Stowe Mountain Lodge lawsuit is settled

That suit was officially settled last week in U.S. District Court.

The suit was brought by nine condo owners, but, over the past four years, represented roughly 325 people from all over the country and numerous countries. Some of them owned their units outright, while others shared ownership with others.

“We feel like we ended up with a fair settlement, and we’re happy that the Stowe Mountain Lodge people worked with us,” said Patrick Sullivan, a condo owner and an original plaintiff in the lawsuit. “We have a more transparent structure ... a cleaner, more understandable structure for owners.”

Now, the annual fees that condo owners pay will be reduced by about 27 percent, shifting a significant portion of operating the development from the condo owners to Stowe Mountain Lodge, according to Stowe lawyer Ed French, representing the condo owners. Under the settlement, those fees — they cover everything from utilities and maintenance to hotel services such as concierge and luggage service, and the use and operation of the hotel’s pools and other amenities — will be reduced retroactively to the beginning of 2014.

“It will have a significant favorable financial impact on the people living up there,” French said.

The two sides actually tentatively agreed to the settlement in August 2013. It took two years to get the condo owners association documents revamped, “because of their density,” Sullivan said.

Originally the lawsuit demanded at least $5 million in damages, as well as punitive damages and court costs. Under the settlement, the resort agreed to pay roughly $1.2 million for attorneys’ fees, but admits no wrongdoing and denies any liability.

Even the anticipation of a settlement appears to have boosted condo sales at the lodge. According to Sam Gaines, director of development for Stowe Mountain Resort, there have been nearly $70 million in real estate contracts and closings in the past two years throughout Spruce Peak, many of which happened at Stowe Mountain Lodge.

Gaines said sales were helped by a combination of lower prices at the lodge and better financing than was available in the aftermath of the 2008 economic crisis.

“With the new village center to be completed over the next six months and low (Stowe Mountain Lodge) real estate prices compared to the 2008 peak, we should expect robust sales volume in 2015-16,” Gaines said in an email this week. “We are very thankful that homeowners and management were able to work together to reduce the cost of ownership for all residences at Stowe Mountain Lodge.

“Today, the Residences at Stowe Mountain Lodge and the Front Four Private Residence Club are significantly more marketable than they were prior to the settlement.”

Details of the suit

The resort began selling luxury condominiums at Stowe Mountain Lodge in 2005 as the centerpiece of a $400 million expansion at Spruce Peak.

Real estate sales at Stowe Mountain Lodge got off to a rocky start, even before there were actual properties available. In 2008, several people sued the resort when it didn’t finish the units on time; the potential owners had paid hefty deposits on the properties.

Part of the cost of owning a Stowe Mountain Lodge condo is the user fees the resort charges, the ones that have been rolled back 27 percent as a result of the settlement.

The nine condo owners who filed the lawsuit paid anywhere from $385,000 to $1.7 million for their units, depending on size. Altogether, the nine plaintiffs had paid roughly $302,000 in Stowe Mountain Lodge Condominium Owners Association fees over three years before filing suit in May 2011.

The owner of a three-bedroom unit was charged almost $69,000 in fees for a place she said she stayed in only 64 days a year. The owners had also paid a total of nearly $1.2 million in nonrefundable deposits for the condos before they closed on the deals.

The lawsuit alleged the case was “about a Wall Street-owned Vermont condominium hotel developer’s attempt to mislead and defraud residential unit purchasers out of millions of dollars through the use of an incomprehensible and ultimately unlawful monstrosity of a development scheme.”

The lawsuit alleged the resort subsidized its own commercial units at the resort on the backs of the residential unit owners, and charged the owners 80 percent of the resort’s annual $750,000 electric bill, even though residential owners were there only a portion of the year, and the Lodge was a year-round hotel, with restaurants and bars.

The “monstrosity” mentioned in the lawsuit was the more than 500 pages of condo documentation owners had to sift through to find out what was going on.

In defending itself from allegations of fraud in the lawsuits, the resort’s lawyers stated the property owners’ lawyers didn’t offer any proof that the resort intentionally tried to mislead them, and their complaint centered too much on the volume of the homeowner agreements.

“They cannot assert a fraud merely because the documents, according to plaintiffs, were thick,” the resort argued.

Sullivan said tensions have cooled significantly since then, and lawyers have a tendency to use colorful language to make their points memorably.

“A lot has transpired in the past six years,” he said. “We want to be constructive because we’re going to be there for a long time.”