The Federal Home Loan Mortgage Corp. filed a foreclosure complaint in Pulaski County Circuit Court on Tuesday against the owners of Big Country Chateau apartments in Little Rock.
Last week, tenants and allies from the Arkansas Community Organizations and Arkansas Renters United gathered in front of Little Rock City Hall to deliver a letter to city officials calling for help in relocating residents.
Central Arkansas Water had just informed tenants that water service would be disconnected in March and Entergy Arkansas sent a notice that electricity would be cut on Feb. 6 due to debt racked up by owners Apex Big Chateau AR LLC.
Attorney General Tim Griffin has pursued a lawsuit filed in August in Pulaski Country Circuit Court by his predecessor, Leslie Rutledge, against three corporate entities behind the Big Country Chateau complex over alleged violations of the Arkansas Deceptive Trade Practices Act.
Big Country Chateau is a 151-unit apartment complex located at 6200 Colonel Glenn Road in Little Rock.
The court filing made on Tuesday by attorneys Wilson and Associates, PLLC states that on July 31, 2019, Apex Big Chateau AR LLC and CBRE Capital Markets, Inc. entered into a loan agreement evidencing a loan of $5,220,000 secured by the apartments.
The mortgage was acknowledged and filed for record with the Circuit Clerk and Ex-Officio Recorder for Pulaski County on Aug. 1, 2019, including a promissory note requiring monthly payments to begin Sept. 1, 2019.
On July 24, 2019, Apex owner Oron Zarum executed a guarantee of full payment, but Apex defaulted under the terms of the mortgage and promissory note, having failed to make the scheduled payments due on Dec. 1, 2022, and afterward.
The Federal Home Loan Mortgage Corp. is now owed $4,943,213.83 together with accrued interest, according to the court filing.
"Defendants have failed to perform and comply with multiple sections of the Loan Agreement, including but not limited to its obligation under Section 6.09(a) to keep the property in good repair. These failures constitute events of default under Section 8 of the Mortgage," the foreclosure filing states.
Last year when city of Little Rock officials inspected 149 of 151 units, they identified 337 life safety violations and 975 other violations, according to a memo from Kevin Howard, director of the city's Department of Housing and Neighborhood Programs.
"By holding out these units as available for rent, Defendants indicated that these dwelling units met the standards set by both the State of Arkansas and the City of Little Rock," Rutledge's original complaint read. "Knowingly renting properties that do not meet these requirements and failing to repair problems throughout the lease term are deceptive and unconscionable trade practices."
Likewise, the owners violated the Deceptive Trade Practices Act when they took money "for the purpose of paying utility bills but failed to pay such bills," the complaint said.
Violations of the Deceptive Trades Practices Act can yield a civil penalty of up to $10,000 each, according to the complaint.
With 151 units at the apartment complex, the state could seek $1.5 million in penalties if there is at least one violation per unit.
Various media outlets have reported over the last year that Oron Zarum has failed to make payments for residents' water and electricity and upkeep apartments through Apex and his nonprofit, JPC Affordable Housing Foundation.
Efforts to get comments were unsuccessful Tuesday.