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Middletown authority sued over sale of McNair House; buyers cite ‘misrepresentations’

By Dan Miller

danmiller@pressandjournal.com

717-944-4628
Posted 5/16/18

New owners of the McNair House in downtown Middletown have sued the borough entity that sold them the property in November 2017, making accusations of fraud and “misrepresentations” …

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Middletown authority sued over sale of McNair House; buyers cite ‘misrepresentations’

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New owners of the McNair House in downtown Middletown have sued the borough entity that sold them the property in November 2017, making accusations of fraud and “misrepresentations” regarding the property prior to sale.

The lawsuit was filed May 1 in Dauphin County Court by Virginia and Adam Germak against the Middletown Borough Industrial and Commercial Development Authority, the arm of borough government that sold the property to the Germaks.

The Germaks allege the ICDA concealed from the Germaks that theirs was the highest of three bids that the ICDA received for the McNair House.

As a result, the Germaks increased their bid and “unnecessarily spent an additional $19,000” to acquire the property, according to the lawsuit.

The Germaks allege that the ICDA failed to disclose problems with the roof and water damage that the property had sustained.

The Germaks say that based on estimates they have obtained they will have to spend $107,744 to replace the metal roof, remediate mold, and replace and repoint the brick and chimneys of the property.

Finally, the Germaks allege that ICDA failed to disclose it was in the process of evicting a tenant who lived in McNair House, and that since 2014 the tenant’s monthly rent of $1,110 had been paid to the ICDA through voucher payments from the Section 8 program of the U.S. Department of Housing and Urban Development.

The Germaks say they incurred court costs and attorney’s fees to evict the tenant, plus costs to repair the “damage” the tenant did to the property.

The Germaks also lost rental payments for three months and incurred “significant utility costs” from having to evict the tenant, the lawsuit says.

The ICDA was created by borough council as an economic development authority in 2013. The ICDA currently has three members appointed by council — Chairman Ian Reddinger, Mayor James H. Curry III and Dawn Knull.

Reddinger and Knull are also both members of the current council.

The lawsuit does not mention Curry and Knull. However, the Germaks attached to the lawsuit seller’s disclosure forms provided to them by the ICDA, each initialed or signed by Reddinger but none disclosing roof or water damage.

The Germaks in the lawsuit say they did not learn of problems with the roof and the water damage until after they settled on the property with the ICDA on Nov. 28, 2017.

However, Reddinger is quoted in an Oct. 25, 2017 Press & Journal article saying that the McNair House roof was in “sad shape,” that borough public works employees had been going inside the house to address leaks, and that the outside brick work needed repointing.

Curry as far back as August 2017 had said the property was in “desperate need of repairs.”

The Germaks also allege in the lawsuit that after their Realtor received a HUD request to inspect the property, the Realtor asked Reddinger if the tenants were Section 8.

Reddinger according to the lawsuit replied “not that I am aware of,” despite the Germaks saying Reddinger had signed the HUD lease and the application to accept the Section 8 voucher rental payments on behalf of the tenant.

Reddinger chose not to comment when contacted by the Press & Journal.

The Germaks seek $126,744 in damages from the ICDA, plus interest, court costs and attorney’s fees.

The Germaks also seek additional damages alleging violation of the Pennsylvania Real Estate Seller’s Property Disclosure Law, and violation of the Unfair Trade Practices and Consumer Protection Law — which according to the Germaks could triple the amount of damages owed to them by the ICDA.

The lawsuit does not say if the Germaks are seeking to get out of their purchase of the McNair House. However, the lawsuit says that the Germaks would not have purchased the property if not for “the unfair, deceptive and fraudulent conduct” of the ICDA.

The ICDA purchased the McNair House property for $325,000 from private investors in 2014, as part of a downtown revitalization project. None of the current ICDA members were on the authority at the time.

In October 2017 ICDA listed the property for sale for $139,900.

According to the lawsuit, the three bids the ICDA received for the property included $55,000 from Epio LLC; $64,900 from the Germaks with an escalation agreement increasing the bid to $77,000; and a $65,000 bid from Keith E. Matinchek with an escalation agreement increasing his bid to $70,000.

The Germaks say in the lawsuit that the agent listing the price for the ICDA told them their’s was not the highest bid received, so the Germaks increased their bid to $90,000.

On Oct. 10, 2017, the Germaks entered into an agreement of sale to purchase the McNair House from ICDA for $90,000. The ICDA transferred title of the property to the Germaks following the Nov. 28 settlement.

Sale of the McNair House left the ICDA with one remaining borough-owned property on its books — the Elks Theatre.