The Cliffs at High Carolina: Developer Liability Under Federal Law

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.

On July 3, 2008 the US 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 steep slope High Carolina development site. Dominant soil types are Porters-Unaka complex (841), Toecane-Tusquitee complex (181) and the Edneyville-Chestnut complex (803). These soils are classified “poorly suitable” as a construction support for roads and streets.

The Cliffs at High Carolina Property Report

Land sales for the Cliffs at High Carolina’s 3,200 acre/1,200 home site subdivision commenced on November 8, 2008. As required, the developer of The Cliffs at High Carolina, Jim Anthony provided his clients with disclosure documents. Of particular interest are the HAZARDS and ROADS sections of The Cliffs at High Carolina Property Report.

—HAZARDS— The lots [99] covered by this Property Report are located in Buncombe County, which is included in an area geologists refer to as the Blue Ridge Geologic Province of North Carolina. As with all developments located in this Province, the terrain contains some moderate to steep slopes and may contain localized areas subject to the natural hazard of landslides.

Furthermore, the developer engaged S&ME, one of the southeast’s most respected engineering firms, to evaluate each of the lots in this Property Report for the possible presence of colluvial materials and found that the identified building area for each lot is suitable for a homesite. 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, well outside a building area, that could potentially have a presence of some colluvium.

Clarification: Buncombe County is a federally designated multi-hazard county. All real property has been evaluated by address for landslide, wild fire, and flood hazards. Buncombe County real estate hazard maps are available in the Buncombe County planning department.

— ROADS— The roads within the subdivision are currently being cleared and graded to permit access by conventional automobile. After completion, the interior roads will be conveyed to and owned by the property owners’ association. We are responsible for the maintenance of the interior roads until they are conveyed.

Clarification: Roads are conveyed at the time property owners sign the Subdivision Street Disclosure Statement. For additional information about this matter, please see the North Carolina Real Estate Commission’s question and answer Web site.

Developer Liability

It is not known why soil assessments and site recommendations for High Carolina roads were omitted in the Property Report. But this issue is moot under the Interstate Land Sales Full Disclosure Act:

A plaintiff need not prove reliance or the defendant's fraudulent intent in order to recover under ILSFDA.137 Instead, the purchaser must only establish a material omission or misrepresentation, however innocent or unintentional, by the developer.138

Reference: “Litigation Involving the Developer, Homeowners’ Associations, and Lenders”—E Richard Kennedy—April 2004