A real estate company is seeking more than $1 million in damages from the city of Cape Coral for its role in a land purchase earlier this year.
The Fort Myers-based Boback Commercial Group, along with one of its agents, filed a lawsuit against the city and two other defendants on Nov. 5, claiming that it was not compensated for the services that it rendered.
At a foreclosure auction in April, the city purchased approximately 652 acres in the Cape at a cost of about $13.08 million total. At the time of the purchase, the property was valued between $17.5 million and $23 million.
In the complaint, the suit alleges that the company and its agent provided the city with advice, expertise and the opportunity to buy the land at a lower price.
The other defendants listed in the compliant are FNB Corporation and a subsidiary, First National Bank of Pennsylvania. First National Bank was the lien holder on the property, which was going into foreclosure at the time.
The lawsuit alleges that the company and its agent procured a buyer - the city - for the property without FNB or First National having to take title to the property or becoming liable for the associated taxes and maintenance until it was sold.
Attorney Jason W. Holtz, with the Holtz Mahshie DeCosta law firm, is representing Boback and Paige Rausch, the real estate agent at Boback.
"Boback Commercial Group developed this idea and how it would be implemented and how it would be financially beneficial to the city," he said. "They used their professional expertise and industry and efforts."
"The city knew that they were real estate professionals and that they expected to be compensated," Holtz said. "Legally and equitably, Boback Commercial Group is entitled to compensation."
He explained that a customary real estate commission on a commercial property deal is about 10 percent of the sale price - $1.31 million.
"That is what they've sued for," Holtz said. "We're seeking what is fair compensation."
However, the city does not believe it is obligated to pay a commission.
"Boback did notify the city prior to them moving forward with the purchase that they expected compensation for the work they had done," he said.
In May, a letter was sent to city officials and council members seeking a commission between 6 percent and 10 percent of the sale price. The council voted to move forward with the purchase, but denied any compensation.
"They made a demand for payment prior to filing suit," Holtz said. "Filing suit was not their first choice, but they are determined to be compensated."
Asked why his clients had no written contract, he cited the timeline.
"I think that everything happened quite quickly in terms of putting this deal together," Holtz said.
As of Friday, the city had not contacted Holtz nor responded to the suit.
"They have not responded to the complaint yet," he said.
The city has 20 days from the date that it is served to issue a response. According to county court documents, the city was served on Nov. 6.
"The next step for us is to receive the response from the city, then we'll know what the next step will be," Holtz said.
"I'm expecting to enforce the rights of my clients to be fairly compensated for the work that they did," he added. "How that takes place will be largely in the hands of the city."
Connie Barron, the city's spokeswoman, declined to comment.
"It is the city's policy not to comment on pending litigation," she said.
While declining to comment specifically on the lawsuit, Mayor John Sullivan explained Friday that he subsequently has researched about 300 unimproved properties sold from January 2010 to May 2012, and that the city paid a greater percentage of the average "summary final judgement price" than is typical.
"I believe the city paid an exorbitant amount for that property," he said, adding that neither staff nor council had enough time to research the purchase before the vote to proceed.
"I voted against it," Sullivan said.