In re Sunnyslope Housing Ltd. Partnership, ___F3d___, 2016 Westlaw 1392318 (9th Cir. 2016)
In re Sunnyslope Housing Ltd. Partnership, ___F3d___, 2016 Westlaw 1392318 (9th Cir. 2016), the Ninth Circuit Court of Appeals held that since affordable housing covenants encumbering a development were subordinated to the senior lender’s lien, the borrower’s valuation of the lender’s collateral in a bankruptcy case had to account for the potential extinguishment of those junior covenants in the event of foreclosure. One could quarrel with the Ninth Circuit’s reasoning which led to this result, because it could be argued that the affordable housing covenants “ran with the land”, and therefore would NOT be extinguished by a foreclosure, that they would still be on the land and would bind whoever was the buyer of the property in the foreclosure sale. However, unless there is a petition for certiorari to the US Supreme Court, and the US Supreme Court grants certiorari, the Ninth Circuit Sunnyslope decision is the controlling law in the Ninth Circuit, whether rightly or wrongly reasoned.