No home, no refund, no hope

Dozens seek money sunk into Middletown project

By GINGER GIBSON

The News Journal — Sunday, December 27, 2009

Milton Delgado put a down payment on his dream three years ago: a three-bedroom 1,715-square-foot condominium at The Promenade in Middletown.

Delgado was one of dozens who laid out thousands of dollars after seeing glossy brochures showing a deluxe housing complex complemented by movie theaters and upscale shops.

But Delgado has watched his dream fade, along with the prospect of recovering his money. He has been trying to get his $16,711 deposit back for more than a year.

Today, the property on the south side of Main Street just east of downtown is a vast field with a few piles of dirt and scattered concrete sewer pipes.

“Every day I was driving by, saying, ‘I can’t wait to see a hole. I can’t wait to see a hole,’ ” Delgado said. “And I never saw a hole.”

“The only hole was in my wallet,” he said.

It shouldn’t have been a problem. The contract Delgado signed in December 2006 with builder Carl Chetty guaranteed a refund if the project wasn’t progressing after two years.

The promise of living at The Promenade enticed many others. More than 30 people who paid for units say they are also awaiting return of their deposits, averaging $25,000 each.

Some have lost their jobs and homes during the recession and say the deal has taken a heavy toll on them.

Chetty Builders Inc. and its subsidiary The Promenade LLC, are under investigation by the Delaware Attorney General’s Office. Carl Chetty would not say why customers’ money has not been refunded, but he renewed a promise to repay them. Chetty wrote in an e-mail that he hopes to finish the project someday.

He continues to advertise The Promenade on his company Web site. He confirmed that the land is listed for sale, however.

Buyers of 31 units met with The News Journal to discuss their travails since making down payments in The Promenade.

All but two said they paid 10 percent deposits between March and December 2006 on units that ranged in price from $236,000 to $469,000. Delgado and another buyer put down 5 percent.

In December 2008, when the two-year contractual deadline for completion of the homes expired, Chetty Builders held a meeting with disgruntled customers in Middletown and agreed in writing to give everyone refunds within 30 days, according to individual accounts and lawsuits filed against Chetty.

None of the buyers who contacted The News Journal has received a refund, according to individual accounts.

Four lawsuits have been filed in Pennsylvania and two in Delaware by buyers who are seeking a refund. Each plaintiff was awarded damages after Chetty did not file a response, but none of the court filings or lawyers representing the plaintiffs say they have been paid.

Chetty refused to comment on the lawsuits.

“He abandoned it,” Delgado said. “It’s an eyesore to the community, and to add insult to injury, he hasn’t given people their money back.”

The project that wasn’t

Chetty brought the initial plans to build the mixed-used development to Middletown in 2005. The town council approved the $75 million project, including 10 movie screens, upscale shops, two parking garages and 273 condominiums on East Main Street in November of that year.

Chetty purchased the 18-acre site in March of 2006 through the Promenade LLC, a subsidiary of his Pennsylvania-based Chetty Builders Inc., according to suits brought against Chetty.

The design called for 170,000 square feet of retail space, including 25,000 square feet for the theater. Four four-story buildings would have retail on the lower levels, with two parking garages and surface lots behind totaling about 1,450 parking spaces.

Construction was expected to begin in February 2007. Contracts for the condominiums estimated completion between March 31 and Sept. 30, 2007.

From the beginning, the project was behind schedule.

Work didn’t start until March 2007, when Daisy Construction began site preparation, according to a mechanics lien it filed against Chetty Builders for failure to pay it $509,935.

By October 2007, construction on the site stopped because payments to Daisy had ceased, according to the suit.

Daisy was awarded damages and was paid by Chetty in the summer of 2008.

Just a few months earlier, in February 2008, Chetty had held a groundbreaking with town officials and prospective residents.

No work on the condos ever resumed.

Contracts not honored

Wayne and Dana Shannon were among the first to ask for a refund, in October 2007, when the housing bubble burst. As builders, their finances were drastically impacted by the ailing housing market, according to a suit they filed against Chetty Builders.

The Shannons had been rejected for a mortgage. Because the contract allowed for a refund if a loan application was denied, they asked for their money back, according to the suit.

The real estate agent representing Chetty Builders, Debbie Gawel, wrote the Shannons in December 2007 informing them they were being denied a refund of their $21,991 deposit because the two-year period had not expired.

“The partnership we entered into was written to allow both the buyer and seller a two-year protection,” Gawel wrote.

But even after the two years expired last December, the Shannons were still unable to collect their deposit, according to their attorney, John J. Sullivan Jr.

The Shannons were the first in a stream of refund requests. Two lawsuits have been filed in Delaware Court of Common Pleas and four in Chester County (Pa.) Court of Common Pleas.

Ian McConnell, head of the Consumer Protection Division of Delaware’s Attorney General’s Office, said his office is investigating more than 20 complaints against Chetty Builders from buyers seeking return of their deposits. McConnell would not comment on the investigations.

Pat Hall, 55, and her husband, Ted, 58, said they were the first to complain to the Attorney General’s Office. Ted Hall retired five years ago after neuropathy made him lose use of his left leg and right hand. The couple planned to retire to the condo, adverstised as maintenance-free.

When they first approached the Attorney General’s Office, Pat Hall said, they were told it was a civil matter and there was nothing the office could do. But after more people began to complain, she said, the office took an interest and this summer held a meeting in Dover for buyers.

Ted Hall said he tried to get a refund before the two years expired because his daughter was diagnosed with cancer and they were going to use the money to pay medical bills.

“[They] told me this was a legal agreement and I had to abide by it,” he said. “When my sales agreement ended, they didn’t abide by it.”

‘The economy got him’

Responding to questions only by e-mail, Chetty pointed to the economy “100 percent” as the cause of the project’s delay.

“It is very unfortunate that economic conditions have affected all of us tremendously in every way of life,” Chetty wrote. “We will forge ahead and do what is necessary to make this project a success.”

National housing construction peaked in early 2006, according to the U.S. Census Bureau.

In January 2006, there were 402,000 multi-unit sites under construction nationwide. By November of this year, that number had fallen to 223,000.

Permits for multi-family units in Delaware fell 25 percent between October 2008 and October 2009, according to the National Association of Home Builders.

Permits for single-family residences fell 7 percent over the same time period. Records for earlier periods were unavailable.

Attorney General Beau Biden said his office is investigating five cases of alleged consumer fraud, in addition to the Chetty case.

“There are at least five involving multiple victims,” Biden said.

Don and Stacey Roi of Middletown initially planned to purchase two units to be used as rental properties, but at the last minute decided to put a deposit down on only one condo. Their company, ROI Investments, owns several rental locations in New Castle County, Don Roi said.

“We requested our money back four times,” he said. “I believe Carl Chetty. I think the economy got him.”

‘Should have been neighbors’

All 31 buyers who spoke with The News Journal said they felt alone at first — until an accident brought them together.

Depositors had been receiving e-mails from Chetty about the delays, but each was addressed individually.

Then one day an e-mail arrived that allowed all the depositors seeking refunds to see one another’s e-mail addresses. It showed each how many people had been affected.

“It’s like you have a disease, and you think you’re the only one who has a disease. And then you find out that people all over the country have the disease,” Delgado said. “We should have been neighbors.”

Delgado started leading an effort to bring the group together and bring more exposure to their problem.

Stacey Roi said she hoped a group would be able to apply more pressure on the builder.

The buyers got together for the first time in the second week of December at The News Journal in numbers that recalled a town hall meeting. Everyone eventually agreed on one thing: They’ll never again put money down on a project that has not been started.

Nancy Seats, president of Homeowners Against Deficient Dwellings, said it’s risky to invest in homes before they are built, especially since the economy weakened. Seats encouraged prospective homebuyers to research lawsuits in the county where the builder is located.

Seats said national builders have taken over the construction industry, making it prohibitively expensive for many people to build a home on their own. Most people seeking a new home these days, she said, are stuck working with developers.

It helps in sizing up a builder if at least part of a project has been built, Seats said. That way, you can interview people who have been though the process and tour completed construction, she said. The riskiest bet, especially in this economy, is on projects that haven’t begun, she said.

In researching a developer’s record, Seats said, it is important to determine whether the company’s standard contract requires that disputes be solved through arbitration. That clause has kept many disputes out of public courts.

“There is not a lot of information out there, if they’re trying to find a good, conscientious developer or builder,” Seats said.

Pat Hall said she did her research, calling the Better Business Bureau and contacting other developers.

Stacey Roi works in real estate, as does her mother, and knew that Chetty had a strong reputation.

Seats said, “They sound like they did everything right.”

Delgado went to Virginia to look at a model unit and reviewed all the lawsuits that had been filed against Chetty, mostly minor issues settled quickly. Delgado recently obtained his Ph.D. in education from Wilmington University and works at Alfred I. duPont Hospital for Children in Rockland.

“I didn’t just go in blindly and plop down money on a pretty little dollhouse,” Delgado said. “I’m supposed to be educated, among the top of the people around, and I got pulled in just like everyone else.”

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