Public Nuisances or Private Business?

Apr 4, 2023
1:50 PM
Originally published at Centro de Periodismo Investigativo

Universal Properties Realty Government Services did not provide the complete list of public encumbrances sold in each municipality with which it has contracts, or their sale price. (José R. Madera/CPI)


SAN JUAN — Twenty-two Popular Democratic Party (PPD, in Spanish) and New Progressive Party mayors delegated the processes of declaring structures as public nuisances in their towns to the firm Universal Properties Realty Government Services, a practice that has led to many of the original property owners being deprived of fair compensation, according to the nearly 70 court records that the Center for Investigative Journalism (CPI) examined.

The process of declaring a building, a house, or an abandoned plot of land a public nuisance, appraising real estate, notarizing documents, transferring ownership, and legally representing the municipalities in court for the compulsory expropriation of structures and plots of land, all fall in the hands of the same company that also handles the sale on behalf of the municipalities.

This extended role that municipalities entrusted to Universal Properties Realty Government Services to act as a municipal agent has resulted in dozens of lawsuits, the cancelation of contracts by four municipalities, and the foreclosure of dozens of properties that already have a new owner.

In the cases that the CPI reviewed, it is Universal Properties, as an agent of the municipalities, who consigns in court the money for the determined fair compensation. In most cases, there was no compensation, because the owners or heirs did not participate in the process or because the debt is greater than the value of the property.

In other cases, the fair compensation —which is what the government must pay to the person who loses their property— was significantly reduced due to existing debt with the Municipal Revenues Collection Center (CRIM) and Universal’s fees were subtracted from the appraisal value. The company’s average profit for each property is close to $20,000, according to the files examined.

The sale of the properties, for which the municipalities got ownership and control through forced expropriation to third parties, is not transparent. The expropriation and purchase agreements that Universal Properties drafts on behalf of the municipality with a “purchasing applicant” are not submitted to the Office of the Comptroller, a public auction is not required for these sales, nor do the municipalities publish the information of the nuisances sold in their towns, who the buyer was, nor the sale price. It is also unknown how much, if anything, is deposited into the municipal coffers for the sale of public nuisances. Not even Universal Properties could produce that information at press time.

Universal Properties Realty Government did not provide the CPI with the complete list of public nuisances sold in each town with which it has contracts, or their sale price.

The company’s legal representative, Antonio Álvarez, said although they keep constant communication with municipal officials, he did not know if Universal Properties sends reports on the sales of nuisances to the municipalities. He insisted that the municipal administrations have this information because the company acts as its agent in these transactions.

Álvarez said the sale is done by the municipality to the purchasing applicant, as the buyer is called. “I don’t sign for the Municipality in the sale process. Universal does not sell properties, the Municipality is the one that sells,” said Álvarez, who asserted that they do not charge commissions for selling the properties either.

But contracts “for the expropriation and acquisition of property” are not registered with the Office of the Comptroller. Only the service contracts that Universal Properties agrees with the municipalities are submitted. The company did not provide copies or the number of such agreements.

Comptroller Yesmín Valdivieso told the CPI that whenever a municipality reaches a deal, it must register that contract with the office. The official further noted that she has not seen the purchase contracts that Universal Properties, as the municipality’s agent, has signed with possible buyers and in which they agree on a sale price.

Valdivieso said her office will review the contracts after the referral she received this Thursday from Sen. María de Lourdes Santiago and Rep. Denis Márquez, both from the Puerto Rican Independence Party, who claim possible legal violations in managing the contracts to handle municipal public nuisances.

The lawmakers referred Universal Properties Realty Government to the Department of Justice, as well as the Francis & Gueits Law Office, which only provides these types of services to the Caguas Public Nuisance Program. The CPI left a message at the firm’s office to get a reaction.

The municipality of Caguas has declared several unoccupied buildings in its urban center a public nuisance. (José R. Madera/CPI)

“We are going to register it as a complaint (the legislators’ referral). I must see what the Department of Justice will do, but we’ll see because when there’s much talk about something, it could be true,” said Valdivieso. “I also sent a copy [of the referral] to the director of the Municipalities Division so that he can make sure what’s going on.”

The attorney for Universal Properties Realty Government Services brushed off the referral.

The comptroller pointed out that municipalities must hire third parties when they lack enough or trained personnel for certain tasks, but that those services must be provided for reasonable rates and under adequate supervision. Without going into the merits of the referral, she said, from the get-go, it struck her that many invoices for the services that Universal Properties Realty Government Services provided exceed the value of the property they sell.

From the court records for three separate collections cases filed against the company, it appears that an individual and two investors, in different transactions, deposited checks on behalf of Universal Properties for the amounts of $55,000, $460,000, and $441,000 to buy properties in the municipalities of Caguas, Luquillo, Juncos, and Las Piedras. The amounts paid were to secure a commitment from those municipalities that they would transfer properties to the buyers once they were expropriated as a public nuisance.

None of these three agreements were registered with the comptroller or in the municipalities’ public records. The sales did not materialize, and the buyers went to court with collections claims against Universal Properties and one of them also sued the municipality of Luquillo. Two of the buyers have already recovered their money, but one of the investors still has his collection claim in court.

The comptroller said the approval of the municipal code in August 2020 gave way to these contracts and procedures. Almost three years after its approval, the code does not yet have an agreement. The Puerto Rico Office of Management and Budget is responsible for drafting it. At the time of this publication, the agency had not responded to the CPI’s request to learn the status of those by-laws.

Public Data Is Scarce

Universal Properties is who appears in court on behalf of the municipalities, has the power to expropriate, give the property a public use, or “for its subsequent transfer to anyone who is willing to buy it for its reconstruction and restoration or to build a new structure,” according to the municipal code.

Universal Properties hires attorneys who assume the legal representation of the municipality in court so that it can determine the fair compensation for the properties that they are interested in expropriating for themselves or third parties and request the deeds for those properties.

To determine fair compensation, the appraisal price is used, minus the balance due to the CRIM and the amount of the invoice pending payment with Universal for the services rendered in the administrative and legal processes, and property maintenance, among other costs.

The CPI looked at, for example, the expropriation claims available from the municipality of Caguas in the court’s electronic case consultation database. Of the 19 cases listed, Universal Properties deposited money for only five of them to pay fair compensation. In the rest of the cases, there was no payment because the debts that the property had with the CRIM or with Universal, or the sum of both, exceeded the property’s value.

Delgado housing development Puerto Rico

Several residences in the Delgado housing development, in Caguas, were included in the inventory of public nuisances. Some properties, but not all, are placed in a condemnation process. (José Madera/CPI)

There was no explanation from Universal Properties of how it charges the administrative expenses that it claims to have had, since the contracts establish that the municipalities will not pay for this service. It also did not answer whether they only expropriate those properties that already have a buyer who will assume the property’s debt. Among the 19 cases of forced expropriation in Caguas submitted in 2021 and 2022 that the CPI examined, Universal Properties presented invoices totaling $357,000 for its services.

Morovis Mayor Carmen Maldonado González, who has contracts with this company, said that Universal is paid when the sale closes.

Regarding the company’s invoices, Sen. Santiago pointed out that her staff examined 40 invoices that Universal Properties filed on two different dates associated with processes for declaring public nuisances and expropriation in the municipality of Guánica and they were struck by the fact that they all added up to the same amount: $25,990.

“In all cases, Universal spent exactly the same amount on maintenance and repairs. To have an idea of how lucrative this matter is… in Guánica alone, in that single municipality, Universal Properties has the potential to earn $1,039,600 if these unjustified charges are validated—as indeed they have been in many cases,” the lawmaker said, adding that the other company that works with Caguas to handle public nuisances, Francis & Gueits, billed around $20,000 for each case worked.

The senator also said that money is illegally pulled from fair compensation. At the press conference, Rep. Márquez said the agencies to which they made the referral “have the obligation to investigate each and every one of the issues that we have noted in the referral, the possible commission of crimes, violations of due process of law and violations of laws that govern these processes. Otherwise, they will be walking away from their obligation to Puerto Rico.”

“Every penny they charge that does not respond to real expenses is money that is illegally subtracted from the fair compensation to which people who have their property expropriated are entitled. It’s millions of dollars. Every penny that they charge is a penny that is subtracted from the value of the property to which they are entitled by virtue of the Constitution, expropriation laws and the municipal code,” said Santiago.

The attorney for Universal Properties was unable to explain —because he said he does not handle that process— how the price that the buyer will pay for the expropriated property is determined. The municipal code establishes that “the purchaser will provide the municipality with a sum of money equivalent to the value established in the appraisal, plus a sum equivalent to ten percent (10%) of the appraisal value, for the costs of the procedure.”

Universal did not explain whether that formula changes when debts against the property exceed the appraisal. He also could not say in which account the money from the sale is deposited, if in Universal’s or the municipality’s.

The mayor of Morovis said that, to her best understanding, the municipal government does not receive any economic benefit from the sale, but that the money generated from the transaction is deposited in court for the compensation that must be paid to the person who loses their property.

“This (the payment) is made directly to the owner (of the property) and in case there’s no owner, it goes to an account in the court, and it’s the court that is responsible for this process, of the money that the buyer is paying as part of the transaction,” she said. “The municipality would only collect the fine or penalty imposed on the person who owns the property for any emergency clean-up work that had to be done.”

Maldonado González said Universal oversees selling the expropriated property.

Action Against Public Nuisances

Universal Properties Realty Government Services was registered as a limited liability company on February 16, 2018. The company’s partners are Andrés Reyes Vélez, José Deyá and Abraham Freyre Medina. Six days later, the former PPD mayor of Guayanilla, Nelson Torres Yordán, signed his first management contract for the Public Nuisances Program. The contract was valid for five years and expired on February 23, 2023.

Since then, the company has signed contracts with Toa Alta, Arecibo, Loíza, Morovis, Ponce, Canóvanas, Luquillo, Patillas, Aibonito, Arroyo, Caguas, Cidra, Dorado, Guánica, Guayama, Humacao, Juncos, Las Piedras, San German, Santa Isabel, and Río Grande. Subsequently, Arecibo, Loíza, Humacao, Canóvanas, and Cidra canceled their contracts.

The process of buying and selling the properties to third parties of which the municipalities obtained ownership and control through forced expropriation is not transparent. (José Madera/CPI)

The lawyer representing the company argued that the company’s goal is not to expropriate as many public nuisances as possible —although it bills for the process it carries out on each property— but rather to get the property owners to get rid of that nuisance. The law defines a public nuisance as any abandoned or vacant structure or lot that is unsuitable for human occupation or use. He insisted that the interest of the municipalities is that “people keep their properties.”

“I would say that of this universe of properties, less than 40 percent are later declared public nuisances because the owners react, the banks (mortgage lenders) react when they see that the municipality is interested in declaring them public nuisances,” said Álvarez.

Loíza Mayor Julia Nazario said she canceled the contract with Universal Properties because, without consulting the municipal Planning Office, the company began notifying about public nuisances and that they even included occupied residences. Nazario did not believe that there was a documented evaluation to support the selections for the inventory of public nuisances.

“What happened was that they sent letters to everything they considered a public nuisance, but there are really houses that seem to be in disrepair, but people live there, so you must be sensitive in the process of identifying them and talking to people. And that wasn’t done,” she said in an interview with the CPI.

Universal Properties’ legal representative said Nazario is lying when she said the letters were sent out without prior consultation with municipal officials.

The mayor explained that she contracted Universal Properties because she does not have enough staff to carry out an inventory of public nuisances. The agreement was signed on September 7, 2018, but was terminated on December 6, 2021, two years before it was due to expire.

On March 9, the municipality signed an agreement with the nonprofit Centro para la Reconstrucción del Hábitat Inc. to work with the public nuisance program in coordination with the communities. This organization has similar agreements with 22 other municipalities. Some are paid with federal subsidies and have support from private foundations to work with nuisances in certain towns.

Carlos Molina’s administration in Arecibo also signed an agreement with Universal Properties in September 2019, but canceled it in July 2020 after strong criticism, particularly from residents of the Islote beachfront neighborhood, because public nuisance signs had been placed on occupied homes. At the time, Molina said these signs were placed without his authorization and he urged residents to “throw them into the trash can.” In the cancelation letter sent to the company, he demanded the removal of the signs.

Residents of Ponce also claimed in 2019 that Universal placed public nuisance signs on occupied residences. Former Mayor María “Mayita” Meléndez Altieri awarded that contract.

The current municipal secretary of Arecibo, Ernesto González Rodríguez, said public nuisances are now handled internally. A notice of intent to declare a public nuisance for 23 properties was published on March 8.

“This administration’s public policy is not to take away anyone’s house,” said the lawyer, who explained that the inventory of public nuisances is limited to those properties reported by citizens because they represent a danger to the health or safety of the neighbors. “Right now, in Arecibo, there isn’t a property that is declared a public nuisance.”

González Rodríguez pointed out that when Mayor Carlos Ramírez’s tenure began in 2021, steps were taken with Universal Properties to get the files of active cases because there was no record in the mayor’s office, but people would come in saying they had started processes to buy properties. He said efforts to get a record of the cases worked, if any, from the company were “unsuccessful.”

The municipality of Humacao also canceled the contract shortly after the mayor and now convict, Reynaldo Vargas, was sworn in. The municipal administration filed an injunction so the company and attorney María Mercado Padilla would hand over the case files. Mercado Padilla went to court on behalf of the municipality, but she was hired by Universal Properties. The files were delivered.

In the cancelation letter, the former mayor said the reason for this action was that the company had “incurred actions and representations that constitute serious conflicts of interest and violations of an ethical, illegal, and immoral nature that made it unsustainable to continue with the contractual agreement with the Municipality of Humacao.”

The municipality of Cidra contracted Universal Properties in February 2019, but incoming Mayor Ángel Concepción González canceled it in April 2021 and entered into an agreement with the Centro para la Reconstrucción del Hábitat Meanwhile, in a lawsuit filed against Universal Properties and the municipality of Luquillo, the municipal administration affirmed that it did not intervene, approve, or participate in the contracts that the company agreed to on its behalf for the sale of some properties. However, the agreement is still active in the municipality of Luquillo.

Universal Properties’ legal representative believes that several of these cancelations were prompted by the political interests of the mayors, who are concerned that their administrative decisions affect them electorally, and not over breaches or excesses by the company.

For his part, the director of the Permits Office of Caguas, Jaime Plaza, was pleased with the work done by Universal Properties and the Francis & Gueits law firm. Plaza said Caguas has contracts with a third company, City Renewal, which deals with public nuisances in the urban area. He said the complaints and the process to identify public nuisances begin in the municipality, which in turn coordinates with the companies throughout the process.

“We keep track through monthly meetings with each contractor, and we’re fine-tuning the process,” he said. “We’re constantly following up with companies.”

Víctor Rodríguez Velázquez and José M. Encarnación contributed to this report.