Arkansas Attorney General Tim Griffin on Wednesday morning asked the Pulaski County Circuit Court to appoint a receiver to pay the bills at the Big Country Chateau apartment complex in Little Rock and to make repairs.
Griffin also asked the court to freeze the assets of the property's owners and to obtain an accounting of Big Country Chateau's collected rents and expenses. The emergency petition also includes a request for a temporary restraining order that would, among other things, prohibit the destruction of records.
On Tuesday, the Federal Home Loan Mortgage Corp. filed a foreclosure complaint with the circuit court against Apex Big Chateau AR LLC.
The court filing on Tuesday by attorneys Wilson and Associates, PLLC stated that on July 31, 2019, Apex Big Chateau AR LLC entered into a loan agreement with CBRE Capital Markets Inc., a commercial real estate firm. That loan of $5,220,000 was secured by the apartments, according to the filing.
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.
Attorneys argue that Apex owner Oron Zarum 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 misappropriated consumer funds intended for utility payments, choosing not to pay Entergy Arkansas and Central Arkansas Water with funds provided to them for that purpose," according to the petition filed by the Arkansas attorney general's office. Referring to the Arkansas Deceptive Trade Practices Act, the petition adds, "Accepting consumer funds for an expressed purpose and failing to use the funds for such purpose is an unconscionable, false and deceptive practice under the ADTPA.”
In its request for a temporary restraining order, the state said that “immediate and irreparable damage will occur if consumers’ water and electric utilities are shut off because the tenants will not be able to safely remain in their apartments. Loss of electricity will invite tenants to use heating and cooking methods that pose a risk of fire and will endanger the lives of the tenants.”
The petition from Griffin's office also argued that the owners of Big Country Chateau chose not to pay tenants' power and water bills, and that the requested asset freeze and restraining order were necessary to protect tenants' money given the “fraudulent nature of the defendants’ misappropriation of funds.”
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.
If the court grants the motion, the defendants will have three days to submit the name of a mutually agreed-upon receiver or give the court a list of names.