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Presentation, discussion, and possible action on recommendation to adopt an Agreed Final Order assessing an administrative penalty relating to The Life at Sterling Woods (HTC 04478 / CMTS 4176)
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RECOMMENDED ACTION
recommendation
WHEREAS, The Life at Sterling Woods (HTC 04478 / CMTS 4176) (Sterling Woods) has uncorrected compliance findings relating to the applicable land use restriction agreement and the associated statutory and rule requirements;
WHEREAS, Sterling Woods is owned by 8625 Winkler Drive Houston LLC, which is controlled by Olive Tree Multifamily Manager II LLC and Ian Bel;
WHEREAS, TDHCA identified findings of noncompliance at Sterling Woods during its regularly scheduled 2024 file monitoring review and as part of a 2024 complaint, and referred the Owner for an administrative penalty when findings of noncompliance were not timely corrected;
WHEREAS, all referred noncompliance has now been resolved;
WHEREAS, owner representatives participated in an informal conference with the Enforcement Committee on January 30, 2025, regarding multiple enforcement referrals, including a referral for administrative penalties for Sterling Woods;
WHEREAS, Ian Bel has agreed, subject to Board approval, to enter into an Agreed Final Order for Sterling Woods, assessing an administrative penalty of $12,000.00; and
WHEREAS, staff has based its recommendations for an Agreed Final Order for Sterling Woods on the Department’s rules for administrative penalties and an assessment of each and all of the statutory factors to be considered in assessing such penalties, applied specifically to the facts and circumstances present in this case;
NOW, therefore, it is hereby
RESOLVED, that an Agreed Final Order assessing an administrative penalty of $12,000.00 for noncompliance at Sterling Woods, substantially in the form presented at this meeting, and authorizing any non-substantive technical corrections, is hereby adopted as the order of this Board.
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BACKGROUND
PROPERTY INFORMATION: 2004 9% HTC award for new construction of a Qualified Elderly Project. 234 units in Houston, with 117 units restricted at 50% AMI and 117 units restricted at 60% AMI. There are four buildings. The HTC LURA was effective in 2008. The 15-year federal HTC Compliance Period expired December 31, 2021, but the state HTC Extended Use Period runs 30 years, and is set to terminate on December 31, 2036.
RESPONSIBLE PARTIES IN CONTROL: Olive Tree Multifamily Manager II LLC and Ian Bel.
Olive Tree Multifamily Manager II LLC, controlled by Ian Bel, is the manager member for
8625 Winkler Drive Houston JV LLC, the sole member of 8625 Winkler Drive Houston LLC, the owner of Sterling Woods. Purchased the development in 2021.
REFERRED VIOLATIONS SUBJECT TO ADMINISTRATIVE PENALTIES FOR STERLING WOODS:
1. File monitoring referral: A file monitoring review was conducted on March 28, 2024, and Compliance set a corrective action deadline of August 7, 2024. The property submitted a timely response, and a 10-day letter was issued on October 4, 2024, setting a further 10-day cure deadline of October 14, 2024, to submit corrections. Most noncompliance was timely corrected, but three gross rent violations caused by utility allowance miscalculations for the months of January through March of 2024 remained unresolved. Those unresolved findings were referred to the Enforcement Committee (the Committee) on December 6, 2024. Of those, the monthly overcharges were $102.00 per month for two units, and $50.00 per month for one unit. Rents were reduced on April 1, 2024, and final corrections were submitted to the Department on January 6, 2025.
2. Complaint referral: The Department received a complaint regarding a nonfunctional elevator in Building four. Building four is a three-story building, with 22 units on each floor. Property management, Asset Living, indicates that the elevator originally broke during Hurricane Beryl on July 8, 2024; the elevator was repaired, but broke again in August and further repair attempts failed. Both the owner and property manager indicate that the elevator is obsolete, and TDHCA inspection staff confirm that parts can be difficult to find for older elevators, however, the timeline for repair has been unreasonable, leading to tenant complaints, legislative complaints, and media inquiries. This broken elevator is a violation of National Standards for the Physical Inspection of Real Estate (NSPIRE) and is an accessibility violation because it is the only elevator in the building and is part of an accessible route. The Department issued a notice of noncompliance on November 14, 2024, setting a corrective action deadline of November 24, 2024. The TDHCA Compliance Division referred the noncompliance for an administrative penalty on December 5, 2024. The elevator was restored to service on February 18, 2025.
FACTORS CONSIDERED TO DETERMINE ADMINISTRATIVE PENALTY: The Committee analyzed the required statutory factors for determining an appropriate administrative penalty as follows:
1. The seriousness, extent, and gravity of the violations: Overcharged rents are serious. Although the monthly overcharged amounts are relatively low, those amounts are still significant for someone who is low-income. It was not an intentional overcharge, however; it was the result of a miscalculated utility allowance, followed by a property management company and systems change. The broken elevator is extremely serious, with multiple reports of elderly and/or disabled residents who were unable to get downstairs without assistance. The timeline for repairs was unacceptably long.
2. Hazard posed to the health, safety, or economic welfare of the public: See #1 above.
3. Efforts made to correct the violations: Corrections were timely submitted for the file monitoring review, but were incomplete. Final corrective documentation was submitted to the Department on January 6, 2025, proving that rents were reduced on April 1, 2024, and that refunds or account credits were issued as required for the overcharges. There was a property management change in March 2024, and onboarding for their new system was completed in May, so this contributed to the timeline for correction.
The elevator violation was resolved on February 18, 2025. Property management indicates that they are providing weekly updates to residents. Property management states that replacing the elevator is prohibitively expensive, so the elevator is being refurbished. According to property management, the manufacturer, Otis, required the elevator repair company, Kone, to send the elevator control board to them for repairs three times before they would agree to replace it. Alternate repair companies were unable to evaluate the problem and bid repairs because the control board was not present, preventing diagnostics. Otis eventually deemed the board unfixable, and sent a replacement, but the proper item was not received and had to be re-ordered. New boards are no longer made for this elevator, so a refurbished board was installed November 4, 2024, but it did not work. After some back and forth with Otis and Kone, it was determined that a custom control board needed to be manufactured. Kone placed a custom order with MCE, a third-party manufacturer specializing in producing universally maintainable control systems, on December 3, 2024, at a cost of $82,320.00, and an estimated three-to-four-week manufacturing timeline. The new board was installed in January, but Kone encountered communication errors at the car and hall stations. Additional components were installed, but problems have persisted. New buttons were then installed the week of February 10, 2025, and the elevator was confirmed operational as of February 18, 2025.
4. Any other matters that justice may require: Compliance confirms that broken elevators are becoming a more frequent problem as buildings with elevators age, and parts become difficult to find. However, this does not justify the extended time period, particularly for a qualified elderly project, where each unit has at least one person 55 years of age or older. Other portfolio enforcement history is discussed in the debarment section below.
Property management indicates that the elevator was a high priority, and states that staff has offered to carry things for impacted residents, there is a high lease renewal rate, they have not received many complaints regarding the elevator, and the elevator company attended a meeting with residents. The Committee noted that there appears to be a disconnect regarding complaints, with people complaining to TDHCA, the Texas legislature, and the news, but perhaps not complaining directly to the property.
The last physical inspection scored 88 out of 100 on July 11, 2022. Compliance intends to perform an NSPIRE inspection during 2025. The owner states that the property is in good condition, occupancy is high, and finances are stable. The most recent unit status report shows only nine vacant units out of 276 total units; of those vacant units, three units are in building four: the household in unit 4301 vacated on 9/20/2024, unit 4205 vacated on 10/31/2024, and unit 4212 vacated on 11/5/2024.
A debarment final order for the responsible parties is also under consideration during this board meeting.
5. Amount necessary to deter future violations: In light of the above factors, the Committee recommends an Agreed Final Order assessing administrative penalties of $12,000.00. There is no recommended forgivable or probated portion to the administrative penalty.
RECOMMENDATION: Accordingly, after consideration of all appropriate factors, the Enforcement Committee and Executive Director recommend an Agreed Final Order for an administrative penalty in the amount of $12,000.00 against 8625 Winkler Drive Houston LLC.