Denver offers owners time to fix violations
Hundreds of residents to get reprieve from enforcement actions if they work with city
Denver officials on Friday sent letters to hundreds of owners of income-restricted homes they may not have been qualified to purchase, offering them a reprieve from enforcement actions if they agree to work with the city to get on the right side of regulations.
Meanwhile, Mayor Michael Hancock asked a trio of state-level regulators and trade groups to help rein in a serious threat to the city’s affordable housing stock: income-restricted housing selling at market rates to unknowing buyers.
The Denver Office of Economic Development’s letters to homeowners detail a “compliance resolution program” for 306 residents whom city staffers have flagged for violating rules of the city’s Affordable Homeownership Program. Denver has 1,302 units in the program.
If recipients sign a document confirming cooperation, the city will freeze enforcement actions against them for six months, giving them time to work with staff on “cures” specific to their violations. If homeowners live in one of 196 covenant-restricted homes that the city has tagged for no longer having affordability requirements attached to their deeds — meaning the homeowner was not an income-qualified buyer — those cures could be painful.
Cure No. 1: Complete an income-verification process that proves the homeowner had a small-enough income to qualify for the home at the time of pur-
chase or does now.
Cure No. 2: Sell to a qualified buyer and move.
“Through (this) program, our aim and our intent is to bring as many of these cases to resolution as we possibly can,” Derek Woodbury, Denver’s economic development spokesman, said at a news conference Friday. “We can’t make any guarantees necessarily on how each and every case is going to turn out.”
In announcing the resolution program, city leaders blamed the real estate industry for allowing so many of Denver’s covenant-restricted homes to end up outside the program.
“The problem is we have folks at closing tables who may or may not have complete information, and, unfortunately, we’ve got title companies that are not properly identifying these types of encumbrances on properties,” City Attorney Kristin Bronson said. “If our market is working correctly, this affordable housing program works.”
Hancock sent letters Friday to the Colorado Real Estate Commission, the office of the Colorado Insurance Commissioner and the Land Title Association of Colorado. He urged them to do more to educate and train real estate agents, title companies and others so they better understand what they are doing when it comes to covenant-protected affordable housing.
“I am writing to request the Real Estate Commission issue a position statement or otherwise provide guidance and/or training to licensees on the need to identify properties subject to affordable housing covenants and on the disclosures required for these properties,” reads one letter. “At best, there appears to be confusion in the industry as to best practices.”
Hancock told the Land Title Association he would like to see it “review the due-diligence practices performed by the title industry as it relates to local affordable housing covenants, provide guidance and set standards regarding best practices to avoid this situation in the future.”
“We as the Land Title Association of Colorado are working with the City and County of Denver to assist in doing everything we can to remedy their situation,” Kelli Klein, the president of the trade group, said in response Friday. “We are trying to help our title company and title insurance members as best we can.”
Division of Insurance officials said that without seeing the title policies or related documents referenced in the mayor’s letter, they could not comment on what shortfalls in procedure there may have been. But the division is committed to working with the city on the issue, they added.
Two professionals in the real estate business were less kind to city leadership.
Donald Opeka, the president of Broomfield-based Orion Mortgages, said that for more than 300 homes to fall out of compliance with covenant restrictions, there would have to have been thousands of people — sellers, buyers, agents, appraisers, title company professionals and mortgage providers — who combined to overlook the restrictions. The only common thread on all those units: the city.
“I think this is a massive dereliction of duty by government agents,” Opeka wrote in an email Thursday. “The mayor can delegate the authority to act, but this does not relieve him of responsibility for proper training and supervision of those working for him.”
Jon Goodman, a real estate lawyer with the Boulder firm Frascona, Joiner, Goodman and Greenstein, has years of experience dealing with housing affordability rules in that city. He said he couldn’t pass judgement on who was at fault for so many homes falling out of compliance with the city program, but he noted, “Affordable housing restrictions don’t enforce themselves.”
Regardless of where the restrictions fell off the map, many of the people caught up in the scramble to fix the problem are unwitting homeowners.
Jessica and Alfonso Medina bought their home at 5570 Perth Court in Green Valley Ranch for $191,000 in 2012. Never in the five years they lived there were they notified of an affordability deed restriction, they said. They probably didn’t qualify to live there, Jessica Medina said.
Late last year, they decided to move. They put their house up for sale for $318,500. The home went under contract to sell, at which point their real estate agent, Karen Hoover, called with bad news: The title company she worked with found the deed restriction dating back to first sale in 2005. By law, the Medina’s had to drop their asking price to $243,488, the maximum allowed under the covenant’s price-appreciation rules.
“We actually received the call the Friday before Christmas,” Medina said. “We were already under contract for another house and were depending on the sale of this property to purchase another home. We were just all sorts of stressed out.”
Fortunately, through the work of Hoover, who reached out to the title company enlisted by the 2012 seller, Canyon Title, the Medinas received an insurance claim for the price difference and were able to proceed. They found an income-qualified buyer for the Perth Court home. That sale closed Friday.
Canyon Title, through its attorney Robert Rosenthal, acknowledged that it handled the title work in the 2012 sale but denied any payout related to it.
“Canyon Title is in the process of reviewing all aspects of this particular transaction and any other past transactions that may have involved the sale of properties that could have been subject to affordable housing covenants,” Rosenthal wrote in an email Friday. “If we identify any affected transactions, we will work with all concerned to determine a resolution to any matters that might be outstanding.”
Medina, who works for Denver County courts, said she is irked by the fact she was paying taxes on an assessed value well over what the affordability covenant dictated her home was worth. She’s not alone. The city’s finance department has identified 381 affordable homes overcharged on their property taxes in either 2016 or 2017. Refund checks, averaging $250 apiece, are on their way to those homeowners, city officials say.
“I’m positive we paid thousands more than we should have over five years,” Medina said. “Maybe I won’t cash that check and say, ‘No, this isn’t what I’m accepting. This isn’t what I paid.'”