The developer of Copperfield Square, a partially built town house development near Silver Spring, has filed for bankruptcy and may face foreclosure if the company cannot find a buyer for the $1.9 million property in the next few weeks.
At the same time, 33 prospective buyers waiting for town houses at the project to be finished could lose deposits ranging from $2,000 to $6,000 if the lender for the project forecloses, an attorney for the company said this week.
Pickwick Village Associates Limited Partnership, the builder of Copperfield Square, filed for protection from creditors under Chapter 11 of the U.S. bankruptcy code several weeks ago. The petition allows the company to restructure the partnership and devise a plan to pay its debts.
Arthur S. Lazerow, president of the company, and his attorney, Roger Frankel, said they filed for bankruptcy in an effort to find another developer to buy the 33 unfinished houses at the project. Frankel said that they want to sell the houses for at least $1.9 million, but that if they do not get an offer within the next three weeks Perpetual Savings Bank, which issued a $1.6 million construction loan to Copperfield, may have to foreclose.
If the bank does foreclose, the would-be homeowners and other creditors may not get their money back, Frankel said. If a purchaser is found, the bankruptcy court would have to approve it, and the bank would get paid first. Prospective home buyers and other contractors or suppliers would be paid next, he said.
"It just makes me mad to think about it," said Carlyn Cole, who put down a $2,000 deposit to buy a $96,785 town house at Copperfield Square. She signed a contract in September 1985 and expected to move into her new home by March 1986. "I'm so angry," she said.
Montgomery County investigators said they are trying to determine if Lazerow was involved in any criminal wrongdoing with three of his projects -- Copperfield Square, Olde Potomac Park and Beech Tree Station. In addition, the county's Board of Registration, which licenses contractors, has revoked Lazerow's license to build in the county because of his inability to complete the projects.
With each of these projects, potential home buyers put down deposits to buy new homes, but have not yet moved into them because they are not finished. Attorneys who represent the would-be home buyers said that Lazerow never put the depositors' money into an escrow account, which is required by Maryland law.
Neither Lazerow nor his attorney would answer questions about whether escrow accounts had been established for any of the developments. "I'm not at liberty to talk about this," Lazerow said. Frankel said he was aware of the investigation but said he "didn't know too much about it."
In March, Lazerow's Route Limited Partnership, which was building Olde Potomac Park, filed for bankruptcy after it ran into financial problems. But last month Magnet Corp., a division of Magruder Corp., agreed to buy the project for $5.85 million and is expected to finish building the homes of at least 90 people who had signed contracts. Magruder is building the 500-home Rockville-Derwood luxury residential home project near Shady Grove.
Prospective buyers waiting for homes at Olde Potomac Park are expected to get most of their deposits back, but must renegotiate a new sales price with Magnet.
Copperfield Square is an 85-unit complex near University Boulevard, south of the Capital Beltway. Fifty-two of the homes, ranging in price from $88,000 to $106,000, have been built and sold, Lazerow said. Most of the 33 unfinished homes are in the rear of the subdivision.
According to the bankruptcy petition, Copperfield Square had $2.55 million in debts and $2.22 million in assets. The major unsecured creditors include Frederick Heights Management, owed $74,216.56, and Imperial Development Co. Inc., owed $45,174.48.
Lazerow and his attorneys said they ran into unexpected financial problems with each of the projects.
"We simply ran out of money," Lazerow said. "It takes a tremendous amount of equity capital to do one of these projects . . . and with everything increasing in price so quickly for us, we weren't financially able to handle it all."
Barbara Kunkle, a detective with the Montgomery County Police Department, confirmed that she was handling the investigation, but said that it would be "quite some time" before she had all the information she is seeking to present a case to the state's attorney office.
Steven A. Skalet and Catherine H. Rost, attorneys retained by some of the would-be buyers at Copperfield, said that the people who put deposits down are owed a total of between $65,000 and $70,000. They said they have been gathering information about the project to determine why it has been delayed and why Lazerow has been having financial problems.
Carole Battle put down her $2,000 deposit for a $101,970 town house in April 1986 and planned on moving in last November.
"It wasn't until late January that I found out that the houses weren't going to be completed," she said. "I started talking to the Montgomery County Consumer Affairs office and talked to a lawyer. In February, trying to find out what was going on was my second job. We have, of course, lost out now due to the higher cost of homes."
Carole Williams, who made a $2,000 down payment, is without her town house, too. "I don't even want to move there anymore," she said. "I just want my money back."