Earlier this year, D.C. Attorney General Karl Racine negotiated that Sanford Capital would divest its real estate holdings in the District by December and stay out of the city for the next seven years. The consent order, voluntarily agreed to by both parties but enforceable like a court order, prohibits the Bethesda-based company, founder A. Carter Nowell, and any affiliate LLCs from acquiring or renting residential housing in the District of Columbia “unless they are able to supply habitable housing to any prospective tenant.”
This negotiation was the result of two years of litigation parallel to investigations by Washington City Paper and The Washington Post that discovered a pattern of neglect throughout the company’s more than 1,300-unit portfolio.
The Superior Court labeled these “slum conditions,” referring to the extensive pest and rodent infestations, backed-up sewage, mold and lack of heat, as a “complete disregard for the District’s housing laws.”
Mayor Muriel Bowser ordered an inspection of Sanford’s entire portfolio by D.C. Department of Regulatory Affairs, who had already fined the company and its affiliates for extensive infractions, and asked the agency to innovate a way to proactively flag future “bad actors” that operate multiple properties in the city.
Despite these reforms, peace of mind was not guaranteed for all former Sanford tenants.
Of the company’s at least 20 housing complexes, all but seven had been sold off or otherwise changed hands by the time the attorney general’s consumer protection suit was resolved in April. Four such properties are now managed by E&G Group, a McLean-based developer that was appointed by D.C. Superior Court to manage four Sanford Properties in Southeast D.C. that Nowell lost when his LLCs defaulted on several loans amounting to more than $25 million.
All four receivership filings submitted to the court on July 12, 2017, were consent agreements, agreed to in advance by the lender, the various Sanford Capital affiliates, and E&G Group.
Impressed with E&G Group’s management, Wilmington Trust, the Delaware lender whose loans were defaulted on by Sanford Capital, petitioned the court in May and June to amend the receivership agreements for Elsinore Courtyard Apartments and Fitch Place apartments in order to empower E&G Group to market those properties for sale, solicit bids and negotiate on behalf of Wilmington Trust.
Leading up to these changes, E&G Group sued more than 100 residents from those complexes for eviction, according to court records. Forty-six of those suits were filed on a single day in April, while another 51 were filed on a single day in September 2017. Each defendant had failed to pay rent, from as little as $336 to as much as $17,952, after E&G Group took charge in 2017.
Cases involving non-payment of rent are generally a landlord’s way of getting a tenant to pay back rent or move out, according to Shaina Hagen, a staff attorney with Neighborhood Legal Services Program, an organization that offers legal counseling to low-income residents who cannot afford lawyers. Hagen has worked on numerous cases involving Sanford properties that are now owned by E&G Group.
“Often a case will end with a tenant agreeing to move out in exchange for back rent being waived,” Hagen said. If a tenant does neither voluntarily, then the landlord can seek a judgment allowing for the tenant to be evicted unless they pay the back rent.
When asked to expand on their role as receiver and explain why there were so many eviction lawsuits related to the two properties they were recently empowered to sell, the company supplied a short statement.
“E&G Group is a developer, owner and manager of affordable housing communities. In July 2017, E&G Group was appointed as the receiver for four properties—Elsinore Courtyard Apartments, Fitch Street Apartments, Sayles Place Apartments and Wayne Place Apartments. Since that time, consistent with the Court order appointing the receiver, E&G Group has managed the properties in a manner that it believes has been fair and respectful to all the tenants at the properties.”
A Street Sense Media analysis of 46 lawsuits E&G Group filed on April 20 found the company could have recouped more than $260,000 if each suit resulted in the full payment of rent owed. However, only seven led to a full or partial payment of back rent, according to available court records. Six tenants agreed to move out in exchange for the forgiveness of all or partial rent owed, nine were evicted and five cases remained open.
Others cases received a default because the tenant did not show up in court or three attempts to deliver a summons failed. In those situations, E&G Group has the option to pursue an eviction with no further court hearings. All but one of the cases that remained open from the April 20 bulk-filing involved tenants who had legal representation. In the other 41 suits, tenants represented themselves while E&G Group was represented by one or more attorneys.
Multiple tenant defenses submitted to D.C. Superior Court claim E&G Group has collected rent on a voided lease or collected more rent than the property is worth due to the company’s “breach of the implied warranty of habitability.”
Several residents also included counterclaims in their response to the lawsuit, aiming for the court to compel E&G to address long-standing maintenance needs. As part of her legal defense, one Elsinore Courtyards resident included a long list of health and safety risks in her defense that she said had been present since she moved in: a front door that doesn’t lock, no smoke detectors, rodents, leaking pipes, and more. Her trial is set for this month.
Similarly, a Fitch Place resident swore in her written defense that there has been insufficient heat, plumbing problems and a malfunctioning stove in her unit since she moved in, December 2015.
The Fitch Place resident stopped paying rent in January when conditions did not improve after E&G Group took control of the property. Her stove was finally fixed in May, shortly after one of the April 20 eviction suits was filed against her. She took the stove and some other small repairs as a sign of good faith and entered into a protective agreement where she would routinely pay a small sum directly to E&G every month as the case continued. A leaky third-floor toilet has since caused repeated water damage to her first-floor apartment. Her trial is also scheduled for this month.
While most resident counterclaims address maintenance issues deferred and willfully ignored by Sanford Capital, pre-dating E&G Group’s management, the defendants seem to think withholding rent is necessary to seek meaningful and long-overdue repairs to the property. One 2017 counterclaim by an Elsinore Courtyards resident that is about to go to a jury trial argues they have had pest, stove, mold and water issues since 1998 or ‘99. Sanford Capital was founded in 2006.
E&G Group’s role as a receiver is clearly outlined by the consent agreements that empower the company to protect, preserve and improve the property; hire, fire or better-compensate whatever employees and partners necessary to accomplish this; and “enter into, enforce, modify or cancel leases … and to obtain and evict tenants.”
The company filed another 38 eviction suits against Elsinore Courtyards and Fitch Place tenants on Aug. 15.
A resident of Sayles Place Townhomes, one of the Sanford properties under E&G Group’s receivership, sued E&G Group for a wrongful eviction in February, according to court records. The resident said they were in the process of moving items between their apartment in D.C. and their recently deceased father’s estate in North Carolina when they received a call from a neighbor saying their belongings were being thrown out.
“I came home and confronted the management team because I didn’t even know that they had switched over [to a new company],” the Sayles Place Townhomes resident said. “And then E&G shows me that Sanford Capitol had me in the system as my unit being vacant.”
The resident had a housing voucher, but it was terminated while she was focused on her father’s estate. E&G Group refuses to lease the apartment back to her at a lower price to compensate for her lost subsidy. The lawsuit she filed claims she has lived in the unit since 2008.
The tenant currently lives in the unit, unlawfully, while she works with her attorney to muster some evidence that shows she did in fact lease with Sanford. She was told any documents proving such proof were lost when building management removed her belongings.
“They never took me to court, I don’t have anything in court saying that they put me out and why they can obtain the property,” the Sayles resident said.
“The shortage of affordable housing is one of the most pressing issues facing the District,” Attorney General Karl Racine said in an email to Street Sense Media. “My office is focused on protecting tenants and we plan to look into the allegations that the receiver at these properties is not living up to its legal obligations.”
Orion Donovan-Smith, Zachary Headings, Katie Bemb and Santul Nerkar contributed reporting.
