Houchen under investigation

Jenny Marder

Two prominent city leaders have come under fire for their part in

widespread real estate scams that have left about 150 residents in a

financial and legal bind.

Councilwoman Pam Julien Houchen is under investigation for her

part in the scandal and longtime Planning Commissioner Jan Shomaker

resigned her post Tuesday because of her ties to the controversy.

A property that Houchen converted from an apartment to a

condominium is one of the 40 under investigating by the Huntington

Beach Police and city Planning Department.

In 2001, she bought an apartment complex on Green Street and

converted it into four condominium units without acquiring the

necessary city permits or paying the required $7,000 fee.

Houchen did not return calls.

Shomaker, who owns Pier Realty, where Houchen worked until the

spring of 2003, said it would be hard to remain neutral on the

commission that will likely be handling zoning changes, variances and

conditional use permits for the properties under question.

Shomaker said she knew nothing about any illegal conversions.

“[The units] weren’t illegal as far as we were concerned,”

Shomaker said.

We sold a condo when somebody handed it to us and that’s what we

sold.”

Renee Tarnow, who lives in an apartment on Delaware Street, is one

of as many as 150 Huntington Beach residents facing legal and

financial burdens as a result of the illegal conversion scams.

Tarnow discovered that her home was not a condominium when she

tried to refinance 11 months after moving in with her husband and two

daughters. But long before that, she knew something wasn’t right.

She couldn’t understand why no building permits had been filed for

renovation. And fixing electrical and structural problems cost the

family more than $80,000.

“Supposedly, it had already just been remodeled with permits,”

Tarnow said. “That’s what my disclosures said. But we put in a few

electrical plugs and uncovered this giant nest of hornets. It was

during all that that we discovered it wasn’t a condo.”

Tarnow has since sued the title company, the broker, the lenders

and her real estate agent.

“You’d think that somebody out of that group would know whether or

not it was a condo,” she said.

Now, planners and police officers are examining documents to try

and determine the source and extent of the problem.

“We’re investigating to see if there may have been some criminal

activity in the selling of apartments as condominiums,” Police Chief

Ken Small said. “It’s an immensely complex task to determine if these

places were properly converted, who owned them and who did this

stuff. We’re trying to sift through all of that.”

Shomaker is urging the city to aggressively pursue the problem and

has said she will make all documents she has available for the

investigation.

“As I believe I am guilty of absolutely no wrongdoing in

connection with these conversions and believe a comprehensive

investigation will demonstrate my innocence, I now realize that the

slow process of identifying what went wrong and assigning blame is

not a complete solution,” she wrote in her resignation letter. “While

the investigative process takes place, innocent homeowners may be

affected by the lack of clear title, affecting both their ability to

enjoy their homes or re-sell them.”

Planning commissioners stood by the integrity of their fellow

board member Tuesday night.

“The feeling of the Planning Commission was, she’s one super

lady,” Planning Commissioner Tom Livengood said. “She wants to

resolve the problem and protect the people that bought those homes,”

Livengood said. “That’s a classy lady. There’s a lot of pressure on

her.”

In order to turn an apartment into a condominium, the apartment

owner must submit a subdivision map and conditional use permit, and

pay a fee of about $7,000, Planning Director Howard Zelefsky said.

Since the city plays no role in real estate transactions, it can’t

enforce whether buildings are complying to code, thus making it easy

for brokers and title insurance companies to skirt city policies.

“I think a group of individuals really wanted to avoid city

review,” Zelefsky said. “If you want to avoid city review, then you

figure out ways to go around the city and I assume that’s what they

did.”

Former Mayor Ralph Bauer, an apartment owner himself, said the

idea to illegally convert apartments has been around for years.

“The idea’s been floating around for a lot of years among people

who are in the know about Downtown real estate,” Bauer said. “People

say ‘Gee, financially it’s a pretty good deal.’ Even though selling

apartments as condominiums can be financially attractive, as opposed

to renting them out, it’s not the right thing to do. I think it’s a

good idea to follow the rules.”

In 1984, the city established its condo conversion ordinance in

order to maintain a balance between rental and homeowner dwellings.

The ordinance requires building owners to undergo a timely and

costly process before converting an apartment to a condominium,

namely owners must pay the fee and change the zoning. They also must

give tenants six months notice of the intent to convert the property

as well as first right of refusal to buy the unit.

Right now, the balance of rental to homeowners units is about 40%

to 60%, a ratio that the city plans to maintain.

“That’s optimal,” Zelefsky said. “If there was no review of that,

then there would be no protections for people renting their units and

no checks and balances between homeownership and rental units in the

city.”

City officials were alerted to the problem when they began

receiving complaints from Downtown homeowners who had discovered that

their homes had been illegally converted in the process of trying to

sell or refinance. Patterns began to emerge and the city began to

conduct research to find out how many illegal conversions had taken

place.

“We didn’t know the extent of it until recently,” Zelefsky said.

Now, city leaders say they want to make it as easy as possible for

residents to legitimize their homes. A meeting will be held in early

June for the homeowners faced with the problem.

“We’ll be bringing everybody in and we’ll explain a plan of action

from here,” City Atty. Jennifer McGrath said. “We’re trying to

minimize discomfort of the property owners currently in the unit.”

McGrath said the city plans to send letters out in mid-May and

hopes to hold the meeting in June. A date has not been set yet.

McGrath will be at the meeting, as will staff from the city’s

Building and Planning Department.

“The city’s goal is to make it as easy as possible for people to

legitimize the units,” Zelefsky said. “The council’s very clear that

they do not want people who bought the units to go through a

cumbersome process in order to legitimize the units.”

Tarnow thinks that those, like Houchen, who handled the

conversions knew exactly what they were doing.

“I think [Houchen] is a pretty smart person and she knew what kind

of powers she had,” Tarnow said. “It’s unfortunate, people that are

in a political position like that, sometimes they think that they’re

above the law. I just hope that it gets resolved and I hope that

instead of a spank on the hand, there’s some type of punishment for

the guilty people in this.”

* JENNY MARDER covers City Hall. She can be reached at (714)

965-7173 or by e-mail at jenny.marder@latimes.com.