HOUSTON (CN) - An HOA's attorney sabotaged FEMA's and Galveston's buyout offer of five hurricane-damaged homes because HOA board members thought it would hurt their property values, the five homeowners claim in court.
The Sands of Kahala Beach HOA and the owners of five homes in the subdivision sued the association's former attorneys, Bruce I. Schimmel and Stephen R. Lewis Jr., in Harris County Court.
"The Sands of Kahala Beach ('SOKB') is a small subdivision consisting of (16) sixteen lots in an upscale beachfront subdivision in Galveston, Texas," the complaint states.
"Twelve (12) of the lots have homes constructed and four (4) lots are vacant. On September 13, 2008 Hurricane Ike hit Galveston and caused unprecedented damage. The hurricane damaged the landscape of the SOKB, wiped out a GeoTube, as its only dune protection, and brought the homes dangerously close to the water.
"Before the hurricane, there were dune walkovers extended out to the beach, allowing a large grassy yard between the homes and the ocean. After Hurricane Ike, it wiped out over six feet of sand under the houses, leaving pilings exposed and leaving more than half the homes with tides coming underneath the structures.
"Home values immediately plummeted."
The plaintiff homeowners say the damage led to a dispute with the HOA's board of directors.
"The main dispute was that the BOD opposed a government buyout of properties within SOKB, in spite of the majority of owners supporting it. Defendant Schimmel acted on behalf of the BOD to stop the buyouts, and vigorously fought against the majority," the complaint states.
"The buyouts were part of a FEMA Hazard Mitigation Grant Program ('HMGP') offered to beachfront owners after Hurricane Ike hit Galveston in September 2008. The HGMP was established to mitigate future damage by purchasing properties that had been damaged more than 50 percent and were likely to incur damage again.
"The City of Galveston ('COG') was to purchase the properties, acting as a subgrantee of FEMA funds. Five SOKB homeowners ('Buy Out owners') applied and qualified for the program because they were deemed by the COG to be more than 50 percent damaged and were located on the beachfront."
The city offered to buy out the owners for prices ranging from $789,000 to $886,000, according to the plaintiffs' attorney Wayne Paris.
"The BOD vehemently opposed the buyout because of their perceived loss of value of their properties after the buyout, the public use of the land, and the loss of homeowner dues. The properties to be purchased by the COG were to be kept as open space in perpetuity, which was a great concern for the BOD," the complaint states.
"The BOD also erroneously claimed the homes that qualified for the program were not 50 percent damaged and used that claim as a tool to stop the buyouts. Defendant Schimmel knew the claims were bogus but encouraged the BOD to pursue them anyway.
"The HGMP program was designed for a situation like this, where it could purchase the damaged homes and avoid repetitive claims. Five of the SOKB homeowners accepted the opportunity to avoid heightened risk.
"However, the board of directors ('BOD') of the HOA encouraged homeowners to stay, touting an impending major Beach Renourishment Project coming from the General Land Office, which could restore the beach. Unfortunately, that project was canceled in November 2010."