City reaches $200K settlement over Towne & Terrace housing complex

A nine-year battle between the city of Indianapolis and the not-for-profit homeowners association that oversees a troubled housing complex might be heading toward a resolution in the form of a $200,000 agreement.

The complex near East 42nd Street and Post Road on the northeast side of of Indianapolis has long been known as a hub for drug dealing, violence and dilapidated buildings. Built in the 1960s with 222 condominium units, Towne & Terrace was the site of seven criminal homicides and dozens of other violent crimes between 2013 and 2019, according to The Indianapolis Star.

Residences in the complex were initially owned by individuals, but the city has acquired 101 of the properties, mostly after they  failed to sell at tax sales. Those properties include 71 units overseen by Towne & Terrace Corp., the homeowners association formed in 1964 to manage the properties.

The city has been in an ongoing legal battle with the HOA since it filed a nuisance lawsuit in 2013. In the back-and-forth, the Court of Appeals has sided with Towne & Terrace’s decision to not allow the city to have a vote on the HOA due to delinquent fees. A court-appointed receiver was also put in place for the city’s properties, with the court ordering the pair to split receivership costs. The HOA fought back against needing to pay for the receiver.

In May 2021, Towne & Terrace declared bankruptcy, halting the proceedings and leaving the parties stuck on who would pay the receiver and if the city would be responsible for HOA fees.

Towne & Terrace Corp. alleges the city owes it up to $700,000 in past-due fees because of its ownership of those properties. The city disputes that amount. Donald Morgan, senior counsel with Taft Stettinius & Hollister LLP’s Indianapolis office, told IBJ that the city estimate was more than $140,000, which it has paid.

Because of the unpaid fees, Towne & Terrace Corp. has blocked the city from exercising its rights as a member of the homeowners association, preventing the city from making improvements to the properties, including demolishing some of them.

Under the agreement announced Thursday, the city will immediately pay $200,000 to Towne & Terrace Corp.,  plus another $18,000 to cover fees for the remainder of the year.

In exchange, the city will be able to vote at the homeowners association elections and put in place a board observer who won’t have voting rights but can participate in meetings. The city was willing to pay to have a role in the complex and increase cooperation with the HOA, city officials told IBJ.

In 2020, the court-appointed receiver advised that the best remedy for the city-owned properties was demolition. But the HOA pushed back against the recommendations. The Star reported that three members of the board own at least 42 units and make $450 a month off the properties.

With the new agreement, the city is hopeful that it can begin to turn around the crime-ridden neighborhood. The first step will be the installation of Indianapolis Metropolitan Police Department safety cameras on HOA property, which was previously prohibited, Morgan said.

The City-County Council also appropriated $5.4 million in American Rescue Plan Act funds towards community engagement, redevelopment and public safety at the site in 2021.

Plans for the area haven’t been fully fleshed out. But, the first steps will involve communication with residents, the HOA and hope for increased cooperation with IMPD.

The city’s properties—which are all vacant—will likely be demolished, Deputy Mayor Jeff Bennett told IBJ, including those outside the HOA. For those still within it, there could still be a process in getting demolition approved, Bennett said. Brentwood Drive on the west side of the complex is the dividing line between HOA and non-HOA properties.

Bennett said the city hopes to not alarm residents during the transition period. 

Scarlett Andrews, head of the Department of Metropolitan Development, said there will be DMD staff knocking on doors and addressing immediate health and safety needs in the next month.

The Marion County Public Health Department governs code enforcement on inhabited units, so the department will likely be involved during the first steps in October, Bennett said. The Department of Business and Neighborhood Services oversees enforcement on empty properties, such as those owned by the city.

Because few of the units are owner-occupied and tenants aren’t able to be part of the HOA, city officials said it’s likely many residents don’t know the HOA exists. As part of the new partnership, Andrews said DMD will provide legal assistance and resources to tenants who may have out-of-state landlords or unwritten leases.

Most city properties in the neighborhood were tax-delinquent properties that fell into city ownership when they weren’t bought at tax sale. The city first maintained in court that it shouldn’t have to pay HOA fees on the properties since it never wanted to possess them. Under the new agreement, the old debt won’t be passed onto the city when it acquires any properties.

DMD might also take steps to acquire dilapidated properties. Andrews said the department will be hiring a consulting firm to help relocate current tenants if it is deemed necessary. The city also plans to have a public meeting next year.

None of the lawyers listed on Towne and Terrace’s court documents responded to IBJ’s request for comment in time for publication. One member of the HOA Board of Directors, Darren Kirkland, was reached but had no comment on the agreement.

Councilor La Keisha Jackson, who represents Towne & Terrace’s residents on the City-County Council, said the city tried to intervene 10 years ago, but litigation prevented it. This led residents to feel ignored or forgotten.

“The message is today that we do care. Help is here,” Jackson said.