Tuesday, October 28, 2008

No State Rule Book for Hazardous Land Development

Photo 1-View looking up the track of the August 31, 2006 embankment failure-debris flow from the development road near lot 107.

Photo 2-View looking downslope at the debris deposit and damage to lot 107
Photo 3-View of cracks in embankment extending northeast from the head scarp of the August 31, 2006 embankment failure-debris flow
Photos compliments of the North Carolina Geological Survey

A little over two years ago a road-building crew caused a massive landslide on Eagles Nest Ridge in Haywood County. Luckily, no homes were in the path of what has been called a “A Whopper of a Slide.”

The August 31, 2006 landslide occurred in a 700-acre development, called Cascades, which was being built by Maurice Wilder of Clearwater, Florida. The subdivision plat shows that the 90 foot wide by 1300 foot long debris flow would have severely damaged or destroyed any structures that would have been built on Lot 107 in the development.

After the landslide Dennis Franklin, contractor for the project, notified county officials and instituted temporary measures to stabilize the area. Marc Pruett, Haywood County’s erosion control supervisor, said that without notification he probably would not have known about the slide since no homes or residents were in danger.

Maggie Valley engineer Kevin Alford, who investigated the slide for a Cascades property owner, said that the failed section of the road bed occurred because
The upper road was built out of shot material (from) where they had to blast the roadway in there. It got too heavy. The sliding material acted like a bulldozer, scouring the slope of almost all soil and vegetation. It wiped out a path down to bedrock. It was like an elliptical -shaped bulldozer. It is an amazing thing when you see that kind of material go down the mountain. When you get up in the mountains and start building roads, there are good ways to build roads and bad ways to build roads. In a situation like that I think it would have been reasonable to do subterranean work to find out what was there. When you have a large amount of uncompacted rock fill that gets a lot of water in it, you have potential for slope failures. There is still more material up there, so it could happen again.
North Carolina Geological Survey’s Findings

Geologists investigating the landslide site found that the collapsed slope embankment was composed of highly unstable woody debris and graphitic-sulfidic bedrock fragments. Rain on this weak, improperly-constructed, roadbed probably precipitated the landslide.

During the course of their survey the geologists determined that the still standing ~ 300 foot long road embankment showed evidence of additional failures. They warned that if the fragile embankment is not properly stabilized, this land mass will pose a future threat to public safety. Recommendations to the developer included a professional investigation of the failed site in conjunction with extensive and expensive stabilization measures or removal of the remaining roadbed.

In their assessment report the NCGS reference other Western North Carolina landslides caused by contractors' use of graphitic-sulfidic road fill.

No State Rule Book for Hazardous Land Development

It is unknown whether Mr. Wilder followed the safety recommendations outlined by the North Carolina Geological Survey. Mr. Wilder, along with all other developers conducting business in the state, are left to their own best judgment on landslide remediation.

Interested parties should be aware of these pertinent facts:

1. Landslides and weak soils endanger most mountain construction sites in Western North Carolina.

2. Developers do not have to report landslides to the state or to their clients.

3. There are no independent safety experts on-site to monitor construction practices.

4. North Carolina does not provide any measure of regulation over hazardous land development even though the region was devastated by landslides in September 2004.

5. North Carolina does not require real estate land risk disclosure.

Wouldn't You Want to Know the Risks of Buying Real Estate in Haywood County?

Landslide hazard maps for Haywood County are scheduled to be released this year, yet commissioners have chosen not to share this relevant information.

Officials only acknowledge that there are "difficulties" such as steep slopes and water quality issues associated with mountain development. The fact is most of the county's developable land is extremely hazardous. Evidence proves that building sites are impaired by unstable soils, the threat of landslides and dangerous unsupervised construction practices.

Haywood County Commissioners and their Planning Board know that hazardous land development is a threat to public safety and homeowners' financial security. There is no reason for this information to be hidden from public view.

For a comprehensive look at landslide-triggered losses in Haywood County please read the following reports.

Gambling with the Unknown
Haywood County Landslide
Rain Triggers Mudslides in Two Western North Carolina Counties
Study brings bad news
Hunters Crossing Landslide...It's Still Moving
Building Homes Where Nature Didn't Intend Them to be Built.
Deadly Landslide in Maggie Valley
Western North Carolina Mudslides Damage Private Mountain Roads. Who is Responsible?
Mudslides and Landslides Affect Property Values in Western North Carolina

Tuesday, October 21, 2008

Two Million Dollar Property Damage in Laurelmor

The following information was found in a federal lawsuit filed against Ginn/Laurelmor. The complaint: Bituminous Casualty Corporation v. West Contracting, Inc. et al.

In late December 2007 a massive 600 foot long by 110 foot high stacked rock wall collapsed at the Laurelmor golf driving range. This is one of 5 similar walls completed in the resort. The others were constructed at the maintenance facility, and near holes 4, 5, and 10 of the golf course.

Ginn-LA Laurel Creek Ltd. LLLP, owner/developer of the Laurelmor project and Ginn Golf, LLC, the prime contractor responsible for the golf course have demanded arbitration to determine whether the firms responsible for the wall's design and construction were negligent.

Ginn hired an outside engineering firm to investigate the cause of the failure and to examine the stability of the remaining walls. Ginns’ consultants state that a number of improper construction practices caused the wall to collapse. They also believe that the still standing walls "will have a short and predictable service life and could fail precipitously at any time."

Ginn and Ginn Golf seek a substantial award ($2,000,000) against the two firms named in the arbitration documents.

Ginn's Prior Knowledge of Hazardous Land Conditions

It is unknown how this dispute will be settled but interested parties should note the following pertinent information.

In April 2005 the Ginn Company acquired the original 5,700 Laurelmor acre tract from David Kaplan of Kaplan Holdings LLC for $57 million. The land was part of Kaplan’s Heavenly Mountain Resort. Prior to the sale Kaplan had received preliminary approval from the Watauga County Planning and Inspection Department for three Heavenly Mountain projects. Approval for these projects, including the golf course, transferred to the Ginn Company at the time of sale.

A state memorandum dated July 31, 2002 advised that the soils in the proposed golf course were highly erodible and that the construction as proposed would likely precipitate landslides. The report warned that "Extreme care should be taken to maintain the stability of these slopes at all times, and to keep undercutting of these slopes to a minimum."

In June 2006 Bob Oelberg, VP for Planning for the Ginn-Laurelmor project, contacted Soil Nail Launcher, Inc. for assistance with slope stabilization issues after the company's consultant had advised that geologic conditions would not permit construction of a critical access road.

The Ginn Company has failed to disclose significant land risks to their clients in their Laurelmor Federal Property Reports. Is it possible that they neglected to advise their contractors of the extraordinary care needed to develop on hazardous land?

Monday, October 20, 2008

Western North Carolina Mountain Real Estate

Real estate contracts do not reveal and developers do not discuss Western North Carolina's significant hazardous soil conditions.

Federal and state professionals who have investigated and mapped the region over the past several decades have determined that weak reactive mountain soils undermine building locations throughout the multi-county area. Unstable soils are definable and measurable geologic hazards that can threaten lives and property. Extensive soil stability tests have proven that most mountain slopes are “unsuitable” or “poorly suitable” for subdivision development.

Soil assessment surveys for the following Western North Carolina counties: Ashe, Avery, Burke, Caldwell, McDowell, Madison, Rutherford and Yancey can be viewed on the United States Department of Agriculture Natural Resources Conservation website.

Surveys for the remaining counties: Alleghany, Buncombe, Cherokee, Clay, Graham, Haywood, Henderson, Jackson, Macon, Mitchell, Surry, Swain, Transylvania, Watauga, and Wilkes can be found in local Soil and Conservation offices.

Note: Buncombe County officials reported in August 2004 that the county’s mountain land was highly susceptible to slope failures. The Hazard Mitigation Plan found that the steep slopes and fragile soils of Western North Carolina ranked the county at high risk of landslides. These historic data-based determinations were made before the rain-triggered 15 county landslide disasters of September 2004.

The recently completed 2008 Madison County Soil Survey findings illustrate the safety concerns that are common throughout the 23 county region. The surveyors advise on page 476 of their report that environmental issues and geologic faults severely limit subdivision building sites throughout the municipality. The researchers also note that some soils are not adaptable for development.

Soil studies provide invaluable information and are intended to protect the interests of prospective buyers. In North Carolina there is no state governance over hazardous land development, so county commissioners, their planning boards and developers are not obliged to consider soil assessments. Buyers are also disadvantaged by the fact that the state does not require land risk disclosures on real estate contracts.

Some proactive consumer rights' states, notably California and Colorado, have passed legislation to prevent developers and sellers from taking advantage of uninformed buyers. For instance, Colorado enacted the Soils and Hazard Analyses of Residential Construction Act in 1984. This bill requires that all developers and sellers provide purchasers of new residences with a copy of the property’s soil survey and site recommendations. This report must be given to prospective buyers no later than 14 days prior to closing.

Western North Carolina Mountain Developers and the Interstate Land Sales Full Disclosure Act.

Even though North Carolina does not require land risk disclosure, prospective buyers of undeveloped land can find protection and relief under federal law.

In 1968 Congress passed the Interstate Land Sales Full Disclosure Act to protect consumers from fraudulent and abusive land sale practices. This law requires land developers to register their subdivision plans for a 100 or more non-exempt lots with the U.S. Department of Housing and Urban Development (HUD) and to provide purchasers with a detailed Property Report. The sale of condominiums is also covered under the Act.

Most of the developers who are conducting business in Western North Carolina are subject to federal law under the Interstate Land Sales Full Disclosure Act. For a list of registered developers and subdivisions please visit the United States Department of Housing and Urban Development website.

Occasionally a developer neglects to file a statement of record with HUD and also fails to provide purchasers with Property Reports. For examples of penalties imposed on developers please visit the Interstate Land Sales Settlement Agreement website.

The Property Report

A Property Report is the most relevant document that a prospective buyer will receive when considering a land purchase in a yet-to-be completed subdivision. It is uniform in design and table of contents.

The Report is intended to be revealing so that buyers can make an informed decision about the present and future value of the land being offered for sale. All material facts must be disclosed. For instance, HUD forces the developer to list all mortgages and liens on the property. The following warning is included on all Property Reports: "A restriction or an encumbrance on your lot or on the Subdivision, could adversely affect title to your lot."

Other sections of the Report define the developer's financial responsibilities for the project's infrastructure.

Equally important developers are required to provide specific data about geologic hazards in the subdivision such as soil instability, flooding and landslides.

Western North Carolina mountain developers who are subject to the Act should disclose the following material information under the Land Characteristics and Climate/Hazard Section of their Property Reports:

1. The land in this mountain subdivision is naturally hazardous. Geologists and soil experts suspect that the lots in this subdivision are at risk of slope failure. Homeowner policies will not cover this damage.

2. This subdivision was approved without hazard mapping and under regulations that did not require site specific stability studies.
Another section of the report defines financial responsibilities for the Property Owner's Association.If applicable, the following should be disclosed:

Roads in this subdivision are private and will be maintained by the Property Owner's Association after the developer's obligations are satisfied. Subdivision roads are presently stable but are subject to erosion and slope failure. All future road costs will be shared by members of the association.

Developers who fail to disclose Western North Carolina's land hazards in their Property Reports are in violation of federal law.


Most states and municipalities ignore soil assessments and permit development on hazardous ground. The following news reports illustrate the disasterous consequences.

"A House Divided, Parts 1 & 2," CNN September 2007. (Sedonia, Arizonia)

"That Sinking Feeling" Chicago Magazine-October 2006

"West Hills home smashed in landslide" The Oregonian-October 2008

Sunday, October 12, 2008

The Grey Rock at Lake Lure Property Owners' Lawsuit

On August 26, 2008 a federal class action lawsuit was filed against the Orlando-based developer, Land Resource, LLC. The group of Grey Rock at Lake Lure land owners filing suit claim violations of federal and state laws. Plaintiffs allege that Land Resource and a number of their affiliates violated the Interstate Land Sales Full Disclosure Act and Florida and North Carolina Unfair and Deceptive Trade Practices.

The following information was extracted from the filing:
Upon information and belief, LAND RESOURCE is the parent company of subsidiaries that collectively form the company which is a close network of investors located in various portions of the world that act as a single enterprise offering customers a wide range of real estate properties and a choice of locale in which to purchase these properties.
The Land Resource, LLC Fact Sheet states that the company has 19 projects developed or under development. Land Resource, LLC, currently headquartered in Orlando, Florida was founded by J. Robert Ward in 1997. The company was based in Atlanta until mid 2007.

Projects under development are:
Bridge Pointe at Jekyll Sound-Waverly, Georgia
Cumberland Harbour-St. Mary’s Georgia
The Docks at Caney Creek-Kingston, Tennessee
Grey Rock at Lake Lure-Lake Lure, North Carolina
Laird Pointe-Panama City, Florida
Roaring River-Fayetteville, West Virginia
Still Water Coves-Lincolnton, Georgia
The Villages at Norris Lake-LaFollette, Tennessee
Wild Ridges-Marion, North Carolina
The websites for these projects have been inoperable since July.

Land Resource purchased the 4,000 acre Grey Rock at Lake Lure, Rutherford County, North Carolina property in 2003. Buffalo Creek is the entity which held title to the Grey Rock lots before they were sold to plaintiffs.

Plaintiffs state that their lots (priced from $75,000 to $700,000) are virtually worthless due to the company’s failure to complete promised infrastructure, such as roads, water, and sewer service. The affected property owners allege that “the wells that have been drilled have a water flow that is insufficient to sustain a single house.”

Other Plaintiff complaints:…Land Resource agents used “insider sales” to artificially inflate the comparables for subsequent appraisals of the lots in the subdivision… they misrepresented the viability and success of the company’s other projects in order to make plaintiffs think that their investment in Grey Rock was secure.

The plaintiffs also allege that Land Resource violated sections of the Interstate Land Sales Full Disclosure Act by failing to provide material information in the Grey Rock at Lake Lure Property Report. They cite omission of the following:
A. The addresses of the lien holders
B. Legal description of the development
C. A map of the property
D. The range of prices for the units covered by the report
An unrelated federal lawsuit was filed against Land Resource et al on September 12, 2008 in North Carolina Western District Court.

Thursday, October 9, 2008

Portland Landslide Splinters Home and Endangers Neighborhood

On October 8, 2008 a fast-moving landslide destroyed a home and severely damaged several others in a southwest Portland West Hills neighborhood.

Bill Burns, an engineering geologist for the state, said that the Burlingame slide was likely caused by a combination of water in the soil, unstable ground, and the steep slope the house was erected on. " Geologists say home slide caused by multiple factors"

On October 10 Portland's Bureau of Development Services sent notices to neighborhood residents stating that they had one week to stabilize the hillside, install temporary erosion and sediment control measures, and obtain demolition/repair permits or face a fine of $1,000 a day, plus fees. "SW Portland neighbors still shaken, stewing over landslide"

When this information was made public the city decided to assume responsibility for emergency repairs. "Crews cover SW Portland house slide lot just in time"

History of Portland Landslides

In early February 1996 the Portland metropolitan area was devastated by landslides after a combination of snow-rain events. Geologists found that the West Hills Soil Province suffered hundreds of slope failures. The soil sediments, which cover the area, are stable when dry but are dangerous when saturated.

After the 1996 disasters the state acted to publicize unsafe residential areas. The West Hills home on 6438 SW Burlingame Place is classified at risk of landslides, wildfires, and earthquakes.

Western North Carolina Mountain Real Estate: No Fair Warning of Landslides and Unstable Soils

In September 2004 storm remnants blanketed the mountain slopes of Western North Carolina. The rain-precipitated landslides caused loss of life in the Peeks Creek avalanche and extensive property damage in a 15 county area. Today state and local governments neglect to warn residents and prospective buyers of the region's significant land risks.

Ginn/Laurelmor's Third Loan Modification

On September 8, 2008 a Third Modification to First Lien Deed of Trust, Security Agreement, Assignments of Rents and Leases and Fixture Filing (this “Agreement”), was made and entered into by and between Ginn-LA Laurel Creek LTD., LLLP and Credit Suisse, Cayman Islands Branch. This document was recorded with the Register of Deeds, Watauga County, North Carolina on September 23, 2008.

For additional information and copy of loan document please see Toby Tobin’s October 8, 2008 article "Ginn/Credit Suisse Laurelmor Loan Also Modified."

Pertinent Information Extracted from Loan Agreement:
2. Secured Obligations. The Original Deed of Trust is hereby amended to increase the aggregate amount of existing Secured Obligations secured by the Original Deed of Trust by $979,500.…

3. Future Advances. The Original Deed of Trust, as modified hereby, is given to secure existing advances under the First Lien Credit Agreement and any future advances made within 15 years after June 8, 2006. The maximum principal amount of present and future advances secured by the Original Deed of Trust is $787,500,000, plus all interest and expenses due under Original Deed of Trust. The amount of existing obligations secured by the Original Deed of Trust is $525,979,500. Notwithstanding anything contained in the Loan Documents to the contrary, advances need not be evidenced by a "written instrument or notation" as described in N.C. Gen. Stat. Section 45-68 (2).

4. Representations and Warranties. In order to induce Beneficiary (Credit Suisse, Cayman Islands Branch-Collateral Agent for the Lenders) to enter into this Agreement, Grantor ( Ginn-LA Laurel Creek LTD., LLLP represents and warrants to Beneficiary that as of the Effective Date: (a) except as disclosed in the Forbearance Agreement, no Event of Default exists under provisions of the Original Deed Of Trust and other Loan Documents; (b) except as disclosed in the Forbearance Agreement, no event exists which, with the giving of notice or lapse of time, or both, could or would constitute and Event of Default under the Original Deed of Trust and other Loan Documents….

7. Subsequent Amendments. The Amended Deed of Trust cannot be further altered, amended, modified, terminated, waived, released or discharged except in writing signed by the parties hereto or their respective successors or assigns. Any future amendment or modification of the Loan Documents or the Secured Obligations ( as defined in the Amended Deed of Trust ) may or may not be recorded. All holders of any interest or claim that affects all or any portion of the Property ( as defined in the Amended Deed of Trust) or any estate or interest therein, which interest or claim is recorded after the date the Original Deed of Trust was originally recorded or that is otherwise or is intended to be Junior and subordinate to the lien of the Amended Deed of Trust (collectively, “Junior Lien Claimants”) are hereby placed on notice of the possibility that the Loan Documents or the Secured Obligations may be amended but any such amendments may or may not be placed of record.
Mr. Robert Gidel, President of the Ginn Company issued the following statement in early July 2008 when news of the default became public information:
Today, Standard & Poor’s will release a statement that indicates two Ginn affiliated Companies, Ginn-LA CS Borrower, LLC and Ginn-LA Conduit Lender, Inc. did not make a principal and interest payment on a non-recourse $675 million credit facility led by Credit Suisse. It will also state that we have reached a 30-day forbearance agreement and are actively negotiating with our lenders.

Thursday, October 2, 2008

Warning: Soil Survey Finds Madison County Slopes Unstable

Experts have determined that the soil composition in Madison County, North Carolina is “unsuitable” or “poorly suitable” for most mountain slope residential development. Their studies conclude that construction sites throughout the mapped area are imperiled by environmental threats and geological faults. This important consumer information is not recorded on plats or disclosed on real estate contracts but can be accessed on the Madison County Soil Survey website.

The 2008 Madison County Soil Survey states the following on page 476:

In order to effectively evaluate soils for engineering or construction purposes, the factors which limit a soil’s use must be considered. In Madison County, there are a number of soil-site characteristics which pose engineering difficulties. Among the most important are slope, erodibility, instability (poor bearing strength or shear strength), shrink-swell potential, stoniness, depth to bedrock, freeze-thaw cycle, hydrology, and organic matter content....Some soils may be unsuitable for development because of the slope.
To date Madison County Commissioners and their planning board have not acknowledged the region’s significant geological impediments. Regulations are non-existent and building permits are granted to all petitioners.

The state of North Carolina does not recognize, govern or disclose Western North Carolina’s significant land hazards. These legislative failures and lack of disclosures are exposing prospective buyers and future homeowners’ associations to costly uninsurable losses and diminished real estate values.

Protection and Relief Available Only under Federal Law

Most of the business entities developing and selling land in the county are subject to federal law under the Interstate Land Sales Full Disclosure Act and they are required to register their subdivision plans with the United States Department of Housing and Urban Development. The law stipulates that non-exempt developers provide complete disclosure of land hazards in their subdivision Property Reports. These hazards would include unstable soils, flooding and landslides.

HUD’s North Carolina Subdivision website reveals that only two Madison County developers, The Preserve at Wolf Laurel and Wolf Laurel have registered their subdivisions. Developers doing business in the county who have not registered their Subdivisions are:
Preserve at Little Pine
French Broad Crossing
Scenic Wolf Resort
Developers often fail to comply with the rules and regulations mandated by federal law under the Interstate Land Sales Full Disclosure Act. HUD advises interested parties that:
It has always been the law that if the developer has an obligation to register with the Interstate Land Sales Division, the developer or sales agent must give the buyer a copy of the current property report before the buyer signs a contract. Otherwise, the buyer has up to 2 years to cancel the contract and get his or her money back. That fact must also be clearly set forth in all contracts. You may have the right to void the contract if the subdivision has not been registered with HUD or you were not given a property report.

Wednesday, October 1, 2008

Western North Carolina Developer Sued for Violation of the Interstate Land Sales Full Disclosure Act

On August 26, 2008 a group of Grey Rock at Lake Lure property owners filed a federal lawsuit against Land Resource, LLC and their affiliates. The lawsuit Goetz et al v. Land Resource, LLC et al will be heard in Florida Middle District Court.