Developer of West End luxury homes suing city of Aspen over $755k in housing fees

This piece of West End property, located at 426 N. Eighth St., is the subject of a federal lawsuit filed by an Aspen law firm on behalf of local hotel developer and operator Michael Brown. (Rick Carroll/The Aspen Times)

A piece of West End property is the subject of a federal lawsuit filed by an Aspen law firm on behalf of a local hotel developer and operator.

Public records link hotelier Michael Brown to a limited liability corporation the firm Garfield & Hecht created before suing the city and Aspen City Council over employee-housing mitigation fees totaling $755,278.

While the city miscalculated the fees, the suit alleged, Brown’s LLC satisfied the amount Jan. 25 in order to obtain a permit to build a single-family residence on 426 N. Eighth St.

The plaintiff is called DR 24F16, which is the LLC that Garfield & Hecht formed Feb. 3, according to the Secretary of State’s office. DR 24F16 LLC represents Forest Lookout II LLC, the corporate identity for the ownership behind the property.

And it is Brown who controls Forest Lookout II, based on documents at the Pitkin County Clerk & Recorder’s Office. Brown also is the co-founder of HayMax Capital, which owns Hotel Aspen and Molly Gibson and is the developer of the unbuilt Lift One Lodge at the base of Aspen Mountain. Haymax also owns two hotels in Idaho and develops luxury residential properties, including the one the lawsuit cited.

Brown did not respond to messages this week seeking comment, nor did David Lenyo, the Garfield & Hecht attorney who filed the suit during non-business hours Sunday in the U.S. District Court of Denver.

City Attorney Jim True held off commenting about the suit Thursday.

“Although we have been contacted by the attorney for the plaintiff, we have not been formally served with the complaint,” True said in an email. “Presently, we are reviewing the complaint … but are not in a position to comment at this time.”

While both sides were mum, the lawsuit spells out Brown’s beef with the city over a piece of undeveloped land the U.S. Forest Service had owned since 1940 before auctioning off its five parcels in 2013.

Five years after the auction, Brown’s LLC paid the newest owner $2.5 million for the empty lot at 426 N. Eighth St. — one of five parcels comprising the Ranger Station Subdivision — in August 2018.

With an eye toward developing property, Brown’s LLC submitted building plans with the city in December 2019 and received its building permit last month.

While the municipal land-use code requires developers of single-family homes and duplex units to mitigate for employee housing, the city violated Brown’s LLC’s constitutional rights by charging it a cash-in-lieu fee five times more than what a developer would be charged to build a single-family home on a lot with existing improvements, the suit said.

“The city of Aspen has no rational basis to treat development of a single family residence on a vacant lot and the development of a single family residence on a lot with existing development differently when calculating FTEs (full-time employees), which in turn impacts the cash-in-lieu affordable housing mitigation rate,” the suit said.

The plaintiff is entitled to a refund, the suit argued, because the fee constituted what’s called a “taking” — which is when government seizes a private property or deprives its owner of certain rights without compensation.

By doing so, the city violated the Fifth Amendment, the suit argues.

“The city of Aspen should refund to plaintiff the amount of the affordable mitigation fee wrongfully imposed and collected with interest thereon from the date collected,” the suit said.

Additionally, the complaint alleged the city violated the 14th Amendment by not providing the plaintiff with due process before setting the fee.

“The city of Aspen’s imposition of the improperly calculated affordable housing mitigation fee is arbitrary, capricious and irrational under applicable due process standards, and the imposition of the fee bears no rational relation to the reasonable amount to defray impacts directly related to the proposed development of a single family residence on Lot 4,” the suit said.

Lot 4 is the property located at 426 N. Eighth St.

Construction has yet to start on the residential project that will include a single-family home and a detached duplex. Another Brown-controlled LLC owns the lot next door, 412 N. Eighth St. It also is undeveloped at this time.

“HayMax purchased two lots and completed entitlement work that allowed for a single family home and detached duplex homes to be built. Each home will be built to the highest luxury standard and take advantage of surrounding mountain views. One residence has been sold,” according to HayMax marketing material.