Cincinnati sues company over 'predatory' land sale contracts, blighted properties

Posted at 7:41 AM, Apr 14, 2017
and last updated 2017-04-14 18:38:18-04

CINCINNATI -- The City of Cincinnati filed a lawsuit this week against a property investor it accused of making "predatory and unconscionable land sale contracts" and of owing the city hundreds-of-thousands of dollars for various unpaid fines and fees.

Harbour Portfolio Advisors LLC of Dallas, Texas and various related companies purchased thousands of foreclosed properties in bulk from Fannie Mae after the 2008 housing crisis. Hamilton County Auditor records show Harbour has sold at least 50 properties here and owns at least 35 more.

While Harbour paid just a few thousand dollars for most of the properties -- and in some cases as little as $0 -- the company would sell them for as much as five times what it had paid for them, city officials wrote in their lawsuit.

The company would sell the properties in "as is" condition, apparently having done no work on them and leaving many of them in dilapidated condition, according to the lawsuit. But they also didn't notify the buyers of any issues with the properties, the suit states.

Harbour sold the properties through "land sales contracts," a method of seller financing sometimes used for purchasers who don't have access to traditional forms of credit, according to a memo from City Manager Harry Black.

Harbour would include an unusual provision in the contracts allowing them to convert the land sale contract into a deed and mortgage. If the city pursued code enforcement efforts against Harbour, the company would then deed the property to the purchaser, according to the city's lawsuit. The new owner would then end up liable for dealing with the problems Harbour hadn't disclosed before the sale.

Dealing with property payments and the costs of making repairs would often be too expensive for the buyer to handle.

"Harbour fails to disclose known violations at its properties and puts vulnerable families into homes that they cannot afford to fix up," city attorneys wrote in the complaint. "In most instances, those contracts fail."

After a contract fails, Harbour "churns the property through the process anew" by selling to another unsuspecting consumer or flipping to an out-of-town investor, according to the lawsuit.

WCPO reached out to Harbour. In a phone call, a person who answered said they hadn't known about the lawsuit. No one was immediately available to comment.

Dangerous properties

Two children living in a property contracted by Harbour have suffered from lead poisoning, according to the city's lawsuit.

Harbour purchased 3814 Saint Lawrence Avenue for $7,601 in September 2011 and entered a land sale contract to sell the property for $40,700 in January 2012, according to Hamilton County Auditor records. That June, a child living there tested positive for lead poisoning and the city vacated the property. However, another child living there in February 2017 also tested positive for lead poisoning.

3171 Beekman Street

Records show Harbour still owns that property. It has been tax delinquent since 2016.

In another case, Harbour purchased 3171 Beekman Street for $0. The city had already declared it a "public nuisance" and found the home to have a lead problem a year earlier.

The company apparently never addressed the lead paint issue, and never responded to city notices that the property was standing open to the elements and trespassers, according to the lawsuit. That forced the city to barricade the property three times, costing taxpayers several hundred dollars. That property has also been tax delinquent since 2015.

Unpaid fines and fees

1046 McPherson Avenue

When Harbour doesn't have a property under contract, it simply ignores notices of violations and other code enforcement efforts, according to the city's lawsuit.

At 1046 McPherson Avenue, a city inspector found the property vacant and uninhabitable. Records show Harbour purchased it for $2,618 in March 2011.

The city inspector found concrete steps collapsing and the front porch rotted out. The garage doors were also rotted, and the roof was open, causing extensive water damage. The property has also been tax delinquent since 2015.

Harbour also owes a lot of money to local government offices, according to the lawsuit. That includes:

  • More than $215,000 for civil offenses
  • More than $6,000 for barricading properties
  • More than $109,000 for vacant building maintenance licenses Harbour failed to obtain
  • More than $29,000 due to Greater Cincinnati Water Works

Harbour properties have racked up fines for building code issues, high grass, weed and litter violations, according to the lawsuit. The company's failure to barricade dilapidated properties has created dangerous conditions.

"The result of the unfair and predatory business practices employed by Harbour is a vicious cycle of blighted properties in the city," city attorneys wrote in the lawsuit.