As red door empire crumbles, tenants pay the price

Read all of this investigation at the GT's Behind the Red Door Web site.

Kip Schoning’s red door rental empire is showing signs of crumbling — and many of his tenants are getting dragged down with it.

Through his Corvallis-based company, Bula Enterprises, Schoning manages more than 150 rental properties around the mid-valley, most with their front doors painted a distinctive red. Over more than 15 years in business, Schoning has racked up scores of complaints with local housing officials for foot-dragging on repairs, charging excessive fees and using the courts to squeeze money out of his tenants.

But now Schoning is falling behind on his mortgages. So far this year, Schoning and his wife, Michelle, have defaulted on 79 properties in Linn, Benton, Marion and Polk counties, according to records on file with the county clerks’ offices.

While the Schonings have managed to redeem some of those properties, 19 have been foreclosed by the lender or sold to satisfy the debt, while another 43 remain in default and could face the same fate, the records show.

The Schonings have not responded to numerous requests from the newspaper for comment.

But what about their tenants? What happens to the people renting a house when it gets foreclosed?

They have to go.

That’s what happened to Kenny Davidson, who rented a converted church in Alsea from Schoning from March 2003 until the beginning of last month. If it was up to him, he and his family would still be there.

“We were forced to move,” Davidson said. “He hadn’t paid his mortgage since the first of the year.”

Just around the corner from Davidson’s old place, a similar story is playing out in the home of David Free. After six years of renting a Schoning house on Main Street, Free learned from the mortgage company at the beginning of October that he and his two teenage boys would have to move. They have until Friday to vacate the premises.

“I went out on the first to pay my rent, and I came back and found a foreclosure notice on my door,” Free said.

Darrell and Rachael Caldwell moved to Alsea from Alaska in August, renting another converted church owned by Schoning on First Street. Within a month of moving in, they were notified by the mortgage company that the loan was in arrears. If the unpaid balance isn’t paid by Dec. 26, they’ll have to move out.

“I don’t know what to do,” Rachael Caldwell said. “I don’t want to have to move my children the day after Christmas.”

All told, three Schoning properties in Alsea have already been foreclosed this year. Three more are in default of their mortgage obligations. If those obligations aren’t met and the lenders foreclose, there’s nothing the tenants can do about it.

Before a rental agreement is signed, state law says, landlords must notify prospective tenants in writing of any outstanding notice of default or other pending legal action involving a property. But there are no tenant-notification provisions for default notices filed after the property is rented.

“All they’d have to do is give (the renters) a 30-day notice,” said Jan Margosian of the state Justice Department.

In a town as small as Alsea, where total school enrollment is only about 150, the fallout from red door foreclosures could be substantial.

“It’s a percentage point of the population,” said John Clark, who owns John Boy’s Alsea Mercantile. “Ken’s got two kids. That’s two kids out of school.”

Free has two more, and so do the Caldwells. If they pull out of Alsea School, that takes away roughly 4 percent of the total enrollment — and the state funding that goes with it. Additional foreclosures could make matters even worse.

“That has quite an impact, I’d say,” Clark said.

While the Alsea foreclosures may be having a disproportionate effect on the community, they represent only a small slice of the Schonings’ troubled investments.

Based on a search of property records in Linn, Benton, Marion and Polk counties, the couple still owe more than $200,000 in delinquent mortgage payments, late fees and related charges on 43 properties around the mid-valley.

But it takes 120 days to go all the way through the process from default to foreclosure. If the Schonings have continued to miss payments since the default notices were filed, the actual amount they owe could be much higher.

Justin Comfort, who ran the Bula Enterprises office from November 2007 until May of this year, said most of the company’s properties were heavily mortgaged when he worked there. In many cases, he said, the rental income lagged behind the loan obligations, pushing the properties toward foreclosure.

“They weren’t making enough money to keep up on the mortgages,” Comfort said.

He said he’d get calls “all the time” from panicky tenants who’d received notices of default from the mortgage company and weren’t sure what to do.

“People would call up and say, ‘Hey, my house is being repo’d,” Comfort recalled.

The Schonings also are behind on their property-tax bills.

In Benton County, where the Schonings own 39 properties, they owe $14,926.21 in overdue property taxes, according to information from the assessor’s office. In Marion County, they have 19 properties and face a bill for back taxes of $2,562.62. And in Linn County, where the Schonings own 81 properties, the tally for their overdue property taxes is $45,488.82.

The bills for the current tax year come due in the middle of this month. That could lead to still more foreclosures, although Oregon law gives property owners a lengthy grace period to get caught up on back property taxes.

Only when the taxes are four years in arrears can a county begin foreclosure proceedings, and then the owner gets another two years to make good before the property is seized and sold to pay the debt.

Even so, the Schonings recently came within a whisker of losing two properties in Corvallis for back taxes.

“They usually go the full four years, then come in and take care of the oldest year, but they missed a couple this year. A mortgage company came in and took care of it,” said Mary Otley, the county’s finance director.

“We had the mortgage company calling us, we had Michelle (Schoning) calling us. We said, ‘You know, folks, we’ve been really lenient here.’”

As with past articles about his business, Kip Schoning did not return calls to his home and office phones seeking comment for this story, so it’s not clear what his plans may be. But the strategy appears to include selling off at least part of his rental properties.

The Web site for Bula Realty, Michelle Schoning’s real-estate brokerage, lists 128 properties for sale. At least 111 of those are Bula Enterprises rentals.

Bennett Hall can be reached at 758-9529 or bennett.hall@lee.net.

Saying goodbye

Three families caught in the fallout from red door foreclosures

Kenny Davidson

201 E. Alder St., Alsea

After five and a half years of renting from Kip Schoning, Kenny Davidson had stopped calling his landlord about minor maintenance issues with the old converted church in downtown Alsea.

“We never had any trouble with him as long as we paid our rent on time. You learn to do your own repairs,” Davidson said.

“We were happy with the place.”

But on Sept. 16, Davidson got a rude awakening. Schoning sent one of his employees by with an eviction notice. He had fallen months behind on his loan payments, and the property was being foreclosed. Davidson and his family had 30 days to get out.

“We sent the rent check every month, and the mortgage wasn’t paid,” Davidson said. “It’s really a breach of trust.”

Early last month, Davidson moved to the Philomath area with his wife and their two children.

“They both went to Alsea High School, which decimated their graduating class when we moved,” Davidson said.

While they were sorry to leave Alsea, they’re happy with their new landlord, Duerksen & Associates.

“Their maintenance has been incredible,” Davidson said. “They’ve been amazing. They actually return phone calls.”

But the family’s not through with Schoning yet. On Friday, Davidson stopped by his old place in Alsea and found a letter from his former landlord. It was a bill for unpaid rent and post-moveout cleanup charges.

“It’s funny. He’s charging me $500 for leaving the house in poor condition,” Davidson said. “I don’t know how he can do that when it’s not his house.”

David Free

147 E. Main St., Alsea

When David Free walks into his rental house on Alsea’s Main Street, he has to step around a row of plastic tubs lined up on the floor of the front room. They’ve been there for about a year, since a section of the ceiling collapsed in a heap of soggy drywall. A second section came down this fall.

“This whole roof has been holding water because there’s no shingles up there,” said Free, a former logger who’s been on disability since suffering a head injury in an on-the-job accident. “When the Sheetrock comes down, it makes a nasty mess.”

Free reported the problems to his landlord, Kip Schoning, but no repairs were ever made.

That’s no surprise to Free. When he moved his family into the big old house six years ago, there were no lights or working electrical outlets in the back bathroom. There still aren’t.

“A guy came out and cut a hole in the wall and never came back to fix it,” Free says, pointing out a 12-inch-square opening in the bathroom wall. “That was the day we moved in.”

That was Free’s introduction to Schoning’s maintenance policy, and he said nothing’s changed since.

“It doesn’t do any good to ask him to fix anything,” Free said. “They come out and work on it, but they never come back. They never finish the job.”

At $850 a month, Free calculates he’s paid Schoning more than $60,000 in rent since he moved in, but very little of that money appears to have gone into maintaining the place.

Now it turns out that, since last December, none of Free’s rent payments made their way to the mortgage company, either.

According to foreclosure papers filed by Schoning’s lender, that’s when he stopped making mortgage payments. On Sept. 15, the property was sold at auction on the steps of the Benton County Courthouse.

On Oct. 1, Free came home from paying his rent to find a letter stuck in his door from the new owners, telling him he and his two teenage sons had to leave.

“I called my bank and put a stop on my check,” he said. “We had to go to court to keep from getting kicked out on our ass.”

Free’s court appearance didn’t buy him much time, however. He still has to vacate by this coming Friday.

“I’m trying to buy a place here in town,” he said. “I hope the financing comes through. If it don’t, I’m out on the street.”

Darrell and Rachael Caldwell

171 N. Main St., Alsea

If he hadn’t been in such a hurry last August, Darrell Caldwell might never have rented the big, drafty converted church. But the unemployed electrical worker had just moved to Oregon from Alaska with his family and needed something right away.

“This place was atrocious when we moved in — piles of garbage all over the place, cigarette butts everywhere,” Caldwell said. “The refrigerator was full of meat and full of maggots.”

Caldwell and his wife, Rachael, cleaned the fridge several times, but could never entirely get rid of the stench — or the maggots, which kept wriggling out of hard-to-reach nooks and crannies.

Their landlord, Kip Schoning, got them a replacement refrigerator after a couple of weeks, but that’s pretty much all he’s done for them, the Caldwells say.

The carpets are an intricate mosaic of stains, paint is peeling off the walls, the plumbing in one bathroom is so clogged they can’t use it, and the yard is a mass of blackberry brambles. The washer and drier haven’t worked since they moved in, so they do their laundry by hand in the bathtub and hang it on a homemade line to dry.

“We can’t get him to fix anything,” Caldwell said.

But for all the problems they’ve had with their rental home, Caldwell and his wife say they love their new hometown. The townspeople have been welcoming, their teenage son and daughter are getting used to their new school, and their pastor and his wife live right next door.

Now, however, they may have to move again.

On Sept. 2, barely a month after they moved in, the Caldwells were hand-delivered a notice of default.

“I hate to tell you this,” the process server told them, “but it goes up for auction on December 31st.”

According to the legal papers, Schoning and his wife, Michelle, hadn’t made a mortgage payment on the old church since April. At the time of the notice, they were $5,269.90 in arrears on the property. If the Schonings don’t bring the account current by Dec. 26, the building will be sold on the courthouse steps five days later.

Caldwell thinks his landlords should have warned him about the possibility of foreclosure.

“They knew, when we moved in, this was happening,” he said. “That’s what pissed me off.”

His wife, Rachael, says the family’s not sure what to do now.

“We don’t want to tear our children out of school n they just got settled in,” she said.

“I never thought in a million years I’d move all the way from Alaska and get this.”