Owner leaves his loft empty — then sees a man living inside

Jeffrey Cote was driving home from work one evening this spring when he noticed a light on inside Unit 312 of the Little Tokyo Lofts.

This was the industrial loft he had bought in downtown Los Angeles for $647,000 — with no money down — at the top of the market in 2007. He thought it would be a great investment. It was also the loft he had abandoned less than two years later, after filing for bankruptcy and expecting the bank to foreclose.

The loft was still in Cote’s name, so the light surprised him. A few weeks later, he and his girlfriend decided to investigate. They got off the elevator and saw a new welcome mat outside Unit 312. When his key didn’t work, Cote knocked on the door.

John Glover, a well-dressed marketing consultant, answered.

“I own this loft,” Cote recalled blurting out. “This is my place.”

“Well,” Glover remembered replying, “I’ve been renting it for the last couple years.”

So began a battle for control of the loft that stretched on for months. Cote said Glover was a squatter. Glover insisted he had a right to be in the apartment.

The standoff is another legacy of the housing meltdown. Large swaths of California were hit by the real estate downturn, but few places fell as far or as fast as downtown L.A.

Cote is one of many who bought into the hope of an ever-rising housing market and the promise of a revitalized downtown in the mid-2000s, only to see that investment — and the dream — disappear. Lofts that once sold for $800,000 to $1 million are now worth less than half the amount.

Downtown’s rate of underwater home loans is among the highest in the country, according to the Zillow real estate database. In some parts of the central city, more than 50% of homes are worth less than the outstanding balances on the loans used to buy them.

In the last year, more than a dozen units in Little Tokyo Lofts have changed hands through short sale or foreclosure. The first-floor storefront, which developers had hoped would attract a shop or restaurant, is occupied by a methadone clinic.

“This whole thing just brings back huge regrets,” Cote said. “I look back at all these things, and I’m just full of regret.”

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Cote, 43, remembers the excitement when he and his then-wife moved into the Little Tokyo Lofts five years ago: dinners at new restaurants popping up in the Arts District and nights out at L.A. Live. They’d picked the loft because of its low cost per square foot, he said, after convincing themselves that the homelessness and blight around skid row were “part of the charm.”

At the time, Cote was teaching in Anaheim and his wife was working in real estate. Then, in June 2007, Cote made the first in a series of decisions that would come to haunt him. He quit his teaching job to pursue a career in the entertainment industry.

Over the next 12 months, his wife’s business collapsed, the couple couldn’t afford their mortgage payments, and their marriage fell apart. By the end of 2008, Cote had filed for bankruptcy. He packed up his belongings and moved in with his parents in Moreno Valley. He figured a foreclosure was imminent and tried to put Loft 312 out of his mind.

During the next three years, the title for the home remained in his name and his lender never moved to foreclose. Cote assumed he was not allowed to live there because he’d stopped making payments, which had been about $3,000 a month.

Now another man was living there. Glover had filled the 1,300-square-foot space with Apple computers, a mini-bar and racks of suits and dress clothes.

“I couldn’t believe it,” Cote recalled. “He had the loft way more decorated and lived-in than I had it when I lived there, window treatments and everything.”

Glover, 42, said he had noticed a vacancy at Loft 312 in early 2009 while moving out of a different unit inside the building. He said he met a real estate agent in the hallway who claimed to represent the unit’s owner.

Glover said he and the agent negotiated quickly, and he signed a rental agreement for $2,150 a month.

“This was right after the financial meltdown — there were so many foreclosures, you just had people cutting and running,” Glover said.

After their first encounter in May, Cote and Glover discussed the situation in a polite series of text messages. At the same time, they each were researching property records and legal documents.

Cote met with a real estate agent who suggested he try for a short sale of the property. Working with the lender, they listed Loft 312 for $230,000.

All they needed to do was to get Glover out.

Glover was not eager to leave. He considered making an offer on the unit. But after digging through Cote’s bankruptcy case, Glover and his lawyer decided they could challenge Cote’s claim of ownership.

Communication between the two sides quickly broke down, and Cote became increasingly frustrated. In June, he called the Los Angeles Police Department. Three officers questioned Glover on San Pedro Street before concluding no crime had occurred.

“You have played game over game with me,” Glover said in one text message to Cote. “I am in this situation because you abandoned the unit and allowed someone to misrepresent themselves as an agent of the property.”

“You’re a squatter,” Cote replied. “You’ve been given an eviction. You need to leave.”

In August, Cote hired process servers to deliver a formal eviction notice, but they could not find Glover.

Cote appealed to other residents of Little Tokyo Lofts for help, writing a letter to each describing the situation, labeling Glover a squatter and asking to speak at a homeowners association meeting. He got no reply.

The association filed a lawsuit against Cote, seeking back dues of more than $35,000. Cote had title to the loft and was still responsible for the dues but had trouble even getting into the building. A security guard one time threatened to report him to police for trespassing. The association’s property manager did not respond to a request for comment.

“They’ve taken sides with the squatter,” said Cote’s real estate agent, Michael Ferguson, who specializes in downtown loft sales. “I’ve never come across a situation like this.”

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This fall, Cote tried a new approach. He filed an unlawful-detainer suit against Glover, seeking a court order that would give him the right to retake control of the loft.

Cote posted fliers around the Little Tokyo Lofts accusing Glover of being a squatter. He called a TV station, which sent a reporter to interview Glover. A producer for the station confronted Glover outside the building.

With all the attention, neighbors started asking Glover questions.

Glover continues to say he was a victim. He said he sent money orders each month to a Sacramento County post office box, an address given to him by the real estate agent. (He explained he did not pay by check because he was going through a divorce at the time and did not have his own account.)

The phone number on the agent’s business card has been disconnected, and Glover said he hasn’t been able to find him. He said that after Cote confronted him, he stopped paying rent.

The Times reviewed a copy of Glover’s rental agreement and tried unsuccessfully to reach the agent. Glover and his lawyer said they had contacted LAPD detectives to try to track down the man.

“There’s a thousand one cases of this stuff happening, because when the real estate market crashed, you had people abandoning houses, and then there were people out there wanted to take advantage. That’s the story of 312,” Glover said. “But instead, Cote wants to label me the bad guy and just harass me and drive me out.”

Recently, Bank of America confirmed that Cote still owned the loft, issuing a statement saying it was working with him to avoid a foreclosure.

Bank of America did not explain why it had not yet foreclosed. But experts said it is not uncommon for the bank to wait years to seize vacated lofts or condos so it doesn’t have to pay homeowners association fees.

“I’ve had many clients who’ve been living rent-free in their condos and town houses for 12 to 24 months,” said Leon Bayer, a bankruptcy attorney.

Last month, Glover decided to pack up and leave the Little Tokyo Lofts and move in with a friend in Westchester. He told Cote in a brief meeting that turned contentious. Cote shrugged and walked away.

That morning, Cote roamed the complex, chatting up neighbors and thinking about what might have been.

Two days later, he returned to Loft 312 to have the lock changed on the front door.

sam.allen@latimes.com