Gem on Ocean Quickly Loses Its Brilliance
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.
Only after she sent the checks did Martinez, 33, start to doubt. She called a Shelter Cove real estate agent, who told her he wouldn’t give her 50 cents for the lots. Neither had power lines to it, and one had an easement, meaning that someone else had a legal right of access to the property, Martinez said.
“I felt like, oh my God, what have I done?” she said. “I lost my savings. You get caught up with all these pictures. They’re just selling you a dream.”
Real estate agents must disclose anything they know about a property that might affect its value. But state disclosure requirements for individual sellers don’t apply to vacant land, and counties are required to disclose very little about tax-delinquent properties they sell, according to real estate experts.
An unsuspecting buyer may sue for fraud or false advertising if the seller described a property as something it wasn’t, said Tom Dressler, spokesman for the state attorney general’s office.
A former sheep ranch, the Shelter Cove development lies on what’s known as the Lost Coast, a remote expanse that has impressive ocean views, black sand beaches and its own airstrip -- convenient for those who want to avoid the narrow, twisting, 45-minute drive from the main highway.
“It’s awesome,” said Vern Bonham, a real estate agent who grew up in Shelter Cove. “It’s the diamond of the North Coast.”
Prime Shelter Cove lots are hot property, selling for anywhere from $60,000 for a usable lot with a view in the upper area to nearly $300,000 for an ocean-front parcel, Bonham said.
In contrast, more than 700 lots have been assessed at less than $2,000, which makes them exempt from county taxes. But owners still can become delinquent in utility fees charged by the improvement district.
Humboldt County tax collector Stephen Strawn said he was bound by law to sell properties that become delinquent by being five years behind in paying their taxes and utility fees. However, Strawn tells people who attend county auctions to inspect any sites before they bid on them.
Lin, the would-be real estate investor, said the county should give more information to bidders. In the meantime, Lin said, she wouldn’t hesitate to unload her property.
“The county doesn’t feel guilty. Why should I be the victim?” she asked. Besides, “It has a gorgeous ocean view. Somebody might be able to do something with it.”
