THE STATE OF NEW HAMPSHIRE
BELKNAP, SS.

SEPTEMBER TERM, 2011
SUPERIOR COURT

THE STATE OF NEW HAMPSHIRE
v.
BRADY SULLIVAN PAUGUS WOODS, LLC

STATE’S PETITION FOR PRELIMINARY INJUNCTION,
PERMANENT INJUNCTION AND CIVIL PENALTIES
PURSUANT TO RSA 356-A, THE LAND SALES FULL DISCLOSURE ACT, AND
RSA 358-A, THE CONSUMER PROTECTION ACT
NOW COMES New Hampshire Attorney General Michael A. Delaney, and
complains against the Brady Sullivan Paugus Woods, LLC and alleges as follows:
JURISDICTION AND VENUE
1.

The Belknap County Superior Court has jurisdiction over the subject

matter of this petition and the parties to it, pursuant to RSA 356-A:10, III and RSA 358A:4, III(a), in that, at all times material to this petition, defendant has been in the business
of developing The Villas At Paugus Bay, a high-density subdivision located on White
Oaks Road in Laconia, Belknap County, New Hampshire. Venue properly lies in this
Court in accordance with RSA 358-A:4, III(a).
PARTIES
2.

Michael A. Delaney, Attorney General of the State of New Hampshire, is

authorized by RSA 356-A:10, III to seek injunctive relief against any person that he has
reason to believe has engaged in, or is about to engage in, an act or practice constituting a

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violation of RSA 356-A, the Land Sales Full Disclosure Act (the “Land Sales Act”) or
any rule adopted pursuant to the said Act. Furthermore, the Attorney General is
authorized by RSA 358-A:4, III(a) to seek injunctive relief and civil penalties against any
person that he has reason to believe has engaged in, or is about to engage in, unfair or
deceptive acts or practices in the conduct of trade or commerce in this State in violation
of RSA 358-A (the “Consumer Protection Act”). The Attorney General’s office is
located at 33 Capitol Street, Concord, New Hampshire 03301.
3.

Defendant Brady Sullivan Paugus Woods LLC is a New Hampshire LLC

that is engaged in the business of real estate development and investment, and is the
developer of the Villas at Paugus Bay Subdivision, located in Laconia, Belknap County,
New Hampshire. The defendants maintain their principal place of business at 670 North
Commercial Street, Manchester, Hillsborough County, New Hampshire.
NOTICE
4.

Pursuant to RSA 358-A:5, the State sent notice to the defendants on May

6, 2011, that this Petition would be filed in court on or after May 16, 2011. Defendants
responded asking for an opportunity to meet with the Bureau prior to litigation. On May
19, 2011, the State met with the defendants in an effort to achieve a resolution to this
dispute, but despite months of discussion, such resolution has been elusive.
SUMMARY OF THE CASE
5.

This is an action for civil penalties and equitable relief against Brady

Sullivan Paugus Woods, LLC (the “Subdivider”), for violations of the Land Sales Full
Disclosure Act, RSA 356-A, and the Consumer Protection Act, RSA 358-A.
6.

The Subdivider is the developer of The Villas at Paugus Bay, a planned

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93-lot high-density subdivision consisting of single-family modular homes and located
on White Oaks Road in Laconia, New Hampshire. To date, 42 homes have been
completed with all of those having been transferred to members of the public. On
information and belief, four additional homes are near or at completion, and sales efforts
remain under way.
7.

The Land Sales Full Disclosure Act establishes substantive protections for

consumers by requiring that subdivided lands be registered or exempted from registration
by the Consumer Protection and Antitrust Bureau of the Attorney General’s Office (the
“Bureau”) before the subdivider may offer the lands for sale to the public. RSA 356-A:4,
I. As part of the registration or exemption process, the subdivider is required to submit
numerous documents related to the subdivision for review by the Bureau, including the
public offering statement. RSA 356-A:5, I (q). Intentional misrepresentations or
misstatements of material facts in an application for registration or exemption is
forbidden, and is grounds for revocation of the certificate of registration or exemption.
RSA 356-A:13. If a certificate of registration or exemption is revoked or suspended, the
subdivider must cease all sales and promotional activities. RSA 356-A:4, I.
8.

The Land Sales Full Disclosure Act establishes further substantive

protections for consumers by including, among others, a prohibition against the
misstatement of material facts by the subdivider or his agent in the course of offering or
disposing of a lot, parcel, unit or interest in subdivided lands. RSA 356-A:16, I.
9.

The Land Sales Full Disclosure Act describes a public offering statement

as a document that is provided by the Subdivider for promotional purposes and that
provides “full and fair disclosure” to prospective buyers. RSA 356-A:6 (f).

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10.

The Land Sales Full Disclosure Act further describes a public offering

statement as a document that is provided by the Subdivider to prospective buyers and that
enumerates all restrictions on the subdivided land, including regulatory restrictions, and
whether the subdivision is compliant with the said regulations. RSA 356-A:6 (c).
11.

The Land Sales Full Disclosure Act establishes a statutory right of

rescission for purchasers of subdivided lands subject to its jurisdiction. RSA 356-A:4, II.
Such right of rescission terminates five days after the purchaser signs a purchase and
sales agreement or receives a copy of the current public offering statement, whichever is
later. Id.
12.

N.H. RSA 358-A, the Consumer Protection Act, outlaws “any unfair or

deceptive act or practice in the course of any trade or commerce within this state.” RSA
358-A:2. An act is “unfair” if it is “within at least the penumbra of some common law,
statutory, or other established concept of unfairness.” Chroniak v. Golden Inv. Corp.,
983 F.2d 1140, 1146 (1st Cir. 1993). The Land Sales Act is intended to protect
consumers, and establishes a statutory concept of fairness in the field of land sales.
Accordingly, any failure to abide by the terms of the Land Sales Act constitutes an unfair
act, and is therefore also a violation of the Consumer Protection Act.
13.

The Consumer Protection Act explicitly forbids a seller of goods or

services from representing that its goods or services have “approval, characteristics,
ingredients, uses, benefits or quantities” that they do not have. RSA 358-A:2, V.
14.

The State brings this Petition because, as shown in detail below, it has

reason to believe that the Subdivider has violated the Land Sales Full Disclosure Act by
selling homes in the Subdivision without disclosing that these homes do not meet basic

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building and housing codes, and are, in fact, hazardous to their occupants, and that the
remediation of these deficiencies and code violations would cause substantial hardship to
the purchasers and owners of these homes.
15.

Furthermore, the State brings this petition because it has reason to believe

that the purchasers of homes in the Subdivision were delivered a document purporting to
be a public offering statement, but which failed to meet the minimum statutory
requirements for such a document. Specifically, the document delivered misstated
significant material facts regarding compliance with building and housing regulations.
RSA 356-A:6, I (c). Accordingly, the purchasers have not yet received a public offering
statement that fully and fairly discloses all material facts about the subdivision, and the
five-day limit on the statutory right of rescission has yet to run.
16.

The State also has reason to believe that the Subdivider violated the

Consumer Protection Act in that it represented to its customers that these homes are
compliant with all relevant building and housing codes, yet in fact the houses in the
Subdivision do not meet basic building and housing codes and are, in fact, hazardous to
their occupants.
FACTUAL ALLEGATIONS
17.

The Villas at Paugus Bay Subdivision was first registered with the Bureau

on March 28, 2007. At that time, the developer was Paugus Woods, LLC, and the
developer of record was Norris Viviers. On July 23, 2009, the Bureau received a request
for a bulk sales exemption pursuant to N.H. Admin. R. Jus 1305.02, indicating that the
Subdivision was being transferred in bulk to the Subdivider. The Subdivider made the
appropriate application for registration pursuant to RSA 356-A:4. After its statutory

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review of the application for registration, the Bureau issued a Certificate of Registration
for the Subdivision to the Subdivider on October 28, 2009. Following registration by the
Bureau, the Subdivider may legally offer the homes to the public. RSA 356-A:4, I.
18.

On January 20, 2010, Donald Carpia, Modular Building Inspector for the

Division of Fire Safety of the New Hampshire Office of the State Fire Marshal, inspected
at random seven homes in the Subdivision. Inspector Carpia identified thirteen code
violations. All but two of these violations were common to all seven inspected homes in
the Subdivision. Inspector Carpia informed the Director of Code Enforcement for the
City of Laconia by letter of these code violations. The defects consisted of structural
defects, electrical defects, and other violations of building codes that could cause the
dwellings to be unsafe. In the letter, Inspector Carpia stated that he was accompanied on
the inspection by Mr. Larry St. Pierre, an employee of the Subdivider and the project
manager for the Villas at Paugus Bay, and that Mr. Carpia alerted Mr. St. Pierre to these
violations.
19.

In the public offering statement provided to prospective buyers, the

Subdivider states at page 5 under the heading “M. Zoning, Housing and Building Codes”
as follows: “The building site is zoned residential single family. The project is in
compliance with all zoning ordinances, housing codes, building codes, and similar laws
affecting the subdivision project.” Thus, the Subdivider explicitly informed prospective
buyers that the units are in compliance with all applicable building and housing codes.
20.

By offering the homes for sale, the Subdivider also implicitly guarantees

that the homes are habitable. Lempke v. Dagenais, 130 N.H. 782 (1988).
21.

In late 2010 through early 2011, in response to an inquiry by certain

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homeowners in the Subdivision, Kenneth Walsh, the State Fire Marshal’s modular
building inspector, inspected six homes in the Subdivision that have been sold and are
currently occupied. None of these homes was inspected earlier by Inspector Carpia.
Each and every one of the inspected homes exhibited serious violations of building and
housing codes. These violations included structural defects, electrical defects, heating
and other building defects which could cause the dwellings to be unsafe or uninhabitable.
22.

The above factual allegations are supported by the sworn affidavit of

Kenneth Walsh, State Fire Marshal Building Inspector for modular structures, attached
hereto.
23.

By offering these homes for sale subject to a document purporting to be a

public offering statement, but which failed to provide a “full and fair disclosure” to
prospective purchasers, and which in fact contained material misstatements of the
condition of the homes, the Subdivider has violated those provisions of RSA 356-A that
require a public offering statement to provide truthful, accurate and full disclosure to the
prospective buyers, and has, in fact, failed to provide prospective purchasers with a valid
public offering statement as that document is described in the statute.
24.

By submitting to the Office of the Attorney General as part of its

application for registration pursuant to RSA 356-A, a document purporting to be a public
offering statement but which contained false statements of material fact, the Subdivider
has engaged in an act or practice constituting a violation of that chapter, and the Attorney
General is thereby authorized to bring this action. RSA 356-A:10, III.
25.

By stating that the homes being offered to consumers are in compliance

with all applicable building and housing codes when in fact they are not, the Subdivider

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has represented that the goods have “approval, characteristics … uses, [or] benefits” that
they do not have, in violation of RSA 358-A:3, V.
26.

In addition to injunctive relief, the Attorney General also seeks penalties

of up to $10,000 for each of the Subdivider’s violations of RSA 358-A.
CONSUMER COMPLAINTS
27.

Daniel and Dawn Crim closed on their new home at 86 Sarasota Lane in

the Villas at Paugus Bay on November 24, 2010. Even before the closing, the Crims
noticed problems with the new home, and were working with the Subdivider to resolve
these issues. On December 1, 2010, Mrs. Crim noticed an anomaly in the ceiling in their
3-year-old child’s bedroom, where she saw what appeared to be severe cracks in the
drywall. After being told by the Subdivider that the issue was cosmetic, the Crims
contacted the State Fire Marshal for an inspection. Inspector Walsh responded to the
request, and found and documented 18 building code violations attributable to the acts or
omissions of the Subdivider. Inspector Walsh suspected that the home had not been
properly assembled and ordered a more thorough inspection which included removal of
sections of drywall covering the part of the structure where the bedroom module was to
be attached to the adjoining module. When the drywall was removed, Inspector Walsh
discovered that the large lag bolts that normally attach the bedroom module (the “C
Module” or the “bump-out”) to the adjoining building module (the “B Module”) had not
been installed. Thus the C Module was not bolted to the B Module, as it is intended to be
by the manufacturer. Inspector Walsh also discovered that not only was the C Module
not bolted to the B Module, the Subdivider had not constructed the foundation to provide
the required foundation support for the C Module. Because of these failures, the C

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Module was physically moving away from the remainder of the house, causing the cracks
and deformation in the drywall that had attracted the attention of the homeowners and
caused them to file their complaint. This more in-depth inspection also showed several
other serious code violations, including but not limited to potentially dangerous wiring
and electrical code violations, violations of building codes related to fire blocking,
insulation, heating/ventilation and air conditioning (“HVAC”), and the installation of
propane gas delivery systems.
28.

Suzanne Boles of 71 Siesta Lane in the Subdivision also noticed similar

anomalies in the walls and ceiling of her child’s bedroom. Dr. and Mrs. Boles’s home
was of a similar design to that of the Crims’ home, although it was manufactured by a
different modular manufacturer. Mrs. Boles contacted the New Hampshire State Fire
Marshal’s Office and filed a complaint. Inspector Walsh responded to this complaint as
well and performed an initial inspection of the Boles’s home on the same day as his
inspection of the Crims’ home. Inspector Walsh discovered that there were similar
structural deficiencies in the construction of the Boles’s home. Again, Inspector Walsh’s
inspection showed that the C Module in Dr. and Mrs. Boles’s home was not bolted to the
adjoining module, and the required foundation support for the C Module was missing.
As in the Crims’ home, the ceiling and wall drywall in the Boles’s home were cracked
and deformed because the C Module was physically separating from the main structure.
Along with these hazardous structural deficiencies, Inspector Walsh also found
potentially hazardous violations of building codes related to fire blocking, electrical
wiring, insulation, HVAC, and propane delivery similar to those discovered in the Crims’
home.

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29.

While her home was being inspected, Mrs. Boles informed Inspector

Walsh that her parents, Mr. and Mrs. Holmberg, own a home in the Subdivision located
near to hers at 63 Siesta Lane, and asked Inspector Walsh if he would also inspect their
home. The Holmberg home is a different style, consisting only of two modules and had
no C Module. Yet Inspector Walsh’s inspection revealed potentially hazardous violations
of building codes related to fire blocking, electrical wiring, insulation, HVAC, and
propane delivery similar to those discovered in the previous two inspections.
30.

In the next few weeks, pursuant to complaints received, Inspector Walsh

inspected three more homes in the Subdivision. All three were of the two-module design
with no C Module, but all three exhibited potentially hazardous violations of building
codes related to fire blocking, electrical wiring, insulation, HVAC, and propane delivery
similar to those discovered in every other home that the state Fire Marshal’s inspector
had reviewed.
ONGOING CONCERNS
31.

On information and belief, the Subdivider made an attempt to remedy

certain of the code violations identified by Inspector Walsh of the State Fire Marshal’s
Office. Yet, on information and belief, the Subdivider’s original attempts to remedy the
deficiencies were inadequate. It relied on its on-site project manager at the time to
oversee the remediation. However, on information and belief, the homeowners found the
Subdivider’s project manager to be inflexible and unwilling to work cooperatively with
them. Reportedly, repairs were scheduled and performed without due regard for the
needs of the homeowners. On information and belief, some repair work was substandard and required reworking before it would meet applicable building and housing

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codes. On information and belief, when homeowners have sought permission to hire
contractors of their choice to perform the needed repairs and to file for reimbursement by
the Subdivider, the Subdivider has denied these requests and stated that it would only pay
for the remediation if it was performed by its own contractors.
32.

After the State informed the Subdivider of its concerns regarding the

condition of the homes in the Subdivision, the Subdivider agreed to halt sales activities
temporarily while a resolution to this matter was sought. During that period, the
Subdivider informed the State that it wished to close on two homes that it had sold prior
to the agreement to suspend sales activities, as the buyers had moved from their previous
homes and failure to allow them to take possession of their homes was a severe
inconvenience. The State agreed provided that an independent inspector or building
engineer inspect each of the two homes for code violations. The State engaged the
services of an independent civil and structural engineering firm to inspect these buildings.
During his review, the independent inspector found errors that needed to be corrected.
These corrections were made, and the homes were deemed to be habitable.
33.

At the State’s request, the independent inspector has recently begun

inspecting the buildings that currently exist in the Subdivision. To date, the independent
inspector has examined over twenty of these existing, inhabited homes. The independent
inspector has uncovered various building code violations in these homes, including but
not limited to a failure to bolt modules together. The independent inspector has also
identified other areas of concern in currently inhabited homes in the Subdivision. Of
immediate concern is the independent inspector’s recent discovery that the modules
generally have not been properly fastened to their respective foundations. These

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violations exist even after the Subdivider has been informed of code violations by two
building inspectors from the State Fire Marshal’s Office and after the Subdivider has
made its own attempts to correct the violations.
34.

Given the breadth and severity of the deficiencies exhibited, and the

unacceptable failure rate of the homes that have been inspected by the State Fire
Marshal’s Office and the independent inspector, the Bureau concludes that these
deficiencies may indicate a pattern or practice by the Subdivider to ignore applicable
building and housing codes, in violation of the law. This pattern or practice puts buyers
and homeowners at needless risk.

CAUSES OF ACTION
COUNT I
VIOLATION OF RSA 356-A
35.

The allegations of the preceding paragraphs are hereby incorporated into

Count I as if fully set forth herein.
36.

On July 28, 2009, the Subdivider submitted to the Bureau an application

for registration under RSA 356-A:5, II for ninety-three lots, units or interests in the
Subdivision.
37.

On information and belief, to date the Subdivider has sold forty-two units

to the public. Of these forty-two, all that have been inspected by the Office of the State
Fire Marshal have exhibited multiple and serious building code violations, which if not
remedied would render the structures unfit for habitation.
38.

By representing that all units offered by the Subdivider met all applicable

 13
building and housing codes, the Subdivider made incorrect statements of material fact in
its application for registration, in violation of RSA 356-A:13.
COUNT II
VIOLATION OF RSA 356-A
39.

The allegations set out in the preceding paragraphs are hereby

incorporated in Count II as if fully set forth herein.
40.

By selling homes in the Subdivision that do not meet all applicable

building and housing codes despite assuring the public, via its statements in the purported
public offering statement, that the subdivision is in compliance with all such codes, the
Subdivider failed to provide consumers with a public offering statement that meets the
minimum statutory requirements for said document, and therefore violated the
requirements that a current public offering statement be provided to all purchasers.
COUNT III
VIOLATION OF RSA 358-A
41.

The allegations in the preceding paragraphs are hereby incorporated into

Count III as if fully set forth herein.
42.

In offering and disposing of interests in the Subdivision, the Subdivider

expressly represented to prospective purchasers that the homes met all applicable
building and housing codes. The Subdivider thus represented that the subdivided lots had
approvals, characteristics or benefits that they did not have, and the Subdivider had
approval or status that it did not have, in violation of RSA 358-A:2, V.
43.

Each offer or disposition of interests in the Subdivision constitutes a

separate violation of RSA 358-A.
COUNT IV
VIOLATION OF RSA 358-A

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44.

The allegations in the preceding paragraphs are incorporated into Count

IV as if fully set forth herein.
45.

In offering or disposing of interests in the Subdivision, the Subdivider

implicitly represented to consumers that it was doing so lawfully, i.e., in compliance with
the provisions of RSA 356-A, including, but not limited to: a) that the buildings in the
Subdivision comply with all applicable building and housing codes; b) that all disclosures
required by law had been made; and c) that all protections required by law were in place.
In reality, the Subdivider had not complied with the statute or the Bureau's duly enacted
regulations. The Subdivider thus represented that the subdivided lots had approvals,
characteristics or benefits that they did not have, and the Subdivider had approval or
status that it did not have, in violation of RSA 358-A:2, V.
46.

Each offer or disposition of interests in the Subdivision constitutes a

separate violation of RSA 358-A.
RELIEF SOUGHT
WHEREFORE, the plaintiff, State of New Hampshire, respectfully requests that
this honorable Court grant the following relief:
A.

Issue a preliminary injunction revoking the registration of the homes in the

Villas at Paugus Bay subdivision, thereby halting the sales or transfer of any new homes
in the Subdivision to any member of the public;
B.

After notice and hearing, find that the Subdivider has violated RSA 356-A

and RSA 358-A as alleged in Counts I through IV;
C.

After notice and hearing, permanently enjoin the Subdivider from

engaging in conduct in violation of RSA 356-A and RSA 358-A as alleged in Counts I

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through IV;
D.

Order the Subdivider to present a plan for the inspection of all buildings in

the Subdivision by an independent building inspector or engineer, and the remediation
and independent verification thereof of all building and/or housing code violations
discovered by the independent building inspector or engineer. As part of this plan, all
inspections of the homes must be performed by a qualified independent building
inspector or engineer not in the employment of the Subdivider or any entity related to the
Subdivider. Such inspections, remediation and re-inspection shall be undertaken at the
convenience of the homeowners. Also, any homeowner whose home does not meet
applicable building or housing codes must be allowed the choice of either 1) allowing the
Subdivider’s work crews to effectuate the necessary remediation; 2) hiring building
contractors of their own choice to effectuate the necessary remediation, for which the
Subdivider shall fully compensate the homeowner for his or her related expenses; or 3)
exercising the statutory right of rescission and return the home to the Subdivider for a full
refund of the entire purchase amount paid;
E.

Assess and award the State civil penalties of up to ten thousand dollars

($10,000) against the Subdivider for each violation. RSA 358-A:4, III(b).
F.

Award to the State its legal and investigative costs of prosecuting this

action. RSA 358-A:6, IV.
G.

Grant such other relief as may be just and equitable.
Respectfully submitted,
THE STATE OF NEW HAMPSHIRE
Michael A. Delaney
Attorney General

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DATE:____________

_________________________________
David Rienzo (NH Bar No 13860)
Assistant Attorney General
Consumer Protection and Antitrust Bureau
33 Capitol Street
Concord, New Hampshire 03301
(603) 271-3643

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