A Northern Virginia couple who sold a slew of renovated D.C. rowhouses that did not meet city construction codes have agreed to pay at least $1.3 million in restitution to the owners of 19 properties.
Insun Hofgard and her husband, Jefferson Hofgard, a Boeing executive, must pay the $1.3 million to the city, which will then distribute the money to aggrieved homeowners who had purchased updated homes without knowing that they posed safety hazards and did not meet construction or zoning standards. The settlement with the city ends a lawsuit filed in May 2015 against the Hofgards by D.C. Attorney General Karl A. Racine, who accused the Great Falls, Va., couple of misleading numerous home buyers into spending millions on shoddy homes in Columbia Heights, Bloomingdale, Petworth and other hot neighborhoods.
The Hofgards are among a wave of developers who have jumped into the District’s booming housing market, scooping up aging townhouses, renovating them quickly and flipping them for big profits.
“This is a unique case for the District — for now,” said Rob Marus, a spokesman for the city’s attorney general. “I’m not sure how unique it will be for the future. A lot of people are flipping houses, and in a market like this, it can be easy for home buyers to get fooled into thinking that if the house looks right on the outside, it’s equally sound on the inside and compliant with all the construction codes. We want to ensure this settlement is a shot across the bow to unscrupulous contractors and developers. They’re playing with people’s lives.”
Marus said he could not recall the attorney general’s office extracting this large a restitution payment from a non-corporate developer — in this case, the Hofgards, who bought and sold homes through a variety of limited-liability companies.
“This is a unique situation. It’s a local developer. It’s a series of small companies,” Marus said.
Asked about the settlement Tuesday, Insun Hofgard referred questions to her attorney. She has said in previous interviews that her husband played no role in the real estate deals. She and her attorneys have blamed their contractors for the poor quality of the renovations.
The settlement is a long-awaited compensation for homeowners who felt duped by the Hofgards. The agreement compels the couple to pay $1 million in restitution and allows the city to distribute $301,500 that the Hofgards have already paid in building fines. Additionally, the settlement requires the Hofgards to pay at least $150,000 to the District in legal fees for investigating and litigating the case. Marus, the attorney general’s spokesman, said that if homeowners wind up needing more in restitution, the city will draw from those legal fees to help repay what homeowners lost.
But in a news conference Tuesday, Racine said that the settlement entitles the city to ask the Hofgards for much more than $1.3 million if the city’s experts find additional problems that require more repairs. He vowed that the affected homeowners would receive everything they need.
“We believe that this court-endorsed settlement agreement has real teeth in it,” Racine said. “And to the extent that the Hofgards seek to not honor this settlement agreement, you better believe the office of attorney general will be right back in court seeking further relief as a result of any breach of such agreement.”
Hofgard attorney Lloyd Jordan stressed that the settlement does not contain any admission from the couple of liability or fraud. He said the settlement frees the Hofgards to pursue damages from their contractors through their own lawsuits. In the meantime, Jordan said he thinks the $1.3 million in restitution to the homeowners is “fair” compensation.
“We believe it’s a comfortable amount of money,” he said. Asked whether he thought more of the Hofgards’ money might be needed, Jordan declined to speculate.
Marc Moskowitz, an attorney who represents one couple who paid $765,000 for a condominium unit in a Columbia Heights rowhouse, said the settlement will not come close to satisfying the entire group of Hofgard home buyers. His clients, Patricia and T.J. Simon, need at least $500,000 to correct their home’s problems, including a master bedroom whose ceiling was vulnerable to collapse. Additionally, Moskowitz said the Simons and others bought homes with additions or designs that need variances from the city’s Board of Zoning Adjustment — a costly, time-consuming process.
The Simons’s three-bedroom home, for instance, has an illegal rear addition that contains two bedrooms and two rear decks — a “pop-back.” Without a zoning variance, Moskowitz said, the couple will have to spend hundreds of thousands of dollars to remove the structure, rendering the home even less valuable for resale because it will have only one bedroom.
Many homeowners have long complained that the D.C. Department of Consumer and Regulatory Affairs (DCRA) did not respond quickly enough to complaints about the Hofgards and that the agency’s reliance on third-party inspections results in approvals for substandard homes.
Racine acknowledged as much. “With respect to some of the inspections and other activity prior to the lawsuit, I think DCRA has frankly acknowledged some mistakes in the past,” he said. “In fact, this has been a significant learning lesson for all of us.”
Matt Orlins, a DCRA spokesman, said in a statement that the agency “expeditiously” reviewed complaints and then “initiated a months-long investigation that resulted in dozens of infraction citations and more than $300,000 in penalties against the Hofgards.”
Brian Jacobson, 45, a website developer who bought a Hofgard home near Petworth, said he is angry that Racine did not consult him or others about the settlement. Jacobson, who is suing the Hofgards for more than $1 million in federal court, worries that the couple will delay making any payments, especially if more than $1.3 million is needed.
“We received an estimate that to fix our house would cost between $450,000 to $500,000,” said Jacobson, whose home came with unsafe lighting, a malfunctioning heating-and-cooling system, and an illegal second kitchen in the basement. “If you look at $1.3 million and divided it by 19 properties, it’s not enough to get an architect to make a drawing.”
Marus, the attorney general’s spokesman, said legal negotiations between the city and the Hofgards had to be kept confidential.
“These consumers under the settlement will get everything they’re entitled to,” he said.