When Patricia Simon and T.J. Snowhite bought a renovated condominium in Northwest Washington 16 months ago, the couple thought the place had just the right touches. The master bedroom had a skylight. The building boasted a parking spot. And the condo’s rear addition, known as a “pop-back,” had two bedrooms, perfect for visitors.
But after 10 days of living in their new $765,000 home in Columbia Heights, water began leaking through a bedroom ceiling, leaving stains. Closer inspections, the couple said, revealed more problems: The master bedroom’s ceiling didn’t have enough support and was vulnerable to a collapse during a snowstorm. The parking space was too small, and it violates city regulations. And the building’s pop-back was built without the required special approval from the District’s zoning regulators.
Eventually, Simon, 39, and Snowhite, 30, a software engineer for a major defense contractor, realized something else: They were not the only aggrieved homeowners who’d bought a property from a developer named Insun Hofgard.
On Thursday, Hofgard, 53, and her husband, Jefferson Hofgard, a 56-year-old Boeing executive, were sued by the city’s attorney general for allegedly violating the city’s construction codes and consumer protection law.
In the lawsuit, filed in D.C. Superior Court, Attorney General Karl A. Racine accuses the developers of misleading Simon, Snowhite and other home buyers into purchasing at least 15 properties that violate city construction codes, contain substandard materials and had inadequate inspections. The complaint seeks restitution on behalf of the homeowners and to bar the Hofgards from selling homes that don’t comply with city zoning laws and construction codes.
In an interview before the lawsuit was filed, Insun Hofgard said she didn’t learn of the attorney general’s investigation until late April, when informed by The Washington Post.
“You would think they would want to contact me, but this has not happened,” she said. “I do feel like I am being unfairly targeted,” she added, by the D.C. Department of Consumer Regulatory Affairs (DCRA), which enforces zoning rules and building codes. She declined to comment when she learned of the lawsuit.
The city’s case against the Hofgards is the first in recent memory targeting the wave of builders trying to capitalize on Washington’s housing boom, said Rob Marus, a spokesman for the city’s office of the attorney general. But it might not be the last as investors buy up hundreds of aging rowhouses in hot neighborhoods, renovate and sometimes subdivide or enlarge them, and then flip them at a considerable profit.
“Given the growth of D.C. and property values, I would not be surprised if we got more complaints” about other developers, Marus said. “We’ve got a lot of complaints about the Hofgards.”
On April 29, the Hofgards were sued in D.C. Superior Court by Brian Jacobson, a Web developer, and his husband, Branko Jovanovic, an economist at a consulting firm. They are demanding $1 million in damages after buying a Hofgard home in Northwest Washington that allegedly has multiple structural defects and a second kitchen, in the basement, that allegedly violates the city’s zoning laws.
Another lawsuit against the Hofgards was filed last summer by Jennifer Headley, a State Department management analyst, who was seeking $1 million in damages for her renovated three-bedroom rowhouse in Northeast Washington.
The case is now under settlement negotiations, but Headley claimed that her V Street property, purchased from the Hofgards for $600,000 in 2013, had more than two dozen code violations. Among the alleged problems: a basement leak, caused by an improperly installed main waterline, that was compromising the home’s foundation as well as load-bearing beams in the center of the living room, required to prevent the second floor from caving in, that were removed but not replaced.
In court documents, the Hofgards blame those problems on contractors who performed “defective” work. In an interview, Insun Hofgard added, “I never claimed to be an expert in construction. I relied and paid for other people to fulfill that role.”
The Hofgards have been investing in rowhouses in Washington for several years through different limited liability companies, which have paid nearly $18 million for at least 40 properties since 2010, according to public records.
In the past two-plus years, Hofgard LLCs have sold 26 single-family homes or condominium units in 14 properties. Twenty-six Hofgard properties remain unsold.
Hofgard said that her husband is not involved in the operations of the real estate business and that she is in “sole control of all aspects” of the development deals. Jefferson Hofgard, who did not return requests seeking comment, has helped secure bank loans for purchases, she said.
Jefferson Hofgard is Boeing’s vice president of international operations and policy, making him the company’s lead executive on its international sales campaigns and relationships with the U.S. and foreign governments, according to his corporate biography. Before his Boeing job, he was a senior adviser to the White House and a top-level NASA official working on U.S.-Russian space cooperation.
He and his wife live in Great Falls, Va., one of the Washington suburbs’ wealthiest enclaves, and own a five-bedroom, five-bathroom home with three fireplaces and a swimming pool, according to Fairfax County records. The assessed value of their property is $2.2 million.
Until their recent legal problems, the real estate business seemed promising for the Hofgards. The 14 condominium units and single-family homes in Hofgard-renovated rowhouses have sold, on average, for nearly three times the cost of buying the properties. One of their LLCs, for example, paid $525,000 for the rowhouse on 11th Street NW where Simon and Snowhite bought one of two condos carved out of the space. Together, the two condos sold for $1.43 million.
Not all of that is profit, said Insun Hofgard, citing interest, labor, construction, administrative, marketing and mounting legal costs. At this point, she said, her returns are “becoming marginal” because DCRA’s stop-work orders have prevented her from selling some of her properties.
District records indicate that the city has placed stop-work orders on nine of her unsold homes as well as on the Petworth property that was sold to Jacobson and Jovanovic. In most of the cases, the government cited Hofgard for illegal construction and working without the proper permits.
In their lawsuit, Jacobson and Jovanovic said they learned from a DCRA inspector that the kitchen in the basement — a big selling point when they purchased their four-bedroom home near Petworth in November — couldn’t have a stove and lacked city approval. That ruined the couple’s plan to use it as an au pair suite for their newly adopted baby’s caregiver or to house Jacobson’s aging mother.
Insun Hofgard said she told the listing agent about the problem with the kitchen before the closing and presumed that the information was passed along to Jacobson. But Jacobson said he was told on the day of closing that the kitchen’s missing stove would be installed — not that it was illegal.
“I was shocked and angry,” Jacobson said in an interview, “that something we had paid a premium for and had plans to make good use of was not even allowed in the house.”
Insun Hofgard is among a multitude of developers swooping into the District’s lucrative housing market.
Tom Daley, a member of the board of directors at the Greater Capital Area Association of Realtors, said he estimates that there are “hundreds” of renovated homes being flipped annually in the District.
“There’s certainly a lot of people running around who see opportunity — developers and people who want to be developers — and take properties that haven’t been touched in decades and go up or back with them,” Daley said.
The demand in Washington is high: The median selling price of a D.C. home was $500,000 in March, up from $405,000 in March 2012, according to the Greater Capital Area Association of Realtors, which relies on data from RealEstate Business Intelligence. And homes in some of the city’s hottest neighborhoods — Columbia Heights, Petworth and Eckington — stay on the market for between a month and two months, according to the realtors group.
To maximize their profits, builders are frequently tacking on additions to rowhouses in the rear or on top — so-called “pop-backs” or “pop-ups” — that are altering the look of many neighborhoods. Those additions enable developers to transform single-family rowhouses into much more profitable multi-unit condominium buildings.
In March, the city’s Zoning Commission took a preliminary vote to clamp down on pop-ups by reducing the maximum height of rowhouses from 40 feet to 35 feet in neighborhoods including Columbia Heights, Capitol Hill and Shaw. The commission also voted to ban pop-backs that stretch 10 feet past the rear of an adjacent house.
NextGen Development owner Brian Brown, who builds pop-ups in Washington and monitors community e-mail lists for residents’ complaints about developers, said there are probably “at least a dozen” developers doing “questionable” work in the city.
“They hire a contractor to do the work,” Brown said, “and they don’t understand what they’re paying for, and the contractor may be cutting corners.”
Melinda Bolling, DCRA’s director, declined to comment on the case against the Hofgards, citing the investigation.
The District requires anyone seeking to build, repair or renovate homes to purchase permits according to the specific scope of work that needs to be done. The DCRA issues the permits and oversees whether developers’ projects match the permits they obtained.
If a developer’s work goes beyond a permit’s scope, the DCRA can place a stop-work order on the property that won’t be lifted until the developer often pays fines, obtains the correct permits and promises to fix the work. Fines related to illegal construction range from $500 to $2,000 per violation.
“A significant problem is that many developers submit to DCRA for approval very basic, vanilla plans and then proceed to build well beyond that which was permitted,” said Marc Moskowitz, the real estate attorney for Simon and Snowhite. “The result is not only illegal construction, which likely had less, if any, regulatory scrutiny, but the end product is a residence that violates zoning laws and a legal mess that would cost hundreds of thousands of dollars to attempt to resolve without guarantee of success.”
Homes whose renovations required construction permits and that have more than one unit need both a final inspection and a certificate of occupancy before someone moves in and uses the property. If developers ignore those requirements, they can be fined.
The DCRA has staff members who conduct final inspections, but if developers want the process done faster, they can choose from a list of more than 70 third-party contractors and pay them to do it. That’s the route Insun Hofgard took during the renovation of the rowhouse that became Simon and Snowhite’s home.
Before Simon and Snowhite bought their Columbia Heights condominium, they hired a home inspector, who found nothing seriously wrong.
But problems began surfacing less than a month after their December 2013 move-in. The roof leaked so much that during holiday parties, they put out pots to catch the water, the couple said.
Worried that the leaks might have caused mold, they asked a Hofgard crew to rip open the walls and ceiling. They found not only mold spores, but also incorrect light fixtures, posing a fire hazard, they said.
Then they learned that the Hofgard LLC sold the two-unit home, which required construction permits for the renovation, without getting a final inspection from its third-party inspector, FMC & Associates, and without obtaining a certificate of occupancy, DCRA records show.
Fadil Abdelfatah, the owner of FMC & Associates, declined to comment for this article.
Hofgard said she relied on her contractors and inspectors to ensure that the building was up to code and structurally sound.
As problems came to light, she said, she offered to make fixes. “They refused us access to their unit to have an expert construction consultant come in and identify issues and have an independent licensed and insured contractor address any issues identified,” she said.
(Simon said the only people she barred from the property were the Hofgard contractors who had built the home with so many flaws.)
Hofgard also said she presumed that her contractor got the final inspection. Typically, she said, a buyer’s lender asks her for a certificate of occupancy, but in this case, that never happened.
A DCRA inspector visited the property last summer and found more than 30 city code violations, including the unapproved pop-back containing two of the home’s three bedrooms.
As for their next steps, Moskowitz, the attorney for Simon and Snowhite, declined to elaborate, saying only: “All options including litigation remain under consideration.”
To keep the pop-back, the couple must request a variance from the city’s Board of Zoning Adjustment — a time-consuming process that could cost tens of thousands of dollars in legal and engineering fees. But if their request is rejected?
The couple would have to pay to remove the pop-back, leaving them stuck with a very expensive one-bedroom, two-story condo.
“We won’t be able to sell the home, especially if we don’t get a zoning variance,” Simon says. “I assume no one wants to pay for a one-bedroom condo with three bathrooms.”
Jennifer Jenkins and Ted Mellnik contributed to this report.