Evictions, flipping tarnish effort to turn squatters into homeowners

A politically connected charity that was supposed to help people living in properties owned by the Detroit Land Bank Authority wrongly evicted some of them and flipped houses to developers with markups of thousands of dollars.

In early 2016, the Black Caucus Foundation of Michigan promised it would convert squatters into homeowners if the Detroit City Council allowed it to buy up to 200 occupied houses from the land bank.

Instead, the plan is sputtering along, with finger-pointing all around.

Squatters, people who live illegally in houses they don't own, are a most vexing problem in Detroit. There are more than 3,600 houses owned by the land bank and occupied by such people, many of whom lost their homes to foreclosure. Evict them and the land bank could add to the city's homeless population and its enormous stock of vacant and blighted buildings. Land bank officials have said an occupied property is better for a neighborhood than an empty building.

The Black Caucus told council it would, at its expense, "rehabilitate and affordably sell the fully renovated homes by land contract to the properties' qualified occupants." To run the operation, the caucus formed a subsidiary, Bridges to Homeownership.

The plan included providing "wraparound" services to squatters, such as educating them on the responsibilities of home ownership, financial literacy and job advancement.

If things didn't work out for the squatters, the foundation would try to find buyers among first responders and skilled craftsmen.

But after council gave its blessing to the Black Caucus, that's not exactly what happened.

Bridges, the subsidiary, evicted some squatters before it had the deeds to the houses. Land bank officials say the evictions were improper.

Bridges or the Black Caucus paid $1,000 each for 29 houses, as of mid-February, then flipped eight of them to investors for thousands of dollars more. It sold a two-story brick colonial on Detroit's east side to a Miami company for $30,000 while it was still occupied. A Southfield man paid $12,500 for a Bridges house and resold it within days for $19,000.

Of those 29 houses, only three have been sold to the squatters, far below the group's stated goal of buying and selling up to 1,800 houses a year. Another three have been rented to the squatters.

Click through 17 Detroit properties involved in the Land Bank dealings:

“It has been a complete nightmare,” said Rachel Yancey, who was evicted from a house she lost to tax foreclosure after she decided against buying the property from Bridges to Homeownership. She said Bridges didn't fix a mice infestation and sewage backups in the basement. She's now living with her children in a friend’s basement.

Even as these issues unfolded, the Detroit Land Bank asked City Council in June 2017 for permission to sell Bridges up to 200 additional houses, in batches. The land bank said the foundation had "demonstrated its ability ... to successfully renovate occupied residential structures in the City of Detroit." Council agreed, unanimously.

Erica Ward Gerson, chair of the land bank's board, defended Bridges.

"I believe that they’re succeeding in our goal, which is to allow these people to stay in their homes or at least to put the homes back into productive use," she said in an interview.

In 2013, Mike Duggan campaigned for mayor on a promise to demolish thousands of blighted buildings across Detroit.

After he took office, he turned to the land bank to help make that happen. The city transferred thousands of properties in its inventory to the land bank to clear title issues, sell the houses or demolish them.

The Wayne County treasurer also began transferring tax-foreclosed properties to the land bank.

Some of those houses had people living in them. Many of the occupants had lost their homes to tax foreclosure or their landlords did. Others simply moved in and took over properties. As of late March, the land bank estimated it owned more than 3,600 structures with people living inside. Overall, including vacant houses, the land bank owns more than 31,000 structures across the city.

Officials who work with land banks say Detroit's squatter problem could be the biggest in the country. The land bank's inventory of occupied properties is likely the largest, in part because many land banks do not take occupied structures.

So Gerson said the land bank drew up its plan for occupied structures "out of whole cloth" and "shopped it to a bunch of different nonprofits."

"They all said, 'this is too hard. This is too heavy a lift. We don’t see that this is something we can take on,' " Gerson said.

Not the Black Caucus. In 2015, the foundation and land bank signed the first of several agreements that allowed its subsidiary, Bridges to Homeownership, to buy occupied properties for $1,000 each (and later, $1,500).

A for-profit company, Realty Services, has a contract to run day-to-day operations for the program. It pays the Black Caucus Foundation a fee "per sale transaction," according to documents Bridges filed in an eviction case in 36th District Court.

"We are not aware of the details of any business arrangements between the Black Caucus Foundation and RSC, nor do we need to be," Gerson said in an e-mail. "Our agreement is with the Black Caucus Foundation/Bridges to Homeownership."

Andrew Munro, a lawyer from Birmingham and chairman of Realty Services, helped create Bridges to Homeownership, which was incorporated with the managing director of the Black Caucus after the nonprofit signed its first deal with the land bank.

After spending a couple of years handling mortgage foreclosures in the private sector, Munro said he designed the program to help Detroiters struggling with affordable housing. Bridges spends about $48,000 to $55,000 per house when it does the renovations, a figure that does not include administrative costs, he said.

The land bank has more than 200 "community partners" who can buy up to nine houses a year without City Council approval. But none has access to 400 houses like the politically connected foundation.

Former state Rep. Alma Stallworth founded the group. One of her two sons, K.B. Stallworth, was managing director but recently retired after inquiries from the Free Press for this article. His wife, Nicole Stallworth, is executive director.

K.B. Stallworth also served in the Legislature — but at that time went by Keith Stallworth. K.B. is also the Keith Stallworth who pleaded guilty to a felony in federal court in 2003. He was accused of helping a gang launder money through a Detroit strip club he owned, according to Free Press reports at the time.

The Black Caucus website lists state Sen. Virgil Smith and state Reps. Brian Banks and Bert Johnson as board members. None is still in the Legislature and all have felony convictions.

The Black Caucus told City Council it is a nonprofit dedicated to public policy analysis and direct service that "focuses on life quality advances for urban, disadvantaged, poor and minority constituencies."

According to its 2015 federal tax return, the most recent available, the foundation's mission is to "decrease usage of drugs and alcohol among youth." That year, Alma Stallworth earned $18,000, Nicole Stallworth, $47,294.

The Black Caucus did not mention any experience in real estate or development in its letter seeking council approval to buy occupied houses from the land bank. But that wasn't a deal breaker.

"We were less worried about that because this is a different deal," Gerson said. "There are people around here who are very successful in real estate who could never handle an occupied property. So what we did was we ran a test. We gave them four properties and said you have to prove to us that the renovation is going to be quality, that you don’t fall down on the finances, that you provide the housing counseling we required. ... And that was the way we due-diligenced them."

And the result of that small experiment? The occupants of two of the houses moved out. The occupants of the other two are buying the properties on land contracts. One is paying $57,000; the other $72,000.

"I know that we do everything we possibly can to keep people in" the houses, Munro said. "Our success rate is fairly high."

Land contracts may be used to sell property to buyers with less than good credit who wouldn't qualify for a conventional mortgage and when the seller does not need the entire purchase price up front.

Under a land contract, the buyer can occupy the property as long as the required payments are made. After the last payment, the buyer gets the deed and holds legal title to the property. If the buyer fails to pay, the seller can take back the house.

In five cases, the Free Press found, Bridges began evictions against the occupants before it had the deed to the houses, according to records from 36th District Court and the Wayne County Register of Deeds.

The occupants of all five are gone, land bank records show. Bridges sold two of those houses to developers and a third to a man in New York.

The land bank's Gerson said the evictions should not have happened that way.

"Our view is that legally, you are not permitted to evict from property that we own. They didn’t have the property. ... Our view is that we don’t allow anyone to evict anyone until after they have legal title and by the way, we made that explicitly clear" in a December 2017 agreement with Bridges, Gerson said. Bridges has not filed to evict since signing the agreement.

The Free Press spoke with Black Caucus and Realty Services officials in February at a Realty Services building on West 7 Mile in Detroit. Alma Stallworth opened the meeting by reading a prepared statement that touched on her 21 years in the Legislature, and various programs that serve children and the community.

As she finished, K.B. Stallworth addressed her.

"Permission to speak, Queen Mother?" he asked. He then launched into a 20-minute monologue about the foundation's many contributions to the world, including teaching life skills to children.

"I wish the rowing was not so difficult," Stallworth said. Then, he left the building, without taking questions.

Foundation President Michael Aaron did not respond to later requests for comment.

Munro, in a separate interview, defended the actions, pointing to Bridges' agreement with the land bank that allowed it to use "any and all legal methods" to evict occupants. But Bridges was not supposed to remove occupants without first giving the land bank five days advance notice in writing.

The land bank said written notice was not provided in those five evictions and two others.

Munro said the evictions were discussed in meetings and noted in spreadsheets shared by Bridges and the land bank.

"Oral notification is OK because they knew about all of these and they've never objected until you got involved," Munro told the Free Press. "My understanding is that there were spreadsheets that went back and forth that indicated the status of all of the addresses."

Bridges also flipped eight properties for thousands of dollars more than it paid for the houses, according to records from the Wayne County Register of Deeds.

Take a house on Bishop on Detroit's east side. Bridges bought the two-story colonial with a sagging gutter and damage to the brick exterior in August 2017 for $1,000. It sold the property last November for $30,000 to IDG Holdings of Miami.

IDG began evicting the occupant in January. On a recent day, she told the Free Press no repairs had been done to the house, and that she has agreed to move. She declined additional comment.

Then there's a house on Murray Hill. Bridges bought it for $1,000 in March 2017. Two months later, Realty Services Company, on behalf of the Black Caucus and Bridges, sold the house to Talfred Waire of Southfield for $12,500. Within days, Waire sold the house for $19,000.

Tasha Hervey, who lived nearby, said she had asked the land bank whether she could buy the house for herself and her two children, but was told it wasn't for sale.

"I saved it from getting broken into," she said. "They promised me they would give me a chance to buy it but they never gave me the chance."

This week, the house sat vacant.

In another case, Bridges bought a house on St Marys from the land bank in March 2017 for $1,000, then sold it to a Florida limited liability company called Invest Detroit in July for $26,000. Five months later, Invest Detroit sold the house for $53,596 to a company called Investuru.

Both companies that bought that house share the same suite with IDG Holdings on Biscayne Boulevard in Miami. An official reached by phone declined comment.

Gerson said Bridges described its buyers as “partners that are providing services like contractors."

A house that Bridges sold to a developer for $33,000 was resold earlier this year to a California couple for $110,000.

Munro did not answer questions about how much money Bridges put into specific homes the Free Press inquired about, but said: "As a company, we have lost money every year of operation."

In December, the land bank began prohibiting Bridges from selling houses to third parties until the houses had been rehabilitated. Regarding the houses that already had been flipped, Gerson said the buyers are successfully completing the required repairs.

But safely? Not always, the Free Press found.

On a warm February afternoon, the Free Press found a crew working on a two-story house on St Marys that IDG purchased from Bridges for $25,500. Two men were on the roof, prying off the shingles. They had no fall protection.

"That's an injury or fatality waiting to happen," said Dr. Kenneth Rosenman, a professor of medicine at Michigan State University who studies occupational and environmental injuries. Falls are a leading cause of death among construction workers and can be prevented with safety equipment.

The workers declined to speak to the Free Press.

On Fairmount, a house that IDG Holdings bought from Bridges in December for $14,500 has a broken front window, a little lion statue in the front yard and an occupant — Reginal Murphy.

Murphy was sitting on his front porch when the Free Press stopped by.

"What seems to be the problem?" he asked.

A Free Press reporter told him the house had changed hands several times.

"That's way out of my jurisdiction," he said.

Murphy said he thought his sister owned the house. He said he is on Social Security and suffered a head injury in a car accident. He asked whether he could pose for a Free Press photographer.

Standing on the front lawn, he declared: "Olympics. Korea. Karate." Then he did a little dance.

The land bank shares the blame for its squatters' troubles.

Under a second program known as Buyback, certain squatters can purchase their properties, as is, for $1,000. The land bank admits it failed to inform some of them, including the occupants of the first houses sold to Bridges, that Bridges wasn't their only option.

The land bank said it has no record of successfully contacting the occupants of 13 houses sold to Bridges. The land bank changed its procedures in May 2017 to require that squatters be contacted about the buyback option before their houses are sold to Bridges.

Carl Payne and Rachel Yancey were among those who missed out.

The couple bought their house on Ilene in 2010 at the Wayne County treasurer's tax-foreclosure auction for $3,005. But they were unable to pay the taxes and lost the home in 2014. They remained in the house.

In late 2015, Payne said he noticed someone taking photos of the house. K.B. Stallworth introduced himself and "said he worked for some organization that helps people in the community save their homes."

Payne said Stallworth's pitch sounded good. The house needed repairs, including a new roof. Yancey said Bridges gave them two options: leave and they would get $900 toward their moving expenses — cash-for-keys — or stay and let Bridges do the repairs and sell them the house.

In January 2016, they signed a lease and began paying $850 a month in rent as Bridges began renovations. That June, a lawyer working with Realty Services sought to close the sale to Payne and Yancey.

According to the purchase agreement, Bridges would sell the house for $57,000 on a land contract with an 8.5% interest rate and monthly payments of about $830. Munro said Bridges had put $63,000 into the house.

Yancey said she and her husband didn't go through with the purchase because the house had a mice infestation and plumbing problems that caused raw sewage to bubble up in the basement. They stopped paying rent and were evicted that September.

Their marriage, they said, crumbled under the stress.

"We separated," Payne said. "I was living with a friend, homeless for a while. It was crazy."

"Having to vacate the home, we eventually just had to go our separate ways because we had nowhere to go together," Yancey said.

Since the eviction, Yancey said, she and her children, who now attend a new school, are living in the basement of a family friend's home.

Yancey and Payne said no one from the land bank told them about the buyback option.

Gerson, the land bank's chair, said the program was developed in late 2015 and was initially offered only to "people ... who called us up."

Land bank records show that Yancey did contact the land bank in 2015 asking how she could stay in the house. She was told there were no guarantees but "it will be taken into consideration that she's been living there."

But in May 2016, the land bank sold the house to Bridges.

"I definitely feel betrayed," Payne said.

Yancey recalled Stallworth's visit to the home, when Stallworth talked about helping to revitalize the tree-lined neighborhood of brick houses.

"I kind of feel like they sent the African-American guy because we’re like an urban community so I felt like they sent him out to communicate with us first just because we would take to him easier and really not ask a lot of questions because, you know, the way he talked and presented himself, we thought it was a reputable organization. So because we couldn’t contact the land bank, or we tried to and weren’t getting any feedback, you know, we’re like OK, the Black Caucus organization, we’re assuming he’s trying to help, so that’s what we went with."

Bridges, in turn, has accused the land bank of undercutting its efforts by not selling it enough houses, according to e-mails obtained by the Free Press between Munro, Gerson, Stallworth and a land bank lawyer.

In an August 2016 court filing in the Payne-Yancey eviction, Bridges predicted it would acquire 200 houses in its first year and at "full scale, the program will seek to acquire and sell up to 1,800 homes annually."

But privately, three months earlier, Munro had complained in a series of e-mails to the land bank that it was not living up to the terms of their deal.

He requested a meeting and wrote that the land bank had not transferred any homes to Bridges in more than seven months, according to e-mail exchanges with Gerson and the land bank lawyer.

"The viability of BTHO is being jeopardized by our inability to get homes," he wrote.

In another e-mail that day, he added: "The financial consequences of the DLBA's nonfeasance are not yet irreparable, but are on the verge of becoming so. If consequences become irreparable, our conversation becomes very different."

Gerson replied: Munro's "hostile demand" was endangering the land bank's relationship with K.B. Stallworth.

"I would be personally very distressed to see your attempted intimidation tactics destroy what he and I have worked so hard to build."

In a follow-up e-mail, Munro said he had raised capital from investors to buy and renovate houses based on his agreement with the land bank, but the land bank hadn't even given him a list of available properties.

"Today, I began laying off employees and am faced with the decision to return investors' money," he told Gerson.

K.B. Stallworth also weighed in, writing to the land bank that Bridges was having trouble getting a "good list" of occupied properties it could purchase. The land bank's lists had properties it didn't even own, that were not occupied, or didn't have a structure on them.

Stallworth said the land bank needed to make his program "a high enough priority to get us properties to work on."

Stallworth added that he had asked Munro to "stand down" from additional communication.

Since signing its first agreement with the land bank in 2015, Bridges has reached additional deals that have allowed it to purchase vacant properties and rehab them. In all, Bridges has purchased 46 vacant and occupied houses from the land bank and one side lot.

Of that total, it sold seven houses to couples and individuals at prices ranging from $69,000 to $92,500. It sold another house to a man living in New York for $15,000 who handled the repairs and said he plans to live there when his family comes from Yemen.

According to Bridges, renovations have been completed at 15 houses and work is under way at two others.

For Muhtasib Dirul-Islam, Bridges was a lifesaver. He and his wife lost their home on Ohio Street to tax foreclosure in 2014. At the time, they were divorcing and money was tight after he lost his job cooking for an Oakland County country club. He couldn't keep up with the repairs, including a leaky roof.

After the divorce, she moved out and he stayed, becoming a squatter.

Things were so dire then that Chef Taz, as he's known, was catering out of his house and delivering food from the trunk of his car. His credit was shot.

"It was a rough time in my life," he said on a recent afternoon in the building on Fenkell where he runs his restaurant, SumThingGood, alongside a mobile phone shop, a check-cashing business and an insurance agency.

Bridges gave his two-story brick house a new roof, windows, kitchen, central heating — a complete makeover.

"My house looks amazing," he said. "It's one of the nicest houses on the block now."

Dirul-Islam is buying the house on a land contract for $72,000. He's paying 8.5% interest and has monthly payments of $1,000.

"For me, it lined up perfectly," said Chef Taz, who bills his restaurant as the King of the Turkey Chop. "I was looking to earn something off the sweat of my brow."

But two other families who bought vacant houses from Bridges had a very different experience.

Lori and Levan Adams said they decided to buy their house from Bridges partly because it was affiliated with the Black Caucus Foundation.

"When I saw it on the website, I’m like, 'it’s gotta be reputable,' " Lori said.

She's buying the two-story house for $92,500 on a land contract. She said that for that price, she was supposed to get a vinyl privacy fence so they could let their dog, Chance (as in Chance the Rapper), run around unleashed. Bridges offered the couple $3,500 toward the fence, but Levan Adams said it could cost twice that.

"I'm very pissed off," said Levan Adams, standing next to his Silverado pickup, wearing a Detroit Bad Boys cap and smoking a cigar.

"I got a big ol' Rottweiler in the basement," he said. "I'm pissed. My wife is pissed. You feel like you got shafted."

Another issue: Bridges built a railing around a second-story balcony and encased the railing with flimsy wooden lattice panels more often seen around deck foundations, they said. One of the panels has fallen.

Lori Adams said she won't allow their daughters on the balcony because she doesn't think it's safe.

The couple moved to Detroit from Roseville because they wanted to be a part of the city's comeback. She works at MotorCity Casino; he is a detective with the Detroit Police Department.

"We could have stayed in the suburbs," Levan said. "But I'm a firm believer that you should police where you live."

Lori said her family could have helped promote Bridges. But not now.

"If this program ran smoothly it would be a good program ... for people like me and my husband, who are working people, who are trying to rebuild credit and live in a home in the city."

Ricky and Denise Sailes are also buying their house on Robson from Bridges on a land contract. Bridges got it for $1,000. County records indicate the couple is paying $70,000 but they say their cost is actually $72,000.

The newlyweds (they were married in June 2017) say they can't use their master bedroom because there's no heat on the second floor. The garage has a new door, but the walls are rotted and when he touches the garage, Ricky said, "it actually moves."

"I ain’t going to say a strong gust of wind is going to bring it down but I could push it down," Ricky said.

The couple said they moved into the house in March 2017 and, at first, it looked great. But it wasn't long before doors started coming off the hinges and the basement flooded with sewage.

They said Bridges told them it would put a bathroom in the basement but ran out of money to build it.

Ricky and Denise share the home with three dogs named after high-fashion houses — Prada, Fendi and Chanel. Denise said she worries she and Ricky made a bad decision. She's not sure how much money Bridges put into the house.

"But to sell it to us for $72,000 with one bathroom, no heat upstairs. It’s a lot," Denise said. "They keep spinning me. I’ve called Mr. Stallworth; he hasn’t returned my calls. I just want to know, 'is this legit, is we going to be in this house until we pay it off or is this some scam going on where in five years we going to be homeless, lose all our money?' That’s all we want to know. Is it legit?"

Contact Jennifer Dixon: 313-223-4410 or jbdixon@freepress.com. Staff writers Joe Guillen and Kristi Tanner contributed to this report.