Friday, January 9, 2009

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.

4 comments:

cessyaaaa, caroline said...

I like this artice..
have a weekend days

wsfamily said...

I purchased a lot from Land Resource at Stillwater Cove in GA. The majority of the owners I have spoken to financed through Wachovia, who had a large financial stake in the development. LRC promised a FREE $10k value vacation but a few months after closing said they could not honor that (bait and switch?). The deal at Stillwater sounds identical to this deal at Grey Rock.

Since LRC has filed bankruptcy there is not much we can do about them, but I cannot help to think that Wachovia is liable for deceit, fraud, and many other items. I have a lot that I'm paying thousands of dollars for mortgage payments, taxes, etc... can't sell, can't build - similar lots selling for MUCH less. What can be done?

Anonymous said...

I have a lot in Grey Rock. I've contacted BofA to see what I might be able to do regarding my $215,000 loan on a worthless lot (nothing back from them yet). I've been making the payments on time but feel I may just let it go and ruin my credit for the next 7 years. My lot is in phase 2, does anyone know if the funds are available from the county to complete roads in this phase?

123 123 said...

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Joan Stepsen
Computer geek