Federal Court of Appeal Rules Against Investors in Boston Social Housing Case

The United States Court of Appeals in Boston ruled on Wednesday that a Denver investment firm had failed to prove that its fight with a South End housing nonprofit was in federal court .

“Essentially refined, this is a dispute over a contract,” said the panel of three judges. in their decision. And this dispute is expected to continue in state court.

The protracted battle between Alden Torch Financial and the nonprofit, Tenants’ Development Corp. of Boston, is followed by housing advocates across the country. Alden Torch is trying to stop TDC from acquiring 36 brownstones that the nonprofit has maintained for decades for low and moderate income residents in an expensive neighborhood. This is a strategy that the investment company has used successfully in other parts of the country.

At the heart of the problem is the federal government’s main program for financing affordable housing. Under the program, investors receive incentives, known as low-income housing tax credits, in return for funding new homes or renovations. At the end of a 15-year partnership, the nonprofit housing group is supposed to have the right to buy the properties below the market price, according to federal lawmakers and housing officials from the State.

But some investors, including Alden Torch, dispute this right. These are costly battles over the language of contracts – and multi-million dollar real estate that Congress intended to keep affordable in the long run.

“We are delighted with the decision of the Federal Court of Appeal. And we will continue to fight in State Superior Court, ”said Anita Huggins, Senior Property Manager at TDC. “It is very costly to fight this case, but we are determined to uphold the rights of these residents. “

Alden Torch did not respond to requests for comment Thursday. His attorney, Louis E. “Le” Dolan Jr., declined to comment.

Dolan argued in the federal appeals court in July that TDC had broken its contract with Alden Torch, moving forward to acquire the properties without investor approval.

“We absolutely say that they violated their contractual and fiduciary obligations. We also say that they violated their legal obligations, ”Dolan told the judges.

The appeals court, in its ruling, cited a “laundry list” of claims filed by Alden Torch against TDC, including breach of contract and fraud. But the appeal decision said Alden Torch had not fleshed out those arguments earlier and could not raise them for the first time on appeal.

There are Boston-like legal battles unfolding between investors and nonprofits across the country, especially in cities where real estate values ​​have soared. At least two cases are currently before federal appeals courts, in New York and Detroit, where the investor is SunAmerica, a unit of American International Group Inc. of Wall Street. Dolan is also the investor’s lawyer in these cases.

David Davenport, a lawyer who represents TDC and a number of other housing groups, said the Boston appeal decision could influence other appellate courts hearing tax credit disputes.

“It has the potential to have a huge persuasive effect,” Davenport said. While not a precedent-setting decision, he said: “When they see what the first circuit did, there’s a chance they can trust it.”

Members of Congress have proposed measures to harden the language of the tax credit law and avoid such lawsuits. They are among the larger bills lawmakers are negotiating in Washington, so their fate is unclear.

In the meantime, Davenport said: “These fights are going to continue, whether they are in federal court or state court.”

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