Article in the November 5, 2013 Tennessean
Seniors at Belle Meade community must pay $15,000 to keep homes
Residents say diocese didn’t tell them rights to land under their condos had expiration date
Early in 1997, Imogene Shea, then 71, moved into a neat community of 240 single-story brick-front condominiums for senior citizens in Belle Meade.
A retired nurse, she expected it to be her last home. Now she’s not so sure.
“I paid $140,000 and now they tell me I don’t really own it,” she said in a recent interview.
She says she can’t afford the $15,000 fee she’s being asked to pay on top of mortgage payments, association fees, taxes and other assessments for living at the Cloister at Saint Henry.
So she finds herself caught up in a cautionary tale about planning for retirement — except that in her case, the diminutive 87-year-old is looking for relief from an unlikely adversary: a development company working on behalf of the Catholic Diocese of Nashville.
What Shea, a lifelong Catholic, and some others living at the cloister say they have been told is this: Yes, you do own your home, at least the inside of it. But not the ground on which it rests.
In an arrangement that most everyone agrees is unusual, especially in Tennessee, Shea and others purchased something called a leasehold interest on the ground beneath their condominiums. The lease severely restricts their ownership rights.
It’s not rare for condominium owners to share interest in community property around their homes. But attorneys locally and nationally say the arrangement at the Cloister is unusual in that the condo owners have only a leasehold interest in the land on which their property sits, one with a relatively short expiration date for a ground lease.
But perhaps more alarming was the news that when the leases begin to run out in 2043, they will not be renewed — and then ownership of the land will revert back to the development company set up by the diocese.
Many residents, Shea included, say they weren’t told at the time of purchase that their rights to the property had an expiration date. The residents say they’ve been told, but only within the past three years, that if they do not purchase something called a “fee simple interest” for the ground under their condo before the leases run out, they will lose their homes eventually. And while many don’t expect to live that long, they worry that their children and grandchildren essentially will be out of luck.
Of perhaps more immediate concern, the price of that fee interest has been climbing by $1,000 a year. It started at $12,000 and now stands at $15,000.
Representatives of the development company and the diocese say the fee simple program was set up to benefit residents by making it easier for them to sell their property or get financing. And, of course , they note that participation was strictly voluntary.
“The intent was to provide reduced-price retiree housing for people over 55,” said David Glascoe, an official of the diocese. “What was sold was a leasehold interest, and the prices reflected that.”
Glascoe acknowledged that the leasehold interest arrangement was unusual but said it helped make the units more affordable. Records show initial purchase prices ranged between $70,000 and $80,000. He said 70 percent of the residents had signed up for it.
Shea, who stands barely 5 feet tall and weighs less than 100 pounds, sees it differently.
“It’s a bad situation,” she said. “They’ve scared some of the people. Just two or three of us are standing up.”
“It’s grossly unfair,” agreed Helen Bratcher, who has lived at the Cloister for 18 years. “The church is money hungry. I don’t think it’s the right thing to do.”
Others were more supportive of the diocese. David Stansberry, an association officer, said he bought a fee simple interest when he moved into the complex, knew what he was getting into and has no problem with it.
“A lot have gone along with the program, a lot have not,” he said.
But records and statements by Shea and some of the other residents show that the battle has a long history, a history not fully disclosed to her and some of the other residents.
The Cloister at Saint Henry, as it is formally known, came into being some three decades ago when the diocese decided to take part of a huge tract of donated land to develop a senior citizen community directly behind Saint Henry’s Catholic Church.
In 1999 a proposal was put forward to have the Cloister Owners Association purchase the land. A vote was held. The purchase was approved in a vote, although the margin is a matter of dispute, and Glascoe said the considerable rancor that followed led the board to drop the purchase plan.
Opponents had hired an attorney who argued that under the arrangement, the condo owners would be unable to get title insurance, an argument Glascoe says is false.
Caldwell Hancock, the attorney for the opponents, said the proposal called for each condo owner to pay $8,500, an amount that was set despite the fact that the supporters had not paid for an appraisal to base it on. Hancock, whose mother lived in the development at the time, said residents erupted angrily after the sale won a slim vote of approval.
In the latest effort, residents have been greeted with a steady stream of messages, most delivered in newsletters about the advantages of buying the fee simple, along with warnings about what could happen without it. Fee simple units sell for higher prices, but the homeowners may not be able to get long-term mortgages because the lease will run out in 30 years, the newsletters warn.
“The diocese and the Bishop cannot and will not extend or otherwise amend the existing ground leases. This is a valuable asset,” a July 2009 newsletter stated.
A separate newsletter published by the cloister association quoted Gino Marchetti Jr., a lawyer for Bishop David R. Choby and the diocese, addressing the residents’ concerns.
“Despite the numerous discussions surrounding this issue,” Marchetti wrote, “I don’t think anyone has provided any reason why this property should be given to current unit owners or the leases extended free of charge.”
Shea said she regards the messages and statements made by officials of the diocese at meetings as threatening.
“They have done all kinds of intimidation,” she said. “There should have been a meeting and a vote.”
Glascoe says a vote was not required.
“I’m sorry that they feel that way,” he said. “It is totally voluntary. I don’t know why they would feel that.”
While Shea and Bratcher say they will stand firm, attorneys not directly involved in the fray take a more cautious view. Wes Turner, a Nashville attorney, said the lease is going to run out and the residents don’t have much choice about what to do.
“The best course would be to apply for the fee simple,” he said.
Michael St. Charles, a Chattanooga real estate lawyer, said the legal structure of the Cloister condominium was extremely rare. “There can’t be more than a handful across the state. There are none in Chattanooga that I know of.”
Meanwhile, Glascoe said the owners are now being asked to approve a merger of the new condo association with the old one. And if it doesn’t pass, he says that will have no effect.
“I imagine they’ll just have another vote,” he added.
Claire Calongne, who bought her Cloister condo in 1994, says she hasn’t gone for the fee simple and is not concerned about the ongoing debate — though she knows she may lose out in the end.
“My heirs will have to deal with it,” she said.
Contact Walter F. Roche Jr. at 615-259-8086 or firstname.lastname@example.org.
If all three women lose their homes when the lease expires the youngest will be 101 years old, the oldest will be 117 years old. Many dozens of Cloister homes have been sold since the start of the Fee Simple program. If necessary, a Fee Simple purchase is made at the closing resulting in a valid Title Guarantee and the ability to obtain a mortgage but will make a difference in the selling price of the home. Attempts to sell a Cloister home without Fee Simple Ownership results in a considerably lower final price. I would not be surprised if the cost of a fee simple purchase does not go up by another $1000 next year.