Ruling Backs Condo Owners

Scores of Dana Point condominium owners accused of improperly selling and leasing units bought under a low-income housing program prevailed in court Tuesday when a judge ruled that they had signed unenforceable sales agreements with the state.

Orange County Superior Court Judge Jonathan H. Cannon also concluded that the state waited too long to enforce 20-year deed restrictions that applied to about 90 homeowners who bought condos in the Niguel Beach Terrace complex in the early 1980s.

His decision prevents the California Coastal Commission, which oversees the project, from continuing with a 2-year-old enforcement action designed to protect the inventory of low-cost housing in coastal Orange County.

“Lots of people have been harmed by this,” said Tom Barnes, a Niguel Beach homeowner accused of renting his unit improperly. “The charges are wild and so absolutely untrue. Hopefully this nightmare will end.”

About 200 units, on a bluff near the Ritz-Carlton hotel, were sold at discounts to people who met the income requirements. Sales prices started at about $60,000 for units that today fetch between $300,000 and $400,000.

The commission contends that the buyers were legally obligated to live in the condominiums at least 20 years or sell their properties back to a public housing agency at a small profit so the units could remain low-cost housing.

Instead, the agency has charged that dozens of homeowners either rented or sold their condos without state permission in violation of their deed restrictions. Some units, they allege, were leased for $1,000 a week or more during the summer.

“This is an outrageous decision,” Coastal Commission Director Peter Douglas said. “It’s unjustly enriching these individuals. This is a gift of public funds, not from heaven, but from a judge.”

Douglas said he would recommend at this week’s commission meeting in Santa Barbara that the panel appeal Cannon’s decision.

Deputy Atty. Gen. Jamee Jordan Patterson, the commission’s lawyer, said if the case was not appealed, the enforcement action would be over.

The owners, who sued the Coastal Commission in July 2003, argued during a hearing Monday that the deed restrictions were unreasonable and that the state waited too long to take action -- in many cases only days before the contract restrictions were to expire.

Cannon agreed with their assertions that the state had imposed an “unconscionable” contract on uninformed buyers who were represented neither by attorneys nor by real estate agents.

Cannon ruled that the original deed restrictions were vague and left homeowners little, if any, opportunity to cancel an improper sale or rental agreement before being forced to sell the property back to a public housing agency.

“If they did one thing wrong, they could lose their property. They had no opportunity for a cure,” said John A. Delis, an attorney for the homeowners.

Cannon also concluded that the Coastal Commission had failed to fully enforce the deed restrictions before they expired after 20 years. The agency had sent cease-and-desist orders to homeowners just before the expiration dates but did not fully enforce the cases within the 20 years.

Similarly, Cannon ruled that the commission’s cease-and-desist orders gave homeowners 30 days to remedy their situations, but the deed restrictions expired before the 30 days had lapsed.

“The court found the whole process put homeowners in an unconscionable sales agreement and then the Coastal Commission failed to enforce it for 20 years,” Delis said.

The state contended that many people who signed Niguel Beach sales contracts were aware of the deed restrictions or should have been.

Patterson, the commission’s lawyer, noted that many Niguel Beach owners apparently understood their contracts because they were able to contact the commission to execute sales and to get permission to rent their units. Cannon’s ruling does not affect those transactions.

“The judge looked at this as a sales contract, not a low-income housing program,” Patterson said. “We believe the homeowners did not live up to their part of the bargain and now they are excused.”

Further court hearings are scheduled for May 10. Delis said he would consider whether to seek damages and attorney fees from the commission.