Otis Hotel residents in limbo

The Otis Hotel, which houses low-income residents in downtown Spokane, is tied up in an ownership tug-of-war between the owner and the former lessee, who believes he has the right to purchase the building.

Owners John and Min Ha said through their attorney that the former tenant’s option to buy the building expired in December 2004. They say the former tenant, a nonprofit corporation run by Jim Delegans, also owes back rent totaling $93,800, according to court documents. A Superior Court judge will consider the matter at 9 a.m. next Friday.

Caught in the middle are dozens of low-income people who live in the five-story structure at First Avenue and Madison Street. Spokane Neighborhood Action Programs, in conjunction with other social service agencies, also serves free meals to 160 homeless and low-income people every Thursday night at the Otis. SNAP Assistant Director Ray Rieckers said his organization has been asked to move the service elsewhere after March 16. It could possibly be moved next door to a building Delegans owns, Rieckers said.

The Has also have received offers from people interested in buying the building, said their attorney, Linnwood Sampson. They would like to consider those offers but can’t while the lawsuit is pending, he said.

“He’d be receptive to someone buying it,” Sampson said of John Ha. Sampson could not say however, what a potential buyer might do with the building.

Delegans’ attorney, Paul Allison, said Delegans wants to continue to use the building to provide low-income and subsidized housing.

The legal wrangling is taking place at a time when the neighborhood surrounding the Otis is rapidly transforming. Ongoing commercial and condominium projects surround the building on almost all sides. Massive renovations are planned on the block just to the east, including new retail, office and housing space. Upscale townhouses are planned on the old city fire station property a couple of blocks to the northwest. And just south of the building, renovations have begun in the old Luminaria building, where a coffee shop and other business opened recently.

The Otis Hotel was built in 1911 and has almost 30,000 square feet per floor, on five floors, according to title reports. The Has bought it for $630,000 in 1986, the records show. Since 1997, the building has been leased to Otis Housing Association, run by Delegans, who in turn leased out the apartments, court documents show. The building is listed on the National Register of Historic Places.

Following a court ruling last fall, Delegans returned possession of the building to the Has, while continuing to contest whether the matter of the option to purchase the building. Delegans said in court documents that the Has acknowledged his intent to buy the building shortly after the option expired. Eric Shumaker, another attorney representing the Has, said he doesn’t doubt that the parties were trying to come to some agreement at the time the option expired.

“The question becomes, what is exercising the option?” Shumaker asked. “Just saying you want to buy it or coming up with the money?”

Delegans contends that a portion of the monthly payments over the years of the lease was to be applied to the cost of the building, and as a result of that and other payments, about $680,000 has been paid toward an agreed-upon purchase price of $1.3 million, court documents show.

However, Shumaker said nothing has been paid toward the cost of the building.

When the court returned the building to the Has in the fall, about 20 people were living in the Otis under the Shelter Plus program, funded by the city and administered by REM Association, a nonprofit corporation affiliated with Delegans, documents show. Another 54 people lived there under a simple landlord-tenant relationship. And two more were getting an alternate form of rent subsidy.