The saga over the Tahoe City Lodge — a $60 million boutique hotel project approved in 2016 then subsequently delayed by two lawsuits — may be coming to an end. But, befitting a project that’s been a tangle of lawsuits, it’s not without another possible legal hurdle.
At issue is the price of the property sitting to the west of the proposed lodge that has been at the heart of the latest litigation. The lawsuit filed last year by the owners of the neighboring property, the Rudnick family, was settled earlier this year. As part of the settlement, Tahoe City Lodge developer Kila Properties is buying the adjacent property from the Rudnicks. Court documents show dismissal of the lawsuit and an agreement for sale of the building signed by Samir Tuma of Kila Properties and Sam Rudnick. However, a member of the Rudnick family told Moonshine Ink the lawsuit is not over and that they have not started the process of selling to Kila. Sam Rudnick did not respond to a request for comment and Tuma says he expects the property sale to wrap up in early summer. Whatever happens, the outcome is sure to shape a corner of Tahoe City’s future.
Sierra Northwest Properties, a holding company for assets owned by the Rudnicks, filed a lawsuit on May 2, 2018 against Kila Properties over a 50-foot easement that dates back to 1950, when the former owners of the SNP property granted it to the former owners of the Henrikson building for right-of-way, road, and utility purposes via the driveway between the two properties. Kila plans to use the easement as the hotel’s main entrance. The Rudnicks asserted the lodge project violated their private property rights and also eliminated 12 of the parking spaces at their property, the Bechdolt building (see Sued Again: Tahoe City Lodge).
As a result of the lawsuit, demolition of the Henrikson building and construction of the Tahoe City Lodge was put on hold for a second time. The first time was when the project was first sued in 2017 by the California Clean Energy Committee based in Davis. It was settled out of court and the case was dismissed in December 2017.
Kila filed a counter lawsuit against the Rudnicks in July 2018. “We were suing for breach of contract and seeking injunctive and declaratory relief from the court based on SNP’s bad-faith conduct, outlandish demands, false representations, and repeated attempts to obstruct Kila’s lawful permitted use of the easement,” Tuma wrote in an email to Moonshine Ink.
In October, the Rudnicks added the Tahoe City Public Utility District to their lawsuit. The TCPUD has a 20-foot-wide easement through the Rudnicks’ property that was also granted in 1950 to secure access to the Tahoe City Golf Course. The Rudnicks sought to “quiet title,” or establish their right to the easement.
“The TCPUD was sued by Sierra Northwest Properties when it asserted certain prescriptive rights of access for the Tahoe City Golf Course property,” TCPUD General Manager Sean Barclay wrote in an email to Moonshine Ink. “Had TCPUD not asserted these important rights that benefit the public, it would have been at risk of losing them.”
The public utility district is also giving Kila Properties the right to build a shared-use parking lot at the golf course in exchange for a new clubhouse.
Tuma said the Rudnicks’ lawsuit was intended to delay the project and cost them more money. With negotiations stalling, Kila in October 2018 requested a trial date. That request was granted in November, with a trial set for March 11, but the case never went to court. Instead, the three parties signed a settlement agreement on Jan. 29, and the Placer County Superior Court dismissed all lawsuits on Feb. 14.
“They were undertaking a litigation strategy of delay, delay, delay to try to ring up our bills and delay the project,” Tuma said. “They had no legal basis for that claim whatsoever. That’s why they wanted to settle when we got a court date. The game of delay, delay, delay got ended by the court.”
As part of the settlement agreement, a public record, Sierra Northwest Properties agreed to sell the Bechdolt building, which currently houses Plumas Bank and Balcony Hair Salon, among others, to Kila for an as-of-yet undetermined amount. Tuma estimates the property is worth $2.5 million to $3 million, and that the sale should be completed by early summer. The contract inflicts significant penalties if either party tries to violate the agreement, including lowering the purchase price by up to $600,000 if the seller tries to back out, and raising the purchase price by up to $600,000 if the buyer tries to back out. Close of escrow is to begin 90 days after the two parties reach an agreement on purchase price.
However, Aaron Rudnick, Sam’s son, says this is not the case.
“The lawsuit is not settled and he (Tuma) does not own the building,” he said.
According to Tuma, mediation between the two parties to reach a final sales price broke down, and negotiations are in the process of being rescheduled.
Repeated phone calls to the Rudnicks’ lawyer were not returned.
Despite the struggle over the Tahoe City Lodge, the lawsuits have not deterred Tuma from investing further in Tahoe City. In addition to pending purchase of the Bechdolt building, he bought the Pete ‘n Peters property in October of last year. He is looking at the possibility of adding workforce housing built out of shipping containers on the site. He hopes to start with a two bedroom demonstration unit behind Tahoe Fit, then build additional homes on another site in town.
“I am very bullish on Tahoe City,” he said. “I wouldn’t have bought the Pete ‘n Peters property, I wouldn’t have looked at settling the lawsuit by buying property, if I didn’t think the future of Tahoe City is very bright.”
Although Tuma does not yet know when demolition of the Henrikson building or construction of the Tahoe City Lodge could start, he is hopeful that the new hotel will bring a boost to the town. The 118-room hotel will feature a restaurant, rooftop pool, bar, and conference and meeting facilities.
“I am optimistic it will be a significant financial catalyst to the community, bring a needed bed-base to help serve the community and get more people to stay in Tahoe City,” he said. “All the benefits we’ve been touting — removal of an eyesore, and a beautiful mountain modern building in town — will finally come to fruition.”
Katherine Hill, president of the Tahoe City Downtown Association, has her fingers crossed that the hotel development will move forward.
“It would be amazing for Tahoe City,” she said. “There hasn’t been any major investment in Tahoe City in decades, and it would redevelop a blighted property … I definitely hope this project shows that Tahoe City is a vibrant place to invest in and grow a business.”
However, Tuma recognizes that the long battle to get the Tahoe City Lodge built is not over yet.
“I can’t say we’re all the way there,” he said.