Last week, the U.S. Bankruptcy Court for the District of Columbia approved a settlement in the matter of Terrace Manor LLC that will compensate tenants who endured severe housing code violations for years while ensuring that they will finally have access to the safe and habitable housing they deserve. Eleven tenants represented by Legal Aid will receive a substantial financial benefit totaling almost $360,000 for their years of suffering and for costs including repair bills, storage units and compensation for belongings damaged by mold and flooding. Importantly, the tenants will also receive ongoing rent protections, immediate relocation to safe housing, and the right to return to a rehabilitated Terrace Manor that will have renewed covenants ensuring it remains affordable for not just these but future tenants as well.
Terrace Manor is a 61-unit apartment complex in Southeast Washington D.C. that has long been plagued by security concerns and serious housing code violations, including rodent and roach infestations, non-working HVAC systems (making for freezing winters and scorching summers inside the apartment units), severe plumbing and roof leaks, and expansive swaths of untreated mold. Many of the tenants in the property have lived there for decades, some their entire lives.
In 2011, the owner of Terrace Manor entered into a contract to sell the property to Sanford Capital LLC (“Sanford”), triggering the tenants’ right to purchase under the Tenant Opportunity to Purchase Act (“TOPA”). Bread for the City (“Bread”), together with attorneys from Ballard Spahr LLP and organizers from Housing Counseling Services (HCS), represented the Tenant Association to help them try to locate alternative buyers. Unfortunately, that process was unsuccessful and the Tenant Association’s only option was to leverage their TOPA rights to secure an agreement for much-needed repairs from Sanford.
Sanford honored none of its commitments. Instead, it allowed the property to languish, deteriorating further from years of willful neglect. Rent-paying tenants called management constantly, complaining of rodents, of bedbugs, and of the need to heat their homes in the winter by leaving their ovens on and open. Management never responded. Frustrated and exhausted, many of the tenants gave up and moved out, or withheld rent due to the conditions and were evicted. Today, only 13 of the 61 units are occupied. Many of the others are in conditions unfit for human habitation.
Bread, HCS, and the Tenant Association coordinated with the D.C. Office of the Attorney General (“OAG”), which ultimately filed a complaint against Sanford and its property management company, Oakmont Management, seeking appointment of a receiver, injunctive relief, and damages for violations of the Consumer Protection Procedures Act.
Rather than making the legally required repairs, Sanford, as the sole member of Terrace Manor, adopted a resolution placing Terrace Manor into bankruptcy. Because bankruptcy sales are exempt from TOPA, Sanford tried to use the court process to approve the sale of Terrace Manor to another landlord with unknown intentions and no guarantee of repairs or continued affordability for the tenants.
Bread and Arnold & Porter Kaye Scholer (“APKS”) agreed to represent the Tenant Association in the bankruptcy proceeding and Legal Aid was retained to represent 11 individual tenant claimants in pursuing compensation for the many years their homes were in deplorable conditions.
Legal Aid attorneys and legal assistants worked quickly to investigate and file claims on behalf of the 11 tenants. Meanwhile, Bread and APKS filed and litigated claims on behalf of the Tenant Association, and worked to identify and negotiate a favorable agreement with a purchaser committed to providing safe and habitable housing. WC Smith proved to be the right partner for the tenants, demonstrating a willingness to invest appropriate resources into rehabilitating the decrepit property, and a commitment to housing the tenants elsewhere at their current rents until construction is complete and they can be returned to their homes.
Days before the hearing on Terrace Manor’s bankruptcy confirmation plan, the tenants, the Tenant Association, and the District entered into settlement agreements to resolve their respective claims. Separately from the relief that Legal Aid and Bread obtained for the 11 tenants and the Tenant Association, OAG also negotiated for $325,000 in fines and compensation for former tenants at the property, with an average benefit of $9,500 per tenant.
Bread for the City, Arnold & Porter Kaye Scholer, Legal Aid, Housing Counseling Services, and the Office of the Attorney General each played a vital role in obtaining relief for the current and former tenants of the property. But it is the tenants of Terrace Manor who truly deserve the credit for their victory. It was their sheer determination and years of endurance in the face of horrific housing conditions and contempt by Sanford that led to this favorable outcome. Legal Aid and Bread congratulate and thank our clients for their willingness to stand up and fight for their rights.
The work of Legal Aid and Bread was funded in part by a joint grant from the D.C. Bar Foundation that supports the preservation of affordable housing and responsible community redevelopment.