San Diego Landmark Embroiled In Litigation Between Developer, Residents; Mortgage Holders Face Grim Prospects

In another condo quagmire story, voiceofsandiego.org reports on the unfolding saga of a California landmark building on the edge of downtown San Diego that was once a hotel, but was rehabbed and converted into condos a couple of years back. A dispute between the developer and its residents involving alleged construction defects stemming from the rehab and failure to disclose certain material facts are the prime contributors to the problem. Plummeting prices of the residential units in the building causing owners to lose their home equity and mortgage holders to eat hundreds of thousands of dollars from resulting foreclosures is another contributor to this mess.

• The red neon letters spell EL CORTEZ when they're all working, launching a beacon from the stately white building atop its namesake hill on the edge of downtown San Diego. But when the letters are on the fritz, as they are now, they flash and blink, muddling the sign's message and portending another: all is not right with the landmark.

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• The building is mired in litigation between homeowners and the developers. The homeowners association and individuals in various suits are suing over construction defects, parking agreements, HOA reserves, disclosures on property tax agreements and the building planned for next door. And of the five units in the building currently for sale, four are being sold for about half of their original selling price by lenders who repossessed them. The other is listed for less than is owed on the mortgage.

• Take unit 405, a two-bedroom, two-bath condo that sold in November 2005 for $625,000. It's been repossessed by the lender and is now listed for sale with an asking price of $290,000 -- a 54 percent price reduction. Another bank-owned unit that once sold for $405,000 is now listed at $199,000. Another one, No. 304, sold in February 2006 for $699,250. Now it's listed as a bank-owned sale for $294,500 -- a 58 percent difference. And though sales have slumped countywide, buyers are especially scarce on this project. Lenders, already reviewing each deal more meticulously, are extremely averse to making mortgages on buildings in litigation. The banks selling the repossessed properties are forced to keep lowering the prices until a buyer can pay cash or work out some other deal with a lender.

Among the problems complained of by the residents of this luxury building are the defective systems that have resulted in bursting pipes and sewage back-ups, failure to disclose that a major real estate tax break was expiring - resulting in a significant hike in unit owners' maintenance charges, and the developers' plan to build a new 12-story contemporary building right next door to the eight decade old landmark - which will kill the views of the city that the building currently enjoys.

For more, see Trouble at El Cortez (In a renovated San Diego landmark, there is dysfunction among the developer and the homeowners).