The homeowners say general contractor Lee Baker and the real estate agency primarily owned by his wife, Patricia Baker, failed to disclose known property defects. Each of the plaintiffs seek more than $100,000 in compensation and damages. They also want nullification of their home sale and purchase agreements, according to a complaint filed in district court June 21.

Attorneys David Shoup of Tindall, Bennett and Shoup, P.C., and Gary Eschbacher of the Law Offices of G.R. Eschbacher, represent the homeowners of 15 condominiums in Fire Eagle subdivision, across from Fred Meyer on the Old Glenn Highway.

There are 130 units in the subdivision. The plaintiffs say their homes have had extreme settling issues since moving in as early as 2004. The units are on Fire Creek Trail Drive and Ironwood Place.

Patricia Baker estimates current market values of the homes to be about $190,000 to $210,000 and said she was only aware of homeowners with problems in 12 units.

All of the plaintiffs allege they noticed cracks in their walls, driveways and other damage after moving in.

Homeowner Alisa Davison told The Star she noticed an unusual amount of cracks and settling almost immediately after moving in June 27, 2005. By August, she said the house had settled so much it had to be lifted and gas lines beneath her home had to be rerouted due to the strain on them.

Neighbor Kaci Bennett said she didn't notice damage to her triplex unit until work began to level an attached home. It was then, she said, that "the outside of my house started popping out."

The condos were built between 2003 and 2005 by Anchorage-based Discovery Construction Inc., which is owned by Lee Baker. They were sold by Northern Trust Real Estate Inc. between 2004 and 2006.

Both companies are named as defendants in the complaint, which alleges they did not inform plaintiffs of problems or disclose defects they knew about or should have known about and misrepresented the condition and quality of the properties.

"I really don't feel there was any misrepresentation," Patricia Baker said. "We're very, very particular about disclosing everything on a property and have absolutely no reason not to. Those units were so popular people didn't care and could have been sold 100 times over."

Baker, who hadn't been served or read the complaint as of Tuesday, said, "As far as we're aware, we didn't misrepresent anything. This is something that took us completely by surprise, and we're certainly going to fix it."

He said he thought structural problems caused by frost jacking or unconsolidated fill were fixed after the condos were made level last summer. He said he was surprised when the homes began moving again in late October.

Baker then ordered a geotechnical investigation, which was completed in March by Anchorage-based consultants Shannon & Wilson, that revealed a subsurface condition about 38 feet down.

The report states about three feet of permafrost is melting beneath the condos and recommends installing helical, or spiral, pilings to reinforce their foundations.

"We had an engineer's report last year that did not say that the problem was down there. We trusted that report," Patricia Baker said.

She said based on that report, about three or four additional homes were sold and it was disclosed in writing that there was "a structural problem of some kind that the builder was working on and fixing."

"It's my understanding that they're fixing the problem as we speak. I guess we're all sort of stunned that this (lawsuit) has even happened," Patricia Baker said, adding that the current fix should be "a final one."

Shoup said the homeowners would rather have their property fixed than have a lawsuit, and Discovery's lawyer has been urged twice in writing to get it done.

"We put them on notice of this claim in January, and we did not file a complaint until last week, hoping they'd get it done," he said.

Baker said work on two units he owns began a few weeks ago while he was waiting for the go-ahead from plaintiffs' attorneys to begin remediation work.

He estimates the work, which entails screwing helical piers 40 to 50 feet below the frost level, will take 60 to 90 days. By then, Baker estimates he will have spent nearly $750,000 fixing the units.

Even if the planned fix works, Shoup said it won't solve the entire problem.

"We've got a serious problem with the soils themselves and with the compaction of the soils," he said. "Our engineer is saying, even if you fix the buildings, the grounds are still going to sink."

Dowl Engineers in Palmer has reviewed initial reports and concluded the soil is of poor quality and not sufficiently compacted, Shoup said, adding that only a small area in the development was tested, and the problem could potentially be widespread throughout the subdivision.

"We are looking at all aspects of this case, including the engineering work that was done for Discovery," he said.

Baker said, "We didn't test just the homes that were having the problem. We had (Shannon & Wilson) test further north, south, east and west to make sure that they actually did define the margins of this problem."

The complaint filed also states mortgage companies have refused to consider loans on Fire Eagle condos.

Patricia Baker said Fire Eagle is back on the Federal Housing Administration's approved list after being removed for a few days while the FHA investigated the problem.

Land use permits for construction were issued in November 2004. Fill and grade permits were certified by Ken Duffus of KND Engineering.

In May, Jack Frost, acting supervisor of the Municipality of Anchorage Building Safety Division, said he had recently reviewed those documents.

"I reviewed his soil reports, and he covered all the areas and certified that everything was as it's supposed to be in the civil engineering field and stamped off on it," Frost said in May.

The municipality does not perform inspections during construction in Chugiak-Eagle River because it is outside of what's called the Building Safety Area, which is generally Anchorage Bowl proper. Frost said he recommends anyone purchasing a new building hire an inspector.

Baker is also the developer of the Marion Bowen subdivision, which ignited controversy last fall when vegetation was cleared from the 10-acre parcel of land behind Tips Bar and Schuck's Auto Supply visible from the Old Glenn Highway. Currently, the site plan for that project is still under review by the Municipality of Anchorage, and no permits have been issued.

Reach the reporter at kate.tracy@alaskastar.com.

This article published in The Alaska Star on Thursday, June 29, 2006.