Lien Filings to Rise as NW Market Cools

With the real estate market cooling, lawyers have told us to expect plenty of lien filings in the next few months.
Arkansas state law requires a contractor to serve a customer with notice of intent to file a lien within 75 days of work being completed. The law also requires contractors to file a lien within 120 days or forfeit their claim.
Attorney Lance Cox, partner with Cox Cox & Estes PLLC in Fayetteville, tells us Dixie Development Inc. of Fayetteville reached a May 10 settlement agreement with four contractors he represents — Campbell Electric Inc., Kitchen Distributors Inc., Built-Well Construction and Johnson Mechanical Contractors — to receive lien releases.
Dixie owed the four companies a total of about $1.56 million on various commercial projects from Nelson’s Crossing to Commerce Park II and was able to release the liens by making payments totaling $904,475, leaving a balance of $659,010 to be paid in full before Aug. 1.
If that deadline is missed, the contractors have the option of refiling the liens or initiating civil action, Cox said. Public records searches at the Benton and Washington county courthouses turned up a few other actions against Dixie.
The company has an IRS tax lien against it for unpaid taxes of $302,425, a default on a lawsuit settlement with Sharon Baggett for $200,854 and a foreclosure action by The Bank of Fayetteville for $282,393.
The IRS lien filed against Dixie relates to unpaid payroll taxes from 2005 when CEO Ben Israel’s daughter-in-law Emily Israel was CFO.
Emily Israel pleaded guilty to theft of property from Dixie on Jan. 26, seven months after Ben Israel reported she embezzled more than $87,000 from the company between September 2005 and July 2006.
Emily Israel served a 90-day jail sentence in Washington County beginning March 19 and has been ordered to pay $76,000 in restitution.
Ben Israel said the IRS has waived the penalties and interest because it is a criminal matter and Dixie is making monthly payments to satisfy the debt.
Dixie received a $185,000 judgment against it in November in favor of Baggett, but an unpaid balance of $182,595 remains and now attorney fees and interest have tacked on another $18,259.
Dixie attorney Derrick Davidson said Dixie hoped to pay Baggett with the proceeds of a real estate sale in Benton County, but that deal was derailed because of a utility issue on the property and the company is seeking other means to make payment.
The Bank of Fayetteville foreclosure was filed against Gulf Star LLC and Ben Israel, which took out a promissory note for $520,000 for two houses in the Brighton Heights subdivision in Bentonville in January 2006. One house was sold and the note was paid down and revised to $279,900 in December 2006. According to Davidson, Gulf Star missed two monthly payments before BOF filed foreclosure.
“We were shocked at that,” Israel said. “Banks can choose to work with us or against us. Some banks are bending over backward to help us out and once we get through this, those are the people we’ll stay with.”
Dixie Development Inc., which includes divisions from construction to landscaping, reported $45.7 million in total revenue in 2006, up 17 percent from 2005.
“Our completed properties are doing very well,” Israel said. “Our problem is with non-income-producing raw land. Interest payments can take quite a bit and you can get behind. We are excited about our future and hope we can get through this.”