his plan to sell all his Oregon properties. He wanted to roll the equity from his entire Oregon portfolio into a single out-of-state property in a 1031 Exchange. Accomplishing this was a challenge since Defect Village was tied up in litigation, which likely wouldn’t be quickly resolved. At Eike Law, P.C., we live by the motto, “Every problem has a solution.” The solution in Defect Village was to hire a contractor to perform repairs to approximately onethird of the project, get the repair costs quantified and then list the property for sale. The sale notice would disclose the construction defects and litigation and seek a buyer who would purchase the property at a discount with knowledge of the need for repairs for the remaining two thirds of the property, and the cost of those repairs (based on the already incurred cost of repairs to the first one third of the property). Such a buyer could see the repairs already accomplished at the first one-third of the project and envision the project fully repaired. The buyer would also have a pretty good idea of the time required to fix the remainder of the project, the impact on tenants, and other relevant issues.
assistance of a real estate and construction attorney. Competent legal representation is critical in the drafting and negotiation of the contract with the contractor and consultant, who will perform the repairs to ensure any pricing agreed upon with the seller can be transferred to any potential purchaser if they so choose. If the buyer prefers not to use the contractor used by the seller to complete repairs on the remainder of the project after the sale closes, the contract is drafted in such a way that the buyer is not committed to using that specific contractor. I think we can all agree that having widespread construction defects with seven-figure repair costs— in a property an owner is looking to sell—is not an optimal situation for the owner, manager, broker, or any prospective buyer. That said, it is something a seasoned real estate and construction attorney can handle in a manner that facilitates the sale if the proper amount of diligence is performed. Kevin Eike is a Portland attorney specializing in real estate and construction law. He can be reached by email at kevin@eikelawpc.com or by phone at (503) 372-6755 or through his website at eikelaw.com.
Selling Defect Village will necessarily involve complex disclosures and addenda dealing with the pending litigation, which party retains the right to the proceeds of the lawsuit and other issues—all requiring the
AFFORDABLE HOUSING (CONT.) Washington HB 1406, which passed in 2019, allows cities to apportion state-generated sales tax funds for affordable housing projects. King County plans to divert nearly $100 million for this purpose over the next 20 years without raising county residential taxes. Lawmakers hope this will help build some of the 244,000 new affordable homes the county estimates it will need to supply by 2040. In his report, Congressman Blumenauer acknowledged the severe lack of new affordable housing funding. He notes that in the 1950s and 1960s federal housing assistance focused on the production of public accommodation. In the 1980s and 1990s, federal funding for public housing construction and maintenance saw deep cuts. The Faircloth Amendment in 1999 prohibits federal funding for the creation of public housing if it would increase units owned by a given housing authority over existing levels. Blumenauer suggests a repeal of the Faircloth Amendment and allocation of $10 billion per year in federal funding for public housing. Many Democratic candidates engaged in current
primaries for the presidential election have also put forward plans for housing reform. While Senator Bernie Sanders is calling for federal-level rent control, Senators Cory Booker, Kamala Harris, and Elizabeth Warren, along with former HUD secretary Julian Castro, all advocate for a renter tax credit for those who spend more than 30 percent of their income on housing. Like Blumenauer, Senator Warren advocates for investment in housing funds. Her plan dedicates $500 billion to build 3.2 million new housing units nationwide.
Conclusion
Housing affordability has grown from the problem of “superstar” cities like New York and San Francisco to a widespread issue. The post-recession building slowdown—along with income inequality and urban job growth concentration—has created a perfect storm of affordability issues. A sharp decline in federal public housing investment has left cash-strapped municipalities holding the bag. Moving forward, cities and states must prioritize the need for a general increase in housing supply and target that increase for lower-income households. The Northwest Apartment Investor
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