Aspen housing authority reaches settlement with Mulcahy, will forgive $133K in fees, fines

After more than five years of legal wrangling, the Aspen-Pitkin County Housing Authority waives attorney fees and fines to clear title on Burlingame house

The home in Burlingame Ranch.(Aspen Times file photo)

The Aspen-Pitkin County Housing Authority has reached a settlement with its foe and former Burlingame Ranch resident Lee Mulcahy, forgiving $133,500 in attorney fees and fines that he was responsible for as part of his nearly six-year legal battle with the local government.

The APCHA board of directors approved a resolution during a special meeting Tuesday that spells out the terms and conditions of the settlement.

It allows APCHA to obtain clear title to the three-bedroom, 3,000-square-foot home located at 53 Forge Road, even though the agency took possession of it in March.

In exchange for the waiving of $48,500 in penalties due to Mulcahy refusing to leave the property after APCHA bought it in December and $85,000 in attorney fees, four lawsuits involving Mulcahy and the agency will be dropped.

Mulcahy, a local artist, ran afoul of APCHA rules in 2015 when the agency found him out of compliance with affordable housing employment guidelines that say he must work 1,500 hours a year in Pitkin County.

The remedy for breaking the agency’s rules at the time was eviction for renters and a forced sale for homeowners. Now, APCHA has established a schedule of fines for such violations and a hearing officer makes determinations on how much a violator pays. Eviction and a forced sale are still options.

While he bought the lot in 2006, construction began in 2012 when Mulcahy received a $970,000 loan from his mother, Sandy, and her late husband in two promissory notes, which were secured by a deed of trust.

Although APCHA has acquired title to the property, Sandy Mulcahy has an outstanding lien, which also encumbers it.

In addition to the unpaid principal on the loan, she claims accrued interest in the amount of approximately $360,000.

“One of the primary reasons for doing this is for APCHA to avoid having the possibility of having to pay the outstanding interest on the family loan,” APCHA attorney Tom Smith said. “In addition to eliminating the financial risks, it also eliminates what could be extensive delay in getting clear title of the property so that can be conveyed to a qualified buyer at the earliest possible time.”

The settlement also will eliminate the risk of foreclosure on the property, according to Smith.

APCHA officials also question whether Mulcahy would actually pay the attorney fees and penalties owed.

A court-appointed receiver acting on behalf of a defiant Mulcahy closed on the property Dec. 8 and sold it to APCHA for $995,000, which was the maximum purchase price.

That money went into a court registry while the lawsuits winded through the courts.

After court ordered disbursements, there is $903,228 being held in the registry, which consist of $19,774 in appeal bonds posted by Mulcahy and $883,454 in proceeds from APCHA’s purchase of the property.

The agreement, approved unanimously by the board, is what’s known as a “walk-away” settlement, so APCHA will have no claims or outstanding judgments against the Mulcahys and vice versa, and Sandy will release the notes and deed of trust on the property.

APCHA board members all agreed that the settlement is a good one for the agency and will allow it to focus on other pressing matters in its pursuit to house a significant portion of the workforce.

APCHA board member and Pitkin County Commissioner Kelly McNicholas Kury said her affirmative vote represented the board of county commissioners’ position on the matter.

“I just want the public to know that, and that I think it will be good to have this chapter come to a close,” she said. “I have a little frustration, I wouldn’t be surprised if the public has a little frustration, about not being able to reclaim any of the legal fees associated with this long litigation, but I will say that I think there is some public benefit.”

APCHA board member and Aspen City Councilman Skippy Mesirow said it’s been a marathon to get to this point with the Mulcahys.

“This has taken a lot of time and effort in the community and this board has some big ambitions about improving, amending and bettering our system to house more people with more accountability and trust and this is going to free up a lot of time to do it,” he said.