The cratering housing market and the collateral effects of our deepening recession are always fun topics, aren't they?
Here's a feel-good story that is sure to be a smile on your face, starring uber-bankruptcy guru Paul Singerman on one side, and fearsome Bob Charbonneau on the other:
...sniff.....Paul, your words have left me a little teary.
Vincent Santanelli was delighted when his elderly father-in-law told him he planned to purchase a home at Cascades at Groveland, a Florida retirement community west of Orlando.
Still under construction, the property was a short distance from Santanelli’s own Groveland home and was reasonably priced – a rare find in central Florida’s tight housing market. Best of all, Santanelli says he felt at the time, the home was a product of Levitt and Sons, a Ft. Lauderdale-headquartered building giant with a solid reputation for high quality and service. The 78-year-old company claims on its Web site to have built more than 200,000 homes across the United States.
With some financial help from Santanelli, the father-in-law placed a $20,000 deposit on the home and put the Cozumel duplex he lived in on the market. He quickly received a couple of offers and was about to sell when, in November, the retired senior and his family learned that Levitt and Sons had filed for bankruptcy.
“We received no indication that this was going to happen,” says the 64-year-old Santanelli, who asked that his father-in-law not be identified by name. “We’re still waiting to find out if Bank of America is going to take over the development so we can get the deposit back. My father can’t sell the Cozumel home, and now that the value of it has dropped because of the market, he’s looking at a bigger mortgage than he’d anticipated. He has no idea where to turn next.”
Santanelli and his family aren’t alone in their predicament. When Levitt and Sons filed for Chapter 11 bankruptcy protection Nov. 9 after defaulting on $181.5 million in debt, hundreds of customers who had shelled out unsecured deposits were suddenly cast in financial limbo. Chapter 11 allows a financially troubled company to put its debts on hold while it tries to reorganize its contractual obligations. While this goes on, debt-holders like Santanelli’s father-in-law have to get in line with everyone else -- homebuyers, contractors, everyone -- to who the bankrupt company owes money. To get a sense of just how long that line is in Levitt’s case, more than 650 liens were filed against the company in St. Johns County, Fla., alone within days of the bankruptcy.
Calls to Levitt and Sons seeking comment were routed to Kekst and Co. Inc., a financial services firm in New York City, which responded with a prepared comment from Levitt lead bankruptcy attorney Paul Singerman.
“Levitt and Sons has made clear from the very first day of its bankruptcy case that one of its primary objectives was to minimize the loss and frustration of its valued customers,” Singerman stated. “We understand that many of our customers have experienced financial and other distress as a result of our bankruptcy and the catastrophic and unprecedented downturn in the residential real estate sector in Florida and beyond. We have endeavored to be as sensitive as we could possibly be to our customers, and we will continue to do so.”
That the company has tried to be sensitive to its customers’ plight is a statement Levitt homeowner Dan Wenk strongly disagrees – so strongly, in fact, that he maintains a Web site dedicated to exposing alleged Levitt wrongs. The Web site chronicles Wenk’s three-year battle with Levitt over toxic mold and water damage in his Clermont home near Groveland -- damage he claims made his home unlivable and that Levitt has refused to address. Wenk says his battle took on new urgency in August 2006 when he was diagnosed with leukemia.
“I’m not blaming Levitt for my illness, but I’m saying, ‘Hey, I can’t live in the home you sold me, and you haven’t done anything to fix the situation,’” says Wenk, adding that he and his family had to rent another home in which to live. “I hired an attorney, and when we finally sued Levitt, it was about the same time that I noticed some of the financial things going on with the company -- they were reorganizing their stock. Levitt requested an extension for responding to the points we raised in the suit, then they asked for more time. Then, I found out they had filed bankruptcy.”
Wenk says that the cost of his now-stalled lawsuit, medical expenses and the burden of maintaining a second home pushed him over the financial edge.
“Because of this, I’m having file for bankruptcy now, and my mortgage company had to foreclose on the Levitt house.”
According to Robert Charbonneau, a Miami attorney representing about 45 Levitt homebuyers in South Carolina now seeking to get their deposits back, versions of Wenk’s story are being repeated across the country. With the U.S. economy already teetering on the brink of recession, the company’s bankruptcy could not have come at a worse time for people whose finances were tied to the building giant.
“Hundreds are affected,” he says. “When a company like Levitt goes under like this, the ripple effect is felt everywhere -- in construction, the construction materials industry, landscaping, maintenance. The effect may be felt in sectors you and I can’t even imagine right now.”
If there’s any lesson to be learned from the Levitt bankruptcy, Charbonneau says, it’s that homebuyers should avoid unsecured deposits like the plague.
“Make sure that your deposits are escrowed with an escrow agent, like a law firm or title company -- preferably a law firm,” he says.
And I didn't know still-bearded Mike Ehrenstein and Bob left Kluger Peretz to form their own firm. And they even have a snazzy website.
Why don't people tell me these things?