Community development district files suit after Florida developer doesn't pay

Aug. 6--In a first for Northeast Florida, a community development district has filed a lawsuit seeking to foreclose on a subdivision developer for not paying assessments to the district.

The Tison's Landing Community Development District wants to take possession of land owned by Yellow Bluff Development LLC on Jacksonville's Northside.

The property is the Tison's Landing subdivision, a 218-acre tract where the community development district built roads, drainage, water lines, streetlights and a neighborhood recreation center as a welcome mat for the anticipated sale of up to 680 homes.

Under state law, community development districts are able to issue bonds and assess property owners on an annual basis to retire the debt and pay operating expenses. The debt load falls on the developer at first, but as homeowners move in, the expense shifts to the residents over a period of up to 30 years.

Jacksonville City Council created the community development district in 2005 at the request of Yellow Bluff Development when the residential real estate market was red-hot. The community development district issued $36.9 million in bonds in early 2006 to develop the property.

The work hasn't translated to home sales, however. After Yellow Bluff Development failed to pay its annual assessment to the community development district, the district declared the developer in default and filed the foreclosure suit on June 24.

The suit is pending in Duval County Circuit Court. The city is not a party in the litigation. Taxpayers have no financial obligations for the district because by state law, the district can only levy assessments on property owners within the district.

Tison's Landing Community Development District plans to find a buyer for the property after foreclosing on the land, said Jonathan Johnson, a Tallahassee attorney representing the district.

"I think we are very comfortable that at the end of the day, this property is well-situated and has a lot of value," Johnson said this week. Yellow Bluff Development did not file any objections to the foreclosure lawsuit.

But Mercantile Bank, the Florida division of Carolina First Bank, filed a challenge last week, saying a community development district must wait at least one year from the time of a missed payment before turning to foreclosure. Mercantile Bank holds a mortgage on the Tison's Landing property for separate real estate loans to Yellow Bluff Development.

Johnson said districts in other parts of the state have filed foreclosure lawsuits against developers, but it's rare. He said Tison's Landing is the first such lawsuit he's aware of in Northeast Florida. John Crofts, deputy director of the Jacksonville Planning and Development Department, also said he hasn't heard of any other local districts taking such action.

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