Macon Bank Alleges Fraud Re Wildflower Development Franklin, NC Lot Sales

At Issue: Ultima Carolina, LLC Wildflower Development Lot Sales

The Franklin Press reported on November 4, 2009 that Macon Bank, a major underwriter of Wildflower development mortgages, has filed lawsuits claiming it was “duped into making questionable loans in excess of $3.5 million.”

Macon Bank vs. Beverly-Hanks Mortgage Services

Macon Bank asserts in one lawsuit that Beverly-Hanks Mortgage Services of Asheville violated the bank’s loan standards by persuading land speculators to buy Wildflower development lots, “pay the interest with cash-back from the developer, and then ‘flip’ the property at a profit when the money from the interest cash-back ran out.” Macon Bank claims that its lot-loan program was limited to primary or secondary residence mortgagors.

Macon Bank is suing Beverly-Hanks for breach of contract, fraud, constructive fraud/breach of fiduciary duties, negligent misrepresentation, unfair and deceptive trade practices and participation in racketeer influenced and corrupt organizations.

Franklin Press reporters, Quintin Ellison and Barbara McRae, note in their article that of the 151 completed Wildflower sales, more than 30 property owners have defaulted. Macon Bank expects a “wave of defaults.”

Wildflower’s steep slope 2,000-plus acreage subdivision site is located in Macon County near the town of Franklin. Lots that were selling for up to $300,000 are now listed for $18,000 to $35,000. Wildflower’s private subdivision roads are a matter of public concern.

As to the Question of Fraud— Ultima Carolina’s Failure to Disclosure Wildflower Subdivision Hazardous-Land Conditions

It is not known whether Robert Ullmann and Hardy Smith co-partners of Ultima Carolina, LLC, ( registered as Ultima WNC Development, LLC in Macon County), have notified property owners of the recent Wildflower Subdivision hazardous-land report.

On November 17, 2009 a section of Thompson Road, a major Wildflower road, collapsed covering the neighboring down slope home site with a half-acre of debris. State geologists have determined that this slide poses a threat to home owners outside the subdivision. In addition to the Thompson Road landslide, geologists have found more than 20 endangerment areas on Wildflower’s 30-mile road system.

The Smoky Mountain News reported on December 16, 2009 that Macon County has notified the developers that since Wildflower Subdivision roads are private, they are liable for stabilizing the Thompson Road debris flow and for addressing other potential road-related hazards.











Digitized Macon County, NC Soil Hazards Map—NCGS

Wildflower roads were built on colluvial soils. The developers, Ullmann & Smith, knew or should have known that these soils are not recommended as a road construction base because of inherent instability and cost to repair. If Ultima Carolina declares bankruptcy, Wildflower property owners will be obliged to assume responsibility for the subdivision’s private roads.

Interested parties should visit the North Carolina Real Estate Commission ( Subdivision Street Disclosure Statement) Web-site for an explanation of property owners’ liability when developers become insolvent.

Pertinent Information for Wildflower Property Owners

1998— Federal Emergency Management Agency requires the state to notify Macon County and 22 other counties that land under their jurisdiction is landslide-hazardous.

2000— Western North Carolina real estate landslide hazard mapping program is instituted.

September 16, 2004— The Peeks Creek landslide kills five people and destroys 15 homes in Macon, N. C. Fifteen Western North Carolina counties are declared federal disaster areas in September 2004.

November 6, 2004 — “Wildflower Celebrates Its Grand Opening”

January 2005—Ultima WNC Development, LLC registers Wildflower subdivision with Department of Housing and Urban Development as mandated by the Interstate Land Sales Full Disclosure Act. Perspective buyers, by law, must receive a highly detailed Property Report. The Interstate Land Sales Full Disclosure Act requires developers to disclose hazardous-land conditions that are present in their proposed subdivisions.

February 2005 —North Carolina General Assembly recognizes the urgent need to accelerate Western North Carolina real estate landslide hazard mapping program.

October 2006—Macon County real estate landslide hazard maps are released with a press statement from then-governor Mike Easley:

These maps will show which areas are prone to landslides, and that will help developers, county officials, and residents decide where to safely build homes, roads, and other structures.

While Macon Bank is pursuing litigation, Wildflower property owners should be asking why Macon Bank loan officers, its closing attorney Steve Philo, Beverly-Hanks Mortgage Services sales staff and developers Robert Ullmann and Hardy Smith failed to disclose hazardous-land conditions on sales contracts and Subdivision Street Disclosure Statements.

Wildflower Development Franklin, NC Threatened by Landslides

Wildflower Subdivision—Thompson Road Landslide—November 17, 2009












Macon County Digitized Soil Hazards Map—
Additional Macon County landslide hazard maps are available through
the NCGS. On September 16, 2004 the Macon County Peeks Creek debris
flow killed five people and destroyed 15 homes.


“Road failures cast uncertainty on Wildflower’s future” The Smoky Mountain News-December 16, 2009 —Staff Reporter Giles Morris

As reported by The Smoky Mountain News, a section of the Wildflower subdivision road failed in mid-November. The half-acre debris flow covered the neighboring down slope home site and according to the North Carolina Geological Survey, potentially endangers property owners outside the subdivision.

Warren Cabe, Director of the Macon County Emergency Services, said

After we noticed there was a slide there, we notified property owners in the valley just so they could know what was going on above them. We wanted them to hear it from us instead of reading it in the newspaper.

State geologists have identified 20 other potential road-construction landside areas within the subdivision.

The County has notified Robert Ullmann, the developer, that his company Ultima Carolina, LLC is responsible for repairing and stabilizing the Thompson Road landslide and is also liable for all other road endangerment issues. Ultima Carolina has indicated that they will hire a geo-technical engineer to assess the at-risk areas and will address future erosion (landslide) issues.

Wildflower’s 30-mile private road system was built on colluvial soils, a highly unstable, difficult to control base. The costs to repair these types of road failures are expensive and pose substantial financial risks to homeowners' associations. For example: In 2003, rain set off landslides on several miles of roads in the Maggie Valley, North Carolina Horseshoe Cove subdivision. McGill Engineers, an Asheville-based firm, provided property owners with the following estimates: $307,021 for road and drainage repairs; $2,868,750-5,230,000 for slope repairs. Horseshoe Cove roads were built on colluvial soils.

Who’s Responsible Should Ultima Carolina, LLC Declare Bankruptcy?

There are concerns regarding Ultima Carolina’s financial well-being. Of the planned 250-Wildflower lots, 151 have been sold. As of November 4, 2009, more than 30 property owners were in default and Macon Bank, a major mortgage underwriter, expects more.

Stacy Guffey, a former Macon County planning director, has raised an relevant question: Who will pay for Wildflower's landslide road damage should the developer become insolvent?

The North Carolina Real Estate Commission advises that Wildflower property owners are responsible for the subdivision’s private roads should Ultima Carolina declare bankruptcy. Road ownership is transferred from the developer to property owners via a document titled the Subdivision Street Disclosure Statement. When Mr. Ullmann sold Wildflower lots, his clients were obligated to sign the following road conveyance document.

Sample Subdivision Street Disclosure Statement

Pursuant to N. C. G. S. Section 136-102.6 _______, as the Declarant of _______, issues this statement indicating that all of the roads within_______ are private. It is the obligation of _______ Homeowners' Association, Inc. (hereafter "Association") to maintain and keep in good repairs all of the private roads in _______Subdivision. It is mandatory for all property owners in _______ to be a member of the Association and the property owners, with the exception of the Declarant, have an obligation to pay assessments to maintain the private roads. The Declarant specifically states that the streets have not been constructed in such a manner to allow inclusion on the State highway system for maintenance.

The standardized Subdivision Street Disclosure Statement which was authorized on October 1, 1975 was not intended as a disclosure document for hazardous-land subdivisions. The statute reads in part

If the street is designated by the developer and seller as a private street, the developer and seller shall include in the disclosure statement an explanation of the consequences and responsibility as to the maintenance of a private street, and shall fully and accurately disclose the party or parties upon whom such street or streets shall rest....

Stakeholders should take notice that there is no explanation of the financial commitment required on the part of property owners for the maintenance of roads built on landslide-hazardous soils.

Mr. Ullmann could have fulfilled his obligation by giving his clients factual information. Wildflower property owners should have received the following full disclosure statement:

Wildflower Steep Slope Subdivision Street Disclosure Statement

Wildflower's private mountain roads were built on unstable soils. Landslides and erosion are recognized chronic hazards above a 15% slope. Soil assessments for the Wildflower subdivision can be found at the Macon County Soil & Conservation Office. Ultima Carolina, the developer, was not required to conduct geotechnical, hydrologic or soil suitability studies for this subdivision. Should this subdivision’s roads be damaged by predictable natural occurrences, the members of the homeowners’ association will be liable for all repairs.

It is unlikely that property owners will be given copies of the Wildflower Roads Evaluation Report commissioned by the developer. In the absence of that Report, property owners can read the Horseshoe Cove Roads Evaluation Report to understand the cost and complexity of repairing and stabilizing failed slopes. McGill engineers advised the property owners that

...due to the nature of the colluvial soil found within the failure areas and the unknown depth to rock or a solid bearing surface, additional geotechnical exploration and testing will be needed during project design to verify the subsurface conditions and more clearly define the extent and cost of the repairs. Therefore, we have estimated a range of repair costs for slope failures. These vary from $25 to $50 per SF for repairs 1, 2, 3, 9, and 10 on the Creekside, Saddle, Stirrup, and Bridle Drives, and from $40 to $60 per SF for the repairs 4-8 on Bridle Drive.

It is clear that Wildflower property owners were disadvantaged by the absence of material information on their road conveyance documents. The question is, will they challenge Ultima Carolina's actions in this matter?

State Acknowledges Western North Carolina Real Estate Landslide Hazards

In February 2005 members of the North Carolina General Assembly had no difficulty recognizing the fact that hazardous-land real estate development would result in the continuing loss of lives and homes. Prompted by the catastrophic Western North Carolina landslide events of September 2004 and the need for federal emergency funding, legislators recommended hazardous-land identification maps as protective measures:

Hurricanes Frances and Ivan wrought havoc upon Western North Carolina impacting the region on a scale not experienced before in that area of the State. The President issued two federal disaster declarations for the Western Region of the State. During Hurricane Ivan, the community of Peeks Creek was devastated by a debris flow triggered by heavy rains. The debris flow traveled speeds as great as 33 miles per hour for two and a quarter miles from the top of Fishhawk mountain. Five persons were killed and 15 homes destroyed by the flow that was estimated to be several hundred feet wide and up to 40 feet high. Other communities that were particularly hard hit by landslides include the Starnes Creek area in Buncombe County, the Little Pine area in Madison County, the White Laurel community in Watauga County, and the Bear Rock Estates in Henderson County. Further...people could not know the landslide risks associated with their housing location because such maps are not readily available. The State needs to…prepare landslide zone mapping for the region so that homes may be rebuilt in safe areas.

Those regional real estate landslide maps are currently unpublicized works-in-progress. Only three out of twenty-five landslide-hazardous counties have been mapped: Macon 2006 , Watauga 2008 and Buncombe 2009.

Thanks to pressure from the North Carolina Association of Realtors, the federally-mandated landslide identification maps remain out of view and hazardous-land information is not communicated to at-risk clients.

Buying Favors

The North Carolina Association of Realtors touted its successful lobbying efforts on May 15, 2009 with the following legislative update:

Mountain Property Development and Disclosure Legislation

Legislation to regulate mountain property transactions and require local governments to more stringently regulate development in those counties was thwarted and instead the issues will be studied. Reps. Ray Rapp (D-Madison), Phil Haire (D-Jackson), and Susan Fisher (D-Buncombe) introduced HB 782 (Safe Artificial Slope Construction Act), which would require local governments to enforce more rules for development in the mountains and amend the residential property disclosure statement to include disclosure of certain mountain property. In response to opposition from REALTORS® from the western part of the state and most other mountain legislators, this bill was turned into a study bill to research landslides and have public hearings. There is to be a bipartisan, eight member panel which will report to the legislature in May of 2010.

The Failure to Disclose Material Facts

Western North Carolina Realtors have been apprised of the region’s hazardous-land conditions. They are also aware that all steep-slope (land above 15% grade) home sites will be evaluated and rated for landslide probability. Buncombe County real property was assessed for potential landslide loss in April 2009 but this data is not available to the public nor is it revealed on sales contracts or Subdivision Street Disclosure Statements.

Members of the North Carolina Association of Realtors may trust that they have no liability in this disclosure matter but they are mistaken. Anti-fraud statutes are clear. It is illegal to profit by schemes or tricks, by issuing untrue statements, by failing to disclose material facts, or by participating in deceitful and fraudulent business practices.

Western North Carolina Realtors can correct substantive contractual omissions by providing two addenda disclosure statements. The first is applicable to sales contracts and the second to private road ownership.

Western North Carolina Hazardous-Land Real Estate Disclosure Statement

Please be advised that you are buying property in a federally designated landslide-prone county.

The decision to buy a landslide-hazardous home site should be well-considered. Flood and fire property insurance is available. Landslide insurance protection is not obtainable. The inability to insure this high-risk real property will have an adverse effect on property values and perhaps the ability to refinance. Please seek legal advice concerning landslide liability.

Steep Slope Subdivision Street Disclosure Statement

This subdivision’s roads were built on likely unstable soils. Landslides and erosion are recognized chronic hazards above a 15% slope. Soil assessments for this subdivision can be found at the county Soil & Conservation Office. The developer was not required to conduct geotechnical, hydrologic or soil suitability studies for this subdivision. Should this subdivision’s roads be damaged by predictable natural occurrences, the members of the homeowners’ association will be liable for all repairs.

The Cliffs at High Carolina Property Report Fails to Disclose Hazardous-Land Conditions

The Cliffs at High Carolina, LLC sales practices are governed by federal law under the Interstate Land Sales Full Disclosure Act (“ILSFDA”). All purchasers of land in ILSFDA-defined subdivisions must receive a highly formatted full disclosure document titled The Property Report. The Cliffs at High Carolina Property Report was registered with the U. S. Department of Housing and Urban Development on October 21, 2008. Disclosures provided in the October 2008 Report pertain to only 99 out of 1,200 planned High Carolina lots.

On July 3, 2008 the U.S. Army Corps of Engineers issued a Public Notice (ID#: 200701619) regarding The Cliffs at High Carolina’s request for a permit. In the report the Corps identified 22 different soil types on the High Carolina steep slope, 3,200-acre, development site. Dominant soil types are Porters-Unaka complex (841), Toecane-Tusquitee complex (181) and the Edneyville-Chestnut complex (803).

As referenced in Western North Carolina Soil Surveys, these three soil types are not recommended as a construction base because of inherent instability. Even with expert engineering techniques, roads built on these soils are subject to slope failure and expensive repairs.

Roads built on landslide-prone soils are not a future financial concern for Jim Anthony, the developer of Cliffs at High Carolina, because legal title for The Cliffs at High Carolina's private roads are transferred to individual property owners at time of each lot sale via a conveyance document titled the Subdivision Street Disclosure Statement.

The Cliffs at High Carolina Property Report provides more than a dozen black box warnings concerning the developer, subdivision and individual lots but there is no reference to the costs of maintaining roads built on unstable soils. The following caveat should have been included in The Cliffs at High Carolina Property Report:

Steep Slope Subdivision Street Disclosure Statement

Portions of this subdivision’s roads were built on unstable soils. Landslides and erosion are recognized chronic hazards above a 15% slope. Soil assessments for this subdivision can be found at the county Soil & Conservation Office. The developer was not required to conduct geotechnical, hydrologic or soil suitability studies for this subdivision. Should this subdivision’s roads be damaged by predictable natural occurrences, the members of the homeowners’ association will be liable for all repairs.

Although not publicized, Buncombe County landslide predictability maps have been available since August 2009. Until such time the Buncombe County Digital Soil Survey Map is released, interested parties will have to rely on data from Western North Carolina Soil Surveys. As noted in the following soil assessment reports, The Cliffs at High Carolina soils are ill-suited for road construction.

Soil Survey Findings for Porters-Unaka Complex

Porters-Unaka complex— 8-15% Slopes
Local roads and streets: Poorly suited

Porters-Unaka complex—15-30% Slopes
Local roads and streets: Poorly suited

Porters-Unaka complex— 30-50% Slopes
Local roads and streets: Poorly suited

Porters-Unaka complex—50-95% Slopes
Local roads and streets: Unsuited

Soil Survey Findings for Toecane-Tusquitee Complex

Toecane-Tusquitee complex— 8-15% Slopes
Local roads and streets: Poorly suited

Toecane-Tusquitee complex&mdash 15-30% Slopes
Local roads and streets: Poorly suited

Toecane-Tusquitee complex— 30-50% Slopes
Local roads and streets: Poorly suited

Soil Survey Findings for Edneyville-Chestnut Complex

Edneyville-Chestnut complex— 15-30% Slopes
Local roads and streets: Poorly suited

Edneyville-Chestnut complex— 30-50% Slopes
Local roads and streets: Poorly suited

Edneyville-Chestnut complex— 50-95% Slopes
Local roads and streets: Unsuited

Landslide Hazards for Tiger and The Cliffs

—The Buncombe County Soil Hazards Map has not been released—



Location of The Cliffs at High Carolina
Subdivision and Tiger Woods Golf Course
on Buncombe County Hazardous-Land Map— NCGS.



Slope Movements and Slope
Movement Deposits Map—NCGS


Stability Index Map—NCGS


Map of Known and Potential Debris
Flow Pathways—NCGS

No one has asked Jim Anthony, developer of The Cliffs at High Carolina, or Tiger Woods his partner whether they have considered the consequences of building a golf course on landslide-hazardous ground.

Mr. Anthony cannot avoid the fact that his subdivision and the Tiger Woods Golf Course have geologic conditions which predispose the development site to landslide events. In addition to the North Carolina Geological Survey Buncombe County landslide hazard maps, the U.S. Army Corps of Engineers issued a Public Notice on July 3, 2008 identifying the predominant soils found throughout The Cliffs at High Carolina subdivision. Western North Carolina Soil Surveys state that these soil compositions are highly erodible and are not suitable for residential development.

So the question is, does Mr. Anthony know what impact the golf course and its irrigation system might have on the mountain’s defined unstable base?

Mr. Anthony may not know the answer but geologists do.

Golf course construction alters the landscape. These expansively remodeled sites are cleared of native vegetation and are replaced with turf grass which requires irrigation. When golf courses are built in stable environments their location and maintenance requirements are not an issue, but when they are placed in geologically hazardous locations they are a matter of concern as demonstrated in the following histories.

Landslides Linked to Golf Course Construction and Irrigation





View of Ocean Trails
Golf Course Landslide—
Ninyo & Moore


Ocean Trails Golf Course Landslide—Rancho Palos Verdes, CA— 1999 (Trump National Golf Club)

Ninyo & Moore, a geotechnical and environment sciences firm, was hired to provide a forensic evaluation for the Ocean Trails Golf Course Landslide. A summary of its findings:

On June 2, 1999, an approximately 16-acre ancient landslide on the coastal bluff was reactivated, sliding approximately 50 feet toward the ocean. The ancient landslide destroyed much of the 18th fairway and green along with adjacent improvements, including an active County sewer line. The geologic setting included gently to moderately tilted beds of the Monterey Formation. The Monterey Formation at this locality included interbedded sequences of fine silty sandstone, siltstones, shales, dolomitic shales, siliceous zones, and bentonitic ash beds. The basal rupture surface was formed along a relatively continuous bentonite layer at a depth of approximately 90 feet. The geologic evaluation included detailed geologic mapping, 26 large-diameter borings, two rotary wash continuous core borings, 12 inclinometers, and the excavation and evaluation of buried sewer lines and artificial lakes. The analysis included preparation of multiple geologic cross sections, slope stability analysis, and evaluation of potential reactivation causes including seismic activity, precipitation, wave erosion, irrigation, construction activities, lake leakage, and sewer line leakage.

Donald Trump purchased the bankrupt Ocean Trails Golf Course in 2002 and he has spent $55 million to restore and stabilize the property.

In addition to the presently contained landslide located underneath the Trump National Golf Club Course, three others are located on the peninsula according to the Rancho Palos Verdes Chamber of Commerce. The largest, the Portuguese Bend landslide, was reactivated in 1956 and moves about a foot a year, depending on rainfall. This underground landslide tract covers 260 acres and has an average depth of 135 feet. Geologists attribute the onset of movement to irrigation, installation of pools and septic tanks that increased ground water levels.

South Golf Course Landslide—Colorado Springs, C0— 1993

Engineers investigating the site determined that irrigation was the cause of the reactivation of the ancient landslide underneath the South Golf Course. Their findings:

The construction of the golf course modified the site hydrology by adding irrigation water inflows and by changing the vegetation from native grass and scrub oak to turf grass over 55 percent of the total area. An analysis of the irrigation and precipitation rates and the turf grass water consumption rates showed a relatively high infiltration rate in the turf grass areas compared to the unirrigated native areas.

Proposals for Slowing the Landslide:

(1) ground water dewatering systems, (2) surface water control systems, (3) collection of flow from horizontal drains, and (4) control of irrigation.

Reference: “CASE HISTORY OF A REACTIVATION OF A LANDSLIDE DUE T0 IRRIGATION ON UNSATURATED SOIL” — Kuo-Chieh Chao 1, Daniel D. Overton 1 & John D. Nelson 1,2
1) Tetra Tech, Inc., USA
2) Colorado State University, USA

Arcadia Bluffs Golf Club Landslide—Manistee, Michigan— 1998

Massive landslides damaged this golf course during a September storm event. Improperly designed drainage inlets were the cause.

Reference: “Arcadia Bluffs sage continues”— Andrew Overbeck Golf Course News—November 2001.

Perfect Timing for The Cliffs at High Carolina Sales Premiere

Smog covered downtown Asheville on July 21, 2008. A Code Orange air quality alert was issued for most of Western North Carolina, especially mountain elevations. Photo —Asheville Citizen-Times.


Tiger Woods Golf Course—The Cliffs at High Carolina

As planned the autumn day provided flawless weather conditions for the launch of the Tiger Woods Golf Course residential community called The Cliffs at High Carolina. The Sunday Asheville Citizen-Times edition provided coverage of the sales event with two front page articles: “Woods cachet could be key to Cliffs’ sales” and “Woods unveils ambitious Cliffs course design."

Jim Anthony, President and CEO of The Cliffs Communities, Inc. and Tiger Woods co-hosted the November 8, 2008 High Carolina press party.

During the news conference Mr. Anthony told the audience that he had sold about 50 High Carolina golf course lots for more than $40 million.

Mr. Woods promoted the scenery by saying “This property is phenomenal, breathtaking, with 50-mile views. I grew up in (Southern California) with nothing but smog; we couldn’t see anything,” Mr. Anthony told reporters that Mr. Woods visits the property often.

Western North Carolina Smog Alerts

It is obvious from Messrs. Anthony and Woods’s comments that they have not visited Asheville during warm-weather months when smog seriously impairs visibility and lung function. The situation is so critical that on January 30, 2006 Attorney General Roy Cooper filed a lawsuit on behalf of the citizens of North Carolina against the Tennessee Valley Authority. In his press release Mr. Cooper stated that “TVA’s pollution is making North Carolinians sick, damaging our economy and harming our environment.”

On August 4, 2008 the Asheville Citizen-Times reported that the North Carolina Department of Environment and Natural Resources had issued an "Air quality unhealthy at high elevation alert" for mountain areas near Asheville.

Pollution warnings are common during summer months when elevated temperatures trap the ozone-laden air over the mountain region. Air quality in Western North Carolina is not expected to improve in the near future.

If The Cliffs at High Carolina sales premiere had been held on July 21, 2008 the expensive sought-after mountain views would have been invisible.

Chilliwack Landslide Moves Homes

Most people think of landslides as violent mountain slope events but there is another type that threatens property owners. Geologists call them "big slow movers." These underground land masses can move of their own accord but generally they are prodded into action by changes in the landscape. Case in point: Panorama Heights/ Marble Hill “Big Slow Mover”—City of Chilliwack, British Columbia.

The media reports that 42 existing subdivision homes are threatened by the creeping 4,000 year-old Panorama Heights landslide—3 others were so damaged that they have been razed.

Here is a description of the landslide damage caused to one Panorama Heights home:

Eleven years ago, Dixon had a few cracks to worry about, but now, his house is like something you’d see in an animated Tim Burton movie. The exterior brick walls are pulling and crumbling away from the foundation, the windows are crooked, the carport cement has pulled away from the house, and the steps up to the front door have inched down so far, Dixon had to put in two more steps just to get into his house. Some of his doors fly open at a whim, while others won’t even close half way, the floors are all on a slope, forcing him to walk uphill or downhill, but never on level.

Gary Dixon's Panorama Heights home—
Photos and news report compliments Chilliwack Progress

Restitution

On October 10, 2009 the Vancouver Sun reported that the City of Chilliwack has offered Panorama Heights homeowners an $18 million purchase plan ( 80% of current assessed value) as compensation for loss of equity and property damage. The offer is extended to Panorama Drive, Ridgeview Street, Ridgeview Place and Allison Place property owners.

Looking Back

Twelve years ago, six Panorama Heights landslide-affected property owners sued the city. In 2006 five plaintiffs agreed to confidentially settle the matter. By searching land title transfers the Chilliwack Progress determined that the city paid $951, 500 for three of the homes at issue in the lawsuit.

Landslide concerns prompted the Chilliwack City Council to pass a 6-month Eastern Hillsides no-build moratorium on September 13, 2004. Reassured by engineering reports, council members rescinded the suspension on October 1, 2004. The moratorium remained in place for the Panorama Heights subdivision.

Mayor Sharon Gaetz has stated that she does not believe the planning department is at fault for granting the Panorama Heights subdivision permit.

Geology Lesson

Garry Taylor, a Chilliwack high school geology teacher, disagrees:

A resource I have used in my classroom to teach my students is a Geological Survey Map of Canada (printed in 1977) that I obtained from the federal government, which is also available to the pubic.

My students are taught that the present site of Panorama Heights sits squarely on this 4,000-year slide site. With this type of information readily available, they find it confusing as to why this development was given the green light to go ahead. Perhaps somebody with the former geo-tech company who did the original stability assessment, or the party who signed off this development at city hall, missed a very important lesson.

City of Chilliwack Hazardous-Land Real Estate Disclosure Statement

Panorama Heights property owners have been ill-served by the city's past actions. If the city elects to continue permitting hazardous-land subdivisions they have an obligation to inform future property owners of the financial risks. Real Estate transactions should include the following fair warning disclosure statement:

Please be advised that you are buying real estate in a critical landslide area.

The decision to buy landslide-hazardous real estate should be well-considered. Flood and fire insurance is available to property owners. Landslide insurance protection is not obtainable. The inability to insure this special-risk real estate will have an adverse effect on property values and mortgage refinancing. Please seek legal advice concerning landslide liability.

Landslides are multi-province concerns but, "In fact, in British Columbia the loss of life and damage to property caused by landslides is greater than losses caused by other natural hazards such as earthquakes and flooding." Findings: Ministry of Energy, Mines and Petroleum Resources

Spanish Peaks Hazardous-Land Report Prompts Two Lawsuits

The Spanish Peaks lawsuits provide invaluable information.

Terrence O’Reilly: Plaintiff

The individual who brought suit, a former employee and property owner of The Club at Spanish Peaks, alleged that the developer had withheld unfavorable geology reports. The case was filed in Gallatin County, Montana in 2007 and confidentially settled in 2009.

New West Bozeman investigative reporters, Elizabeth Diehl and Megan McLean, offer a look at the documents submitted in the O’Reilly Complaint in their August 10, 2009 article “Spanish Peaks Lawsuit Alleges Deception on Landslide Risk.”

The Club at Spanish Peaks Hazardous-Land Report

Court records show that as part of Spanish Peaks approval process subdivision home sites were evaluated for hazardous-land conditions. In March 2000 NTL Engineering and Geoscience, Inc. provided the developer, James Dolan, with a “geotechnical reconnaissance report.“ Each lot was color-coded to reflect the risk of landslides and unstable soils. Spanish Peaks lot sales were initiated in 2004.

Behind the Scenes

Emails procured during the discovery process reveal the company's unwillingness to share the NTL report with prospective clients.

In a February 2004 email exchange between company executives the question is posed: “Soil tests and stability seem to be coming up pretty regularly with potential buyers. Any suggestions on how to handle this based on your past experiences?”

The reply: “With regard to geotechnical stability, this seems to be one of those areas where we should baffle them with BS rather than provide the actual report.”

Sales continued for the next two years with the developer remaining silent about the subdivision’s hazardous-land report. In another email the NTL report is discussed again:

Any interim report would open the lodge and settlement to scrutiny. The more information in the public eye today may only cause additional and unnecessary concern in the public that will leak its way into the real estate community and the approval process.”

Harbaugh Lawsuit

The evidential NTL report is the issue in another lawsuit filed against the Spanish Peaks developer. According to allegations in the August 2009 Gallatin County District Court Complaint, the developer failed to disclose that lots were sold on an “active landslide.”

If there is a moving landslide inside the subdivision, property owners face incalculable costs: absence of landslide insurance, repair of roads, loss of equity and inability to refinance.

Interstate Land Sales Full Disclosure Act

Although not referenced in the New West Bozeman article, Spanish Peaks property owners have protection under federal law. The Interstate Land Sales Full Disclosure Act, administered through the U. S. Department of Housing and Urban Development, seeks to protect purchasers from fraudulent actions by requiring developers to disclose all material facts affecting the value of land in their subdivisions. Relevant information is conveyed to purchasers via a legal document called the Property Report.

Hazardous-land assessments are material to purchasers and the failure to disclose them would be a violation of the Act.

Strike Two—Ocoee Gorge Rockslide Closes U. S. Highway 64

For those who missed the national news, here is the real-time video of the November 10, 2009 Tennessee Ocoee Gorge rockslide.

Since late October, rockslides have closed two primary connectors between western North Carolina and eastern Tennessee. The Pigeon River Gorge I-40 rockslide severed the route between Asheville, North Carolina and Knoxville, Tennessee. The Ocoee Gorge U. S. 64 rockslide blocks access into Cherokee, North Carolina.

Sections of the Blue Ridge Parkway in North Carolina have also been affected by unstable slope conditions.

This season's rockslides have so far only hit public roads. Because memories fade, the news media has not linked current events to those of September 2004. Five years ago rain set off landslides in 15 western North Carolina counties which resulted in two federal disaster declarations. Those wide-spread slope failures claimed lives and cost homeowners millions of dollars in property losses. Caveat: Homeowners nationwide have to self-insure for landslide damage: policies do not cover this peril.

For the usual profit-driven reasons, North Carolina legislators are adverse to publicizing the fact that steep slope home sites and subdivision private streets are threatened by the same conditions that brought down two mountainsides. By intent, conveyance documents such as sales contracts and Subdivision Street Disclosure Statements fail to reveal the high costs of western North Carolina mountain real estate.

I-40 Pigeon River Gorge Rockslides: Past, Present and Forecast

As reported by Vicki Hyatt, editor of The Mountaineer, the Pigeon River Gorge section of I-40 has and will continue to be a rockslide-hazardous corridor. The following is a reprint of her November 3, 2009 article “I-40: A troubled history.”

Rock slides that halt travel between Haywood and Newport, Tenn., have plagued Interstate 40 since it first opened in October 1968. Just four months after the dedication of the route, known early on as the Pigeon River Road, occurred in February 1969, when a slide blocked traffic on all four lanes of the route.

The area near the access road to Waterville Dam was grouted, rock was drilled, dynamited and then filled with liquid cement to halt the earth movement. It was the first of many actions that would be taken through the years to stabilize an area engineers had long warned would pose problems in the future.

In 1974, the pavement again started showing signs of movement, according to an article in The Mountaineer, and it wasn’t unusual for smaller slides to cause periodic delays.

The interstate was closed for two weeks in March 1977 after about 40,000 tons of rock slid onto I-40 about two miles inside the Tennessee state line. At the time, a state geologist noted the area was the site of a major fault with mostly coarse rock which could easily fracture and slide. News reports said geologists were striving to determine if there was one big slide or two separate ones in the area.

In May 1978, a major slide that led to a wreck in which seven people were inured closed the eastbound lanes of I-40 near the Fines Creek exit. The $1 million repair job included work on the cut to prevent future slides and halt slippage of a rock bank near the exit. Two-way traffic was maintained in the westbound lanes during the work, and three people were killed in a head-on collision when slide repairs were underway.

A February 1981 rock slide, about half a mile east of the Tennessee line, covered both the east and westbound lanes of I-40 with boulders, dirt and trees.

The frequent slides made it apparent a longer-term solution was called for, and the state transportation department announced plans to reconstruct four miles of interstate through Haywood County near the Tennessee line to reduce the danger of rock slides. The first phase of the project would shift two lanes of traffic away from the mountainside and toward the Pigeon River, a May 20, 1981 article in The Mountaineer stated. The second phase would remove loose rocks from slopes and take other measures to install wire mesh to catch the rocks before they hit the highway.

Since the roadway opened, two people had been killed as a direct result of falling rocks and another three died in a collision at a landslide detour near the Fines Creek exit, the article noted. At the time, the state’s assistant transportation director said experts believed the possibility of rock slides was of such a magnitude that it could close the road.

In the fall of 1981, a N.C. Department of Transportation report projected $10.3 million — three times the $1.5 million per mile cost to build the roadway — would be needed to reduce the danger of rock slides on I-40 near the Tennessee line. This amount would be enough to correct problems at five potential slide areas, a news article reported. Even with the stabilization work, state officials noted there was no way to stabilize cut slopes entirely.

Before a contract was finalized for the work, a March 1982 slide buried the westbound lanes near the Tennessee line. The project continued into 1984. It included shifting three miles away from the rock slopes and toward the Pigeon River, as well as bolting rocks too large to remove in the five problem areas identified as most susceptible to slides. The project included a chain-link fence to prevent smaller boulders from falling onto the driving lanes.

In March 1985, a massive slide blocked both tunnel entrances. The repair cost about $6 million and nearly a year to clean up.

In July 1997, a massive slide again closed the roadway, taking six months and $2.5 million to clean up.

Road a political victory

Haywood County leaders won a hard-fought battle more than 60 years ago when the county became the last in the state to have a 1921 road law implemented. The law promised a paved roadway linking every county seat and linking every county adjoining another state to that state’s county seat. The long-identified route between Haywood and Newport, Tenn. was a water-level route following the Pigeon River. The route received state funding and was begun five years before it was necessary to designate an interstate route between Knoxville, Asheville and Spartanburg, S.C. The interstate designation, which held the promise of vastly increased commerce — and economic prosperity — was coveted by both Haywood leaders and those in Madison and Buncombe counties, which pushed for a four-lane highway along the French Broad River.

Haywood leaders were able to garner support from the Tennessee Highway Commission, as well as counties to the west. That support, along with free right-of-way along the Pigeon route and a head start on construction, won the prize.

See more pictures of rock slides throughout I-40’s history at www.themountaineer.com.

I-40 Rockslide Reveals Western North Carolina Hazardous-Land Conditions

Western North Carolina: I-40 Pigeon River Gorge Rockslides— July 1997 /October 2009 —NCGS & Asheville Citizen-Times

The Pigeon River Gorge I-40 rock slide has shut down a major corridor from Asheville, North Carolina to Knoxville, Tennessee. This mountain side collapse preceded a similar I-40 rock slide in 1997. Professionals estimate remediation will take months and cost millions.

A major landslide also threatens the Blue Ridge Parkway as noted in the following October 16, 2009 Blue Ridge Parkway Update:

With growing fears of a major landslide onto the Blue Ridge Parkway, officials have indefinitely closed a 1.5-mile section of the Parkway near Mt. Pisgah - south of Asheville. Barricades are at the Bad Fork Valley Overlook at milepost 399.7 and the Wash Creek Valley Overlook at milepost 401.1. The closure is a result of widening 300-foot-long fissures on a slope 200 feet above the road. If the 50-foot-deep cracks cause a landslide, an estimated 1,000 tons of rock and soil could end up on the Parkway. The cracks are 5-7 feet wide and a bulge has developed under the down-slope roadbed. Federal Highway Administration geotechnical engineers determined that an inordinate amount of rainfall, the likelihood of additional precipitation and the tenuous condition of the slope create a high risk of failure. The slope failed in 2002 and has been closely monitored since being repaired.

In April 2009 a landslide damaged a section of the Parkway near Boone (milepost 270) necessitating closure of a two mile stretch. Officials hope to have repairs completed in December 2009.


Blue Ridge Parkway Landslide/Rockslide 2004-2006 —NCGS


Western North Carolina Mountain Real Estate

Those reading the Interstate and Parkway landslide articles would not know that these destructive forces target all Western North Carolina mountain real estate.

According to the Federal Emergency Management Agency all steep slope building sites in the 25-county region known as Western North Carolina are at considerable risk of landslides. ( Contrary to local planning boards’ definition, steep slope is defined as land above a 15% grade.)

In an effort to control and mitigate hazardous-land development practices, FEMA is requiring disaster-susceptible counties to provide risk/loss assessments. For example all real property in Buncombe County, North Carolina has been evaluated for probable disaster events. The North Carolina Geological Survey's Buncombe County landslide hazards maps were published in August 2009 but the FEMA address-specific hazardous-land data maps (April 2009) have not been released to the public.

Presently there are no federal rules governing hazardous-land disclosure so states are left to their own discretion. In North Carolina, real estate documents such as sales contracts and Subdivision Street Disclosure Statements fail to provide fair warning that mountain home sites and roads are landslide-hazardous.

Since 2003 Western North Carolina landslides have caused six deaths and millions of dollars in real property damage.



Before and after photographs- Donin Landslide
Haywood County, NC—2009 —Asheville Citizen-Times


Horseshoe Cove Subdivision Landslides- Haywood County, NC
2003 —Pam Williams, Property Owner



Mountain Air Landslides-Yancey County, NC 2003-2004






Airport Landslides -Jackson County, NC
1977-2005 —NCGS



White Laurel Subdivision
Landslide -Watauga County, NC
2004—NCGS



Jonas Ridge Debris Flow
Burke County, NC 2004—NCGS



Jones's Landslide Fatality
Haywood County 2003—NCGS



Peeks Creek Landslide
5 Fatalities/15 homes destroyed
Macon County, NC 2004— NCGS



Moody Landslide
Haywood County, NC 2009
Asheville Citizen-Times



Starnes Cove Landslide
Buncombe County, NC 2004 —NCGS

Landslide-hazardous real estate is an ill-advised investment because property owners have no access to insurance protection. Insurers have weighed the risk and they will not cover landslide losses. As a result, earth movement damage is excluded in all homeowners policies nationwide. Specialty landslide insurance is not available in Western North Carolina.

The question then arises why would the mortgage industry provide financing for homes that have no critical insurance protection? The answer is securitization. Hazardous-land mortgages, like subprime loans, were bundled and sold to other investors.

Hazardous-Land Subdivisions

In addition to personal loss, Western North Carolina steep slope property owners are faced with the responsibility for maintaining their private subdivision roads.

At time of lot sales, developers require their clients to sign a document titled the Subdivision Street Disclosure Statement. By signing this standardized conveyance document, property owners agree that they own and are responsible for the subdivision’s private roads.

For information concerning property owners' legal obligations please visit the North Carolina Real Estate Commission Web site

The Cliffs at High Carolina Tiger Woods Golf Course and Landslides

—The Buncombe County Soil Hazards Map has not been released—



Location of the Cliffs at High Carolina
Subdivision on Buncombe County
Hazardous-Land Map— NCGS.



Slope Movements and Slope
Movement Deposits Map—NCGS


Stability Index Map—NCGS


Map of Known and Potential Debris g
Flow Pathways—NCGS

No one has asked Jim Anthony, developer of The Cliffs at High Carolina, or Tiger Woods his partner whether they have considered the consequences of building a golf course on landslide-hazardous ground.

Mr. Anthony cannot avoid the fact that his subdivision has geologic conditions which predispose the development site to landslide events. In addition to the North Carolina Geological Survey Buncombe County landslide hazard maps, the US Army Corps of Engineers issued a Public Notice on July 3, 2008 identifying the predominant soils found throughout The Cliffs at High Carolina subdivision. Western North Carolina Soil Surveys state that these soil compositions are highly erodible and are not suitable for residential development.

So the question is, does Mr. Anthony know what impact the golf course and its irrigation system might have on the mountain’s defined unstable base?

Mr. Anthony may not know the answer but geologists do.

Golf course construction alters the landscape. These expansively remodeled sites are cleared of native vegetation and are replaced with turf grass which requires irrigation. When golf courses are built in stable environments their location and maintenance requirements are not an issue, but when they are placed in geologically hazardous locations they are a matter of concern as demonstrated in the following histories.

Landslides Linked to Golf Course Construction and Irrigation





View of Ocean Trails
Golf Course Landslide—
Ninyo & Moore


Ocean Trails Golf Course Landslide—Rancho Palos Verdes, CA— 1999 (Trump National Golf Club)

Ninyo & Moore, a geotechnical and environment sciences firm, was hired to provide a forensic evaluation for the Ocean Trails Golf Course Landslide. A summary of its findings:

On June 2, 1999, an approximately 16-acre ancient landslide on the coastal bluff was reactivated, sliding approximately 50 feet toward the ocean. The ancient landslide destroyed much of the 18th fairway and green along with adjacent improvements, including an active County sewer line. The geologic setting included gently to moderately tilted beds of the Monterey Formation. The Monterey Formation at this locality included interbedded sequences of fine silty sandstone, siltstones, shales, dolomitic shales, siliceous zones, and bentonitic ash beds. The basal rupture surface was formed along a relatively continuous bentonite layer at a depth of approximately 90 feet. The geologic evaluation included detailed geologic mapping, 26 large-diameter borings, two rotary wash continuous core borings, 12 inclinometers, and the excavation and evaluation of buried sewer lines and artificial lakes. The analysis included preparation of multiple geologic cross sections, slope stability analysis, and evaluation of potential reactivation causes including seismic activity, precipitation, wave erosion, irrigation, construction activities, lake leakage, and sewer line leakage.

Donald Trump purchased the bankrupt Ocean Trails Golf Course in 2002 and he has spent $55 million to restore and stabilize the property.

In addition to the presently contained landslide located underneath the Trump National Golf Club Course, three others are located on the peninsula according to the Rancho Palos Verdes Chamber of Commerce. The largest, the Portuguese Bend landslide, was reactivated in 1956 and moves about a foot a year, depending on rainfall. This underground landslide tract covers 260 acres and has an average depth of 135 feet. Geologists attribute the onset of movement to irrigation, installation of pools and septic tanks that increased ground water levels.

South Golf Course Landslide—Colorado Springs, C0— 1993

Engineers investigating the site determined that irrigation was the cause of the reactivation of the ancient landslide underneath the South Golf Course. Their findings:

The construction of the golf course modified the site hydrology by adding irrigation water inflows and by changing the vegetation from native grass and scrub oak to turf grass over 55 percent of the total area. An analysis of the irrigation and precipitation rates and the turf grass water consumption rates showed a relatively high infiltration rate in the turf grass areas compared to the unirrigated native areas.

Proposals for Slowing the Landslide:

(1) ground water dewatering systems, (2) surface water control systems, (3) collection of flow from horizontal drains, and (4) control of irrigation.

Reference: “CASE HISTORY OF A REACTIVATION OF A LANDSLIDE DUE T0 IRRIGATION ON UNSATURATED SOIL” — Kuo-Chieh Chao 1, Daniel D. Overton 1 & John D. Nelson 1,2
1) Tetra Tech, Inc., USA
2) Colorado State University, USA

Arcadia Bluffs Golf Club Landslide—Manistee, Michigan— 1998

Massive landslides damaged this golf course during a September storm event. Improperly designed drainage inlets were the cause.

Reference: “Arcadia Bluffs sage continues”— Andrew Overbeck Golf Course News—November 2001.

Western North Carolina Landslides—Waiting in the Wings

Western North Carolina's steep slope topography and unstable soil composition are similar to that of the state of Washington. Landslides come with the terrain.

Washington State Road 410—Naches Landslide— October 2009

On October 11, 2009 a massive landslide buried a quarter-mile section of Washington State Road 410. Geologists are calling the Naches slope failure a deep rotational landslide: the immediate cause— mining or long-ago rain— is yet to be determined. Photos of the Naches landslide are compliments of The Seattle Times and the Washington State Department of Transportation.











Western North Carolina/I-40 Pigeon River Gorge Rock Slide— July 1997—NCGS



Blue Ridge Parkway Rock Slide— 2006—NCGS



Western North Carolina Real Estate—Landslide Advisory

All Western North Carolina mountain real estate is classified
landslide-hazardous. This designation includes privately-owned roads in subdivisions and planned communities. For an example of the costs related to repair and stabilization of damaged roads please see Horseshoe Cove Landslide Report.

The photographs below offer a small sampling of the harm caused by Western North Carolina landslides.



Airport Landslides -Jackson County, NC
1977-2005 —NCGS



White Laurel Subdivision
Landslide -Watauga County, NC
2004—NCGS



Jones Ridge Debris Flow
Burke County, NC 2004—NCGS



Jones's Landslide Fatality
Haywood County 2003—NCGS



Peeks Creek Landslide
5 Fatalities/15 homes destroyed
Macon County, NC 2004— NCGS



Moody Landslide
Haywood County, NC 2009
Asheville Citizen-Times



Starnes Cove Landslide
Buncombe County, NC 2004 —NCGS

Federal Emergency Management Agency—Western North Carolina Hazardous-Land Maps

The Federal Emergency Management Agency has long established that homeowners in all mountain counties, whatever the state, have been carelessly exposed to landslide hazards. In North Carolina the risks are exacerbated by the absence of regulation and hazardous-land real estate disclosure.

In an effort to spotlight planning board practices, FEMA is requiring
disaster-prone counties to identify by address all geologically-hazardous public and private property. Highly-detailed real estate hazard maps were completed for Buncombe County in April 2009 but this information has not been released to the public.

The parties involved in Western North Carolina mountain development and sales influence legislative actions, so critical land conditions have not been disclosed. Real estate documents such as sales contracts and Subdivision Street Disclosure Statements are compromised by the concealment of hazardous-land conditions and the financial risks involved.

Prompted by a near-fatal landslide event the Asheville Citizen-Times initiated its "Dangerous Ground" public-awareness campaign on March 1, 2009. By happenstance, this investigative report was followed by The New York Times article, "Increased frequency of landslides remains largely ignored despite risks."

Since there are no federal regulations governing hazardous-land development the public should consider these pertinent facts concerning ownership of landslide-affected real estate: insurance protection is not obtainable and homeowners associations must bear the costs of maintaining highly unstable roads.

The Cliffs at High Carolina— Road Schedule October 21, 2008

The Cliffs at High Carolina, LLC sales practices are governed by federal law under the Interstate Land Sales Full Disclosure Act (ILSFDA). All purchasers of land in ILSDFA-defined subdivisions must receive a highly formatted full disclosure document titled The Property Report. The following two pages were copied from The Cliffs at High Carolina Property Report. This is the ROADS section of the Report.