Facing Mounting Legal Issues, Affiliate Of Notorious Kansas City Landlord Files For Bankruptcy
Residents at Kansas City-area properties owned by T.E.H. Realty have sued over deplorable conditions, including mold, roaches and inadequate heating.
A local affiliate of a corporate landlord that has earned notoriety for the deplorable living conditions of its apartment units has declared bankruptcy.
KM-T.E.H. Realty 10 LLC on Friday sought Chapter 11 protection in U.S. Bankruptcy Court in Kansas City.
Jackson County property records show the affiliate owns the Park Gate Apartments on East Meyer Boulevard. The apartments consist of 1- to 3-bedroom units.
KM-T.E.H. Realty 10 is one of many affiliates of T.E.H. Realty, which, through separate LLCs, owns dozens of apartment complexes in the Kansas City and St. Louis areas, as well as other U.S. cities.
An LLC, or limited liability corporation, is a commonly used ownership structure that shields the owners of a company from personal liability.
The bankruptcy filing appears to have been triggered by a lawsuit filed earlier this year against Realty 10 by U.S. Bank. The bank alleged that Realty 10 had defaulted on the conditions of a $1.6 million loan it obtained in 2018 to purchase the property by failing to maintain it “in good repair and free of deterioration.” A judge later appointed a receiver to take charge of the property.
Nicole Plank, an attorney for Realty 10, said the U.S. Bank action was "a contributing factor" in the bankruptcy filing but denied that it was the main reason for the filing.
She cited attorney-client privilege when asked what the main reason was.
The bankruptcy filing has the effect of halting U.S. Bank’s lawsuit, at least temporarily.
In March, a T.E.H. affiliate that owns Crown Manor Apartments in St. Louis also filed for Chapter 11 bankruptcy.
Both bankruptcy filings come after a string of legal setbacks for T.E.H., which has been accused by tenants in multiple lawsuits of neglecting its properties.
In April, Jackson County Circuit Judge Joel Fahnestock fined T.E.H. $1,000 a day after finding it in civil contempt. Fahnestock found that the company had ignored previous court orders to produce the names and addresses of current and former residents of its Ruskin Place Apartments in south Kansas City.
Fahnestock earlier had granted the tenants the right to sue T.E.H. as a class after they complained of water leaking through windows, mold, sagging floors, inadequate heat, unsecured doors and “large critters” roaming through the units.
And in December, a Wyandotte County judge appointed a receiver to manage T.E.H’s Crestwood Apartments, a 124-unit complex in Kansas City, Kansas, after Fannie Mae sought to foreclose on the property. Tenants had complained it was infested with roaches and mold.
T.E.H. was founded in Israel in 2006 and specializes in acquiring low-income housing.
Plank, the T.E.H. attorney, insisted that all of the T.E.H. limited liability companies were separate entities and not related to one another.
"There's a company called T.E.H. Realty LLC. It's a Pennsylvania entity that owns one piece of property here in Pennsylvania," she said. "Every entity is a separate registered entity owned by separate individuals and companies. They are not affiliated in any legal sense of the word."
Earlier this year, a court in Israel entered a $4.5 million judgment in favor of an Israeli investor named Emanuel Kronitz and against T.E.H. investors in the United States. The judgment was registered in both Jackson and Cass counties.
On Friday, Kronitz’s attorneys asked Jackson County Circuit Judge Patrick W. Campbell to order the investors to pay the judgment. The proposed order indicates the investors have ownership interests in various T.E.H. LLCs, including KM-T.E.H. Realty 10.
The bankruptcy filing halts that action, at least for the time being.