The condominium owners association at the HarborView Towers has filed for bankruptcy-law protection from its creditors after its bank accounts were frozen amid a long-running legal dispute over water leaks and mold problems in one of the building's penthouses.
The Council of Unit Owners of the 100 Harborview Drive Condominium is seeking to reorganize its debts and continue operating in a Chapter 11 bankruptcy, filed in Baltimore's federal bankruptcy court.
The council said it was unable to pay its bills after its bank accounts were garnished in January following a $609,000 judgment against the association stemming from the legal dispute.
Paul Sweeney, an attorney with Yumkas, Vidmar, Sweeney & Mulrenin LLC who represents the council, said the group hopes to craft a plan for restructuring its debt by the end of the year.
"We intend to move as quickly as possible in preparing a plan that addresses the needs of all creditors and addresses the needs of the unit owners," Sweeney said.
The 249-unit tower, which rises 30 stories above the harbor and Key Highway in Federal Hill, opened in 1993.
"With contested litigation filed by a condominium owner over the course of several years, Chapter 11 protection will enable The HarborView Towers and the Council to continue to conduct its business operations while it develops a plan addressing the interests of all creditors and owners going forward," Dr. Reuben Mezrich, the council's board president, said in a statement. "This was a necessary decision as a result of judgments entered against the council and subsequent garnishments that froze our banking and management accounts and prevented us from providing necessary services to our constituents."
The legal dispute began in 2010 when the council was sued in Baltimore Circuit Court by Penthouse 4C LLC, owned by James W. Ancel Sr., who said numerous leaks in the building had caused water damage and mold in his unit, making it uninhabitable. The case was sent to arbitration, which resulted in a decision giving the council two years to make necessary repairs.
Condominium associations are responsible for maintaining and operating the shared parts of a condominium development such as the exterior, pools and landscaping.
When the repairs were not completed on time, the Circuit Court found the council in contempt in 2012 and ordered it to pay Ancel $1.2 million in damages plus $15,543 a month for living expenses, retroactive to Jan. 1 of that year. The council lost its appeal of the decision at the Court of Special Appeals in August 2015.
The judgment stems from the living expenses part of that decision.
"It's unclear to me how the garnishments affected the ability of the condominium to operate," said Raymond Burke, a principal of Ober Kaler who represents Ancel.
In a release about the bankruptcy, the council said it recently completed more than $7.8 million in repairs and improvements to the building's interior, exterior, roof and facade.
In its initial bankruptcy filing, the council reported that it had both assets and liabilities of between $10 million and $50 million. It said its largest unsecured creditor is Constantine Commercial Construction Inc. of Timonium, owed $203,516, followed by Baltimore Gas and Electric and the City of Baltimore, due $93,164 and $63,604, respectively.
"We are trying to minimize discomfort to creditors and the unit owners," Sweeney said. "We're exploring every option to have successful reorganization."