Some of the country’s largest home builders might have to buy hundreds of acres of desert near a failed development at boom-era prices, The Wall Street Journal  reported.
The legal battle between builders such as KB Home and Toll Brothers and a group of banks led by J.P. Morgan Chase stems from Inspirada, a failed development near Las Vegas. The builders used a popular, but controversial, form of off-balance-sheet accounting when buying the land that insulates them from debt and other obligations.
The banks lent $585 million for the venture, which sold only 635 out of the planned 14,500 homes. The builders thought they were only liable for $370 million, but now the banks say they must buy hundreds of millions of dollars worth of land and develop it.
During the housing boom, off-balance-sheet deals were common because they let companies buy large tracts of land without putting large amounts of debt on their balance sheets.