that the loan was accelerated or foreclosed on; or if Rental Achievement was not reached by September 30, 2005.