84 Sinking Condo Owners Win $6-Million Settlement

Eighty-four homeowners in a section of the sinking Monterey Hills housing complex in northeast Los Angeles were awarded $6 million Wednesday in a settlement of their lawsuit against the Community Redevelopment Agency.

Superior Court Judge Philip F. Jones approved a settlement reached by homeowners of the Drake Terrace condominiums and the CRA, which coordinated the Monterey Hills project, after testimony concluded in a jury trial.

The settlement is the first in numerous lawsuits filed against the agency by homeowners in the 1,600-unit development, which is tilting and cracking on improperly compacted landfill.

Three other homeowners associations and dozens of individuals have filed suit against the agency over damages to the development.

Under terms of the agreement, the agency, which has already collected the funds from seven of its insurance companies, will deposit the money into a trust account for the homeowners on Thursday, CRA spokesman Robert Alaniz said. The homeowners will distribute the funds among themselves, he said.

The CRA also agreed to use an additional $3 million recovered from insurance companies to repair damage to the 87 Drake Terrace units, all but three of whose owners joined in the inverse condemnation lawsuit, Alaniz said.

Drake Terrace is one of six developments in the complex to suffer damage because of soil settlement. It was built on as much as 120 feet of landfill. The repairs will include soil stabilization, structural and cosmetic work on the buildings.

The 84 homeowners owe about $6.5 million to the banks who hold their mortgages. The agreement contains no provision to protect the banks if the homeowners default on the loans.

However, Security Pacific National Bank, bond trustee to the CRA, supported the settlement and expressed confidence that the planned repairs would restore the condominiums to their full market value.

Envisioned in the late 1960s as a haven of affordable housing for mostly first-time homeowners who wanted easy access to downtown, Monterey Hills has instead become a legal morass for the CRA, developers and investors in the project. But for the Drake Terrace homeowners who reached agreement with the CRA this week, the settlement affords some measure of relief.

James and Melinda Osman bought a one-bedroom condominium in the complex in 1981. In 1985 they moved out of their damaged unit to a new home in Glendale and have since been paying mortgages on both.

“It’s just a relief to us,” James Osman said of the settlement.