October 15, 2019
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Lewiston’s fight against its ‘truly uncooperative’ landlords

Troy R. Bennett | BDN
Troy R. Bennett | BDN
A for rent sign in Lewiston.

Editor’s note: This is part of an ongoing series about Lewiston housing. Ideas? Write to mainefocus@bangordailynews.com. See all the stories here.

As the mold grew around the leak in Maria and Jonathan Knapp’s bathroom ceiling, so did the smell that came with it, which was so strong it sometimes made Jonathan vomit. And when it rained, water ran down the walls and onto the lap of anyone who happened to be sitting on the toilet.

Like the smell and the mold, the leak at the apartment at 125 Pine St. in Lewiston grew slowly over the 15 months the Knapps’ landlord failed to fix the issue, according to court filings.

The leak was relatively small when Portland investor and lender Scott Lalumiere purchased the apartment building in April 2017. He then transferred it to SK Housing LLC, which he owned with Kevin Fletcher, then the president of the Maine Commercial Association of Realtors.

In addition to the Knapps’ building, the men’s companies had bought a number of rental properties in downtown Lewiston, where, almost a decade after the financial crisis, multifamily residential buildings could still be acquired for a fraction of their pre-crash value. Lalumiere scooped up the building at 125 Pine St. for $85,000. It had previously sold in 2006 for $272,500.

The Knapps reported the leak to their new landlords soon after they took over the property, according to court filings. They also mentioned that their kitchen sink wasn’t draining and that their smoke detector didn’t work. When no one made the repairs, they complained again and again. The problems continued and worsened.

After eight months went by with no repairs, the Knapps turned to other means of getting their landlord’s attention: They called Lewiston’s code enforcement department. Code inspected the apartment and issued a notice of violation to Lalumiere and his companies, which also included MECAP LLC. Still, no one made the repairs. So Maria Knapp made a rare move in August 2018 and filed suit.

Last year, the city of Lewiston brought its own legal action in civil court against Lalumiere and his companies for failing to repair not just the Knapps’ apartment but eight other properties in downtown Lewiston.

These lawsuits, and others like them, shed light on the extent to which the city has changed its posture toward landlords who don’t immediately address violations. The city of Lewiston has brought more than 100 lawsuits against property owners in the last decade to force them to make repairs, 90 of which were filed since the start of 2015, according to a Bangor Daily News analysis of court records.

In contrast, similarly sized Bangor has filed only 11 such lawsuits since 2009.

Josh Keefe | BDN
Josh Keefe | BDN
This is 125 Pine St. in Lewiston where Maria and Jonathan Knapp used to live. The Knapps reported a leak in their bathroom ceiling to the new landlords who took over the property in 2017. When no one made repairs, they complained again and again. The problems continued and worsened.

The lawsuits show just how much housing in downtown Lewiston has required extreme intervention. They reveal a pattern in how some property owners manage their buildings, seemingly ignoring code violations and housing problems until they are legally forced to invest in their own properties.

By suing landlords, the city is forcing landlords to put money into their downtown properties, instead of only using them to extract rents from some of Maine’s poorest residents. When they resided at 125 Pine St., the Knapps lived on a monthly disability check of $745, about 70 percent of which went to Lalumiere’s company in the form of a $535 rent check, according to court documents.

Downtown Lewiston is a tough place for both tenants and landlords: It’s the poorest neighborhood in the state; its housing is old and often contains poisonous lead; and the city is an eviction hotspot, with an eviction rate double the state and national average. As a result of decades of neglect, large portions of the housing stock do not live up to the city and state’s legal requirements for safe housing.

But in recent years, in large part due to pressure from downtown organizers and activists, the city has cracked down on owners of distressed housing by increasing inspections, demolishing property, and filing lawsuits against landlords like Lalumiere who fail to make fixes. The city is also seeking a $30 million federal grant to build new apartments and has told the federal government that fixing its downtown housing market “requires aggressive, disruptive intervention.”

When the city sues a landlord over code violations, it brings the suit via a civil court procedure under the state’s 80K rule, an action recommended only for “the truly difficult enforcement issues and the truly uncooperative violators,” according to the state. That typically means property owners have already repeatedly failed to make repairs, and, in some cases, failed to meet repair deadlines they agreed to with the city in court.

Sometimes this process results in financial penalties for the owner. But the city’s primary goal in suing is to force the owner to invest money, or their companies’ money, back into the property, according to David Hediger, a longtime employee of the city’s code enforcement department who became its director in 2018.

[They wanted a home. Instead they learned the human cost of living in Maine’s most distressed neighborhood]

Property owners said in interviews that the neighborhood’s poverty means they can’t charge rents that are high enough to fund improvements to their buildings. Landlords also said that code requirements are unreasonable for the aging downtown housing stock. It means the code office can essentially target any building at any time.

“You’re at the whim of the bully,” said longtime downtown landlord Joe Dunne, who, together with his girlfriend and business partner, Debra Sullivan, manages between 200 and 300 units in the downtown, a number the duo is actively trying to reduce, according to Dunne. Since the beginning of 2018, the city has brought Sullivan to court over problems at 18 of her buildings, more than any other landlord.

Though some landlords may be extracting rent from cheap properties while purposefully keeping them in disrepair — a business model known as “milking” — both city officials and landlords attributed many problems to landlords not understanding the job they signed up for. Bargain housing prices make it easy for some people to jump into the market before realizing how much maintenance will actually cost.

“There are some bad actors who haven’t done the greatest job in taking care of their properties,” said Mayor Kristen Cloutier. “But I think there are folks who became landlords without understanding the ins and outs of that job, and find out quickly they aren’t particularly good at it.”

But whether the reason for failing to maintain property is ignorance or avarice, the results are the same, according to Gil Arsenault, Lewiston’s longtime code enforcement director who retired in early 2018.

“Either you intended to do this, or you didn’t know what the hell you were doing,” Arsenault said of landlords who don’t maintain their property. “Either way, shame on you. We in code pay the price, because we’ve got to chase you. The tenants are paying the price. And the other property owners in the neighborhood are paying the price.”

David Sharp | AP
David Sharp | AP
In this March 2019 photo, acting Mayor Kristen Cloutier, right, talks to City Administrator Ed Barrett in his office in Lewiston, Maine.

‘I’m an absentee landlord’

Lalumiere is president of Milk Street Capital, a Portland financial services company and private lender whose website boasts: “We Invest in Maine.” But in 2018, the city of Lewiston brought Lalumiere’s two companies to court for failing to fix nine properties.

The city and Lalumiere settled on the schedule and terms for repairs at six of those properties, including the Knapps’ apartment building at 125 Pine St., in a June 2018 agreement. But the city had to take him back to court to set new deadlines for completing repairs and levy him with new fines in January 2019 because he hadn’t done the work he’d previously agreed to.

Reached by phone, Lalumiere said he wasn’t involved with the day to day running of his properties and declined to discuss them or the lawsuits.

“I’ve been so detached from that because I’m an absentee landlord,” Lalumiere said.

“The [property] management people haven’t done a great job, and I’ve fired some of them.”

Kevin Fletcher, who has since ended his affiliation with SK Housing, said the pair bought the properties with the hope of making significant improvements and renovations.

Between the summers of 2015 and 2017, the company increased its portfolio from two buildings to 10 buildings and three condos, worth more than a combined $1 million in assessed value, according to an analysis of property tax records. But difficult tenants, among other issues, made the process harder than anticipated. One of those issues was code enforcement, Fletcher said.

“I have an understanding that code needs to have a place,” Fletcher said. “But the approach was just overbearing and difficult and created undue expenses and fees.”

Fletcher said the legal fees were especially onerous. In total, Lalumiere has paid the city nearly $20,000 in penalties and nearly $30,000 in attorney’s fees and costs, according to figures provided by code enforcement.

“The only one making any money on this is the city attorney,” said Fletcher, referring to Michael Carey of law firm Brann & Isaacson, who handles land-use violation actions for the city. Carey declined to comment on the record, deferring to city code officials.

Fletcher said he had no memory of Maria Knapp or the lawsuit she filed against Lalumiere and his companies in August 2018.

While Knapp and the city both brought legal action against Lalumiere over the conditions at 125 Pine St., they did so separately. While the city sued Lalumiere and his companies for not following city building code ordinances, Knapp alleged that they violated the Warranty of Habitability, Maine law that says all rental units must be fit for human habitation. The court filings in that case provided details of property conditions that were absent from the city’s lawsuit.

By the time she filed suit, Maria Knapp couldn’t go to the bathroom on a rainy day without water drizzling down on her through the moldy crack in her ceiling, she alleged in her complaint, which she filed with Pine Tree Legal Assistance.

According to the suit, Lalumiere’s company eventually sent over a maintenance worker in April 2018, a year after the Knapps originally asked for the leak to be repaired and after they withheld rent to try and force their landlords into action. But the worker didn’t fix the leak and instead patched it over with drywall and spackle.

The patch soon failed, and parts of the ceiling crumbled into the apartment. The hole was filled with mold, and the Knapps couldn’t use the shower, Knapp said in legal documents. They traveled to friends’ homes to bathe.

“There is so much mold in the ceiling that the bathroom has a terrible smell,” Knapp said in an affidavit. “My husband sometimes gets physically sick when he enters the bathroom and smells the mold.”

The Knapps could not comment on their living situation that year because of the terms of an eventual settlement of their suit.

Troy R. Bennett | BDN
Troy R. Bennett | BDN
Sumaya A. Mohamed, 16, (from left) Halima Ibrahim, 16, and Nurto Ibrahim, 17, are close friends at Lewiston High School. They've lived in various substandard apartments in the city's Tree Streets neighborhood with their families.

‘We didn’t even sleep in our house’

Like many other African refugees who have arrived in Lewiston in the last two decades, Halima Ibrahim, 16, and her family had never experienced the winter cold. They expected to experience a frigid winter in Maine. They just didn’t expect it to follow them into their homes, like an intruder.

But that was the case at 166 Bartlett St., where Ibrahim lived with her parents, sister and eight brothers. Because the heat often failed, the family would layer and bundle up in winter clothes while at home.

“We’d be freezing,” Ibrahim said. “We didn’t even sleep in our house.”

When night fell, Ibrahim remembered when the whole family went to her grandmother’s apartment on Pierce Street, where five people were already split across three bedrooms. Ibrahim and her family slept in the living room. She said they complained to the landlord, but nothing was done.

As a child, she didn’t know the policies at play or the fact that the heating problems at 166 Bartlett St. had existed long before she arrived. Her home was like many properties in the downtown: It had several different owners in a short period of time, none of whom put an end to the building’s chronic problems. Impermanence — frequent turnover of owners, and tenants, too — makes it harder for a neighborhood to thrive.

Roughly a decade before the Ibrahims moved into the building, the city temporarily condemned it. That was in December 2004, after code enforcement determined it had been unheated for 10 straight days. The city eventually allowed tenants back in the building, which changed ownership seven times after it was condemned, according to city records.

Since December 2004, the city has cited the building for inadequate heating, as well as violations for bed bugs, cockroaches, mice, an accumulation of bird carcasses in the basement, broken windows, leaky roofs and ceilings, and trash and debris on porches and in hallways.

And while it was piling up violations, it was sold from one landlord to another who would become frequent targets of city lawsuits.

For example, Dunne, who with his partner, Sullivan, has been sued by the city more than any other ownership group, sold the building to Rick Lockwood’s holding company in 2014.

Since 2009, the city has filed 15 lawsuits against Lockwood, one of which forced him to demolish part of 166 Bartlett St. after it was damaged by a fire. Of the 10 buildings Lockwood has owned in Lewiston, the city has taken legal action over six of them.

In September, Halima Ibrahim and her friends Nurto Ibrahim, 17, (no relation) and Sumaya Muhammad, 16, were hanging out at Tree Street Youth, an after school center down the hill from Lewiston High School, which they all attend. Despite their age, all three have lived in several different apartments in the downtown. They recalled experiences with lead poisoning, lack of heat, and insect and rodent infestations at various addresses on Knox, Bartlett, Pierce, Birch and Howard streets.

“Landlords really need to do their job,” Nurto Ibrahim said.

Troy R. Bennett | BDN
Troy R. Bennett | BDN
An elementary school student walks over a chalk drawing on the first day of school in Lewiston this year.

‘I know very few well off landlords’

Even though rents and property values in downtown Lewiston are low compared to the rest of Maine, there are ways to make money off of poor housing. It relies on compromising quality, experts said.

That business model has been dubbed “milking” by Alan Mallach, senior fellow at the Center for Community Progress, a nonprofit in Washington D.C.

It tends to happen in areas where property hasn’t appreciated in value, Mallach said, which has been the case in Lewiston over the last decade. Residential real estate values in Lewiston as a whole have slightly dipped since 2009, according to city records.

When properties don’t appreciate in value, paying the cost to maintain them becomes an expense to avoid. Landlords can buy cheap buildings, extract rents from poor tenants, and eventually sell the property for little or no gain and still make a handsome profit, provided they didn’t shrink their margins by investing in maintenance or paying bills on the property.

“When you can make a profit from pure cash flow, and don’t care about what happens to the property, that’s where it becomes ‘milking’,” Mallach said. When milking is done on a massive scale, the profits usually go to landlords who live elsewhere — and is aided by lax enforcement of housing codes.

In fact, landlords can often expect greater profit margins from renting in distressed neighborhoods than in more affluent ones, researchers found in a 2019 study. That’s because they can rent rundown housing for prices that are only slightly below what they can for housing in fair condition in the same area.

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“Property values and tax burdens are considerably lower in depressed residential areas, but rents are not,” Nathan Willers of the Massachusetts Institute of Technology, and Matthew Desmond, a leading expert in America’s affordability and eviction crisis, wrote in the American Journal of Sociology. In other words, landlords can often “overcharge” poor renters for squalid housing.

Matthew Mastrogiocomo, an attorney who has represented landlords in the area for nearly 20 years, pushed back on the perception that Lewiston landlords are purposefully profiting off the poor, if they’re turning much of a profit at all. He spoke generally, declining to discuss any of his specific clients, which include Lalumiere, Fletcher and Dunne.

“The most obvious [false perception] is of the old fat cat landlord, sitting on a pile of cash, squeezing poor people out of their last dollar,” he said. “Most of my landlords desperately do want to have safe housing. Very few landlords make good money. I know very few well off landlords.”

Mallach, too, said that the majority of landlords in poor communities aren’t looking to exploit poor tenants. You don’t need to be getting rich to be milking a property, either. Most landlords, he said, are simply responding to the economic pressures of their environment.

But in Lewiston, those pressures may be changing.

“If you require that all properties live up to certain basic health and safety standards, and you really enforce it effectively, then you’re going to discourage milking,” Mallach said.

Troy R. Bennett | BDN
Troy R. Bennett | BDN
Cotey Smith of Northeast Rental Housing works on kitchen upgrades in a first floor unit on Drummond Street in Auburn on Sept. 4.

‘It’s a different place than when we started’

Many people who live, work and own property in the heart of Maine’s second largest city said that things are starting to change in the downtown. The city has demolished 228 housing units since 2010 but has only built 71 new units over that same period, according to a city committee. As the housing supply has tightened, rental prices have started to tick upward, according to landlords and tenants. That means properties could start to increase in value and make them more ripe for investment.

“It’s a different place than when we started four years ago,” said Anthony Joliceur of Northeast Rental Housing, which has been buying and fixing distressed properties throughout the downtown, including 166 Bartlett St. in 2017. “As an investor here, I’m really excited about that.”

Some landlords are getting out of Lewiston or drastically reducing the size of their portfolio in the city since officials began to enforce its housing codes more aggressively. Edward Riekstins, a Boston-based real estate investor whom Lewiston took to court over eight properties in 2018, has put much of his downtown Lewiston rental property on the market in recent months.

“We’d rather have fewer buildings and upgrade them. That’s what the city’s looking for, and we’re with them on that,” said Joyce St. Pierre, Riekstins’ property manager.

It is yet unclear how the city’s actions on housing have influenced the market. Hediger and his predecessor Arsenault both said stepped-up enforcement was not done with the market in mind. Rather it is the result of additional resources afforded to the department by the city, which acted in response to political pressure from downtown residents.

[What you need to know about the push to transform Maine’s poorest downtown]

But even with more code officers and new legal tools, compliance from landlords can still be difficult for the city to secure.

As of the beginning of October, the city was still waiting for Lalumiere to make repairs. The code office also found new issues at another Lalumiere property, a building at 16 Prescott St. that had been condemned “due in part to water damage and the need for roof and electrical improvements,” Hediger said in an email.

Maria Knapp reached an agreement in her lawsuit against Lalumiere in November 2018, according to court documents. She and her husband now live next door at 123 Pine St., another property owned by Lalumiere. But city records show there have been code violations there, too, including for a rotted section of a second-floor porch. As of July, Lalumiere owned 17 buildings, worth nearly $1.7 million in combined assessed value, between his two companies, according to city tax records.

Despite all the legal wrangling, the city is still working with Lalumiere and his companies on bringing 123 Pine St. and 125 Pine St., the building with the moldy leak, into compliance.

Hediger said the code department had again agreed to extend the deadlines for those properties until the end of October. However, Hediger said, the property manager of 125 Pine St. told the department “additional time will likely be needed” to replace windows at the property.

Maine Focus is a journalism and community engagement initiative at the Bangor Daily News. Questions? Write to mainefocus@bangordailynews.com.

 



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