Condo Deals May Trigger State Lawsuit

Dozens of state-mandated low-cost condominiums in Dana Point may have been sold illegally on the open market, denying low-wage earners the chance to buy the homes, California Coastal Commission officials said Friday.

The agency is considering legal action to recover damages and profits from the illegal sale or lease of dwellings in Dana Point, Laguna Niguel and San Clemente, said Peter Douglas, the panel’s executive director.

The enforcement action on the properties, which were built as part of the commission’s affordable housing requirements in the late 1970s and early 1980s, is proceeding under a $300,000 state grant. The commission is investigating hundreds of buyers who allegedly sold or rented their properties in violation of purchase agreements requiring them to live in the condos.

“We might want to go after any illegal profits,” Douglas said. “The sales contracts clearly state what has to be done.”

Commission officials are to meet next week with the state attorney general’s office to discuss possible legal action.

Douglas said he did not have a precise number, but his staff has discovered “dozens” of low-cost housing units that may have been sold improperly at the Niguel Beach Terrace condominium complex in Dana Point. Commission officials said Thursday that a substantial number also are being rented out.

About 200 Niguel Beach Terrace dwellings were sold to low- or moderate-income buyers in the early 1980s at below-market prices of about $65,000, with the requirement that the home remain owner-occupied for at least 20 years. If a buyer moves before the term expires, the property must be sold back to a public housing agency at a modest profit so it remains affordable for the next low-income buyer.

From 1977 to 1981, the Coastal Commission required developers in coastal Orange County to set aside 25% to 35% of their homes for low-income workers, who qualified for government subsidies to buy them.

The Legislature ended those requirements in 1981, but not before hundreds of units covered by the rules had been sold at six condominium complexes in Dana Point, Laguna Niguel and San Clemente.

This week, the commission began issuing cease-and-desist orders to the owners of about 175 affordable housing units at Niguel Beach Terrace. They are suspected of renting their properties for up to $2,000 a month to people who probably would not qualify for low-income housing.

Similar notices are being prepared for up to 200 other people who bought condominiums in Laguna Niguel and San Clemente under the commission’s affordable housing program.

The orders require owners to either prove they have not violated their sales contracts or to sell the property back to the housing program at about $200,000 below market value.

Niguel Beach Terrace is a neatly landscape condominium complex off Selva Road on the beach side of Pacific Coast Highway. It has spas, a pool and a recreation area. The Ritz-Carlton resort is next door. Condos that aren’t part of the affordable housing program can sell for $300,000 or more.

The owners “shouldn’t be prohibited from renting,” said James Bradley, whose landlord is named in a cease-and-desist order. “But to sell it for more than they bought it for would be wrong because it was classified as low-income housing.”

Bradley said the owners, Burhan and Mary Beth Nasser, have told him to move out because the property is going to be sold. The Nassers could not be reached for comment Friday.

Juana Laur, a deputy city clerk in Laguna Niguel, said she bought a one-bedroom condo in the complex for less than $150,000 through the affordable housing program six years ago. She added that she is well aware of the restrictions.

“As a buyer you need to follow them,” Laur said. “There are always going to be people who take advantage of the system. Renting them out is wrong.”

Commission officials said they have received reports of contract violations over the last two years, but have not had the funds or staffing to respond.

When the commission received word about 18 months ago of a rash of possible violations, Douglas said, there was some discussion about what to do.

Eventually, the commission obtained a $300,000 grant, and state legislation approved in August allowed the agency to take action to protect the remaining low-cost housing units.

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Low-income housing?

Areas where resale restrictions on more than 400 coastal homes sold at below-market prices will expire over the next 11 years:

*--* Total Earliest Location City no. units expiration Niguel Beach Terrace Dana Point 241 2003 Cyprus West San Clemente 9 2004 Aliso Meadows Laguna Hills 7 2011 Beacon Hill Dana Point 33 2012 Spinaker Run Dana Point 52 2013 Pacific Terrace Dana Point 36 2014 Seawatch Laguna Niguel 38 2014

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Sources: California Coastal Commission report, March 2002