Chicago couple deals with toxic mold, unresponsive bank
10/06/2010 10:00 PM
Matt Duffey and his girlfriend, Erika Hayes, were thrilled to purchase their first home in October 2008 — a third floor condominium on a quiet, leafy stretch of Leavitt Street in Wicker Park, just steps away from historical homes featured on neighborhood tours.
Duffey, a software engineer, and Hayes, a sales rep for Discovery Education, fell in love with the neighborhood after moving to Chicago from Milwaukee in 2007. They found their dream home at 1520 N. Leavitt, a double-wide model with unique features, lots of light and a modest front and back yard.
“After looking at 25 other places, we knew we’d found the perfect one,” said Hayes.
But a month after they moved in, the neighbor who owned the first unit in their building died.
Now they find themselves in a situation faced by a growing number of condo owners. As the foreclosure process stretches past the two-year mark, they are struggling to maintain the empty unit and stanch the bleeding in their homeowners association fund from lost assessments.
Duffey’s frustration is focused on Bank of America, whose Countrywide Home Loans Servicing division filed for foreclosure in November 2009, but has yet to complete the process. With his neighbor’s unit effectively abandoned, Duffey tried numerous times over the past two years to contact Bank of America and request that it work out an agreement for handling maintenance and assessment fees.
“We’ve contacted the bank so many times, and nothing ever gets done,” said Duffey. “Every time I call the lawyers, they just say they’re waiting to schedule a judgment.”
“Meanwhile, we’re in limbo and we have no power,” Duffey continued. “We’re stuck with this vacant unit that’s pulling down the value of our property and everybody’s property in the neighborhood.”
Duffey believes the bank is purposefully pushing off the foreclosure.
“They know that once they foreclose, they’ll have to pay for maintenance for the unit, plus all the assessments going forward,” he said.
Bank of America did not return repeated requests for comment on the situation.
Because the building is small — only three units — the neighbor’s unit represented 40 percent of association fees. To compound the financial stress, the deceased owner owed a year’s worth of assessments, something the couple learned only after they moved in.
“I think one of the biggest lessons here is know who your neighbors are,” said Duffey, who is president of the building’s small homeowners association. He said the sum lost to uncollected assessments and attorney’s fees is nearing $10,000.
The association, which includes Duffey’s neighbor in the second unit, shelled out for lawyers, first to put a lien on the property to recoup past due assessments. Then they hired a lawyer to help evict a squatter who’d been living in their neighbor’s illegal basement unit, a matter that became especially urgent when they learned that he was a registered sex offender.
The deceased owner’s estate is not fighting the foreclosure, but has washed its hands of any responsibility for the unit, Duffey said.
“They’re totally hands-off; they don’t care,” said Duffey.
The additional maintenance has become more than a headache. For the past two years, the homeowners’ association paid to keep heat and water flowing for the unit, so that the pipes didn’t burst.
Despite these efforts, catastrophe struck this summer. In early August, Duffey heard water dripping and discovered a broken pipe in the vacant unit’s bathroom.
Mold covered the bathroom floor, part of the kitchen and much of the basement, where giant mushrooms sprouted from the carpet.
“I only got half-way down the stairs to the basement, when I had to stop,” Duffey said. “I was blown back by the stench of mildew.”
The association’s insurance covered the cost of cleanup. But large portions of the walls in the affected rooms are now stripped to the studs.
The belief that banks are delaying foreclosure has spurred a cottage industry of legal innovations in Florida, where condo foreclosures are epidemic. There, state law obligates banks to pay past due assessments — as well as current ones — once they take title.
Attorney Ben Solomon of the Miami-based Association Law Group touts “reverse foreclosures,” a process by which courts speedily transfer title of a property to the bank, thereby triggering the bank’s liability for fees and maintenance.
“Of course the banks are stalling intentionally in many cases,” said Solomon. “Why would they want to take title to a financially upside-down unit that will trigger their financial and legal liabilities for all the costs associated, which include … future assessments, legal fees, late fees, property taxes and insurance?”
“And of course they have to dispose of the unit and figure out what they’ll do about the loss due to current market value versus past,” said Solomon.
However, Chicago real estate lawyer Mark Pearlstein says he sees no evidence that area banks are deliberately dragging their feet. Pearlstein chairs the legislative action committee for the Community Associations Institute, a trade group for homeowners’ associations.
He helped draft certain provisions in the Illinois Condominium Property Act, including the requirement that anyone purchasing a foreclosed property from a bank pay six months of past due assessments. In Illinois, banks pay condominium assessments going forward, beginning the first of the month after they foreclose.
“From what I can tell, it’s a matter of the banks getting overwhelmed with the sheer volume of foreclosures,” said Pearlstein. “These days it can easily take a year to complete a foreclosure.”
Last year saw a total of 52,000 homes foreclosed upon in Cook County. To date in 2010, mortgages on 48,000 homes have been foreclosed, according to Pearlstein.
Another problem, Pearlstein said, is that the courts are clogged.
“It takes three to four months longer to process the foreclosure, including judgment and sale,” he said.
Attorney Ebony Lucas, a managing partner with Peace of Mind Properties, said it’s important for homeowners associations to know they have the right to collect assessments during pending foreclosures.
One option, Lucas said, is for the association to take possession of the unit and rent it out.
“It’s not an ownership interest,” said Lucas. “They don’t have the obligation to pay taxes or mortgage,” she said. “But they collect the rent that’s going in, and all repairs, attorney’s fees and court costs can be added to the ledger of past due.”
Though some associations worry that renters will be evicted if the unit is sold, federal law protects the tenant for the length of the lease, Lucas said.
Duffey and Hayes looked into that process, but couldn’t pursue it due to the expense and their depleted funds.
Pearlstein said the couple might be able to make a good case that the bank should step in.
“Here you have owner who died, and the unit has been sitting empty,” said Pearlstein. “It seems from these facts that they could argue that the bank has possession of unit and should be paying assessments on the property.”
“We could file a motion to compel,” said Duffey. “That would force the bank to take action on this or provide evidence on why they’re not. But our reserves are at zero.”
A few weeks after the mold incident, some representatives from the bank’s property preservation department came out to take pictures of the damaged unit. But Duffey hasn’t heard from them since.
“This is our life,” said Erika Hayes. “We’ve done everything right. We’re getting married in two months and it should be a fun time.
“Instead,” she said, gesturing to the skeletal walls in the vacant unit, “this is like the ghost in the basement that we can’t get rid of.”