Dallas Developer of Lake Whitney Resort Sued For Allegedly Pocketing Owners' Assn. Fees
More than 450 current and former property owners at a Lake Whitney residential golf community, including dozens of locals, are suing Dallas-based developer Double Diamond, Inc., claiming they were charged exorbitant fees by a puppet property owners' association that funneled the proceeds directly to the company.
In some cases, the complaint alleges, the fees became so burdensome that some of the plaintiffs were forced to walk away from their property, which they allege was subsequently foreclosed upon by Double Diamond's financing arm.
It all began, according to suits filed in Dallas and Hidalgo county courts, with an invitation to tour the White Bluff Resort -- an offer that included free golf clubs and a stay at the resort's signature inn. What followed, plaintiffs claim, was a high-pressure sales pitch in the "closing room," where salesman were allegedly instructed that a potential buyers has to refuse 10 times before they are allowed to leave. After each pitch, the complaint says, the salesman would leave the room to allow a husband and wife to have a private discussion. But the sales force was allegedly eavesdropping, then adjusting the pitch accordingly.
After signing, it's alleged that residents had to pay a $12,000 fee to join the golf club, which uses a course open to the public. They also had to join the property owners' association, on whose board of directors sat Double Diamond CEO and president R. Michael Ward of Highland Park and a number of other executives. Property owners paid a mandatory $250 "food and beverage" fee that subsidized Double Diamond's hospitality operations, they claim.
The property owner's association was also responsible, according to court filings, for the maintenance of the golf course, even though all of the proceeds went to Double Diamond. Hundreds of thousands in fees were levied by the board for security costs and road maintenance, despite the fact that many of the resort's visitors were public visitors, not private residents, who'd be spending money with Double Diamond. The property owners' association, the lawsuit alleges, was a wholly owned subsidiary whose tax-exempt status Double Diamond used to collect millions, "then [use] that money to subsidize its own for-profit operations."
The company maintained control of the board by rigging elections and changing the bylaws, according to the complaint.
And the property owners paid up under threat of foreclosure. At least they did until they couldn't, at which point the company's mortgage finance arm foreclosed on the property. Contrary to what they'd been told by pitchmen, some of the plaintiffs claim there was no market for their property.
Winstead PC, counsel for Double Diamond, would only say that "their clients believe there is no merit to the allegations and the matter will be vigorously defended."
This isn't the first time the company has been dragged to court. The Kentucky Attorney General sued Double Diamond in June for violating state consumer protection law, among other things.