Texas sues Colony Ridge development for fraudulent real estate practices

This story was jointly published by The Texas Tribune and the Houston Landing. Sign up for The Brief, The Texas Tribune’s daily newsletter that keeps readers up to speed on the most essential Texas news.

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HOUSTON — Texas Attorney General Ken Paxton sued the Houston-area developers of Colony Ridge on Thursday, accusing them of deceptive sales, marketing and lending practices that allowed their sprawling housing development to flourish.

Residents of Colony Ridge filed dozens of complaints for years about the development to state agencies, but Texas had little to show for addressing those concerns, according to a Texas Tribune and Houston Landing investigation. Paxton announced his office’s investigation last fall, after right-wing media conflated the development’s growth with high levels of illegal immigration at the Texas border.

At least 11 consumer complaints were sent to the Attorney General’s Office about Colony Ridge since 2019, long before Paxton told a conservative talk radio host his office would investigate. Paxton at the time also said it was “completely insane that they can set up these villages with illegal immigrants,” but claimed the Legislature had not given his office the “authority to do anything about it.”

Thursday’s lawsuit marks the most significant state action to date against the development. It echoes many of the claims in a U.S. Department of Justice lawsuit filed against Colony Ridge in December. In the state’s lawsuit, Paxton argues the developers target foreign-born, Latino consumers with a bait-and-switch sales scheme that leads to sky-high foreclosure rates.

“The development profited from targeting consumers with fraudulent claims and predatory lending practices” Paxton wrote in a statement. “Their deceptive practices have created unjust and outsized harms. Nearby communities have borne a tremendous cost for the scheme that made Colony Ridge’s developers a fortune.”

Colony Ridge developer John Harris said there was no merit to the allegations in either lawsuit, and that the legal action was prompted by the recent attention from Texas lawmakers and GOP leaders following right-wing media coverage.

“​​They're following the same line as the Department of Justice, there's no creativity in Paxton's words and we're ready to defend this suit,” Harris said in a statement.

New details about Colony Ridge’s marketing practices

The 33,000-acre development was painted by conservative lawmakers and media outlets last fall as a destination of immigrants living in the country illegally, and as a hub for cartel activity.

While parts of Paxton’s lawsuit repeat similar findings brought by the federal government, it also alleges new details about Colony Ridge’s business practices.

The lawsuit claims the developers launched an aggressive marketing strategy that relied on deception to attract potential customers. It alleges employees of Colony Ridge were provided multiple cellphone SIM cards to make marketing calls from burner phone numbers and set up dozens of social media accounts to market the development.

One former employee told state investigators that the company required them to make more than 60 fake online listings every day on fake social media accounts, according to the lawsuit. That employee recounted witnessing another colleague get fired for not hitting the quota, according to the lawsuit.

Throughout the lawsuit, former Colony Ridge employees who spoke to state investigators are referred to by pseudonyms to “prevent harassment and/or retaliation.”

The lawsuit argues the developers told sales people to use misleading marketing tactics, such as misrepresenting themselves to potential buyers and falsely claiming the properties were home-ready.

When they bought land in Colony Ridge, many customers discovered their properties flooded frequently and lacked basic services like water and electricity. High-interest rates caused owners to fall behind on their loan payments, allowing Colony Ridge to buy back the properties and repeat the process, the lawsuit alleges.

"Significant pain and suffering"

A Houston Landing investigation in December found the Liberty County developer reacquired 45% of the 35,000 plus properties it sold over the past decade.

Six days after that story was published, the federal government sued Colony Ridge, accusing the developer of issuing predatory loans to tens of thousands of Latino buyers. The Justice Department and Consumer Financial Protection Bureau’s allegations corroborated the Landing’s initial findings: that Colony Ridge “fails to assess borrowers’ ability to repay” their loans, and those business practices have resulted in a massive churn of buying, foreclosing and reselling property.

Both Paxton and the DOJ’s lawsuits allege that the largely Latino buyers were “set up to fail.”

That has been the drum Suellen and Keilah Sanchez have beaten for years now.

The sisters told the Landing and Tribune in a previous story that the developer lied to them about how the eight parcels of land they purchased were “move-in ready,” gave them incorrect tax documents and stole money from them before forcing them both into foreclosure.

Both filed complaints with the state’s Department of Savings and Mortgage Lending, which investigates some mortgage-related complaints. One of those complaints was forwarded to the attorney general’s office in August 2021, but the sisters did not hear from Paxton’s office for two more years.

“Colony Ridge and associated companies have inflicted significant pain and suffering on numerous families and individuals,” they wrote in a statement.

After years of delays, Keilah Sanchez said she was overwhelmed and buoyed by Paxton’s announcement on Thursday.

“Our fight is for the fundamental rights of happiness and safety that every individual (affected by Colony Ridge) deserves,” the sisters added. “We remain committed to aiding agencies by providing leads, information, and supporting all who have reached out to us for help.”

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