Amid Bee investigation, Sacramento opens review of company appointed to code enforcement cases

The city of Sacramento initiated a review for receivers it recommends to take over properties in serious code enforcement disputes following questions from The Sacramento Bee that exposed high fees one of the companies passes on to homeowners.

The Bay Area Receivership Group is one of several receivers courts can appoint to fix code enforcement issues in Northern California at a city’s recommendation. The Bee’s investigation showed the company in some cases plans extensive renovations that go far beyond the violations and charges administrative fees that can drive a property owner into deep debt.

In Sacramento, BARG demolished Oak Park senior Wanda Clark’s home in January. It charged Wanda Clark about $100,000, mostly in fees. The city paid those charges, but Clark lost the house and is sleeping on her sister’s couch.

The Bee’s reporting showed the company is charging Linda and Bruce Siegrist far more in administrative fees than for actual work on their North Sacramento property. The couple so far owes about $189,000 to BARG — $142,000 of which is for administrative charges.

“This story raises serious questions about whether a process meant to safeguard neighborhoods is instead hurting vulnerable residents,” Sacramento Mayor Darrell Steinberg said in a statement. “It’s time for us to re-evaluate which receivers we will be recommending to the court.

After The Bee asked the city for comment on its investigation in August, City Attorney Susana Alcala Wood directed staff to send “requests for qualification” forms to receivership companies in August, said Mary Lynne Vellinga, Steinberg’s chief of staff.

The office will send the forms by the end of October, Vellinga said. The review was prompted by Clark’s case, which ended nine months before, Vellinga said.

The City Attorney’s Office will ask the companies for information about their billing practices, including administrative fee amounts. The City Attorney’s Office staff will then decide whether to stop using BARG or any other receivership firm, Vellinga said.

BARG president and receiver Gerard F. Keena II did not respond to a request for comment.

In addition, City Council members Jay Schenirer, Eric Guerra and Angelique Ashby are calling for a city audit.

“It seems at least from (The Bee’s) reporting the difference between what they charge and others charge is pretty dramatic,” Guerra said. “If that is the case, I’d be in favor of disqualifying them.”

Audits are typically ordered by the council’s Budget and Audit Committee. Steinberg, the chair of that committee, would also support an audit, Vellinga said.

Councilwoman Katie Valenzuela raised concerns about BARG, but was unsure if an audit was needed before taking action. Audits typically take several months.

“If there’s evidence that this company is overcharging people then of course we should use different companies,” Valenzuela said.

Northern California code enforcement company

Records show BARG, a go-to for cities from Fresno to Santa Rosa, routinely charges fees that are not for actual work to fix code violations, but instead for administrative tasks, according to court records The Bee reviewed.

The Bee identified 25 cases in Northern California since 2017 in which BARG took control of a home. Records in 13 of those cases showed detailed expenses that were passed on to homeowners. The final bill for administrative fees alone averaged $157,000 in those cases. Two other firms operating in the same region, appointed from 2015 to 2020, charged far less — averages of $27,000 and $11,000.

BARG has charged Berkeley homeowner Leonard Powell, 80, more than $1 million, half of which is for administrative and legal fees. The company completed a top-to-bottom renovation of the house, going far beyond the city code violations.

One Berkeley City Council member is calling upon that city to stop using BARG.

“Given what I know and the experiences documented in your investigation, I do not think the city should be recommending them,” Berkeley Councilwoman Sophie Hahn said in an email. “No one should be profiting at the expense of vulnerable community members. In all cases, there should be several layers of oversight to ensure homeowners are charged the minimum possible for both repairs and administration.”

Berkeley changed receivership policy

After Berkeleyside first reported Powell’s story, the Berkeley City Council adopted a policy in 2019 requiring council approval prior to the city filing a receivership petition in court against a property owner, Berkeley Mayor Jesse Arreguin said.

“We need to help low-income homeowners to address code violations including through loans, and non-profit construction firms, rather than go straight to court,” Arreguin said in an email. “Also elderly homeowners may not be able to afford legal representation or know how to navigate the complex legal process and we need to provide clear information and counseling. I will say that BARG’s (appointment) resulted in significant cost increases in the project adding further debt for Mr. Powell, beyond what appears is necessary for the purposes of correcting the code violations. ... We are very weary of appointing receivers in the future given Mr. Powell’s case and certainly given the challenges of BARG we will be mindful if we ever need to appoint a receiver in the future.”

Kendra Lewis, executive director of the Sacramento Housing Alliance, said Sacramento should follow Berkeley’s lead and require council approval for all receivership cases.

“The council is not involved in this process, but these residents are in their districts so they should definitely know what’s going on,” Lewis said. “We can’t keep losing properties. This is displacement.”

Lewis, who tried to help Clark, the Oak Park property owner, before BARG demolished her home, supports the Sacramento audit. She said there should also be state legislation to close loopholes that allow companies to become “predatory” once they are appointed. That legislation should cap the amount of administrative fees receivers can charge homeowners, and also bar them from doing renovations beyond the city code violations, she said.