Frank Prell was a Harbours real estate investor who purchased condominium units and parking spaces to resell for profit. At the time of Harbours conversion, all units were investor owned by the Developer, and there’s nothing in HOA governing documents limiting investor activity. Mr. Prell was one of several individuals in the early 2000s who bought property from the Developer for that purpose. By the time of the lawsuit, he had liquidated all of his Harbours assets.
The building’s original construction included mostly one- and two-bedroom units with floor plans ranging from around 1,000 to 1,500 sq ft. There were 184 total units originally and about thirty have been combined into larger units. 1103 and 1104 were two such units located on the top floor/penthouse level. Each measured 1,358 sq ft, and the combined size was exactly twice that or 2,716 sq ft. An owner of two adjacent units does not need permission to combine them, but they must be recorded with the HOA as combined and with their combined square footage. Unit square footage is prescribed in the governing documents and cannot be changed without an amendment.
Purchase and Renovation of 1103 and 1104
According to public records, these properties were purchased by Frank Prell on April 12, 2005 from the Harbours at Riverpointe, L.P. Each property was two bedrooms and two baths with kitchen, living/dining area, and washer-dryer closet. Shortly after purchase, Mr. Prell undertook their remodel, first removing the wall separating the condos and then redesigning the floor plan to provide a more spacious three-bedroom, three-bath unit. A complete combination was achieved including electrical and plumbing.
Short, homemade videos are presented here which show the condos after they were combined. The videos accurately present the quality of workmanship with which Mr. Prell and his subcontractors completed the renovation.
There was one formal contact between Frank Prell and the Harbours Board of Directors during the renovation. He asked the HOA for permission to install new windows and doors as he discussed during his deposition (LINK: pp. 29-31). He composed a letter to the Harbours Building & Grounds Committee dated September 16, 2005, and the request was approved by the Board. (LINK) In addition to the other three Defendants, the members of the Board on that date were Harvey Allen, Bobby Branham, Barb Hilb, Harry Leiding, William Mapother, and Sandy Wilson. Mr Prell remarked in his deposition that other people were also aware of the renovation. It is believed that Complainant Marty Haley was a member of the B&G Committee in 2005.
Marketing the Renovated Property
Evidence provided through discovery shows that the expanded condo was first listed for sale on August 4, 2006 at an asking price of $960,000. At the time of sale to Mr. Prell, the individual units were listed for $339,900 or a combined price of $679,800. Profit for the renovated unit based on that $280,200 difference–$960,000 minus $679,800–would have been offset by the additional investment by Prell to renovate. Those costs were likely half to two-thirds of the $280,000; and price reductions would have cut dollar-for-dollar into his profit. Here is the progression of price reductions on the condo to try to sell it:
Frank Prell systematically lowered the price and tried different agents to market the property unsuccessfully and against a backdrop of one of the worst real estate recessions nationally on record. It’s likely that at the lowest price shown, the condo was being advertised below the costs incurred to buy and remodel the units, i.e., the condo was being sold for a loss.
Short Sale and Redividing the Condos
In mid 2010, Frank Prell entered into discussions with Kevin Zipperle about a short sale/purchase of the combined condos. This was at a point where Mr. Prell believed that the market value of the property had fallen to the level of the underlying mortgage debt, or about $550,000. That was the total of the two mortgages–one on each original condo–at the time of purchase per recorded documents 200507158 and 200507160 in Clark County, IN. His property taxes are estimated to have been about $13,600 annually applying a 2% investor rate to the purchase price of $680,000. HOA and related fees on the condos were $10,300 and $11,100, respectively, in 2011 and 2012. And mortgage interest costs would have been at least $15,000 per year. Total annual carrying costs on the renovated condo were north of $40,000 while the property was up for sale. Frank Prell remained current on his HOA fees and property taxes until he surrendered control of the unit.
A short sale is a real estate transaction in which the holder of the debt agrees to accept less than full repayment of the amount owed. The debt holder in this instance was Bank of America (BofA) through it’s former subsidiary, Countrywide Financial.
Purchase contracts were originally submitted by Mr. Zipperle for the combined unit as well as the individual units since they were still recorded individually in 2010. The first page of each contract is linked here. (LINK) It was unknown at the outset how BofA wanted to manage the transaction, individually or combined. Subsequent contracts were submitted for each condo on an individual basis per BofA’s request.
After BofA was informed by Frank Prell that the two original condos had been combined, they required that a temporary wall be constructed between the two units to approve a short sale. He was directed by BofA to rebuild a wall in order to have the condos appraised individually as they were still recorded. The wall was not built to code because it was never intended to be permanent. It was clad in 3/8″ drywall with exposed seams and screws and only lightly anchored in place at the top and bottom. The wall contained no electrical or plumbing. And once the short sale was approved, it was the intention to remove the wall and restore the appearance of a combined unit.
Ultimate Disposition of the Condos
At each submission, separate contracts were prepared for 1103 and 1104 with the expectation that they would both be approved or rejected by BofA. By late 2011, the two sets of documents ended up on different paths within BofA. Kevin Zipperle was notified that the contract for condo 1103 had been approved by BofA for short sale at a price of $175,000. However, condo 1104 went to foreclosure through Fannie Mae with the temporary wall still separating the units. At that point, Frank Prell had lost ownership control of 1104. Mr. Zipperle purchased 1103 in February 2012 with the understanding that he would have to try to purchase 1104 at foreclosure auction and recombine the properties if successful.
Mary Lou Trautwein-Lamkin expressed an interest in the recombined property, and she eventually submitted her own offer for 1104 at the high bid of $220,000. Her contract was submitted to Fannie Mae which auctioned 1104 according to their sealed bidding procedure. At one point in her decision-making process, Ms. Trautwein-Lamkin submitted a contract jointly with Mr. Zipperle that was the subject of an earlier posting. (LINK) Once she had firmly decided that she wanted the combined unit, Ms. Trautwein-Lamkin submitted the purchase contract for 1104 in her name alone, and Mr. Zipperle agreed to sell her 1103 to which he had title when she purchased 1104.
Owner Occupancy Issue
The sequence of events are important in view of allegations made by the Indiana Office of the Attorney General (OAG) in their lawsuit… Trautwein-Lamkin submitted her final contract to buy condo 1104 on July 6, 2012, and the key pages of that contract are linked here. (LINK) She promptly listed and sold the Harbours condo in which she resided at that time. Mention of that is made by the Fannie Mae listing agent on the Owner Occupancy Certification (ref. “Unit 603”). To expedite her move, Trautwein-Lamkin fairly priced 603 and sold it quickly on August 6, 2012. (LINK) The sale of 603 allowed her to meet the terms of the Certification, i.e., move into the recombined 1103-1104.
The OAG filed its lawsuit on August 30, 2012. By that time, Mary Lou Trautwein-Lamkin had successfully purchased 1104 as the high bidder, sold the condo in which she previously lived, and completed all or most of her move into the her new residence as agreed with Fannie Mae. These events weren’t orchestrated in response to the OAG suit; rather, they occurred before it and with no knowledge that the lawsuit was going to be filed. There was never an effort by Trautwein-Lamkin or Zipperle, as alleged by the OAG, to buy the property during the period reserved for owner-occupant buyers without that intention on her part.
Indeed, had she not stepped in as the buyer of 1104, Zipperle would have continued to bid on the unit and moved into the combined 1103-1104, if successful. In fact at the time of sale, Mr. Zipperle had lived in three different Harbours condos in the decade or so that he and his wife had resided there. In 2012, he and his wife individually or jointly had title to five Harbours condos as either primary residence or investment.
OAG Story Telling
In order to pursue its intended course with condos 1103-1104 , the OAG had to first concoct a story about Kevin Zipperle’s involvement with the construction of a temporary wall built by Frank Prell to short sell his property. (LINK: pp. 47-54) It then had to try to prove that Zipperle, with the assistance of Mary Lou Trautwein-Lamkin, devised a way to “jump
the line” to buy unit 1104: sidestepping Fannie Mae restrictions that favored owner-occupants as buyers. This was according to a theory that Zipperle was only an investor and that Trautwein-Lamkin was a front to make the purchase. At the time of this post, she’s about to start her seventh year residing in the property.
And as their previously discussed theory of cohabitation demonstrated, the OAG would concoct a story to fill in any blanks for what it did not know. They didn’t know the Fannie Mae requirements for joint auction bidders, they didn’t know who built the temporary wall and why it was built, and they didn’t know what the eventual plan was for the property. As in so many other instances in their lawsuit, the OAG didn’t have accurate information in large part because they were listening to and believing the wrong people.
Harbours Lawsuit 