A small-time real estate investor thought she had found a real bargain when she bought a foreclosed four-plex in St. Paul for $47,621.57 in 2008.
"It could be fixed up and [the units] put up for rent," said Aychoeun Tea, who also owns two small apartment buildings in Minneapolis.
What Tea didn't know when she acquired the vacant building was that it had been declared a nuisance by St. Paul officials and was facing demolition in a few months. In two lawsuits, she claims she was never notified of ongoing condemnation proceedings by either the city or the seller.
"I feel like they've robbed me," said Tea, who was stuck with the city's $27,000 bill for tearing down the building.
Tea's case illustrates the pitfalls that come with buying troubled real estate. Though Tea legally owned the property, St. Paul officials weren't required to notify her of the city's intent to demolish the building because her deed was not recorded with the county at the time the city's official notice went out, according to a 2009 decision by the Minnesota Court of Appeals.
Tea also claims she was never told of the property's legal problems by the seller or its agents. In her lawsuit, she claims the property was owned by an investment trust represented by Bank of New York.
Eric Rucker, the bank's attorney, declined to answer any questions from Whistleblower. In legal filings, Bank of New York claims it is not liable for any damages and puts the blame on Tea or others for unspecified "acts of omission."
"I have been doing this for 23 years, and I haven't seen a case like this before," says David McGee, a real estate lawyer who represents Tea's real estate agent in the purchase.
"I think it's a shame what happened," said real estate broker Jeffrey Johnson, who represented the sellers in the deal.
Tea's troubles apparently began on April 1, 2008, when St. Paul's Department of Safety Inspections declared the four-plex at 263 Sherburne Av. to be uninhabitable. Among its problems: a deteriorating foundation, walls with peeling paint and defective stairs and handrails.
The city mailed its findings to Bank of New York and other entities that showed up as interested or responsible parties in a January search of county records, according to the Appeals Court ruling.
The owners were given until May 1 to fix the problems. That also happened to be the day Tea finalized her purchase. On May 9, the city sent another notice to the bank, explaining there would be two public hearings to determine the property's fate. Neither Tea nor anyone else showed up to protest the proposed demolition, according to the Appeals Court ruling.
"Tea was not mailed a copy of this notice, as the list of interested parties was still based on the January 2008 records search," the court found.
The city also posted a warning on the property, declaring that the building was a nuisance subject to demolition.
"Maybe she should have had somebody inspect it, maybe she should have read the notices," said attorney Tom Olson, who represents First American Title, which Tea also has sued for its role in the transaction.
But according to Carl Christensen, Tea's attorney, she was unable to understand the warning because it was faded and unreadable. Moreover, Tea's real estate agent, Shawn Marie Strathe, never saw the card or knew that the property "was registered vacant, condemned or set for demolition," said McGee, who represents Strathe in the litigation.
Christensen said that Tea, who is Cambodian, speaks broken English and is far from savvy and relied on the sellers for information.
"The trust and its agents defrauded her," Christensen said. "They had actual knowledge that this house was slated for demolition. That is something they would be required to disclose in any real estate transaction."
The building was demolished in mid-2009, after Tea had spent $5,000 on repairs. Tea's lawsuit against the bank and other entities involved in the transaction is scheduled for mediation in June.
Tea, 54, said she is struggling to repay her brother, who lent her money to buy the four-plex.
"I still want to cry," said Tea, standing on the sidewalk in front of the empty lot where her four-plex once stood.
"I drive by here a lot to look at it. The children play on it in the summertime."
Randy Furst • 612-673-4224