• Vacationers for decades have rented the Dohler Cottages, near Twenty Mile Creek on Lake Erie
  • Mary Dohler, 68, current owner of business, filed for Chapter 11 bankruptcy reorganization
  • Bankruptcy plan calls for lots to be sold for as much as $250,000 in new subdivision called Edgewater

NORTH EAST —  For more than 60 years, a colony of cottages just west of the Pennsylvania-New York line have offered families rustic getaways along a stretch of Lake Erie shoreline notable for its long and uninterrupted access to beaches.

The seasonal rental cottages, a business of the Dohler family, of North East Township, are soon to disappear.

The frames of the Dohler Cottages and their contents — refrigerators, night stands, hot water tanks, sofas, coffee pots — will be sold off piece by piece at an auction on Nov. 20.

Set to replace the cottages, which sit on about 25 acres, is a subdivision of 20 high-end houses perched near the beach. It is a planned community that, according to court records, will take advantage of “the largest undeveloped residential area in Pennsylvania with direct waterfront access along Lake Erie.”

Financial issues are driving the auction and the development. The moves are designed to free Dohler Cottages and Farms and its owner, 68-year-old Mary Dohler, from about $2 million in debt, including $253,000 to $976,000 owed to the IRS and another $200,000 owed in back property taxes, according to court records.

Mary Dohler and her family’s business filed for Chapter 11 reorganization in U.S. Bankruptcy Court in Erie in September 2019. The filing stopped Dohler’s property —the cottages and her nearby house and grape farm, totaling 300 acres — from going to auction at an Erie County tax sale.

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More than two years later, Dohler’s court-approved plan to emerge from bankruptcy and satisfy her creditors is going into effect. The auction of the cottages’ contents and frames will precede the yet-to-be scheduled sale of 20 lots of real estate for what is to become a new subdivision called Edgewater.

The undeveloped lots are projected to sell for as much as $250,000 each. Dohler’s bankruptcy estate will use the proceeds to pay off her debts and allow the family farm to stay in business and let her keep her house.

“It will be a full-out real estate development, soup to nuts,” said Dohler’s bankruptcy lawyer, Guy Fustine.

He said the lakefront makes the planned development unique. Few stretches of lakefront property in Erie County have such continuous beachfront access.

“Looking at Erie County, you have to go to Manchester Beach, in the west county, where there is that type of access where you can walk out the door and put your toe in the lake,” Fustine said, referring to the houses along Manchester Beach Road in Fairview.

Auction of cottages’ contents set for Nov. 20

The Nov. 20 auction, announced in a legal advertisement in the Erie Times-News late last week, will be held at the site of the cottages, north of Route 5, west of Gay Road and east of Twenty Mile Creek in North East Township. U.S. Bankruptcy Judge Thomas P. Agresti, who is handling the case, set Thursday as the deadline for him to receive objections to the auction.

The auction does not include the real estate. Only the cottages’ contents and frames, or shells, are to be sold on Nov. 20, with the proceeds to help pay legal fees and other administrative costs in the Chapter 11 case. Under the bankruptcy reorganization plan, the real estate will be subdivided into 20 lots, which will be sold separately later in individual and private sales.

The money from those sales will go toward paying off the debts and allow Mary Dohler to exit from bankruptcy. She will also get any money raised in excess of the amount she owes her creditors, according to the bankruptcy plan.

“I want to thank the guests for their business and support along the way over the last 60 plus years,” Dohler said in a statement her lawyers released. “We’ve gotten to be such good friends with so many of the cottage customers but this has to be and I am ready to retire. The happy memories will always be there.”

Lake as a ‘tremendous asset’

Once the cottages are gone, the development of the subdivision is set to advance.

Erie real estate agent and developer Gregory J. Rubino is assisting Fustine and another lawyer, G. Christopher Orton, to market and sell the properties on behalf of what is known as the liquidating trust, of which Fustine and Orton are co-trustees. Agresti appointed Rubino to work on the case. Orton is the lawyer for Mary Dohler’s son, George Dohler Jr., who co-owns the cottages and other property with his mother. He is not a debtor in the case.

The trust, also established under the bankruptcy plan, “will oversee the development of the lakefront properties, create a homeowner’s association and work with the court-appointed realtor to sell the properties,” according to the disclosure statement that Fustine filed with the Chapter 11 reorganization plan. Other court records show that the Pittsburgh area will be a focus of the marketing of the lots.

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The disclosure statement details the execution of the bankruptcy plan. After reviewing the statement and other information, Agresti confirmed the plan on Aug. 24.

For the subdivision to move forward, according to the plan, it must also receive any required approvals from North East Township as well as state approval for the sewage system planned for the new homes.

The undeveloped lots are projected to sell for $250,000 or $175,000 each, according to the disclosure statement. The higher prices are anticipated for each of the 10 lakefront lots, and the lower prices are anticipated “for each of the 10 lots across from the newly formed road from the lake,” according to the disclosure statement. The homes will include four bedrooms, according to the court records. 

“The lots will be staggered to maximize the view of the lake,” according to the disclosure statement. “These are estimated sale prices based on historic sales of similar lots in the local area.” The statement includes the description of the project as the largest of its kind involving lakefront property in Erie County at this moment.

If no major delays slow the approval process and the development of the sewage system, construction of the houses in the subdivision could start as early as April 1, according to the disclosure statement. The project, including sale of all the parcels and the development, is expected to take up to five years, according to a summary of the plan.

North East Township Supervisor Bob Mazza, a longtime public official, said the private development is welcome in the township, with a population of about 6,500.

“It is certainly better than what is there now,” Mazza said. “What is there now is a dump.”

He said the Dohler Cottages have become run down over the past five to 10 years, making them “unmaintained and dilapidated.”

“They are not very attractive and don’t really really provide what I would call a quality experience,” Mazza said.

Heavy flooding damaged the cottages in November 2020, though they reopened this summer — for what turned out to be their last season.

Mazza said officials with the project have briefed the supervisors on the development plan.

“If they go through all the regulatory hoops, we are certainly not opposed to a development like that,” Mazza said.

The development would increase property tax revenue for the township, the North East School District and Erie County. Mazza predicted that many residents of the subdivision will be from out of town, given the price for the lots and the attraction of Lake Erie to those who live outside of Erie County.

“It is a tremendous asset that we have here, and people are willing to pay for that,” Mazza said of the lake.

Going into bankruptcy

The histories of the Dohler Cottages and the Dohler family are intertwined.

Mary Dohler’s later father-in-law, George Dohler, started the family’s cottage business and family farm in the 1940s and 50s. Mary Dohler’s husband, also named George, ran the businesses until his death, at 52, in 2000.

After her husband’s death, Mary Dohler continued to operate the cottages and farm with her son. Financial problems soon followed.

“As a side effect of her grief,” according to the disclosure statement, “Ms. Dohler did not keep up the books and records of the businesses for many years. As a result, there are large tax liens against Ms. Dohler, as well as unpaid real estate taxes. The Chapter 11 petition was filed to stay a real estate tax sale.”

Dohler’s creditors, in addition to the IRS and the local taxing authorities, include mortgage companies and the state Department of Revenue.

The IRS is the largest creditor. It filed a claim totaling $975,947 against Dohler’s bankruptcy estate.

Fustine, the lawyer, is contending that the total is closer to $253,300, based on Dohler’s amended tax returns for 2013 and 2014, according to the disclosure statement. The IRS has not accepted the lower amount for the claim, and the amount remains in dispute.

Dohler’s bankruptcy estate intends to use the proceeds from the real estate sales to raise enough money to make “full payment to all the creditors,” Fustine said — an unusual situation in U.S. Bankruptcy Court, where many creditors receive only pennies on the dollar to satisfy their debts.

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Also as part of the plan, Mary Dohler will keep her Gay Road residence, of which she is the sole owner, according to the disclosure statement. But her residence will be her only real estate. Her son, George Dohler Jr., is to get other pieces of land.

In return for George Dohler Jr. transferring his interest in the cottages to the liquidating trust, in preparation for the sale of the lots, Mary Dohler is to “transfer her interest in the grape farm and other jointly-owned real estate to her son, who will continue the farming operations,” according to the bankruptcy plan. Once the bankruptcy plan is complete, “Mary Dohler will no longer be part of the family enterprises,” according to the disclosure statement.

The plan, Fustine said, is designed to pay the creditors and give the debtor, Mary Dohler, “a fresh start.”

In addition to satisfying the creditors, he said, the plan will allow Dohler to “retain her residence and retire with dignity. We think it is a win-win.”

Building on valuable land

The Dohler bankruptcy reorganization plan differs from many bankruptcy plans in a major respect. In many bankruptcy plans, real estate is auctioned as a way to raise the most money.

In the Dohler case, private sales of the lots make more sense, Fustine said.

Fustine said the bankruptcy estate got approval from Judge Agresti to sell the 20 lots privately, rather than at auction, because the lots are expected to sell for higher prices if they are connected to the development of the subdivision. He also said the property on which the cottages sit are “out of compliance with many laws” for setting property boundaries, for example.

“The lakefront property is significantly more valuable as a planned community than it is now,” according to the disclosure statement, which Fustine signed with Mary Dohler. “Currently, the cottages are in disrepair, the road is unworkable, the cottages sit within the flood zone and rising water table, the existing lot lines are mistrewn and the existing lots do not serve a buyer today as they did in the 1940s when first drawn.”

Turning the Dohler Cottages into a subdivision has made for a big project, Fustine said, but he said it is headed for “a successful conclusion.” He said prospective buyers are already asking about the development.

“They want to get in early and get a lot,” Fustine said.

Contact Ed Palattella at epalattella@timesnews.com. Follow him on Twitter @ETNpalattella.

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