Focus, Law, and Real Estate

Lawsuit puts property sales on hold

Land bank is delaying closings on nine properties it has sold.

December 8, 2012
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Another ramification has surfaced from a lawsuit some residential real estate professionals have filed against Kent County, the Kent County Land Bank Authority and Kent County Treasurer Kenneth Parrish.

First, the legal challenge caused the Kent County Land Bank Process Subcommittee to temporarily halt its meetings until the matter is resolved. The subcommittee is looking at whether the county can, or should, sell tax-foreclosed properties to the land bank prior to the public auction. Commissioners agreed to sell 44 properties, mostly residences, to the bank in July, and that sale is at the heart of the lawsuit.

The suit’s latest consequence, though, is the KCLBA has decided to delay the closings on nine properties the land bank has redeveloped and for which it has accepted sales agreements.

“We have nine properties; all are signed and ready to close,” said KCLBA Executive Director Dave Allen.

Eight of the properties are homes, while one is a commercial building on East Fulton Street in Grand Rapids. The new owner plans to open a catering business and coffee shop in the structure that once was home to a Believe in Music store.

The closings have been put on hold because a portion of the plaintiffs’ lawsuit calls for all the actions the land bank has taken with the properties it bought this summer from the county to be undone. The legal term for the provision is lis pendens, which is a notice of pending action to buyers or prospective buyers that the title to, or possession of, those properties is in legal dispute.

The suit is also the reason New Development Corp. Executive Director Helen Lehman told the land bank board recently that her nonprofit residential development firm would delay work on two homes it bought from the land bank. The land bank sold 19 of the properties it purchased from the county to four nonprofit housing developers.

Lehman assured the board that her organization wasn’t ending its relationship with the land bank because of the lawsuit. “We will continue to partner with you. You are right, but the trickle-down is difficult,” she said.

KCLBA Chairman and Kent County Treasurer Kenneth Parrish told the Business Journal the lis pendens filing clouds the titles to the properties. He said the land bank asked to have that provision removed from the suit at a recent hearing held before 17th Circuit Court Judge George Buth.

Buth ruled that the land bank could either post a $1.4 million bond to cover the properties purchased or file to have the provision removed. The authority is pursuing the latter.

“Once that happens, we’ll be able to close on the properties,” said Parrish. In the meantime, Parrish said the plaintiffs are appealing Buth’s decision.

Rusty Richter, Keystone Realty Group, 383OG LLC, Jeff Fortuna, James Kane and the Affordable Housing Coalition have brought the suit. They argue the private sector was deprived of being able to bid on the properties the county sold to the land bank prior to the auction. They also allege the sale violated the county’s policy and state law on property distribution when county commissioners agreed to sell the properties and cost the county revenue.

Allen said the land bank has redeveloped and sold 21 properties in the past six months, and those sales have raised the property values in the respective neighborhoods.

“Our point is to try to push up property values,” he said.

Allen said the land bank has used Realtors who belong to the Grand Rapids Realtors Association for its transactions and has listed properties on the group’s multiple-listing service. He said the land bank has created an economic impact of $4 million. Allen shared that message with members of the county’s subcommittee Nov. 8, the same day the group voted to suspend its meetings.

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