Loan Holdout

A St. Paul homeowner refuses to pay a city-sanctioned contractor for unfinished work

Allison Atkins still remembers seeing her dream home for the first time. It was March 1999, the real estate market was tight, and the 39-year-old mother of two had been schlepping in and out of featureless, postwar boxes for six months, wondering if she would ever find anything in her $100,000 price range. Then she walked through the door of a 104-year-old duplex on the west side St. Paul and found herself surrounded by oak woodwork and leaded glass windows dotted with rose-colored swirls.

There was work to be done, of course; especially on the main floor. The electrical system was archaic, the plumbing rusted, and there was even a wall or two to knock down. But Atkins couldn't get over the ornately carved mantel above the fireplace, the steep, winding staircase, or the sky-high ceilings. "My heart skipped a beat when I saw this place," Atkins remembers wistfully.

After deciding to buy, Atkins, a clerical worker, applied to St. Paul's Department of Planning and Economic Development for a Purchase and Rehabilitation Mortgage. The program, available since 1990, allows buyers to combine a property's price with the cost of rehabilitation, then take out a low-interest, 30-year mortgage (currently the rate is 6.9 percent). The city benefits by keeping people on its property-tax rolls and saving structures that might otherwise become boarded-up eyesores. Consumers like Atkins get more house than they would have ordinarily been able to afford.

Allison Atkins wonders if her St. Paul home will ever be properly wired
Tony Nelson
Allison Atkins wonders if her St. Paul home will ever be properly wired

Atkins got approval for a $134,000 loan, of which $56,000 was earmarked for home improvement. So on May 10, 1999, she signed a $52,000 contract with Nilles Builders Inc., a 20-year-old building company owned by brothers Brian and Brad Nilles. They agreed to refurbish everything from the floors to the lighting to the landscaping by September 10. Atkins agreed to reimburse them in stages, as the work was finished. By the first week in September, though, Atkins says, the surface had hardly been scratched. Some rough electrical and plumbing work had been completed, but the house was still far from done. So when Atkins received a bill totaling $17,555 on September 6, she refused to pay.

When Atkins held out, Nilles stopped working. And the two parties have been in a stalemate ever since. On December 23 the contractor placed a $20,000 mechanic's lien against Atkins' house, making it very difficult for her to sell. Last week Nilles filed a lawsuit in Ramsey County District Court seeking to foreclose on that lien. A hearing has yet to be set, but if a judge rules in the plaintiff's favor, Atkins will either have to come up with the cash or face foreclosure.

In the meantime, Atkins and her two little girls, ages two and six, are living in a construction zone. Tendrils of different-colored wiring poke from holes cut in the new sheetrock. Antique radiators are stacked in the dining room. And the woodwork that Atkins once found so charming has been pulled off and piled in the basement. "We'd been staying with different friends for over a year and we needed to be in our own home," exclaims Atkins, who finally moved into the duplex two weeks ago. "Why should I have to go through this?"

"The work we did on her house was good quality work," insists Brad Nilles, speaking on the phone from his office on St. Paul's Grand Avenue. "We were out there doing what she asked us to do. If she would have just paid us for our work, we would have continued with the project and all of this would be over by now."

Atkins claims that even if she wanted to pay Nilles, the fine print in her loan agreement forbids it. "Under no circumstances can any construction item be paid for without the work being acceptably installed," the city's Rehabilitation Inspection Report reads. In this dispute, though, the city has been encouraging Atkins to make peace with Nilles and set up a payment plan. "Where is the city in all of this? Their contract says I shouldn't pay for work that's not done," Atkins fumes. "So I didn't and they've made that be my fault."

Maribeth Hultman, supervisor of rehabilitation for St. Paul's Office of Planning and Development, says they believe Atkins should cooperate because the city inspected Nilles's work and found it to be satisfactory. "If it wasn't acceptable we wouldn't have advised her to pay," she says. Atkins alleges that Nilles's work was never inspected. "I've asked them for a copy of the inspection report many times and I've never received one," she says. (City Pages' request for a copy of the report was denied.)

Atkins is also angry with the city for recommending Nilles in the first place. When a Purchase and Rehabilitation Mortgage is first approved, the Department of Planning and Economic Development also assigns the new homeowner a rehabilitation adviser, charged with ensuring that all repairs are up to code. When Atkins was given a list of 23 local contractors the city had previously hired for municipal projects, she alleges, her rehabilitation adviser suggested Nilles.

Hultman finds it hard to believe that any of the rehabilitation supervisors she manages would have pointed to any one contractor. "The city doesn't recommend specific contractors and we aren't endorsing anyone on that list," she explains. "It's just a guide to help homebuyers find a contractor that they want to use."

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