Questions Concerning The Cliffs at High Carolina Property Report

The Cliffs at High Carolina Engineering Report

Cliffs Communities, Inc., developer of The Cliffs at High Carolina, disclosed in their October 21, 2008 subdivision Property Report that all of the ninety-nine (99) single-family building lots offered for sale on November 8, 2008 were evaluated by S&ME, Inc., a Raleigh-based engineering firm, for the possible presence of colluvium materials.

The High Carolina Property Report Hazards section states that:

The term “colluvium” is used to describe a condition where a lot possesses loose rock and soils, evidencing their deposit in the past due to erosion and movement from an uphill position, and having a potential for lateral movement both from man-made development and construction activities, as well as from natural conditions such as might be caused by heavy rains. In its written evaluation to the developer dated August 15, 2008, S&ME reported that it had inspected each lot in this Property Report and observed that in some lots there existed some potentially unstable areas in steep portions thereof or at their outer boundaries, but well outside of the identified building area. Some lots were identified as having shallow draws or swales, also well outside a building area, that could potentially have a presence of some colluvium.

With respect to all lots, however, S&ME reported that it was its opinion that “residential structures can be suitably supported at the lots,” and found that the identified building area for each lot was suitable as a home site.

Colluvial Soils Cited as Contributing Factor in Mountain Air Resort Landslide

It is not known whether S&ME, Inc. advised The Cliffs Communities, Inc. that they were defendants in the Hemlock Bluff Villas Condominium Association, Inc. vs. Mountain Air Development Corporation et al Complaint. (06-CVS-51) According to court documents S&ME, Inc. was engaged by the Mountain Air Development Corporation to provide geotechnical engineering services and site preparation, construction planning, and design services for Building C of Hemlock Bluff and an abutting golf course hole in Mountain Air Resort. Resolution of the lawsuit is unknown as the dispute was settled out of court.

Nature of the Hemlock Bluff Condominium Association, Inc. Complaint

The Plaintiff alleged that:

Since completion of the Project, a landslide or shift in Hemlock’s supporting land mass occurred, resulting in substantial damage to Hemlock and requiring urgent and costly repairs. An inspection of the building and surrounding area resulted in the discovery of structural and safety defects. Upon information and belief, the problems or defects at Hemlock are a result of defective design and/or construction of Hemlock and/or the abutting golf course and the interaction between the two projects.

As a direct and proximate result of the numerous design and/or construction defects and problems discussed above, Hemlock has been severely damaged, including separating of the decks from the buildings, cracking in the foundation and supports, movement of stairs and walls, and otherwise and Plaintiff has spent and will spend substantial sums of money for the extraordinary repairs and reconstruction of the buildings and major portions of the common elements at Hemlock.

The Plaintiff alleges that S&ME was negligent and/or grossly negligent in that it:

negligently relied on its experience with other projects in the Mountain Air development in preparing its report on Hemlock Buffs rather than conducting a proper geotechnical analysis of the specific site and abutting land, including making inadequate assumptions about subsurface conditions, adequacy of supporting land, appropriate depths and design bearing pressures and doing so without taking into account the plans for the abutting golf course area.

Building C of the Hemlock Bluff condominium cluster was not the only building affected by the slope failure. Two buildings in the adjacent Austin View Villas complex were also severely damaged. According to court documents in a related Complaint, Buildings C & D of the Villas “became-and remain-completely uninhabitable.” Property owners of these units filed a separate lawsuit (07 CVS 19) against Mountain Air Development Corporation ( MADC) et al. S&ME was not listed as a defendant in this legal action.

The Austin View Villas plaintiffs alleged that:

MADC, the Unit Builders, and the Golf Course Builders knew about the problems with and damages to the Hemlock Bluffs units before MADC and the Golf Course Builders began working on the portion of the Golf Course adjacent to and below the Units. In fact, upon information and belief, in August 2004 MADC hired Bunnell-Lammons Engineering, Inc. (“BLE”), a geotechnical company, to analyze and to recommend immediate remedial action with respect to the slope collapse below Hemlock Bluffs. In a letter dated August 20, 2004 BLE repeated its oral recommendations that “no further excavation be made at toe of the slope,” that “a buttress…of earthen fill approximately 20-25 feet in height and 30-40 feet in width [be] at and against the toe of the existing slope. This will serve to stabilize the toe against additional lateral movement,” and that “soil supporting the wall foundation on the downhill side of the [Hemlock Bluffs] condominium structure should be stabilized/underpinned.” Moreover, in a letter dated September 24, 2004 BLE stated that its initial determination as to the cause of the slope collapse was the combination of (1)the presence of five feet of colluvial soils at the site surface of Hemlock Bluffs and (2) the removal of the soils at the toe of the slope of the Golf Course below Hemlock Bluffs.

Colluvial soils are common geologic hazards in Western North Carolina and, as noted, can cause significant property losses.

The Cliffs at High Carolina Property Owners' Association

The Cliffs at High Carolina Property Report does not address the question of whether other construction sites in the 3,200 acre tract, such as roads, have been evaluated for the presence of colluvium. This is an important concern: the soon-to-be formed property owners' association will assume financial responsibility for all road maintenance and repairs.

Insurance Coverage for High Carolina Property Owners

The developer states that "The subdivision is not located within a flood plain or an area designated by any federal, state, or local agency as being prone to flooding. Insurance is available, but is not customarily required in connection with financing for improvements on lots."

Concerning other perils, the developer notes that the subdivision... "may contain localized areas subject to the natural hazard of landslides." This disclaimer is disingenuous: federal and state agencies have issued numerous reports finding that Western North Carolina mountain slopes are at high risk of landslides. The Property Report also neglects to warn prospective buyers that insurance is not available for this hazard. Homeowner policies nationwide will not cover earth movement damage regardless of the cause.

Interstate Land Sales Full Disclosure Act

The Cliffs at High Carolina sales are subject to federal oversight under the Interstate Land Sales Full Disclosure Act. The statue stipulates that each purchaser receive a standardized highly-detailed Property Report prior to signing a contract. By law the developer is required to disclose all material facts that could potentially affect the future value of the lots being offered for sale.

The Cliffs Communities, Inc. began acquiring Buncombe County land for High Carolina in 2004 and received approval for the development in June of 2006. During this period, September 2004, rain-triggered landslides devastated the mountain counties of Western North Carolina. In February 2005 the state authorized landslide hazard mapping for Buncombe County and 18 other at-risk counties.

Preliminary Buncombe County Landslide Studies show that major portions of the High Carolina tract are geologically hazardous. These maps were scheduled to be completed in the summer of 2007 but for unknown reasons they have been delayed.

The developer provides a generic list of possible financial risks for High Carolina purchasers but fails to disclose a material fact: publication of landslide hazard maps will diminish property values in the subdivision.

In all fairness to prospective buyers, Cliffs Communties, Inc. should revise their Property Report to inform their clients of the pending High Carolina landslide studies and the absence of insurance.

The High Carolina Property Report was dated October 21, 2008 and signed by Lucas T. Anthony, President of The Cliffs at High Carolina LLC. Mr. Anthony stated that the information contained in this Property Report is an accurate description of our subdivision and development plans.

Copies of the Cliffs at High Carolina Property Report are available through the United States Department of Housing and Urban Development.