Update, May 20, 2024: On Sunday, the Minnesota Legislature passed a bill to reform controversial contracts-for-deed real estate deals as a part of the Judiciary, Public Safety, and Corrections Supplemental Budget Bill. The measure includes greater protections for buyers and outlaws the sort of property churning that some brokers have been accused of engaging in. Gov. Tim Walz is expected to sign the bill this week.
The Minnesota attorney general’s office filed a lawsuit Tuesday against a home seller who allegedly targeted the East African Muslim community for real estate deals that authorities called “predatory and deceptive.”
The lawsuit alleges that Chadwick Banken and six of his limited liability corporations broke state and federal laws, including Minnesota’s laws against religious discrimination, by using transactions known as contracts-for-deed to sell homes at higher prices than warranted and on worse terms to Muslim buyers.
Attorney General Keith Ellison, a Democrat, said in an interview that while the complaint focuses on Banken, the case is intended to send a message to others engaged in similar practices.
“He’s not the only one, but he’s one of the worst that I’ve seen,” Ellison said. “When people can’t pay back, they’re out of their house, and they’re out of their money. I can’t think of anything more financially devastating to a family than that.”
Banken did not respond to requests for comment.
The lawsuit, filed in Hennepin County district court, follows a ProPublica and Sahan Journal investigation in 2022 that identified a rising market in Minnesota for contract-for-deed home sales, particularly in the Somali community. Many buyers in the East African Muslim community avoid paying or profiting from interest because of their religious principles, and investors have been offering them deals as an “interest free” way to purchase a house.
But buyers told the Sahan Journal and ProPublica that they signed contracts they didn’t understand and would not be able to pay off. The lawsuit said Banken used inflated home prices, abnormally high down payments and six-figure balloon payments due at the end of short contracts to push buyers into default and to ultimately retain ownership of the property.
The ProPublica-Sahan Journal story featured Abdinoor Igal, a long-haul trucker who bought a home from Banken in suburban Lakeville in 2022 and is described in the lawsuit as “purchaser 2.” Officials confirmed that Igal was purchaser 2, and Igal said he has spoken with the attorney general’s office several times.
Igal said he walked away from his house this past winter after making about $170,000 in payments. He slept in his truck for months after sending his wife and *****ren to live in Kenya. He said the lawsuit was news he’d been waiting to hear.
“I’m really excited,” he said. “I can’t even believe how I’m feeling.”
The attorney general’s actions follow a push at the state Legislature to rewrite Minnesota’s contract-for-deed law. The bill would outlaw the kind of property “churning” that Banken is accused of in the lawsuit, and it provides a number of new protections and ways to recoup losses from a contract-for-deed deal gone wrong. It is currently included in an omnibus bill awaiting final approval at the Legislature.
The lawsuit alleges that Banken has sold hundreds of homes in contracts-for-deed deals in the last six years. It also reveals new details about his practices. The name of one of Banken’s six limited liability corporations, Slow Flip LLC, is actually a useful term for the predatory practice, the lawsuit alleges: Buyers submit exorbitant down payments and agree to large monthly installments that they will eventually default on, and then Banken takes the home back and “flips” it to a new purchaser.
According to one email from Banken’s business to a real estate agent, the ideal buyers are described as people with “low credit scores” or a “recent bankruptcy/foreclosure.” Banken also allegedly insisted that buyers enter contracts using their business names to create the false impression in court that he was evicting commercial tenants rather than families from their primary residence. None of Banken’s contracts disclosed the true total cost of the homes or the balloon payments, both in violation of federal Truth In Lending Act requirements, according to the lawsuit.
The contracts, according to the lawsuit, contained monthly interest payments in excess of the market rate, and the down payment, monthly payments and total price of the home went up if the purchaser was Muslim. Ellison said this was particularly galling, given that Banken markets his business as helpful to a community that has been shut out of the traditional home purchasing market.
“He’s not helping,” Ellison said. “What he’s really helping himself to is their money that they probably have mopped floors and pushed brooms for. … He’s setting people up to fail. His conduct is predatory, deceptive. And we hope to bring a stop to it.”
Ellison said buyers should reach out to his office if they feel they’re in a predatory contract-for-deed and that there may be options for restitution in the future.
Igal said that while he is excited to hear that there may be consequences for Banken, defaults and evictions are ongoing, affecting some of his former neighbors. And he is still struggling to put his family’s lives back together.
“My *****, the smallest one, 4 years, she called me and asked me, ‘Daddy, when am I coming?’ And I told her I’m making some money, but I don’t know when,” he said. “It’s not something I can describe.”
