Case ends against Maryland developer Hensley is ordered to take back titles on 75 time shares

Legal affairs

March 30, 1996|By Timothy J. Mullaney | Timothy J. Mullaney,SUN STAFF

The state attorney general's office said yesterday it had ordered disgraced time share developer H. Lloyd Hensley to take back about 75 time share units at his Ocean High development in Ocean City, closing the door on a decade-long effort to unravel the financial and legal miscues of the man who was once the biggest time share developer in Maryland.

The developer's problems began after Old Court Savings and Loan failed in 1985, leaving Hensley with a $20 million debt to the state deposit insurance fund that paid off Old Court depositors and with books in such disarray that it took investigators more than a year to figure out what he owed.

The problems intensified in 1990 when Hensley lost his time share development license amid accusations that he had sold shares to consumers without paying off liens to his banks, effectively taking consumers' money for units that were subject to repossession by the developer's lenders. He was convicted of theft and misappropriation of funds and is serving a 20-year prison sentence.

A time share is the right to use a condominium at a complex like Ocean High for a given period. Usually, time shares are sold in one-week intervals allowing the buyer to use the same unit during the same week each year.

Shares at Hensley developments could cost $7,500 or more, depending on the time of year when the buyer could use the condo. But consumers complained that Hensley vastly exaggerated the resale market for the units, which commanded very little when they could be sold at all.

"I'm happy that my office was able to assist consumers who fell victim to Mr. Hensley's deceptive sales schemes," Attorney General J. Joseph Curran Jr. said.

The order by the consumer protection division of the attorney general's office followed the dropping of a lawsuit by the Ocean High Condominium Council of Unit Owners. The council wanted the state to reimburse it for about $30,000 the council spent building amenities that Hensley never finished, said Thomas Kimmel, a Cambridge attorney representing the council.

"The consumer protection division, in a way, created additional victims," Mr. Kimmel said. "The expense of contesting this nearly forced Ocean High into bankruptcy."

Assistant Attorney General Steve Sakamoto-Wengel said 463 time share buyers at Ocean High were victimized by deceptive sales practices, including promises that they had won a car that could only be claimed if the consumer came to Ocean City and listened to a sales pitch for a time share. Other deceptions included lying to consumers about their right to back out of the sales contract within 10 days of signing, a right guaranteed by Maryland law.

Of the victims, 141 opted to give back their time shares. They will still be stuck with the bill for money they have already paid, but will be excused for unpaid condominium fees and for about $120,000 they still owed Hensley's finance company. Consumers whose loans were sold to other lenders who didn't know of the fraud may still be liable for their debts, Mr. Sakamoto-Wengel said.

Only 75 of the time shares went to Hensley. The state said the owners of 66 time shares gave their intervals to the condominium council rather than Hensley.

Mr. Kimmel said giving some of the time shares to the association will allow the group to resell the intervals and raise money to maintain the complex.

The attorney general had earlier reached a settlement with consumers at eight other Hensley developments in Worcester and Garrett counties.

Pub Date: 3/30/96

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