Cliffs at High Carolina Developer Fails to Disclose Financial Risks

The Cliffs Communities, Inc. initiated sales for High Carolina, its 3,200 acre/1,300 lot Tiger Woods’-sponsored subdivision, on November 8, 2008. Cliffs' press releases and web promotions imply that High Carolina land is prime real estate but are these advertisements true? Pre-sale High Carolina disclosure documents reveal that there are substantive risks associated with buying land in this undeveloped Buncombe County, North Carolina subdivision.

The Cliffs at High Carolina Property Report

During the November sales presentation prospective buyers were given financial risk-disclosure documents titled “The Cliffs at High Carolina Property Reports.” Cliffs Communities, Inc. activities are governed by federal law under the Interstate Land Sales Full Disclosure Act and all interested parties must receive these Reports prior to signing a contract. A Property Report is similar to a prospectus in that the developer is forced to disclose any and all information that would materially affect the future value of the real estate.

The Cliffs at High Carolina Property Report begins with this caveat: “The future value of any land is uncertain and dependent on many factors.” The Report dutifully notes the various adverse contingencies that could affect property owners' investments. The factors include: bankruptcy, subdivision liens, failure to complete infrastructure, resale competition, natural hazards, and flood insurance.

Hazard Insurance Coverage for High Carolina Property Owners

The developer states in the Property Report 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 real property risks, the developer recognizes that the subdivision... "may contain localized areas subject to the natural hazard of landslides."

What the developer should have disclosed is

The subdivision is located in a federal, state, and county designated high-risk landslide hazard district. Insurance is not available. Homeowners policies universally exclude property damage caused by earth movement and single-peril providers will not write insurance in defined hazardous areas.

Cliffs Communities, Inc. acknowledges that portions of the subdivision site are geologically hazardous, yet fails to warn its clients that landslide insurance is not obtainable. The developer should be obliged to disclose all relevant risk information in both its advertising and in its Property Report.

Geologic Hazards Noted in Cliffs at High Carolina Property Report

Landslide Stability Index Map: Buncombe County, North Carolina.

This North Carolina Geological Survey risk-determinate map ( one of three studies) shows that The Cliffs at High Carolina development site is located in a highly hazardous zone. Geologists caution that construction of homes and roads in these areas will likely yield landslides.

Interstate Land Sales Full Disclosure Act

As required by federal law under the Interstate Land Sales Full Disclosure Act The Cliffs Communities, Inc., developer of The Cliffs at High Carolina, has prepared client Property Reports to disclose the risks of buying land in this undeveloped subdivision. The Cliffs at High Carolina Property Report reveals some but not all geologic hazards in the 3,200 acre mountain tract.

Cliffs at High Carolina Engineering Report for Phase 1

The Cliffs at High Carolina Property Report states 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: an unstable, landslide-triggering soil base.

The High Carolina Property Report Hazards section states

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.

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. Colluvium soils were cited as a contributing factor to the slope's collapse. For addition information please see "Multi-Million Dollar Landslide Property Loss in Mountain Air."

The Cliffs at High Carolina Property Report does not address the critical question of whether other locations in the 3,200 acre tract have been evaluated for the presence of colluvium or other unsuitable construction-site soils. This is an important financial concern for the soon-to-be formed property owners' association: this group will assume all costs for road maintenance and repairs.

For unbiased information concerning Western North Carolina landslide hazards, please contact the North Carolina Geological Survey.

Copies of the Cliffs at High Carolina Property Report, Subdivision ID: 32367, are available through the U.S. Department of Housing and Urban Development.

Maggie Valley Landslide Will Affect Real Estate Values

Wild Acres Landslide 2009



Wild Acres Landslide 2003



Maggie Valley/ Haywood County Real Estate


So you have fallen in love with Maggie Valley, and you’re ready to buy or build your mountain dream home. How do you choose? The answer is: carefully.

What you don’t know and what your realtor isn't required to tell you is that landslides have caused and will continue to result in catastrophic property losses in Maggie Valley and throughout the county. Sometimes they are deadly.

Property values in Wild Acres and in other Haywood County mountain developments will be adversely affected by media reporting of this tragic event. Risks that were never disclosed are now in the public domain.

Wild Acres

It is thought provoking that two homes in one Maggie Valley neighborhood have been destroyed by landslides. Pat (Trish) Jones was killed in December 2003 when her Wild Acres home was buried by a wall of dirt. The cause of the slope failure: a broken water main. A wrongful death lawsuit was filed against the Maggie Valley Sanitary District. During the trial, the defense argued that “creep” a natural slope occurrence was responsible for the line break. Becky Johnson, who covered the trial for the Smoky Mountain News, wonders in the conclusion of her article, “Landslide death case ends in mistrial” how a new jury will weigh the evidence.

If the jury in the new trial sides with the water department, that, too, could have precedent-setting ramifications….If creep caused the water line to break, which in turn killed Jones’ wife, then liability would fall with whoever granted a permit on an unstable slope. If the case takes that turn, a slope stability assessment could one day be part of the county’s process in granting permits.

Ms. Johnson’s suppositions never came to be. There was no new trial: the matter was settled out of court.

On January 7, 2009 rain set off the second residence-destroying landslide in Wild Acres. The owners, Bruce and Lorraine Donin, had no warning that a 300-foot swift-moving landslide would shatter their home. The Donins’, neighbors Edward and Pamela McAloon, are being blamed for causing the landslide. Documents show that the McAloons were advised several times by Haywood County officials that two areas on their 83 percent slope lot were exhibiting signs of collapse. It is unknown how many other Wild Acres home sites are at risk of landslides

A Disaster Waiting to Happen

Wild Acres is a typical mountain residential community. The Haywood County planning department authorized the permit for the subdivision in the 70s. Many of the homes were built at that time, others like the Donins and the McAloons were finished in the past few years. To maximize developer-profits and to enhance tax revenues, Haywood County allowed the dangerous practice of stacking small-lot home sites one on top of the other.

What the Donins, McAloons, and other Wild Acres residents didn’t know when they bought or built their homes, was that soils in this tract of land had been scientifically identified as “poorly suitable for residential development.” (Hazardous land disclosure is not required on North Carolina real estate contracts.)

Marc Pruett, head of the Haywood County erosion control department, told Vicki Hyatt, editor of The Mountaineer, that there have been landslides above and below the Donin home site as well as across the top of the mountain in the Villages of Plott Creek development. The slope failures were triggered when rain soaked unstable soils known as Tuckasegee-Cullasaja complex, ( TvE). The Wild Acres subdivision along with others in Maggie Valley share this highly reactive, expensive to control, soil composition. Resource: “Soil Survey of Haywood County Area.”

Soil surveys were conducted and published to provide critical land-use information. These extensive advisory documents are intended for a variety of purposes. One of the most important: prevention of hazardous land development. For whatever reason Haywood County officials forgot to check their survey book when they issued the permit for Wild Acres.

Insurance

The Donins now know that their homeowner's policy does not cover their loss. Most people, unfortunately, don't read their contracts. If they did they would see that damage caused by landslides or earth movement of any kind is not covered. This exclusion is applicable to all homeowners’ policies nationwide. Landslide coverage is available through a few single-peril carriers but they will not write insurance in high-risk areas. ( All 21 Western North Carolina mountain counties are designated high risk and the North Carolina Geological Survey is mapping these counties for specific landslide hazards.)

Lawsuits

David Wijewickrama, the Donins’ attorney, has been asking questions. He wants to know whether the McAloons or the county or perhaps both parties were responsible for his clients‘ losses. These are pertinent questions and ones that will surely be debated in a courtroom.

Postscript

The Wild Acres subdivision was developed in the 70s by a company owned by Charles Taylor, former U.S. Representative.

Multi-Million Dollar Landslide Property Loss in Mountain Air

Undated photograph of Hemlock Bluff C-1. The building which houses this unit was the issue of one of the lawsuits.






Photograph of A-1 of the Austin
View Villa condominiums. This structure is one of a 5- unit cluster, with each building containing four residences. Buildings C and D of the complex were the issue of one of the lawsuits. Photographs of the landslide-damaged buildings are not available.



Mountain Air Resort-Austin View and Hemlock Bluff-condominium buildings severely damaged by slow moving landslide in 2003-2004. (Yancey County, North Carolina)

Description of the Austin View Villas Condominiums Landslide Property Damage

Court documents reveal:

…in 2003 the foundations of two buildings of the five unit Austin View Villas began cracking and in late 2004 the foundations of the Units began and/or continued moving and “sliding” on the side of the mountain upon which the Units had been constructed, causing the foundations, wall structures, floors, and other components of the Units to crack and to deteriorate substantially. As a consequence, the Units became-and remain-completely uninhabitable and the Intervenor Plaintiffs have been deprived entirely of the use and enjoyment of their Units since January 2005.

Current tax records show the value of each unit to be $640,000. A conservative estimate of the landslide damage is over $5 million. Mountain Air Development Corporation owned Unit D-1. For a copy of the lawsuit ( 07 CVS 19), please visit wncsos.com.

Description of the Hemlock Bluffs Condominium Landslide Property Damage

During the summer of 2004, Building C, one of the Hemlock Bluffs condominium units began shifting on its slope site. This building is part of the Hemlock Bluff Condominium Association, Inc. According to court documents:

Hemlock has been severely damaged, including separating of the decks from the buildings, cracking in 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 complaint, Hemlock Bluff Villas Condominium Association Inc. vs. Mountain Air Development Corporation et al (06 CVS 51), was settled out of court.

Mountain Air Landslide Hazards Stay Hidden

On June 20, 2007 the Mountain Air Development Corporation placed a half page advertisement in the real estate section of the Wall Street Journal to introduce property in their newest neighborhood community:

Settlers Edge offers unbelievable views... the Settlers Edge opportunity is very limited... just 16 spectacular home sites... 11 mountaintop estate homes, and 38 condominium homes.

Readers of this promotion or visitors to the company’s website will not find any hint that Mountain Air’s topography is geologically hazardous.

Mountain Air marketing materials, be they print or web, have serious omissions: They fail to warn that landslides and unstable soils impair building sites throughout the subdivision and that insurance coverage for this hazard is not available. Engineering reports submitted indicate that 5 feet of colluvial soils at the sites' surface were contributing factors to the slope failures.

Mountain Air Resort is a private gated community. Plaintiffs chose not to publicize their property losses and as a result these costly landslide events were never covered by the media. Copies of legal documents were mailed to the editors of the Charlotte Observer and The News and Observer in the summer of 2007: they declined to publish the story.

The information in these lawsuits is newsworthy and not a private affair. Mountain Air Development Corporation has a legal obligation to disclose material facts: so far they have failed. The question is how can investors make informed decisions about buying real estate in Mountain Air or in other Western North Carolina mountain subdivision if geologic hazards and property losses remain well-kept secrets?

Haywood County Landslide Disaster Photos

For years local environmental officers have expressed alarm about Haywood County's unregulated building practices. On March 27, 2006 Marc Pruett told Haywood County commissioners, "Currently anyone with a bulldozer and backhoe can carve out home sites and roads into the mountainside. This lack of engineering is causing homes and roads to slide down the mountain throughout the county."

On January 7, 2009 a Maggy Valley home was demolished by a predictable landslide. Lawsuits are looming, so it is important to ask when did regulators know about the consequences of hazardous land development?

Mr. Schmerker's article addresses this question.

"Disappearing Haywood" by Jeff Schmerker, The Enterprise-Mountaineer, October 31, 2005.

County to craft ordinance aimed at halting erosion

If you ever get the chance to see Marc Pruett’s erosion control disaster slide show by all means, watch it.

Pruett’s diorama is a hundred or so photos that depict in shocking detail the worst of Haywood County residential development. There are photos of roads splintered into tiny bits as the slopes underneath them give way. There are images of streams running dark brown, choked with silt from unmitigated erosion. There are pictures of cut slopes so steep they have been reduced to constantly avalanching gullies.

And then there are the homes. Pruett has pictures of houses being slapped on one side by landslides and falling off deliriously steep slopes on the other, homes whose yards are riddled with gaping crevasses as the land pulls away beneath them, homes whose foundations have cracked, some of the cracks so big daylight shines through them, and pictures of homes literally being torn apart as the unstable ground they sit on gives way. Pruett, the county’s erosion control program director, who showed his slides Tuesday night to a gathering of county officials and environmental workers, said in nearly every case the culprit was the same: shoddy building practices in unsafe terrain.

The Haywood County Board of Commissioners is looking into a new set of standards to combat the effects, both personal and environmental, of slope development.

Commissioners have said they would like to see recommendations on a plan in January. Pruett told that group that in many cases the erosion nightmares are the result of poor education, or bad decision-making, in areas saddled by steep slopes and bad soils. The goal in writing such a plan, he said, would not be to hinder development, just to ease erosion.

“My personal opinion is that we do not need to look at mandating densities of development or prohibiting development,” Pruett said after the meeting. “We need to allow development wherever people want to build, but get them to build a little bit better.

Traditionally, said Commissioner Mary Ann Enloe, some builders have resisted similar ordinances.

So the challenge, she added, is finding a solution that protects mountainsides and residents, while allowing home and road building.

“A lot of the time, folks from the flat country don’t realize the challenge in purchasing mountain land,” Enloe said. But the workshop’s big turnout shows that the community is taking the issue seriously. “It is a heavy responsibility to meet that challenge of protecting our hillsides and mountainsides while not prohibiting people from being about to build a house and build a road into that house,” she said. “The roads to houses are sometimes as much of a problem as anything else.”

Pruett said any recommendations would likely focus on development practices in areas where the soils are known to be challenging for development. But setting standards for development in concert with soil mapping is complicated, he warned. Crafting a workable solution will require input from a variety of sources, and Pruett said he hopes the public weighs in.

“I feel like unsuspecting buyers need to be protected to some extent,” Pruett said. “We should probably look at the long term-effects (of erosion) and find reasonable regulations for the greater good. There is a considerable amount of construction work and land disturbing being undertaken in areas where we do not know enough about the soil.” Pat Tilley, who is leading the planning department’s subcommittee which is investigating ordinances, said she commends the county commission for taking the issue on. Hopefully, she said, the municipalities will adopt rules identical to the county’s so guidelines are uniform.

“What we need is protection for property owners,” she said. “After the house is built, the developer and the builder are gone.”

Haywood County Hebo Mountain Landslide

Enbankment failure that mobilized into a debris flow. Rock baskets installed to reinforce the enbankment appear to have been placed on unstable foundation material. Photos compliments of the North Carolina Geological Survey

Haywood County Fails to Protect Homeowners from Landslide

Photographs of the home on 93 Wildcat Run Road before and after the January 7, 2009 landslide.

Tragedy always stirs the media and occasionally awakens dozing regulators.

The recent tragedy: a 300 foot-landslide that flattened a three story Maggie Valley, North Carolina residence on Wildcat Run Road. Bruce and Lorraine Donin, who were at home, survived. Rick Wooten, a senior geologist for the N.C. Geological Survey who investigated the site, said “It wasn’t so much that the house that was destroyed was located on a steep slope, it just got hit by a landslide that would have knocked any house over that wasn’t bombproof.”

Is the County Responsible for the Donins’ Property Loss?

The building permit for 93 Wildcat Run Road was issued in 2004: the home was completed in 2007.

In 1998 and again in 2004 the North Carolina Department of Emergency Mangement cautioned all Western North Carolina municipalities that mountain land under their jurisdiction was extremely hazardous.

Haywood County officials became acutely aware of landslide hazards in December 2003 when Patricia ( Trish) Jones, a resident of Maggie Valley, was killed by a landslide.

The Asheville Citizen-Times advised on January 10, 2009 that the county knew about the imminent landslide threat. Two reports, one from the Haywood County Erosion and Sediment Control Office and the other from a private engineering company indicated that the slope above the Donins' home was showing signs of collapse. Tim Surrett, an erosion control inspector, sent the following 2006 notice to the homeowners above the slide: “We have concerns about the slope just past your home. It appears to be exhibiting signs of failure. Please have your plan designer or other qualified person have a look at it.”

Alpha Environmental Services, Inc., the engineering firm employed by the homeowners above the slide, issued a report in 2005 that stated “this area will most likely continue to erode until the slope gives way and slides.”

The Donins' attorney, David Wijewickrama, is asking whether the county did anything to prevent the landslide. He said that county documents show that no action was taken to prevent the slide.

Marc Pruett, director of the county's erosion control office, told the Asheville Citizen-Times that "Inspectors at the time had no authority to order that work be done to shore up the slope."

In an interview with Vicki Hyatt, editor of the Mountaineer, Mr. Pruett pointed to a county map showing the Donin home site, and said there have been landslides both above and below it, as well as across the mountain top in the Villages of Plott Creek Development. The area has 30 to 50 percent natural slopes and is characterized by the same soil type. "These soils are poorly suited to building site development because of the large stones and the slope," according to the "Soil Survey of Haywood County Area."

There are other pertinent questions: why were building permits issued in a known hazardous area and why didn’t county inspectors warn neighborhood residents of the impending danger?

County officials cannot plead ignorance. Haywood County, along with all the other mountain counties in Western North Carolina have experienced serious to catastrophic landslide damage.

Haywood County is not immune from lawsuits. The United States Supreme Court ruled in April 2006 that cities, counties, and other levels of government below that of the states themselves are not protected by the general immunity from suits that states enjoy in federal court.

The Haywood County Hunters Crossing Landslide...It's Still Moving

After the massive 15 county slope failures of September 2004, the North Carolina Geologic Survey began a landslide mapping study for the western region of the state. Western North Carolina has long been identified as a high risk natural landslide hazard zone but the catastrophic multi-county events of 2004 prompted greater scrutiny over the causes and effects of these disastrous occurrences.

In November 2005 Rick Wooten PG, a senior geologist with the North Carolina Geologic Survey, was asked to investigate earth movement at the Hunters Crossing residences in Waynesville, North Carolina. The property owners had noticed cracks in their basement walls and were observing growing fissures and crevices in their yards and parking areas. Studies show that this landslide is an active, very slow to slow, rotational weathered -rock slide, that encompasses a 1.5 acre of 65,000 cubic yards of completely decomposed rock that is moving downhill at the rate of inches per month.

Haywood County Hunters Crossing Property Condemned

This type of slide is identified as a Big Slow Mover and engineering reports indicate that this creeping earth movement cannot be controlled or stopped. The moving land is destroying two condominiums, affecting a third, and is damaging three homes at the base of the slope. The Hunters Crossing families have discovered that they own worthless assets. The state is unwilling to buy back their property and insurance policies exclude all damage caused by earth movement. It should be noted that if Haywood County had required site specific safety studies this mountain condominium complex would not have been developed.

All owners and prospective buyers of mountain slope property in Western North Carolina should be aware and seriously concerned that development permits for home sites and access roads do not require the proven safeguards of landslide mapping and site specific stability testing.

Haywood County Maggie Valley Landslide

On January 7, 2009 a Maggie Valley landslide demolished the home of Bruce and Lorraine Donin.

For unbiased information about the dangers of Western North Carolina landslides please contact the North Carolina Geological Survey.

Land Resource LLC Developer of Grey Rock at Lake Lure Files for Bankruptcy Protection

History of Grey Rock

Land Resource, LLC purchased the 4,000 acre Grey Rock tract for less than 12 million dollars in 2003. Wachovia financed the acquisition.

Official land sales for Grey Rock, a yet-to-be developed mountain residential community located in Rutherford, North Carolina, commenced over the spring weekend of April 28-May 1 2005. The 900 home sites were priced from $200,000 to $700,000. (Court records show that in April 2005 Land Resource had received $15,693,000.00 from earlier sales.)

Grey Rock marketing material, the Property Report and the property owner’s manual indicated that the subdivision would be constructed in various timed-phases with roads, infrastructure and amenities showing specified completion dates. Today most of the developer’s promises have not been fulfilled.

Grey Rock at Lake Lure received national recognition from the HGTV’s 2006 Dream Home Giveaway promotion. The Dream Home is the only structure completed in the development.

On September 21, 2005 the North Carolina Department of Environment and Natural Resources cited the developer for repeatedly violating erosion control regulations. The state halted all construction in Grey Rock from September 21, 2005 through February 16, 2006 and fined the company approximately $94,000.

On August 2, 2007 the Orlando Business Journal reported that Land Resource, LLC had obtained a $60 million revolving line of credit from KeyBank Real Estate Capital and Wachovia.

In July 2008 the Grey Rock sales office was closed and on November 6, 2008 Land Resource, LLC filed for bankruptcy protection.

Lawsuits

On June 29, 2008, the Asheville Citizen-Times reported that a lawsuit had been filed against Land Resource, LLC. The plaintiffs, a group of 15 property owners, claimed that streams on their property were damaged by Grey Rock construction practices.

On August 26, 2008 a federal lawsuit was filed against Land Resource, LLC and their affiliates. The group of Grey Rock land owners bringing suit claim violations of federal and state laws. Plaintiffs allege that Land Resource (LRC) and a number of their affiliates violated the Interstate Land Sales Full Disclosure Act and Florida and North Carolina Unfair and Deceptive Trade Practices.

On September 12, 2008 Bond Insurance Company filed a federal lawsuit against Grey Rock developer, Land Resource, LLC et al.

On October 15, 2008 a separate group of Grey Rock property owners filed a civil suit against Land Resource, LLC their affiliates, company executives, lenders, appraisers, the property owner’s association, and Scripps Network Interactive d/b/a HGTV. The plaintiffs cite numerous Causes of Action. The first two are violations of the Interstate Land Sales Full Disclosure Act: Failure to Provide Property Reports and Fraud and Deceit upon Purchasers. The other Causes of Action can be found in the lawsuit.

It should be noted that the Interstate Land Sales Full Disclosure Act defines the term "developer" as, any person who, directly or indirectly, sells or leases, or offers to sell or lease, or advertises for sale or lease any lots in a subdivision[,]15 U.S.C. s. 1701(5).

Under General Claims concerning HGTV the Plaintiffs allege that

102. Throughout the marketing material provided to Plaintiffs and potential home purchasers, HGTV was held out as a partner of LRC in the development of Grey Rock. HGTV’s logo adorns a substantial amount of the marketing materials provided including letterhead sent from LRC.

105. HGTV in association with LRC implied and represented that LRC and Grey Rock were “selected” for a Dream Home for objective and appropriate criteria including quality, when in fact, upon information and belief, LRC paid or gave consideration of over One Million Dollars ($1,000,000.00) to be “selected.”

106. Neither LRC nor HGTV disclosed the conflict of interest created thereby.

What wasn’t mentioned in the lawsuit was that HGTV partnered with Land Resource in their 2004 Dream Home giveaway promotion. Tours of Dream Homes are held over three months, fees are charged and these advertising campaigns are mutually advantageous.

Banks

According to the Complaint, prospective buyers were given a “North Carolina Lender Information Sheet.” There were four banks recommended:

a. Bank of America with Mindy Johnson;
b. Branch Bank and Trust with Lenore Henry;
c. Bank of America with Marie Sladky; and
d. Wachovia with Becky Polosky.

Plaintiffs allege:

114.Upon information and belief, the above lenders were engaged in a joint venture or common enterprise with LRC and did otherwise exceed their ordinary course of dealing, promotion, marketing, and sale of lots in conjunction with LRC. Plaintiffs do not know what if any consideration was exchanged in order to be listed on the “Lender Information Sheet.”

Grey Rock Appraisals

Plaintiffs have discovered that Grey Rock lots had three separate valuations: the sales price, Wachovia’s interest in the land and the appraisal. The following examples were extracted from court documents.

The Allens
1.Sales price: $249,900.00
2. Wachovia’s interest: $49,980.00
3. Appraisal:$258,000.00

The Carlssons
1. Sales price: $ 399,900.00
2. Wachovia’s interest: $ 71,982.00
3. Appraisal: $420,000.00

Property owners believe that insider deals were employed to enhance the value of Grey Rock land. For further information please see paragraph 77 of the Complaint.

This is not the first allegation of improper sales activities on the part of Land Resource. The Knoxville New Sentinel reported on July 29, 2008 that Land Resource was a defendant in a lawsuit involving three company employees who claimed that they were fired because they refused to participate in illegal practices, including “the utilization of bait-and-switch tactics to induce lot purchases.” Land Resource denied the charges and the case was settled out of court.

The public trusts that lenders and their appraisers value real property according to the Uniform Standards of Professional Appraisal Practice.

Grey Rock property owners have the right to know how and by what standards raw land in an undeveloped subdivision could be valued as prime real estate.

Land Resource has collected $79,025,000.00 from their clients. Grey Rock property owners correctly state that these funds were more than sufficient to clear the Wachovia lien and to complete the subdivision’s infrastructure, utilities, and amenities.

The most important question before the court is what happened to the money?

Postscript

Grey Rock property owners are not the only group questioning appraisal practices in Western North Carolina. For additional information please see Village of Penland property owners' lawsuit.

Sprinkler Systems Should be Banned on Mountain Slopes

October 8, 2008 photo of the Portland West Hills neighborhood landslide-The Oregonian

Authorities cannot control rainfall, a natural occurrence and the most frequent cause of slope failures, but they can provide a measure of protection by outlawing the use of sprinkler systems on steep slopes.

These are the lessons that North Carolina regulators can learn from a recent landslide in Portland, Oregon. Although not conclusive, numerous investigations indicate that this multi-property financially-devastating tragedy was precipitated by the use or perhaps overuse of a sprinkler system on the part of an uninformed homeowner.

The mountain counties of North Carolina are geologically hazardous: lives and property are under the ever-present threat of an unstable land environment. Rain was the trigger for the disastrous Western North Carolina landslide events of September 2004. These slope failures killed five people and cost millions of dollars in uninsurable real estate losses. Another Western North Carolina landslide fatality occurred in December 2003. The cause: a leaking water pipe.

It is time for North Carolina lawmakers to recognize that sprinkler systems pose a significant threat to public safety. Current permit holders should be warned of the risks and all new permits should be denied. The following article details the history of the Portland landslide.

Portland Officials Believe Sprinkler System Responsible for West Hills Landslide

In the early morning hours on October 8, 2008, an unimaginable event transformed the landscape of a well-established Portland West Hills neighborhood. When the slope collapsed under the home on 6438 S. W. Burlingame Place, it became a swift-moving mass destroying two homes and significantly damaging several others. The companies providing insurance for the injured parties have so far declined coverage for the landslide property losses. (Homeowners policies do not cover this peril).

Portland officials have ruled out rain and leaking city water and sewer lines as possible causes of the slide. The Oregonian reported on November 21, 2008 that the primary suspect appears to be a sprinkler system that was installed on the back yard slope where the landslide occurred.

Portland Commissioner, Randy Leonard, told the press, “What has changed to cause the soil conditions to become so malleable that what had held for 75 years broke loose? What’s different is the installation of an irrigation system combined with an unusually high use of water.” Records show that the property owners, Kathei and David Hendrickson, received a city permit to install the system in March 2005. The City of Portland Natural Resources website shows that the Burlingame property was located on a slope greater than 25% and subject to landslides and soil erosion.

Bill Burns, an engineering geologist for the state, said he believed the slide was likely caused by several factors: water in the soil, unstable ground and the steep slope the house was erected upon.

The Portland metropolitan area experienced catastrophic landslides in February 1996. Geologists found that the West Hills Soil Province suffered hundreds of slope failures during this wet-winter period. Soil sediments, which cover the area, are suitable building sites when dry but are dangerous when water-laden.

The Hendricksons are facing numerous lawsuits. The city has denied all responsibility for the slope failure and resultant property damage. It should be noted that if the sprinkler system is found to be the cause of the landslide the city granted the permit.