‘Skin Walker’ Agency Averts Subsidies Kickup

(CN) - Likening the U.S. Department of Housing and Urban Development to "a skin walker from Navajo legends," a federal judge found that the agency's mercurial nature forecloses a claim by a property owner that lost its subsidies.

Normandy Apartments Ltd., owner of a 208-unit complex in Tulsa, Okla., sued the United States in 2010 over housing assistance payments.

It claimed that HUD breached a 2004 renewal contract by failing to follow appropriate procedures for terminating payments. Specifically, the owner said, HUD disregarded a 1992 housing assistance payments contract, in which Normandy agreed to maintain and operate 192 of its units for low-income families in a "decent, safe, and sanitary" manner in exchange for monthly rental assistance payments.

Judge Francis Allegra with the U.S. Court of Federal Claims tossed the complaint in 2011, with leave to amend, ruling that the court did not have jurisdiction because of a lack of privity between the parties.

Last week, the court reaffirmed the decision and granted the government's motion for summary judgment on Normandy's sole remaining claim - the taking of property in violation of the Fifth Amendment.

Judge Eric Bruggink said the Oklahoma Housing Finance Agency, not HUD, signed the renewal contract in question.

"As our predecessor the court of claims phrased it, the takings clause has 'limited application to the relative rights in property of parties litigant which have been voluntarily created by contract,'" the 20-page ruling states. "This is just such a case. Although plaintiff has standing, defendant has shown that plaintiff cannot prevail on its takings claim. We also reaffirm that plaintiff has no contract claim against the United States based on the HAP [housing assistance program] renewal contract. Accordingly, although we deny defendant's motion to dismiss for lack of standing, we grant defendant's motion for summary judgment."

Before HUD halted the assistance payments, Normandy allegedly attempted to sell the apartment complex to Summit Assets Management for $8 million, in 2007.

HUD, Normandy claimed, withheld approval of the property transfer and claimed the owner could not show an "investment-backed expectation" to sell the property to Summit because it knew HUD had the contractual right to approve or disapprove of any sale.

HUD suspended the assistance payments in 2007, after informing Normandy in separate letters of the abatement due to "failure to maintain [the] project in decent, safe, and sanitary condition," the ruling states.

"Plaintiff had no reasonable expectation to continue receiving payments under the HAP contract when that contract expressly conditioned those payments on keeping the property in a condition that met HUD's approval," Bruggink found.

Bruggink likened the federal agency to "a skin walker from Navajo legends."

"The conclusion is inescapable: HUD and Normandy had no contractual relationship in the 2004 HAP renewal. Plaintiff is unable to enforce its rights in that contract against the federal government because the United States was not a party to it," the ruling states.

"To the extent that HUD correspondence with plaintiff was to the contrary, these were misstatements that could not resuscitate a contract relationship. They did not change the fundamental fact that OHFA was the contract administrator after the 2004 renewal. The confusion stems, in part, from the fact that HUD, like a skin walker from Navajo legends, chooses to appear in some relationships as a contracting party, although it always retains the right to resume its regulatory persona, which is what it did here."

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