Skanska and Seattle Condo Developer Seek To Resolve Costly Tangle Of Disputes
Skanska and a condominium developer in Seattle are trying to settle a multifaceted dispute over costs and payments that has simmered for a year and boiled over into a lien filed Jan. 31 by the contractor for $34 million, or about 20% of the contract value. The developer contested most of the lien in state court in Washington and is now negotiating a settlement.
Court documents show that the two sides agreed to mediation in early March and, according to a joint statement from Skanska and Burrard Properties, the Vancouver-based developer, the two companies are “continuing to work toward resolving the dispute.”
The conflict involves a 41-story condominium high-rise called The Nexus. Most of its 389 apartments, whose sale prices range from $400,000 to $2 million, are already under contract and many are occupied. At no point has the quality of the work been affected by the dispute, the two companies said.
In January, the city awarded the building a temporary certificate of occupancy, with “some items left to be completed,” according to the joint statement. Work recently re-began following Gov. Jay Inslee’s (D) announcement permitting construction to continue in Washington State with new safety protocols.
Skanska says in a lawsuit in state court in Seattle that 258 unresolved and unpaid change orders remain with a value of $4.7 million. In the lawsuit, Skanska claims it is owed about $11 million for uncompensated impact and delays and that subcontractors are seeking $6.2 million for such costs.
Skanska puts its unpaid balance through January at $9.1 million, but the math behind the different impacts and costs doesn’t sum to the full $34 million lien placed on the property. The final amount of the damages and costs, including interest accruing at 12% per year, Skanska states, “will be proven at trial.”
The tangle of issues during the course of the project included “water events”—floods that Skanska claims it did not cause but that added significantly to its costs. Water damage is often covered by builders’ risk insurance policies.
Still another thread in the conflict is described in a predecessor lawsuit that originated in federal court and was terminated before the current litigation in state court. In that prior lawsuit, Skanska claimed the developer was refusing to honor terms enumerated in its contract to pay an additional fee for line items of work that were self-performed, including $19.3 million for concrete and $2.3 million for structural steel. Under the guaranteed-price construction management contract, Skanska expected fees on that work beyond the 2.5% base fee on all the other line items in its contract to be performed by subcontractors.
State Lawsuit Continues
But that litigation, filed in U.S. federal court in Seattle, was terminated and apparently now is superseded by the cost and contract claims in state court.
In March, 2017, Burrard, operating as an entity called 1200 Howell Street LLC, hired Skanska as general contractor for the residential tower, ground-level retail space and parking stalls. The original guaranteed maximum price was $153 million.
The Puget Sound Business Journal first reported the lien filing by Skanska and subsequent legal documents were collected by Levelset, a payment services software company that recently created a public payment rating section on its website.
In its claim against Burrard, Skanska reports that the developer was seeking $4 million in liquidated damaged from Skanska for late completion.
Skanska’s lien is excessive, the developer argues in reply to Skanska’s state court lawsuit, and the contractor is due only the GMP amount in the original contract. Burrard says that a portion of what Skanska says it is owed is money the contractor has not yet billed for. Additionally, Burrard says $6.5 million is legally withheld retainage and that the $11 million Skanska seeks for its own costs is not fully or adequately explained. Further, the developer claims Skanska is disputing some costs claimed by its subcontractors.
“The parties are working diligently to close out all outstanding items in a timely manner,” the joint statement said. Closings of purchased units continue and, the two companies said, “the parties look forward to a fully occupied building soon.”
“The dispute and lien filing,” Skanska and Burrard concluded, “do not reflect negatively on the quality of work" and “both Skanska and Burrard are extremely proud of the work that has resulted in this incredible building.”
This story was updated May 5 to reflect that Skanska and Burrard Properties issued a joint statement about their cost and contract dispute related to the Nexus condominium project. An initial version of the story attributed the statement only to Burrard Properties.