Since three would-be buyers at Honua Kai sued to cancel their contracts in December, another nine unhappy buyers have filed complaints in 2nd Circuit Court seeking refunds.
By HARRY EAGAR, Staff Writer
reprinted courtesy Maui News 1/24/09
Since three would-be buyers at Honua Kai sued to cancel their contracts in December, another nine unhappy buyers have filed complaints in 2nd Circuit Court seeking refunds.
Richard Rost, who is representing all 12 purchasers, said this week that Intrawest had not responded to letters sent on behalf of his clients asking that their contracts be canceled.
The total of deposits he is seeking to recover is about $4 million, with the possibility of recovering treble damages if the plaintiffs succeed in their claims that Intrawest companies failed to comply with state laws governing condominium sales.
Since Intrawest and its majority owner, Fortress, are reportedly under financial pressure, the buyers are worried that the money they placed in escrow could not be recovered in a failure, because some of it has already been disbursed. They are asking the court to sequester the assets.
Intrawest accepted a list of questions about its position but had not responded to them by Thursday night.
Rost has amended the original complaints, based on new information as it comes out.
The contracts appear to say that Intrawest would not take out mortgages for more than $240 million for construction of the resort at North Beach, which is due to open its first phase this month, he said. But a Dec. 24 letter to buyers shows that Intrawest has mortgaged the resort for "at least $650 million." Rost said the total may be $700 million, a point he expects to clear up when discovery begins.
Developers are required to file various contingent and final reports on their plans with the state.
Among the objections by some of the buyers is that they were not told that the resort is a few hundred yards from the Lahaina wastewater treatment plant. The complaints say that reports in November 2005 and November 2006 did not mention the plant, although it was disclosed in June 2007.
That was after all Rost's clients had signed contracts, some as long ago as 2005.
Buyers made down payments of $130,000 to $320,000. When some wanted to avoid step payments, they discovered the company was charging 1.5 percent per month late fees, which Rost says is 18 percent a year and "unconscionable."
Buyers were also surprised to find that if they put their units in a rental pool but did not choose an Intrawest-related company as manager, their guests would be denied use of common areas. State law says condos cannot prevent access by owners.
The Legislature revised Hawaii Revised Statutes Chapter 514 in 2006, so not all the plaintiffs may have the same rights of cancellation, but Rost contends, for example, that the late disclosure about the sewage treatment plant should have opened a new 30-day window for buyers to back out.
The main claim, though, is that the contracts required buyers to give up several legal remedies, including the right to go to court.
Intrawest and its associated companies did not give up any of those rights for themselves, however.
Rost said a decision last year by the Hawaii Supreme Court declared that such lopsided contracts are unacceptable as a matter of public policy and that they will not be recognized as valid.
That lawsuit involved the sale of a hotel, not condos, but Rost said: "I read it to mean . . . we won't allow those contracts to be recognized. I may be 100 percent wrong, but I don't think so."
The plaintiffs relied upon the representations of the sellers that the agreements were in accord with both federal and state laws and were thus enforceable between the parties, wrote Rost.
Since, he claims, the agreements did not comply because they lacked required language regarding liquidated damages, they constituted negligence and fraud, and his clients are entitled to get their money back, with interest, plus attorney's fees and special damages.
The defendants, all associated with Intrawest ULC of Vancouver, are Intrawest, Maui Beach Resort Limited Partnership, Northwest Maui Corp., Playground Destinations Properties Inc. and Intrawest Hawaii Inc.
The plaintiffs, some of whom are buying one unit jointly, are Jeff Clark, Richard Mader, Mickei Riley, Hansi Riley, Mickey Norvell, Bruce Stewart, David Ward, Barbara Duhamel, Michael Elam, Judith Elam, Mark Neumann, Victoria Neumann, Kathi McQuitty, Christina Dickson, Frank Linhart, Jill Linhart, Geoffrey Wilson, Shiobhan Wilson, Todd Brooke, Saeed Sahami, Jila Tabib, Mohammad Mirzamaani and Fatemeh Mirzamaani.
* Harry Eagar can be reached at heagar@mauinews.com.
reprinted courtesy Maui News 1/24/09
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