Baltimore's Community Law Center helps tenants assert right of first

Daily Record, The (Baltimore), Mar 15, 2003 by Lawrence Hurley

Isabelle Hubbard has good reason to be house-proud.

She can sit back and survey the cozy rowhouse in East Baltimore she recently purchased, content in the knowledge that the events of last year are in the distant past.

It was less than a year ago that Hubbard was presented with an eviction notice, despite having been a model tenant for three years - - a victim of the then-owner's failure to pay his mortgage.

If it weren't for the timely intervention by Baltimore's Community Law Center (CLC), she would have needed to find a new place to live and never would have thought of purchasing her property.

"I feel like I'm blessed," she says. "I was all packed up and ready to move."

CLC's director of research and policy, Diane Cipollone, says Hubbard is the first tenant to purchase a property under the non- profit law firm's new Tenant Conversion Pilot Program.

This project is aimed at helping tenants assert their 30-day right of first refusal -- guaranteed under a Baltimore ordinance passed in 1976 -- and, in the process, hamper the efforts of flippers.

It turns out that Hubbard's house had been flipped without her even knowing it was on the market.

State Department of Assessments and Taxation records show that the house was sold by T and L Realty Inc. on Dec. 1, 2001, to Bryan P. Rosenberg; then sold the same day by Rosenberg to a man named Stephen Ritter.

In the process, the valuation went from $18,000 to $45,000. A classic flip.

It was when Ritter, who purchased several other houses around that time, defaulted on his payments that Hubbard's future as tenant came into doubt.

Luckily, that was also when CLC's pilot program was getting underway.

Canvassing sales

The impetus for the project was a survey the CLC carried out in 1999 and 2000, which indicated that out of 1,800 suspected flips, 1,100 involved properties sold to investors who would become absentee landlords.

After this report, action was taken to coordinate anti-flipping activities through the Baltimore City Flipping and Predatory Lending Task, in which the CLC is heavily involved.

When Cipollone came up with her idea to help tenants, she received backing from colleagues on the task force, including Fannie Mae.

And last May, the CLC received a boost when a Baltimore judge decided to enforce the right-of-first-refusal law by granting a preliminary injunction against Shelter Solutions Inc., a non-profit landlord that had quoted one of its condominium tenants, Ahmad Onyango, a sales price that exceeded its ultimate listing price by $20,000. (After a seven-month legal wrangle, Shelter Solutions agreed in a settlement to offer the apartment to Onyango first when it goes up for sale later this year.)

While that case did not involve a flipping situation, Cipollone's predecessor at the CLC noted at the time of the preliminary injunction that it would be an important tool against same-day sales.

Meanwhile, Cipollone was sending out letters to hundreds of tenants living in houses she believed had been flipped, asking them if they had been given the chance to buy their homes when they were sold.

Hubbard was one of many who responded.

Although the deed had been done, Cipollone realized that she could still help Hubbard when she noticed that Fannie Mae had taken possession of the property.

She contacted local representatives from the firm and, after explaining the situation to them, they agreed to sell the property to Hubbard.

Now two other tenants in similar positions are also enrolled in the program and are currently negotiating with Fannie Mae.

Cipollone is hoping that she will be able to encourage more people to get involved as the program continues to expand.

Help wanted

Although she has made headway in her crusade, Cipollone is aware that the CLC can't go it alone, and she has some suggestions on how others could help, including mortgage lenders.

One is to bar lenders from closing on a deal until the seller certifies that all local laws have been complied with.

"There should be some way for it to be stated that they have verified that the tenant has been notified of his or her right of refusal," she says.

Cipollone stresses that this could be as simple as a check-off box at settlement, and that the onus would still be on the seller, not the lender, to ensure compliance with the laws. (In fact, Baltimore's right of first refusal ordinance already requires an affidavit of compliance from the seller to the city.) But bringing the lender into the mix would add a key incentive: If the paperwork isn't done, the sale would fall through.

Further down the line, she also hopes that lenders may allow tenants to stay in houses that have been foreclosed upon until a new buyer is found.

At the moment, she said, tenants are evicted as a matter of course.

Cipollone stresses that at this point she has not floated her ideas to lenders, but Thomas C. Shaner, executive director of the Maryland Association of Mortgage Brokers, believes that, in theory, the prospect of tenants being offered a right of first refusal on foreclosed homes could work.