Court Backs Owner in Contract Rent Adjustment Case

Facts: The owner of a Section 8 site in Ohio sued HUD for breach of its HAP contract. Ocean View Towers Associates sought damages stemming from HUD's failure to provide the automatic annual rent increases specified in the HAP contract beginning in the contract anniversary year of 2002 and continuing through the date it filed its complaint, January 2009. Even though Ocean View requested contract rent adjustments, its contract rent remained the same from the 2002 contract anniversary year through the 2005 contract anniversary year. Ocean View went to the U.S. Court of Federal Claims to recover full contract rent payments from HUD for the entire period. HUD asked the court to dismiss the owner's claims from 2002 and 2003 because they were outside a six-year statute of limitations.

Decision: The court refused HUD's request to dismiss the 2002 and 2003 claims.

Reasoning: HUD argued that Ocean View's claims for rent increases from Jan. 23, 2003, through Sept. 2, 2003, were barred because those claims are based on the anniversary date of the 2002 contract year—Sept. 3, 2002—which is more than six years from the date the complaint was filed. Ocean View said that its claims for payments during that period fell within the statute of limitations because HUD was permitted to adjust the contract rents at any time during the anniversary year, not just on the anniversary date. The court ruled that because HUD has in some circumstances approved adjustment of contract rents at times other than on the contract anniversary date, HUD is not limited to providing Ocean View with rent increases solely on the contract anniversary date of Sept. 3, 2002. In other words, HUD could have granted rent increases for the remaining portion of the 2002 contract year after the contract anniversary date of that year had passed. The court thus rejected HUD's statute-of-limitations argument.

• Ocean View Towers Associates, LP v. United States, July 2009