When DCS Capital Investments bought the stalled and indebted Bella Collina in 2012 for $10 million it got 50 home lots, the unfinished clubhouse, the developers' rights, and hundreds of deadbeat property owners who were hundreds of thousands of dollars behind on their Property Owners' Association fees (POA's).
"We had people out here who paid $7- or $8 million for a house [and] who never paid the POA and never made one mortgage payment," said Randall Greene a partner in DCS. "We had one lady from Miami who bought a house, financed it, rented it out, and never paid the bank and never paid the property owners' association."
Typically the people who bought lots in Bella Collina in the speculative heyday years of 2004 and 2005 were from outside the state. Many buyers were from other countries, including China, England and South America. They planned to sell their lots at a profit, not build a home and move to the hills of Montverde.
"We were stunned when we got here how deep the problem was," said Greene. "Ninety-eight percent, maybe 99 percent of them were strategic defaults. They never had any intention of building a house. They never wanted to live in Florida. They don't even go to Disney World. They wanted to flip. It was greed."
Today DCS has amassed close to 700 lots in the 901-lot community and has collected hundreds of thousands of dollars for the POA thanks to thousands of telephone calls, and hundreds of lawsuits following a litigation technique he calls innovative and unprecedented.
After buying Bella Collina, DCS hired two people who made collection calls on the community's lot owners who were behind on their payments. In many cases the owners had never bothered to make any payments when the community stalled.
The buyers were from everywhere, local and abroad, and for the most part were absentee. When they didn't pay up DCS started suing them, filing some 500 lawsuits in 90 days. But instead of suing for mortgage promissory notes on the lots, they sued for the delinquent property owners' association fees which had accrued to hundreds of thousands of dollars collectively since most were bought roughly between 2004 and 2006.
"That got their attention," Greene said, especially when Lake County judges began signing judgments for hundreds of thousands of dollars. "They realized that (judgment) doesn't just go against your house or lot, but anything you own."
There were some owners who had multiple lots that had devalued to $10,000 or less at the time who owed $50,000 to $60,000 in delinquent dues plus 18 percent interest, Greene recalled.
Next DCS started working out deals with the lot owners who had judgments against them. It offered to buy the lots back for current worth, applying whatever the current value was to the debt. The owners started taking the deals.
"Some actually walked out with a little money in their pockets," Greene said, adding that wasn't the majority. And DCS ended up with what it wanted, substantial ownership in Bella Collina's empty lots, roughly increasing its ownership from 50 to more than 600-plus lots and counting, plus cash to improve the amenities as the original developer had promised and to keep up the community, which has an annual maintenance budget of about $1.5 million.
Greene would not comment on how much DCS has spent to keep Bella Collina up and running for nearly three years, not to mention the costs of half a dozen law firms to help it gain control of more lots and advise in other matters.. He did say that the company also kept the roughly 200 people who were working at Bella Collina at the time of the sale employed for the duration, even giving some raises.
And the costs aren't done since there are still about 100 more lawsuits pending against delinquent lot owners, Greene said.
A source close to the deal estimated DCS has spent at least three times its initial $10 million investment on those additional expenses.
Greene chalks up the whole Bella Collina collapse to human greed. But a quick look at how high lot sale prices climbed between 2004 to 2007 and the money lot sellers were making on resale would be tantalizing for many.
Here is one of many examples:
One vacant lakefront lot valued at $75,000 now by the Lake County Property Appraiser sold June 7, 2004, from the original developer, Ginn-L.A., for $416,900. On June 2, 2005, it was sold again for $975,000, and that wasn't out of the ordinary at the time.
Greene said the property records don't reflect the true frenzy for the lots at the height of the market because when the original developer took lot orders, the original lot "buyers" would resell the right to buy the lots to someone else, who would then sometimes sell to another person, with the price increasing each time before the sale was closed and recorded.
"For the folks who never had to close it was a huge payday for them," he said.
But the tenor of Bella Collina buyers now is completely different, Greene said.
"This is not '06 here again," Greene added. "Now it's real people (buying) who want to live here."