Chicago Takes on Bad Developers, With Mixed Results

February 25, 2010

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Just a few years ago, homebuyers stampeded into brand-new condos all over Chicago. Then, reality hit. Water started leaking in. Mold crept up the walls. Elevators stopped working. Now the city of Chicago is trying to clean up the mess by chasing after developers responsible for shoddy work. But the city's good intentions have, in some cases, made life even tougher for the homeowners.
 
If you stand here on West Wabansia in the North Side neighborhood of Bucktown, almost everywhere you look are new condo buildings. The ones I'm standing in front of are red brick with big picture windows. Just looking, you'd never know each building has a stack of litigation sitting in folders at Cook County Circuit Court. Each one has taken up hours and hours of this man's time.
 
GREG JANES: So here are one file, two file cabinets, three file cabinets full of our cases.
 
Greg Janes is an attorney for the city of Chicago. His cabinets bulge with architectural plans and building permits. Since 2007 he's led the Bad Developer Task Force for the law department. Janes says the idea came from Mayor Richard Daley who was bombarded by homeowners complaining their new condos were falling apart.
 
JANES: He intended two things: he wanted to make sure the people who caused the problems, fixed the problems, and to also punish bad actors.
 
So Janes and three other city lawyers, along with inspectors from the buildings department, started investigating. They found lots of serious code violations and a few developers that left a path of destruction across the city. Janes and his team began filing lawsuits that now total almost 90. But he says lawsuits weren't even needed in some smaller cases.
 
JANES: We've said, listen, if you do it now, we won't file a lawsuit, and you know it's going to cost you $8000 to make this repair, spend that $8000, don't spend it on a lawyer to defend you on a lawsuit where you're facing $100,000 worth of fines. So we have been successful that way.
 
PAULA FRANZESE: Chicago is certainly taking the lead in the context of trying to cure or fix a very severe malaise that is afflicting so many regions of the United States.
 
Paula Franzese is a property law professor at Seton Hall University in New Jersey. She says lots of cities are struggling with unfinished or poorly built developments. She's been fascinated to watch Chicago's effort, but says it may be a dead-end if developers are broke.
 
FRANZESE: It may not yield the results the city hopes simply because the developers are unable to comply.
 
Greg Janes says most developers here in Chicago have fixed at least some of the problems. But a few companies have left disasters in their wake. Take Equinox Development Corporation. More than a third of the city's cases have been against that company. I tried to reach Equinox's lawyer, but he didn't get back to me. Janes says the company is broke and its owner moved to Arizona without fixing his buildings. Those include the Bucktown condos I talked about earlier. That's where Scott Shapiro moved with his family in 2006.
 
KIDS: Guys, let's go back here. Yeah! (laughing)
 
Shapiro's sons are playing with friends in the basement. It's the same basement that flooded their first winter here. And their building had no electric meters, just open wiring exposed to rain and snow. Shapiro thought about suing his developer, but the next thing he knew, the city had already done that.
 
SHAPIRO: As soon as the city filed its suit and filed its initial complaint and did an inspection with all the violations, it opened a can of worms we had no idea was there.
 
Everything from more dangerous wires to a balcony that was a hazard for the kids. But Shapiro was lucky. Equinox had a co-developer on the building. While Equinox skedaddled, the other developer came back and fixed the problems. Shapiro says he's irked the city allowed such shoddy work to be built in the first place. But he says he's grateful his building is now up to code and he didn't have to file his own lawsuit.
 
SHAPIRO: It would have been a huge financial hit for us to have to do this. It was a tremendous burden off of us.
 
Still, as condo president, he had to spend many hours in court. But he knows things could have been a lot worse. For Mary Feeney, it has been. She's pulling up the blind to show me her window.
 
FEENEY: (opening blinds) Uh, you can sort of see the damage on the wood here, and then this is mold that's developing in the wall, but when they pulled this out it was just water sitting all under the windowsill.
 
Feeney's four-unit building near Logan Square has a big glass façade and windows that jut out in dramatic angles. But its concrete block walls leak like crazy. Feeney and her neighbors contacted their alderman, who said to call the city. They did and the city sued their developer, Jerry Czerwik. But Feeney and her neighbors were also named on the lawsuit.
 
FEENEY: I mean that's what was so ironic when we were first found as defendants in the same pool as the developer, it was like, well the only reason you have a case is because we called you, and now we're defendants?
 
City attorney Greg Janes says homeowners are included because they need to know everything in the case and give city inspectors access to the building. In this case, Czerwik tried to fix the problems at first. But inspectors found more and more issues, and he stopped. Feeney says one day, the judge was fed up.
 
FEENEY: I was sitting in court that day and they started to read, like, for this code violation, for every day you're in violation it's a $350 fine for a total of $300,000 and on and on. And all the lawyers that were sitting waiting for their upcoming cases were gasping. And one guy turned to me and said, `I've never seen the city do this.' So it felt really great to think the city's really going after this guy. But he left the country.
 
So here's where being co-defendants really starts to get painful. Feeney and her neighbors are now on the hook to fix the code violations that their developer caused. That could cost them upwards of $200,000 split four ways. Meanwhile, according to Janes: Czerwik's off in Poland and owes the city more than $700,000 in fines. He didn't respond to emails and his lawyer didn't return my calls.
 
JANES: I personally feel horrible the city wasn't able to do more.

Again, Greg Janes from the city's law department. He says it's frustrating knowing he set out to help people only to have this happen.

JANES: You know, every time we try to work with a building and a general contractor, I think, let's hope it doesn't turn out that at the end the unit owners are still on the hook for over $100,000.

Or more, as is the case for Feeney and her neighbors. She says she appreciates Janes's lawsuit, but on the whole, the city let her down. The rash of complaints by homeowners like Feeney shows what was missing during the boom years: strong oversight by the City of Chicago. Until recently, the buildings department depended on developers to call during construction when they were ready for an inspection, sort of an honor system. Those who wanted to avoid scrutiny could just not call. Many of the developers in Janes's cases, like Mary Feeney's, never got a certificate of occupancy showing final inspections had been done.
 
FEENEY: When we all bought our units they took a big chunk of tax out of that. Everyone made money off of this building and we're the ones stuck with a building that's not code-compliant. Well, how is it that a person is allowed to sell a building that's not code-compliant?

And Feeney says she now knows one thing for sure.
 
FEENEY: I will never buy a property in Chicago again. I don't think there's any consumer protection for homeowners in Chicago.

That's the kind of distrust city lawyer Greg Janes hopes to dispel by going after bad developers. But he's on clean-up duty, trying to fix the mess after the fact. To prevent all this from happening again, Chicago needs to change how it regulates what gets built. I'll take up that part of the story in my next report.