News

JUDGE ALLOWS COUNTY TO SHED SEVEN FALLS

By Lightning Reports, Published: January 26, 2017

Unable to recruit a developer to take over and faced with infrastructure costs far greater than a surety bond payment, Henderson County has given up on efforts to salvage the failed Seven Falls project and turned the money over to a court.

Henderson County Superior Court Judge Mark Powell on Thursday granted Henderson County's request to be relieved of further responsibility regarding Seven Falls Golf & River Development. After a previous lawsuit against the developer's insurance writer, the county obtained the proceeds of a $6 million surety bond due to the default of developer Keith Vinson, who is currently serving a federal prison sentence for defrauding Seven Falls lenders and property buyers. Vinson sold lots for a quarter-million dollars and up and promised a premium golf course, tennis courts and a retail and services village in the 900-lot development on the French Broad River in Etowah.

“After spending much effort and staff time searching for a new developer or another way to obtain the subdivision infrastructure promised to the lot purchasers, it became clear that there was neither enough money from the bond to complete the work nor an alternative method to reach that goal,” County Attorney Russ Burrell said in a news release.

"While this litigation was pending, I know that I talked to 15 developers who were in the business of developing subdivisions, and I mean golf course subdivisions, not only locally but all over the country," he said in an interview. "None of them saw it as profitable enough to get involved."

Burrell also began negotiating with lot owners and their attorneys to see if they would be willing to organize as a homeowners association and take on the work of competing roads, water and sewer lines and other site work.

"They weren't willing to do that because they would have had to assess themselves additional money to do the work," Burrell said. Having exhausted options that they thought might salvage the project, county officials filed motion for summary judgment, shedding Henderson County from the state. Judge Powell agreed. The remaining money, $5,540,077.64, will go from the country treasury to the Superior Court. Powell will appoint a mediator, who is expected to hear from two sides who are in a dispute over how to disburse the money.

About 25 to 30 property owners, represented by Sharon Alexander, say a payout should be apportioned based on how much buyers paid for their lots. Developer Scott McElrath who bought around 75 lots from a South Carolina bank that had foreclosed on them, wants the payout to be an equal amount for each lot, regardless of the purchase price. McElrath is represented by Esther Manheimer, a land-use attorney who is also the mayor of Asheville.

"That is not our fight," Burrell said of the dispute. "The county will pay the remaining bond funds to the court. The court will then decide who gets what. That fight is going to be determined by the court unless there's some compromise" by the parties before then.

Henderson County is also seeking a change in state law that will prevent situations like Seven Falls from happening again.

State law sets out the requirement in which developers must have a surety bond as insurance against a project's failure, as happened at Seven Falls. But it says nothing about what happens "if the work isn't done and it doesn't say what happens if there's not enough money," Burrell said.

Burrell has repeatedly told his bosses on the Board of Commissioners that the county was sailing in uncharted waters because state law fails to spell out what happens in a failed development with an inadequate bond. He said he spent hours this week talking with bill drafters in the state Legislature who are writing a bill that would fix the problems. State Rep. Chuck McGrady, who was on the Board of Commissioners when Seven Falls was approved in 2006, supports the bill, Burrell said.