Neighbors fear trick by developer at foreclosure auction
A mortgage foreclosure auction is planned for Sept. 15 for 120 Rindge Ave., top, the longer of two lots making up a residential development in North Cambridge.
A troubled residential development on Rindge Avenue is going on the auction block Sept. 15, but neighbors and North Cambridge watchdogs — who have been complaining about the site for about six years — fear it is a trick that will return the property to the developer prompting all the complaints.
The developer, Joseph Perroncello, of Boston, is due in court Oct. 21 for a jury trial on a charge of failing to clean the site, but has been acting as his own lawyer since June. He owes back taxes in Cambridge and Boston as well as money to his contractors, and Webster Bank has filed for foreclosure proceedings on the $15 million mortgage for 120 Rindge Ave., which connects to property Perroncello owns at 45-47 Yerxa Road.
It is Webster Bank, through Boston attorneys Murtha Cullina LLP, holding the 11 a.m. auction at the Rindge property. While neighbors said they have been telling favored developers in hopes they will bid, they fear Perroncello has a proxy buyer in place so he can get the site back at a bargain — and free of debt.
“It’s been done,” said area resident Charles Teague, citing examples from Donald Trump in Atlantic City to more down-to-earth examples of real estate shenanigans. “The whole concept seems flawed fundamentally.”
Neighbor Lizzie de Rham said Tuesday she shares Teague’s fears that “the big danger is whether [Perroncello] is pulling a fast one with a straw buyer.”
Ideally the space would become live-work space for artists, she said.
It’s the same plan she and other residents were pursuing when the site — a 2.2-acre, three-building former Roman Catholic school and convent that wraps around other properties in the shape of an L — came on the market in 2004. But the neighbors proposing units for artists were disappointed when Perroncello completed the sale with the archdiocese and began construction. The site was to ultimately become 64 units of either apartments or condominiums; like the number of affordable-housing units to be built, different documents say different things.
“No reason to trust”
Six years later, most of the site remains unoccupied and, by the description of area residents and city inspectors, only recently was tidied adequately. Construction has drawn rats with garbage, caused flooding and cracked foundations at nearby homes, neighbors say. Perroncello also brought in tenants illegally, although he was given temporary permission by the city after the fact — via short-term versions of documents called certificates of occupancy — to lease units in one building while the others were under construction.
“There’s no reason to trust him,” de Rham said of Perroncello. “He basically reneged on every promise he’s ever made. He’s been bad news from day one.”
She also doubts Webster Bank’s $15 million went solely toward the North Cambridge construction site, considering contractors’ complaints of not being paid.
Now she, Teague and others are skeptical about how the auction is being run.
According to a legal ad that ran twice last month in the Cambridge Chronicle:
A deposit of Two Hundred Thousand Dollars ($200,000) by certified or bank check will be required to be paid by the purchaser of the entirety of the mortgaged premises to be auctioned. The balance is to be paid by certified or bank check at the office of Murtha Cullina LLP, 99 High Street, 20th Floor, Boston, MA 02110 within thirty (30) days from the date of sale. A foreclosure deed will be provided to purchaser for recording upon receipt in full of the purchase price.
“It seems like it’s going to get sold at a heavy discount,” Teague said Tuesday. “You have to wonder about the whole concept.”
He questioned why the auction was being held at the site, rather than by mailed bids.
“It doesn’t make any sense to auction it off like an old couch,” he said of the property.
A message seeking comment on the auction was left Tuesday evening at a phone number identified as being Perroncello’s.
The auction was postponed until Nov. 3, 2010. Postponement often means a bankruptcy filing by the mortgagor, but no filing was to be found for Peroncello on the Bankruptcy Court database as of 10:AM 9/15/10.
The auction is being held at the site because well-advised mortgagees make entry on the mortgaged premises in accordance with Chapter 244 of the Massachusetts General Laws just prior to holding a public auction on the mortgaged premises. In more than twenty years of being a real estate conveyancer and title examiner (including two really unpleasant years during the last bursting of the bubble doing foreclosures most of my workday), I have never encountered a foreclosure by power of sale done any other way. The whole process is not conducive to being done other than in person; for example, the notice of sale is read aloud, further information and terms, including making a current municipal lien certificate available for review, are announced, and potential bidders are allowed to ask questions. Perhaps the biggest reason for the current procedure is the requirement that potential bidders be given accurate information on any liens or other encumbrances that have priority over the mortgage, some of which could change or even arise over the time period during which an auction by mail was conducted. Every once in awhile, things become customary because it makes sense. This is one of those times.