Yesterday Sanford Capital principal Aubrey Carter Nowell filed for bankruptcy over a property so troubled that a city inspector found raw sewage leaking from a pipe there last month.
Today the District’s chief lawyer asked the D.C. Superior Court to hold Sanford, the city’s most notorious landlord, in civil contempt for allegedly failing to fix “numerous housing code violations” at the same property, and also for flouting a joint plan brokered in January that was supposed to relieve conditions there.
D.C. Attorney GeneralKarl Racine also filed for receivership over the property, called Terrace Manor, as potential relief against the Bethesda-based company.
Sanford Capital and its affiliates’ “failure to correct these long-standing violations has prolonged the Terrace Manor tenants’ exposure to substandard living conditions, including risks to their life, health, and safety,” reads Racine’s motion for contempt. D.C.’s lawyers request that Sanford appear before court to explain why the company shouldn’t be held in contempt, and that the company pay $2,000 a day for each day the housing code violations remain unresolved.
The contempt motion points to a separate motion for receivership—or a third party rehabbing Terrace Manor—as more effective than fines.
“The District’s position is that, between the two remedies, appointment of a receiver is more likely to result in lasting repairs to the Property than allowing Respondents to continue managing this process,” the motion reads. It additionally says Sanford has not fixed issues that “date back over a year to February and March” 2016, and that the company has still “demonstrate[d] a pattern of neglect and indifference.”
An attorney for Sanford told City Paper yesterday that he could not comment on his “work for this client at this time” in response to a request about recent inspections of Sanford properties. But Racine’s filings say Sanford’s counsel stated “they do not consent” to either of the motions.
Last night, Bowser rebuked Sanford during her annual State of the District Address, saying the company could either remediate housing code violations and pay assessed fines or “see [D.C.] in court.” The D.C. Council has also criticized Sanford in interviews and during agency oversight hearings. Council Chairman Phil Mendelson has suggested officials can make D.C. an “unpleasant place for Sanford to do business,” in part by invoking a “Clean Hands” law regarding licenses and permits.
In total, the company manages more than 1,300 units across roughly 20 properties, most filled with low-income people of color. Dozens of these tenants are transitioning out of homelessness. Observers have called the situation a “catch-22” because Sanford provides subsidized housing.
According to Racine’s office, D.C.’s Department of Consumer and Regulatory Affairs cited Sanford with 84 housing code violations at Terrace Manor in December 2016. Of those, 56 were unabated by February 2017, and all but six were “serious”: among them, failing to provide electricity, eliminate pests, and maintain smoke alarms.
Then, in mid-March, DCRA found that violations at two of Terrace Manor’s 11 buildings had not been addressed at all. Two occupied units also did not have heat. City lawyers say that beyond condition problems, Sanford “has refused to clean out and install fireproof drywall in [the property’s] vacant units,” which is required under the abatement plan Sanford agreed to in January.
Sanford’s “failure to comply with the court’s orders is particularly baffling given their participation in every stage of the process,” Racine’s office argues, noting that the company’s representatives attended these inspections. If Judge John M. Mott grants the motion for receivership, the abatement plan would functionally end and a receiver would fund repairs with tenant rents.
Nowell, the company’s principal and co-founder, has remained mum on media reports about Sanford and on public pronouncements by District officials. But he appears in the attorney general’s motion for receivership, which says Nowell attended a Feb. 17 inspection of Terrace Manor.
A DCRA inspector informed Nowell that a basement “pipe was leaking raw sewage and needed to be addressed immediately,” the document says. “In response, Mr. Nowell denied that the pipe was leaking raw sewage and claimed that the pipe had only ruptured the night before, despite the mold creeping up the wall and the accumulation of water throughout the basement.” The pipe wasn’t fixed until 21 days later, according to the receivership motion.
Nowell lives in a $2.9 million Bethesda home with eight bathrooms. He and Patrick B. Strauss established Sanford Capital in 2006. Nowell told District lawyers that Strauss is no longer with the company.
Yet a review by City Paper found Strauss and his wife Mary J. Strauss have recently pursued real estate opportunities in Northwest, and that he was involved in redevelopment plans for a Sanford property in Congress Heights at least until the end of 2014. The Strausses live in a $1.6 million Chevy Chase, D.C. home. They attend and volunteer at a nearby Presbyterian church, where they have prepared sandwiches for the homeless.
Nowell filed for bankruptcy for Terrace Manor yesterday through an attorney. Sanford Capital purchased Terrace Manor in 2013 for $3,150,000. The company listed a sale price of $5,856,000, “subject to higher or better offers” in its bankruptcy filings.
A recent City Paper investigation found that Sanford Capital systematically increased vacancies at Terrace Manor. When the company bought the property, more than 50 out of 61 units were occupied, but over time conditions became so dire that many tenants left. Workers removed the benches that once sat outside each building’s front door, razed the property’s playground, and eventually closed the laundry rooms and rental office. Squatters used vacant units, leaving residents in fear.
Sanford did not refill the vast majority of vacant units. In a January interview, former Sanford employee Richard Horchner, who did maintenance on the property between 2014 and 2015, said: “I took care of the residents that were there, but that was all I could do. I was not permitted to move anybody in.” Today only 13 units at Terrace Manor are occupied.
The company’s bankruptcy filing states that Sanford makes $9,000 a month in rental income at the property. Brent C. Strickland, the attorney representing Terrace Manor LLC (which is the company Sanford created for ownership of the property under consideration) in the bankruptcy matter could not be reached for comment this afternoon. City Paper will update this article if it receives comment.
The Office of the Attorney General declined to speculate on how the bankruptcy filing might impact its current litigation, but clarified that bankruptcy proceedings do not absolve property-owning debtors from their obligation to maintain their properties under the D.C. housing code.
Yet the bankruptcy filing puts Terrace Manor tenants at risk. Under D.C.’s Tenant Opportunity to Purchase Act (TOPA), the remaining tenants—who meet regularly and share a common vision to restore the property to the beautiful home they remember it once was—have first right to buy the property.
In some cases, however, bankruptcy proceedings have robbed tenants of that right.
In a recent case at 220 Hamilton Street NW (as WAMU reported), tenants lost their TOPA rights when the building owner filed for bankruptcy. The tenants had selected a buyer, MED Developers. But when the building owner, prolific D.C. slumlord Rufus Stancil, declared bankruptcy, the property sale went to a bankruptcy court auction between MED and a third party, Vivienne Awasum. Awasum won the auction by $10,000, and the tenants’ work to choose a developer who shared their vision for their building’s future went out the window.
Taylor Healy of Bread for the City, a local nonprofit, represents the Terrace Manor tenants in the TOPA matter. Healy says: “The tenants responded to Sanford’s December TOPA offer in January with a Letter of Interest indicating that they wanted to exercise their TOPA rights. To date we haven’t received any of the required due diligence materials from Sanford, and bankruptcy could certainly put the tenant association’s TOPA rights in jeopardy.”
An initial bankruptcy hearing is currently scheduled for April 3 at 10:30 a.m. before Judge S. Martin Teel, Jr. at the E. Barrett Prettyman U.S. Courthouse.
Monica Jackson, president of Terrace Manor’s tenant association, has now survived winters without heat and squatters taking over her building’s vacant units. She is living on hope. “Before, when it was in way better condition, it really felt like a community,” says Jackson. “We’ve stuck with it because we hope to give back again.”
“It seems like the fight just gets harder and harder.”