Columbus and Colonial Village lender fight over who should pay to relocate asylum seekers
The city of Columbus is in a legal battle with the receivership estate of a long-troubled apartment complex over a multi-million dollar question: Who should pay for the relocation costs of more than 1,300 residents displaced after the property shut down late last year?
Colonial Village, the complex in question, made headlines in November after the discovery of a large number of people — mostly Haitian asylum seekers — living there without official rental agreements. A network of human traffickers had brought many of the Haitians from Florida, then made them pay rent to stay in unsecured, vacant units — many of which lacked heat or hot water — while issuing fake rental agreements that simply listed “Colonial Village Apartments” as the landlord. A staff member from the apartments’ management company, Hayes Gibson (Property Services), was allegedly involved in the scheme, according to court documents submitted by both the city and the receivership estate.
The city has so far allocated $4 million — and spent over $1.6 million — to provide hotel rooms to the former Colonial Village residents through the end of March.
In a civil case, City Attorney Zach Klein’s office is trying to recoup those and related costs from Colonial Village’s receivership estate. The estate includes the property’s mortgage-holder, EFM Transfer Agent LLC, and a court-appointed receiver. The property went into receivership in early 2022 as part of a foreclosure case that EFM filed against the owner.
“The need for relocation is a direct result of EFM, the Receiver and Hayes Gibson's failure to abide by both Columbus City Code and this Court's orders and thus should be considered a necessary expense of the receivership estate,” the city argued in a November motion in Franklin County Court of Common Pleas.
However, EFM is arguing that rehousing former residents falls beyond the scope of the receivership estate's legal duties.
“Those ‘relocation costs’ may be socially attractive to the City but are unrelated to the purpose of the Receivership: to preserve and rehabilitate Colonial Village and sell it to a responsible buyer to operate as affordable housing,” wrote EFM’s attorneys in a court filing last month.
The lawyers earlier wrote that it was not “fair or reasonable to ask EFM, as lender, to cover 'relocation' costs with respect to units that are being occupied unlawfully by trespassers without EFM' s knowledge.”
Securities and Exchange Commission filings indicate that EFM is a subsidiary of Ellington Financial Inc., a publicly-traded corporation based in Connecticut.
A company spokesperson did not respond to The Dispatch’s emailed questions about the case.
An attorney for EFM declined to comment beyond what they had submitted in court filings.
Colonial Village and Latitude Five25 may have had same owners, though legal cases differ
The Colonial Village case bears some resemblance to an earlier case, when more than 150 people were displaced from the Latitude Five25 towers on Columbus’ Near East Side after it was shut down due to emergency housing code violations. In that case, a judge ordered the owner — a company named Paxe Latitude LLC — to reimburse the city and the county for nearly $2 million of taxpayer money spent on temporary housing for displaced residents.
But the Colonial Village case is different in several respects: many of the residents lacked official rental agreements, and the city is trying to recoup the costs from the receivership estate and mortgage holder, not the owner.
Colonial Village’s owner — a company named Apex Colonial LLC that appears to have been created solely for the purpose of owning the complex — purchased the property in March 2020.
Though owners can hide their identities behind LLCs, Apex Colonial’s owners may have been the same individuals behind Paxe Latitude, according to the city attorney’s office.
“We believe that Apex Equity LLC is the overarching ownership entity of the two entities that owned Colonial Village and Latitude 525. Legally, there may be enough differences to argue they are not the same owners, but there appear to be relationships between the underlying guarantors of the loans issued for both properties and the management companies for both,” said a spokesperson.
At the time Apex Colonial acquired Colonial Village, city code inspectors had already cited hundreds of violations, according to Klein’s office. The problems continued under the new owner, and the city won a municipal court order declaring the property a public nuisance.
But Apex Colonial lost control of the complex in March 2022 amidst a foreclosure case in Franklin County Court of Common Pleas brought against it by mortgage-holder EFM, from whom it had taken a $15.5 million high-interest loan in 2020. The city, as an interested party in that case, supported the receivership because it believed doing so would help address the ongoing nuisance-abatement issues.
Columbus developer Robert J. Weiler, Sr. was initially appointed receiver, but in April 2023, he was replaced by Kenneth Latz, senior managing director of Riveron ETS LLC. Weiler, who is not included in the city’s motion against the current receivership estate, told The Dispatch that he left the receivership due to disagreements with EFM’s leadership.
Both receivers contracted Hayes Gibson — whose staff member allegedly participated in the rental scheme involving Haitian asylum seekers — to manage the property.
In October, the city learned that many Haitian families — including those with newborn children — were living in apartments lacking basic amenities like heat. The city ordered emergency repairs to the apartments, and then the receivership estate decided to close down the entire complex to bring units up to code.
City argues Colonial Village lender acted as 'owner'
Under Ohio law, receivers appointed through foreclosure cases are charged with paying for expenses "necessary to preserve the value of the assets held,” including making repairs to a property, selling it and using the proceeds to pay creditors.
In practice, buildings that go into receivership seldom result in sales that make all the creditors whole. Mortgage holders are generally paid only after the receiver’s fees and tax lien obligations, according to Jeff Lewis, a Columbus attorney who has represented receivers but who has no involvement in the Colonial Village case.
In this case, EFM was made responsible for paying for the receivership’s expenses — which exceeded $4 million over nearly two years, according EFM’s January court filing.
The city conceded that relocation expenses may not have been “necessary” in the traditional sense of repairing buildings. But the city said in its November court motion that the receivership should still pay “because the nature, extent, and worth of the expenditure is entirely justified by EFM and the Receiver's legal responsibilities, conditions at the Premises, and the threat inaction at the Premises poses to the receivership estate and the people of Columbus, generally.”
In a February filing, the city argued that “EFM should be considered both an owner and a landlord of Colonial Village” because it co-initiated (with the city) the court motion for receivership and because it was “in possession” of the property for more than a year and a half before it had to be shut down.
For its part, EFM has argued that its status as the mortgage holder is far different from being an owner. It suggested that the city instead try to recoup the costs from those directly involved in bringing the Haitians to the complex and handing out fake lease agreements.
Lewis told The Dispatch that the city is likely going after the receivership estate and EFM because they have recoverable assets — unlike the traffickers.
“You go after the folks who have money,” he said.
But Lewis said that he doesn’t think the law is on the city’s side, and a “dangerous precedent” could be set by holding a lender responsible for a property for which they hold the mortgage.
“Bad law makes bad business. If the interest of the city is in developing the city, building affordable housing or having reputable people come in and take over dilapidated structures, what lender is going to lend that kind of business money — if they might be on the hook for relocating people?”
“I get city doesn't want to throw these folks out on the street, and that's noble, and that's moral. But the law and morality often don't intersect,” he said.
Kate Walz, an associate director of litigation at the National Housing Law Project, based in Chicago, said she’s seen many cases of residents displaced due to emergency housing code violations.
“What gets lost in these stories are the families themselves. I can appreciate why local governments who are cash strapped are looking for pathways to get their money back. I think we would love to see pathways for creating greater housing stability, and a greater regulation of landlords at the front end, so this sort of thing doesn’t happen,” she said.
Former Colonial Village residents face an uphill battle finding permanent housing in a city that is becoming less and less affordable. They have until the end of March before the city’s commitment to providing temporary housing runs out.
More: Colonial Village housing crisis continues for Haitians, Americans as March deadline looms
Peter Gill covers immigration, New American communities and religion for the Dispatch in partnership with Report for America. You can support work like his with a tax-deductible donation to Report for America at:bit.ly/3fNsGaZ.
pgill@dispatch.com
This article originally appeared on The Columbus Dispatch: Columbus, Colonial Village legal fight over relocating asylum seekers
