In The News
- Buyers' lawsuits against Coastal Companies focus on sales tactics
By Shelby Sebens
Shelby.Sebens@StarNewsOnline.com
A developer that was selling lots for more that $200,000 apiece four years ago now says similar ones in the same subdivisions were worth only $55,000.
To try to cut its tax bill, The Coastal Companies has appealed the value of 838 properties it owns in Brunswick County, arguing the county illegally raised the values in 2008.
When asked if that is an admission that lots sold in 2006 went for much more than they were worth, attorneys for the developer didn't directly answer.
“We are talking about the failure of the county to follow process, not the valuation of the individual lots,” said Elaine Jordan, in-house attorney for The Coastal Companies.
The lots' values, however, are a central issue in lawsuits filed against The Coastal Companies by disgruntled buyers. They accuse the company of using fraudulent tactics to inflate the market.
Appraisal challenge
The Coastal Companies owes the county more than $2 million in back taxes and initially blamed the unpaid taxes on an issue with the county. The company contended that a water line crossing its property was blocking development and that the county owed the developer more than the total of the taxes.
But now The Coastal Companies is also saying the county illegally raised the tax values of company-owned property in 2008, which increased its tax bill by $400,000.
“The 2008 tax bill was a blow to us because it was so unexpected,” Jordan said.
After a countywide revaluation in 2007, the county realized in 2008 that it had undervalued several lots, Assistant County Attorney Jana Berg said.
So the county went back and adjusted those values. Berg said state law allows the county to correct mistakes in a non-revaluation year.
But The Coastal Companies argues, and in at least one case the state has agreed, that the county acted improperly. Coastal is saying, for example, that a lot in Ocean Isle Palms should be valued at $55,000 instead of the $233,750 the county assigned it in 2008.
Berg said the county changed the value after realizing the lots sold for more than $200,000. She said the county's appraisers had initially based values on the fact that the subdivision lacked basic infrastructure. But the county's ordinance does not allow for the appraisers to use that as a basis for valuation.
Hearing slated
The N.C. Property Tax Commission has ruled that the county improperly revalued an Ocean Isle Palms property owner's lot and ordered the to change it back to $55,000.
Berg said the county has filed an appeal with the N.C. Court of Appeals. She also said the outcome of one appeal has no bearing on another.
The Coastal Companies has appealed the tax values for 2008-2010 and will have a hearing in front of the county board of equalization and review at 9 a.m. May 20.
Tax Administrator Tom Davis said the appeal includes the majority, if not all, of the property owned by Mark Saunders' various companies. But he said the board of equalization and review can only take appeals for the current year and will not be able to review the 2008 and 2009 values.
The five “group” lawsuits – filed by property owners in three phases of Ocean Ridge, Seawatch at Sunset Harbor, Ocean Isle Palms and River's Edge in Shallotte – allege that Saunders' development company and mortgage company worked with James Powell Appraisals, BB&T and Four Oaks Bank and closing attorney Douglas Baxley to concoct a fraud scheme that inflated the market.
The suits include claims that Coastal Companies sales associates pushed buyers with high-pressure and misleading sales tactics. They also recently added a claim that Baxley recorded artificially high sale prices on the lots with the register of deeds so the appraisal company could establish higher lot values based on those excise stamps.
The lawsuit claims that seller incentives, which included the developer paying for two years of interest, were included in the recorded sale prices of the lots to make the costs appear higher than they actually were.
Neither Baxley nor a representative from James Powell Appraisals could be reached for comment.
Company dismisses claims
Attorneys for The Coastal Companies say the claims are baseless.
In an opening statement asking Judge John Jolly of the N.C. Business Court to dismiss the lawsuits, the company states, the claim has “everything but the foreboding organ music and a voice-over from that guy who promotes horror movies.”
The lawyers for Saunders' companies and the banks argue there is no hard evidence in the case.
Jolly is considering whether to stop the banks from foreclosing on property owners until the lawsuits are resolved.
Chris Graebe, outside counsel for Saunders and The Coastal Companies, said this is a case of property owners trying to recoup losses from the economic crash.
Graebe points to a “buyer beware” statement property owners signed that says the dates for completion of the basic infrastructure are estimates and that amenities are not guaranteed. He also pointed out that the buyers had seven days from signing the contracts to bow out of the deals.
But an attorney for the property owners, Wes Hodges, argues the developments are not victims of the economic downturn, and the property owners argue the lack of infrastructure in these developments that is keeping them from building is instead a product of the fraud scheme.
Shelby Sebens: 343-2076
On Twitter.com: @ShelbySebens
Published: Saturday, May 15, 2010 at 4:44 p.m.
- Date Posted: May 16, 2010