HDSA Westfield Lake, LLC, et al v. Harris Cnty. Appraisal Dist., No. 14-15-00180-CV, 2016 Tex. App. LEXIS 1439 (Tex. App.—Houston [14th Dist.] Feb. 11, 2016, no pet.)
The Westfield Lake Apartments and Mill Creek Apartments received tax exemptions available to low and moderate income community housing development organizations (“CHDOs”). Years later, the owner defaulted and bondholders decided to foreclose. At the foreclosure sale, the indenture trustee for the bondholders created a special purpose entity to bid on the property. The special purpose entity subsequently transferred title to HDSA Westfield Lake, LLC (“Westfield Lake”) and HDSA Mill Creek, LLC (“Mill Creek”), two entities formed by a CHDO. Westfield Lake and Mill Creek subsequently filed timely applications for continuation of the tax exemptions. The Harris County Appraisal District (“HCAD”) denied the application and the Appraisal Review Board upheld the denial. After Westfield Lake and Mill Creek appealed to district court, the parties filed motions for Summary Judgment and the court granted HCAD’s motion.
Texas Property Tax Code § 11.182 states that a CHDO tax exemption will not terminate due to change of ownership if the property is sold in foreclosure and the new “owner” submits evidence to the chief appraiser of its CHDO status within 30 days of the sale. On appeal, the parties did not dispute that the properties were purchased at a foreclosure sale, that Westfield Lake and Mill Creek were qualifying CHDOs, and that the entities submitted timely applications for continuation of the tax exemption. Instead, HCAD argued that since the special purpose entity that purchased the properties at the foreclosure sale (before transferring the properties to Westfield Lake and Mill Creek) was not a CHDO, Westfield Lake and Mill Creek were not entitled to a continuation of the exemption. The court of appeals rejected this argument because the plain language of the statute used the word “owner,” not “purchaser.” Because nothing in the language of the statute prevented passing through a special purpose entity, and because the purpose of the statute was to preserve CHDO exemptions, the court of appeals reversed and rendered judgment for Westfield Lake and Mill Creek.