YELM - Andy and Cindy Smith, both 42, built their dream house on a hill that offers a picturesque view of the community they love.
Andy, a lieutenant colonel based at Fort Lewis whose military career uprooted the family 11 times in 17 years, is fond of the downstairs office. No longer will he have to work on his computer in the living room. Cynthia, a self-described “yarnoholic,” loves the upstairs nook where she can knit. Their three kids’ bedrooms will be painted in their favorite colors. Cynthia says it’s the place where the family poured its heart and soul.
The painting is unfinished. The house sits empty. More than seven months since its completion, the Smiths can’t move in.
They are caught in a land-use process gone awry.
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The city issued a building permit for the home despite a development condition that prohibited it. Now, to uphold a second condition, the city refuses to issue an occupancy permit to the Smiths.
The developer was unable to install required improvements because of the U.S. financial meltdown, although both city and builder were assuming the improvements were moving forward when the building permit was requested and issued.
The builder, who was involved in the early stages of the land-use process, acknowledged he could have done more to head off the crisis if he had better information. The city said he had the information and bears blame for the resulting mess.
“In hindsight, everybody can share in some of the fault here,” said Dan Lee, the builder.
It’s a cautionary tale for homeowners dipping their toe in a housing market remade by the economic crisis.
It’s no clearer today than it was in April as to when the Smiths, experienced home buyers who have owned three homes previously, will be able to move in. They’ve spent tens of thousands of dollars in their efforts to do so, but the possible solution on the table likely requires them to spend more money and excuse the city of any liability it might hold in the matter, steps that Andy Smith might not be able to afford or agree to.
“When you pay your money, you kind of expect to get the product you intended to buy,” he said. “You don’t expect people not to do what they’re supposed to do.”
The hill that Lot 15, the Smith’s property, and the rest of the first phase of the Palisades West subdivision sits on is the root of the problem.
A staff report shows the city made it clear to developer Steve Chamberlain and Lee, who was then working with Chamberlain, during a pre-submission meeting in May 2005 that the elevation of about 60 feet could pose a potential problem. Water pressure declines as elevation increases, and there was concern about insufficient pressure to fight fires and for domestic uses.
The development application submitted the following January to subdivide the property into 24 lots acknowledged the need for a booster pump station to maintain adequate pressure for the homes on the hill. The need was echoed by the city hearing examiner who placed it as a condition for preliminary subdivision approval, which allowed Chamberlain to install the roads and utilities needed to serve them. The hearings examiner gave preliminary approval of the subdivision in September 2006.
Chamberlain wasn’t convinced the pump was needed. A city engineer reviewing civil plans approved his request in March 2007 to install the water system to determine if there was enough pressure to meet fire flow requirements without the pump, the staff report says. The system would subsequently be tested using standards set by the city public works department. If it didn’t meet the standards, Chamberlain was told the city would not accept his application for final plat approval, which would allow the sale of the buildable lots.
During this review, the elevation of the proposed subdivision posed another problem, this time as it relates to the sewer system.
At night, when use of toilets and showers tapers off, pressure in the line would decrease and wastewater would recede down the hill. Throughout the night, bacteria would convert some of the sewage into hydrogen sulfide, trapping it in the line. In the morning, when pressure in the line is restored, it would be released in the air. Hydrogen sulfide smells like rotten eggs and, at higher concentrations, is toxic. To prevent this, the city required Chamberlain to install a valve known as a sewer roll seal, to maintain pressure through periods of low use.
Meanwhile, testing on the water system failed; the booster pump was needed.
The City Council gave final subdivision approval in February 2008 at the request of Chamberlain, who needed it to convert more expensive construction financing into long-term financing. Two conditions were placed on the plat:
• The city would not issue a building permit for any of the lots until the pump was installed, with the exception of a model home.
• It would not issue an occupancy permit until the sewer valve was installed.
The Smiths fell in love with Yelm during Andy’s second stint at Fort Lewis and vowed to build their dream house there if he got a third transfer to South Sound. Their wish came true in 2007.
“We looked nowhere else,” Cynthia said.
In the spring of 2008, the Smiths began working with Lee, who still was working with Chamberlain but also led a home construction company called Triance Homes. Lee said he was asked by Chamberlain to step away from Palisades West subdivision process before preliminary approval was granted. Lee said he stopped working with Chamberlain at the beginning of this year.
Lee said he was unable to secure financing for construction of the custom home. The Smiths closed on a $400,000 interest-only construction loan to buy the lot and build the home in late September. They used a portion of the earlier down payment to pay $14,419 for a building permit, which Lee applied for on Sept. 5, 2008. It was issued 12 days later.
Here the story takes divergent paths.
Community Development Director Grant Beck said Lee asked the city building official to issue the permit, substituting the Smiths’ home for the model home that was exempted under the condition, so construction of a single home could proceed.
The city granted the permit despite the council-approved condition, Beck said, because permits and plans for the pump and sewer valve had been submitted and both projects appeared to be moving ahead. He said that the city made it clear to Lee that it would not issue an occupancy permit until the conditions on the recorded plat were satisfied. Beck said the city assumed Lee informed the Smiths of the plat conditions and they agreed to move forward despite the risk.
The Smiths said they knew none of this. They first learned of the plat conditions in June, nine months later.
In hindsight, Beck acknowledged the city should have handled the situation differently. Beck added he expected if the city had not issued the permit, the Smiths would have gone to the City Council to lobby for it anyway.
“It would have been the same battle with a different face,” he said.
Lee said he was not told of the plat conditions when he requested the permit. While he was aware of the water pressure concern from the initial meeting in 2005, he said it faded into the background now that his focus was on building the home, not the land-use issues. He said the concern was allayed because Chamberlain told him he had secured financing to build the improvements, prompting Lee to file for the permit.
“It kind of relieved my concerns about the booster station,” he said.
Lee said Chamberlain later told him financing had not come through.
Both the city and builder were operating with the understanding that Chamberlain would finish the improvements, which turned out not to be the case. The housing bubble had burst, and bank lending was in a deep freeze. A future phase of Palisades West is now in foreclosure, according to a notice of trustee’s sale. Chamberlain did not return messages for comment left at his office and cell phone Tuesday and Wednesday.
Lee heard that the city would not issue an occupancy permit until the improvements were installed from a building inspector during construction of the home and in a copy of a letter from the city sent in December. In both cases, however, Lee said he thought the improvements were part of a verbal agreement between the city and Chamberlain and did not know they were recorded on the subdivision plat. He said he learned otherwise in April.
“There was no deception on my part to hurt or harm these people in any shape or form,” he said.
As a result of the city’s warnings, Chamberlain approached the city about alternatives to the pump so the Smiths could move in, but none worked.
STANDOFF IN JUNE
The Smiths awoke to the nightmare earlier this year when Lee told them there would be difficulties in securing the permit to move into the home.
That led to a meeting on June 5 between the Smiths and city officials, who reiterated the need for the pump. Before that, the Smiths had allowed Lee to communicate exclusively with the city about the home.
It also is at that meeting that the Smiths first learned of the conditions placed on the plat and the city’s issuance of the permit in spite of one of them.
Realizing the complexity of the situation and possible liability on the city’s part, the Smiths hired a lawyer, Ben Cushman.
The legal fees only added to their expenses related to the “unattainable house,” as Cynthia said her husband began calling it. They were spending about $2,000 a month on the construction loan. They can’t convert the loan to long-term financing, which would carry a lower interest rate and allow them to pay down the principal, until the occupancy permit is issued.
Andy Smith estimated he’s spent more than $32,000, including rent, and fees for the lawyer and engineer, since March in an effort to move into the new home.
Smith earns good money as a veteran Army officer, but the unanticipated expenses was a drain on their savings.
Initial negotiations over the summer led to a proposal by the city to amend the plat to exempt the Smiths’ properties from the conditions. With some minor changes, the Smiths’ engineer, Vince McClure, maintained that the existing systems were more than adequate to serve a single home.
The council has not formally voted on the amendment. The city’s lawyer, Brent Dille, said that it would open the city to liability and could run afoul of state regulations for water systems and jeopardize its operating permit.
Smith thought the central issue before the City Council was fire safety and was bewildered that new issues were broached.
“I wonder where it stops,” he said, according to video of the meeting posted on the city’s Web site. “I wonder where some sanity comes into this where we can find some solutions.”
Equally galling to the Smiths was that the city of Yelm would take no responsibility for issuing a permit that the Smiths contend shouldn’t have been issued.
“Had that been enforced, we wouldn’t be here today,” Andy Smith said.
Dille held that because Lee was aware of the conditions prior to requesting the building permit and acting on his client’s behalf, “the Smiths are deemed to have the same knowledge and, therefore, cannot now claim they were misled by the city when it issued the permit,” according to his written opinion.
Dille also notes that the Smiths could have learned of the conditions with “reasonable investigation” and that the title company would have noted it in its report. Andy Smith said the plat document was included in the closing documents, but the conditions were illegible because the document was shrunk down. The plat conditions were not noted by the title company, he said.
Dille concluded that any liability falls with Chamberlain and Lee, and Mayor Ron Harding echoed that sentiment at a meeting.
“They didn’t issue a building permit, sir,” Andy Smith reminded him, according to the video of the Oct. 27 meeting.
Responded Harding: “Well, OK, we’ll table that. I won’t get into that argument with you because clearly we have a difference of opinion there. But they (the builder and developer) all knew what the requirement was and it was on the plat.
“So let’s say we move past that because what the council would like to do is try to find a resolution.”
The engineers representing the city and the Smiths have come up with some interim solutions to resolve the pressure issues for the home to allow the Smiths to move in. The proposal was forwarded to the state Department of Health for its review. On Tuesday, the council tabled the matter until the first meeting in January to allow adequate time for the review.
But even if that passes muster, there’s still the liability issue. The City Council has directed staff that any solution must protect the city from any past or future liability. Smith said he’s not sure he wants to go that far. And the Smiths will have to pay for any engineering solution because Andy Smith said the city maintains that it’s prohibited from spending public money to benefit an individual homeowner.
The Smiths are disheartened. Cynthia Smith’s eyes well up when she talks about it. Andy Smith says he’s gotten empty promises from city officials who have pledged to find a resolution; he said the city made a mistake and should fix it.
“I’m not sure what’s going on, but they don’t want us in that house,” he said.
Christian Hill: 360-754-5427