Disclosure
In APCHA’s deed restricted housing program every unit placed for sale passes from the current owner to APCHA who then acts as the seller and broker in the sale to the lottery winner they have chosen. With Centennial as with any real estate, a seller’s disclosure form is required by Colorado law specifying the condition of the unit for sale. Unit owners have been providing disclosure forms to APCHA as required, but no disclosure of the water intrusion problems Centennial has experienced from the beginning was made from APCHA to any buyer until 2009. And currently that disclosure is vague at best. Buyers are referred to the volunteer HOA Board for details. The HOA is not a party to any sales transaction and receives no commission. Unit inspections would reveal interior leaks, but as previously stated much of the damage is hidden behind redwood siding.
When asked why APCHA was not disclosing to housing lottery winners the inherent and ongoing problems with Centennial so that they might make an informed decision before buying, City staff claim that APCHA was never informed themselves. Issues with water intrusion started in 1987 when developer Brown’s management company was in charge. His company, with the same manager from the ‘80’s, still operates the rental units which are under the jurisdiction of APCHA. They have a long relationship and much shared communication. Centennial has had numerous studies done and major repairs and alterations going back 25 years. In 1992, $37K was spent on siding repairs. APCHA was consulted, but denied this as a capital improvement. In 1993 and 1994, the HOA spent over $100,000 on water-mitigating features to try to protect their buildings. Venting and an extensive system of roof overhangs were added to every building among other additions. SEEN HERE these overhangs were installed on nearly every side of every building in a 2-year project. It is beyond believability that APCHA staff were not aware of major construction and additions to the buildings over several years and the reasons for it.
APCHA has re-bought and re-sold these units scores of times. The 148 rental units separate from the ownership units and part of the APCHA rental pool, have undergone extensive repairs for nearly a decade due to the same issues. It can be assumed that at some point, APCHA staff would have noted the amount of work taking place if, for some reason, they weren’t directly informed. At a minimum, they should have been curious or taken an interest. The Housing Authority is still mostly unaware of the condition of their largest and nearly oldest in-town property. Having been properly informed of the condition of these buildings and the expense necessary to keep them intact, most current owners would have likely had second thoughts before signing their names to the titles.
“In Colorado, fraud is a misrepresentation, which is a false or misleading statement that induces a home buyer to act, either with knowledge of its untruth, or recklessly and willfully without regard to its consequences, and with an intent to mislead and deceive. “I don’t know” on a seller disclosure form is fraud when, in fact, a seller has knowledge of recent repairs or problems. The rule is, when in doubt, disclose. “-Douglas A. Turner, PC
Here is a typical, State-mandated disclosure form provided to a Centennial home buyer. Notice anything missing?
Update: It is now the last week of July 2014. APCHA has just informed the HOA Board that they will providing potential Centennial buyers with access to the reports and studies indicating that the property is in need of millions of dollars in repairs.
CAPITAL IMPROVEMENTS
In order to keep sales prices affordable, APCHA limits what capital improvements can be added to a unit’s resale value and those that are allowed, depreciate over a short period of time. A cap of 10% is placed on capital improvements. Major repair, replacement, and maintenance improvements are disallowed from increasing resale prices while something like adding kitchen cabinet storage is allowed. e.g. In 1992, Centennial had to spend $37,463 to repair its 7-year old siding. APCHA was asked about considering this crucial, building-sustaining maintenance as a capital improvement…disallowed.
ENFORCERS OF THE DEED RESTRICTION
After a unit is purchased, APCHA is supposed to enforce their deed-restriction rules by verifying that the owner continues to work in Pitkin County for a minimum of 9 months per year, among other requirements. They place a 3% cap on the appreciation of that unit so that it remains affordable to the next buyer. That cap coupled with mortgage interest negates the real estate from being used as an investment by limiting equity gain. According to current housing policy, a homeowner’s income is capped, but the amount they would be required to spend to keep their building safe, habitable, and structurally sound is unlimited.
An HOA’s capital reserves are funded by monthly homeowners dues. The rules of the APCHA deed restriction dictate that owners not paying dues are to be turned over to APCHA so that APCHA may require the owner to meet his/her financial obligations or sell the unit. In multiple instances, Centennial has reported owners who have stopped paying dues to APCHA. Even after repeated requests, APCHA takes no action until a delinquent homeowner is several thousand dollars in arrears. At that point, the owner is put on a 2-year payment plan by APCHA which gets defaulted on in nearly every instance leaving the HOA on the hook for the absent funds.
APCHA has repeatedly told HOA representatives that they are too busy to enforce their collection policies leaving the HOA with no options, besides liens, to collect from delinquent owners. City staff, making their case to provide no financial assistance to Centennial, have informed the public that the HOA has been financially irresponsible.
Stewards of the Program
The housing programs 30-year history has shown great successes and great failures. Those failures have cost this community millions of dollars. The BMC Lumber Yard purchased at the height of the real estate boom for land banking purposes, cost $18.25 million in housing funds for a property worth half that at best (some appraisals were lower than $6 million) and sits un-utilized for housing 3 miles from the core. It would require $450,000 per unit subsidy to make housing there affordable according to a 2007 Aspen Times article. Burlingame was sold to voters prior to ballot approval for $14.7 million in taxpayer subsidies while the real figure of $85.5 million in tax payer dollars was withheld until after the election. When asked why subsides would be more than 5 times what voters were told, Asst. City manager Crook said that it was a language error in a brochure that did not include the total costs and was released to the public prior to the election without explanation or correction. Burlingame has experienced construction issues and cost over runs. Even the landscaping has run into several millions of dollars. Subsidies have run as high as $379,000 per unit. (Centennial received exactly $0 in subsidies) Units have sat unsold and lawsuits between owners, contractors and materials manufacturers abound, but the project moves on to the next phases. When City staff requested that the contractor they desired for Phase 2 lower his bid price, the contractor bailed out due to the impossibly low expectations. The next bidder was 20% higher. Construction bids have been accepted for 40% over published estimates.
City of Aspen Affordable Housing Project Manager Chris Everson explains the cost overruns showing little concern for the extra million here or there when it comes to building affordable housing—
“That’s the nature of the construction process. It lends itself to speed bumps.”
–Chris Everson, Aspen Daily News 10/3/13
When it comes to Burlingame, the well never seems to run dry. Now, City staff have requested and received $2.5 million to further buy down the price of overpriced, unsold units that were built regardless of more than a decade of planning and pre-sales to gauge interest. The point is that the stewards of the housing program can be careless with funds that could have been better utilized. To preserve 92 poorly built homes in an ideal location housing about 150 hard working Aspenites which will become unaffordable, unsafe, and unsellable as they deteriorate due to poor design and construction defects has been deemed an inappropriate use of housing dollars. As Centennial owners flee due to the inability to finance the repair of leaking, water-damaged, mold-infested condos, finding interested buyers will be difficult.
Meanwhile Centennial cost the taxpayers of Aspen and Pitkin County nothing beyond the donation of an EPA Superfund site of contaminated mine tailings. Our housing program received 240 rental and for sale units in a great location with no financial investment. Money well spent!
