The Ramsey Housing and Redevelopment Authority has decided to negotiate with its former development manager to obtain intellectual property and settle a contract dispute.
According to City Administrator Kurt Ulrich, Landform president Darren Lazan, who was the city’s contracted development manager for the COR project, agreed to give the city intellectual property, including plat files and GIS mapping when his two-year contract ended March 31, but that has not happened.
After receiving a couple of letters in January, one anonymous, about whether the city should be paying Landform for all of its work, including some potential brokerage work the company was not licensed to provide, the HRA had the contract reviewed by an outside attorney as well as its HRA attorney, Tom Bray.
In reviewing the role the city staff played in the sale of land and what Lazan did, Lazan was the primary contact for prospective developers, Bray said.
The development proposals involved the sale of land and it is fair to say there were brokerage activities done by Lazan, he said.
The HRA could do one of four things, Bray said.
“I think the HRA could choose to pay this (Lazan’s contract) and it would not be violating the law,” Bray said.
The law does not say the city cannot pay it or that the contact is void without a brokerage license, meaning Landform cannot recover those brokerage costs, Bray said.
The HRA did receive the services, he said.
The city is current on all of its payments to Landform and it has been operating in good faith with the company, but it is still waiting for the promised intellectual property, said HRA Chairman Randy Backous.
The HRA could pay a portion of the compensation that it feels it owes and withhold the portion it does not, Bray said.
Brokerage fees were about 7 percent of the land costs, he said.
It is unlikely Landform could sue the city for breach of contract for the portion that the HRA withholds for brokerage services because Landform does not have a brokerage licences, Bray said.
The city can seek a declaratory judgment if the HRA feels there is some component that it should not pay, he said.
Or it could negotiate with Landform, Bray said.
“The HRA needs to determine what it wants to accomplish and see if it can come to an equitable and fair solution to this,” said Ulrich.
The HRA voted 7-0 to negotiate with Landform and to send the company a letter setting a deadline for when all of the intellectual property needs to be given to the city.
It is very important that the city receives the intellectual property so it can continue the COR project without missing a beat or the HRA may need to get a declaratory judgment, HRA member David Elvig said.
The city still has some contracts with Landform that are in various forms of completion, including some engineering services, Ulrich said.
The HRA sought an outside attorney’s opinion in February on whether Landform Professional Services’ actions were equal to serving as a real estate broker or agent after receiving two letters questioning Landform’s ability to provide the services and the enforceability of the service contract.
According to the anonymous letter, which was received in early January, the city’s “contract with Landform, which requires it to pay Landform commission for managed service, is unenforceable because Darren Lazan… does not hold a required license to manage the sale of land in the development area.”
“Landform is not entitled to compensation for its role in selling land in the city of Ramsey because Lazan… is not a licensed broker. The city has no obligation to pay Landform and public policy and the city’s charter weigh against compensation.”
In addition to Landform’s monthly $15,000 administrative compensation for providing the city development management services for the COR, Landform receives 2 percent incentive compensation on the total capital costs of the end use of any property sold or developed in the COR, which is what the letter writer is targeting.
The city also received a letter from local attorney William Erhart expressing concerns on the same issue.
According to Finance Officer Diana Lund, the city has paid Landform $1.454 million since 2009, which includes the original COR 2010 contract as well as an incentives, engineering contracts, plat work, soil analysis and work done on the city’s bid for the Veterans Administration clinic.
Landform will also receive incentives on any development that takes place in the COR 15 months after its contract ended, said Bray.
Tammy Sakry is at [email protected]