Carbondale sues developers over alleged affordable housing violations

CARBONDALE — The town of Carbondale is suing the developers of the Lines II Condominiums on West Main Street, for allegedly violating the town’s deed-restriction regulations on four of the six housing units.

The town seeks to recoup damages, costs and attorneys’ fees, as well as enforce the agreed-to deed restrictions, claiming that the developers, George Lines and Tong Luu, made numerous breaches of contract requirements.
The lawsuit was filed by town attorney Mark Hamilton in Garfield District Court on Feb. 25.

According to the town’s claim, in 2007, Luu and Lines developed the six-unit condominium project. As part of development approvals, the town of Carbondale had required that the developers restrict the occupancy of four of the six units to individuals who would use the condominiums as a primary residence, according to the lawsuit. The agreement also encompassed a restriction on the sale, and potential resale of the units.

Under the town’s resident-occupied, or R.O., deed-restriction agreement, the units
were to be conveyed to: “qualified buyers … who represent and agree to occupy the unit as their sole place of residence for a minimum of nine months per year and to not
sell, or otherwise transfer the unit for use in a trade or business.”

Further, the deed restriction required that use of the units be limited exclusively to
qualified buyers, under the town’s affordable housing requirements, and their families.

The deed-restriction agreement was adopted and accepted and recorded by both the Carbondale Housing Authority (CHA) and the Carbondale Board of Trustees, according to the town.

However, in December of last year, Garfield County Public Trustee records showed that Lines and Luu attempted to sell the four units to a limited liability company under the name of MD1, for $490,000 each.

“Upon information and belief, the sole members of MD1, LLC are David Daniels and Mike Peppers,” according to the lawsuit. Timberline Bank, another defendant in the case, provided the financing for the purchases.

According to county records, in January, MD1 turned around and listed all four restricted condominium units at advertised prices of $635,000 per unit, more than $145,000 more per unit than had been paid only weeks before.

The town’s lawsuit claims that Daniels and Peppers did not meet the “qualified buyers” or “natural persons” standards that were outlined in the deed-restriction agreement.

The deed-restriction also required that the prospective buyers be pre-qualified by the CHA and that prior to closing, all documents for the sale of a unit be submitted to the CHA for review and approval.

Neither Lines or Luu, or the MD1 company, requested or received prequalification, nor was the CHA provided with a copy of the purchase and sale contracts prior to the closings, according to the town’s lawsuit.

As a result, due to the developers non-compliance with the deed-restriction regulations, the title transfers of the units from Lines and Luu to MD1 are considered null and void, the lawsuit states.

Lines did not return a phone call Wednesday seeking comment on the lawsuit.