In today's Real Estate section, which was printed in advance, a phrase was omitted from an article involving lawsuits against the Sentinel of Landmark condominiums. The paragraph should read: Sales of the nearly 70 units to individual buyers were finalized in late 1981, despite assurances from real estate salesmen to many purchasers that the settlements would not take place until more than half the apartments had been sold, attorney James C. Brincefield Jr. quoted several of his tenant clients as saying.
Fourteen homeowners in an Alexandria condominium project are suing the developer, his attorneys and a real estate sales company, charging fraud and violations of the Virginia Condominium Act.
The buyers want their sales contracts canceled and payments of $350,000 each in damages, according to documents filed in Alexandria Circuit Court. The homeowners' attorney, James C. Brincefield Jr. of Alexandria, said several suits are being prepared on behalf of other purchasers and will be filed soon.
When the homeowners bought their units in the Sentinel of Landmark, built by Northern Virginia developer John F. DeLuca, they say they were told 80 percent of the 272 apartments would be owner-occupied. Instead of selling to individuals, however, DeLuca sold more than 200 of the units to a Boston syndicate that operates them as rental apartments.
"This change will alter the project from a predominantly owner-occupied residential condominium to a predominantly absentee, investor-owned rental project," say the court documents.
DeLuca said he "didn't deceive anyone. I don't operate that way. I did everything I was supposed to do" in sales and operations of the Sentinel buildings.
Condominium homeowners typically fear that tenants, who have nothing invested in the buildings, will not pull their weight in keeping up the condominium complex. As the number of condominium units in the Washington area has grown from 1,672 in 1970 to more than 100,000 now, conflict has often erupted between buyers who plan to live in their homes and investors who rent out the units for tax advantages and eventual profits from sales.
The Sentinal buyers say they were not told that DeLuca had changed his mind and planned to sell more than 200 units to a syndicate nor about changes in the documents that set out rules for operating the condominium building, as is required by the Virginia Condominium Act.
DeLuca said "altering the condominium documents was my attorney's responsibility." A real estate firm handled the settlement of the unit purchases, and "apparently they forgot" to tell buyers about the changes that had been made in the documents, he added.
Spokesmen for Burr, Morris and Pardoe, Inc. of Chevy Chase, the real estate company, and for Bettius, Rosenberger and Carter of Fairfax, the law firm, would not comment on the suits.
Russell S. Rosenberger Jr., who handled settlement of several of the sales and who, a spokesman said, is no longer with the law firm, could not be reached for comment. The two firms are named as defendants in the suits, and Rosenberger and another attorney, Ronald Proffitt, are named in several of the cases. Several salesmen for the Chevy Chase real estate firm also are named in some of the suits. DeLuca's companies, DeLuca Construction Corp. and Sentinel of Landmark Associates, also are being sued.
Virginia Real Estate Commission Condominium Administrator William L. Thompson, said his review of documents concerning the project indicated that "condominium instruments as recorded and those distributed to purchasers are materially different." Thompson, whose statements are contained in a letter written in December, concluded that "it would appear that no person who purchased at the Sentinel had received current documents." Thompson wrote that "normally, [these] facts would warrant an immediate cease and desist order from this office." At that point, however, DeLuca had sold the remaining units to the syndicate, the March Co. of Boston, removing him from the jurisdiction of the commission.
Under Virginia law, owners must give buyers a "public offering statement" disclosing "all unusual and material circumstances affecting the condominium," terms of financing and title, a projected budget and provision for reserve funds and "such other information as may be necessary to assure full and fair disclosure to prospective purchasers." All of this information must be provided to buyers before sales are completed.
Rosenberger, DeLuca's attorney for several of the Sentinal sales, told the buyers "no changes had been made in the public offering statement," according to the court documents. In addition, "DeLuca stated that everything was going according to plan and did not inform [the buyers] of the material changes and actions . . . ," the documents say.
The changes purchasers say were kept from them include alterations in condominium documents that reduced the voting rights of residential apartment owners and transferred some of those rights to commercial units that were not a part of the original plan for the building.
In addition, the purchasers charge DeLuca deleted from the Unit Owners Association budget a provision for $20,000 in a "reserve for replacements" fund to pay for repairs and equipment replacement in common areas of the building. DeLuca also improperly commingled funds of the owners' association with the general funds of his company, and failed to pay at least $64,000 in unit assessments for the unsold condominiums he held in the building, the court documents say.
DeLuca said the charge that he failed to pay $64,000 he owed was "totally untrue." He said he made all payments he owed before he sold the remaining units to the March Co. He added that "all the bills were paid when I turned over the association [to the new owners of the condominiums] and there was $13,000 for reserve for replacement in the bank."
The court documents for several of the suits say that, in addition to assuring purchasers that no more than 20 percent of the units would be sold to investors, the real estate firm and the two sales agents incorrectly told some of the individual buyers that:
* Their loans "would be assumable at the original interest rate."
* The condominiums met the loan requirements of two government-chartered agencies, the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corp., or Freddie Mac. This status makes mortgage loans on units easier to obtain.
* DeLuca and Sentinal of Landmark Associates "would provide, at their expense, certain furniture and furnishings for the pool area and community rooms at the condominium."
Sales of the nearly 70 units to individual buyers were finalized in late 1981, despite assurances from real estate salesmen that the settlements would not take place until more than half the apartments had been sold, Brincefield said.
DeLuca said that, in the depressed real estate market of '81 and '82, few individuals were buying the units, which he said were priced in the "low 70s." He said, "My only choice was to give [the unsold units] back to the bank . . . and let them have a forced sale" or conclude the deal with the March Co.
March Executive Vice President and General Counsel Jerome Heller is president of the Sentinel's homeowners association. A March employe holds another seat and the remaining three are occupied by homeowners. The syndicate, as owner of the majority of the units, has "majority voting rights," Heller said.