The District’s top lawyer is continuing to hold the city’s most notorious landlord’s feet to the fire.
On Tuesday, Attorney General Karl Racine filed a motion with the D.C. Superior Court to add the owner and the head property manager of Bethesda-based Sanford Capital as parties to one of the District’s lawsuits against the company. Launched last October, Racine’s complaint over Sanford’s Terrace Manor property in Ward 8 alleges scores of housing-code violations and “a demonstrated pattern of neglect” by Sanford that effectively forced many tenants to leave. While the company and the city have agreed to an abatement plan for the 61-unit rental complex since then, Racine’s office says it has “discovered evidence” through an ongoing investigation that led them to file this motion.
If Judge John M. Mott agrees with the District that Sanford’s principal operators should be named as individual defendants in the lawsuit, their personal assets would become available “to satisfy any judgment in this case,” according to Racine’s office. As the suit currently stands, only Sanford Capital’s corporate assets are subject to potential legal damages.
The attorney general believes the principal operators “controlled, had the ability to control, or substantially participated in the unlawful trade practices of the Corporate Defendants and, therefore, may be held personally liable under [D.C.’s consumer-protection laws],” the motion states. “Moreover, any injunctive relief ordered by the court would survive the dissolution of any of the Corporate Defendants to the extent [these executives] were to establish and control new companies engaged in the same conduct that is the subject matter of the instant case.”
In other words, Racine wants the buck to stop with Sanford’s executives. “Ideally, it can provide some additional leverage to bring them to the table on this discussion,” a spokesman for Racine explains. The spokesman adds that the attorney general’s office succeeded in getting the owner of allegedly usurious lending company CashCall to settle with the District earlier this year after CashCall’s owner was named as an official defendant in a consumer-protection suit.
In the Terrace Manor case, Racine is asking that Sanford co-founder and principal Aubrey Carter Nowell be added as a party to the suit, as well as Todd Fulmer, who directs Sanford’s property-management arm, Oakmont Management. Sanford’s attorney declined to comment on the motion.
“At this time this office as counsel to Oakmont, Sanford, and Terrace Manor [LLC] has no comment on pending matters, nor on this latest filing by the [attorney general’s] office,” the attorney, Stephen Hessler, writes in an email. “Our position will be made clear when we respond to the motion.” In its court filing, Racine’s office notes that “counsel for Respondents/Defendants did not consent to the relief requested” in the motion.
Beyond housing-code violations, the District alleges that Sanford violated local consumer-protection laws by “representing they would provide habitable premises to consumers and failing to do so.” At a D.C. Superior Court hearing in January, Hessler told Mott that Sanford would fight the consumer-protection piece of the lawsuit “tooth and nail.” Racine’s office is testing new legal ground in the case by applying consumer laws to landlord-tenant issues.
Nowell, who lives in a $2.9 million home in Bethesda, created Sanford Capital with his business partner Patrick Strauss more than a decade ago. Since then, it has amassed roughly 20 properties containing 1,300 units across the city. Notably, Strauss is not named in the Terrace Manor litigation, nor a concurrent suit over conditions at a similarly neglected apartment complex owned by Sanford in Congress Heights. Racine’s office says Nowell told District lawyers that Strauss was no longer with the company, though property records show he signed multiple Sanford mortgages.
The majority of Sanford’s buildings are filled with low-income tenants, hundreds of whom receive government rental subsidies paid to Sanford. Based on housing-voucher and homeless-services numbers the District provided to City Paper, Sanford Capital is estimated to receive at least $3.7 million a year in federal and local subsidies. Other Sanford tenants are working poor and pay full rent with no subsidy.
Thirteen households remain at Terrace Manor, down from more than 50 in 2012, when the company acquired the complex. Per the January abatement agreement with the District, Sanford is supposed to rehabilitate the two most habitable buildings on the premises, relocate the remaining tenants into them at no cost to the residents, secure vacant units, and conduct repairs within given timeframes.
Racine’s motion comes as Mayor Muriel Bowser‘s administration is inspecting Sanford’s buildings. Bowser commissioned the review earlier this month after investigations by City Paper and the Washington Post. The mayor told WAMU last Friday that more than half of all Sanford’s buildings had been inspected.
The deplorable housing conditions at Terrace Manor appear across Sanford’s portfolio. Last week, a tenant at the company’s Oak Hill Apartments, also located in Ward 8, reported many of the same problems that residents at the Terrace Manor and Congress Heights complexes have complained about: broken locks, lack of heat, and pest infestations among them. “I’m at my wit’s end,” she said.
A status hearing in the Terrace Manor case is scheduled for April 25.
This post has been updated with additional context from the attorney general’s office.