Jim Butler at a Paradise Homes construction site in 2011. Herald-Tribune Archive / Michael Braga.
Home buyers left high, dry and angry by bankrupt builder Paradise Homes have filed suit against Schroeder-Manatee Ranch (SMR) and its LWR Communities (LWRC).
They allege the developer of the highly successful Lakewood Ranch master-planned community failed to vet Paradise as a qualified building company and monitor its financial health.
Since its opening in 1995, Lakewood Ranch has maintained a list of approved builders. Paradise was on that list, building in Country Club East.
“We have been attempting for three months to reach a negotiated settlement with SMR,” said Sarasota attorney Alan Tannenbaum, representing the plaintiffs. “Some progress was made, but they were not participating with the intensity that was justified.
“We had no choice but to file the suit. We hope they will take responsibility and step up to the plate to make these folks whole.”
In a statement by SMR’s general counsel, Daniel J. Perka, the development company blamed Paradise Homes for the plaintiffs’ woes. It characterized the company as plagued by “mismanagement.”
“Jim Butler and the other executives of Paradise Homes are responsible for the mismanagement and bankruptcy of that company, not SMR,” according to the statement.
“Paradise Homes continually misled and deceived many people — their own customers, subcontractors, financial institutions, as well as SMR,” the statement alleges. “Local and national lenders periodically evaluated the financial condition of Paradise Homes and continued to fund ongoing projects and to lend to new Paradise customers.”
The SMR statement also blamed the plaintiffs.
“These customers entered into contracts with Paradise Homes, not with SMR,” it said. “SMR has had discussions with Paradise customers to determine if there are ways that SMR can assist them. But SMR is not financially responsible” for Paradise’s contracts.
The plaintiffs include five individuals and 17 married couples who visited an onsite sales center or Lakewood Ranch’s website.
Tannenbaum said experienced builders, such as Todd Johnston Homes and John Cannon Homes, were on LWR Communities’ list of approved builders. New to the list was Paradise Homes, which, he said, was “pushed” on the home buyers as a builder “of the highest integrity and financial strength.”
According to news reports, Paradise Homes began building in Country Club East in February 2010 and quickly became a sales leader.
But Tannenbaum said Paradise was new to home building, did not have enough money to operate, and its principal, Jim Butler, was funneling money from the home-building company into Viking Culinary Center, a cooking school in Lakewood Ranch, operating in space rented from SMR.
“A poorly capitalized company became well underwater,” said Tannenbaum in an interview. “All this time, SMR kept the company on the website as a preferred, approved builder,” failing, said the attorney, in is stated and voluntary task of monitoring Paradise’s capability.
Paradise was, “in essence, a mere startup company,” the suit alleges.
In October 2012, Paradise filed for Chapter 7 bankruptcy — walking away from partially completed houses and vacant lots purchased by home buyers.
Tannenbaum said his clients suffered “millions in losses” from incomplete houses for which payments had been made, liens from unpaid contractors and materials suppliers, extra interest payments and finance charges and additional costs of completion.
The plaintiffs also claim SMR and LWRC violated Florida’s Deceptive and Unfair Trade Practices Act by misrepresenting Paradise’s ability, experience and financial condition.
The lawsuit is a rare dent in Lakewood Ranch’s reputation. The community, begun in 1995, has become a national model for master-planned communities, which include structures for retail, recreation, office, education and worship, in addition to single-family and multi-family residential development.
“It does taint them a bit, to be honest with you,” said builder John King of Rampart Homes, who does not build at Lakewood Ranch. “When you buy at SMR, you think you are buying into a safe environment.”
Staff writer John Hielscher contributed to this report.
