House showdown: Court case draws national attention

Gainesville doesn't want a modular home in residential-1 zones, but this builder refuses to go down without a fight.
By RICK LAVENDER - The Times

modular house
 
Grant Smereczynsky has sued Gainesville in federal court after the city ordered him to stop construction of this modular house in Waters Edge subdivision in March 2005. It has since given Smereczynsky 30 days to remove the home, though legal wrangling continues.

Grant Smereczynsky refuses to go quietly.

Since March 2005, when Gainesville ordered the Building Systems Network chief executive officer to remove a partially-finished modular house in Waters Edge subdivision, Smereczynsky has sued in Hall County and federal court, rallied interest from the modular construction industry nationwide, and regularly pleaded his case to area media.

"I've chosen to continue the fight," Smereczynsky said last week. "... I'm in the deal to the end."

The deal has reached a new boiling point.

The city, feeding off a state Court of Appeals denial of Building System's appeal, on Sept. 12 gave the Gainesville company 30 days to remove the home on Waters Edge Drive. Smereczynsky is seeking a court stay.

Grant Smereczynsky
 
Smereczynsky, a builder and chief executive officer of Building Systems Network, stands in front of his office Thursday morning.

An attorney representing the city's insurance company has also filed to dismiss constitutional claims in Smereczynsky's second lawsuit. The aim: Return the suit to Superior Court where it started, said George Butler, Smereczynsky's lawyer.

Butler does not expect a ruling for months. City attorneys could not be reached for comment.

Meanwhile, Smereczynsky is circulating recent letters of support from building groups including Greater Atlanta Home Builders Association and the National Association of Home Builders.

Some leaders said last week they know of no other federal case involving the industry, a significance that is raising eyebrows.

"It's a case that certainly has some interest and poses some concerns to us as an industry," said David Endy, chairman of the national association's Building Systems Councils.

The question is where does this lead, or leave, Gainesville?

Building barred

The dispute can be traced to January 2005. That's when the city issued building permits to Building Systems Network for two lots in Waters Edge, an upscale subdivision off McEver Road behind Free Chapel Worship Center's former main complex.

Smereczynsky, 43, a former developer, had started Building Systems a few years before. The Dawsonville Highway firm designs and builds modular or industrialized homes and offers related services.

The Homestead Modular House
 
Smereczynsky's house in northern Hall County is similar to the one his company and Gainesville are sparring about. Among its features, the 6,900-square-foot home has a 25-foot-tall stone fireplace, hickory floors and a three-car garage.

The move to build in Waters Edge proved a misstep.

City officials maintain the permits should not have been approved and that Smereczynsky's agent provided inaccurate or incomplete information on the applications. Smereczynsky denies the charge.

Gainesville bars industrialized homes in residential-1 zones, which cover Waters Edge and other single-family subdivisions.

Instead, houses that are mainly built off-site are limited to agricultural-residential, residential-2 or multifamily and residential-office districts.

Apparently alerted by neighbors, city officials stopped Smereczynsky in midconstruction.

More than a year later, part of the story-and-a-half structure is still stapled with Tyvek house wrap. The other lot has only a cement foundation. That owner went bankrupt, Smereczynsky has said.

Building Systems has weathered its own troubles. The company lost in Superior Court and then on appeal to the state.

Superior Court Judge Kathlene Gosselin nixed the company's key claims. City code is clear, Gosselin wrote, nor does it conflict with state law regarding industrialized buildings and local zoning.

One modular home official said Smereczynsky's former attorney bungled the case. The builder came up shy in other areas, too.

City Council unanimously denied his request in May to rezone the lot as residential-2, which would allow him to finish and sell the "spec" home. Council saw it as spot zoning. That decision led to the pending lawsuit.

The city bumped it to federal court in July because of the constitutional claims. One is that Gainesville code illegally favors local builders over houses manufactured out of state, a violation of the Constitution's interstate commerce clause.

Neither side is budging. City Manager Bryan Shuler said this week, "The solution is to remove the violation."

Industry growing

Industrialized or modular housing takes its name from construction largely done in factories and built in blocks, or modules. Related offshoots include houses built in panels, precut structures such as log homes and even mobile homes.

The trade harkens to the kit houses sold by Sears in the early 1900s. But the business has grown far beyond bungalows.

Smereczynsky lives in North Hall in his company's newest showcase, an $895,000, 6,900-square-foot mansion with a 25-foot-tall stone fireplace, hickory floors and a three-car garage.

Second-floor railings and other trim pieces came from boards in an 1800s barn moved to make way for the house.

modular homes
 
Grant Smereczynsky's house in northern Hall County was built using the same modular technology that is at issue in a legal battle between his company, Building Systems Network, and the city of Gainesville.

Speed and affordability have long been selling points for industrialized commercial buildings. Examples are as close as the next Waffle House or bank branch. Yet, the business is also blazing in-roads into housing.

One Internet commentary said modular structures account for about 3 percent of new homes nationally each year.

A report tracking modular home shipments marked totals down in this year's second quarter compared to 2005 but up in some states, including Georgia, according to the National Modular Housing Council.

Georgia is one of a handful of states where state law puts modular housing on par with its site-built cousins.

About 27 factories make industrial homes or products in the state, said Rex Kennedy, a former plant owner and chair of a state advisory committee on industrialized housing. Another 85 businesses are licensed to ship products into Georgia, he said.

A stigma hampering wider acceptance is the thinking that industrialized housing equals manufactured homes, or trailers.

Kennedy and others point out that manufactured homes are built to 1974 federal Housing and Urban Development standards. Industrialized or modular housing in Georgia are held to International Building Code, the same as site-built or so-called stick-built homes.

Advocates argue that industrialized houses can even be better, customized and crafted with machine precision in controlled conditions, inspected more thoroughly, put together quicker, proven stronger in at least one federal report following Hurricane Andrew, and rated greener in energy and waste savings.

Walls are often studded with 2-by-6 boards instead of two-by-fours, offering more room for thicker roll insulation.

The modules arrive with everything from dry wall to wiring. They are set in place like giant-sized Legos. Collapsible parts such as roof sections are unfolded. Seams are bolted and strapped. Finish crews add what's missing.

Smereczynsky's "Homestead" house in Squirrel Creek Meadows off Ga. 60 arrived in five sections. Crews pieced it together with a crane in two days. Finishing it inside and out took less than 120.

Counting costs

The end to the standoff in Waters Edge may take longer.

Neighbors have opposed the home. They are concerned it will erode property values and maintain that Smereczynsky should have known the regulations.

Some homeowners have been reluctant to comment. The subdivision association president could not be reached. Another homeowner who declined comment on the record said Waters Edge houses range from $300,000 to $1 million.

Smereczynsky said the four-bedroom, three-and-a-half-bath house he hopes to finish will appraise at $339,000, a price-point some critics question.

Smereczynsky alleges that outside influences are at work. Taking his side, the editor of Colorado-based trade magazine said City Council has shown "Taliban-like wisdom" in limiting residents' personal choices.

Council members have remained mum about the lawsuits. Planning director Kip Padgett said there is no internal move afoot to change the zoning code and open the door to industrialized homes in single-family subdivisions.

Hall County did in 2002. Commissioners amended county regulations to allow modular housing in all residential zones. The change followed a similar conflict involving Smereczynsky and a house he was building in Gillsville.

His odds in the city seem longer, however.

Though his business is thriving, he said he has lost more than $200,000 on the Waters Edge project. He hopes through federal court to regain that and more.

He has the backing of the state Department of Community Affairs. A March 2005 letter from department Commissioner Mike Beatty mentions state law highlighting construction standards and points to DCA rules that guard against discriminating against housing built off-site.

Steven Snyder, executive director of Pennsylvania-based Modular Building Systems Association, has proposed an amendment to write that prohibition into law.

Smereczynsky said there is a sponsor for the legislation in the 2007 General Assembly, though he did not know whom.

Snyder said he knows of no other federal court challenge involving industrialized housing. "We're kind of breaking new ground here," he said.

The prospect has helped Smereczynsky raise donations for his legal fight, about $50,000 so far, he said. What impact the outside interest will have is unclear, however.

Mike Gleaton of Community Affairs said the agency has no enforcement power. And as a "helping hand" for local government, the department is in an awkward position trying to pressure city leaders, he acknowledged.

The state Attorney General's office has been asked to file a brief in Smereczynsky's favor. It hasn't, so far.

'Crucial' call?

Kennedy called the outcome "vitally crucial" to the industry. He said he could recall only only two similar cases in Georgia, both settled in the builder's favor.

"Is anybody going to fight these people?" Kennedy asked. "Or are we going to just sit and play dumb because of some special interests?"

Shuler declined detailed comment but said the Superior Court ruling shows that Community Affairs' rules do not trump local zoning powers.

Smereczynsky walked a visitor through the Waters Edge house last week. The house looms over a steep street corner lot sprouting weeds and shored up by a concrete wall.

A leak inside meant tearing out pieces of drywall, work Smereczynsky had to get the city's permission to do.

"She's kind of gotten worn a little bit," he said of the house.

Built in three sections, yes, it could be disassembled easier than a stick-built home, he said later.

But before conceding the fight over whether the Waters Edge house stays or goes, Smereczynsky promised something else.

"I'm gonna be on top of the roof. In a perch. With a megaphone.

"It's going to be Grant's last stand."

Contact: rlavender@gainesvilletimes.com, (770) 718-3411

Originally published Monday, October 2, 2006

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