RiverCity Co. has no right to reclaim property on the 700 block of Market Street in downtown Chattanooga, according to a company that had planned condominiums on the site in answer to a lawsuit.
The company, 700 Block Development Partners LLC, meanwhile has brought the Chattanooga Housing Authority into the lawsuit, saying CHA's failure to turn over funds for the project is a cause of its having ground to a halt.
RiverCity, the nonprofit downtown redevelopment group, sued 700 Block Development and another entity, Rose & Crown LLC, in November and is seeking to regain ownership of the property.
Mayfair on Market was slated to hold 58 condominiums.
But Sam Elliott, an attorney for 700 Block Development, said CHA didn't fulfill its commitment to Mayfair on Market, a $16 million mixed-use project for 58 condominiums.
The development group claims in court papers CHA had committed $3.3 million from a Fannie Mae loan to Mayfair but turned over only $2.1 million. It said CHA diverted $1.2 million to its general operations.
While 700 Block Development denies liability to RiverCity, CHA may be liable to the development company for all or part of RiverCity's claim against it, court papers said.
Bill Lord, CHA's chief information officer, had no comment on the petition to bring the agency into the case.
"We wouldn't respond. It's pending litigation," he said.
Trey Stanley, whose development company planned to build Mayfair, said the project is on hold because of the legal action.
RiverCity sold the property, almost a half a block on the east side of Market, about three years ago for the development.
However, it said in the suit that while the buildings on the site were torn down, no work to raise the condominiums was started.
RiverCity said in its suit it had an agreement that demolition of the buildings wouldn't start until redevelopment was ready.
It said that because of the defendants' actions, it exercised an option to repurchase the land. RiverCity said the defendants have refused to sell back the property.