CARLSBAD -- City officials announced Friday that they had reached a $12.5 million settlement with homeowners in La Costa de Marbella, a condominium complex in south Carlsbad where eight units where destroyed in a landslide in March 2005.

Settlement papers obtained from the city of Carlsbad indicate that the eight condo owners will have their remaining mortgages paid off and will receive an additional $600,000 in damages.

Fifty other homeowners who are still able to live in their units will receive $20,000 each, according to the settlement.

In addition, more than $2 million will go toward repairing damage to the hillside where the condominiums are perched overlooking the La Costa Resort and Spa golf course.

Residents at the complex on Friday declined to speak with a reporter.

Attorney John Schroeder, who represents six of the people whose condos were condemned, said Friday that he thought the key to obtaining the agreement came when he learned that the city had replaced a leaking o-ring in a fire hydrant near the Marbella complex on March 2, 2005.

Nine days later, Schroeder said, the city returned to find a water pipe hooked to the hydrant had ruptured, leaking water into the hillside.

"That probably put a million gallons into the slope and caused the landslide," Schroeder said.

When the slide was discovered March 11, homeowners were forced to evacuate as their units sank several feet. Cracks and other signs of settling appeared elsewhere in the 58-unit complex.

The city removed the eight wrecked units in 2005.

Patrick Catalano, a San Diego attorney who represented the Marbella Homeowners Association and two residents who lost their homes, said Friday that tenacity contributed to reaching a deal with the city.

"It came from hammering them in scorched-earth discovery," Catalano said.

Attorney Brad Bartlett, who was hired by the city of Carlsbad and the Carlsbad Municipal Water District to defend the case, said Friday that the settlement was not an admission of liability for the slide.

Rather, Bartlett said, the city sought pay some cash now, rather than risk a much higher amount that could be awarded by a jury at trial.

The city will pay $11.3 million while its insurance company, the Insurance Company of the State of Pennsylvania, will pay the remaining $1.25 million.

Attorneys Schroeder and Catalano both took the landslide case on contingency, meaning they bore all costs of suing the city up front in exchange for a percentage of any eventual settlement. Schroeder said he will get "about a third" of the $5.7 million awarded to his clients. That amounts to about $1.9 million.

Catalano declined to specify his percentage but said the homeowners association will be able to completely repair its property and will end up owning the chunk of land where the eight units used to sit. While the land might seem worthless, Catalano said the now-vacant property will be worth about $2 million once repairs are made.

Officials with the Marbella Homeowners Association did not return telephone calls for comment Friday.

Contact staff writer Paul Sisson at (760) 901-4087 or psisson@nctimes.com.