R.K. from Massachusetts writes:
Dear Mister Condo,
I have worked in Condominium Management for 15 years. I currently own and operate a small management company in Massachusetts. I have been awarded Manager of Year through CAI New England, and I have problem I cannot solve and need help! At the very least, perhaps you have a story to share with others in a very unusual situation.
One of my clients (a 12-condo association in Cambridge, MA) was formerly owned by the Cambridge Housing Authority (CHA) which operated the property as affordable housing units. Through a program in Cambridge in the 80’s and 90’s, CHA turned a few of these buildings into Condo Associations, giving the residents the opportunity to purchase and become homeowners and govern the property! The concept was noble and worked out wonderfully for many of the residents who purchased the units, but there was an unanticipated glitch that does not seem to have a reasonable solution. 2 of the 12 Homeowners in this one association I manage (there are others in other Associations) for whatever reason were unable to keep up with the mortgage and walked away. The mortgage holder cannot sell/foreclose the property (they have tried) through the normal super lien process in Massachusetts because of CHA will not remove a restriction in the deed through this program designed in the 80s/90s. The outcome, the mortgage company will not foreclose because the mortgage (and refinances) owed on the note exceed the “market value” of the units with the CHA restriction. The consequence, the mortgage company pays the minimum HOA fee and the unit have sat empty for a decade. This is in Cambridge where affordable housing is almost nonexistent, and here we are with two empty units, banked owned, working against the very heart of the CHA program created to provide affordable homeownership. It’s outrageous! The kicker, those that purchases the unit and have paid off the mortgage (in some cases it was $30-$70k), own the unit clear (with no CHA restriction) and are free, and have, sold at market value. The problem is complex and the solution might be as well, so if you cannot help, perhaps with your resources perhaps we can help this Community out together! I have talked to their attorney, I have talked to the CHA, and now I’m in the process of talking to a Bank to see if there is any possibility to loan the Association the funds to purchase the units from Owner(s)/first mortgage holder and then sell and/or rent the units to help with desperate building repairs they need (masonry reappointing / new roof, spruce up the common areas). I know it’s a long shot, but maybe you have some creative resources that can help?
It’s a shame to see these units sit empty, and from the property manager’s perspective (that’s me) as a liability (the units are barely maintained and I’m scared a pipe will burst in the winter), to the rest of this amazing Community who is truly stuck in an unfortunate situation that has been going on for a decade plus!
Mister Condo replies:
R.K., the issue you are describing is not completely unheard of although it is quite rare. The Cambridge Housing Authority is no different than many other “Housing Authority” operations around the country. They are mostly found in larger cities and they all have a similar purpose. They assist folks who need help achieving home ownership. The goal is noble and while the results are mixed, it is ultimately deemed a necessity by many municipalities.
The problem comes in once the “Housing Authority” is out of the picture. In other words, the applicant has been assisted and they now own their first home. The quasi-governmental “housing authority” is no longer assisting the new homeowner as they are off to the next person in need of their assistance.
When a new homeowner purchases a single-family house, their success or failure is largely their own. If they succeed, they continue to build equity in the house and they can sell it at their leisure and buy a newer or better home and continue their pursuit of the “American Dream”. If they fail, the bank can take their home through foreclosure and they can start over. Their success or failure truly effects no one but themselves.
The same cannot be said for any type of common interest community. By its very definition, the success or failure of a common interest community requires that all common interests are served and that all unit owners succeed. The move by CHA to establish condominium associations out of previously held affordable housing units shows a marked lack of knowledge of how a condominium association works. This is not surprising to you or me given the nature of a “Housing Authority”. Their duty is to get needy folks into home ownership. They already owned the real estate which looked like a typical cluster of condos so why not go down the path of popularity and create condominiums?
The problem, from what you have described to me, is that they simply forgot to remove a restriction in the deed that the banks overlooked when they issued the mortgages. I am guessing they will no longer issue mortgages with the type of deed restriction that the CHA applied. Have any of the banks sued the CHA? That would be one likely course of action although banks are not quick to sue unless they are certain they will win.
The more likely solution to this problem will be political. The CHA, while largely autonomous, is still overseen by a Board of Commissioners, all of whom are Appointees. Look them up online or call the city to learn who they are. You’ll learn who they are and what governmental body appointed them. If the Commissioners themselves aren’t open to removing this antiquated deed restriction that is creating the problem, the groups that have appointed them may be. I would begin the task of having this deed restriction removed by writing to the Commissioners, finding out when they meet, and asking to be on their Agenda. It’s quite possible that none of these commissioners were on the Board back when the deed restrictions were placed and would have no objection to having the restrictions removed, especially in light of the fact that there are vacant and abandoned units creating a problem for the remaining residents. After all, creating housing problems is in direct violation with the mission of the CHA, isn’t it?I am not saying it will be easy but I am saying it will be worth it. Flexing your political muscle can also be rewarding as you meet people important to your community. Good luck correcting this problem!