Orphans among us

It’s not a topic city officials like to talk about, but it’s a growing fact: Builder bankruptcies are leaving homeowners in orphaned neighborhoods, stuck with problems that won't easily go away.

As more and more homebuilders file for bankruptcy, unfinished subdivisions are experiencing blight because of abandoned properties, weed-filled lots and common ground that looks like nobody cares.

But talk to homeowners and they’ll say plenty of people care. It’s just that builders bailed with homeowner associations stacked by builder representatives. Most say they have slid out of sight when it comes to subdivision maintenance.

In Wentzville, Mayor Paul Lambi says 30 percent of the city’s new subdivisions have been left abandoned because of bankrupt builders. Officials in Dardenne Prairie, an area much smaller than Wentzville, say they have four subdivisions in the same boat. St. Charles County, O’Fallon and Cottleville have all experienced the plight of residents whose builder promises and homeowner dreams disappeared with the sound of hammering nails.

Home Builders Association of St. Louis and Eastern Missouri media representative Shelly Stengel said the group doesn’t track bankruptcies among builders, and doesn’t have information on the number of builders who have bailed in the past year or two. However, according to St. Charles County records, in 2007, 875 parcels of property were foreclosed upon. Although the number of individual lots has not been calculated, St. Charles County officials say 2008 developer foreclosures numbered 102, and so far this year there have been 175.

St. Charles County Public Information Coordinator John Sonderegger said the only guarantee in terms of public improvements to builder-abandoned subdivisions is for the county to use the escrow and surety bonds builders put up before their businesses sunk.

“If a guy (builder) is going to put up 50 homes in a subdivision, he must guarantee public improvements. Even if he goes belly up, we go after the bond money to make sure public improvements are done,” Sonderegger said. “If a builder starts a home and doesn’t finish it, we go into our building codes and we can get the home condemned and torn down.”

Public improvements mean streets, sidewalks and infrastructure, but when it comes to aesthetic issues like neighborhood pools or park-like settings, neighborhoods abandoned by builders are up a creek.

“Most of the problems in St. Charles County are developers who have bought land and haven’t developed it,” Sonderegger said.

County and most municipal ordinances require all weeds, grass, or plants to be cut if they exceed 10 inches in height. Vacant lots in residentially zoned areas are required to be cut shorter than 24 inches in height.

The local government can go after the homeowners association to tell them they have to maintain the property—whether the homeowners association is comprised of the individual homeowners, developer’s representatives or a bank. If they don’t do it, the county does it and a lien is placed against the homeowners association and they’ll pay it back in their property taxes, Sonderegger said. 

“It is not happening very much in the (unincorporated county),” Sonderegger said. “There haven’t been many builders that have gone belly up without streets, sewer and lighting. But whether it’s the developer that has flown the coop or there are people who are not maintaining property, the county will go after them and see that it gets done.”

Dardenne Prairie

Brad Turvey, director of community development for Dardenne Prairie said that city currently has four subdivisions that are owned by banks after being abandoned by builders’ bankruptcies.

“Some of the builders have sold some lots, and three or four builders have gone under,” Turvey said. “We routinely contact the banks on subdivisions affected, and so far, they’ve mostly been cooperative.”

The four subdivisions in Dardenne Prairie include Winterset Hollow, Avalon, Leighton Hollow and Providence. Each had different builders, Turvey said. Tyson’s Corner had a developer who went bankrupt, but not the builder. It stopped the development and maintenance of the second phase.

“Banks have taken over two of our subdivisions, and in the other two, another builder has stepped in, so they have been able to take over the maintenance,” Turvey said. “When banks have to come in, they’ve been very responsive as far as getting the subdivision back in shape—mowing the grass and silt control.”

In the case of Tyson’s Corner, the bank came in and did grading and put in streets and storm sewers and completed the development of Phase 2, Turvey said.

“This is something new that most cities aren’t used to dealing with, so it’s been a learning curve for everyone,” Turvey said. “We do not have the funds to keep up all this maintenance if it’s placed on the city. That’s why when the banks take over and cooperate it helps those who have to live next to or inside these subdivisions.”

Turvey said in Dardenne Prairie, the city keeps the builder escrow funds on file, but that money stays in escrow. When the items for the escrow are completed, it goes to the bank or the owner on record at that time. When a bank takes over, the bank is responsible for correcting any deficiencies. If they are completed, the money would be released to the bank because it owns the lots.

“There are no situations where everything was refused, at least with the banks,” Turvey said. “The builders pull out and they’re just gone, and some of them have left a pretty big mess which the banks have been stuck with. Luckily, they’ve been cooperative.”

Turvey said some of the banks have come to the city and set up meetings to go over deficiency lists. Some issues in subdivisions are still in progress because issues couldn’t be corrected in winter, but they are moving on.

“We were getting complaints on high grass and weeds and siltation in detention areas, but that was prior to the banks involvement. That was during the period when the builders were going out. But the banks stepped up right away and started taking care of the subdivisions.”

The subdivision the city has received the most complaints about is Avalon. They had some questions when the bank took over, but the bank took the spots that the builder was holding on the HOA. The homeowners are working with the bank in resolving those issues, Turvey said.

“The city still has ultimate control over deficiencies. If there is a problem with streets, siltation, storm sewers or detention areas, and the city can also step in and force the banks to remedy the situation,” Turvey said. “It’s in the city’s best interest and in the bank’s best interest to provide upkeep on the neighborhoods, because they don’t want to keep them. They want to sell them. They want to make them as attractive as possible.”

For more than a year, Steven Landfair and other residents of Sterling Crossings in Dardenne Prairie have been fighting for removal of a dilapidated, partially-built home on in Sterling Crossings, next door to his home. Since then, little has been done, Landfair said.

“The city of Dardenne Prairie actually placed a ‘condemned’ placard on the structure on March 30, but now the city has had a change of heart and decided to let the builder continue construction at the site,” Landfair said. “Prior to last April's election, the mayor assured our homeowners association president that this house will come down. This house, and I do use that term loosely, will never be structurally secure, nor will it be an environmentally safe habitat for the future occupants. I am a licensed architect, and I have over 13 years of experience as a building code official with St. Louis County. It is my professional opinion that the city is guilty of gross negligence.”

Turvey said the home was being built by a contractor who ran into hard times. He said the builder has now agreed to return and take the home to completion.

“That’s all I will say about that,” Turvey said.

Turvey said there are other vacant lots, but because Sterling Crossings had custom homes, it’s not just one builder. He said he has looked at the house, and says it’s probably 90 percent complete. The city is doing its inspections and making sure the house is structurally sound and completed properly, he said.

St. Peters

In St. Peters, a major scar on the terrain of the city is the ruddy gray, worn plywood framing that stands at the Highland Park condominium ghost town at Hwy. 94 between Kisker Road and Mid Rivers Mall Drive.

The development once billed by its developers as Missouri's First Green Development has turned into an eyesore example of what happens when builders go bankrupt.

“Highland Park has been a real bad one because we have to deal with as many as nine banks to get it torn down,” said St. Peters Mayor Len Pagano. “That’s why it has taken so long to tear it down. It has to go through the courts, and each building is owned by a different bank.”

Pagano said in terms of new neighborhoods in the city, he is finding that many developers are selling their interests to other developers, delaying the subdivision completion. And, it seems to be going on more than once, Pagano said. 

“I don’t know if it’s standard business practice, but what I am seeing is there are several properties that have been sitting still for some time, but have begun to move as of late,” Pagano said. “This time of year I’ll be getting complaints, especially about high grass and weeds. There aren’t complaints about buildings, because these builders aren’t building too many display homes. That’s how they’re cutting costs. And if they do, it’s a display home that will be sold shortly.”

Pagano said St. Peters has been fortunate that most builders are looking after the subdivisions.

O’Fallon

Tom Drabelle, spokesman for the city of O’Fallon said the city formed a Neighborhood Preservation Team last June to focus on issues with foreclosed houses and subdivisions.

“We are looking at all of them very closely and using escrow funds to address some issues,” Drabelle said. “Although O’Fallon Station is not in bankruptcy, we did use escrow funds to keep grass mowed, trash cleaned up and to make minor safety improvements. We take the issues very seriously and if we can do anything under code enforcement, we are very concerned about it, especially considering the economy and the situation with development.”

Drabelle said whether it’s a foreclosed development or another situation, the city of O’Fallon relies on code enforcement and building inspectors to work with the landowner, the homeowner or the developer to resolve the issue.

“It can be resolved through fines, or sometimes as easy as through a conversation,” Drabelle said. “There are situations where a developer or landowner is not willing, but we haven’t seen those at all. If so, we would use the ability of the escrows to fund repairs.”

One situation in O’Fallon occurred in the Brookside subdivision, he said.

“We have worked with the bank that holds escrows to get the subdivision cleaned up,” Drabelle said. “There were multiple developers, but because TR Hughes stopped building, we went to the bank. McBride is still building and taking care of their property.”

Cottleville

Cottleville Mayor Don Yarber said he feels fortunate that only one builder in Cottleville went bankrupt and the transition to a new builder went seamlessly. That neighborhood, Harmony Ridge along Cottleville Parkway, was taken over by Sun Bank, who sold remaining lots to another builder.

“That builder is continuing to build homes of the same quality,” Yarber said. “There are several homes in the subdivision that are already occupied.”

Other areas are doing well, Yarber said. A new condominium development on Ohmes Road is in progress, and Ted Dettmer homes on Gutermuth Road are doing well, he said. Four or five homes have been sold in the Dettmer subdivision during the past couple of months.

 “We haven’t had to go in and maintain any of the properties,” Yarber said. “The new builder is following what was already approved from the previous builder that went under.”

The Lofts along Cottleville Parkway are empty, but are also owned by Sun Security Bank, Yarber said. The bad news is that Sun Security is in trouble, and recently received a FDIC order to “cease and desist” alleging unsafe or unsound banking practices and violations of law and regulation notice. There’s no word on the outcome of the complaint as yet.

Weldon Spring

Weldon Spring City Administrator Michael Padella said that city has some proposed developments, but to his knowledge, none are bankrupt. The projects are just on the back burner.

“Weldon Spring was near build-out as far as buildable lots when the economic recession hit, although there are plenty of areas that could be developed,” Padella said. “We’re not seeing the degree of those problems that other cities are having. We’re not seeing any subdivisions with problems. Camelot subdivision, for example, goes back to the late 1990s, and it has several hundred homes, but there are just a few lots left in the subdivision. It’s a very small number, so the lots are being maintained because they are privately owned.”