Lendlease, WinnResidential Sued Over Alleged ‘Slumlord’ Practices At Marine Corps Base

Three United States Marine Corps families are taking two commercial real estate giants to court over housing conditions at one of the largest Marine bases in the country, Camp Lejeune in North Carolina.

Six plaintiffs — three Marines and their wives — are seeking to establish a class-action lawsuit against Australian Lendlease Corp. and its American subsidiaries, along with its partner, Boston-based WinnCompanies, for allegedly turning a blind eye to a litany of safety issues at Marine housing the companies operate and lease from the U.S. Navy.

The families have had to deal with leaks, mold, and roach and vermin infestations after the base suffered damage from Hurricane Florence in 2018, a Reuters investigation revealed. The plaintiffs also claim they were subject to bullying, and that Lendlease and WinnCompanies released a false resident feedback survey to avoid further scrutiny.

The families are suing for negligence, breach of contract and are asking the Eastern District U.S. Court in North Carolina, in a lawsuit filed Sept. 18, to grant them an injunction to force the landlords to make repairs and customer service improvements, as well as monetary and punitive damages. 

“They should have the right to hold some of their rent back instead of giving it to Lendlease and Winn every month,” said John Hughes, an attorney with Wallace & Graham, representing 1st Sgt. Scott Johnson, Sgt. Garrett Burn and Cpl. William Lewis and their families. Hughes declined to make his clients available for an interview.

Salisbury, North Carolina-based Wallace & Graham is one of four firms representing the Marine families in the proposed class-action suit.

In 2005, Lendlease entered into a joint venture with the Navy called the Atlantic Marine Corps Communities to manage more than 4,000 housing units at Camp Lejeune outside Jacksonville, North Carolina in a 50-year groundlease. AMCC later tapped WinnCompanies to manage the properties.

By 2018, though, frustration boiled over into the media following Hurricane Florence after Reuters' report about housing conditions in the community and AMCC’s lack of response to the damage. In February 2019, the U.S. Senate called a hearing about the poor housing conditions at some military bases, including Camp Lejeune.

Lendlease Americas CEO Denis Hickey testified and admitted “the situation is clearly unacceptable." Executives from other companies who operate military housing, including Balfour Beatty and Corvias Group, vowed to address and fix housing issues.

Hughes said conditions for his clients haven't improved since then. Some of the housing unit conditions go beyond lingering issues from past storm damage from the hurricane and instead stem from “slumlord” behavior by AMCC, he said including cockroach infestations, water leaks, mold, failing appliances and fixtures, and ineffective and inadequate maintenance and repairs.

Lewis’ wife, Lakin, claimed that she repeatedly called the property manager to fix a faulty air conditioning system after moving into one of the units in October. Instead, Lewis alleges the system was never repaired and the situation left her to tend to her newborn in 80-degree heat.

“She had to keep her baby bottles and nipples in Ziploc bags to keep the cockroaches off. Adding insult to injury, the family also found water leaks and mold in their home over time,” attorneys for The Rhine Law Firm said in a press release.

The military housing community contains a mix of apartments, duplexes and single-family houses. Hughes said two of the families in the lawsuit lived in the duplexes, but have since moved off-campus. The third family continues to rent from AMCC on Camp Lejeune, he said.

Given the number of issues the plaintiffs faced with moisture and mold, Hughes said Lendlease should have known that housing in this part of the U.S. would require more attention and money to maintain than it has spent, especially given weather conditions.

“Lendlease knew it was bidding to run the housing in a warm, wet, coastal North Carolina environment,” he said.

“We are reviewing the complaint. As is true in any instance, we have strict protocols in place to ensure any concerns are assessed and remediated appropriately and expeditiously,” a spokesperson for AMCC told Bisnow via email. “Our residents’ safety, health, and well-being are our top priority. As such, we stand by our strong track record, providing quality homes for service members and their families. Due to the pendency of this matter, we are unable to provide any further details or comment at this time.”

Lendlease manages $13.6B in military housing in the U.S. in a portfolio encompassing 50 military communities, according to its 2020 annual report. Lendlease is traded on the Australian stock exchange.

Lendlease officials reported in the annual report that operating earnings were resilient on higher fund management fees, including “a solid performance from the military housing operations.” Rents for the housing are automatically deducted from Marines' paychecks in an arrangement that gives Lendlease and its partner “a guaranteed revenue stream,” according to the lawsuit.

The attorneys allege in the suit that Lendlease has doubled its "project valuation" in its military housing business, bringing in reliable income even in the last six months.

“Lendlease turned privatized military housing into a profit center,” the lawsuit claims. “This was done by cutting service, repair and maintenance costs, letting housing deteriorate, and causing military families to live in abhorrent conditions.”

Marine Corps Installation East Director of Communications Strategy and Operations Nat Fahy told Bisnow in an email that the Marine Corps wouldn't comment on the lawsuit since it wasn't a party to it.

“Nevertheless, the Marine Corps is committed to ensuring our families have safe and adequate housing. We thoroughly investigate any life, health, or safety concerns raised by our residents, and work through our housing partners to ensure any underlying issues are properly addressed,” Fahy said.

Hughes said the lawsuit is in the early stages and has not been scheduled for a hearing, nor has it been granted class-action status by a federal judge.

“The families are choosing to pursue a class action because thus far, all that the AMCC housing provider has offered is to make reforms in the future. It has not offered to compensate families for loss of their homes in the past,” he said. “They seek to represent a group that is estimated to include 5,000 households.”

CORRECTION, SEPT. 23, 12:15 P.M. ET: A previous version of this story incorrectly stated the composition of Atlantic Marine Corps Communities. This story has been updated.