The rise and fall of Deep Creek's Greg Mortimer
Greg Mortimer walks near one of the villas at Cedar Creek. The siding has been pulled off to check damages from the leaks. The villa is one of four that have several leaks.
A foundation and concrete walls are overgrown after Greg Mortimer's Timberlake project was shut down.
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DEEP CREEK, Md. -- In the 17 years since Gregory Mortimer became a real estate developer, he has built and sold more than 150 homes and commercial properties in this tony resort community formed around the largest freshwater lake in Maryland.
Life was good for Mr. Mortimer and his family during the boom years when vacation homes around the lake and the popular Wisp ski resort were selling as fast as he could build them. He lived in the most expensive home on the lake -- a sprawling $3.5 million residence with five bedrooms, four fireplaces and 13,000 square feet of living space. He cruised the tree-lined streets of this small village in luxury cars and enjoyed the respect that came with being one of the premiere builders in Garrett County.
Now his whole world has changed.
His real estate business fell on hard times about three years ago after homebuyers discovered that homes Mr. Mortimer sold them are plagued with leaky roofs, walls and other defects so severe that a whole community of residents had their homeowners insurance policies cancelled. Other homes that his business built during the same time frame have been condemned by the county and continue to deteriorate.
"I can't sell condemned property, and I don't have the $800,000 that it's going to take to repair those properties," Mr. Mortimer said.
While many homebuilders across the nation wound up in a financial bind when the ripple effects of the mortgage lending crisis began to impact the home construction industry starting around 2007, Mr. Mortimer says his business failed for different reasons. He says he trusted the wrong people to build his houses and now they are locked in a legal battle.
He is determined to someday build again. For now, he has been unable raise cash to repay a $5 million loan and his bank -- BB&T -- has cut off his funds, leaving him unable to build additional homes or repair the ones with serious defects.
The biggest legal battle over the flawed homes is the one between Mr. Mortimer and the main supplier and primary subcontractor on the project -- Washington County-based 84 Lumber Co.
In April 2011, 84 Lumber sued Mr. Mortimer for $600,000 in the Allegheny County Court of Common Pleas for unpaid labor and supplies.
Mr. Mortimer countersued later the same month in the U.S. District Court for the Western District of Pennsylvania, claiming the quality of the work that the Eighty Four company did for him while constructing 12 units in 2008 is what ruined his real estate business.
He is refusing to pay 84 Lumber because he says the work was unsatisfactory. He is instead asking the company to make repairs that would allow him to fix seven condemned units, he said, as well as repair five units 84 Lumber built that have been sold.
84 Lumber denies responsibility for any construction defects. "From our perspective, this is a collections matter, not a construction matter," said Mike McCrobie, vice president of installed sales and manufacturing for 84 Lumber.
Mr. Mortimer, 43, said the conflict is especially agonizing because of the long relationship he says he has had with the company and its owners.
He worked almost exclusively with 84 Lumber for 17 years and bought millions of dollars in supplies and labor from the company. He personally knows Maggie Hardy Magerko, president and owner of 84 Lumber; and he and his wife, Sheri, were married in 1999 at Nemacolin Woodlands Spa and Resort, a vacation destination in Farmington, Fayette County, owned by Joe Hardy, the company's founder.
The fallout from the problems has been hard on his family.
"This company until the last year and a half has been a highly respected and profitable company," Ms. Mortimer wrote in a December 2010 letter to Frank Cicero, chief operating officer of 84 Lumber. "The defective work done ... completely destroyed our reputation as the high-quality, high-end builder of the years past."
She said the couple and their two daughters had moved into a duplex with no furnace in the main level and basement level. "We remain committed to our responsibilities, but feel that we have been put in a no-win situation," she wrote. "I can only ask that you treat us with fairness."
Mr. Mortimer sent his family to live in Savannah, Ga., about a year ago. The final straw was when his 12-year-old daughter came home from school in tears about rumors her classmates were spreading that her father had gone broke.
He said he borrowed money from his father to relocate his wife and daughters -- ages 12 and 5 -- out of the small community. He stayed behind to fight his lawsuit and run two restaurants he and his wife own in the area: the 300-seat Santa Fe Grill and a Dairy Queen Chill & Grill, which are now his family's sole sources of income.
A graduate of Towson State University in Maryland, Mr. Mortimer had a college roommate whose father was a builder in Deep Creek Lake and used to always tell him what a beautiful place it was. He had already cut his teeth as a rental housing landlord while in college. After making some money, he bought a boat and took a weekend trip to Deep Creek with some college friends.
"I decided this was the place I want to stay," he said.
He built his first house in the community in 1992 and went on to build many more. After buying, building, selling and moving six times during the course of his marriage, he and his wife had built up a nice nest egg and by 2006 were living in the largest house on Deep Creek Lake.
"The house was much bigger than we ever needed, but it was our safety net, our 401(k)," Mr. Mortimer said.
Business was going strong in 2008. He was in the middle of developing the Dairy Queen restaurant and some luxury villas when he said 84 Lumber representatives approached him about the company's National Corporate Install Program.
"This program is for builders, so we don't have to be at the site," Mr. Mortimer explained, adding that previously he had used his own construction crew for building projects. "[84 Lumber does] the labor and materials in one. They would completely manage the whole site. It was completely different than before. I thought, 'What a great program.' "
Mr. Mortimer hired 84 Lumber to build six townhouse-style buildings consisting of 12 units. Four of the buildings were for a development called Timberlake. Two were for Cedar Creek.
By August 2009, Mr. Mortimer was complaining about the work on both projects in a letter to Harry Streudel, a former manager at 84 Lumber.
"As we have discussed on numerous occasions over the last two months, I am extremely disappointed and dissatisfied with the quality of 84 Lumber Co.'s workmanship as well as very disappointed about the multiple leaks that have existed for four months, and continue to persist on the project," said his letter, which is part of the court record. "I am demanding that we meet in the next week, at which time I fully expect that 84 Lumber will set forth its plan to remedy and cure the defects in the buildings and establish a definitive time-period for these repairs."
The National Corporate Install program generated $250 million for 84 Lumber in 2011, a hefty chunk of the company's total $1.4 billion in revenues last year, according to the company. Jeff Nobers, a spokesman for 84 Lumber, said not all the corporate install projects run like clockwork, but the company addresses construction issues as work goes along.
Mr. Nobers said Mr. Mortimer entered a payment arrangement with 84 Lumber in March 2010. The plan was for him to pay $20,000 a month for four months. Then the payments would kick up to $50,000 a month.
"He made three or four of the initial payments," Mr. Nobers said. "Only when those payments jumped up did he stop making payments. And only when we filed a lawsuit did he start running around calling [the media] claiming that all of our work was defective and that's why he's not paying us."
Greg Mortimer "developed the land," Mr. Nobers said. "Greg Mortimer either designed the homes or had them designed. Greg Mortimer hired subcontractors on the job, and we were one of them. Greg Mortimer marketed and sold the homes and signed them over to eventual buyers. That is the general contractor, and ultimately they are the responsible party."
"My reputation as a high-quality builder has been harmed greatly in the community," Mr. Mortimer said. "Not knowing, I sold defective units. In people's eyes, it is not 84 Lumber's work. It is Mortimer Builders. I thought hiring 84 Lumber to build my buildings was a good thing."
He said he relied on the company's assurances that the defects had been fixed. "Only until we tore down 84's work did we see the defects. I immediately notified the county, homeowners, the bank and, most importantly, 84 Lumber."
Representatives from 84 Lumber are seeking $578,708 plus interest at a rate of 1.5 percent and accruing attorney fees for materials and services provided to the two job sites in Deep Creek.
Mr. Nobers said 84 Lumber stands behind the quality of its work.
"His attempt here is to deflect the cause and problems that exist onto us and other subcontractors, which is absurd," he said. "If there were things we didn't repair, it was our position that they weren't issues that we caused."
No other subcontractor is named in Mr. Mortimer's complaint.
With 65 miles of pristine shoreline, Deep Creek Lake was dammed in 1925 and provided a source of power for Pennsylvania Electric Co. for many years. The area is a popular destination for Pittsburgh-area residents, many of whom have vacation homes there. Since the opening of Interstate 68 in 1984, traffic from Baltimore and Washington, D.C., has increased as well.
Whitehall residents Tony and Monica Bonacci bought into a small tight-knit association of 21 condominium units in the Timberlake development in 2008.
"We all have worked hard to buy this little piece of heaven in Maryland," said Mrs. Bonacci, a Pittsburgh-area insurance agent. "These were our dream homes, and within a few years of buying them they've become our nightmare."
Following the catastrophic snowstorm in February 2010, 12 homeowners in Timberlake filed claims for water leaks. Homeowners have filed about a dozen claims individually for water leaks since then.
The residents asked Mrs. Bonacci to serve as president of the Timberlake Homeowners Association in November 2011 when Erie Insurance Co. cancelled the community's master condominium insurance policy because of the number and severity of water-based claims. They appealed the cancellation to the Maryland insurance commissioner, but the commissioner ruled in Erie's favor.
Getting a new insurance policy wasn't easy, she recalled. "Every carrier that saw our loss history wouldn't even quote us a rate," she said.
When they finally located a willing insurance company, the company doubled their premiums, and their deductible went from $1,000 to $25,000 for water intrusion claims and $5,000 for all other claims.
"No water claim we sustained in the past has gone over $25,000, so we are basically on our own in terms of any future claims," Mrs. Bonacci said. "It is financially devastating at this point for our association, taking into consideration this is not the only expense we are facing."
Another Timberlake resident, Charlie Johnson, has been making waves at the Garrett County building inspector's office. He paid more than $400,000 for his unit in June 2009. Six to eight months later, he began experiencing water leaks from the roof and the walls. At times, his building leaks so badly that water pours out of the base of his walls, he said.
"Since the county was the last to inspect these houses, I put a lot of the blame on the county," said Mr. Johnson, 58, a industrial contractor in Baltimore. "But at the end of the day, 84 Lumber and their subcontractors did the work."
Mr. Johnson has filed a complaint against Mortimer Builders with the Maryland attorney general's office, which is pending.
Meanwhile, he has made so many trips to the Garrett County building inspector's office that the county administrator, Monty Pagenhardt, has asked him not to contact employees anymore. In a letter dated Nov. 3, 2011, Mr. Pagenhardt told Mr. Johnson: "On the advice of legal counsel, county employees have been advised not to engage in any dialog or discussion with you. Thank you."
Mr. Pagenhardt also declined to discuss the county's inspection process on Mr. Mortimer's properties with the Pittsburgh Post-Gazette.
Bill Weissgerber, owner of Railey Realty, the largest real estate company on Deep Creek Lake, said by mid-2010 he was forced to stop marketing Mr. Mortimer's properties that had water infiltration problems he couldn't solve. On some occasions, pools of water were on the floors in houses while agents showed the units to prospective buyers.
"Despite assurances that the problems were repaired, water infiltration continued to be an issue for well over a year," Mr. Weissgerber wrote in a letter contained in the court record to Mr. Mortimer in January 2011 referring to units in the Cedar Creek development. "The issue impacted the credibility of the project, and I know many agents who shy away from the project as well."
Mr. Weissgerber said his agency has represented every home Mr. Mortimer has built for 15 years.
"Whatever is going on with Greg over the last few years has pretty much ruined his reputation as far as building anything in the future," Mr. Weissgerber said. "I think he's really trying to get these problems corrected and he's not been able to.
"There are people in Garrett County who have had issues [in the past] with Greg on a financial basis. In almost every case I'm familiar with, he always resolved them. His situation now prevents him from being able to solve issues with people."
First Published October 21, 2012 12:00 am