National Housing Law Project Housing Law Bulletin

The Resident Council then brought this action against the PHA. It claimed that it was the qualified representative of the tenants in the project and that it was entitled to a right of first refusal before the PHA could demolish or sell the project. It sought a declaratory judgment settling its claim to be the representative of the tenants and to have a right of first refusal and injunctive relief preventing the PHA from selling the project without giving the organization an opportunity to buy it. The rival tenant organization was allowed to intervene as a defendant. The tenant organizations filed cross motions, the plaintiff for summary judgment in its favor and the defendant for dismissal of the action. The district court ruled in the Resident Council's favor and the Court of Appeals affirmed.

The question for the district court was whether the Alexandria Resident Council was entitled to a right of first refusal before the PHA could offer to sell the project to any other buyer, including the rival tenant organization. The court addressed a series of issues in answering that overall question.

First, it was undisputed that the Resident Council met the regulatory criteria for a tenants organization to represent public housing tenants. The members of the board were elected public housing residents, the qualified voters had to be residents of the projects ARC represented, and the bylaws required regular elections, authorized recalls, required at least five board members and staggered their terms. It was irrelevant to the court that the organization was a nonprofit corporation without members, because the board members had to be public housing tenants elected by other public housing tenants.

Second, the Council had been recognized by the PHA for years and had recently renewed its memorandum of understanding with the PHA to spell out their respective responsibilities. The PHA provided funding to the Council based upon the number of units in the Downtown Homes, as well as other units represented by the Council. The PHA also provided the Council a vacant unit in the Downtown Homes to use as an office. HUD provided the Council a Tenant Opportunities Program (TOP) grant. Two residents of the Downtown Homes served on the Council's board. The Council provided services to residents of the Downtown Homes.

Third, and most crucial for the court, it did not matter that the Council represented other developments of the PHA in addition to Downtown Homes. The statute and HUD's regulations made clear that being a city-wide tenant council does not entitle a council to a right of first refusal. Only a council that represents the tenants of the development that is being demolished or sold has the right of first refusal. However, on the facts it was clear that the Alexandria Council did not represent the tenants in all of the PHAs developments. One elderly development was represented by a separate council that had no affiliation with the Alexandria Council. In addition, the Council was not a coalition of separate tenant councils from different developments. The Council operated as a direct representative of the tenants at Downtown Homes and at several other developments in Alexandria. Thus it qualified as the representative of Downtown Homes as well as the representative of the other developments.

Fourth, the PHA had never formally withdrawn its recognition from the Council. Under HUD's regulations it was obliged to recognize the Council as the sole representative of the tenants at Downtown Homes and the other developments in Alexandria where the Council operated. The PHA could withdraw its recognition only if it considered the Council not to be representative of the Downtown Homes and if it withheld funding from the Council. It never did that and it never provided funding to the rival organization.

These factors led the court to conclude that the Alexandria Council was the tenant council for the Downtown Homes and thus was entitled to a right of first refusal before the development could be sold. The court also bolstered its conclusion with the observation that, as an established and experienced council not formed solely to secure a right of first refusal, the Council could more effectively protect the tenants' interests in retaining their homes.

As an alternative ground for its decision, the court relied upon the memorandum of understanding between the Council and the PHA. That agreement included a clause in which the PHA promised to make available to the Council a right of first refusal to purchase any development of the PHA that was being sold. The court concluded that that provision could be enforced as a contract between the parties.

When the case got to the Court of Appeals, the District Court's decision was affirmed on a single ground. Although the Court of Appeals described the complete reasoning process that the district court had undertaken, it concluded that it would have to agree with only one of the lower court's reasons for its decision. That was the point that the Council had met the criteria for recognition by the PHA, the PHA had recognized the Council as representative of the Downtown Homes, and the PHA had never properly withdrawn that recognition. Because the Council was a qualified representative of Downtown Homes, under HUD's regulations the PHA could not recognize a competing organization and give it the right of first refusal.