Catherine Reagor, Jessica Boehm, Ralph Chapoco – Arizona Republic

In a rush to get money out fast, a $10 million state aid program for struggling landlords gave money to two people who had been cited by regulators for bad rental operations and handed out too much money to other property managers.

The Arizona governor’s Economic Recovery Management Team handled the landlord fund, which appears to have been run without the same oversight used for federally funded renter aid programs. 

Housing advocates were concerned when the fund was launched that the way it was managed could create a “double-dip” problem, where rental property owners could receive money from both the landlord and tenant-aid funds. 

It happened with at least one case. But because the state refused to provide unit numbers of the rentals that received assistance at multifamily properties, it was not possible for The Arizona Republic to check whether landlords double-dipped in multiple assistance programs or had filed eviction notices against tenants who received rental assistance. 

“The majority of landlords and renters are good and respectful of each other, but there are some bad landlords and renters,” said Joan Serviss, executive director of the Arizona Housing Coalition, a group that advocates for affordable housing, eviction prevention and people experiencing homelessness.

She said renter-aid programs had to get up and running fast during the COVID-19 pandemic, and that means some give and take between efficiency and transparency.

About $37,000 of the landlord fund was spent on mistakes acknowledged by the state. 

A Tucson landlord received funds despite two recent Arizona regulatory orders banning him from real estate sales or leasing. He also received funds from a Pima County renter-aid program for one of the homes on which he got state landlord aid, according to an Arizona Republic investigation. That is essentially double-dipping in government funds.

Another landlord, who received money for two trailer parks in Yuma, has a recent regulatory judgment against him in California for fraudulent practices in his mobile home operations. 

Two landlords received too much money.

And eviction filings didn’t stop at many of the apartment complexes that received the most money from the fund.

Aid programs created for renters, then landlords

As the pandemic led to massive job losses and less work for other renters, government-funded aid programs were launched for tenants under the CARES Act and eviction moratoriums put in place. Get the Street Scout – Catherine Reagor on real estate newsletter in your inbox.

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Money for the landlord fund and a $7 million state renter fund came out of a $50 million state appropriation for COVID-19 relief programs a year ago. The renter fund, launched in March 2020, was criticized for getting money out too slowly to struggling renters.  It was managed by the Arizona Department of Housing.

Later, the Arizona Rental Property Owner Preservation Fund was set up for landlords struggling without their expected monthly rent payments. Gov. Doug Ducey launched it through his grant office in August with $5 million. The money ran out in late September, and another $5 million was added and spent by January.

Janelle Johnsen, the state housing agency spokesperson, said the goal with the landlord fund was to get money out quickly to struggling landlords.

“This program (the Rental Property Owner Preservation Fund) was designed to achieve that, and was successful at doing so,” she said. “It specifically aimed to address an issue unique to the COVID-19 pandemic — the lost income for rental property owners due to unpaid rent of unresponsive (“ghosted”) tenants.”

Landlords could apply directly for up to $50,000 per property, which was different from almost $90 million in CARES Act-funded renter aid programs in Arizona. 

“We heard from rental property owners that there was a portion of renters that were choosing not to seek out the rental assistance or engage in figuring out a payment plan,” Patrick Ptak, then the spokesperson for Ducey, said in August.

Rental property owners applied to the governor’s grant office for the landlord fund money. A rental property owner didn’t have to be on the verge of foreclosure to qualify for the financial help.

The property owners could not have received payment through another renter assistance program for any rental unit included in their application. 

To qualify for the Arizona Rental Property Owner Preservation Fund, rental property owners were to submit:

• How many units they sought funding for, the total months they had not received rental payments for each of those units, the total loss of income and the steps taken to secure rent payments from tenants.
• Copy of a lease ledger or lease agreement for each claimed unit.
• A five-day notice or any other documentation that showed the tenant had been notified and given an opportunity to pay the total amount due but had not responded or paid. 
• Documentation of the outstanding unpaid balance per unit.
• W-9 and ACH payment forms to receive direct deposit payment from the state.

Most Arizona renter-aid programs funded by the CARES Act were handled through city and county community action agencies that worked with each other to cross-check tenant applications for information. 

Landlords with regulator problems

David Kinas of Deed and Note Traders LLC received about $10,000 for four Tucson rental properties from the landlord fund.

In 2018 and 2019, the Arizona Department of Real Estate sanctioned Kinas for operating without a license. It issued orders for Kinas to “immediately cease and desist from engaging in any real estate activity including sales, listing, rental and/or leasing activity and property management activity, in any capacity whatsoever, directly or indirectly, within the State of Arizona.”

Between August and the end of December 2020, Kinas received $2,460 from the state’s landlord fund for a 1,200-square-foot rental home at 2403 S. Holly Stravenue in Tucson that he acquired in 2006, according to property records. 

In October, he also received $3,410 in renter aid from Pima County for the same property. 

Property owners were not permitted to receive payment through another renter assistance program for any rental unit included in their application for the Rental Property Owner fund, according to the application guidelines.

Landlords must return funding to the state within 10 days if they later receive a subsidy through a tenant assistance program. The housing department said some landlords have returned funding but didn’t provide a requested list of those property owners. 

Multiple attempts were made to reach Kinas, but he didn’t respond.

“We are reviewing the (David Kinas) situation and may take follow-up action if it is determined that the grantee did not meet the grant program criteria,” Johnsen said. “This has also been forwarded to the Department of Real Estate for review.”

Louis Dettorre, deputy commissioner of the state’s real estate department, said the agency has shared its findings on Kinas’ activities with the Arizona Attorney General’s Office.

Over the past 15 years, the state Attorney General’s Office has investigated Kinas and some of his companies on suspicion of violating the state’s consumer fraud act with practices in rent-to-own and foreclosure-rescue businesses.  

He hasn’t been fined or sanctioned in Arizona.

Although a cease and desist order was issued, state agencies can’t enforce those orders. They must be pursued by the state attorney general or another prosecutor. 

Abraham Arrigotti received Arizona landlord grants awards totaling nearly about $7,320 from the fund for two Yuma mobile home parks.

He has a recent regulatory judgment against him in California for his mobile home operations.

In April 2019, the California Department of Housing and Community Development and Yolo County reached a $175,000 settlement with Arrigotti on allegations of fraudulent practices while operating as a mobile home dealer.

More than two dozen California mobile homeowners were compensated through the regulatory action after being sold “below-standard homes without notification about the homes’ defects, later resulting in homeowners facing fees and penalties, violation notices, and/or eviction for not repairing their homes in a timely manner.”

Some of those two dozen California mobile homeowners never obtained titles for ownership after the sale, while others fought for years before titles were transferred into their names.

Arrigotti, who didn’t respond to multiple calls and emails, received Arizona landlord aid for the Linda Mesa and Town and Country mobile home parks.

 “The grant program is governed by the laws of the State of Arizona and administered according to the grant program criteria,” said Johnsen about the Arigotti grants. “The program did not consider regulatory judgments in another state as a basis for approving or denying a grant application.”

At least one eviction notice was filed at a Yuma mobile home park Arigotti received aid for during the last four months of 2020.

Some landlords got too much money

Guidelines for the landlord fund said no more than $50,000 in aid could go to one rental property.

BAZV Tempo LLC received $65,942 in renter aid from the two rounds of the state-run fund for an apartment complex at 1831 Apache Blvd. in Tempe.

The money was given to the landlord for 50 renters in the Tempo at McClintock Station complex that has 423 apartments. Rents range from $1,200 to $2,400.

The average funding per renter was about $1,318. The fund was capped at $2,000 per renter.

 “Unfortunately, it appears the second award was made in error,” Johnsen said. “We will be investigating how this occurred, which will include conducting a full review of all awards from the program, collecting any funds paid in excess of program criteria and reviewing procedures to ensure this does not occur again.”

MEB Management applied for the landlord funds and responded to the overfunding with this statement. “Tempo at McClintock Station did apply for and was approved for the RPOPF on behalf of preserving housing for its residents. All funding was applied to each corresponding resident ledger to prevent eviction or judgment status to their record. We are actively researching the possible overpayment of funds and will resolve the matter accordingly.”

Ranchwood Apartment Holdings LLC, representing a Glendale apartment complex at 5740 N. 59th Ave., was the other property to receive more than the maximum from the landlord fund.

The 360 unit-complex received $53,695 for 41 renters from two rounds of the landlord funding. The average grant amount per renter was $1,309.

The apartment complex didn’t respond to inquiries about its overfunding. 

Of the 800 grants awarded, 25 received the maximum $50,000 allotment, with a handful of others receiving slightly less than that. 

Aid offered with no checks for evictions 

Johnsen said the state did not check to see if landlords had evicted tenants before awarding assistance — nor did it check to make sure landlords did not evict tenants after assistance was awarded. 

She said judges and constables were responsible for determining whether evictions are lawful. 

“We believe this program helped to prevent evictions by reducing the financial penalty for property owners who had tenants not paying rent,” she said. 

The landlords who received money from the Arizona Rental Property Owner Preservation filed nearly 2,500 eviction notices during the pandemic, according to The Republic’s investigation.

The Republic’s investigation found that nearly half of the 633 Maricopa County properties that received assistance from the Arizona Rental Property Owner Preservation Fund filed eviction notices during the pandemic. An eviction filing signals an intent to evict but does not necessarily mean a tenant was evicted. 

A landlord who received almost $1 million from the state’s assistance program — the most of any landlord  — filed for more than 350 evictions at apartment complexes across Maricopa County during the pandemic, The Republic’s investigation found. 

Another landlord filed for eviction on almost 30% of his tenants at a single Glendale apartment complex despite receiving $50,000 in assistance for the same property.

“As occurs in any grant program, there appear to be a handful of errors in the processing of applications, which we will be correcting to ensure the integrity of the program,” said Johnsen about the landlord fund.

The housing agency said errors in grants from the landlord fund will be corrected.

A spokesperson for the Maricopa County Justice Courts said landlords have a responsibility to disclose all information to the court that would allow a judge to make a decision about the legality of an eviction.

Spokesperson Scott Davis said constables bear no responsibility in determining the lawfulness of an eviction and judges only can make a judgment based on evidence presented in court.

He said judges hearing eviction cases only were allowed to begin asking landlords whether they received rental assistance beginning in December under an administrative order by the Arizona Supreme Court.

Arizona Multihousing Association’s spokesperson David Leibowitz said in a statement, “We don’t see this (mistakes with the landlord fund) as an issue of failing to meet best practices. Instead, this is about dollars and sense. Various levels of government canceled almost 1 million rental leases in Arizona, thus requiring property owners to provide free housing for a year and counting.

“Many of (our members) are working tirelessly to keep roofs over people’s heads while struggling to pay their bills,” he said. “Meanwhile, there continues to be a lack of compensation and assistance in Arizona as compared to the need and compared to other states. And what resources do exist have been deployed far too slowly.” 

More funds on the way, with added oversight

Arizona received another $492 million in renter aid from the late December stimulus that the state, counties and cities are starting to give to both landlords and renters.

Additional money will be coming from President Biden’s $1.9 trillion stimulus approved earlier this month.

Funding for renter aid from both are expected to carry more regulator oversight than money awarded from the CARES Act.  Housing advocates say mistakes with renter programs from 2020 can be fixed in the new programs, which come with tougher guidelines and specific reporting measures to the federal government. 

Coverage of housing insecurity on azcentral.com and in The Arizona Republic is supported by a grant from the Arizona Community Foundation. 

Reach the reporter at catherine.reagor@arizonarepublic.com or 602-444-8040. Follow her on Twitter @catherinereagor.

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