Coast Homes Battle Grows

A major court battle is developing between the California Coastal Commission and scores of property owners it suspects of abusing a state-mandated, low-income-housing program along the Dana Point coast.

The case involves Niguel Beach Terrace, a bluff-top enclave of condominiums where more than 200 units were sold at steep discounts to qualified buyers in the early 1980s.

The controversy erupted last summer when the Coastal Commission, which oversees the project, issued 143 cease-and- desist orders to owners thought to have rented out or sold their condos at market value, violating the original purchase agreements.

Although the commission has retracted 38 of the cease-and- desist orders, most are headed toward a court showdown because many of the homeowners are now suing the commission in response. Those cases could turn on whether owners broke their end of the bargain or whether the commission’s handling of the low-income-housing program was so sloppy that owners were left in the dark.

Under terms of their original sales contracts, buyers were obligated to live in the condominiums for at least 20 years or sell their properties back to a public housing agency at a small profit, guaranteeing that the units would remain affordable for the next buyer. But some owners, Coastal Commission officials contend, rented out their units during summers for $1,000 a week or more, exceeding the restrictions, while others leased their properties and moved out, a few to other states.

Some of the condos, the agency alleges, have been sold in the county’s lucrative housing market at substantial profit. Niguel Beach condos, just south of the posh Ritz-Carlton hotel in Dana Point, can fetch at least $300,000 today -- roughly five times the original sales price.

“These people don’t seem to understand that they were subsidized to buy the units in the first place,” said Deputy Atty. Gen. Jamee Jordan Patterson, who represents the Coastal Commission. “Now they want to take the money and pocket it without living up to their end of the bargain.”

To enforce its terms, the commission could take such actions as levying fines, extending terms of the deeds or forcing the sale of homes back to the program itself to keep them as low-cost housing.

The enforcement action has sparked angry responses from dozens of Niguel Beach Terrace owners. Agency officials, they say, failed to properly administer the program for years and hastily issued cease-and-desist orders just as many of the deed restrictions were about to lapse.

“The commission has taken a shotgun approach to this,” said John Anderson, a San Clemente attorney representing a group of the homeowners. “After 20 years of neglect, they are finally trying to do something. But their records are in chaos.”

So far, the commission has retracted 38 cease-and-desist orders after determining that there was no evidence that property owners had breached their purchase agreements.

Aaron McLendon, a statewide enforcement analyst for the commission, said two owners have settled with the commission and two more have sold their units back to the low-income program, as required.

A total of 101 actions remain unresolved.

Although the commission would like to resolve the cases quickly, Patterson said, she expects the vast majority to end up in Orange County Superior Court. At least 70 property owners have sued the commission; 10 to 20 more have said they might take legal action.

Homeowners contend that the program’s administration was so poor that it was difficult to find out which nonprofit agency to contact about selling or renting out their units. They also said the commission did not notify them when new nonprofit agencies were brought in to manage the program.

In the early 1980s, the Orange County Housing Authority administered the project for the Coastal Commission. After the county declined to continue overseeing the project, it was handed over to a small nonprofit staffed by volunteers.

When that did not work out, the Coastal Commission assumed control but said it had neither the staff nor the money to handle it. Since 1990, the nonprofit Civic Center Barrio Housing Corp. in Santa Ana has administered the program.

Frustrated trying to keep up with administrative switches, some homeowners said they struck out on their own and rented out their dwellings at below-market rates to tenants they thought were low- to moderate-income wage earners. In doing so, they said, they met the intent of the program.

John A. Delis, a Santa Ana attorney who represents more than 70 homeowners, said that although owners had to get approval before renting out or selling their units, “the bottom line is that ... the Coastal Commission chose never to enforce that.”

Delis said the commission was so shoddy in its investigation that it had to retract cease-and-desist orders against two of his clients who had clearly complied with the restrictions.

In one case, he said, the owner had simply let his 83-year-old mother live in the unit without paying rent. In the other, a teacher had transferred title to a family trust to help her qualify for refinancing.

Anderson, the San Clemente attorney, said the Coastal Commission is trying to force owners who improperly rented out their units to sell their condos back to Civic Center Barrio well below market price. That punishment, he says, is not spelled out in the sales agreements, as it is for improper sales.

Anderson said Civic Center Barrio has done nothing for years to enforce deed restrictions, although it was warned in the early 1990s that many of the Niguel Beach units were being rented out improperly.

Helen Brown, executive director of Civic Center Barrio, denies that her organization has ever mismanaged the program.

Patterson, the deputy attorney general, said many Niguel Beach homeowners were nonetheless able to contact the nonprofits and the commission to execute sales and get permission to rent out their units.

She noted that 41 owners from Niguel Beach Terrace reached the commission in 1988 when the agency offered homeowners the chance to opt out of the program and its restrictions in exchange for a $10,000 fee.

Patterson disputed the contention that Niguel Beach homeowners were insufficiently notified about management changes. She said Civic Center Barrio mailed notices to all Niguel Beach units shortly after it took over the program.

“Had the owners lived there like they were supposed to,” she said, “they would have received their notices.”

As for Anderson’s contention that the commission is inventing penalties as it goes along, Patterson said he has misinterpreted what the deed restrictions mean.

If a homeowner did not obtain written consent to rent out a property, Patterson said, that triggers the Coastal Commission’s right to force the sale of the unit through the program.

Finally, the commission dismisses the allegation that it was unfair in waiting until the eleventh hour to do something about suspected abuses in the program.

“It’s better to wait to the last minute than not at all,” Patterson said. “What matters is we caught them in time and asserted the public’s right to enforce the deed restrictions.”