HOUSTON (CN) — The state of Texas on Thursday sued northeast Houston real estate developer Colony Ridge and its primary owner, John Harris.
The attorney general's office accuses the company of deceiving Hispanic homebuyers — particularly immigrants and buyers who do not speak English — with the prospect of cheap land, quick loans, and move-in-ready homes. In fact, the tricked buyers were left to face thousands of dollars in repairs, high interest rates and the threat of foreclosure, the AG's office says.
According to the AG's office, the deception began with a barrage of fake social-media posts. Colony Ridge instructed its sales employees to use multiple SIM cards and phone numbers to pose as hundreds of nonexistent Colony Ridge owners who were willing to sell.
These false profiles then spread false property listings for the Colony Ridge subdivisions. The company scraped images of homes from the internet to trick potential customers, the AG's office says.
The company backed this social media campaign with its own fraudulent marketing, the AG's office argues in its lawsuit. It says developers stated online that their properties had access to all necessary municipal services (including water, gas, sewage and electricity) and that prospective buyers would need just a few hundred dollars to set up utility accounts. In fact, many properties had no services at all, and even those that did have them required tens of thousands of dollars in infrastructure upgrades and repairs.
Once a prospective buyer had fallen for the ruse, a second company, Colony Ridge Land aka CR Land, would offer loans to the buyer, according to the AG's office.
While these 20-year loans had an easy buy-in — including a low $500 down payment and little to no prior credit checking — they also came saddled with a 12.9% interest rate. That meant, as CR Land’s chief financial officer told the Texas Senate in October 2023, that Colony Ridge homeowners could end up paying $85,000 on a lot worth just $31,000.
Even after buyers finally moved in, Harris and Colony Ridge used their property owners association, El Norte POA, to levy hundreds of dollars in additional fees and fines against the homeowners. They charged each homeowner $120 in annual dues but provided few if any services in return, the AG's office says.
Through the whole process, the AG's office says Colony Ridge also exploited the language barrier to lure and entrap their buyers. While their advertising targeted almost exclusively Spanish speakers, the company would only give legal paperwork to the buyers in English — leaving them unaware of what exactly they were signing, according to the office.
When it comes to what happened to these buyers, “the proof of Colony Ridge’s scheme is in the pudding,” attorneys with the AG's office stated in Thursday's lawsuit.
Colony Ridge homes had a foreclosure rate “roughly 50 times greater than the 2023 nationwide average,” those lawyers wrote, with 12% of their homes getting foreclosed on. Because Colony Ridge had provided many of the loans, ownership of the homes often reverted right back to the company.
“CR Land routinely repurchases the lots in foreclosure and resells them at higher prices," the lawyers wrote. "In fact, CR Land often resells a foreclosed lot to the very same consumer at a significantly higher price."
"The more foreclosures CR Land initiates, the higher likelihood it will acquire residential lots with free improvements which make the foreclosures profitable," they added. "Thus, Colony Ridge’s business model incentivizes foreclosures.”
The state lawsuit comes just three months after the federal government brought its own lawsuit against Colony Ridge on similar grounds. Like Thursday's suit, that one was also filed in the Southern District of Texas, which is headquartered in Houston.
While both suits accuse Harris and Colony Ridge of violating the federal Consumer Financial Protection Act, the Texas suit also goes after the developer for violating the state’s own Deceptive Trade Practices Act.
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