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Developer says Capitol Hill apartment building ready for tenants despite $500k+ construction lawsuit

(Images: CHS)

(Images: CHS)

IMG_5425A color problem briefly brought one E Union development project to a halt earlier this year — a $500,000+ problem has put the development of another E Union apartment project into what the developer says will only be a short limbo even as the more than $11 million construction of the six-story building is mostly complete and marketing for new tenants already started.

CHS has learned that a King County judge ruled late last month that a construction company holding a major lien on the mostly completed Evolve Apartments project at 10th and Union is owed hundreds of thousands of dollars and can proceed with a foreclosure on the property if the developer behind the project does not pay up.

Despite the ruling, the developer tells CHS the building is open and already home to tenants.

According to court records, Arlington, Washington-based Hilltop Concrete Construction won a $530,000 judgement against developer 954 East Union and Matt and Shahla Aatai of Seawest Investments in a late August ruling in a breach of contract suit brought in 2013.

In the suit, the court ruled that Hilltop was still owed for the bulk of its more than $1 million contract with the Aatai-owned company Acton Construction:Screen Shot 2014-09-10 at 10.31.49 AM

Despite arbitration, the two sides could not come to an agreement on the sizable remainder of the contract that had not been paid.

“It’s unusual to have it get this far,” said A. Shawn Hicks, lawyer for Hilltop. Hicks said his client has been waiting for a few weeks for payment but has been assured it’s coming soon. If not, the lien will be foreclosed and Hilltop will start the process of taking the property to auction. Liens from other contractors could further stretch out the foreclosure process, Hicks said. In the meantime, interest grows at $185 a day, the lawyer added.

“We had a couple chances to settle this,” he said. “But our offers were not accepted.”

UPDATE 9/11/14: Hicks tells us that it appears the situation is about to be resolved and that the money to satisfy the judgement will be wired today.

This is not the first time a Seawest-related project has landed in court over contractor payment issues but it appears to be — by far — the largest dollar amount involved. Previous cases appear to mostly involve disputes over contracts in the ballpark of $10,000 to $15,000.

Kya Aatai of Seawest tells CHS the Evolve building is open and actively marketing to new tenants and that the judgement will be satisfied soon.

The construction work on the building slowed considerably to the point that the Seattle Department of Transportation started fielding numerous complaints about the right of way and sidewalks around the site being blocked even as no work was being done. The city has since created a “Construction Hub” community process to help manage construction impact in the busiest neighborhoods for development in Seattle — including, of course, Capitol Hill and the blocks around 10th and Union.

IMG_5414Construction liens are a common tool in big money developments — and sometimes small — as companies sometimes proactively seek protection on their contracts and, other times, move to protect themselves when deals sour. CHS has found records of additional, smaller liens on the E Union property but no other lawsuits appear to be proceeding at this time.

CHS first reported on the project in June 2011 as plans came to light to demolish the old warehouse at the site that had been used by community groups and arts organizations. A small player in the Seattle mixed-use development scene, Seawest later said it had plans to reduce the amount of retail planned for the building. Later that year, Occupy Seattle attempted to make a stand and take over the building until SPD and SWAT units moved in. An activist attempted to “save” the old building by marrying the structure in this 2012 wedding.

Meanwhile, commercial tenants are already planning to open in the new, street-level retail spaces. At one point, McDonald’s was rumored to be making plans for its first Capitol Hill beachhead. CHS reported earlier this year on the plans from two Seattle food and drink veterans to open sushi restaurant Yuzu by Musashi in the building. “I don’t think I would have been able to open up my restaurant without it,” co-owner Jun Park told CHS in July about the new building and the wave of construction taking place on Capitol Hill. “I really appreciate all these buildings going up. It gave me and my business a chance.”

Thanks to tipster and community meeting attender Tyler for alerting us to this situation.

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Matthew Davis
Matthew Davis
6 years ago

Just noticed this article and thought I would offer a comment. I am an attorney and represent the owner of the building.

For someone who is not a lawyer, you did a nice job of summarizing the situation. Unfortunately, construction disputes and lien claims are as you said common in large construction projects. And like most things, they have more than one side. The arbitrator in this case awarded the owner over $100,000 for defective work, but quite a bit more to to the contractor in a payment dispute.

Fortunately, the building is complete, the award has been paid in full, and the building is filling quickly. A lot of time and attention went into the details, and I think that the building will prove to be an asset to the neighborhood.

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