The Company leases several offices in South Carolina under operating lease agreements with related parties, and one office in North Carolina with a third party. The office leases have a remaining lease term of up to four years, some of which include options to extend on a month-to-month basis, and some of which include options to terminate the lease. These options are excluded from the calculation of the ROU asset and lease liability until it is reasonably certain that the option will be exercised. The Company recognized an operating lease expense of $1,262,653 and $1,099,406 within Selling, general, and administrative expense on the Consolidated Statements of Operations for the years ended December 31, 2024 and 2023, respectively.

Operating lease expense included variable lease expense of $24,164 and $48,086 for the years ended December 31, 2024 and 2023, respectively. The weighted-average discount rate for the operating leases was 9.13% and 9.68% during the years ended December 31, 2024 and 2023, respectively. The weighted-average remaining lease term was 3.20 and 4.44 years for the years ended December 31, 2024 and 2023, respectively.


December 31,	Lease Payment
2025	$	1,219,984
2026	973,453
2027	696,069
2028	522,052
2029 and thereafter	—
Total undiscounted operating lease liabilities	$	3,411,558
Interest on operating lease liabilities	(453,824)
Total present value of operating lease liabilities	$	2,957,734

In December 2022, Legacy UHG closed on 19 sale-leaseback transactions with related parties, whereby it is the lessee. The leases commenced on January 1, 2023. The Company is responsible for paying the operating expenses associated with the model homes while under lease. The rent expense associated with related party sale-leaseback agreements was $286,400 and $476,525 for the years ended December 31, 2024 and 2023, respectively.

In December 2024, the Company sold 21 completed model homes to a third party and simultaneously entered into a lease agreement for these homes. As the executed contracts for the sale have commercial substance, legal title was transferred, and the risks and rewards of ownership were conveyed, the Company accounted for these transactions as a sale-leaseback. The Company determined that the sale of completed homes is part of its ordinary activities. Accordingly, the sales were recognized as Revenue in the Consolidated Statement of Operations for the year ended December 31, 2024, in accordance with ASC 606.

The leases commenced on December 31, 2024. Eleven of the 21 individual leases had a lease term greater than twelve months. In connection with these eleven leases, the Company recognized an operating lease right-of-use-asset and a corresponding operating lease liability of $564,588.

The Company has certain leases which have initial lease terms of twelve months or less (“short-term leases”). The Company elected to exclude these leases from recognition, and these leases have not been included in operating ROU assets and operating lease liabilities. The Company recorded $134,777 and $319,436 of rent expense related to the short-term leases within Selling, general and administrative expense on the Consolidated Statements of Operations for the years ended December 31, 2024, and 2023, respectively.

During the ordinary course of business, certain regulatory agencies and municipalities require the Company to post surety bonds or letters of credit related to development projects. As of December 31, 2024, the Company had outstanding surety bonds and letters of credit totaling $7,616,669 and $653,153, respectively. The Company believes it will fulfill its obligations under the related contracts and does not anticipate any material losses under these surety bonds or letters of credit.

The Company is subject to various claims and lawsuits that may arise primarily in the ordinary course of business, which consist mainly of construction defect claims. In the opinion of management, the disposition of these matters will not have a material adverse effect on the Company’s Consolidated Financial Statements. When the Company believes that a loss is probable and reasonably estimable, the Company will record an expense and corresponding contingent liability. As of the date of these Consolidated Financial Statements, management believes that the Company has not incurred a liability as a result of any claims.

Rosewood has been named as a co-defendant in a lawsuit alleging negligence/recklessness and breach of certain implied warranties arising out of Rosewood’s construction of homes in a subdivision prior to the Company’s acquisition of Rosewood. The Company is continuing to gather facts and evaluate the plaintiffs’ claims and possible defenses.

The Company believes that a loss related to this matter is reasonably possible; however, the Company cannot estimate the amount or a range of reasonably possible losses for this matter, if any, at this time, due to several factors,

including causation of certain of the plaintiff’s alleged damages. While the Company intends to defend against these claims, there can be no assurance that the ultimate resolution of this litigation will not have a material, adverse effect on the Consolidated Financial Statements.