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Rolling Hills Lesson: Caveat Emptor

7 min read

Harry Kim hoped that buying Rolling Hills Mobile Homes in April 2004 would keep him set throughout his retirement with a steady cash flow.

Within months, though, the 59-year-old, who emigrated from Korea to America in 1992, discovered his retirement plans had turned into a nightmare.

Kim failed to get the Little Rock property inspected before he bought the nearly 22-acre site for $1.6 million from Bill and Margaret Leggett of Hot Springs. It turned out that the natural gas line on the property had been patched over the years, which was a violation of city codes — not to mention dangerous. CenterPoint Energy shut the gas off to 60 trailers for safety reasons in January.

Also in January, Kim was convicted of 60 counts of misdemeanor failure to restore gas services, which resulted in $12,000 worth of fines.

In addition, the city of Little Rock sued Kim in Pulaski County Circuit Court when it discovered other code violations at the property.

Since January, Kim claims, the substandard conditions have cost him $600,000 in repairs, lost rent and legal fees.

“I guess in hindsight, there are a lot of things you wish (Kim) would have done [before buying the property] because he spent a lot of money on it so far,” Kim’s attorney, G. Randolph Satterfield of Little Rock, said. “But Mr. Leggett represented that it would pass all inspections by the city. … Mr. Kim kind of relied on that.”

In April, Kim sued the Leggetts for the $600,000 he is out, alleging breach of contract and fraudulent concealment.

The Leggetts denied the allegations in their court papers and said if there was any problem at the trailer park, they didn’t cause it.

Bill Leggett declined to comment on the allegations or say what business he was in now.

“I don’t care to help you with any article on this,” he said.

The Leggetts’ attorney, John Payne of Little Rock, said, “At this point discovery is ongoing and we have to stand behind our responses in our answer.”

When Kim bought the property there were 115 spaces for trailers. The tenants owned their own trailers but paid Rolling Hills $155 a month to rent the land.

But the city of Little Rock recently told Kim to reduce the number of spaces by 20 because part of the park wasn’t zoned for trailers, Satterfield said. The number would be reduced by attrition, he said.

“That would potentially result in additional damages for Mr. Leggett if he represented he had 115 spaces but really legally only had 95,” Satterfield said.

For Sale

In 1998, the Leggetts bought Rolling Hills from the Claudia B. Sparrow Trust for $650,000.

In April 2004, the Leggetts sold the property for $1.6 million to Kim and his wife, Kyung Ae. The Kims were looking at the property as a long-term investment, Satterfield said.

“This is not something they were speculating with just to get the real estate,” he said.

Neither party was represented by an agent. In the three-page offer and acceptance contract, the name of the project was misspelled, and the entire document was typed in capital letters.

Kim said in his lawsuit filed in Pulaski County Circuit Court that a key section in the contract was this: “Seller warrants that the premises will pass inspections necessary to conduct such business at the time physical possession is delivered to purchaser and all equipment will be in working order.”

Kim said the property wasn’t up to code when the deal closed in June 2004 and alleges that the Leggetts knew it.

“(The Leggetts) knew that the existing gas lines would not pass inspection nor be in proper working order to conduct the business [of a mobile home park],” Kim said in the lawsuit.

Complaints

At first, the most serious complaints that came into Little Rock’s Depart-ment of Housing & Neighborhood Programs about Rolling Hills were that too many people were living in a trailer or someone stored a junk car in his yard.

Around Christmas 2004, Kim received a report that a gas line had ruptured, Satterfield said.

“When they got a plumber out there, they determined (the line) was so patched that it would have to be entirely replaced,” Satterfield said.

The cost of replacing the gas lines was estimated at $300,000-$400,000.

When CenterPoint learned of the leak, it shut the gas line to the property.

Tenants then started flooding Kim with complaints.

Daisy Bendeck, who has lived at the park for three years, said she didn’t know about the gas being shut off until she came home from work on Jan. 4 and tried to cook but couldn’t get the stove to work, according to her affidavit filed in a lawsuit that the city of Little Rock brought against Rolling Hills.

It was a week before the Kims told her that the trailer park would be converted to propane gas instead of natural gas, she said.

“When I asked about heating, Mr. and Mrs. Kim told me to purchase electrical heaters, and if I didn’t like it, then I could leave,” Bendeck said.

Bendeck said her propane tank wasn’t installed until Feb. 8 or 9.

Satterfield said Mr. Kim is “very polite and nice.” But his wife became stressed out over the situation and it “just about put her in the hospital,” Satterfield said.

“They were doing everything possible to get people comfortable,” he said.

At the beginning of 2005, the Department of Housing & Neighbor-hood Programs received a complaint that a tenant’s gas had been shut off, which initiated an investigation, said Shelia Reynolds, senior code enforcement officer.

“We went out there and got to looking because we kept getting complaints,” Reynolds said.

Soon Kim was charged in Little Rock’s District Court for failing to restore gas services. On Jan. 12, he was convicted of 60 counts of the misdemeanor charges. Each count carried a fine of $175 and $25 for court costs, for a total of $12,000.

But Housing & Neighborhood Programs wasn’t done with Rolling Hills.

While it has the authority to inspect rental properties, it hadn’t inspected Rolling Hills prior to the gas line complaints because no serious complaints had been received.

Satterfield said he was surprised the city didn’t inspect the land when the Leggetts owned it.

“I’m amazed that they haven’t,” he said. “I don’t know whether (Bill Leggett) was lucky or what.”

On Feb. 10, Reynolds and other code enforcement officers descended on the property for a closer look.

During that inspection, Reynolds found “many life-threatening violations” on the property, including several electrical meters improperly attached to wooden poles.

In one case, the meter “was affixed to a metal shed which could cause the shed to become electrified,” Reynolds wrote in her affidavit filed in a lawsuit the city brought against the property. “At another trailer, the dead-front cover at the panel box is open which allow(s) for the possibility of someone, such as a child, putting his or her fingers in the box and risking electrocution from uncovered wires.”

The city code enforcement officer served Ed Daniels, the registered agent for Rolling Hills, with the list of code violations on Feb. 18 and gave the owners 24 hours to fix them. But no action was taken at that time, Reynolds said in her affidavit.

The city sued Rolling Hills on Feb. 18 to have the land declared a nuisance and order Rolling Hills to make the repairs or be shut down.

In its lawsuit the city said the condition of the property “contributes to the lawlessness and deterioration of the neighborhood.”

On March 14, Pulaski County Circuit Court Judge Jay Moody ordered that Rolling Hills had 48 hours to correct the life-threatening violations at the property.

Reynolds said the Kims then had about 15 electricians working to fix the problems within the deadline.

Kim said in his lawsuit that he spent more than $75,000 correcting the electrical code violations plus another $10,000 defending the company in the lawsuit.

“(Kim) was very cooperative and tried to do what was needed,” Reynolds said. “Honestly, I don’t think he realized what he bought.”

Little Rock Assistant City Attorney Stephanie Crimarco said the life-threatening and safety violations at Rolling Hills have been brought into compliance.

When the city filed the lawsuit against Rolling Hills, Moody ordered Rolling Hills not to evict tenants until those violations had been corrected.

As of May 26, all of the violations had been corrected except for two, which Rolling Hills disputed. Moody then lifted the ban on evictions.

On June 16, Rolling Hills flooded Pulaski County Circuit Court with five lawsuits in an attempt to collect back rent from tenants. Two of the lawsuits have already been dismissed, one when a tenant paid the past-due amount and the other when an accounting error was discovered that proved the tenant wasn’t in arrears.

Some of the other tenants, who are all representing themselves, said they are disputing the bill because of the lack of gas service.

Ricky Smith wrote in his response filed on June 20 that he still hasn’t had gas since January. Rolling Hills is suing him for $1,072 in back rent.

“I feel that they are in breach of contract due to failing to provide gas services to my home,” Smith wrote.

The collection cases are still pending.

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