CEDAR FALLS - With the winter finally over and the sun breaking through between storms, Wednesday afternoon was a prime day for construction in Cedar Falls.

But in three southern Cedar Falls neighborhoods, where some homes sat partially completed, there was not a construction worker in sight. The wind whistled through the skeleton-like frame of one house in Huntington Ridge, trusses lying in the dirt that would be the home's front yard.

That home was just one victim of the collapse of Iowa's largest home builder, Des Moines-based Regency Homes. There are dozens of others in Cedar Falls that Regency had already sold or was building on speculation when subcontractors packed their bags and left last month.

Now, homeowners, real estate agents and even the city of Cedar Falls are left with a dilemma. Some homes are complete and occupied. Some are complete but vacant. Others have occupants, even though some work remains to be done. Those occupants have paid for their houses, but Regency cannot pay its subcontractors to finish the work.

How it happened

On April 26, Regency announced it had laid off 103 employees - everyone but top management. In a letter to The Associated Press, Regency said it did not have the money to cover its obligations.

Within two weeks, all construction had halted, and more than 2,100 subcontractors and suppliers filed liens against Regency for work performed and supplies provided on the homes. In Black Hawk County alone, $143,103 in mechanics liens were filed against Regency Homes and Cedar Rapids-affliliate Regency Homes of Northeast Iowa, according to documents obtained from the Black Hawk County Clerk of Court. Those liens applied to work performed in Greenhill Village, Greenhill Village Townhomes or Huntington Ridge in Cedar Falls.

Martinson Construction was among the subcontractors working on Regency Homes when the news of the company's financial woes broke. With $62,908 invested in projects, according to the liens filed by the company, and no guarantee of future payment, Martinson wrapped up a few loose ends and hit the road, just as subcontractors all over the state did that week.

"We read the story in The Courier, and then we made some phone calls to try to get some answers," said Scott Martinson, vice president of Martinson Construction. "We had a few (houses) in progress. I know I made a few cuts and picked up some lumber, and we moved on to other projects."

The Des Moines Register reported earlier this month that Wells Fargo, the nation's fifth-largest bank, demanded Regency officials pay off more than $50.5 million in corporate debt and $5.25 million in personal lines of credit. Other lenders followed suit, and soon Regency did not have enough revenue from home sales to cover the demands of its lenders. This led to the layoffs, which led to the liens.

Caught in the middle are homeowners who paid Regency for their houses but now have to wait until the mess is sorted out before their homes can be completed.

"I would expect there is a very good chance that a number of homeowners are going to have to take money out of their pockets to get occupancy permits," said attorney Gary Jones of law firm Truax & Jones in Cedar Falls. "It's a very difficult situation for homeowners."

A rock and a hard place

A number of people who purchased homes from Regency moved in over the winter, even though minor aspects of construction had not been finished.

According to Ron Gaines, Cedar Falls director of developmental services, there are at least a few homes in Regency neighborhoods where temporary occupancy permits were granted, even though some issues - such as sidewalks and grading - had not been completed. Those permits included conditions that would need to be fulfilled by specified dates, once the weather cleared up.

"I know there are people out there who need sod and sidewalks," said Jake Huff, a real estate agent for Weichert Realtors who handled many sales in the Huntington Ridge neighborhood. "But I'm a little clueless as far as what the city's going to do."

Huff's confusion is not unique. Greenhill Village townhome owner Cindy Lang is missing the sod and grading she paid for when she bought her home. She said the neighborhood had an unofficial homeowners' meeting at which she heard different rumors surrounding the city's plans.

Gaines said the city had no intentions of evicting owners who did not fulfill the commitments laid out in the temporary occupancy permits. One option would be for the city to perform the work on behalf of the occupants and simply bill them. But with respect to code violations that are not safety-related - such as sidewalks or a back deck - the city will try to find common ground with homeowners.

"Considering the extenuating circumstances, we are going to do our best to work with the homeowners," he said.

The ungraded lawns - those with mounds of exposed dirt - could be the only sticking point. According to Cedar Falls city engineer David Scanlan, those ungraded lawns could lead to erosion issues and may need to be addressed.

"If the yard is not taken care of, they would have to [install] some kind of erosion control, as per a city ordinance," said Scanlan, who added that he was not aware of any issues in the Regency neighborhoods.

Huff said some of the owners have escrow accounts set up that could help cover the final stages of construction.

What next?

Though the city is willing to work with those who have already moved into their homes, there are several homes and lots in the three neighborhoods that have been purchased but not completed to a state in which moving in is an option.

Several homes, including the aforementioned roofless frame home in Huntington Ridge, have "sold" signs in their front lawns. Even the model home in the Greenhill Village neighborhood has no lawn or grading done, and a "no parking" sign lies in front of the house. The model home also has more mechanics' liens against it, in terms of dollars, than any other Cedar Falls Regency homes - $27,441.

None of those projects will be completed until Regency Homes works through its financial situation.

"I would imagine things will come to a head pretty quickly here," Huff said.

But Huff has not had much contact with Regency. Nor have Martinson and the homeowners.

"It would be a lot easier if they (Regency) would just make a decision," Huff said. "I'd imagine somebody is going to pick up the ball and run with it. I'd just like to know who and when."

Huff says a company could finish the speculative homes and pay the subcontractor's liens from the profit of the home sale, but he was not sure what fate would befall those homeowners who have already paid for work that may never be completed. They may have to pay out of pocket for the work and get in line with the countless subcontractors who have liens against Regency.

"I would guess they will be pretty far down the line," Jones said of those owners. "I don't know Regency's total financial situation, but typically in corporate bankruptcy, more secured than unsecured creditors [end up getting paid]."

Huff says he does not think the situation will slow the sales of the completed homes and empty lots in the three neighborhoods, as the local housing market continues to remain steady amid a national slump.

"With the market the way it is, there's not a lot of inventory out there," Huff said. "And, these are good neighborhoods and nice places to live."

Contact Drew Andersen at (319) 291-1418 or drew.andersen@wcfcourier.com.