Lawsuit targets MSD for lack of disclosure on flood damage to homes

msd-300x160One of the homeowners the Metropolitan Sewer District prohibited from making repairs to her home following flood damage earlier this year has filed a third-party complaint against MSD in an existing foreclosure lawsuit, saying the agency acted in bad faith by not disclosing prior flood damage to her home. In addition, the complainant seeks to make this a class-action lawsuit including other affected homeowners.

As IL first reported in April, after Jenn Meredith’s home in the Riviera neighborhood near River Road was damaged by flooding, MSD issued a stop-work order on her repairs, citing a city ordinance prohibiting repairs on houses that have sustained total flood damages amounting to more than 50 percent of the home’s value over the course of 10 years. Many homeowners faced the same dilemma due to the FEMA-designated floodplain manager blocking such repairs — despite receiving insurance claims to pay for them — and complained that MSD had never informed them about the amount of flood damage to their home before purchasing it.

The lawsuit that Meredith’s attorneys seek to include MSD in stems from a foreclosure complaint filed against her by Wells Fargo in October. While the bank claims she defaulted on her mortgage payments, Meredith’s attorneys allege this was due to false information given by Wells Fargo that she would be given a 90-day moratorium on payments while dealing with MSD.

As Meredith and her husband Kyle told IL in April, she never would have purchased the home in 2011 if she had known about the city ordinance and had MSD informed her how close the cumulative damage to her home was to the 50 percent limit that would prohibit repairs. An MSD work group has deliberated over the past six months on reforms to the city ordinance that would increase such transparency for prospective homebuyers and give more homeowners the ability to repair damages, in addition to creating a pool of money to buy out some of the affected homes.

A Circuit Court judge will rule on Monday whether to grant Meredith’s motion to add MSD to the suit, which argues that MSD acted arbitrarily and in bad faith by failing to give notice to property owners of the cumulative damage to their homes under the city ordinance, which “resulted in an improper and illegal taking” in violation of the state constitution.

Though it won’t be decided on Monday, the motion also seeks to make this a class-action suit against MSD, which would include others who bought a home in the floodplain and were not notified by the agency of its past cumulative damage.

Asked about Meredith’s motion, MSD spokesman Steve Tedder told IL that MSD “will review the filing but MSD does not comment on pending litigation.”

MSD conceded this summer that they have list of flood-damaged properties in the floodplain that they manage, but has not made such specific information available to the public, citing legal concerns of doing so. Debating what the new disclosure requirements should look like in an October meeting of the MSD flood mitigation work group, MSD development manager David Johnson cautioned against placing too heavy an administrative burden on MSD staff.

Randal Strobo, one of Meredith’s attorneys, told IL that while such future reforms on disclosure are necessary — and explicitly requested in their lawsuit, along with compensation and damages — that won’t help those like his client who have already been negatively impacted.

“MSD basically has a secret program with a secret list of property that only MSD has access to,” said Strobo. “We’re just trying to get MSD to reveal the damages to these properties and let people know which properties are damaged and by how much. And I think it’s intuitive to any kind of objective selling and buying situation that people who buy property know what they’re buying, and that’s what we’re trying to do.”

This summer, MSD allocated $1 million to a “quick buyout program” for homeowners whose property sustained damage over the past year worth over 50 percent of their total home value — with 18 being approved and accepting this buyout. This fall, MSD allocated another $500,000 to a buyout program for homeowners whose damages surpassed over 50 percent of the home’s value over a 10-year period. Though the agency hoped that Metro Council and Mayor Greg Fischer would kick in additional city funds for these buyout programs, to date they have not done so.