Two years ago, Vincent Periolat paid $250,000 for what he thought was a condominium in Huntington Harbor. But six weeks ago, a pair of Huntington Beach police detectives showed up at his door with a copy of a Weekly article that revealed the property was actually an apartment unit that had been illegally converted into a condominium. Now, Periolat says, he isn't sure what he bought, and he's not happy about the confusion.
He's especially angry because the real-estate agent who sold him the property—and who also owned the building—should have known better: she's Pamela Julien Houchen, a Huntington Beach City Council member. The Weekly article described how Houchen had converted the four-unit apartment building into four separate condominiums without applying for a city permit (see "Condo-Mania," Oct. 27, 2003).
"It was listed as a condo, and of course we were told that by Pam [Houchen]," Periolat said. "It was always represented to us as a condominium and not as an apartment or co-op. I'm obviously and justifiably upset. The county says I own a condominium. The city says I own an apartment, and in cases like this, city law supercedes county law. It's very disturbing."
Six months after the article ran, city officials now say they've discovered at least 40 other illegal conversions, which is why they forwarded the probe to police for criminal prosecution. Property owners who illegally convert apartment buildings to condominiums could face felony charges of real-estate fraud.
But even as Huntington Beach police investigate whether Houchen broke the law, the City Council is considering whether to allow people who unwittingly purchased illegally converted condominiums to pay the city to obtain the proper permits. Those fees amount to $7,000 for each property, or $1,750 per unit in an illegally converted four-plex.
Houchen recused herself from at least two recent closed-session council meetings held to discuss proposed changes to the city's condo conversion ordinance. She failed to respond to numerous interview requests.
But council member Debbie Cook said the closed-session meetings were held at the request of the city attorney, who said that unless the condo conversion ordinance is changed, the city would have to sue roughly 120 people who converted apartments to condominiums without a permit. Cook said the council informally decided not to pursue litigation, but will continue to discuss its options in public session.
One of those people most affected by this debate, of course, is Houchen herself. She clearly stands to benefit if her colleagues on the City Council vote not to sue her. She would also benefit if the council allowed people such as Periolat to pay a fee to legalize their properties, because doing so would make it less likely that Periolat would sue Houchen.
"If we hadn't indicated we were willing to look at a change in the ordinance, that would have implied we want to have 120 lawsuits," Cook said. "So we gave direction that we don't want to litigate 120 condo conversions." But Cook added that nothing the council does to change the city's condo ordinance would protect a person who broke the law. "That's not what this is about," she said. "Nobody's going to get off free."
Huntington Beach police spokesman Sergeant Dave Bunetta refused to discuss the investigation, except to say the department is focusing on real-estate fraud, forgery and other violations.
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"We are conducting an investigation based on information we received from the city attorney and planning department," Bunetta said. "Whether the violations meet the criteria for criminal prosecution hasn't been determined. Once our investigation is finished, we will report to the district attorney, and they would determine if a criminal complaint will be filed."
The city's investigation of illegal condo conversions began last year. In October, the weeklyrevealed Houchen's May 2001 purchase of a Huntington Harbor four-plex for $500,300. She sold each unit individually over the next year for a total of $1,102,500, for a gross profit of about $600,000. Houchen never applied for a permit to convert the four-plex into condominiums and never declared her ownership of the property in financial-disclosure forms filed at City Hall.
"I was thrilled about this [property] originally," Periolat said. "We could live in the city we wanted to live in and in an area that has almost everything we wanted. But now I don't know if I'd go through this again, even if it all works out."
Periolat says he'll be relieved if he only has to pay a few thousand dollars to the city. "What if something needs to be done to the structure to bring it up to code?" he asked. "What if the city determines it's not a condo, and that affects its value? What if this drags on for a year or two and we need to move but can't get out of it?"