When Mary Kay Buford rented a newly built home in Toledo’s central city in 2002 she was signing up for a promise made by the developer — that she could buy that house in 15 years and she would earn $1,000 a year toward the price.
It was a promise that was backed up by the power of federal, state, and local governments.
“It was exciting,” she said.
But last year she got a worrisome letter: Her house was being foreclosed for tax delinquency, and she was being stripped of her “rent-to-own” rights — which come due early next year.
“I was shocked. Now it’s scary. We could end up homeless, with nothing,” Ms. Buford said, standing in front of her two-story Norwood Avenue house with a porch and picket fence.
Ms. Buford and other women who rent homes in the Oakwood Homes I & II project, including Samonia Smith and Lakesha Williams, aided by Advocates for Basic Legal Equality, have sued to intervene in the tax foreclosure planned for 43 homes left standing and still occupied from the 80-home project.
They’re hoping to be able to acquire their dwellings for little or nothing because of the promise that was made, the expenses they’ve undertaken, the conditions of the homes, and the failure of a state agency to monitor the project for problems.
The original developer, the now-defunct nonprofit Toledo Community Development Corp., built the development with mortgage financing of about $9.3 million, according to the two suits filed in Lucas County Common Pleas Court, with federal tax credits to lower the risk.
The project has fallen behind in paying its bills with the result that some of the houses have been demolished and others are in poor repair.
The original local partner, Toledo Community Development Corp., also known as Central City Neighborhood Community Development Corp., was once supported by the city with as much as $86,825 annual subsidy of taxpayer money.
The financial partner, National Equity Fund, an affiliate of the Local Initiatives Support Corp., or LISC, has been subsidizing the operating deficit — about $115,000 in 2015 — but has not been paying the property taxes. Lucas County Treasurer Wade Kapszukiewicz has filed two tax foreclosure lawsuits because the homes are behind in property taxes by about $230,000.
Ms. Buford, Ms. Smith, and Ms. Williams are seeking through their intervention in one of the cases to force the project to live up to the promise that was made — that they could get credit to buy their homes after the 15th year.
Whether their legal intervention will be accepted is up to Lucas County Common Pleas Court.
Lawyer contentions
Lawyers for Mr. Kapszukiewicz say the tenants don’t have any standing to block the foreclosure suit. In the first case, which is virtually identical, and which also has tenants suing to stop the sale, Common Pleas Judge Dean Mandros denied a motion to intervene.
George Thomas, a lawyer representing the tenants, said the tenants’ rights are spelled out in a covenant. Even though one section of the covenant says the tenants’ rights terminate when foreclosure is filed, Mr. Thomas noted that the covenant also says the tenancy continues after foreclosure. He contends their right of first refusal to buy the homes is included in their tenancy rights.
Mr. Kapszukiewicz said he sympathizes with the tenants and said the foreclosure suit is part of a plan aimed at getting the houses out of financial limbo and into the hands of a responsible community development corporation that can manage the rental properties and sell them.
The plan was devised by the city of Toledo Department of Neighborhoods; the Lucas County Land Bank, which Mr. Kapszukiewicz chairs, and NeighborWorks, a local nonprofit community development corporation. Toledo City Council voted unanimously June 7 to approve the foreclosure plan, and the measure was signed by Mayor Paula Hicks-Hudson.
The plan is to have the treasurer foreclose on the homes, turn them over to the Lucas County Land Bank to wipe the deeds clean of liens, such as mortgages — including $225,000 from the city of Toledo — and then transfer them, at a price of $300 each, to NeighborWorks, also known as Neighborhood Housing Services, Inc. of Toledo.
NeighborWorks would then rent them and try to sell them for about $20,000 each, according to NeighborWorks Executive Director Bill Farnsel.
“Our hope in this endeavor is that there are neighborhood residents that want to buy and are qualified that we can transfer ownership to, and in a two to three-year period we end up with just a handful of homes that residents don’t want to buy,” Mr. Farnsel said.
Ms. Buford said the improvements she’s made include new carpeting downstairs, paint, and a repaired kitchen sink. She said the dishwasher is broken and there’s a sewer smell from the basement drain.
“A lot of residents are scared to speak up for themselves. It’s only a few of us speaking up for what we believe in and that’s buying our houses and owning our houses,” Ms. Buford said. “Our question was, if you’re going to give them to [NeighborWorks] why don’t you give them to us?”
Conspiracy claim
Ms. Buford, Ms. Smith, and Ms. Williams are named in the complaint filed by ABLE, a federally funded legal aid agency that provides free representation in civil cases to low-income people. Complaints against the Oakwood Homes I and II foreclosure have also been filed by residents Dawn Autry, Monica Ham, Latoya Pearson, Latoya Broughton, Terri Pope, Darcell Jordan, Ronnita Holyfield, Polly Petoskey, and Charles and Tay Lee.
Ms. Autry’s pro se complaint accused local officials of conspiring to deprive them of their ownership rights.
“It reeks of conspiracy and fraud,” said the complaint brought by Ms. Autry.
Mr. Farnsel said that the $20,000 cost to resell the homes was necessary revenue to keep up the homes while they are sold, which will take several years.
Mr. Kapszukiewicz said NeighborWorks is “in the best position to deliver on the promise that was made.” As a community development corporation, NeighborWorks can lend mortgage funds to people who can’t get conventional loans.
Mr. Farnsel said he didn’t know enough about the failure of Oakwood Homes I and II to explain why it happened.
“In general, single family rental homes are kind of a hard thing to manage. If you don’t stay on top of rent collections, stay on top of evictions, repairs and replacements, it’s easy for a project like that to get out of control,” Mr. Farnsel said. “If you’re not diligent things can get out of control quickly.”
Failed projects
Oakwood Homes I and II is one of several tax credit projects that failed.
A Blade investigation in 2012 found that of Toledo’s 800 low-income tax credit homes, more than 100 were boarded up, gutted, or demolished. The investigation found that the Ohio Housing Finance Agency was not inspecting the units as required for the federal tax credits.
The Oakwood suit accuses the Ohio Housing Finance Agency of failing to do its job of inspecting the rental units regularly. OHFA was supposed to notify the Internal Revenue Service if a unit fell out of compliance so that the IRS could “recapture” the tax credits that had been awarded.
According to the suit, for the five years preceding February, 2013, “OHFA failed to [notify] the IRS to document compliance related to any Oakwood Homes rental unit.”
The women say they deserve some credit for making their own repairs, and for any deterioration that has not been maintained by the developer.
Recent prices of homes sold in the Norwood and Oakwood area range from as little as $1 to as much as $40,000.
Ms. Smith said the house she’s been in since 2013 has a lot of problems, including a slow leak in her ceiling, and broken kitchen drawers.
Ms. Smith said she survives on Social Security disability checks, and she shares the house with two children and four grandchildren.
She went to the informational meetings that NeighborWorks organized, and found that some of the other tenants — who she said are nearly all women — were scared.
“We are mostly women. We are trying to stay and build our community,” Ms. Smith said.
Contact Tom Troy: tomtroy@theblade.com or 419-724-6058 or on Twitter @TomFTroy.
First Published November 27, 2016, 5:00 a.m.
