Out among a patchwork of farms along Columbia Road between Mason and Aurelius Township is a sprawling subdivision called Columbia Lakes, named for the small body of water it surrounds.
The few homes that have been built abut large tracts of open land. Planned streets dead end after a few feet and weeds poke up through the snow in empty lots. One plot, overlooking the lake, has just a foundation and looks like construction was halted long ago — there’s a sapling, maybe 10 feet tall, growing out of the foundation. “No trespassing” signs hang on a fence cordoning the foundation, and in front is a Strathmore Development Co. sign advertising that it’s for sale.
According to the Columbia Lakes Web site, 509 homes are supposed to encircle the lake. But it’s doubtful that more than 50 homes have been built in Columbia Lakes.
And now, the developer behind Columbia Lakes, East Lansing-based Strathmore Development Co., owes Ingham County $129,206 in delinquent taxes and late fees for 157 parcels in the development that have gone unpaid since 2007. Strathmore President Scott Chappelle says the taxes will be paid before March, the last month before the county could foreclose on the properties.
Chappelle, whose troubles with property taxes surround his planned City Center II development in East Lansing, would not comment on why the taxes went unpaid for so long. But his late taxes are only the fifth-largest amount owed in the county. According to Ingham County tax records and Treasurer Eric Schertzing, this year’s list of properties heading toward tax foreclosure is over 1,500, compared to last year when it was just over 800 — a 46 percent jump. The grand total for taxes owed to the county is $5.9 million.
Moreover, Schertzing says this is the first year that significant commercial properties in Ingham County have appeared on the list. The properties range from high-profile office buildings in downtown Lansing, to large apartment complexes, shopping plazas and a local hotel. The list also includes a property owned by Ingham County Drain Commissioner Pat Lindemann on Michigan Avenue in Lansing.
Tax foreclosure is a measure that comes in several steps. The properties that could be taken over by the county on March 31 owe taxes from 2007. On Feb. 11, those who still owe taxes can go to a show cause hearing at the Ingham County Treasurer’s Office in Mason to pay taxes or work out other payment arrangements. On Feb. 24, anyone who still has not paid property taxes can attend a hearing in front of a judge to protest foreclosure.
The way properties end up facing foreclosure has to do with how taxes are collected. In a given year, property owners will owe property taxes to their local municipality. If those taxes are not paid by March 1 of the following year, the taxes are turned over to Ingham County, which is then in charge of collecting the taxes. Local municipalities are made whole because the county borrows money to pay them. If those taxes are still not paid two years later, the county could foreclose on a property.
Last year, 85 percent of the properties heading toward tax foreclosure paid their taxes before the county seized them, Schertzing said, but with a worse economy and a larger list, it is unknown how many will pay up — there is at least the potential for the county to see an increase in tax foreclosures this year.
“We could potentially see twice as many foreclosures,” Schertzing said. “The list is just growing.”
Some property owners are contesting their tax bills in the Michigan Tax Tribunal. This year, the tribunal has 35,000 cases pending. A favorable ruling for a property owner in the tribunal could result in any overpayments being refunded — but unless or until property owners get a favorable ruling, they are still obligated to pay.
Topping the list
There are many properties in Ingham County’s list of delinquents from 2007, and going through the list it might appear that many different companies and people own many different properties. But if you start checking the hundreds of limited liability companies that own some properties, you come up with a different story.
By far, the name attached to the most delinquent properties in Ingham County — the No. 1 on a top 10 list — is Sameer Dua, a local attorney.
Dua or his law firm, Dua and Associates, appear as the resident agent of at least six different LLCs that owe a grand total of $573,534 in delinquent taxes and fees on 61 different addresses. Because Dua is listed as a resident agent, he may not outright own any of the properties, but he receives notice that taxes are owed as part of the county’s collection process. Dua did say that he owns a property at 1344 Christopher St. in Lansing, which is delinquent $3,370, but that Ingham County tore down a building on it, so he’s letting it go.
“The taxes will be paid before (the properties) are lost to the state or county,” Dua said. He would not divulge the name of the actual owner of any of the properties for which he is a resident agent.
Dua is resident agent for BCD Apartments LLC, which owns several large apartment complexes on Bardaville Street, on Lansing’s north side near the intersection of Waverly and Grand River avenues, and on Dorchester Circle, off of Martin Luther King Jr. Boulevard, and on Cavanaugh Road. BCD owes a total of $345,141 to the county on these three apartment complexes.
Some of the BCD apartments appear to be in poor shape, and Schertzing said that if taxes on an apartment building are not being paid, that probably means proper care of the buildings is probably also not being done. Further, with this year’s list, Schertzing said this is the first time large apartment buildings have been in jeopardy of being foreclosed.
“The crisis that arose in single-family homes is spreading into the commercial sector,” Schertzing said.
Sometimes, Schertzing said, a resident agent has a legal status as a responsible party for a property — it’s whom the county would turn to if a property was owned by an LLC. Sometimes resident agents can be a problem property owner.
“Resident agents can be partial owners, they can be wonderful people that have connections that know how to get things rented, or they can be part of the reason that the property is struggling because they’re not able to willing to represent the property well,” Schertzing said.
Dua said that the taxes on all the properties he is resident agent of would be paid. Dua blamed the economic downturn on an inability to get renters into the apartments, which accounts for being unable to pay the late taxes.
“It’s hard for the owners to generate the revenue for those apartments while keeping insurance on those properties and dealing with the rise of utilities,” Dua said.
Also in Dua’s resident agent portfolio are the Kaymarr Apartments on Pennsylvania Avenue on the south side, delinquent $56,965, and South Square Apartments on Aurelius Road in Holt delinquent $109,976.
High profile properties
After Dua, two other property owners filling the No. 2 and No. 3 spots on a top 10 list of tax delinquents own or have a connection to some of the most visible buildings in downtown Lansing.
Paul Vlahakis, president of Vlahakis Companies (which has no connection to Mid-Michigan Vlahakis, in international real estate company with a presence in the Lansing area), owns 101 South Washington Square — Troppo occupies the first floor which is delinquent
$252,950. The building is behind in taxes because of a past arrangement
with a failed bank, according to Vlahakis.
said that Irwin Union bank financed the building with the agreement
that Vlahakis would pay for any tenant “build outs” — meaning preparing
office or commercial space for use by a tenant — and the bank would
finance payments for property taxes. Vlahakis said he is working with
the bank that bought Irwin Union’s portfolio, Hamilton, Ohio-based
First Financial Bank, to pay the taxes. He said he expects the taxes to
be paid by January.
“We’ll have this resolved before further action is taken,” Vlahakis said.
The Federal Deposit Insurance Corp. took Irwin Union Bank into receivership in September.
Vlahakis Companies is also connected to 2025 S. Washington Ave., a
medical office building just south of Mt. Hope Avenue, delinquent
$47,303, and 4900 Montrose Ave. in Okemos, the Vlahakis Companies
headquarters, which is delinquent $27,035. The Washington Avenue
building, Vlahakis said, is worth $1.2 million and has no mortgage, but
a business partner had borrowed against it for another project. On
Tuesday, Vlahakis produced receipts that showed he had paid all of the
taxes owed on the Washington and Montrose avenues properties.
Sometimes, Vlahakis said, other bills have to be paid in tougher times.
never to your advantage to wait (to pay taxes), but when money can be
more effective, you have to pay when the time comes,” he said. “When
you have a lot of vacancy, you have to take care of more urgent bills.”
said that the property at 101 Washington Square is in the tax tribunal
and that he goes every year to dispute his taxes. Peter Kopke, the
tribunal’s chief clerk, said that if a property owner has a pending
tribunal case leftover from 2007, property owners usually file for
motions for subsequent years to be part of the proceedings. When a
judgment is finally made — either for or against a property owner — it
would also change the other years’ property taxes owed.
Two other high profile downtown Lansing buildings are also potentially facing foreclosure.
is 100 Washington Square, at the southwest corner of Michigan Avenue
and Washington Square, which is delinquent $148,175. Paul Gentilozzi’s
Gentilozzi Real Estate owns the property.
company also manages the building at 211 S. Washington Square — better
known as the old Michigan Theater building — which on paper is listed
as being owned by a company called Atrium Associates. That building is
name is also attached to an East Lansing property at 3400 West Road
delinquent $79,028 — this property is owned by 3400 West Road LLC, but
Gentilozzi is listed as resident agent.
the case of the West Road property, Gentilozzi says that the property
is being rented under a triple net lease and that the tenant is
responsible for the property taxes.
100 and 211 Washington Square, Gentilozzi says he will pay the taxes
around the first week of January. The 100 Washington Square building is
before the tax tribunal, with whom he filed in 2007 and expects a
judgment on subsequent years. Due to the economy, he said, some
buildings have fewer tenants and are not as valuable as they once were,
which is why the assessment is being challenged in the tribunal.
a given time in a given economy, a building could be worth $10. But as
the economy changes, rental goes (down) it’s only worth $8.
sometimes pay what you don’t owe,” he said, noting that it takes a long
time to get a decision out of the backlogged tribunal. He expects a
ruling in early 2010.
said that it’s never good to wait to pay taxes — he noted that he pays
millions in taxes on other properties — but that it can be cheaper to
pay taxes all at once after a judgment from the tribunal. It is
essentially like taking a loan from the government, which, in the end,
makes money from late fees.
“It’s always better to pay (your taxes),” he said. “In essence when
you don’t pay them, you’re b o r r o w i n g money from the local
government b e c a u s e you’re paying interest.”
Ingham County adds a $245 fee to every property delinquent more
than one year. Property taxes delinquent for more than one year are
also hit with a 1.5 percent per month interest rate, which is
retroactive. So, in the second year of delinquency, a property owner
could be on the hook for 18 percent interest per year, plus a 4 percent
administrative fee that is attached in the first year.
large properties in the area in danger of tax foreclosure include the
former Clarion Hotel on Dunckel Road in Lansing. That property, which
is undergoing renovation and according to a sign in front will reopen
as the Waterford Hotel in the spring, is delinquent $216,090. Thomas
Flood, the resident agent for Brownstown-based F, G and P LLC, which
owns the property, said that the taxes would be paid, but refused to
Haney, who owes $124,899 on properties on Simken Drive, did not return
a call seeking comment. Coolidge Cedar Park Equities owes $121,632 on a
shopping plaza along Cedar Street in Holt that contains a Kroger. A
Detroit-area company called The Corporation Co. is listed as the
resident agent. The old Metro Ford building on Martin Luther King Jr.
Boulevard in Lansing, owned by
3406 S MLK LLC, is delinquent $82,951; and the property in East Lansing
that houses the Spartan Hall of Fame Caf, owned by S & K Real
Estate, is delinquent $77,806.
At least one countywide elected official is facing property foreclosure: Ingham County Drain Commissioner Pat Lindemann.
and his wife, Mary, owe $4,222 on a property at 2010 E. Michigan
Avenue, which at one time housed the family butcher shop. He says he’s
owned the property since the 1970s, but for the last year he has not
had a tenant in the building. The building used to be home to the
United Nations Association, which paid $750 in rent and utilities per
month up until about a year ago, Lindemann said. (Lindemann also owns
the building next door, which used to house Magdalena’s Tea House,
which closed last summer due to flagging business.)
whose salary is $71,000, said Tuesday that he paid the taxes last week,
which was after City Pulse contacted him, and chalks up his lateness to
a family dispute. The property was part of Lindemann’s d e c e a s e d
mother’s estate, he said, and there was a dispute over who should get
it. Lindemann said the probl e m w a s resolved a few months ago.
you get a regular tenant in there, it’s easier to keep up with
expenses,” Lindemann said Friday, speaking about the difficulty of
owning a vacant commercial property. “Some properties go through sad
times. I will pay it soon; it won’t go through foreclosure.”
Commercial sector down
That fact that the top 10 tax delinquents in Ingham County are all commercial properties is not a surprise.
Association of Realtors real estate economist Jed Smith says that the
commercial property market continues to get worse. Space
in office buildings is driven by employment, and with a high
unemployment rate, a high rate of vacancy follows. Retail space is
driven by consumer demand, which has also slowed in the national
recession. For apartment complexes, the outlook is better, but fewer
people with jobs mean fewer renters.
estimated that there is about $6.5 trillion worth of commercial
property in the country, about $3.5 trillion of which is debt. Every
five to seven years, property owners roll over their mortgages. With a
decreased demand for commercial property, values are lower and can make
rolling over mortgages difficult if not impossible, Smith said.
problems are actually getting worse while the economy is starting to
recover. The commercial market tends to lag the economy,” he said.
said that paying of property taxes is usually a high priority for
property owners because a mortgage lender usually requires it.
anyone misses a property tax payment, they’re obviously in trouble,”
Smith said. He said that if a property owner is one to two years behind
in taxes, they probably have a “major problem.”
talks of furloughs and layoffs among local governments recently, it may
seem that property owners not paying taxes is directly affecting this.
But Schertzing said that there are enough fees and penalties built in
to property tax collection system to make up for property owners that
may never pay and have their property foreclosed by the county.
those that persist in not paying taxes, the county could take ownership
as early as June 2010. If a property such as a large apartment complex
were to fall into the county’s hands, it could become a landlord — it
has happened in the past with homes that have been foreclosed, but
contain renters. As many as 75 percent of the properties, Schertzing
said, have “no redeeming feature” and are demolished. Tax foreclosures,
he said, are usually “bottom of the barrel.”
Schertzing wants to make sure that if the county sets up a payment plan
with a property owner that the owner will fulfill it. There are several
properties on this year’s list that in the past had set up plans to pay
back property taxes but never made good.
years ago, Schertzing said, the county was less open to payment plans.
But keeping properties owned by their owners is important. He posited
that places in Michigan like Flint weren’t as bombed out 30 years ago,
but that the decline of a city has to start somewhere.
have to be thinking about what things can we be doing strategically —
policy-wise — to make sure this is a short-term aberration and make
sure it doesn’t become something that ingrains itself,” he said. “Two
years ago there were not commercial properties (on track to tax
foreclosure). Now there are. But you don’t give payment plans to folks
only to allow them to dig themselves into bigger hole.”
Schertzing can not predict how many of the 1,500 on this year’s
delinquency list are going to pay up, he said that the property owners
that contact his office to make payment arrangement are usually the
ones that end up keeping their property — that goes for the owners of a
large downtown Lansing office building, to someone behind on a little
home in Dansville.
need to hear from people,” Schertzing said. “I don’t worry about the
people we hear from. The problems are those we don’t hear from.”
required by state law, the complete list of tax delinquencies appears
in this and the next two weeks issues of City Pulse. The information
is also available on the Ingham County Treasurer's Web site and on www.lansingcitypulse.com. To view the list now click here.