Q & A : What Baldwin Bankruptcy Means to Customers
When the Baldwin Co. put its two home building units into Chapter 11 bankruptcy Tuesday the action left thousands of Baldwin homeowners and home buyers with lots of questions and few answers.
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A Chapter 11 filing doesn’t necessarily stop the daily operation of a company. It is a tool used to stop creditors from foreclosing on property or taking other actions while the company reorganizes its finances and comes up with a plan to repay its debts.
A Chapter 11 also stops action on most lawsuits against the company and bars collection of judgments or settlements from suits that were completed before the bankruptcy.
A repayment plan, which must be approved by the Bankruptcy Court, sometimes calls for full repayment, sometimes for partial payment, of the bankrupt company’s debts. But in the meantime, bankruptcy law specialists say, the company can continue its operations pretty much as usual.
Here, from several Orange County bankruptcy attorneys and real estate specialists, are answers to the questions likely to be asked about the bankruptcy by Baldwin homeowners and those in the process of buying a house in one of the company’s seven developments in Orange, Los Angeles, Ventura and San Diego counties.
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Q: We just gave a Baldwin sales office a $7,500 deposit on a new house. If we decide we don’t want to buy it now that the company is in bankruptcy, can we get the deposit back?
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A: That depends entirely on your contract. Builders sometimes take reservations, and those aren’t binding. However, if the contract says that each side must do certain things, then it probably is not a contract you can just walk away from and still get a full refund. But the bankruptcy itself doesn’t necessarily alter your contract.
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Q: I just opened escrow on a home being built by Baldwin. What happens now?
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A: Close of an escrow is contingent on completion of the residence. So if the house is completed, you can be pretty sure that Baldwin is going to expect you to go through with the purchase. And the bankruptcy isn’t likely to stop work on the house. Baldwin has said it has a $20-million line of credit and plans to continue doing business as usual. Baldwin is not allowed to skirt its obligations under general real estate law, but neither are you.
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Q: Will Baldwin still honor my new home warranty?
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A: Company President Albert Baldwin has publicly stated that the company intends to do that. Problems would arise if for some reason the company doesn’t come out of bankruptcy. Some attorneys believe that in that case, the company’s major lender could have responsibility for making good on a warranty. And suppliers who have their own warranties for things like ovens and air conditioners must still honor them. You also might ask the seller to buy you a warranty from one of the private companies, as is done in the resale market.
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Q: I recently filed suit against Baldwin Co. because the windows in my house leak and they won’t fix them. Does this affect my suit?
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A: Yes. Your suit is automatically stayed, or halted. You should file a proof of claim with the Bankruptcy Court to become a creditor in the bankruptcy case. The good news is that you no longer have to prove that Baldwin owes you money or repairs. The bad news is that your claim is subject to whatever repayment plan might be approved by the court.
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Q: The bankruptcy was filed in Santa Barbara. Do I have to go there to file a claim?
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A: No. You can file by mail. Claim forms can be obtained at any U.S. Bankruptcy Court or in most stationery stores that sell legal forms.
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Q: Will this affect the value of the Baldwin home I bought last year?
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A: That is entirely up to the marketplace. If the home is a desirable one in a good location, it shouldn’t have much impact. An appraiser wouldn’t devalue the house just because the builder filed for Chapter 11. But if consumers get skittish, then anything can happen. Your chances of holding onto the value of the home while the bankruptcy is still fresh in people’s minds are better if you live in a completed Baldwin development than if you live in one where homes still are being built.
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Q: The Baldwin brothers, Albert and James, also are majority owners of a separate land development company, Village Properties, as well as a retail landscape and plant nursery company, Village Nurseries. Were they affected by the bankruptcy.?
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A: No. Only the two companies that actually filed are under the jurisdiction of the Bankruptcy Court. However, any financial dealings among the various companies could be affected.
