Carbon Grove Estates in Cole Bay.
~ Judge describes case as ‘all time low’ ~
COLE BAY--In two separate summary proceedings, the Court of First Instance ordered Melbon Enterprises to deliver the rights to three apartments in Carbon Grove Estates in Cole Bay.
Under agreements of sale, purchase and construction of April 2019 and September 2020, three litigants had purchased apartments against payment of US $115,000, $125,000 and $195,000, respectively.
Buyers paid the full price for the $195,000 apartment, whereas down payments of $65,000 were made on each of the other two apartments.
Despite these payments, delivery of the apartments has not yet been forthcoming, although the purchase agreements stipulate that delivery should have taken place no later than December 31, 2020.
Melbon, the holding company of Carbon Acquisition Group, describes Carbon Grove Estates as “a new standard in real estate.”
Located on five acres on a hilltop in Cole Bay overlooking Simpson Bay Lagoon and the airport, the estate is Carbon’s largest development to date. It is currently “well” into the construction phase, the company states on its website.
The gated community is to consist of 92 homes, 64 condominiums and 28 town houses. It will have a community recreational park and state-of-the-art infrastructure including a waste treatment plant, fibre-optic Internet, telephone cabling and 24-hour security service.
By notarial deed of November 13, 2020, the 23,250-square-metre plot has been mortgaged with a credit of $7.5 million in favour of FirstCaribbean International Bank.
When designing the concept for this community, Carbon Acquisition Group Chief Executive Officer and founder Dwain Carbon “created a unique plan that makes purchasing a home in a community with high quality standards more affordable.
It is with great pride that we are able to deliver a product like no other in St. Maarten – one where over half of our buyers would not have been able to afford to purchase a home on the island otherwise, much less a mid-luxury property. If you’re interested in owning prime real estate for 40 per cent below the market value, call us today for further details,” the company says on its website, claiming that 90 per cent of Carbon Grove Estate is sold, with only nine town houses remaining for sale.
The judge did not share the developer’s optimism about this project, as these two cases are far from isolated incidents. Describing this case an “all time low,” the court stated it is aware of “numerous” other conflicts between Carbon and buyers of apartments in the Carbon Grove project”; for instance, related to the untimely delivery of apartments, or the down payment of more than 10 per cent of the purchase price, which is prohibited under the Civil Code.
Also forbidden by civil law are direct (down) payments made to Carbon, while payments made by real estate buyers must be deposited under a public notary and not made directly to a developer before delivery has taken place.
“Any insolvency risk of Carbon is, therefore, wrongly placed with the buyers of the apartments,” the judge stated in a footnote in the verdict.
‘Ponzi’ scheme
The court stated that Carbon’s course of action resembles a so-called “Ponzi” scheme. Construction at Carbon Grove can only continue as long as Carbon is able to continue to sell apartments and receives substantial down payments, assuming that the bank does not throw a spanner in the works by cancelling the loan.
Without these substantial down payments, construction will come to a standstill and Carbon will not be able to fulfil its commitment to deliver the apartments, unless the bank provides additional financing.
This course of action may also lead to Carbon board members’ personal liability for any damage suffered and yet to be suffered by the buyers, although the judge does indicate that the legal entity Carbon Acquisition Group NV does not exist, even though its name appears on purchase and construction agreements.
In these summary proceedings, litigants demanded fulfilment of the purchase and construction agreements. The court stated that Carbon must honour these agreements and ordered Melbon Enterprises to deliver two of the apartments no later than seven days after the judgment has been served.
Melbon was ordered to make the other apartment ready for delivery within seven days, to provide the owner with the keys, to connect the property with the GEBE network for the delivery of water and electricity and with fibre-optic Internet, and to create on-site parking.
In case of non-compliance, the enterprise will have to pay daily penalties of $5,000, with a maximum of $500,000.
Melbon was also ordered to pay the legal costs of these proceedings, estimated at NAf. 2,440 and NAf. 2,190.50, respectively.
