Photo by Robb Long

(From left) Sexton residents Stacy Rankin, Bridgette Bornstein, Kim Kaufenberg (seated), Trey Fortner, Brian Scates, Kelly Guest and Rachel Malvin in the lobby of the Sexton. The building's condo owners have hired an attorney to help them sort through leg

By Michelle Bruch

Sexton condo owners fight for quality of life at a building rocked by legal trouble

The residents of the Sexton are living on a legal battleground, and they have worked hard to take control of the building they call home. 

They confronted trespassers in the halls at 521 S. 7th St. They made diagrams of police-raided units and combed through hundreds of Sexton court documents. And they hired an attorney so they can stop paying out-of-pocket to park at Downtown ramps and meters every day.

The residents who moved in were drawn to the 1926 building’s original brick walls, wood floors and massive windows. The former commercial building was converted to condos in mid-2006.

Despite having major cases of buyer’s remorse within months of moving in, some residents say things are looking up. Developers are interested in rescuing the embattled property, and the chaos has built up some condo camaraderie.

“We’ve already become this very close community, out of necessity,” said Sexton resident Bridgette Bornstein.

The parking situation wasn’t always quite this bad. The developer provided 24-hour valet parking while residents waited for parking ramp construction to start on the south side of the block.

But when Bank of the West began foreclosure proceedings last fall and appointed a receiver to manage the property, bank staff decided they were not obligated to pay for valet parking. Instead, the homeowners have been paying $125 per month to park in a ramp across the street.

That arrangement doesn’t sit well with homeowners who paid about $20,000 for a parking space (or $40,000 for two spaces).

Late last year, all of the residents met together in a vacant unit and agreed to pitch in money and sign a retainer for an attorney.

“It was really somewhat of an easy decision,” said Kelly Guest, a resident who said she absolutely loves her condo. “We jokingly say, we’re not stupid people, and yet we all bought into this and we’re all collectively screwed right now.”

Residents interviewed for this story said they didn’t smell anything fishy in the building until it was too late. People who signed on early and got a good deal watched as units identical to theirs started selling for hundreds of thousands more than they paid.

As it turns out, at least one of those high-priced condos that sold for $366,000 was resold the same day for $700,000 with more than $300,000 of that money coming back to the first buyer and an agent working for the developer. One of the recipients of that kickback pled guilty on March 10 to charges of mail fraud brought by the U.S. Attorney’s office.

Sexton developer Heather Enterprises alleges that its development partner, JJT Development, oversaw similar kickbacks in at least five other units. JJT, in turn, is alleging that Heather mismanaged the construction budget.

Another lawsuit could be on the horizon: investors in the project’s stalled second phase are exploring a lawsuit to reclaim their deposits.

The litigation has put sales at a standstill for nearly a year, and even the current owners are effectively stuck in the building. An unpaid contractor that worked on the renovation has placed a $5.3 million lien on all the units. Any condo sale would put the owner on the hook for that debt, according to the residents’ attorney, Daniel Tyson.

“Until that’s resolved ... people can’t sell,” Tyson said.

Fortunately, the problem of building safety has been resolved. Only the bent latches of kicked-in doors leave evidence of prior trouble.

“We all kind of knew that something was going on,” said resident Brian Scates, recalling beer bottles scattered in the hallway and tenants passed out with their doors left wide open. “[I wondered] can this person really afford to live here, living this way?”

During the summer of 2007, police investigated a group that was allegedly storing and selling cocaine in several condos at 7th & Portland.

Gittleman Management Co. took over the building in August, and ordered everyone to produce a purchase agreement. Anyone who could not prove residency was locked out.

“It’s a totally different place now,” Bornstein said. “I walk through there now and I feel safe.”

Part of that feeling of safety comes from familiarity. All of the residents know one another, they invite each other over for happy hours, and they have an e-mail chain that keeps everyone in the loop on legal updates.

Another bright spot for the Sexton is that it apparently has a queue of potential rescuers. Residents said they have been approached by a couple of developers who want to build a ramp on the empty lot next door and sell the rest of the Sexton units.

Live-Work resident Trey Fortner said he is optimistic about the building’s prospects, even though he has every right to complain. He worries about the resale value of a neighboring condo that still has stripper poles in the basement and he drains more than $700 per month into heating a unit with a freezing basement.

“There’s nothing like this in the Twin Cities,” he said. “It’s a really cool building, just done by really bad people.”

Rachel Malvin, the Sexton’s in-house expert on all the legalese, said the homeowner’s litigation is going to be mediated in June.

“We’ve already spent a substantial amount of money on legal fees,” Malvin said. “We’re the little people in this fight, everyone else is a corporation or a bank, so it’s a lot more difficult for us to fight this. But it’s really important that we are. ... It was really the only way for us to protect ourselves.”

Bornstein said that after living in legal limbo for so long, it’s encouraging to see more information come to light in the recent plea agreement.

“We’ve heard rumblings of illegal activity, so to see some movement [and] see some potential evidence, it’s encouraging, because it may mean that some of this legal wrangling will be coming to a head. The sooner it’s over, the better for all of us,” she said. “I love my unit, and I don’t want to leave.”