Condos Drowning In Water Debt

A years-long leak has sunk a Fair Haven Heights condo association into $138,000 in debt — landing the group in bankruptcy court, and leading to a legal fight over whether the association’s water bill or urgent maintenance should be paid for first. 

Meanwhile, Winters Run resident Rose Appi has been living with all of her furniture in a storage pod since March as construction crews work to repair the source of the water problem beneath her condo’s kitchen.

That’s the latest in a prolonged legal fight that has left the owners and residents of the 30-unit Winters Run Condominium Association at 121 Lexington Ave. in a bind: They are sacrificing short-term upkeep as they face mounting legal bills, a hefty debt owed to the water company, frustrations with a previous property management company, and the stress of living in a complex where they feel like so much has been out of their control for too long.

A representative from the South Central Connecticut Regional Water Authority (RWA) declined to comment on this case, citing pending litigation and the confidentiality of customer information. They did say the water company is ​“working with the Winters Run Condominium Association to resolve this matter.”

A representative from the condo complex’s previous property management company, Alan Barberino Property Management LLC, did not respond to requests for comment by the publication time of this article.

The residents and owners of the Winters Run condo complex had plenty to say — about their current bankruptcy bind, and about a decision now before them of whether to pay their association’s water bill in full or find a way to chop chop chop that debt so they can dedicate their funds elsewhere.

“We’re all frustrated, but what are we going to do?” said Phillipa Blake, who’s lived at 121 Lexington Ave for over 20 years. 

The condo association is presided over by its sole board member, attorney Kenneth Krayeske. 

The complex’s residents met last Monday, June 3, at Krayeske’s office at 315 Front St. to discuss how best to pay back the water authority for the accumulated water bills resulting from the leak.

Residents weighed two options: a so-called ​“consensual” plan, in which they would pay the RWA the full amount of $138,776.40 over four years with no further interest accumulation, and a ​“non-consensual” plan, which would involve paying far less than the full amount, likely in the $20 – 25,000 range.

Despite being much more expensive, the first route would drop the liens and the possibility of foreclosure. The second could rack up legal fees and will be possible only if the United States Bankruptcy Court for the District of Connecticut first approves the plan. The condo association filed for bankruptcy last October.

The Winters Run Condominium Association is meeting again on Monday, June 17, for the residents to vote on which option to pursue before taking that plan formally to court.

"Piss-Poor" Construction Strikes Back

Krayeske became president of the condominium association in October 2022, shortly after moving there. ​“I volun-told him to become President,” Wildaliz Bermudez, Krayeske’s wife, told the roughly 20 meeting attendees — half in person, half on Zoom. 

Soon after taking on the role of condo association president, Krayeske noticed an anomalously high water bill: upwards of $7,000 every month. With other residents, he soon found a massive leak under unit 25, where Appi lives.

“This is not the first time this has happened,” Appi said. ​“It all stems back from the developers” who built the property in the 1980s, she said.

Krayeske described the construction as ​“piss-poor.” But in the past, according to Appi, leaks and maintenance issues have been taken care of in time. ​“If [former property manager Alan Barberino] took care of this when he was supposed to,” Appi said, ​“this could’ve all been avoided.”

Krayeske said he had the condominium association (which does not own the individual condos) declare what’s called a Chapter 11, Subchapter V bankruptcy to get some ​“breathing room” from the RWA, which had attempted to place Winters Run into receivership last October. ​“We needed to go into bankruptcy to protect ourselves.” 

The RWA initially filed a claim for payment as a ​“secured” creditor, meaning that they would have first priority on the condo association’s income. But the association’s lawyer, Gregory Arcaro, noted that the Winters Run Condominium Association as a legal entity doesn’t own any property — meaning that there’s no collateral to seize if the debt isn’t repaid. So the RWA reached out to the now-bankrupt association and told the Bankruptcy Court it ​“reserve[d] all rights re: lien against all unit owners.”

The Longer The Leak, The Greater The Costs

The leak has caused the costs for Winters Run’s owners and residents to go up across the board: money spent on construction has prevented other routine maintenance, like roof and electrical upkeep.

As a result, the condo has moved into a more expensive insurance bracket, driving up annual costs — and the buildings are showing signs of neglect. The gutters are noticeably sagging away from the roofs of some buildings. The association has had to pay legal fees to both a lawyer and a US Trustee as part of the stipulations for undergoing bankruptcy. 

CPE Property Management owner Doug Newman, Winters Run’s new property manager, said “[the RWA] should have sent a notice of a continuous meter read.” That is, there should have been some notice that something was going wrong. But, Newman said, to the best of his knowledge, the condo association ​“wasn’t notified.” 

Finally, on Jan. 24, the Bankruptcy Court approved Winters Run’s plan to pay Command Construction $46,095 to fix the leak. On March 15, Appi packed her furniture into a storage pod in the complex’s parking lot and moved into her bedroom. Command began fixing the leak. ​“They dug a trench through my living room,” Appi said. 

The water bills immediately began to decrease: at first to around $4,000 in April, and then around $800 for the month of May. But when Mynor’s Home Improvement Services, LLC, came to Winters Run to repaint Appi’s unit and replace the floors, they saw that something was wrong: after the leak was repaired, the floor in the kitchen had sunk. 

“You could fit your whole hand under the cabinets,” Krayeske told me. It turned out that flooding from the leak had eroded the packed earth that was holding up the concrete under Appi’s kitchen; the floor was in danger of collapsing. 

So, Winters Run sought permission in Bankruptcy Court twice to pay for further repairs: first, to level out the kitchen, then to replace the earth under the floor and re-paint and re-floor the apartment. The RWA objected in court both times, claiming that the condo association had not yet paid their legal fees and still owed the bulk of the money from the first round of construction.

“The RWA requests that the Court deny the relief sought in the Motion until the Debtor demonstrates an ability to satisfy the administrative expenses of the estate,” reads an April 17 court filing submitted by the water company’s lawyers. The court allowed the construction to go forward over the RWA’s objection — which would have left Appi without a real floor indefinitely. 

What was supposed to be a two-week job has turned into a difficult three months for Appi. Finally, Mynor’s filled in the floor, painted the walls, and put in flooring at the end of last week. At the June 3 meeting, Krayeske criticized what he called ​“cruelty from the RWA.” ​“How can we take the RWA seriously if they object to fixing a public safety hazard?” he said. 

In late April, unit owners received letters from the RWA declaring their liens on each individual unit. The letter estimated each unit’s portion of the debt at $4,625.88, and offered to release individual liens as unit owners paid back their slice of the pie. ​“I think [the RWA] would love to have a race” to see who’s going to sell first, Arcaro told the residents. 

Now, both choices on the table represent a hefty burden for the residents of Winters Run. In the consensual plan, the RWA would waive accruing interest and remove the liens. Bankruptcy reorganization procedures would end, reducing attorney and Trustee fees, but the cost of repairs and the full water bill still adds up to an ask of nearly $7,000 per unit. 

Though the non-consensual plan would involve paying less to the RWA, it would require a confirmation hearing. The condominium association would attempt to convince a bankruptcy judge that the reduced payment plan represents the association’s maximum capacity to repay. In general, in bankruptcy cases, ​“the longer a case goes on, the more fees go up,” Arcaro said. 

The non-consensual plan would also leave each unit owner to deal with the liens on their property, either by paying them or by contesting them. Such liens might also prevent owners from selling or refinancing units, options that could help owners recoup the higher costs of the consensual plan. 

The enforceability of the liens is a separate legal question from the bankruptcy that would have to be settled in the Connecticut Superior Court with a lawyer representing the unit owners instead of the legal entity of the condo association, according to Arcaro. That means the non-consensual plan might involve a whole new set of court proceedings and attorney fees.

Whatever the legal tribulations, the cost, both financial and emotional, is landing on the condo complex’s residents. When the condominium association filed for bankruptcy, it levied a $2,800 assessment on each unit to help pay for repairs and legal fees. Now, owners are staring down the barrel of ever-increasing cost burden. ​“I’m a little skeptical as to where our money went,” Jay Appi, Rose’s son and the owner of unit 25, said. 

Rose Appi is ​“thankful everything’s getting done now.” ​“I just want my furniture back,” she said, after noting that the leak repairs had at least brought water pressure back to her building. ​“How are you still going after these people after they declared bankruptcy?” she wondered.