Buyers Catch a Break in Surf City

From the elation of buying a place just blocks from the ocean to panic that a prior owner’s illegal actions might force him to lose it, the first two years of homeownership have been rocky for Matthew Busser.

This week, his fear turned to relief after learning that he and more than 100 other Huntington Beach property owners would not be liable for as much as $22,000 in fees owed for the unlawful conversions of their condominiums from apartments.

The five title companies that insured the condo sales agreed Wednesday to pay the costs of legalizing the units, such as obtaining permits and paying an affordable-housing fee of $10,000 to compensate the city for the loss of each condo as a rental.

“I couldn’t have afforded it myself,” said Busser, 30, a software salesman and avid surfer. “It would have been terribly unfair to have been held accountable for something that took place so long ago.”

Busser was one of many unwitting buyers who bought an illegally converted condo. City planning officials revealed the investigation in April, after being alerted to the issue almost two years ago, when owners discovered they were unable to sell or refinance their homes because the units didn’t comply with city codes.

Nearly 50 of the owners banded together to fight being penalized for a law they didn’t break. They created a website, e-mailed weekly updates and voiced their frustration at a City Council meeting.

“It’s been a nightmare,” said Jason Austin, 34, a family therapist.

He had been thrilled a year ago when his bid was accepted for the three-bedroom, 1,600-square-foot condo in the center of Huntington Beach. Just six months later, he learned that he could be held criminally and financially responsible for the conversion.

Like Austin, condo owner Steve Martin said he is grateful to the insurance companies for shepherding them through the resulting dealings with the city rather than deserting them to fend for themselves.

Since the dispute erupted, city police, county prosecutors and the local FBI office have investigated the conversions. Among those still being probed is the purchase and resale of four units by then-Councilwoman Pam Julien Houchen, who resigned Sept. 1. She acted as the real estate agent on the transactions but has denied wrongdoing.

One couple, Scott and Renee Tarnow, won a $450,000 judgment Monday in their lawsuit against the real estate broker they said fraudulently sold them an illegally converted condo.

The agreement reached this week between Huntington Beach and the title companies would require homeowners to release the city, but not the insurance firms, from further liability.

An official from one of the title companies said he was glad that the current owners would not be held responsible for the illegal conversions.

“These people did nothing wrong,” said Ken Dzien, general counsel and vice president of Los Angeles-based United Title. “All they did is buy condominiums, as far as they’re concerned. We’re here to insure those condominiums.”

Almost 60 homeowners eligible to be covered under the agreement have not contacted either the city or their title company, and will not have their fees paid until they do.

Martin said the deal seemed fair but added that the investigations against those who illegally converted the condos should continue.

“I’m glad it works out for all the buyers, but I hope everyone involved with letting this happen gets their due,” said Martin, 42.

City officials have indicated the homeowners will also not be responsible for other costs incurred during the process, including city inspections, permits and bringing their units up to current codes. Residents said they expected further clarification at Monday’s scheduled City Council meeting.

“If the settlement is correct, then it sounds like the city and title companies have both done the right thing,” owner Carolyn Kiefer said. “I believe we need to wait until Monday’s City Council meeting is completed to know the final outcome.”