A Jackson County judge on Tuesday fined a corporate landlord $7,500 a day and entered a default judgment against it after finding the company in contempt for ignoring court orders.
The extraordinary sanctions against a unit of T.E.H. Realty, which has been the subject of multiple complaints about living conditions at its apartments in Kansas City and elsewhere, came after the judge had already fined T.E.H. $1,000 a day for civil contempt in April.
In her order Tuesday, Judge Joel P. Fahnestock found that T.E.H. had failed to appear at scheduled videotaped depositions, failed to respond to discovery requests and ignored multiple court orders.
In addition to the fines, she entered judgment for the plaintiffs, residents of Ruskin Place Apartments in south Kansas City, on their claims that T.E.H. had violated Missouri law and breached its implied warranty of habitability.
“It was a strong order, no question about it, justified by their misconduct and their absolute disregard,” Greg Leyh, an attorney representing Ruskin Place tenants, said of Fahnestock’s order.
“They (T.E.H.) just don’t care about circuit courts. They use the associate circuit courts in Missouri to evict tenants and to seek double rent in rent and possession cases. Then when they get sued, they frequently don’t even respond," he said.
T.E.H.’s attorney could not immediately be reached for comment.
T.E.H., which was founded in Israel in 2006 and specializes in acquiring low-income housing units, owns numerous apartment buildings in the Kansas City area, St. Louis, Tulsa, Indianapolis and Reading, Pennsylvania.
Tenants of Ruskin Place sued T.E.H. in October, complaining of leaking water, mold, sagging floors, inadequate heat, unsecured doors and “large critters” roaming through the units. Fahnestock later granted them the right to sue as a class.
It’s not clear what will happen now that Fahnestock has entered judgment in favor of the tenants.
The local T.E.H. affiliate that owned Ruskin Place, KM-T.E.H. Realty 8 LLC, no longer owns it. Federal mortgage giant Fannie Mae foreclosed on the apartment complex earlier this year and it was purchased at a foreclosure sale by a New Jersey company for about $4.2 million.
Leyh said the new owner has promised to repair and maintain the property.
"We’re working cooperatively and hopefully for the benefit of the tenants out there," he said.
In the meantime, Leyh plans to ask Fahnestock to assess damages against KM-T.E.H. Realty 8, but he said he doesn’t harbor any illusions about collecting any money.
“But I’ve got clients who have been living in squalor for however long they’ve been living there,” he said. “And so I don’t really want to just give up on them.”
Because each of T.E.H.’s apartments is owned by a separate legal entity like KM-T.E.H. Realty 8, technically any judgment would be limited to that entity. But under a legal doctrine known as “piercing the corporate veil,” shareholders may be held personally liable for a company’s obligations if the company is found to have committed fraud.
Leyh said he might pursue that avenue, “but whether that will happen will depend essentially on finding a judgment debtor who can pay.”
Another difficulty Leyh could face is the possibility of KM-T.E.H. Realty 8 filing for bankruptcy. That’s what another T.E.H. entity — KM-T.E.H. Realty 10, which owns Park Gate Apartments near Swope Park in Kansas City — did earlier this month.
Realty 10 sought Chapter 11 protection after U.S. Bank sued it over a $1.6 million loan that Realty 10 obtained in 2018 to purchase the property. U.S. Bank claimed Realty 10 had defaulted on the loan by failing to maintain the property.
Yet another T.E.H. entity — the owner of Crown Manor Apartments in St. Louis — has also filed for bankruptcy.
And another T.E.H. apartment complex, Crestwood Apartments at 57th and Parallel Parkway in Kansas City, Kansas, was taken over by a receiver late last year after Fannie Mae sought to foreclose on that property.
Tenants there had complained it was infested with roaches and mold.
