Brothers default on 30 mortgages

September 12, 2008
By

DAVID TABER

Brothers Roger and Douglas Smith likely own more rental property than anyone in Jamaica Plain. Over the years, the management and upkeep of their properties has been decried by many, even as others have taken advantage of and expressed appreciation for affordable rents in their apartments.

In March the Gazette reported that foreclosure proceedings had begun on a number of their properties. This summer the Gazette looked deeper into the brothers’ business and learned that the brothers—one of whom appears to be living in Ireland—are breaking up the management of their local rental empire. The break up resulted from what Vincent DiMento, a lawyer with knowledge of the Smith Brothers’ dealings, described as a “beef.”

Roger and Douglas Smith, along with Phillip Tracy, a Boston attorney long associated with the Smiths, own close to 40 multi-unit rental properties in Jamaica Plain and Roslindale. Many of those properties are triple-deckers housing three or four people in each unit.

According to the listings from Warren Group of Boston and the Suffolk County Registry of Deeds web sites, the brothers have defaulted on mortgages for at least 30 of those properties. Those defaults have led to foreclosure proceedings being started for at least three-quarters of the properties the Smiths own, but they appear to have so far managed to avoid any actual foreclosures.

Foreclosure petitions are the first step in foreclosure proceedings. While actual foreclosures often lead to the eviction of tenants, a real estate lawyer with some knowledge of the Smiths’ business who reviewed Suffolk deeds documents relating to the Smiths with the Gazette, said it is unlikely the Smiths will lose any of their properties.

“As long as they are willing to pay above-market rate for loans and have the rental stream to support repayment, they should be able to keep it up,” said the lawyer, who asked to remain anonymous when commenting on business transactions he is not involved in.

All of the rental properties, until recently, seem to have been managed by the Roger Smith-owned realty company Jamaica Plain Associates. Affordable rents, poor repairs and an unresponsive property management company have been common characteristics of the rental experience, according to many Smith brothers’ tenants who spoke to the Gazette.

Three sources with ties to the Smiths, including lawyer Vincent DiMento of the law firm DiMento and Sullivan, said Roger Smith had been managing all of the properties but this year the brothers are splitting up management responsibilities. DiMento said his law firm has represented the brothers in the past.

“Some properties will be managed by one brother, some by the other brother,” but they are not breaking up ownership of their holdings, he said.

Legal documents obtained by the Gazette indicate that, at least as of June, Douglas Smith was living in Ireland.

The Gazette spoke to five tenants at three JP properties that the Smiths and Tracy hold deeds to, they all asked to remain anonymous talking about their landlord.

The Gazette repeatedly attempted to contact Roger Smith for this at a number given by Adrian Priestly, a property manager for Roger Smith’s buildings who works for a company called Arlington Financial Properties.

Priestly himself declined to comment on the record. The Gazette also attempted to contact Jamaica Plain Associates—which has an office on Centre St.—both in person and on the phone. Messages were unreturned.

The Gazette was unable to find contact information for Douglas Smith, who appears to be living in Ireland, but attempted to contact him via Robert Derian, a Canton-based lawyer who’s name appears on legal documents signed by Douglas Smith this summer. Derian did not return Gazette calls.

The Gazette also attempted to contact Tracy, who works at DiMento and Sullivan. When the Gazette contacted the law firm, DiMento took the call and commented briefly.

He said the firm had represented the Smith brothers in the past and that Tracy in 2001 and 2002 became a trustee for a number of Smith-owned properties in order to refinance mortgages on them.

Most of the properties the Smith brothers and Tracy are holding are in trusts, with one of the three listed as trustees. In trusteeships, the trustee holds the title to the property on behalf of an undisclosed group of beneficiaries.

Roger and Douglas Smith have a long history in JP. Roger Smith was convicted of arson and insurance fraud in 1981 in connection with a rental property they owned at 4 Kenny St. in Jamaica Plain. He served an 18-month sentence for the crime and again began purchasing rental properties in and around JP.

Douglas Smith has long been rumored to be living in Ireland. This summer, the Gazette confirmed that Douglas Smith has spent at least some time there. An affidavit signed by Douglas Smith, and notarized in Dublin County, Ireland in early June, asserts that he holds a 50-percent interest in trusts that control 12 JP properties. Roger Smith is listed as the trustee for all of those properties.

The affidavit—a legally binding sworn statement of facts—asserts that Roger Smith must consult his brother before conducting any financial transactions with the 12 properties.

“Notwithstanding any language to the contrary in that Trust, my written consent to any sale, mortgage or transfer of any interest in the trust property must be obtained by any third party and put on record at Suffolk Deeds,” it says.

The 12 properties named in the affidavit are 23 Burr St.; 15 and 34 Catherine St.; 232 Jamaicaway; 424 Jamaicaway; 217-219 Lamartine St.; 272 Lamartine St.; 274 Lamartine St.; 35 Parkton Road; 6 Pond St.; and 145 South St.

Five of those properties—15 Catherine, 272 and 274 Lamartine, 6 Pond and 145 South—were also part of a complicated mortgage refinancing agreement Roger Smith entered into in January of this year.

Since the affidavit was filed with the Registry of Deeds, no records indicating that Douglas Smith has consented to any major financial transactions involving the 12 properties appear to have been filed with the registry.

Douglas Smith’s filing of the affidavit came in the wake of at least three large business transactions by Roger Smith.

In January of this year, Roger Smith entered into a complicated refinancing plan—known as a cross-collateralization agreement—with the mortgage company Oceanick LLC. Under that deal, according to records filed with the Registry of Deeds, six mortgaged properties—including three for properties that Douglas Smith claimed his stake in with the affidavit—were bound together in a cross-collateralization agreement.

Under that agreement, it appears that Roger Smith got a new $150,000 mortgage for a property at 593 Centre St. and was required to put all of the money he earned in rent from the properties included in the agreement toward paying off what he owes on the six mortgages.

The agreement stipulates that a default on any of those mortgages would be considered a default on all of them.

“That might have been the source of the beef [between the brothers]. Who knows?” DiMento said of the agreement.

This spring Roger Smith sold off two properties—593-595 Centre St. in April and 52-54 Green St. in May—for around $1 million each. Mortgages were subsequently paid off for both of those properties, and the Centre Street property was removed from the cross-collateralization agreement, according to registry records.

The Gazette reported in March that 21 properties owned by the Smiths and Tracy were in default and had foreclosure petitions taken out against them. Foreclosure listings between March and mid-July show that at least four more properties where Roger Smith is listed as the owner have had foreclosure petitions taken out against them.

A Registry of Deeds search shows that two properties where Douglas Smith is listed as the owner have had petitions taken out against them. Three more petitions have been taken out for properties listed as being owned by Tracy. In the meantime, hundreds of JP tenants are living in the affected properties. Four the tenants the Gazette spoke to said as far as they know, Roger Smith is still their landlord.

For those living in properties controlled by Roger Smith, that means “no upkeep of the property whatsoever,” according to one tenant.

The front porch of that tenant’s house is falling apart, and when the furnace blew last winter, he and his roommates paid for it to be fixed and took it out of their rent, he said. “It was January or February and we had no heat. It was very cold. We called several times and left voicemails, but we heard nothing back.”

Still, his roommate said, “It’s affordable enough. It’s not so bad. We don’t get harassed. If something needs to get fixed, we can fix it.”

Over the years that they have been living there, those tenants said, they have been instructed to send their rent to multiple different post office boxes. Tenants the Gazette spoke to from other properties said their rent is usually collected in person, sometimes by Roger Smith himself, and sometimes by others claiming to know Roger Smith.

“Sometimes we say we will pay later and they never come back, so we end up not paying the rent for that month,” the tenant said.

That tenant said that Roger Smith had talked about raising the rent on his apartment, but initially accidentally proposed a $1,000 deduction.

“You never know what to expect,” one tenant said. But, “for the amount of space, it is the cheapest place in JP or probably in Boston. For people like us it is a pretty good situation.”

“Roger Smith is not the most organized but he is a very good man,” another tenant, who said he has heard that someone else is taking over the property he rents, said. “He [is] always fair.”

If not for Roger Smith, that tenant said, he would likely not be able to afford to live in JP. “I would rather have the troubles” than have to pay higher rent, he said.

The real estate lawyer and one other source said Douglas Smith is making an effort to rehabilitate some of the properties he now controls and has, in some cases, raised rents.

The reporter is a former tenant at a Roger Smith-owned property. He did not live with and has no personal relationships with anyone quoted in this story. He had no contact with any of the tenants quoted prior to interviewing them for this article.

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