Developer sues landowners, township
By PAT FRIDGEN Echo Pilot

K. Hovnanian, the developer of Red Oak Estates, has filed a complaint in Franklin County Court against landowners Alan and Kendra Meyers, and Antrim Township. The plaintiffs and defendants have different intrepretations of the sales contract signed in 2005. The model home for the development is on the left.

The softened real estate market has caused one developer to change its plans in Antrim Township. K. Hovnanian of Pennsylvania and Maryland purchased 59 acres from Alan and Kendra Meyers with the intention of creating Red Oak Estates off Brown's Mill Road in two phases.

The two parties closed on the sale of 20 lots in 2005. The second closing for 65 lots was to be in November 2006. KHOV asked to postpone the closing until November 2007 due to the flat sales market.

The Meyers agreed but they and KHOV could not concur on the terms, so KHOV notified them last November it would not purchase the remaining lots.

In August KHOV filed a complaint in the Franklin County Court of Common Pleas against the Meyers and Antrim Township. The township holds the completion bond, which KHOV stands to lose if subdivision improvements are not completed by Dec. 31, 2008.

The complaint is an Action for Declaratory Judgment.

"It's not a lawsuit," said Paul Schemel, attorney for the Meyers.

He said the complaint was filed and served, he will file a response as will the township, and then the case will enter a discovery phase. Any hearing before a judge would be in 2008, he expected.

"This is based on legal issues with regard to contracts," he said. "KHOV had a contractual obligation to post a bond, which they did. They also had a contractual obligation to buy the lots. They reneged on that."

William Otto, counsel for KHOV, agreed that the contract was the issue.

"We have a different view of the agreement. We tried earlier to resolve the matter. It's a contractual matter that we dispute."

Parting of the ways

According to the court document, KHOV and its insurance company want a judge to interpret the written contract as well as the obligations between KHOV and the township. It states that if the court does not hear the controversy KHOV will be subjected to damages of $1.3 million. KHOVcontends that with the termination of the Lot Purchase Agreement, the Meyers are obligated to substitute their own bond for KHOV's bond.

In its presentation of material facts, KHOV asserts that Alan Meyers received approval for the subdivision from Antrim Township in 2004. The plan was approved and recorded in the Office of the Recorder of Deeds Oct. 10, 2005.

The sellers and buyers signed a purchase agreement in August 2005. After amending the closing dates that October, the purchase price would total $5.2 million when the deal was completed.

Though KHOV posted a $2.4 million bond that September for improvements including streets, sanitary sewer, utilities, erosion control and stormwater management, it states that the obligations to complete the improvements were undertaken by Meyers as the developer.

The Antrim Board of Supervisors reduced the bond to $1.3 million in September 2006. The township's engineer ruled that the remaining funds were sufficient for the work yet to be completed.

The following month KHOV told Alan Meyers and Schemel that the infrastructure for 43 lots was done. Due to the housing market, it wanted to delay closing on the second phase of lots for a year.

Schemel responded in a letter that the Meyers were agreeable, but wanted $20,000 monthly interest payments in the interim. KHOV in turn said it would not close on the remaining lots. Schemel then issued a notice of default.

That led to KHOV's move to the courts.

KHOV's request

The complaint includes three counts for declaratory judgment.

KHOV contends that the wording of the contract is such, that by failing to produce their own bond, the Meyers are in breach of contract. It cites the phrase 'in the event of the purchaser's wrongful failure to close upon the lots' seller's sole remedy was to receive the $500,000 deposit at the initial closing.

Otto said the Meyers authorized the deposit be returned to KHOV. "The agreement was complied with."

The second count states that the Meyers will receive unjust enrichment if Antrim Township uses KHOV's bond to complete the subdivision improvements. In that case, it says, the Meyers will have developed lots instead of undeveloped lots to sell.

The third count is lack of privity concerning Antrim Township. KHOVsays the township was not a party to the Lot Purchase Agreement and is an incidental beneficiary. It states Antrim is obligated to accept a substitute bond from the Meyers.

Schemel commented on the municipality's situation.

"They are caught in the middle because they are holding the bond."