Condominium owners assume they will be able to settle down in their homes if they stay on top of monthly payments, follow homeowner association rules and maintain the property. But eleven condo owners in Reading, Pa. had a rude awakening when a developer purchased the property and turned the building complex into rented apartments.
Three years ago, Teresa Fusco, 56, bought a condo unit, appraised for $101,000, at Deer Path Woods in Reading, about 60 miles northwest of Philadelphia. Eleven units were owned and occupied while the other 97 apartments were rental units.
Fusco, a secretary who lives alone, had about $71,000 left on her mortgage when the property owner went into foreclosure last fall.
A developer, Kevin Timochenko, purchased the rental units for $7,200 at a foreclosure auction, as reported by AOL. That gave Timochenko almost 90 percent of voting power for the condominium homeowners' association.
Because Pennsylvania law allows homeowners who have 80 percent of voting power to control the sale of the entire property, Timochenko could legally convert the entire complex -- including the condos -- into apartment units for rent.
Fusco said she and the other 10 condo owners were given a choice during a condo association meeting on Dec. 22: pay rent for the property they had previously owned in addition to their mortgage payments, or move out.
"I was devastated because this was my home, not just my house," Fusco said. "It was where I was going to retire. If something happened to me, I could still afford my mortgage and my taxes. I was just completely taken aback."
Kevin Timochenko did not return a request for comment. Nicole Plank, an attorney for Timochenko's Metropolitan Management Group, did not return a request for comment either.
To add insult to injury, property values in Reading have taken a hit as in many other parts of the country, and Timochenko had the entire property appraised at a value that was less than fair market value, said Fusco and Fred Nice, her attorney.
The average appraised value was around $35,000 for each unit, whereas owners like Fusco had mortgages of around $60,000 to $90,000, said Tom Beaver, an attorney working with other former condo owners.
Pennsylvania state senator Judith L. Schwank, whose district includes the town of Reading, introduced a bill on Thursday that would allow half of the total number of unit owners to reject an appraisal when a single owner or a group acting together controls 70 percent or more of the votes. Unfortunately, she said, the bill, if passed, could not be retroactively applied to Fusco's situation.
"It's not fair," Schwank said. "The situation as it is dooms individuals who thought they would own property until they agree to sell it."
Schwank said the situation for Fusco and the other condo owners is rare, "but nevertheless it is devastating."
"These individuals weren't of great means," she said. "It might have been legal but it's not moral."
Michael Kim, a condo attorney in Illinois, who serves on the legislative board of the Association of Condominium, Townhome and Homeowners Associations, said some states, like Illinois, have laws that protect homeowners in distressed condo associations.
"If a condo property is not functioning -- with too many foreclosures or not paying utility bills -- then in our case the city can intervene and take over the property and have a receiver appointed and operate the property as best they can," Kim said.