Article Courtesy of The Orlando Sentinel

By Mary Shanklin

Published June 11, 2015

Bank of America donated a foreclosed lot in the Bella Collina development to a nonprofit but it had more than $70,000 in property-association debt on.

Rather than being an asset, though, the piece of dirt in the Bella Collina country club near Montverde has become a liability. The property is so buried in property-association debt from previous owners that The Housing League LLC may have to give it back to developers and face losing tens of thousands of dollars it spent to stay current on taxes and association dues.

 

"All we're asking to do is get back the dollars we invested," said Jerry Flick, who oversees the League. By forcing the nonprofit to repay previous owners' debt, the developers of Bella Collina are "stripping away affordable-housing dollars just so they can subsidize their development." Across the country, lenders have donated thousands of foreclosed residential properties to the Housing League and other nonprofits since the real estate market collapsed starting eight years ago. Bank of America has donated more than 5,000 properties and about 100 of them went to The Housing League, which is based in Vero Beach. The group sells the properties, usually to struggling homebuyers, and reinvests profits in its housing program. Of the hundreds of donated properties The Housing League has taken during the last four years, none have been as problematic as the one at Bella Collina, Flick said.

Bank of America donated a foreclosed lot in the Bella Collina development to a nonprofit but it had more than $70,000 in property-association debt on it.

Bank of America's donation of the debt-laden home site in Bella Collina is the latest in a series of twists involving DCS Holdings, developers of the 1,800-acre golf-course projects on the banks of Lake Apopka. Randall Greene, part of the development team, recently announced DCS Holdings would invest $10 million developing part of Eatonville but backed off when the town announced it would seek bids. And DCS recently banned a real-estate agent from entering the community after she had used the community's name in her marketing materials.

Since it bought the busted development from Bella Collina creator Bobby Ginn in 2012, DCS has filed dozens of lawsuits against property owners drowning in $8 million of unpaid property association fees. Some owners owed more than $100,000 in back association dues on just one lot and DCS charged 18-percent interest rates — the maximum allowed — on unpaid association dues.
Courts granted the company ownership of many of the financially underwater properties and DCS has now uses those newly acquired lots to help ramp up its home-building program.

Flick said Bella Collina's developers are "equity skimmers" who bury property owners in so many fees that the owners are forced to walk away, leaving DCS with more land to sell. The nonprofit saddled its Bella Collina lot with a legal requirement that only low- and moderate-income buyers could purchase it — an unusual requirement in a community where house prices start at about $700,000.

Orlando attorney Andrew Fisher, who specializes in real estate and serves on several nonprofit boards, said he often gets calls about donations of real estate, primarily time-share units. Nonprofits, Fisher said, should calculate all the expenses of keeping any donated property and weigh them against possible revenues from selling. The donations might not pay off, he said, using the example that the offer of a time share usually does not.

And before the groups take any donation, they should get a letter from the property-owner association stating any fees owed on the property, Fisher added.

Flick said his housing group typically investigates properties before accepting them as a donation.

The Housing League has little hope of profiting from its experience with Bella Collina. The developer and owner agree the vacant property is worth about $30,000 — a casualty of a market crash that leveled prices particularly at Bella Collina, where speculating buyers drove up prices. Now, the lot is laden with $76,000 to $136,000 in debt, including a mandatory $40,000 charge to join the country club. The League could surrender its piece of Bella Collina, as many other investors have, but it would never recoup the $25,000 it has spent on property taxes and association fees during the last three years.

Greene, a principal with DCS, said he warned The Housing League against taking the donated lot from Bank of America back in 2012.

"I told them, 'Don't do this. Bank of America has not paid the association fees and you're stepping into a liability loop for what was previously owed,'" said Greene, adding that the bank backed away from donating a similar lot after realizing it carried debt.

Bank of America spokeswoman Jumana Bauwens said, "The bank paid the $16 that we were told was due. We were not aware there was anything else."

Typically, she added, nonprofits thoroughly check out these donated properties before taking ownership. She added that the lender would reach out to the League and clarify who has responsibility for the unpaid fees.