Md. orders 2 builders to repay customers

Attorney general tells JAE to return $605,362 for seven unfinished houses

Cease-and-desist order bars more construction

Probe finds companies failed to follow procedures required by state law

September 11, 2004|By Bill Atkinson | Bill Atkinson,SUN STAFF

Maryland's attorney general ordered yesterday two affiliated Baltimore-area homebuilders and their executives to pay more than $600,000 to seven customers for taking their money without completing their homes.

The cease-and-desist order bars JAE Developers of Owings Mills and JAE Homes Inc. of Baltimore and their executives, Kimberly Zahrey and Walter Osborne Ely Jr., from building more homes in Maryland and requires them to pay customers $605,362.

An attorney for Zahrey, of Baltimore, said his client plans to cooperate with the office of the attorney general "to ensure that the whole truth comes out and that the matter is effectively resolved."

Ely, of Baltimore, could not be reached for comment after repeated attempts yesterday.

"We have filed the necessary papers to stop them immediately," Maryland Attorney General J. Joseph Curran Jr. said. "The largest investment a consumer will ever make in their lifetime is their dream home. When they save their money to build their dream home and somebody unscrupulously takes that money and destroys that dream, we are going to go after them big time."

A state official involved in the investigation said he expects more JAE customers to file complaints with the division before a public hearing in the case, scheduled for Nov. 30.

"We are aware of other consumers," said Jeston Hamer Jr., assistant attorney general and director of the state's homebuilder registration unit.

Attorney Godson M. Nnaka, representing Zahrey, said the allegations made by the JAE customers "are factually inaccurate and untrue," and that a number of the houses are under construction and about to be finished.

Nnaka said his client does not owe customers $605,362.

"That figure is factually incorrect," he said. "Most of those funds ... were applied toward the construction of those houses."

The order comes at a time of growing concern among some industry leaders that more homebuyers could face problems as new builders and mortgage bankers have rushed into the market to meet a strong demand for homes.

"We've filed some lawsuits. We have ongoing investigations," said Hamer, who has not noticed an increase in cases. "The large portion of builders do a great job, but consumers should be very aware when they enter into these large purchases, which in many cases are the biggest purchases they make in their lives."

The investigation by the Consumer Protection Division of the attorney general's office began about two months ago after customers contacted the agency with problems. The probe revealed that JAE was not registered with the state, as required by Maryland law. It also found that the companies and executives failed to put customers' payments into an escrow account and did not have a surety bond or letter of credit to cover deposits, also required by law.

JAE customers complained to the agency that the companies agreed to build homes and received "substantial progress payments" to begin work but either did not start or did not finish the job, according to the cease-and-desist order.

A number of the homes are in Catonsville and the Brighton area, between Liberty and Reisterstown roads, in Baltimore County. Homebuyers discovered JAE after seeing the companies' billboard advertisements, the order said.

Bonita Ball, a teacher at Harbor City High School, sold her house in Fallstaff, where she lived for 17 years, to buy a JAE-built home, she said.

"I wouldn't have sold it right away or I would have gone with another builder had I known this was the kind of trouble I would be in," she said.

She invested about $138,000 in a property at 6506 Mount Vernon Ave. The house was supposed to have been built five months ago, but the plumbing, electrical wiring and air conditioning have not been installed, she said.

"I am angry," said Ball, who is renting a place to live in the meantime. "I am losing a lot of money. I am waiting for them to finish."

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