University Park homeowners sue builder D.R. Horton

The University Park neighborhood in Bluffton was beautiful when sales started in 2005, Realtor Pat Hancock said.

Its array of new homes, located behind the campus of the University of South Carolina Beaufort, sold quickly, in part because buyers expected they'd be able to rent units for $500 per bedroom, she said.

Since then, D.R. Horton has maintained control of University Park's homeowners association as the neighborhood has deteriorated, angering owners and leading some tenants to move out, said Hancock, who owns two of the 277 homes there and manages the rental of 100.

Hancock says she's heard a refrain from people who've moved out: "We loved this area when we moved in, but it's not the same place," she said.

The problems have prompted a group of owners, including Hancock, to file a lawsuit against D.R. Horton, claiming the company mismanaged and underfunded the association.

The relationship between the neighborhood's builder and some owners is so frayed that an advisory committee of owners resigned and some stopped paying their dues. As the disagreement intensified, D.R. Horton offered to settle to avoid a trial, but owners say they refused. Melissa Smith, vice president of sales and marketing for D.R. Horton's coastal Carolinas division, declined comment on the lawsuit. Jessica Hansen, a spokeswoman at the company's headquarters in Texas, said she was not immediately familiar with the case.

According to the lawsuit and interviews with homeowners:

• They are now responsible for their own lawn care and trash collection, which the association previously had provided.

• The association does not have enough money to pay bills or maintain cash reserves for major repairs or emergencies.

• D.R. Horton allowed taxes on the neighborhood's amenity center to become delinquent.

The lawsuit alleges the builder breached its duty to the association's members and violated South Carolina's Unfair Trade Practices Act.

The suit seeks unspecified actual and punitive damages and legal fees. It also asks the court to order D.R. Horton to relinquish control of the association, provide accounting information and deed the neighborhood's common property to the association.

Developers generally maintain control of an association while units in the development are being sold and then turn the association over to homeowners. In this case, University Park's covenants allow D.R. Horton to control the neighborhood's association as long as the company continues to own property or until January 2010, whichever comes sooner, Hancock said.

Plaintiff Chris Breeland said the owners who are suing want to take care of their own neighborhood and build a better sense of community.

'That's what I bought into," he said.

Hancock said the neighborhood's problems have caused property values to plummet more dramatically than in other area developments, tarnishing University Park's reputation.

Since the association stopped paying for trash collection and lawn care, bags have piled up and garbage blows into lagoons, Hancock said.

The association also has stopped providing security patrols of the neighborhood, leading to an increase in vandalism and graffiti, she said.

Hancock has tried to solve some of the problems herself.

She has arranged for trash pick-up and mulching for the properties she manages, but she said many homeowners haven't done so.

She also has asked law enforcement officials to increase patrols and is working to move officers into the neighborhood to keep it safe.

Because it had control of the association, D.R. Horton knew or should have known some homeowners would not pay their assessments and failed to fund the association accordingly, according to the lawsuit.

Instead, the lawsuit alleges, the builder "purposely set the amount due for assessments low in a deceptive manner in order to entice buyers to purchase units in University Park."

Many of the neighborhood's owners, she suspects, have never come close to breaking even on the property they bought there. "Now all these owners are sitting there, and they're furious," she said.

The lawsuit, originally filed in Beaufort County, was moved to a federal court, but has since been sent back to Beaufort County, Hancock said. The discovery phase of the trial -- when attorneys on both sides exchange factual information pertinent to the case -- should start next week, she said.