Note: This story has been been updated to correct the amount of Tesco’s contract with HUD.

MEMPHIS, Tenn. — New, internal records uncovered by the NewsChannel 3 Investigators show that despite demands, the owners of Peppertree Apartments delayed repairs, leaving residents in difficult conditions.

Families at the Peppertree Apartments are still waiting for more details about when they’ll be able to move out of the Whitehaven complex after federal housing regulators terminated the owners’ contract. Peppertree is run by Germantown, TN based Tesco.

WREG spoke with a resident who said she’s grateful.

“I can’t do nothing but praise God, I can’t do nothing but thank god for everything. He’s walked me through this whole three years with this apartment,” the woman told us.

HUD yanking its contract with the owners, now means taxpayer dollars will go directly to the residents in the form of a Section 8 voucher. Funding previously went to the owners.

As WREG previously reported, the most recent, decade-long deal between HUD and Peppertree signed just over a year ago amidst a federal lawsuit, was worth roughly $2.3 million a year. Records uncovered by WREG show the owners have pulled in roughly $22 million since 2012.

As those housing assistance payments continued, residents said they’ve lived in deplorable conditions.

“My whole house is molded. It’s not livable at all, period. It just don’t make no sense and I been having this complaint since 2019,” one resident said.

Earlier this year, the complex was banned from accepting new tenants. The August federal court order was the second in less than a year. That order was set to expire in late December.

Attorneys for the City of Memphis, asked a judge to extend that order and at a related hearing on January 5, 2023, attorneys representing HUD told the court that the federal housing agency had recently notified Tesco via letter that it would be abating its Housing Assistance Payment contract.

The News Channel 3 Investigators requested a copy of the letter HUD sent to Tesco explaining why it’s abating the contract.

While we wait on that document, we’ve uncovered others revealing the owner violated the rules and its contract, continuing to delay repairs, despite HUD’s demands.

HUD hit the owners with two Notices of Default, Notices of Violation and demands for correction in a span of seven months.

Last January, during a REAC inspection of the property, inspectors sounded the alarm on potentially hazardous walkways months before one collapsed.

Peppertree failed that inspection, then another in August after a walkway collapsed and sent residents to the hospital.

The NewsChannel 3 Investigators have also learned inspectors were on site when that walkway collapsed.

An inspector wrote, “breezeway between building 2 and 44 collapsed. Happened on 1st of inspection after hours.”

During that inspection, which ran from August 2nd, the day the walkway collapsed, to August 4th, inspectors found 70 health and safety deficiencies.

Ten were life-threatening and six were related to smoke detectors. The leasing office caught fire two weeks later.

Afterwards, HUD sent the owners their second notice of violation in less than a year. They cited the two consecutive failed inspections. HUD gave the owners 30 days to respond and said the owners needed to take the following corrective action:

  • Conduct a survey of the entire Project, identifying all physical deficiencies
  • Correct all physical deficiencies identified at the Project from the Owner’s survey and REAC’s inspection report
  • Execute the enclosed certification that: all deficiencies identified at the Project have been corrected, and that the Project meets HUD’s Physical Condition Standards and Inspection Requirements and applicable state and local codes

In September, Larry Sisson, the president of Tesco properties, sent HUD an email asking for a 90-day extension.

In a follow up letter dated September 23, 2022, citing multiple reasons, HUD rejected Peppertree’s request for an extension. Tesco has not responded to requests for comment.

What’s Next for Peppertree Residents?

Tenants will reportedly be required to qualify for the vouchers, which will be distributed over the next 60 days. WREG has learned the Memphis Housing Authority will be assisting HUD with the relocation.

The following was sent by a spokesperson working on behalf of MHA.

“Memphis Housing Authority has been asked by the U.S. Department of Housing and Urban Development (HUD) to administer Tenant Protection Vouchers (TPVs) to the Peppertree residents who are currently in place. MHA will work closely with HUD, the City of Memphis and Shelby County government to ensure tenants are taken care of and housed in a safe, sufficient space.”

When asked about a specific timeline for the relocation, a HUD spokesperson said the following,

“HUD’s relocation contractor will be engaged and will work as quickly as possible.  Leumas is the contractor.”

At the airing of this story, HUD had not yet provided tenants with notification about the relocation.

The spokesperson explained tenants will be issued tenant protection vouchers which will allow them to move to any property that accepts Section 8 vouchers. The vouchers are also portable to other states, the spokesperson explained.

The Newschannel 3 Investigators also asked if and when HUD will be meeting with Peppertree residents. The spokesperson said,

“HUD’s relocation contractor will meet with the residents.  The meetings are being scheduled and are expected to occur in February. HUD will also be meeting with tenants during approximately the same timeframe.”