The D.C. housing department recently sold six rehabilitated houses in Brookland without telling most of the buyers that thousands of dollars in contractors' liens were outstanding against the properties.
Documents at the D.C. Recorder of Deeds office and title papers given the homeowners show an outstanding lien totaling $52,000 against all six homes and two smaller liens on one of them.
City housing officials and the two title companies who handled the sales for the houses located in the 900 block of Evarts Street NE said yesterday that they considered the three liens invalid at the time of sale, but they offered conflicting explanations of why that should be so.
Ben Carter, deputy director of the Neighborhood Improvement Administration, said the liens should have been removed before the homes were sold because while the formal claims exist "the title is not clear." He said the city would try to have them removed promptly.
"We screwed up," Carter said. "We didn't cover all the bases. We didn't clean up our act as we went along."
Papers given to the buyers at settlement indicate that the homeowners would not be protected by title insurance if the contractors sued successfully to collect the money. Officials at Commonwealth and Dolphin and Evans, the title companies, said the actual insurance policies will cover the homeowners for any losses resulting from the liens. However, those policies have not yet been issued.
Carter said the city paid building contractor Leander Calhoun Jr., $28,493 last December to settle the $52,000 lien he had filed against the homes to cover the cost of rehabilitation work his company performed there. Calhoun said yesterday he has not removed the liens because he believes the city still owes him money. He said he is consulting with his attorney about how to proceed.
The six home buyers won the right to purchase the rehabilitated homes under the city's urban homesteading program. They moved into the houses in late 1980 and early 1981, but were told that they could not settle the sales then because liens were outstanding against the properties. They lived in the homes rent free for a year. In December, all six said, city officials told them it was time to settle.
Carter said yesterday the department was attempting to wrap up the sales quickly because officials were concerned about possible public criticism of the families' being allowed to occupy the houses at no cost.
Two families said they asked about the liens and were told by project director Charles I. Brooks, who attended all the settlements, that they had been resolved. Those families and two others discovered only after the settlement that the liens remained outstanding.
Irene Kellogg was the only one of the six accompanied by a lawyer at her settlement. She said the liens were the last papers presented to her at that proceeding and that her lawyer "was very concerned" about her possible liability. She said she went ahead with the purchase because she feared she would lose the house otherwise.
"I decided to take the chance and keep fingers and toes crossed," she said.
She said Brooks assured her that the liens were in litigation and that the city would win. Carter, however, said yesterday that there was never any court action over the liens.
A sixth owner said she knew the about the liens but also settled because she wanted the house.
Ordinarily a buyer would hire the title insurance company to search the title and ensure that the buyer had a clear title. But in this case the city hired the settlement company which was paid by the buyers.
In another unusual move the city also made the mortgage loans for the property instead of going to a private lending institution. Carter said high interest rates prevented placing the loans outside the department.
Ardenna Cowan said she had asked about the liens at the settlement and had been assured they had been resolved. She said she was "hostile and angry" when she and her husband later found the liens. They called Brooks at home for an explanation.
Carter said he was told by the housing department lawyer and the title companies that since Calhoun filed the liens in October 1980 under the law he had to file a court suit to collect within a year. Carter said that when Calhoun failed to file within that period, the lien was invalidated.
However, the housing department paid Calhoun in December 1981 more than two months after that one-year period expired.
William Copenhaver, the settlement officer for Commonwealth Land title company, said the liens were listed in documents given the buyers because those papers had been prepared in July and were never changed.
He said the company will not allow a sale until all liens are satisfied.
Valeria Hiller, the manager of Dolphin and Evans, said her company had a similar policy. She added that the company decided the liens were invalid because they had been released at the recorder's office. She said that one had been improperly recorded.
However, a check of the recorder's office yesterday showed no releases of the liens.
Attorneys knowledgable in real estate matters said it is highly unusual for property to be transferred with a mechanic's lien--the type of lien filed by Calhoun and the other contractors--outstanding against it.
The staid two-story brick homes on Evarts Street were condemned in late 1967 to make way for the controversial North Central Freeway. After the freeway project was abandoned, the city moved to rehabilitate the houses.
On Sept. 26, 1979, the city held a lottery for the houses and five of the six buyers were selected. One buyer had previously lived in one of the houses and the city had promised that families displaced by the freeway would be given the first right to return.
The city planned to complete the renovations by June 1980, but the first contractor died, the second was fired, a third was hired and now a fourth is finishing up the work.
Carter said the D.C. Development Corp., an arm of the housing department, did a poor job of overseeing the rehabilitation work and many of the repairs had to be redone by several contractors. DCDC has been criticized in the past for poorly administering its rehabilitation and business loan programs.
Carter said his office stepped in late last year "trying to clean up this whole fiasco with DCDC." The cost of the project had risen from $295,000 to $378,289, he said.
Carter said Calhoun filed the $52,000 lien in a dispute with DCDC in over the cost of some materials.
The city wanted to settle on the homes last July but Brooks told the homeowners that settlements would be delayed because title companies had found nearly a dozen liens filed against the property, including Calhoun's.
The families said they welcomed the delays because they wanted the city to fix some of the defects in the homes.
Carter and Brooks said they met with all the contractors in November, agreed on settlement and had all of them sign documents releasing the liens.
Apparently all the contractors except Calhoun then released their liens. Neither DCDC nor the city required him to release the liens, although it had paid him the largest sum, $28,493.
In late December, Carter and Brooks started telling the six homeowners they would have to buy the homes or become renters.
Several of the homeowners said they did not ask about the liens because they assumed the scheduling of settlement meant they had been cleared.
"I'm too trusting," said Joyce B. Higginbotham. "I thought the government would go by the book." CAPTION: Picture, These six houses on Evarts Street NE, sold by the city to urban homesteaders, have a $52,000 lien against them. By Gerald Martineau -- The Washington Post