Attorney General rules on C/D and L/O in Ft Worth - Posted by Mike-DFW

Posted by NICHOLS on November 20, 2000 at 09:18:15:

Linwood residents lose legal decision; State says lease-to-own home buyers weren’t fraud victims.
By Chris Vaughn
Star-Telegram Staff Writer

FORT WORTH – The Texas attorney general’s office has retreated from its involvement in the tornado-battered Linwood neighborhood, having concluded that no intentional fraud was committed against home buyers in the working- class area.

The state’s decision, criticized by several people trying to help in the Linwood area, comes as residents continue to live in damaged houses almost eight months after the March 28 tornado.

Linwood, a small neighborhood of modest World War II- era houses north of West Seventh Street, has had difficulty rebounding from the storm because as many as three dozen families are purchasing houses with “contracts for deed.”

Contracts for deed are essentially lease-to-own agreements, in which the buyers don’t get the deed to the house until they are finished paying set amounts. Until the house is paid off, the sellers retain all legal rights, which has complicated issues of who is responsible for what.

Stephen Maxwell, who leads the Tarrant County Bar Association’s efforts in Linwood, said state attorneys discovered about 10 families who either had paid for nonexistent insurance, or who had not received their insurance settlements months after the storm.

In most of those 10 cases, Maxwell said, residents were not, in the state’s view, victims of consumer fraud but “a legitimate error.”

“It’s going to be more of a private cause of action,” Maxwell said.

Heather Browne, a spokeswoman for Attorney General John Cornyn, said that consumer protection is “a top priority” and that attorneys will continue to assist private attorneys working in Linwood.

But Browne said: “The attorney general’s office does not have an active legal role in the matter. We will continue to monitor the situation and help residents get what they need.”

That decision disappointed and shocked some home buyers, representatives of charitable agencies and private attorneys. Additionally, many of the home buyers and their volunteer attorneys said they never met with anyone from the attorney general’s office.

“That’s just insane,” said Joe Brown, managing attorney of West Texas Legal Services, which provides legal aid to the poor. “Maybe it doesn’t rise to the level they need it to or maybe it’s not organized. But it’s certainly fraud on an individual level.”

Two families – Joe and Silvia Garza, and Juan and Guadalupe Garza – thought they qualified as victims of fraud. They paid homeowner Chester A. Riggs $45 a month for insurance for three years, but they found out after the storm that Riggs had no insurance on their homes.

Riggs’ attorney, Randall Schmidt, said that it was a “mistake” and that anyone who suggests it was fraud doesn’t know the “relevant facts.”

“The attorney general has apparently looked into these things and made the same decision,” Schmidt said.

Silvia Garza said she is frustrated that the state is not going to help her family. Worse yet, she said, she is unsure whether she has insurance or whose name it is in.

“I want my contract right and I want insurance in my name,” she said. “This could happen again to us.”

A different problem has persisted for a handful of families buying homes from HGU Investments, a company owned by a husband and wife who sell houses with contracts for deed.

In those cases, the families and attorneys say, they signed over the insurance checks to HGU, which has done minimal, if any, repairs to the homes. HGU’s owners, James and Tracy Roan, did not return phone messages. Their west side office said they were closed for the week.

“I signed the check over” to HGU, said Lupe Cardona, who lives in a storm-damaged house on Azalea Avenue. “Since they had paid the insurance, they said the check belonged to them. I’m a first-time buyer. I was not aware of anything.”

Alice Hernandez, who is buying a house on Mercedes Avenue, said HGU has approximately $10,000 from the insurance company and has made no move to repair the house or turn the money over to them.

But the Hernandezes’ volunteer attorney, David DeBusk, isn’t sure there is anything he can do about it. Their contract does not require that HGU use insurance proceeds to repair the house, he said.

“When you get down to it, it’s HGU’s property,” DeBusk said. “That’s the crux of the problem. It’s their property.”

Emergency Assistance of Tarrant County, a coalition of public agencies and private charities, bought thousands of dollars in supplies and organized hundreds of volunteers all summer to repair damaged houses that hadn’t been touched since March, including three owned by HGU.

The organization had hoped to recoup some of its expenses from HGU houses, because they were insured, but disaster coordinator Gloria Reeves doubts it will happen now.

“Why insure your house at all if you know we’ll come in and fix it for free?” she said. “We’re there to help people with unmet needs. We’re not an insurance company. But if this is what happens, then nobody should ever insure their house.”

City leaders, including Mayor Kenneth Barr, state Sen. Mike Moncrief, D-Fort Worth, and state Rep. Lon Burnam, D-Fort Worth, have said they want the Legislature to tighten consumer protection in contracts for deed.

State law offers little protection for buyers, except in the Rio Grande Valley. In 1995, the Legislature passed several safeguards for people only in certain counties close to the Mexico border.

“While it is very sad what has happened in Linwood, it’s almost always the case that you have something like that happen to gain momentum to correct the wrong,” Burnam said. “We want to take advantage of this opportunity to correct that wrong.”

Attorney General rules on C/D and L/O in Ft Worth - Posted by Mike-DFW

Posted by Mike-DFW on November 20, 2000 at 01:55:21:

Here is an interesting article from the Ft Worth Star Telegram.

http://www.startelegram.com/news/doc/1047/1:TOPHOME3/1:TOPHOME31120100.html

Mike

C/D and L/O in Ft Worth - Posted by Bud Branstetter

Posted by Bud Branstetter on November 21, 2000 at 10:16:00:

Mike, another reason I will not do contracts for deeds. There are just better ways.

Re: Atty.Gen. rules on C/D and L/O in Ft Worth - Posted by gwtx

Posted by gwtx on November 20, 2000 at 07:43:06:

Mike,
Is it me, or is this a dead link already? I couldn’t get anything but the default page of the star-telegram! Could you give us the readers digest version?

thanks
gary