Texas lawsuit accuses Colony Ridge of 'pernicious business model'

The state of Texas has lodged a lawsuit targeting Colony Ridge for allegedly perpetrating a scheme that involves selling properties while misleading buyers about their condition.

"Colony Ridge, Inc. (CRI), Colony Ridge Development, LLC (CR Development), Colony Ridge BV, LLC (CR Bella Vista), Colony Ridge Land, LLC (CR Land), T-Rex Management, Inc. (T-Rex), (collectively, 'Colony Ridge') and their owner, John Harris, have built a sprawling community northeast of Houston on a foundation of false, misleading, and deceptive sales, marketing, and lending practices," the suit claims.

The suit describes a "pernicious business model" in which a high rate of defaults perpetuates a profitable cycle in which Colony Ridge can scoop properties up only to sell them again.

"Colony Ridge's business model is predicated on churning land purchasers through a foreclosure mill. Namely, Colony Ridge targets foreign born and Hispanic consumers with limited or no access to credit with promises of cheap, ready to build land and financing without proof of income," the suit claims.

"And Colony Ridge lies in a multitude of ways about the conditions that those buyers will experience on the property. Many of those conditions, once discovered, preclude the buyer from actually making any practical use of the land. The result is that the buyer, having discovered that they cannot meaningfully use the land, defaults on the land financing at jaw-dropping rates. Colony Ridge then forecloses on the buyer, re-possesses the land having lost nothing, and then turns around and sells the same land again to another unsuspecting buyer with the same deceptive set of misrepresentations. At best, consumers struggle with unexpected financial burdens for years to avoid foreclosure, to the benefit of Colony Ridge and its pernicious business model," the lawsuit alleges.

"On information and belief, CR Land routinely repurchases the lots in foreclosure and resells them at higher prices. 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. Thus, Colony Ridge’s business model incentivizes foreclosures," the suit claims.

It also claims that Colony Ridge requires buyers to join a property owners association but does not utilize those funds to better neighborhoods.

"After Colony Ridge sells property to buyers, it further enriches itself by imposing mandatory membership dues in its affiliated Property Owners Association (POA). Namely, Colony Ridge requires buyers to join a POA and imposes mandatory yearly dues of approximately $120 per member," the Texas suit declares. "However, contrary to how legitimate property owners associations operate, Colony Ridge fails to spend the millions in collected POA dues to improve or benefit consumers’ neighborhoods. Indeed, Defendants do nothing to enhance the welfare of its dues-paying members, some of whom live amongst neglected trash heaps, on empty lots, in ramshackle or improvised dwellings."

According to a press release, Texas Attorney General Ken Paxton said, "Colony Ridge has been flagrantly violating Texas law. The development profited from targeting consumers with fraudulent claims and predatory lending practices."

Last year, when responding to a letter from House Republican lawmakers from the Lone Star State, Paxton wrote of Colony Ridge, "The development appears to be attracting and enabling illegal alien settlement in the state of Texas and distressing neighboring cities and school districts."

The federal government targeted Colony Ridge in a lawsuit lodged last year.

"The Justice Department and Consumer Financial Protection Bureau (CFPB) today sued Colony Ridge, a Texas-based developer and lender, for operating an illegal land sales scheme and targeting tens of thousands of Hispanic borrowers with false statements and predatory loans," a December press release states. "The lawsuit filed in federal district court alleges Colony Ridge sells unsuspecting families flood-prone land without water, sewer, or electrical infrastructure, and that the company sets borrowers up to fail with loans they cannot afford."

In a statement, Harris slammed that suit as "baseless and both outrageous and inflammatory," reports indicate.

The Blaze Originals documentary "The Real Story of Colony Ridge," delves into the topic of Colony Ridge.

Watch 'The Real Story of Colony Ridge,' a Blaze Originals documentary:

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