【破产新闻】Homebuyers rocked by builder’s bankruptcy filing

Dec 30, 2017

  

It didn’t take long for Justin and Suzanne Wicke-Coamey’s dream house to become their nightmare.

 

The 33-year-old Orange and Rockland Utilities employee, his wife, 32, and their boys, ages 3 and 5, were ecstatic when they closed in late June on a $442,000 Walden Savings Bank construction loan to build a home on Hickory Lane in Westtown.

 

They sold their house in Howells in April. Two months later, they took the title to the 2.7-acre Westtown lot, and prepped for Village of Florida developer J.C. Builders Inc. to custom-build their three-bedroom, 2,900-square-foot, $470,000 country farm house. But the developer barely started.

 

Six months later, they are the exasperated owners of a well, a foundation and a swimming pool. The property faces at least five liens from subcontractors that the Wicke-Coameys said they paid J.C. Builders to compensate. And the family is renting an old home around the corner while they wait.

 

J.C. Builders’ $2.3 million Chapter 7 bankruptcy, filed Nov. 15 in U.S. Bankruptcy Court for the Southern District of New York, has left at least eight prospective homeowners with unfinished houses or unbuilt lots, according to a Times Herald-Record investigation.

 

The property owners in the towns of Warwick and Minisink are scrambling to finish their homes, and more than four dozen mostly local vendors are reeling from hundreds of thousands of dollars in unpaid bills.

 

The company led by Charles Neustadt, 63, of the Town of Goshen, left three of the eight incomplete homes along House Road, off Big Island Road, in the Eden Estates subdivision in the Town of Warwick.

 

Three, including the Wicke-Coameys’, are on Hickory Lane, near South Plank Road, in the Hickory Hills subdivision in the hamlet of Westtown in the Town of Minisink.

 

Another two are respectively on Eagles Watch in the Pelton Crossing subdivision in Warwick and on Grahamtown Road in the Town of Greenville.

 

The properties, most of which Neustadt was supposed to finish by Christmas, are at different stages of construction — from unbuilt lots to nearly complete. Seven of the eight owners are dealing with deadlines from nine- to 12-month construction loans from Walden Savings Bank, while some seek to clear liens filed by subcontractors that Neustadt failed to pay.

 

“He took our money and ran,” said Heidy Pena. She and her husband, Ezequiel, closed in January 2017 on what was supposed to be a $384,000, four-bedroom, 3,400-square-foot Cape Cod-style house next to the Wicke-Coameys on Hickory Lane. “He sold us a home that’s half built, with a bunch of liens on it because he never paid the subcontractors with the money we gave him to pay them.”

 

The bankruptcy filing has also swept up more than 50 mostly local suppliers and subcontractors. Rich Majewski of Allied Excavating in Warwick has $342,600 in unpaid bills.

 

“Near the end of the summer, I suspected something was wrong,” Majewski said. “I said, ‘You’re closing on houses, and you’re not paying me any money. And he’d say ‘Oh, the next house I’ll give you money.’”

 

“I’m really hurting from it,” Majewski added. “I’m behind from all my bills because of it ... For 20 years, he always paid. I’m just embarrassed by the fact that I let it go so far.”

 

Several sources, from vendors to homeowners to Realtors, said Neustadt was devastated by his wife Jennifer’s death from cancer in the spring, and he used her demise to buy more time.

 

‘We were blindsided’

 

Neustadt’s eight clients with unfinished homes and unbuilt lots aren’t the only ones affected by J.C. Builders’ bankruptcy. The owners of at least three of the homes that the developer completed in Warwick also are listed as creditors, though it’s unclear why, and they couldn’t be reached to comment.

 

The homeowners could be responsible for maintenance costs associated with House Road because it appears Neustadt didn’t finish enough houses in the subdivision to dedicate the road to the town.

 

Before the bankruptcy, Neustadt had finished 12 of the 15 lots in Eden Estates in Warwick, which he started in 2006, and 17 of the 20 lots in Hickory Hills in Minisink, which he began in 2004.

 

Most of J.C. Builders’ creditors are subcontractors rather than banks because the company’s prospective homeowners took out construction loans. Banks disperse such loans in stages based on construction progress. Recipients then pay the general contractor, who is supposed to reimburse the subcontractors.

 

What happened to the money prospective homeowners gave J.C. Builders remains a mystery.

 

Founded in 1993, the developer had already built Kingsbrook Estates, a 23-lot subdivision in the Town of Wawayanda. Bankruptcy documents list Neustadt as owning 89 percent of J.C. Builders. Jacob Klein owns the rest.

 

Cell and home numbers associated with Neustadt no longer work. Emails to his work and personal addresses and a postal letter to his home went unanswered. In a phone call, Klein’s mother, who lives in Goshen, said he had never lived at her address, and she doesn’t know where he lives.

 

Several interviewees described Neustadt as the company’s principal and Klein as an investor and local mason.

 

J.C. Builders’ attorney, Andrea Malin of the Wappingers Falls bankruptcy firm Genova & Malin, said she “felt sorry for all the homeowners” and others caught up in the bankruptcy. She declined to comment further because the case is pending.

 

Subcontractors and prospective homeowners weren’t the only ones ensnared by the Chapter 7 filing. J.C. Builders also owes $53,000 in commissions to Better Homes and Gardens Rand Realty, leaving listing agent Katheryn DeClerck unpaid. Since 2011, she played the lead role in bringing clients to Hickory Hills and Eden Estates.

 

“We were completely blindsided by the bankruptcy,” DeClerck said. “His company went back to 1993. He seemed reputable. We’re doing what we can to help the people who’ve been impacted by the bankruptcy.”

 

DeClerck said she wouldn’t comment further because J.C. Builders is embroiled in “a legal matter being resolved by the court.” The bankruptcy may not be Neustadt’s only legal issue.

 

Three homeowners, two subcontractors and a Realtor said they had recently been interviewed by Thomas Reinle, a criminal investigator with the Orange County District Attorney’s Office. Christopher Borek, the county’s chief assistant district attorney, said his “office neither confirms nor denies the existence of any investigation unless or until charges are filed.”

 

‘Robbing Peter to pay Paul’

 

At the heart of the case is the question of what Neustadt was doing with the money homeowners like Heidy Pena and her husband, Ezequiel, gave him to pay the subcontractors building their houses.

 

One thing Neustadt was doing with his clients’ money was paying himself a salary of nearly $174,000 between November 2016 and November 2017. Klein, the 11 percent stakeholder in J.C. Builders, received $6,000 over that span.

 

Several of Neustadt’s creditors also think he was using his new clients’ money to pay his old debts. That’s the theory advanced by the Penas, the Wicke-Coameys and their Realtor, Luisa Jackson, an associate broker at Keller Williams Realty Hudson Valley United, whose firm J.C. Builders owes $2,350. Two of J.C. Builders’ former subcontractors made the same argument.

 

“I just think (Neustadt) got in over his head, and I think he just took from one place to pay for the other, and money was being shifted around,” said Jackson.

 

Jackson, who first worked with Neustadt five years ago, said she was stunned by the bankruptcy, which she attributes to incompetent money management rather than theft. But she said the effect is the same — her clients feel ripped off.

 

“These were people’s dreams,” Jackson said. “They’re not rich. They could have bought an already existing house. They chose to buy their dream house, and they really got cheated.”

 

At a December bankruptcy hearing in Poughkeepsie, Neustadt said he had been struggling to pay debts accrued a decade ago during the Great Recession, said Doug Kuiken, president and a co-owner of the Fair Lawn, N.J., lumber and home-supply company Kuiken Brothers.

 

“I think he was robbing Peter to pay Paul,” said Kuiken, whose business is owed $213,000, according to the bankruptcy filing. “What (Neustadt) stated to the U.S. bankruptcy trustee is that this didn’t happen overnight, that a lot of the issues stemmed from during the recession. He got behind, and he was never able to get ahead.”

 

Mark Tulis, the bankruptcy trustee assigned to the case, confirmed Kuiken’s account of what Neustadt said at the hearing. Tulis was quick to add that his investigation is ongoing.

 

Neustadt’s next bankruptcy hearing is set for 3 p.m. Jan.25 at the federal court at 355 Main St. in Poughkeepsie.

 

“Generally speaking, I often see businesses where people are eternal optimists and there’s no reality, and people dig themselves in deeper and deeper,” said Tulis, who estimated he’s overseen 1,000 business bankruptcies and 30,000 consumer cases. “People think they can get out, and they keep struggling, but they also leave a great deal of damage to innocent parties.”

 

Neustadt appears to have bought much of his subdivisions’ land at peak prices before the housing market collapsed, and then carried the tax burdens for years, according to a review of public property and tax records.

 

Typical was the lot that would become the first house Neustadt sold in Eden Estates on House Road in Warwick. In June 2007, Neustadt bought the lot from a local farmer, Alan House Sr., for $125,000.

 

But J.C. Builders didn’t develop that one-acre lot until 2011, when he sold a house on it for $423,000. Most of the rest of the development wasn’t erected until between 2013 and this year. Hickory Hills in Minisink dates all the way to 2002, when Neustadt purchased 56 acres from John and Marilyn Geraghty for $325,000.

 

‘We’re a victim, too’

 

If Neustadt intentionally misused money from one client’s job to pay for another or to settle old debts, he could be open to prosecution under Section 79-a of state Lien Law. The statute requires builders and home-improvement contractors to hold a customer’s funds in trust to pay subcontractors, suppliers and clients.

 

The deliberate diversion of more than $50,000 would be class-c felony larceny, which carries a maximum sentence of 15 years, while the intentional misuse of more than $1 million carries up to a 25-year penalty.

 

For now, former J.C. Builders’ clients like the Penas and the Wicke-Coameys are most concerned with finishing their houses, which were supposed to be completed by Christmas.

 

Each family now faces multiple liens from Neustadt’s subcontractors. The Wicke-Coameys are fighting a half-dozen liens they say they don’t owe, and the Penas, whose house is not yet completed, say they paid Neustadt to reimburse three of the lien holders.

 

Despite offering the vendors documentation that they tried to pay them via J.C. Builders, evidence the families shared with the Times Herald-Record, the liens remain. And the homeowners can’t use their construction loans to finish building until their titles are clear.

 

The Penas say that lien holders, such as Seldom Rest Construction in Pine Bush, TJ Construction of Port Jervis and Turnbull Well Drilling Associates in Warwick, have taken intractable positions against them.

 

Turnbull and Dougherty Concrete are lien holders for the Wicke-Coameys, as are Mark Sorge Excavation of Circleville and Woodard’s Concrete Products of Middletown.

 

Among the lien holders, only Turnbull and Sorge responded to requests for comment. In a statement, Sandy Turnbull said she wants to sort out any liens placed on properties associated with the J.C. Builders.

 

“We’re a victim, too,” Turnbull said in the statement, “and in light of the current criminal investigation of Charlie Neustadt, I’ve been advised not to make any further comment.”

 

Kevin Preston, Sorge’s attorney, disputed Wicke-Coameys’ view that the construction loan money he paid Neustadt invalidates Sorge’s lien.

 

Regardless, Derrik Wynkoop, president and CEO at Walden Savings Bank, which holds construction loans for seven of the eight properties left incomplete by J.C. Builders, said the bank is committed to helping the prospective homeowners.

 

Some of the solutions Wynkoop is considering or implementing include increasing the construction loan amounts; waiving appraisal fees; and providing affidavits that the bank dispensed funds for the homeowners to pay the subcontractors.

 

The bank has already granted up to six-month extensions of the construction loans at their lower original interest rates for several of the homeowners who needed additional time.

 

“I’ve been a banker for 28 years, and I haven’t had this happen to my borrowers,” said Wynkoop, who came in to work just before Christmas to hold conference calls with some of the affected families. “I totally sympathize for them. We have no incentive to make this difficult for them.”

daxelrod@th-record.com

 

Source:http://www.recordonline.com/news/20171230/homebuyers-rocked-by-builders-bankruptcy-filing

Copyright © 2013 | 上海交通大学凯原法学院破产保护法研究中心,沪交ICP备20121189
上海市徐汇区华山路1954号,上海交通大学凯原法学院破产保护法研究中心(邮编: 200030 E-mail: chinainsollaw@126.com) 技术支持:维程互联