State laws protect owners of bankrupt apartments
August 26, 2013
A broken spigot keeps Britney Westmoreland from giving her three young children a bath. And if she runs the shower, water leaks into the kitchen below.
"Nobody fixes anything," said Westmoreland, 22, a merchandise processor at the Gap distribution center in Groveport.
She feels abandoned by management at the Oakland Manor Apartments. So do city and county officials.
Like several other large apartment complexes in Columbus, Oakland Manor, built in 1963, is in financial trouble. The owner, Oakland Manor Apartments LLC, is in bankruptcy, court records show, and Franklin County says the company owes $53,532 in back taxes on the property.
Residents said a third of the 60 units are occupied; copper thieves and vagrants destroyed others.
Development experts agree that delinquent taxes, code complaints, liens, high vacancy rates and bankruptcies are strong indicators of problems ahead. Owners could abandon these properties, leaving neighborhoods and taxpayers on the hook to clean up the blight.
Last year, a Dispatch investigation uncovered 14 large hotel/motel and apartment properties in Columbus and a few in suburbs such as Dublin and Westerville that had warning signs of financial trouble.
Since 2007, Columbus has spent more than $6 million to demolish or secure such properties.
A year later, a few of those 14 properties, including a Holiday Inn at 3495 Maxwell Place and the Westin Great Southern Hotel, 310 S. High St., have addressed back taxes or code issues and are no longer a concern, city and county officials said.
But many remain on a list that grew in the past year to 16 properties that owe at least $15,000 in delinquent property taxes. They are concentrated mostly on Columbus' East Side and Linden neighborhoods. Combined, they owe more than $8 million in delinquent taxes and have more than 100 code complaints.
"These in general are huge concerns," said Jennifer Adair, who leads the North Linden Area Commission. Crime, drugs and squatters hurt the surrounding neighborhoods, she said.
The sprawling Reflections on the Lake apartment complex near I-71 and Rt. 161 tops the list with $2.5 million owed in delinquent taxes and more than 60 code complaints. The 457-unit complex was sold on Friday, receiver Rich Kruse said.
Kruse said the taxes will be paid now that the property has been sold. The apartments will remain open.
Oakland Manor Apartments LLC is related to two other entities also in bankruptcy that own apartment complexes on the Hilltop and East Side that also owe more than $100,000 in back taxes. Here's how they're related: Ehab Eskander of Pickerington is the incorporating agent for all three ownership groups. Eskander did not return calls for comment.
The three entities filed a motion Tuesday to dismiss the bankruptcy cases.
City and county officials said it's difficult to corral this problem because state law protects property owners.
Unlike the financial and emotional damage homeowners experience when they default on their mortgages, owners of commercial properties usually avoid such problems because their loans are structured so that banks can seize only the property and its assets upon foreclosure.
In most cases, the property owner establishes a limited-liability company to purchase the property, which protects personal assets from creditors and insulates the owners from government action.
Steven Schoeny, Columbus' head of economic development, said cities need more tools from the state to shift the burden from the public to the property owner.
"We are working closely with the county treasurer's office and the land bank to address these issues," he said.
County Treasurer Ed Leonard has said the state could make changes to the LLC process to force a property owner to respond to issues before a tax foreclosure is filed.
"Sometimes, you can't even make contact with these people," Leonard said.
The owners of one complex, Sandstone Manor Apartments at 3688 Cleveland Ave. in Clinton Township, owe $135,026 in property taxes.
The owners live in China, said Charles Jia, the property manager and chief executive for the limited liability company, Epoch Investment. He said the owners are prepared to pay their taxes.
Last year, state Sen. Charleta B. Tavares, a Columbus Democrat, said she planned to look for ways to take cities off the hook for abandoned properties.
Tavares' office said last week that nothing has been discussed at the state level.
