Terrace Manor (file) Credit: Darrow Montgomery

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More than two years after the District first sued Bethesda-based landlord Sanford Capital over the deplorable housing conditions at some of its properties, D.C. Attorney General Karl Racine has brokered an agreement with the company that requires Sanford to divest all ownership in residential properties in the city.

The agreement, which a D.C. Superior Court judge still must sign to make it official, stipulates that Sanford is “taking all practicable steps” to leave the D.C. market within six months and cannot re-enter the District for the next seven years. If Sanford, its affiliates, and principal Carter Nowell are unable to divest their holdings in the six-month period “due to circumstances outside of their control,” they must hand over the management of their remaining properties to Novo Management, a third-party that the District and Sanford have mutually designated for this purpose, according to a copy of the agreement City Paper obtained.

The settlement is rare in that few companies consent to closing out their business in D.C. and, when they do, it tends to be for only a handful of years. The proposed order to the court specifies that over the next seven years Sanford must not acquire any ownership interest in affordable housing financed in any part by low-income housing tax credits and federal and local housing programs, such as the District’s rapid rehousing program for families leaving shelters. Since its founding more than a decade ago, Sanford has bankrolled much of its operations through low-income housing vouchers that supply tenants’ rents.

City Paper has reached out to Nowell and his attorneys for comment and will update this post should he respond. Lawyers for the District say the settlement is a victory for Sanford’s tenants, many of whom are working-poor people of color who have endured years of disrepair, little security, and apathy from their landlord while lacking many other housing options. The agreement arises out of a 2016 case where Racine sued Sanford for derelict conditions at its former Terrace Manor complex in Ward 8. With the consent of the tenants and the District, Sanford sold that property through a bankruptcy case to WC Smith, which is fixing it up.

In a statement, Racine calls the agreement “a new era” for tenants of Sanford Capital. “When landlords won’t take the basic steps to make sure that their tenants live in safety and dignity in accordance with the law, we will work to move those bad actors out of the market and allow other owners who respect the law and respect their tenants to take their place,” he says.

But the settlement does not resolve all of D.C.’s pending litigation against the company. The parties are in court over back rent that Racine contends tenants at three properties are owed for having lived in conditions that did not comply with the District’s housing code and mold laws. In one of those cases, Racine is also disputing the unexpected transfer of occupied properties from Sanford to developer CityPartners through a deed-in-lieu of foreclosure transaction in December. Sanford and CityPartners deny the District’s argument that they violated a court order for Sanford to negotiate a sale exclusively with the tenants.

At its peak a few years ago, Sanford owned more than 65 buildings across D.C. and brought in millions of dollars annually through market-rate and subsidized rents. Tenants at some of the company’s properties organized with the help of tenant advocates to draw attention to the poor living conditions, and to press the District for legal action. For example, the tenants at Terrace Manor won $325,000 in rent restitution from Sanford last year, as well as the right to return to the site after WC Smith completes needed renovations. Nowell told City Paper last June that his company was working toward selling its entire portfolio.