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An Upper Chichester apartment complex at the heart of a class-action lawsuit sold last month for $18.5 million and former individual unit owners now say they are being asked to rent what used to be their homes.
“Basically, they wanted the complex and now they have it,” said Christine Scott, lead plaintiff in the lawsuit encompassing claims from a dozen former owners at Willowbrook Apartments. “No matter how nice that may be for them, it cannot make what is happening to people around here right.”
The complaint, filed earlier this year in Delaware County Common Pleas Court by attorney Leslie A. Margolies on behalf of the former owners, alleges 16 counts including fraud, unjust enrichment, deceptive business practices and criminal conspiracy against real estate broker Daniel Berger and others who allegedly orchestrated a hostile takeover of the property in order to auction it to themselves.
Berger’s company, Boothwyn Partners, has denied the allegations.
Boothwyn Partners allegedly acquired 121 of the 374 Willowbrook units in 2013. The company is owned by BGP Realty and Berger holds a financial interest in both entities, according to the complaint.
Berger allegedly became the Condominium Association Board treasurer at the time of the 2013 purchase, then established control of the association by installing non-resident family members, business associates and employees in four of the seven board seats. The association also allegedly hired Berger Real Estate Client Services as property manager.
Berger, with the help of fellow named defendant and employee Zack Moore, then allegedly began systematically buying up additional units through a fraudulent scheme that imposed financial hardships on unit owners.
Plaintiffs claim the board imposed “special assessments” to make up a shortfall for years of unpaid debts by a former management company. The Condominium Association allegedly then began ignoring requests for service, marking tickets “completed” or “canceled” when no work had been performed. The assessments were tripled within one year, according to the complaint.
Moore also allegedly hounded unit owners to sell their properties, but never disclosed his or Berger’s financial interest in Boothwyn Partners, or that he was a real estate agent employed by Berger Real Estate Sales.
The plaintiffs say the mounting financial burdens caused some homeowners to sell their condos to Berger and Moore at a loss. Boothwyn Partners was eventually able to secure the required 80-percent ownership needed to dissolve Willowbrook under a provision of the Pennsylvania Uniform Condominium Act. The board allegedly voted to dissolve the condominium at a special meeting in February.
Attorneys for the defendants filed preliminary objections in April and moved to dismiss the complaint, arguing the condo association is an indispensable party to the suit and should have been named as a defendant. Margolies said in a response that it makes no sense to name the association because it is in a “winding up” period and will soon cease to exist.
The defendants argue the plaintiffs can’t bring suit under the Real Estate Licensing and Registration Act or Pennsylvania Rules of Professional Conduct for attorneys because neither allows for private causes of action. The objections also claim the plaintiffs cannot bring any action on behalf of non-party former condo owners who already sold their units and that Berger and Moore only owed a fiduciary duty to the Condominium Association, not the individual unit holders.
Margolies countered that members or shareholders of a corporation are entitled to bring a derivative action on behalf of that corporation. The defendants owed a minimum duty of “good faith” to the individual unit owners and had a fiduciary duty to the association, which exists solely for the benefit of its unit owners, she said.
The preliminary objections also argued that the complaint was full of open-ended language and lacked specificity for certain claims. Margolies responded that she is not expected at this point to recount every detail of the claims, which she said could be fleshed out with testimony and other discovery during the course of litigation.
The defendants additionally moved to sanction Margolies for allegedly admitting to the press that the process for dissolving the condominium was “legal” and that she went forward with a frivolous lawsuit anyway. Common Pleas Judge Spiros Angelos dismissed that claim before Margolies could respond.
Margolies was able to push back the sale through a preliminary injunction, but an auction took place May 31 at a Berks County law firm and the property sold for the appraised value of $18.5 million to Chichester Apartments LLC.
Chichester Apartments was created March 2 and lists no officers on the Pennsylvania database of corporations, but Berger was acknowledged as an officer in an email from the public relations firm representing the new corporation.
Although several companies showed interest in the auction, Chichester Apartments was the only company to submit a bid, according to the firm.
“Only ten days since the auction, the unit owners are now receiving letters which advise them to either sign a lease or face eviction, even though they have not yet received their pro-rata share of the auction proceeds,” said Margolies in an email. “Some units were owned by investors and their tenants who may have become month-to-month lessees are also being threatened with similar letters. We have yet to see whether Chichester Apartments will honor the other annual leases but we are monitoring the situation.”
Chichester Apartments has indicated a willingness to work with residents to ensure they remain at Willowbrook and is offering a $1,200 annual reduction in rent for former owners, according to the PR firm.
One-bedroom units start at $855 per month and two-bedroom units start at $970 per month, according to the firm. Rent includes heat, water and sewer fees. Security deposits for former owners are being waived and those tenants were given the option of signing month-to-month leases, the firm said.
“The annual discount in rent will bridge the gap between rent and the amount the former owners paid in condo dues, real estate taxes and their mortgages,” according to a “fact sheet” provided by the firm. “This will ensure that everyone can afford to stay in their homes. In addition, former owners will have all funds from the sale of their unit.”
But Scott points out it is no longer “her home” and claims the market rent amounts receiving the discounts are higher than the fair market figures used in the dissolution appraisal.
She added that the $100 off per month is nice, but said it is still not cheaper than owner-occupancy for her. Scott noted several of the individual owners at the complex also rent their units out, sometimes at little or no cost to aged or disabled family members.
“Willowbrook Condos was the only place that I could afford to buy and pay ongoing expenses in this area,” she said. “I am moving in with a friend as I cannot afford to rent my own unit here, as I live on a fixed income. Some of the people who ‘decided’ to sign the yearly lease cannot move as they have not received any proceeds from the auction yet or the proceeds will only pay a portion of or all of the mortgage off, leaving them with little or no money to move anywhere else. Others have renovated their units to new condition and do not want to leave their investments.”
Continue reading the article at Delaware County Daily Times News.