Is the City of Portland Responsible for the 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 underneath 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.

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 indicate 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 information 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 disastrous 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 stable construction sites when dry but are dangerous when saturated.

The Hendricksons have lost their home and they are facing numerous long-term lawsuits. No one has yet determined the trigger for the landslide, whether manmade or natural. 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.

Questions Concerning The Cliffs at High Carolina Property Report

The Cliffs at High Carolina Engineering Report

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

The High Carolina Property Report Hazards section states that:

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

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

Colluvial Soils Cited as Contributing Factor in Mountain Air Resort Landslide

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

Nature of the Hemlock Bluff Condominium Association, Inc. Complaint

The Plaintiff alleged that:

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

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

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

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

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

The Austin View Villas plaintiffs alleged that:

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

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

The Cliffs at High Carolina Property Owners' Association

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

Insurance Coverage for High Carolina Property Owners

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

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

Interstate Land Sales Full Disclosure Act

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

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

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

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

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

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

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

The Cliffs at High Carolina Property Report

Red, orange and yellow color-coding show unstable to marginally unstable areas on this Buncombe County landslide susceptibility map.

History of The Cliffs at High Carolina

In June of 2006 The Cliffs Communities Inc. received approval from the Buncombe County Planning Department to begin construction in their 1,284 acre, 592-lot subdivision called The Cliffs at High Carolina. The project has grown considerably since the initial application. High Carolina, the largest land development in the county, now covers 3,200 acres. Approximately 10% of the tract will remain natural open space, the balance of the land is dedicated to the Tiger Woods golf course, 1,300 home sites, and various recreational facilities.

The Cliffs Communities, Inc. initiated sales for High Carolina lots on November 8, 2008. Jim Anthony, President and CEO of The Cliffs Communities, Inc. told the press that approximately 50 lots had been sold for a total of more than $40 million.

The individuals who purchased lots were given Property Reports as required by federal law under the Interstate Land Sales Full Disclosure Act.

The Risks of Buying Land in The Cliffs at High Carolina Subdivision

The High Carolina Property Report was dated October 21, 2008 and signed by Lucas T. Anthony, President of The Cliffs at High Carolina LLC. Mr. Anthony stated that the information contained in this Property Report is an accurate description of our subdivision and development plans. The document opens with the required statement “The Risks of Buying Land.” The following was extracted from the Report:

The future value of any land is uncertain and dependent upon many factors. DO NOT expect all land to increase in value.

Any subdivision will have an impact on the surrounding environment. Whether or not the impact is adverse and the degree of impact will depend on the location, size, planning, and the extent of the development. Subdivisions which adversely affect the environment may cause government agencies to impose restrictions on the use of the land. Changes in plant and animal life, air and water quality, and noise levels may affect your use and enjoyment of your lot and your ability to sell it.

What Wasn’t Stated in the Property Report

By happenstance or choice High Carolina land sales were held in November when air quality meets EPA standards. Mr. Anthony is aware that during warm weather months smog clouds visibility and impairs lung function. The situation is critical: 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 a public health air quality alert for mountain areas near Asheville. ( “Air quality unhealthy at high elevations” ) 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.

The Cliffs at High Carolina Encumbrances, Mortgages, and Liens

The Property Report states that:

There are blanket encumbrances, mortgages or liens on some of the lots included in this offering. Those are: (1) a Deed of Trust by and between Longview Land Company, LLC ("Borrower"), Steve I. Goldstein ("Trustee") and Strauss Family Limited Partnership ("Lender"); (2) a Deed of Trust between The Cliffs at High Carolina, LLC ("Borrower") and Julie El Abiyad ("Trustee") and Capital Bank ("Lender") such Deeds of Trusts covering the lots as shown in the Listing of Lots on page 26 below.

The Cliffs at High Carolina Hazards

Developers are required to make known all hazards located in the subdivision. The High Carolina Property Report Hazards section reveals that:

The lots covered by this Property Report are located in Buncombe County, which is 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 and steep slopes and may contain localized areas subject to the natural hazard of landslides. However, according to Buncombe County’s Hazard Mitigation Plan dated August 23, 2004, while the likelihood of an occurrence of a landslide is quite high, any such event would have a negligible impact on a small area of the County.

Clarification

Historic data was the determinate in accessing the impact of landslides in Buncombe County. Certainly after the catastrophic multi-county landslides of September 2004 Hazard Mitigation Planners would have found that landslides pose a significant threat to major portions of the county. Buncombe County, along with 18 other at-risk counties, are to be surveyed for these highly probable events.

The Cliffs at High Carolina Property Report Hazards section continues with the following:

In its development activities, the developer has followed the Hillside Development Standards Ordinance of Buncombe County in developing roads, infrastructure, and lots and the identifiable building sites thereon.

Buncombe County Hillside Development Standards Ordinance

County Commissioners enacted the Hillside Development Ordinance in March 2006. It should be noted that the High Carolina Property Report fails to mention that this ordinance has been highly criticized. In January 2007 the Buncombe County Environmental Advisory Board issued an admonishment to the Board of Commissioners regarding the absence of Ridge Top/Steep Slope Development regulation. The Board found that:

A clearly defined, comprehensive, countywide plan is needed to adequately manage RT/SS development in Buncombe County. The costs associated with a comprehensive strategy to protect these irreplaceable assets and to protect the health and safety of our citizens is minimal compared to the costs of doing nothing further. The present condition of allowing increasing waves of unregulated (or loosely regulated) haphazard growth to occur along our mountain ridges and steep slopes has become an untenable position.

For further information regarding geologic hazards please see "Questions Concerning The Cliffs at High Carolina Property Report."

The federally mandated Property Report is intended to warn prospective buyers of the financial risks of purchasing land in yet-to-be developed subdivisions. When projects, such as the Cliffs at High Carolina, are permitted in geologically hazardous unmapped areas, the risks are magnified.

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

Buncombe County Commissioners Facilitate Hazardous Land Development

Red, orange and yellow color-coding show unstable to marginally unstable areas on this Buncombe County landslide susceptibility map.

When Did They Know?

Buncombe County officials were notified in August 2004 that the mountain land under their jurisdiction was geologically hazardous. This was not the first hazard designation for the county.

In 1998 and again in 2004 the North Carolina Department of Emergency Management warned in their hazard rating reports that landslides were significant threats to lives and property in the following 21 western counties: Alleghany, Ashe, Avery, Buncombe, Burke, Caldwell, Cherokee, Clay, Graham, Haywood, Henderson, Jackson, McDowell, Macon, Madison, Mitchell, Surry, Swain, Transylvania, Watauga, and Yancey.

In mid-September 2004 Buncombe County along with 14 other western counties were declared federal disaster areas after rain-induced landslides caused loss of life and massive property damage. ( The Federal Emergency Management Agency provided $72 million in aid to the state.)

In February 2005 the North Carolina General Assembly authorized landslide surveys for 19 at-risk counties. The Buncombe County "Is it safe to build here" hazard maps were scheduled to be completed by the summer of 2007 but, for unknown reasons, these studies have been delayed.

Landslide maps are intended to restrict or prohibit hazardous land development and they are a critical component of hazard mitigation planning. Simply stated hazard mitigation is defined as sustained actions that serve to protect the public and their property from recurring natural disasters.

Buncombe County Commissioners knew that the pending landslide hazard reports would focus attention on slope construction standards so they tightened the rules. In March 2006 the commissioners passed new regulations but held them in abeyance for three months. During this open-rule window the Cliffs Communities, Inc., along with other developers, submitted permits for mountain slope subdivisions. The Cliffs at High Carolina project now encompasses 3,200 acres and plans for 1,300 homes.

Excerpts from the following article detail the recent history of hazardous land development in Buncombe County.

“Builders rush to beat stricter slope rules” John Boyle, Asheville Citizen-Times, July 2006

If you had any doubt that developers desire mountainside locations for new homes, consider the recent rush of subdivision applications that recently arrived on Buncombe County planners’ desks.

“ Twenty-three subdivision applications came in before the deadline,” said David Young, a Buncombe County Commissioner. Asheville and Buncombe County have been discovered. Real estate in Florida has tanked, and we’re getting a lot of developers coming in from other places wanting to develop our mountains. It scares me to death.”

The new regulations apply to subdivisions with 11 or more lots, and they control density on slopes greater than 25 % and restrict the amount of cleared area on steep lots. County commissioners passed the regulations in March. They went into effect July 1, a deadline some developers wanted to beat because the new rules likely will increase development costs and prevent them from placing homes on some mountainsides.

Among the applicants that came in at the last minute was one for High Carolina, a 592-lot subdivision proposed for 1,284 acres in Swannanoa. The Cliffs Communities Inc., which is developing the high-end Cliffs at Walnut Cove subdivision in southern Buncombe, is the developer.

Cliffs President Jim Anthony acknowledged that his company submitted the application to beat the deadline….

A Flood Of Applications

Debbie Truempy, a planner with Buncombe County, said the Planning Department usually gets three to five subdivision applications for each of its twice-monthly meetings. The 23 applications in question , which comprise 1,713 lots, came in during the last week of June, although Truempy noted that only a dozen of them were new master plans. The remainder were amendments to existing plans.

Some of the subdivisions may never be built. The application and a plan essentially reserve the developer’s right to build the subdivision under pre-July rules.

Brad Galbraith, president of the Asheville Board of Realtors, said the numbers of applications doesn’t surprise him, given the popularity of the Asheville region for retirees and other new residents seeking a beautiful setting and high quality of life. Some developers are moving into the area, but Galbraith said he knows that several of the subdivisions whose applications came in under the deadline have been in the works for a long time.

But even those developers simply trying to beat the deadline make financial sense. Developers are businesspeople, he said, and have to consider the expense of a project, which will affect investors and buyers alike. To not take advantage of the previous rules that could affect the bottom line would be irresponsible.

“It’s not that anybody is trying to rape anything or exploit anything,” Galbraith said. “They’re just trying to make a good business decision and abide by the rules and regulations in place at the time. It’s not something where all the sudden we’re going to get a lot of skyscraper’s"....

Buncombe County's Hazard Mitigation Plan was finalized on August 23, 2004. The report stressed the need for the governing body to be able to "evaluate and strengthen" ordinances in view of ever-changing conditions, such as rapid development, technological change or a natural disaster.

In January 2007 the Buncombe County Environmental Advisory Board issued an admonishment to the Board of Commissioners regarding the absence of Ridge Top/Steep Slope Development regulation. The Board found that:

A clearly defined, comprehensive, countywide plan is needed to adequately manage RT/SSDevelopment in Buncombe County. The costs associated with a comprehensive strategy to protect these irreplaceable assets and to protect the health and safety of our citizens is minimal compared to the costs of doing nothing further. The present condition of allowing increasing waves of unregulated (or loosely regulated) haphazard growth to occur along our mountain ridges and steep slopes has become an untenable position.

It has been almost two years since the advisory board issued their report and yet the Commissioners have failed to enact a hazardous land ordinance.

The Cliffs at High Carolina not Mapped for Landslides

Federal Disaster Declarations Result in Landslide Hazard Studies

In September 2004 fifteen Western North Carolina counties were in a state of emergency after rain-initiated landslides caused loss of life and catastrophic damage. To fulfill federal hazard mitigation requirements, the North Carolina General Assembly authorized a 19 county landslide mapping program in February 2005. Governor Mike Easley stated in an October 2006 press release that

These (hazard) 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.

The North Carolina Department of Environment and Natural Resources reported in October of 2006 that Buncombe and Watauga County landslide hazard maps would be released in the summer of 2007. Maps for Haywood, Henderson, and Jackson were to be published in 2008. To date only Watauga and Macon Counties have been surveyed.

Buncombe County Commissioners Facilitate Hazardous Land Development

In an effort to assuage criticism regarding mountain development, county commissioners passed new slope regulations in March of 2006 but left old rules in place until July 1. (“Builders rush to beat stricter slope rules,” John Boyle, Asheville Citizen-Times, July 2006).

Jim Anthony, President and CEO of The Cliffs Communities, was one of 23 developers who took advantage of the old-rule window. Anthony told the Asheville Citizen-Times that his company had requested the Cliffs at High Carolina subdivision permit in order to avoid the more stringent regulations. The Cliffs at High Carolina site, now at 3,200 acres, is the largest residential project in the county.

In December 2007 The Cliffs Communities, Inc. won a lawsuit they had filed against Buncombe County. At issue was the county regulation restricting the density of condominium or apartment complexes on steep mountain slopes. Buncombe County Superior Court Judge Ronald Payne ruled that The Cliffs Communities, Inc. did not have to comply with county rules. The Asheville Citizen-Times reported that the Cliffs Communities, Inc acquired the land for a little over $45 million and have been working on the project since 2004. ("Cliffs can dodge building limits," Mark Barrett, Asheville Citizen-Times, January 12, 2008).

The Cliffs Communities, Inc. opened land sales for the Cliffs at High Carolina on November 8, 2008. Jim Anthony told the media that regarding sales “we’re past our expectations, with lot sales totaling more than $40 million."

Geologic Fact: If a Slope has Failed, It will Fail Again

Although Buncombe County hazard maps and the updated soil survey have not been officially released, preliminary investigations show that the High Carolina development site is threatened by landslides, unstable soils, and former debris flows.

The Cliffs Communities, Inc., like all Western North Carolina mountain developers, understand the reason for the "Is it safe to build here" hazard maps. The disturbing question is how can the Cliffs' contractors safely lay out roads and homesites when there are no landslide maps to follow?

Judge Rules: The Cliffs at High Carolina will not have to Comply with Steep Slope Regulations

Location of The Cliffs at High Carolina on Buncombe County Landslide Hazard Map

This preliminary Buncombe County landslide hazard map shows mountainous terrain at serious risk of slope failures. Red (High Geologic Hazard) designates areas of high probability that disturbance of the slope will trigger landslides. Also displayed are significant numbers of landslides and landslide deposits. These locations are considered extreme risk building sites.

The Buncombe County Hazard Mitigation Plan (August 23, 2004) found that the steep slopes and fragile soils of Western North Carolina place Buncombe County at high risk for landslides. This report was issued just weeks before the 15 county slope failures of September 2004.

Even though city and county officials know that landslides are serious threats to lives and property they continue to permit the development and sale of identifiable hazardous mountain land.

Important risk information for prospective buyers of mountain slope property in the City of Asheville and Buncombe County.

"The landslide problem will probably be a problem for years to come. Once a slope has failed the strength of the underlying shale or clay that is in the failure zone will never go back to its original strength and even in dry years these slopes can continue to show movement (it may slow down to almost zero but it does not take the same force to sustain movement after failure)." Pre-Disaster Mitigation Plan for Colorado Springs ( Page 41)

"Any home in an active landslide will be destroyed at some point in the future-it could be 5 years or 5000 years-it's nearly impossible to say." Pre-Disaster Mitigation Plan for Colorado Springs (Page 44)

"When you clear-cut potentially unstable slopes, you increase the risk of landslides up to tenfold." Testimony by geologist and University of Washington Professor David Montgomery.
"Clear-cutting, nature blamed for landslides" by John Dodge, The Olympian, January 11, 2008. The Cliffs at High Carolina will be extensively cleared to accommodate the 2,500 acre resort.

Extensive studies by the North Carolina Geologic Survey show that much of the land in Western North Carolina is susceptible to landslides. These areas include: steep slopes, usually greater than 30 degrees, embankments or fills, cut or excavated slopes, hillside depressions or hollows near streams and springs, eroded or undercut streams or river banks, areas below steep mountain slopes, areas on hills or mountainsides where runoff accumulates, disturbed or modified slopes on mountainsides, areas where roads cross drainage or streams on mountainsides. The North Carolina Geological Survey issues landslide advisories whenever extensive rain is forecast for the region.

The financial risks for those who live on or near unstable slopes can be extreme. In North Carolina there is no insurance coverage available to protect homes and property from landslide damage regardless of the cause. Insurance companies know from experience that landslide events are predictable and costly and they will not insure this risk.

Prospective buyers should choose wisely. Tell the seller/builder/developer that you will not buy slope property unless it has been certified by a state licensed geologist.

It should be noted that in the following article there is no mention of the Buncombe County hazard map or the location of The Cliffs at High Carolina on that map.

"Cliffs can dodge building limits" By Mark Barrett
Asheville Citizen-Times January 12, 2008

Developers of the Cliffs at High Carolina can put condominiums or town houses on property in Fairview without regard to Buncombe County rules severely restricting multi-family units in some places, a judge has ruled.

Buncombe County Superior Court Judge Ronald Payne ruled last month The Cliffs Communities had moved so far ahead with plans to build on property north of Spring Mountain Road that the company has "vested rights" that trump an ordinance county commissioners adopted in March 2006.

The property is part of a huge luxury development to include around 2,500 acres or more in Fairview and Swannanoa and, most likely, more than 1,000 homes.

The county ordinance limits the density of condominium or apartment complexes on land from 2,500 to 2,999 feet in elevation to one unit per two acres in buildings no taller than 35 feet. Above 3,000 feet, the limits are one unit per four acres and 2 feet in height.

Mores homes?

It is unclear whether the decision will result in more homes than earlier planned on the property or if The Cliffs will simply build about the same number but make some of them multifamily units.

"The final decision has not been made" as to how many homes and what kind will be built on the land, Jim Anthony, CEO of South Carolina-based The Cliffs Communities, said in a statement. He did say The Cliffs will move ahead with a "wellness village" to include condominiums and town houses and health and exercise facilities.

Attorneys for the winners and losers said it is unlikely many, if any, other property owners would be affected by the ruling.

Word that The Cliffs was assembling land for an upscale development that will take property on the south side of Swannanoa and in Fairview's northeast corner got out in the summer of 2006, although The Cliffs says it has been working on the project since 2004.

Just before the multifamily ordinance was adopted, The Cliffs asked Buncombe County to allow it to move ahead with condominiums and town houses regardless. The county declined and The Cliffs later sued to preserve its rights.

Anthony said his company is "very pleased to have the opportunity to move forward with the wellness village we planned as a cornerstone for The Cliffs at High Carolina" and that the development "will become a tremendous asset for western Carolina."

Commissioner David Gantt said he is disappointed by the decision and that "there will be more development in the project than there would have been under the existing rules."

"I just hope The Cliffs continues to be sensitive to the community makeup," Gantt said.

Commissioners have not decided whether to appeal Payne's ruling, Assistant County Michael Frue said.

County government approved a plan last year that showed 733 single-family home lots and a golf course on a portion of The Cliffs' Fairview property that is about the same area as the 966 acres affected by Payne's ruling.

But a rough plan that included condominiums and town houses that The Cliffs submitted as part of its effort to be exempted from the ordinance actually called for fewer homes in the same area. It shows the golf course, 197 single-family lots, 106 duplex units, 300 quadruplex units and 100 units in larger condominium buildings-a total of 703 dwelling units.

Work proceeding

Anthony said his company hopes to make an announcement related to the golf course, being designed by Tiger Woods, in the coming months. Later in the year it will announce details of the first offering for sale of lots in the development he said.

Plans submitted to Buncombe County last June say The Cliffs had acquired almost 2,500 acres for the project. It is likely to include a total of more than 1,000 homes.

The Cliffs said in its lawsuit that it had paid about $45.1 million for property in Fairview by the time the multifamily ordinance was adopted in March and had contracted to so spend another $9.4 million for more land. That doesn't include an oral agreement with Buncombe County Commissioners Chairman Nathan Ramsey and his brother Franklin for The Cliffs to buy 190 acres from the Ramseys for $3.7 million.

The Cliffs said it had also spent more than $3 million on legal, planning and related work on the project by that point.

Other impacts

David Owens, a professor at the UNC Chapel Hill School of Government who specializes in land-use law, said developers can acquire vested rights for a project if they have made substantial investment in a specific project and can show they are actively working on the project before new rules affected it are adopted.

"The fact that you wanted someday to build an apartment building on (property) doesn't mean anything... You've got to act on your intentions," he said.

Both Frue and Phillip Anderson, who represented The Cliffs in the case, said the company's situation appears to be "unique" and that they expect other property owners to be able to ignore the county multifamily ordinance.

The Cliffs filed plans for part of its development in 2006 ahead of the effectiveness of a county ordinance on steep slope development. In response to community concerns, it subsequently said it would build according to the ordinance.

The multifamily ordinance, however, would have had a "potentially devastating effect" on the Cliffs plans making the lawsuit necessary, Anthony said.

Earl Crawford, who lives downhill from the Fairview property, said he doesn't have a strong preference as to whether The Cliffs builds single-family homes or condominiums.

"I hate to see them tear the mountain up," he said, although, "It's not been bad so far."

Staff writer Clarke Morrison contributed to this story.

Perfect Timing for the Cliffs at High Carolina 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 compliments of the Asheville Citizen-Times.


As planned the fall day provided flawless weather conditions for the launch of the Tiger Woods-sponsored 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 and Tiger Woods co-hosted the November 8, 2008 High Carolina party and tour for a large gathering of media, recent purchasers and prospective clients.

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

Mr. Woods promoted the spectacular 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 Woods often visits the property.

Asheville Citizen-Times reporter, Keith Jarrett, said in his article that "the view looking west toward Asheville from the green of the drivable par-4 14th hole was a gorgeous, long-range look toward the setting sun."

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 a public health air quality alert for mountain areas near Asheville. ( “Air quality unhealthy at high elevations” ) 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 High Carolina land sales premiere had been held on July 21, 2008 the expensive sought-after mountain views would have been invisible.

No State Rule Book for Hazardous Land Development

Photo 1-View looking up the track of the August 31, 2006 embankment failure-debris flow from the development road near lot 107.
Photo 2-View looking downslope at the debris deposit and damage to lot 107
Photo 3-View of cracks in embankment extending northeast from the head scarp of the August 31, 2006 embankment failure-debris flow
Photos compliments of the North Carolina Geological Survey

A little over two years ago a road-building crew caused a massive landslide on Eagles Nest Ridge in Haywood County. Luckily, no homes were in the path of what has been called a “A Whopper of a Slide.”

The August 31, 2006 landslide occurred in a 700-acre development, called Cascades, which was being built by Maurice Wilder of Clearwater, Florida. The subdivision plat shows that the 90 foot wide by 1300 foot long debris flow would have severely damaged or destroyed any structures that would have been built on Lot 107 in the development.

After the landslide Dennis Franklin, contractor for the project, notified county officials and instituted temporary measures to stabilize the area. Marc Pruett, Haywood County’s erosion control supervisor, said that without notification he probably would not have known about the slide since no homes or residents were in danger.

Maggie Valley engineer Kevin Alford, who investigated the slide for a Cascades property owner, said that the failed section of the road bed occurred because

The upper road was built out of shot material (from) where they had to blast the roadway in there. It got too heavy. The sliding material acted like a bulldozer, scouring the slope of almost all soil and vegetation. It wiped out a path down to bedrock. It was like an elliptical -shaped bulldozer. It is an amazing thing when you see that kind of material go down the mountain. When you get up in the mountains and start building roads, there are good ways to build roads and bad ways to build roads. In a situation like that I think it would have been reasonable to do subterranean work to find out what was there. When you have a large amount of uncompacted rock fill that gets a lot of water in it, you have potential for slope failures. There is still more material up there, so it could happen again.

North Carolina Geological Survey’s Findings

Geologists investigating the landslide site found that the collapsed slope embankment was composed of highly unstable woody debris and graphitic-sulfidic bedrock fragments. Rain on this weak, improperly-constructed, roadbed probably precipitated the landslide.

During the course of their survey the geologists determined that the still standing ~ 300 foot long road embankment showed evidence of additional failures. They warned that if the fragile embankment is not properly stabilized, this land mass will pose a future threat to public safety. Recommendations to the developer included a professional investigation of the failed site in conjunction with extensive and expensive stabilization measures or removal of the remaining roadbed.

In their assessment report the NCGS reference other Western North Carolina landslides caused by contractors' use of graphitic-sulfidic road fill.

No State Rule Book for Hazardous Land Development

It is unknown whether Mr. Wilder followed the safety recommendations outlined by the North Carolina Geological Survey. Mr. Wilder, along with all other developers conducting business in the state, are left to their own best judgment on landslide remediation.

Interested parties should be aware of these pertinent facts:

1. Landslides and weak soils endanger most mountain construction sites in Western North Carolina.

2. Developers do not have to report landslides to the state or to their clients.

3. There are no independent safety experts on-site to monitor construction practices.

4. North Carolina does not provide any measure of regulation over hazardous land development even though the region was devastated by landslides in September 2004.

5. North Carolina does not require real estate land risk disclosure.

Wouldn't You Want to Know the Risks of Buying Real Estate in Haywood County?

Landslide hazard maps for Haywood County are scheduled to be released this year, yet commissioners have chosen not to share this relevant information.

Officials only acknowledge that there are "difficulties" such as steep slopes and water quality issues associated with mountain development. The fact is most of the county's developable land is extremely hazardous. Evidence proves that building sites are impaired by unstable soils, the threat of landslides and dangerous unsupervised construction practices.

Haywood County Commissioners and their Planning Board know that hazardous land development is a threat to public safety and homeowners' financial security. There is no reason for this information to be hidden from public view.

For a comprehensive look at landslide-triggered losses in Haywood County please read the following reports.

Gambling with the Unknown
Haywood County Landslide
Rain Triggers Mudslides in Two Western North Carolina Counties
Study brings bad news
Hunters Crossing Landslide...It's Still Moving
Building Homes Where Nature Didn't Intend Them to be Built.
Deadly Landslide in Maggie Valley
Western North Carolina Mudslides Damage Private Mountain Roads. Who is Responsible?
Mudslides and Landslides Affect Property Values in Western North Carolina

Two Million Dollar Property Damage in Laurelmor

The following information was found in a federal lawsuit filed against Ginn/Laurelmor. The complaint: Bituminous Casualty Corporation v. West Contracting, Inc. et al.

In late December 2007 a massive 600 foot long by 110 foot high stacked rock wall collapsed at the Laurelmor golf driving range. This is one of 5 similar walls completed in the resort. The others were constructed at the maintenance facility, and near holes 4, 5, and 10 of the golf course.

Ginn-LA Laurel Creek Ltd. LLLP, owner/developer of the Laurelmor project and Ginn Golf, LLC, the prime contractor responsible for the golf course have demanded arbitration to determine whether the firms responsible for the wall's design and construction were negligent.

Ginn hired an outside engineering firm to investigate the cause of the failure and to examine the stability of the remaining walls. Ginns’ consultants state that a number of improper construction practices caused the wall to collapse. They also believe that the still standing walls "will have a short and predictable service life and could fail precipitously at any time."

Ginn and Ginn Golf seek a substantial award ($2,000,000) against the two firms named in the arbitration documents.

Ginn's Prior Knowledge of Hazardous Land Conditions

It is unknown how this dispute will be settled but interested parties should note the following pertinent information.

In April 2005 the Ginn Company acquired the original 5,700 Laurelmor acre tract from David Kaplan of Kaplan Holdings LLC for $57 million. The land was part of Kaplan’s Heavenly Mountain Resort. Prior to the sale Kaplan had received preliminary approval from the Watauga County Planning and Inspection Department for three Heavenly Mountain projects. Approval for these projects, including the golf course, transferred to the Ginn Company at the time of sale.

A state memorandum dated July 31, 2002 advised that the soils in the proposed golf course were highly erodible and that the construction as proposed would likely precipitate landslides. The report warned that "Extreme care should be taken to maintain the stability of these slopes at all times, and to keep undercutting of these slopes to a minimum."

In June 2006 Bob Oelberg, VP for Planning for the Ginn-Laurelmor project, contacted Soil Nail Launcher, Inc. for assistance with slope stabilization issues after the company's consultant had advised that geologic conditions would not permit construction of a critical access road.

The Ginn Company has failed to disclose significant land risks to their clients in their Laurelmor Federal Property Reports. Is it possible that they neglected to advise their contractors of the extraordinary care needed to develop on hazardous land?

Western North Carolina Mountain Real Estate

Real estate contracts do not reveal and developers do not discuss Western North Carolina's significant hazardous soil conditions.

Federal and state professionals who have investigated and mapped the region over the past several decades have determined that weak reactive mountain soils undermine building locations throughout the multi-county area. Unstable soils are definable and measurable geologic hazards that can threaten lives and property. Extensive soil stability tests have proven that most mountain slopes are “unsuitable” or “poorly suitable” for subdivision development.

Soil assessment surveys for the following Western North Carolina counties: Ashe, Avery, Burke, Caldwell, McDowell, Madison, Rutherford and Yancey can be viewed on the United States Department of Agriculture Natural Resources Conservation website.

Surveys for the remaining counties: Alleghany, Buncombe, Cherokee, Clay, Graham, Haywood, Henderson, Jackson, Macon, Mitchell, Surry, Swain, Transylvania, Watauga, and Wilkes can be found in local Soil and Conservation offices.

Note: Buncombe County officials reported in August 2004 that the county’s mountain land was highly susceptible to slope failures. The Hazard Mitigation Plan found that the steep slopes and fragile soils of Western North Carolina ranked the county at high risk of landslides. These historic data-based determinations were made before the rain-triggered 15 county landslide disasters of September 2004.

The recently completed 2008 Madison County Soil Survey findings illustrate the safety concerns that are common throughout the 23 county region. The surveyors advise on page 476 of their report that environmental issues and geologic faults severely limit subdivision building sites throughout the municipality. The researchers also note that some soils are not adaptable for development.

Soil studies provide invaluable information and are intended to protect the interests of prospective buyers. In North Carolina there is no state governance over hazardous land development, so county commissioners, their planning boards and developers are not obliged to consider soil assessments. Buyers are also disadvantaged by the fact that the state does not require land risk disclosures on real estate contracts.

Some proactive consumer rights' states, notably California and Colorado, have passed legislation to prevent developers and sellers from taking advantage of uninformed buyers. For instance, Colorado enacted the Soils and Hazard Analyses of Residential Construction Act in 1984. This bill requires that all developers and sellers provide purchasers of new residences with a copy of the property’s soil survey and site recommendations. This report must be given to prospective buyers no later than 14 days prior to closing.

Western North Carolina Mountain Developers and the Interstate Land Sales Full Disclosure Act.

Even though North Carolina does not require land risk disclosure, prospective buyers of undeveloped land can find protection and relief under federal law.

In 1968 Congress passed the Interstate Land Sales Full Disclosure Act to protect consumers from fraudulent and abusive land sale practices. This law requires land developers to register their subdivision plans for a 100 or more non-exempt lots with the U.S. Department of Housing and Urban Development (HUD) and to provide purchasers with a detailed Property Report. The sale of condominiums is also covered under the Act.

Most of the developers who are conducting business in Western North Carolina are subject to federal law under the Interstate Land Sales Full Disclosure Act. For a list of registered developers and subdivisions please visit the United States Department of Housing and Urban Development website.

Occasionally a developer neglects to file a statement of record with HUD and also fails to provide purchasers with Property Reports. For examples of penalties imposed on developers please visit the Interstate Land Sales Settlement Agreement website.

The Property Report

A Property Report is the most relevant document that a prospective buyer will receive when considering a land purchase in a yet-to-be completed subdivision. It is uniform in design and table of contents.

The Report is intended to be revealing so that buyers can make an informed decision about the present and future value of the land being offered for sale. All material facts must be disclosed. For instance, HUD forces the developer to list all mortgages and liens on the property. The following warning is included on all Property Reports: "A restriction or an encumbrance on your lot or on the Subdivision, could adversely affect title to your lot."

Other sections of the Report define the developer's financial responsibilities for the project's infrastructure.

Equally important developers are required to provide specific data about geologic hazards in the subdivision such as soil instability, flooding and landslides.

Western North Carolina mountain developers who are subject to the Act should disclose the following material information under the Land Characteristics and Climate/Hazard Section of their Property Reports:

1. The land in this mountain subdivision is naturally hazardous. Geologists and soil experts suspect that the lots in this subdivision are at risk of slope failure. Homeowner policies will not cover this damage.

2. This subdivision was approved without hazard mapping and under regulations that did not require site specific stability studies.

Another section of the report defines financial responsibilities for the Property Owner's Association.If applicable, the following should be disclosed:

Roads in this subdivision are private and will be maintained by the Property Owner's Association after the developer's obligations are satisfied. Subdivision roads are presently stable but are subject to erosion and slope failure. All future road costs will be shared by members of the association.

Developers who fail to disclose Western North Carolina's land hazards in their Property Reports are in violation of federal law.

Postscript

Most states and municipalities ignore soil assessments and permit development on hazardous ground. The following news reports illustrate the disasterous consequences.

"A House Divided, Parts 1 & 2," CNN September 2007. (Sedonia, Arizonia)

"That Sinking Feeling" Chicago Magazine-October 2006

"West Hills home smashed in landslide" The Oregonian-October 2008

The Grey Rock at Lake Lure Property Owners' Lawsuit

On August 26, 2008 a federal class action lawsuit was filed against the Orlando-based developer, Land Resource, LLC. The group of Grey Rock at Lake Lure land owners filing suit claim violations of federal and state laws. Plaintiffs allege that Land Resource and a number of their affiliates violated the Interstate Land Sales Full Disclosure Act and Florida and North Carolina Unfair and Deceptive Trade Practices.

The following information was extracted from the filing:

Upon information and belief, LAND RESOURCE is the parent company of subsidiaries that collectively form the company which is a close network of investors located in various portions of the world that act as a single enterprise offering customers a wide range of real estate properties and a choice of locale in which to purchase these properties.

The Land Resource, LLC Fact Sheet states that the company has 19 projects developed or under development. Land Resource, LLC, currently headquartered in Orlando, Florida was founded by J. Robert Ward in 1997. The company was based in Atlanta until mid 2007.

Projects under development are:

Bridge Pointe at Jekyll Sound-Waverly, Georgia
Cumberland Harbour-St. Mary’s Georgia
The Docks at Caney Creek-Kingston, Tennessee
Grey Rock at Lake Lure-Lake Lure, North Carolina
Laird Pointe-Panama City, Florida
Roaring River-Fayetteville, West Virginia
Still Water Coves-Lincolnton, Georgia
The Villages at Norris Lake-LaFollette, Tennessee
Wild Ridges-Marion, North Carolina

The websites for these projects have been inoperable since July.

Land Resource purchased the 4,000 acre Grey Rock at Lake Lure, Rutherford County, North Carolina property in 2003. Buffalo Creek is the entity which held title to the Grey Rock lots before they were sold to plaintiffs.

Plaintiffs state that their lots (priced from $75,000 to $700,000) are virtually worthless due to the company’s failure to complete promised infrastructure, such as roads, water, and sewer service. The affected property owners allege that “the wells that have been drilled have a water flow that is insufficient to sustain a single house.”

Other Plaintiff complaints:…Land Resource agents used “insider sales” to artificially inflate the comparables for subsequent appraisals of the lots in the subdivision… they misrepresented the viability and success of the company’s other projects in order to make plaintiffs think that their investment in Grey Rock was secure.

The plaintiffs also allege that Land Resource violated sections of the Interstate Land Sales Full Disclosure Act by failing to provide material information in the Grey Rock at Lake Lure Property Report. They cite omission of the following:

A. The addresses of the lien holders
B. Legal description of the development
C. A map of the property
D. The range of prices for the units covered by the report

An unrelated federal lawsuit was filed against Land Resource et al on September 12, 2008 in North Carolina Western District Court.

Portland Landslide Splinters Home and Endangers Neighborhood

On October 8, 2008 a fast-moving landslide destroyed a home and severely damaged several others in a southwest Portland West Hills neighborhood.

Bill Burns, an engineering geologist for the state, said that the Burlingame slide was likely caused by a combination of water in the soil, unstable ground, and the steep slope the house was erected on. " Geologists say home slide caused by multiple factors"

On October 10 Portland's Bureau of Development Services sent notices to neighborhood residents stating that they had one week to stabilize the hillside, install temporary erosion and sediment control measures, and obtain demolition/repair permits or face a fine of $1,000 a day, plus fees. "SW Portland neighbors still shaken, stewing over landslide"

When this information was made public the city decided to assume responsibility for emergency repairs. "Crews cover SW Portland house slide lot just in time"

History of Portland Landslides

In early February 1996 the Portland metropolitan area was devastated by landslides after a combination of snow-rain events. Geologists found that the West Hills Soil Province suffered hundreds of slope failures. The soil sediments, which cover the area, are stable when dry but are dangerous when saturated.

After the 1996 disasters the state acted to publicize unsafe residential areas. The West Hills home on 6438 SW Burlingame Place is classified at risk of landslides, wildfires, and earthquakes.

Western North Carolina Mountain Real Estate: No Fair Warning of Landslides and Unstable Soils

In September 2004 storm remnants blanketed the mountain slopes of Western North Carolina. The rain-precipitated landslides caused loss of life in the Peeks Creek avalanche and extensive property damage in a 15 county area. Today state and local governments neglect to warn residents and prospective buyers of the region's significant land risks.

Ginn/Laurelmor's Third Loan Modification

On September 8, 2008 a Third Modification to First Lien Deed of Trust, Security Agreement, Assignments of Rents and Leases and Fixture Filing (this “Agreement”), was made and entered into by and between Ginn-LA Laurel Creek LTD., LLLP and Credit Suisse, Cayman Islands Branch. This document was recorded with the Register of Deeds, Watauga County, North Carolina on September 23, 2008.

For additional information and copy of loan document please see Toby Tobin’s October 8, 2008 article "Ginn/Credit Suisse Laurelmor Loan Also Modified."

Pertinent Information Extracted from Loan Agreement:

2. Secured Obligations. The Original Deed of Trust is hereby amended to increase the aggregate amount of existing Secured Obligations secured by the Original Deed of Trust by $979,500.…

3. Future Advances. The Original Deed of Trust, as modified hereby, is given to secure existing advances under the First Lien Credit Agreement and any future advances made within 15 years after June 8, 2006. The maximum principal amount of present and future advances secured by the Original Deed of Trust is $787,500,000, plus all interest and expenses due under Original Deed of Trust. The amount of existing obligations secured by the Original Deed of Trust is $525,979,500. Notwithstanding anything contained in the Loan Documents to the contrary, advances need not be evidenced by a "written instrument or notation" as described in N.C. Gen. Stat. Section 45-68 (2).

4. Representations and Warranties. In order to induce Beneficiary (Credit Suisse, Cayman Islands Branch-Collateral Agent for the Lenders) to enter into this Agreement, Grantor ( Ginn-LA Laurel Creek LTD., LLLP represents and warrants to Beneficiary that as of the Effective Date: (a) except as disclosed in the Forbearance Agreement, no Event of Default exists under provisions of the Original Deed Of Trust and other Loan Documents; (b) except as disclosed in the Forbearance Agreement, no event exists which, with the giving of notice or lapse of time, or both, could or would constitute and Event of Default under the Original Deed of Trust and other Loan Documents….

7. Subsequent Amendments. The Amended Deed of Trust cannot be further altered, amended, modified, terminated, waived, released or discharged except in writing signed by the parties hereto or their respective successors or assigns. Any future amendment or modification of the Loan Documents or the Secured Obligations ( as defined in the Amended Deed of Trust ) may or may not be recorded. All holders of any interest or claim that affects all or any portion of the Property ( as defined in the Amended Deed of Trust) or any estate or interest therein, which interest or claim is recorded after the date the Original Deed of Trust was originally recorded or that is otherwise or is intended to be Junior and subordinate to the lien of the Amended Deed of Trust (collectively, “Junior Lien Claimants”) are hereby placed on notice of the possibility that the Loan Documents or the Secured Obligations may be amended but any such amendments may or may not be placed of record.

Mr. Robert Gidel, President of the Ginn Company issued the following statement in early July 2008 when news of the default became public information:

Today, Standard & Poor’s will release a statement that indicates two Ginn affiliated Companies, Ginn-LA CS Borrower, LLC and Ginn-LA Conduit Lender, Inc. did not make a principal and interest payment on a non-recourse $675 million credit facility led by Credit Suisse. It will also state that we have reached a 30-day forbearance agreement and are actively negotiating with our lenders.

Warning: Soil Survey Finds Madison County Slopes Unstable

Experts have determined that the soil composition in Madison County, North Carolina is “unsuitable” or “poorly suitable” for most mountain slope residential development. Their studies conclude that construction sites throughout the mapped area are imperiled by environmental threats and geological faults. This important consumer information is not recorded on plats or disclosed on real estate contracts but can be accessed on the Madison County Soil Survey website.

The 2008 Madison County Soil Survey states the following on page 476:

In order to effectively evaluate soils for engineering or construction purposes, the factors which limit a soil’s use must be considered. In Madison County, there are a number of soil-site characteristics which pose engineering difficulties. Among the most important are slope, erodibility, instability (poor bearing strength or shear strength), shrink-swell potential, stoniness, depth to bedrock, freeze-thaw cycle, hydrology, and organic matter content....Some soils may be unsuitable for development because of the slope.

To date Madison County Commissioners and their planning board have not acknowledged the region’s significant geological impediments. Regulations are non-existent and building permits are granted to all petitioners.

The state of North Carolina does not recognize, govern or disclose Western North Carolina’s significant land hazards. These legislative failures and lack of disclosures are exposing prospective buyers and future homeowners’ associations to costly uninsurable losses and diminished real estate values.

Protection and Relief Available Only under Federal Law

Most of the business entities developing and selling land in the county are subject to federal law under the Interstate Land Sales Full Disclosure Act and they are required to register their subdivision plans with the United States Department of Housing and Urban Development. The law stipulates that non-exempt developers provide complete disclosure of land hazards in their subdivision Property Reports. These hazards would include unstable soils, flooding and landslides.

HUD’s North Carolina Subdivision website reveals that only two Madison County developers, The Preserve at Wolf Laurel and Wolf Laurel have registered their subdivisions. Developers doing business in the county who have not registered their Subdivisions are:

Preserve at Little Pine
French Broad Crossing
Scenic Wolf Resort
Breakaway

Developers often fail to comply with the rules and regulations mandated by federal law under the Interstate Land Sales Full Disclosure Act. HUD advises interested parties that:

It has always been the law that if the developer has an obligation to register with the Interstate Land Sales Division, the developer or sales agent must give the buyer a copy of the current property report before the buyer signs a contract. Otherwise, the buyer has up to 2 years to cancel the contract and get his or her money back. That fact must also be clearly set forth in all contracts. You may have the right to void the contract if the subdivision has not been registered with HUD or you were not given a property report.

Western North Carolina Developer Sued for Violation of the Interstate Land Sales Full Disclosure Act

On August 26, 2008 a group of Grey Rock at Lake Lure property owners filed a federal lawsuit against Land Resource, LLC and their affiliates. The lawsuit Goetz et al v. Land Resource, LLC et al will be heard in Florida Middle District Court.

Bond Insurance Company Files Federal Lawsuit Against Grey Rock Developer

Bond Safeguard Insurance Company filed a federal lawsuit against Grey Rock Developer, Land Resource, LLC et al on September 12, 2008. Land Resource, LLC Buffalo Creek is the developer of Grey Rock at Lake Lure.

Plaintiff: Bond Safeguard Insurance Company

Defendant: LR Buffalo Creek, LLC, Land Resource, LLC, Land Resource Group, Inc., James Robert Ward, Robert Vacko, Michael Flaskey, Jason Beaird, Realan Investment Partners, LLLP, DPB Solutions, LLC, Weeks-Grey Rock, LLC, Euram Grey Rock Associates, L.P., Daniel D Dinur, Barrington H Branch, Blue Mist Farms, LLC, Bridge Pointe at Jekyll Sound, LLC, Clarks Hill Lake, LLC, Coastline Properties, LLC, Roaring River, LLC, Laird Bayou, LLC, Laird Point, LLC, Land Resource Group of North Carolina, LLC, Land Resource Orchards, LLC, Land Resource Satilla River, LLC, Land Resource Watts Bar, LLC, LR Baytree Landing, LLC, LR Riversea, LLC, Point Peter, LLLP, Villages at Norris Lake, LLC, Land Resource Meigs County, LLC, LRC Holdings, LLC, Land Resource Round Mountain, LLC, Southern HOA Management, LLC, Wachovia Bank, N.A. and KeyBank USA, N.A.

Case Number:1:2008cv00434

Filed: September 12, 2008

Court: North Carolina Western District Court

County: Rutherford

Nature of Suit: Contract - Other Contract

Cause: 28:1332 Diversity-Other Contract

Jurisdiction: Diversity

Jury Demanded By: Plaintiff

Third Lawsuit Filed Against Ginn Company

On September 17, 2008 Toby Tobin, a Florida real estate reporter, advised that another lawsuit has been filed against Ginn Development Company, LLC and some of its subsidiaries. The lawsuit was filed on September 12, 2008 in St. Lucie County, Florida.

The 17 Ginn/Tesoro plaintiffs claim that the company violated Florida’s Deceptive and Unfair Trade Practices Act.

Previous Ginn lawsuits allege that the company violated SEC regulations and the Interstate Land Sales Full Disclosure Act.

The Ginn Company is currently developing Laurelmor in Western North Carolina.

Clear Skies Required for The Cliffs at High Carolina Land Sales

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 compliments of the Asheville Citizen-Times.

It is all about the timing.

In November 2008 when Asheville’s haze has dissipated and the state has stopped issuing air quality warnings, Jim Anthony, founder and President of the Cliffs Communities, Inc will begin selling land in his newest resort, The Cliffs at High Carolina. This steep slope mountain development encompasses 3,200 acres and is the largest land project in Buncombe County. Homesites will be priced from around $500,000 to more than $2 million.

The Cliffs Communities, Inc. Vision for The Cliffs at High Carolina:

A thriving community…in a setting like no other. Years ago, when the Cliffs founder Jim Anthony first set foot on this land, he knew he was experiencing something extraordinary. Hiking along the ridges, he encountered high mountain meadows, natural mountain springs, and tumbling waterfalls. As he inhaled the fresh mountain air and felt the cool summer breezes, he was also mesmerized by the 360-degree views.

Mr. Anthony’s memories are true. A long time ago, he would have breathed Western North Carolina’s clean air and enjoyed the region’s stunning vistas but today, summer smog clouds the landscape and is a major health hazard.

How serious is Western North Carolina’s air quality? Critical, according to North Carolina lawmakers and environmental experts. On January 30, 2006 Attorney General Roy Cooper filed a suit 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.”

During the course of the trial this summer in U.S. District Court in Asheville, Bill Cecil, Jr. president and CEO of the Biltmore Company addressed the court about the issue of air pollution. He stated that the region’s poor air quality is threatening travel and tourism. Mr. Cecil said that during summer months Biltmore visitors cannot see Mt. Pisgah and on some days the smog reduces visibility to less than 3 miles.

It is unlikely that Judge Thornburg's findings, which are pending, will affect change. Duke Energy is constructing a new coal-burning plant in nearby Rutherford County. This facility along with others in North Carolina and those operated by the TVA will continue to release millions of tons of carbon dioxide waste into Western North Carolina's air.

Western North Carolina residents can see the contaminated haze and they understand the medical significance of a Code Orange day. The question is, will High Carolina purchasers be warned of the risks before they sign their contracts?

Federal Lawsuit Filed Against Grey Rock at Lake Lure Developer

The following information was obtained from Justia.com. The lawsuit, Goetz et al v. Land Resource, LLC et al was filed on August 26, 2008 in Florida Middle District Court. (Case Number: 6:2008cv01471)

Plaintiffs allege violation of the Interstate Land Sales Full Disclosure Act.

Are Land Resource, LLC Developments Encumbered?

On July 9, 2008 Mike Flaskey, CEO of Land Resource, LLC advised the media that the company was forced to shut down sales operations in six developments. Flaskey cited a souring economy and banks reluctance to lend as the reasons for the closures. Land Resource has 9 projects under development. They are:

Bridge Pointe at Jekyll Sound-Waverly, Georgia
Cumberland Harbour-St. Mary’s Georgia
The Docks at Caney Creek-Kingston, Tennessee
Grey Rock at Lake Lure-Lake Lure, North Carolina
Laird Pointe-Panama City Florida
Roaring River-Fayetteville, West Virginia
Still Water Coves-Lincolnton, Georgia
The Villages at Norris Lake-LaFollette, Tennessee
Wild Ridges-Marion, North Carolina

Land Resource has stopped sales in two Western North Carolina developments, Grey Rock in Lake Lure and Wild Ridges in Marion.

On August 31, 2008, Land Resource issued a press release on their proprietary website advising that the company was still in negotiations with lenders. Land Resource Chairman and CEO J. Robert Ward said that company officials are… “focused on preserving the value of its enterprise for the benefit of all company stakeholders, including vendors, suppliers and most importantly property owners and customers. We will remain steadfast in the pursuit of the financing we need…”

On August 1, 2008 a Topix Land Resource participant said:

My heart goes out to everyone here, such a shame. I just wanted to throw something else into the mix. LRC's actions have extended far beyond the boundaries of their developments. Not only has LRC done an incredible injustice to the property owners, but they are in tremendous debt to many vendors. Some vendors are having to absorb losses so large that it might put them out of business. I represent one of them.

Land Resource property owners have the right to know the nature and extent of the debt that may encumber the various named projects. The United States Department of Housing and Urban Development reminds purchasers that restrictions or encumbrances on lots, or on Subdivisions, could affect titles to lots.

On August 26, 2008 a group of Grey Rock at Lake Lure property owners filed a federal lawsuit against Land Resource, LLC and associated parties. The plaintiffs allege violation of the Interstate Land Sales Full Disclosure Act. Please see Goetz et al v. Land Resource, LLC et al.

Rain Triggers Mudslides in Two Western North Carolina Counties

Intense rainfall on August 26, 2008 set off mudslides and mudflows in Haywood and Rutherford Counties. Local newspapers provided the following information.

Haywood County

The Mountaineer reported in their August 29, 2008 edition that an east Canton home had been damaged by a mudslide.

In the article, "Welcome rain brings woes, too," Greg Shuping, director of Haywood County Emergency Management Services told Staff writer, Beth Pleming that, "Due to heavy rains, the mountain behind the home slid off and broke down a retaining wall, sending water and mud sliding up against the house. It was a pretty dangerous situation, but again nobody got hurt. The homeowners (who were in the home at the time) self-evacuated."

In the same issue of The Mountaineer Staff writer Justin Waybright covered the Haywood County industrial site mudflow. In his article, "Mud plagues Beaverdam site," Waybright reported that a dam on a sediment trap at a county construction site gave way and unleashed a river of muddy water onto a nearby roadway. Marc Pruett, Haywood County erosion control director, assessed the damage and stated, "The basin did not blow out, it filled up over the top, it caught hundreds of cubic yards of mud. The minimum requirement for a state site is to have a 10 year storm design and the rain last night may have exceeded the design."

Local residents have complained about construction activities since the project began and they say that the county has not observed 1996 regulations that restrict public nuisances.

Lake Lure/Rutherford County

Jean Gordon, a writer for The Digital Courier, spotlighted the mudslides that impacted Chimney Rock and Lake Lure.

In her article, “Mudslides hit lake area,”Gordon focused on the mudslide that forced the closure of a local lake front restaurant. The manager of The Beach Grill, Anthony Simmons, said he believed the mudslide had been caused by a developer who had clear-cut the slope behind the building. Officials also reported mudslides along Highway 64/74 and a mud flow near the Esmeralda Inn.

Read The Cliffs at High Carolina Property Report Before Signing Anything

In November 2008 The Cliffs Communities, Inc. will begin showing land in their latest planned community, The Cliffs at High Carolina. This mountain slope development is located near Asheville, North Carolina.

During the private sales presentation, participants will have the opportunity to view the layout for the 3,200 acre mountain property that define High Carolina. Guests will be shown a map for the centerpiece Tiger Woods golf course and selected homesites. They will almost certainly be told that the High Carolina lots which are priced from about $500,000 to more than $2 million are desirable real estate. While this information may be true there are two factors that may undermine the future value and salability of land in this development.

Geologic Hazards

Mountain land in the 21 county region known as Western North Carolina is inherently unstable. Professionals and lawmakers warn that the permitting of residential construction on unmapped and untested mountain slopes has caused and will continue to result in costly uninsurable property loss. In October 2006 Governor Mike Easley stressed the importance of the Western North Carolina landslide mapping program with this comment:

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.

The Cliffs Communities, Inc. knew when they purchased the Buncombe County tract that many of High Carolina’s building sites were likely hazardous. In August 2004 Buncombe County officials issued a report which stated that the county’s land was highly susceptible to slope failures. Preliminary Buncombe County geologic hazard maps support these findings. (In September 2004 landslides devastated fifteen counties in the region).

Considering the risks, this hazard information should be disclosed on The Cliffs at High Carolina website.

It is unknown whether the Cliffs’ staff will advise their prospective clients that High Carolina land sales are subject to federal law under the Interstate Land Sales Full Disclosure Act. This law demands that all interested buyers receive a comprehensive Property Report regarding the land for sale. The developer must provide a description of the land and disclose all known geologic hazards. Experts define a geologic hazard as a natural geologic event that can endanger lives and threaten property.

Encumbrances, Mortgages, and Liens

HUD requires the following warnings in all Property Reports:

A person with legal title to property generally has the right to own, use and enjoy the property. A contract to buy a lot may give you possession but doesn’t give you legal title to the lot. You won’t have a legal title to your lot until you receive a valid deed. A restriction or an encumbrance on your lot, or on the Subdivision, could adversely affect title to your lot.

The Cliffs at High Carolina Property Report must disclose all encumbrances and restrictive covenants.

The Cliffs Communities, Inc. is a privately held company but because their sales activities are regulated under provisions of the Interstate Land Sales Full Disclosure Act , the company must provide HUD with a copy of their Corporate Charter and financial statements. These documents are available to the public.

The United State Department of Housing and Urban Development advises all purchasers to carefully read their Property Reports before signing anything. The most important question that the government asks purchasers to consider is “If the developer defaults on the mortgage or goes bankrupt, could you lose your lot and investment to date to satisfy a claim against the development?"