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Gem on Ocean Quickly Loses Its Brilliance

Owners discover the land they bought sight unseen can't be built on. They, in turn, can sell the property to another unsuspecting buyer.

June 21, 2004|Emily Gurnon | Special to The Times

EUREKA, Calif. — Julia Lin's venture into real estate investment recently took her to a Humboldt County tax auction, where she paid $5,300 for a tiny lot in Shelter Cove.

She thought she had gotten a great deal for a stunning piece of the California coast. Then she ran into a professional bidder at the assessor's office.

The land, he informed her, could not be built on. "I never knew," admitted the former software engineer from Silicon Valley.

"You can still resell," he told her. "I want to sell it," Lin told a reporter. "On the Internet it will sell easily." If so, Lin's lot will continue a 40-year cycle in a place once touted as the "Carmel of the north."

Approved in the 1960s, Shelter Cove is a 4,200-lot subdivision south of Eureka that authorities say would never be permitted under today's regulations. The county tax collector estimates that as many as half of the residential lots -- those in the hilly, upper section of the development -- can't be built on.

At just one-third acre, most are too small to accommodate a septic system, while other larger properties can't get building permits because septic systems are not allowed on a lot that has a 30% or greater slope.

But that hasn't stopped them from being passed from owner to owner in perfectly legal transactions that, if nothing else, prove the wisdom of the maxim "Buyer beware."

Many of the original lots were sold sight unseen to military men in Southern California, Hawaii or overseas. Today, buyers are still putting down their money with little or no knowledge of what they're getting.

"There are people who come into the Cove who are all excited because they bought a lot on the Internet, and then they go and look at it and it's like this," Shelter Cove resident David Halbrook said with a vertical slice of his hand.

Halbrook, 70, bought two Shelter Cove properties at the same county auction Lin attended earlier this month. They were the only two lots of the 15 for sale that he thought were worth anything.

A retired accountant and real estate agent, Halbrook said he was amazed at how much the others sold for. "One was just air space," he said. (Winning bids ranged from $4,700 to $41,000.)

The Shelter Cove saga dates from 1965, when the Humboldt County Board of Supervisors approved plans for the 2,800-acre residential subdivision proposed by developers Richard Walker and George Isaacs of Los Angeles.

The county's blessing came after intense pressure from local residents, politicians and school officials in southern Humboldt County, all of whom saw coastal development as a boon to the poor rural area, recalled Guy Kulstad, then the county director of public works.

Faulty maps didn't help. "The maps didn't even have [topographical] lines on them," said Richard Culp, general manager of the Shelter Cove Resort Improvement District, the public agency that now supplies utilities, recreation and fire protection for local residents. "It's as if it was in Kansas in the middle of a flat cornfield. But in reality, it's a very rugged terrain out here."

Though the lower part of the development is fairly level and is connected to a sewer system, the terrain changes as one gets farther from the sea, county officials said.

If the Shelter Cove development were proposed today, it wouldn't be approved, according to Bob Merrill, North Coast district manager for the California Coastal Commission. The Coastal Act, passed by the Legislature in 1976, bars subdivisions in rural areas from including parcels smaller than the average lot in the surrounding region, he said. "They wouldn't have passed that test," Merrill added.

Kirk Girard, Humboldt County's planning director, said other laws passed since the 1960s also would prevent the creation of another Shelter Cove. Local officials must verify that any proposed lot be "suitable for its intended use."

A drive along any of the 42 miles of roads the developers built reveals how many lots would fail that test. Those in the upper reaches of the subdivision snake precariously over steep hills or end abruptly at a cliff's edge.

Most of the 450 homes that have been built in the development are on gentler terrain.

Girard said his department advises anyone who inquires about Shelter Cove of the problems. But he added, "We don't have the authority to go and declare a lot unbuildable. Government doesn't have the right to go in and take somebody's private asset."

Last fall, Giovanna Martinez, an Alameda County accountant, paid $12,480 sight unseen for two parcels far up in the hills that were advertised over the Internet as "fabulous residential lots," complete with photos of the surrounding area.

She said the owner assured her that it was a great investment, that the lots could be built on, and demanded payment immediately.

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