When a House Is Not Quite a Legal Home

Renee Tarnow doesn’t know how much more her family can take. The dream home she and husband Scott bought in Huntington Beach two years ago has spawned a string of financial, bureaucratic and emotional nightmares.

After spending more than $80,000 to fix electrical, plumbing and construction deficiencies to comply with city codes, they discovered that their new home, part of a fourplex, had been illegally converted from an apartment to a condominium -- opening up a new set of troubles.

“Nothing’s gone right and nothing will,” Tarnow said. She said the ordeal is burdening her family with debt, stress and a legal mess that could take years to resolve.

The couple “own” their home at Delaware Street and Yorktown Avenue, according to the county.

But they are in legal limbo with Huntington Beach, because the unit’s status was never changed from apartment to condominium in city records.

The Tarnows’ case is just one among many.

Huntington Beach city officials are surprised at how many illegal conversions have occurred and how easily they were accomplished.

Officials believe that as many as 120 rental properties have been illegally converted to condominiums over the last several years, and more may yet be found, said City Atty. Jennifer McGrath.

Almost all were duplexes or fourplexes built decades ago in older areas of Huntington Beach around City Hall and downtown.

The scope of the illegal conversions has sparked a criminal investigation that could lead to charges, McGrath said.

Owners of illegally converted dwellings face more than $7,000 in city fees to comply with codes and regulations.

And the City Council would still have to approve changes to the zoning code to address the problem.

City and county officials agree that fault doesn’t lie with the owners. There is no process in place to prevent an unscrupulous agent, broker or seller from illegally converting an apartment to a condominium in Huntington Beach and other Orange County cities.

Scott Drapkin, an associate planner for Laguna Beach, said his city has no mechanism to check whether apartments are being illegally converted and sold as condominiums. That is the responsibility of those involved in the real estate transaction, he said.

“Any reasonable Realtor would never allow an apartment to be sold as a condominium” because of the liability, Drapkin said. “And nobody would loan money for that. I mean, [someone] at the bank had to approve [the Huntington Beach] sales” in order for the banks to fund the mortgages.

The same is true for the title insurance companies that issued the policies for the property sales.

Officials say the title companies bear the brunt of the liability if the sale is illegal, because they insure that everything necessary for the transaction is correct.

Cities pay attention to their stock of low-cost housing and rentals, Drapkin said, but otherwise they have no jurisdiction and little interest in real estate sales.

Subdivision or parcel maps needed for conversion are important for property tax purposes but have little impact on city planning, whether the dwellings are occupied by owners or renters.

“The city doesn’t care unless it alters density,” Drapkin said.

Laguna Beach requires property owners who are converting apartments to condominiums to provide an equal number of rental units elsewhere in the city, either through development or by converting condominiums into apartments. Huntington Beach, however, has no such requirement.

In Huntington Beach, officials are concerned about illegal conversions because they could tilt the desired proportion of rentals and owned property.

According to the 2000 census, the city had about 60% owner-occupied homes and 40% rentals -- an ideal mix, officials said.

The city’s investigation has focused on the title companies that insured that all legal requirements for the sales had been fulfilled, including any necessary city permits.

“Right now their argument is that they didn’t know, and I find that that’s untrue,” City Atty. McGrath said. “That’s their role.”

Real estate transactions become official only after the county records the transaction.

A long list of documentation is necessary for that to occur, including a surveyor’s map that describes the property line and boundaries in detail.

The city relies on the principals in a condo conversion to apply for a conditional use permit and supply a surveyor’s subdivision map, so the county can assess each unit’s value and bill the new owner for property taxes.

Because the city and county do not communicate with each other, however, the process is vulnerable to fraud at worst, or ignorant missteps at best.

“Someone didn’t follow the [city] law, and there’s no way that other jurisdictions can catch that,” said Orange County Clerk-Recorder Tom Daly.

He said his office cannot be responsible for ensuring that a transaction is done correctly.

“We are not a police or law enforcement agency,” Daly said. “We accept information from citizens and companies on its face value.”

Meanwhile, the Tarnows -- who said they are suing the real estate agent, the broker, the escrow company and the mortgage holder involved in their sale -- are struggling to withstand the financial and emotional drain.

They also plan to sue their title company.