Landowners sue Nantahala River developer

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Landowners sue Nantahala River developer

fr mystic Updated 1/22/20: The lawsuits between Mystic Lands landowners and developer Ami Shinitzky have since been resolved. Progess had been made on amenties and lots are still for sale.

When they bought up prime lots in the Mystic Lands development in Swain County, property owners envisioned living in a peaceful setting as close to nature as they could get.

But eight years later, they are entangled in a legal dispute with the developer, claiming the utilities and amenities that were promised to them never materialized, or had to be paid for out of their own pockets.

Litigation wasn’t in Mystic Lands Developer Ami Shinitzky’s plans either. He also didn’t anticipate the real estate crash and the great recession that hit the nation in 2007 just two years after he purchased the Mystic Lands property.

“I came here because I wanted to retire after selling my publishing company and have a quiet spot to write my book by the national forest,” he said. “I thought it was heaven on earth.”

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Apparently, so did the lot owners when they bought into Mystic Lands.

“A lot of lot owners were very patient, especially with the circumstances, but eventually it gets to the point you’ve got to do something,” said Perry Polsinelli, a lot buyer from Atlanta who’s a party to the suit against Shinitzky.

The property owners’ story isn’t unique. On the downhill side of the real estate crash, developers across the mountains failed to deliver on the grand plans they initially touted when selling high-end lots, leaving the trusting buyers not only without their promised golf courses and club houses, but sometimes not even a road to get to their lots.

Shinitzky’s story as a developer isn’t unique either.

“You buy the land and make a certain presentation of what you can deliver for infrastructure and amenities. Then you sell lots and the revenue pays for amenities and hopefully you get profit at the end,” he said. “In 2005, everything was rock and roll — we could do no wrong.”

The Mystic Lands includes three subdivisions — Mystic River, Mystic Ridge and Mystic Forest. Mystic River was the most controversial development, lining a narrow 35 acres along the bank of the Nantahala River that was divided into 32 lots.

Many rafters, kayakers and river outfitters protested the development out of fear it would destroy the natural beauty of the Nantahala Gorge. On the other hand, out-of-town nature enthusiasts who jumped at the chance to be on the water snatched many of the lots up as soon as they hit the market in 2005.

Polsinelli purchased his Mystic River lot in 2005 and is just now starting to construct his retirement home. While he wasn’t crazy about the river property being developed, he said the people buying property have a vested interest to protect it.

“I figured if it’s going to happen, I want a piece of it,” he said. “My main interest is to preserve it.”

Polsinelli and others also paid top dollar for their quarter-acre to one-third acre lots. The average selling price in 2005 was $300,000 per lot.

Property owners file complaints

In return for paying top dollar for riverfront property, property owners say they were promised things that still haven’t been delivered 10 years later.

Waynesville lawyer Bill Cannon is representing seven Mystic Lands property and homeowners.

Cannon said the lawsuit was served to Shinitzky at the Mystic Lands development a couple of weeks ago but no response has been received.

Tom Schreiber, another party to the lawsuit who purchased a lot in the Mystic Ridge subdivision, said his road up the mountain still hasn’t been paved like promised and it is a challenge for him to get up the road at times, much less have company over.

Meanwhile, Tom Anderson, who lives in Winston-Salem and built a second home in Mystic River in 2012, said property owners were not provided with a septic system as promised.

He and Polsinelli had to put in their own septic systems — a highly specialized and expensive one at that, known as the Bioreactor Membrane System, because of the proximity to the river and the high water table.

Polsinelli said the homeowners understand the recession hindered Shinitzky’s plans but ultimately, as the developer, it is his responsibility to live up to his obligations.

Schreiber agreed that property owners have been empathetic with Shinitzky and the sluggish economy that hindered lot sales, and thus a revenue stream to finish the development.

But it became a chicken or egg type situation. Shinitzky didn’t want to finish the amenities — including a clubhouse and an observatory — because no one was building. Yet no one was building because there were no amenities, Schreiber said.

The clubhouse finally got built with the help of the existing property owners. Schreiber said lot owners were asked to contribute in the form of a loan to Mystic Lands and $550,000 was raised to complete the clubhouse. He said the note was extended two times and Shinitzky just recently paid back the property owners.

He has no doubt that Shinitzky is passionate about finishing Mystic Lands, but he said the plaintiffs in the case want him to retire and turn the development over to the property owners association to operate. The property owners covenant says the declarant, Shinitzky, shall own the development for 20 years or when 95 percent of the lots are sold.

While Shinitzky claims that threshold hasn’t been hit yet, making him the legal owner of the development still, property owners aren’t so sure. They want Shinitzky to go ahead and turn over control of the development — including the shared roads, common areas, and property owners fund — so they can manage it themselves.

Whether 95 percent of the lots have been sold, thus triggering Shinitzky to turn over control of the development to property owners — is a matter of debate, since the number of lots is a moving target.

“He keeps certain lots off the market on the ridge, and he’s taking common area lots and splitting them up to sell,” Schreiber said.

Schreiber said the ideal outcome would be getting Shinitzky removed as the declarant so he is no longer able to appoint the property owner’s board of directors. He said the members should be allowed to elect their own board and set their own budget.

“The board’s always just rubberstamped everything because Ami can remove a board member without reason and appoint whoever he wants,” Schreiber said.

The straw that broke the camel’s back was when Shinitzky told members last summer that the property owners association owed him $280,000 because he overspent dues. That’s what spurred the lawsuit, plus the fact that Shinitzky has increased dues by 15 percent every year. Members were paying $700 a year in 2005. The cost recently reached $2,200 a year, and amenities still aren’t complete.

“He spent the money on development items,” Schreiber said. “Any normal developer would have gone bankrupt because the business model was broken.”

Randolph Properties also has filed suit against Shinitzky and Mystic Lands Development. Douglas Randolph is the managing member of the plaintiff. According to the lawsuit, Shinitzky sold Randolph a lot in December 2006.

Randolph’s complaint is similar to the others — claiming he purchased the property with the understanding that his road would be paved, an observatory would be built next to his lot, common areas would be located next to his lot and electricity would be available during the second quarter of 2007.

“… the representations made to the Plaintiff by the Defendants …. were false and fraudulent when made and the Defendants knew or reasonably should have known that the above representations to the Plaintiff were false and fraudulent when they were made to the Plaintiff,” the complaint stated.

Randolph claims the alleged misrepresentations have severely diminished the value of his property.

For example, what was initially billed as a shared common area was instead taken back by Shinitzky and sold for a lot instead, according to the suit.

Randolph also accuses Shinitzky of trespassing on his land to cut down large trees and excavate a road through the center of his property without consent, in order to reach the common area being turned into a lot.

In Shinitzky’s response, he admitted that roads were not paved and the electrical hookups weren’t available until 2014 but denied the claims about the observatory and common areas. He also denied using unfair and deceptive practices and that claims of financial losses were speculative. The defendant claims his entry on the plaintiff’s land was lawful and asked that the complaint be dismissed.

Shinitzky pushes forward

Shinitzky said Mystic Lands has survived the worst of the economy, and he is disappointed the lawsuit complaints have surfaced just as he is seeing the light at the end of the tunnel.

He purchased Mystic Lands at top price and sold lots at the going rate. He sold 86 lots in two and a half years before the housing market bubble burst. Then only five lots sold within the next five years at a third of the price.

Shinitzky said most developers would have filed for bankruptcy and walked away, leaving the property owners with an incomplete development that would further devastate their land values.

“That’s not what we did here, because I built my own home here — it becomes personal because your customers are your future neighbors,” he said. “You do whatever it takes to sweat it out and hope it’s not too bad, but it was really hard.”

He said he’s invested personal money to have work completed and expressed appreciation to the property owners for contributing funds in order to complete the clubhouse. The completion of the clubhouse did make property owners feel more comfortable about moving forward with their building plans. There are now eight homes built in Mystic River with the ninth and 10th under construction.

While things seem to be on the uptick, Shinitzky fears the negative publicity surrounding the lawsuit will breed more fear and halt growth, which Shinitzky said will only hurt the property owners and property values.

“They are willing to lose the war to win the battle. I don’t want to self-destruct,” he said. “Property values have declined everywhere — we can’t stop that — but there’s a difference between completely losing value by abandoning it. It would have been worse if I walked away.”

Shinitzky said the bottom line is that a majority of the property owners want him out of the equation. He said that would not happen until he feels Mystic Lands will be in the hands of people who will take care of it.

“I’ve worked on this for 10 long years. I’m never going to walk away. I’m not going to let someone else write the Mystic Lands story,” he said.

Shinitzky denies stealing money from the property owners association as claimed in the lawsuit, saying the claims are not provable and are based on false testimony and misreading of the financial records. He said the timing of the lawsuits couldn’t have come at a worse time since his wife died four months ago.

“Why would I build my house and stay here? If you’re going to steal, you would take it and leave,” he said. “I’ve worked so hard. They want to damage me for no reason at all other than vengeance.”

His plan moving forward is to sell more lots so that he can continue paving the roads and finish the amenities. He said work should start this summer on the observatory.

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