The homeowners association at Burlingame Ranch, a city of Aspen developed affordable housing complex, has hired lawyers as it claims the municipal government is responsible for paying $8 million in construction defects and other associated costs.
The city is claiming governmental immunity as it heads into arbitration with the HOA, which represents 82 condominium owners at phase 2 of Burlingame Ranch.
At issue is the wildly different cost estimate of the repairs needed at the complex.
The construction consultants hired by the HOA’s attorney to assess the alleged defects estimate it will cost almost $4.9 million.
The city’s insurance carrier’s consultant comes in at just under $820,000.
Robert Lapidow, a Front Range-based attorney with Overturf McGath & Hull, retained by the city’s insurance carrier, said Friday that government immunity is a justifiable defense to protect all Aspen citizens and the municipality, particularly when negotiations are unsuccessful.
“This is a taxpayer-subsidized project and they shouldn’t pay over-exaggerated claims,” he said. “The city has limited resources and with claims like this government immunity is a defense the government can use.”
The two sides could not come to an agreement earlier this month in mediation and now are headed to arbitration.
Chris Griffiths, also a Front Range-based attorney who represents the HOA, said the city has been dragging its feet for years in addressing the construction defects at Burlingame, which is off Highway 82 across from Buttermilk Ski Area.
“Our hope has been that one day we would have a conversation about what’s wrong in that community, but that hope is fading,” Griffiths said.
Since homeowners started moving into their condos in 2014, construction defects began appearing — rapid deterioration of the exterior glulam wood beams, leaking roofs and failed solar systems among other issues, they claim.
The HOA board sent a letter to homeowners earlier this month that summarized its negotiations and current position regarding the city’s role as the developer of their deed-restricted units.
“It is our position that the city of Aspen clearly and intentionally acted as a developer in this instance, and should be held to the standard of a developer,” reads the letter. “The project was funded and managed by the (city’s asset department) and city management, and maintained declarant control of the (Burlingame II) Board of Directors through the warranty period of our community.
“We are disappointed in their decision to maintain this irresponsible position and to therefore force millions of dollars of repairs back on homeowners.”
The Griffiths Law office hired three consulting firms to evaluate the engineering, mechanical and technology systems at Burlingame Ranch II. Griffiths said in order to collect the full amount for the HOA, his firm is charging a 33.3% contingency fee, plus expenses.
The HOA’s consultants found defects in the wood beams, patios and hand rails, rooftop solar systems, water heater plumbing, fan coils, coax cable, as well as the lack of consideration of water quality, fire alarm pull stations, siding, exterior sidewalk and stairway and pressure reducing valves.
Haselden Construction and R.A. Nelson were the general contractors in the two phases of the original construction, which occurred between 2013 and 2015. Also on the project team were OZ Architecture, Resource Engineering Group, Inc., BA Consultants, Inc. and MV Consulting.
Homeowners have been dealing with construction issues and the city for the past five years but with no resolution.
The majority of residents in 2018 voted in favor to pursue a construction defect claim against the city.
“My goal was to not have our homeowners pay an assessment for mandatory repairs specifically linked to construction design and installation defects,” said Ben Yaeger, vice president of the Burlingame HOA board of directors.
City Attorney Jim True said the city has tried to work with the HOA but the association’s hired consultants’ demands are too high.
“Although the city has always been willing to directly address some matters related to the construction of the property, the association has rejected every effort by the city to resolve certain issues,” True wrote in an email. “Instead, with the help of its attorneys and hired experts, the association demanded a large settlement.
“When the initial efforts at settlement failed, the attorneys for the association threatened to take this out of the litigation process and circumvent the agreed-upon procedure for resolution and make it a political matter,” True continued. “This is apparently the next step in that effort to seek a political rather than a legal solution.”
In a Feb. 24 email from Griffiths to the city’s attorneys, he suggests the municipal government’s move to claim immunity rather than advancing the case to arbitration “would be politically devastating to say the least.”
Jacob Gudenkauf, an attorney with Overturf McGath & Hull, wrote back in a March 2 email calling it coercion.
“To the extent that the association seeks to make these claims political, I also remind you that the city subsidized this development to the tune of approximately $300,000 per unit, and many of the alleged defects appear to be the result of poor maintenance, or demands for a betterment or improvement of the current conditions,” Gudenkauf wrote. “Should there be any political implications raised by the association, I would suggest the association consider the implications of demanding the city pay an additional $4 million to further subsidize the Burlingame project.”
Griffiths said Friday that there is still time to talk.
“If they want to negotiate, we will negotiate,” he said. “If they want to talk about immunity, we’ll talk politics.”
Lapidow, representing the city, said the municipal government has acknowledged there are construction issues that need repair and has made offers to the HOA to rectify them.
“It’s not that the city is trying to hide behind governmental immunity,” he said. “We have made efforts to settle this.”
HOA President Steven Miller said homeowners feel the city needs to take full responsibility as the developer, especially because it is in the process of developing the third phase of Burlingame Ranch, which could have as many as 77 units.
“We don’t want our circumstances and problems to be overlooked in the development of (Burlingame III), so similar problems don’t arise there,” he said last week. “We also don’t feel it’s right for the city to move forward on developing another big project until the previous project is made whole and the original, as-built problems are resolved.”
The city settled with the HOA of Burlingame phase 1 in 2012 over defective siding by the manufacturer that was installed by Shaw Construction, the general contractor for that project.
Miller and other homeowners said the first issue that arose in phase 2 was the glulam beams, when at move-in they were already deteriorating.
City officials first claimed the wood would naturally fade and weather, and maintenance was not necessary, according to Miller.
Then the city’s position changed, with officials telling homeowners that the exterior beams required maintenance and instead of that cost being a line item in the HOA’s capital reserve account, it needed to be in the annual budget.
“They were distancing themselves from having to do anything,” Miller said.
That’s when the HOA looked for outside representation.
“The homeowners didn’t want to do this,” Yeager said Friday. “But the city didn’t take this seriously and we didn’t have the capacity to navigate through it.”
The city was the landowner at Burlingame II, but conveyed the land to the HOA in 2014 and 2015.
The city held a majority on the HOA board with three staff members until 2017 when homeowners took over entirely, according to Chris Everson, the city’s affordable housing project manager.
The city’s total public subsidy in the land, infrastructure and 82 condo units at Burlingame II is $27.2 million.
Both sides were aiming for arbitration in May but with the government immunity issue, it’s unclear what the next move is in the dispute.