Affordable housing lawsuit drags on
November 29, 2013
In a case initially filed in 2009, Summit County and Mountainlands Community Housing Trust alleged that a Florida couple had violated the deed restrictions of an affordable housing unit they sold in 2005. One of the attorneys involved in the case believes it could be settled this winter.
According to court documents, Jeffrey H. Gordon and Donna Riven Gordon had in 2005 purchased a deed-restricted property from Fox Point Affordable Housing L.C. for $175,000. Later that year, the Gordons sold the property to Christine C. Healy for the same price, which was the maximum allowed under Mountainlands’ Master Deed Restriction. Mountainlands was never made aware of this transaction, according to the documents.
However, the Gordons also sold the furnishings in the condominium through a separate agreement at the price of $100,000, leading to an essential total cost of $275,000, says Helen Strachan, attorney for Summit County.
According to the documents, $100,000 was "far in excess" of the actual value of the furnishings. Strachan said that since the sale did not have Mountainlands’ consent, Judge Ryan Harris voided the sale.
The complaint states that in February of 2008, Christine Healy had conveyed the property to Jack Healy by a Special Warranty Deed, which Mountainlands was not informed of. Jack Healy then obtained a mortgage loan by a deed of trust in the amount of $293,600 on the property, which was greater than the maximum allowed sale price.
"The deed of trust was above and beyond what [the property] was allowed to be sold for," Strachan said.
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Strachan added that although Judge Harris had voided the sale of the property, he was not going to make a ruling on the deed of trust issue, and various title companies and lenders were added to the lawsuit, such as First American Title Insurance Company, the Federal National Mortgage Association and JP Morgan Chase and others.
There could be allegations of "fraud and unclean hands" on the part of these companies, Strachan said. These new parties to the lawsuit are entitled to discovery, she said, and Strachan has shared with those companies all relevant documents.
"It’s a big cluster at this point. It’s opened up a whole big can of worms," Strachan said. "This is one of those cases we could potentially settle."
The Gordons’ attorney, Joseph Wrona, said his clients’ position is that they sold the property for the deed-restricted price and were asked by the Healys to enter into a separate agreement to sell the property’s furnishings.
"It was an appropriate arm’s length transaction," Wrona said. "My clients have always been willing to return the money they received for the sale of the unit in exchange for the deed to the unit."
The Healys’ attorney, David Pedrazas, declined to comment on the case, but Wrona alleges that after the Gordons sold the property to Healy it was transferred "in and out of the family" and equity was being skimmed from it as the mortgage was taken out for it. He said he expects the case to be settled at some point during this winter.
After this case was filed, Strachan said Summit County enacted an ordinance that made circumventing or violating deed restrictions a Class B misdemeanor.
According to Strachan, cases like this did occur frequently during the height of the housing market. She said violations of deed restrictions like this were never legal but now people are becoming aware of the illegality of these transactions.
Fannie Mae, Seterus and MERS are three other parties that may be added to the lawsuit, and Strachan said she expects JP Morgan Chase to be removed.
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