Lien times in Pitkin County
Two Man Crew is like a lot of small and large construction firms in the valley these days. Hampered by a credit crunch, a national recession and a construction slump, the Carbondale firm isn’t mustering the same business it did just one or two years ago.But the shrinking workload isn’t the firm’s only challenge during this Great Recession: The act of collecting bills has unveiled its own set of issues.When Two Man Crew couldn’t get paid for the remodeling and repair work it did on a home in Aspen’s West End, on March 2 it filed a mechanic’s lien for $43,123 against proprietor Solstice Ownership.Two days later, Solstice, headquartered in New York, filed for Chapter 11 bankruptcy protection in its home state. For Two Man Crew owner Gordan Altmaier, the amount he claims Solstice owes his firm is substantial.”That is probably 30 percent of my net income,” says Altmaier, who’s owned the business for eight years. His staff of two includes himself. He once employed 11.Mechanic’s liens are filed by construction firms or individual workers as a way to get paid for their labor and materials. The lien is attached to the property where the work was performed, and the property cannot be sold until the billing dispute is settled. Once the dispute is settled or the bill is paid, the lien is released from the property.But because Solstice is bankrupt, Altmaier says he’s not optimistic he’ll get paid in full; 50 cents on the dollar would surpass his expectations.According to published reports, Solstice went bankrupt in the wake of a $23.6 million loan it had through the Fortress hedge-fund group. Solstice, a destination club, owns 14 homes around the world, including the one in Aspen.”I’m in there (the bankruptcy filing) with these huge banks,” Altmaier says.The Solstice bankruptcy, combined with a number of other economic factors, has hit Altmaier’s business hard.”I would say I’m down 50 percent,” he says.Gone are days when Aspen’s soundtrack was a symphony of jack hammers, power drills and towering cranes. These days, construction firms and their workers are playing a quite different, not-so-uplifting tune.Through May 20 of this year, 334 liens, most of them levied by construction firms, had been filed in unincorporated Pitkin County. That’s more than triple the number of liens filed in the same period last year, according to public records, and more than five times the 61 filed in 2005.Through May 20 of this year, 128 of those liens were released, equating to 206 bills that remain in dispute.
The surge in liens this year is a statistic that may seem jaw-dropping, but for the most part it’s merely a reflection of the times: Cash isn’t flowing like it was when work began on construction projects, which are now on the decline. In the first quarter of this year, Pitkin County handed out 42 building permits, compared to 79 in the first three months of 2008 and 80 in 2007’s first quarter. January through March of 2006 saw 111 building permits issued, according to county data.All of this makes the pie even thinner for the valley’s construction industry. Says Altmaier: “Now you’ve got so many of the big companies looking for every small job they can get.”Highly touted projects such as Base Village at Snowmass, the Stage 3 redevelopment on Main Street, among other developments both big and small, have stumbled mightily since the recession gripped the Roaring Fork Valley last year. When cash was abundant and lenders were handing out money, contractors and subcontractors were more focused on work and less on playing the role of a collection agency. “As a matter of business, in Aspen we had been fortunate,” says Brad Whitehead, owner of Paragon Technology Group, a Glenwood Springs-based firm that installs home theaters and light control systems. “The money was flowing.”Whitehead said that in the past, billing disputes with property owners are part of a course of doing business. Sometimes projects have cost over-runs, or aren’t finished on schedule, which can create billing disagreements between the general contractor and the property owner.”If you have a large enough client base, sometimes you’re going to have a disagreement,” Whitehead said.But this year, it’s different. For sure, there are billing disputes, but it’s no coincidence that the spike in liens comes against the backdrop of a downtrodden economy.Charles Plimpton, owner of Myers & Company Architectural Metals in Basalt, said his firm has filed five to six liens so far this year.”In the past,” he says, “we filed one or two a year.”While liens are up at Myers, the firm’s worker count is down. “We had been running at 95 to 100, now we’re at about 75,” Plimpton says.Even though it’s tougher to get paid these days, Plimpton says he’s still able to run a sustainable business. Although he had to cut his staff by nearly 25 percent, he’s still meeting payroll despite declining revenues and disputed bills.”So far we’re able to sustain ourselves with the cash flow we have,” he says. “It’s not that each lien is critical but if you put them all together it obviously adds up.”The market is tight. And whatever profit margins you have get eaten up by nonpayment.”He adds: “Obviously the economy has something to do with it. We’ve had several jobs stop right in the middle of the job. We were right in the middle of the Stage 3 project on Main Street and it stopped.”Plimpton says Myers was paid for its work on the Stage 3 redevelopment. Other construction firms, however, have filed liens on the property, owned by America Development of Dallas. Among them are Charles Cunniffe Architects, which claims it is owed $167,536, and John Olson Builder, which filed a claim for $254,194, though that amount has been lowered, according to public records. Last year, America Development stopped during the middle of its 34,000-square-foot redevelopment on the 600 block of East Main Street, where the old Stage 3 theater building once was.Jeffrey Jones, owner of Dallas-based America Development, the developer of the old Stage 3 site, did not return a telephone message seeking comment.
Krabacher, the attorney for Cunniffe Architects and Olson Builder, would not discuss those liens specifically. Krabacher, who specializes in construction law, says he’s handling more liens these days, but he’s not that surprised by the uptick. “In general we’re seeing a substantial rise and it’s a result of the general economy, the credit market squeeze and the inability of some owners to pay the contractors on time,” he says. Plimpton also wonders if some property owners are trying to capitalize on the recession by stalling payments or haggling for lower rates.”I think there are some owners who are taking advantage of the circumstances, and wanting for us to reduce our bills,” he said. “And they’re being reluctant to pay. There are owners who are looking for deals in the market.”There have been a few instances in which contractors and subcontractors have simply had to wait to get paid.The so-called Target House on Buttermilk Mountain, for example, had at least eight mechanic’s liens attached to it at one time. The home, located above the superpipe terrain feature and originally listed for $26 million, was seized from Buttermilk Landowner LLC by lender Alpine Bank in February. By the time Alpine sold the 13,544-square-foot home for $12 million in April, the liens had been paid off.And at one time, the Dancing Bear fractional-ownership project had more than $8 million in liens attached to the property. Records show that the debt has been whittled down considerably, including $696,291 that went to Whitehead’s Paragon Technology.
Perhaps the best case-study for construction billing disputes can be found at the Liquid Sky and Junk restaurants in Snowmass Village. There, more than $1 million in liens have been racked up on the property.A typical project arrangement involves a general contractor and a host of subcontractors. Once the contractor gets paid, it then pays off the sub-contractors. But when it doesn’t, a chain reaction of liens can ensue, with the general contractor and the subs filing mechanic’s liens. That’s what happened at the Junk and Liquid Sky projects, in which Contractor PCL Construction filed the largest lien, for $663,732, and a host of subcontractors followed suit.But Scott DeGraff, who owns both projects, told The Aspen Times earlier in May that he is waiting for the project to be completed before he pays off PCL.”There’s still a lot of work to be done,” DeGraff said at the time. “It’s an unfortunate thing and a Catch-22. Do you pay and hope the work gets done or wait and hold the final payment?”For painting company owner Macky Morris, one of the lien claimants who says he is owed $32,122.40, the answer is clear: “It’s not reasonable to ask someone to do the work and not get paid. It’s hard to pay the bills … It puts a financial crunch on our business.”email@example.com
Top 5 most-read articles: City of Aspen considers three finalists as restaurateurs, CDOT grapples with snowplow driver shortage
We’ve rounded up the top five most-read stories on Aspentimes.com from last week.