Homebuilding Giant Told to Pay $16M


One of the United States’ largest homebuilders has been ordered to pay $16.3 million in damages for mishandling the finances of the homeowners association at a condominium complex it was building in Florida.

D.R. Horton, which bills itself as “America’s Home Builder,” was ordered by Judge A. Jay Cristol, of the U.S. Bankruptcy Court, to pay the money, including $12.5 million in punitive damages, to the Majorca Isles Master Association. The Master Association, which filed for bankruptcy in 2012, served as the complex’s main homeowner’s association, overseeing five other associations.

The judge said the handling of the HOA’s funds by D.R. Horton employees between 2006, when construction began, and 2011 was “motivated solely by greed," and the homebuilder “knew the conduct was certain to cause injury to the Master Association and unit owners.”

It’s the homebuilder’s second major legal hit this year; in May, D.R. Horton was ordered to pay $9.6 million over defective stucco, windows and roofing at a condo complex in Jacksonville.

Faking Budget Numbers

D.R. Horton began building Majorca Isles, intended to be a 681-unit condo complex, in Miami Gardens in 2006. During the period when construction was ongoing and there were few homeowners, the company appointed its employees to run the HOA.

According to the South Florida Business Journal, during that time, the HOA was failing to collect on many units’ monthly fees, as nonpayment became more common during the housing crisis of the late 2000s. The Horton employees allegedly covered up the nonpayment problem, faking budgetary numbers and leading homeowners and buyers to believe the HOA was in better financial shape than it was.

In 2011, D.R. Horton stopped building at Majorca Isles due to the economic downturn, though only about half of the originally planned 681 units were built. The company turned the HOA over to residents in January of that year. In April 2012, the association filed for bankruptcy.

‘Between Not Nice and Evil’

The judge ruled that the D.R. Horton employees who had been running the Master Association used its funds to pay off bills from the other five condominium associations, bleeding the main HOA’s account. The Master Association then cut amenities that homeowners were entitled to as members.

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D.R. Horton reported revenues of $10.8 billion in 2015, and has been the country's largest homebuilder by volume for the past 13 years.

“The actions by D.R. Horton can only be classified somewhere between not nice and evil,” Cristol said in his ruling.

Cristol ruled that D.R. Horton had violated the state’s Deceptive and Unfair Trade Practices Act.

A D.R. Horton representative told the Wall Street Journal the company plans to appeal the ruling. The company did not respond immediately (Monday, Nov. 14) to a request for comment.

About D.R. Horton

D.R. Horton reported revenues of $10.8 billion in 2015. The Fort Worth, TX, firm was founded in 1978 by Donald R. Horton, who is currently its chairman. David V. Auld was named CEO in October 2014.

The company has been the country's largest homebuilder by volume for the past 13 years, according to corporate literature.

Heron’s Landing Case

In May, after a 38-day trial, a Florida jury ordered D.R. Horton to pay $9.6 million in a case stemming from Heron’s Landing, a condo complex in Jacksonville. Homeowners there alleged that stucco work, windows and roofing were defective, leading to water damage and other issues.

D.R. Horton denied that the work was shoddy. The $9.6 million in that case is to be used to replace the problematic features on the homes. The company indicated at the time that it would appeal.


Tagged categories: Bankruptcy; Condominiums/High-Rise Residential; Criminal acts; Developers; Finance; Good Technical Practice; Laws and litigation; North America; Residential Construction

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