Not So Fast! Auction’s Off

Just as New Haven was ready to start fixing the mess a developer made of a longtime housing co-op, a judge has halted a crucial tax foreclosure sale — and may have postponed any further action for at least three more months.

Superior Court Judge Michael Maronich ruled that the city may not go ahead with a foreclosure auction planned for this Saturday at the former co-op known as Dwight Gardens. The co-op comprises 80 townhouse apartments on Edgewood Avenue between Dwight and Garden Streets.

The judge ruled last week that the auction can’t take place until Dec. 6. The move thwarts city efforts to get a new owner to start fixing up the property and avoiding a repeat of last winter’s troubles for the dozens of families remaining at the complex. Meanwhile, the complex’s owner now owes $236,448 in back taxes, according to the city.

Now the city is exploring other methods to drive away the Bridgeport developer who failed to produce a promised makeover of the 80-unit complex.

“We are disappointed by the court’s decision,” said Erik Johnson (pictured), head of New Haven government’s Livable City Initiative (LCI). He vowed to find other ways to take action on Dwight Gardens before the winter.

Maronich’s ruling is just the latest setback to the city’s continuing efforts to reverse the slide of Dwight Gardens.

The saga of Dwight Gardens (nee Dwight Co-Op Homes), one of a number of ​‘60s-era federally backed housing co-ops that have failed in recent years, has been a painful one for tenants. The tenants in some cases have lived there for decades, most of that time as co-op members who came tantalizingly close to owning their complex outright before it all fell apart. The federal government previously had foreclosed on the property in 2010 and sold it to the city, which in turn sold it to Bridgeport developer Garfield Spencer, despite his spotty financial record, on the condition that he make $6 million in repairs, $1 million of that coming from a city loan.

Spencer’s First National Development company failed to make most of the repairs. The once-proud complex slid into further disrepair. Only 30 of the 80 homes are still occupied. Remaining tenants endured a tough winter and have waited since for New Haven government’s Livable City Initiative (LCI) to find a new owner.

LCI chief Johnson first sought the fastest route: get Spencer to agree to a sale brokered by the city. Six potential buyers lined up. Johnson helped establish a committee of tenants and others to choose their preferred buyer as he negotiated a sales price with Spencer. They negotiated for months. Spencer said he needed to be reimbursed for $1.3 million in repairs he had allegedly made as part of any sale. The federal Department of Housing and Urban Development (HUD), which provided the original co-op loan for the property and retains a ​“reverter deed” on the property (and has the right to foreclose on Spencer for failing to fulfill his original contract), concluded in an audit that he is entitled to only $600,000 in reimbursements.

So negotiations hit an impasse. Since Spencer owes the city over $200,000 in unpaid taxes, Johnson’s LCI then pursued the next-fastest route: proceeding with a scheduled tax foreclosure auction this coming Saturday.

Then Spencer went to court and asked Judge Maronich to postpone the auction.

Spencer’s Side

Spencer has declined to comment publicly on the dispute since it began last year. His Dwight Gardens project manager, Aurora Leigh, finally offered a public accounting of his side in an affidavit filed with the court in connection with the motion to postpone the foreclosure.

Leigh stated that Spencer tried to make the promised repairs on time but ran into roadblocks: It ​“took too much time to place tenants elsewhere” so crews could redo their apartments. Spencer couldn’t find financing because of the economic downturn. And ​“the units themselves were in severe disrepair.”

HUD agreed to give Spencer an extension on its contract to make the promised repairs. But it turned out that HUD didn’t have the authority to offer an extension. The city had that authority, and chose not to. That left Spencer in legal default of the terms he signed upon buying the property. Leigh’s affidavit accuses LCI of waiting eight months to inform Spencer of its decision not to abide by HUD’s extension.

Leigh offered this explanation for Spencer’s six-figure back-tax bill: ​“The taxes … are not a recoverable expense. [The owner] believed it would soon sell the property and the taxes would be paid from the sale, and because of the claimed default by the City, the project did not produce enough income.”

Meanwhile, Leigh stated, Spencer heard from an interested potential buyer. With an extension of the foreclosure auction, Spencer will have time to allegedly continue making repairs and negotiate a sale with the city, she stated.

LCI countered the arguments and pushed for allowing the foreclosure sale to take place this month, in a brief filed by Carl M. Porto II, an outside attorney from Hamden hired to represent the city.

Porto noted that Spencer had promised back in February to pay its back taxes ​“within a few weeks. None of the taxes were paid.”

The owner has left Dwight Gardens ​“in significant disrepair,” Porto wrote. “[LCI] is concerned regarding the physical condition of the property and the people residing within. The property has become deteriorated and the plaintiff has already cited the owner for multiple housing violations.”

If the judge were to grant Spencer’s motion to postpone the tax foreclosure sale, ​“it is unlikely the sale will occur before the winter arrives,” Porto wrote. Plus, he stated, negotiations between the city and Spencer over a possible alternative sale were dead.

The judge sided with Spencer, setting the new Dec. 6 date.

“All Options” On The Table

The city doesn’t plan to wait until Dec. 6 to try to get the property out of Spencer’s hands and into the hands of a developer who can fix it, LCI’s Johnson said in an interview after the ruling.

“We’re exploring all options to either expedite the tax sale” or ​“transition ownership of the property,” Johnson said. ​“The conditions of the property and the conditions that tenants are forced to live in are untenable.”

Johnson did not elaborate on the ​“options” beyond mentioning the possibility of returning to court, increasing code enforcement, and finding other ways beyond a tax sale to claim a right to the complex.

He said the options do not include resuming negotiations with Spencer on terms of a city-brokered sale.

Johnson and Mayor John DeStefano visited Dwight Gardens last week to update tenants on the judge’s ruling and planned next steps.

“By that move, that’s showing great concern,” said Dwight Alderman Frank Douglass, who attended the meeting. ​“I’m hoping we really move on this.”

Previous coverage of the Dwight Co-Ops/Dwight Gardens Saga:

• On Verge Of A Dream, Co-op Faces Foreclosure
• City Finds Potential Buyer For Dwight Co-Op Homes
• City’s Co-op Savior Has Troubled Track Record
• Dwight Coop Rescue Advances
• Dwight Co-op Deal Squeaks Through
• Housing Authority Quits Dwight Co-Op Deal
• Dwight Co-Op Makeover In Limbo
• Day Laborers Move The ​“Mountain”
• City Turns Up Heat On Dwight Co-Op Landlord
• City Seeks New Buyer For Dwight Co-Ops
• 6 Vie To Buy Failed Housing Co-op
• Dwight Gardens Rescue Effort Takes New Turn