Lien from Builder - Advice on Settlement Offer - Contract Breach

[Kirby Davis]

We built a short term rental property last year. The builder shorted the contracted square footage by 366 square feet. This was built in a new construction neighborhood, and the builder actually did this on 8 of the lodges. Several owners, including us, withheld payment and asked for meetings with the builder to resolve the issue equitably. 

The builder met with one owner and offered a verbal settlement, which he withdrew a month later. 

The builder refused to meet with the other owners and sued us all for breach of contract for not paying the full amount. We have counter-sued for breach of contract for not building to the scope of work and consolidated our separate lawsuits into a joint lawsuit. We currently have 3 liens on our property - 1 from the builder, 2 from subs for small amounts. 

We met in mediation yesterday. The builder offered each of us different amounts, and even stated he would not settle at all with one owner. If we settle with him, he will not sign anything to indemnify us from subs or guaranteeing he will pay the subs. We are past the date that further liens could be filed against us. However, subs could potentially lodge small claims against us. One sub has done so already with 2 of the other owners. 

Does anyone have experience with this? Any thoughts on settlement without indemnification and the likelihood of actually being pulled into small claims court? 

For reference, we withheld only the amount that tied to the discrepancy based on a sq ft cost to build. Others withheld more. The builder placed a lien against us for more than we withheld, and he's offered to settle with us by eliminating his lien plus paying us $4100. Our lawyer believes he's wanting to settle with us (he made us the best offer by far) for 2 reasons: 1. He believes the lien against us is most likely fraudulent, as it's higher than we withheld. 2. We have in writing that we withheld exactly the sq ft price of the discrepancy based on conservative calculations and asked to meet so we could resolve the issue fairly and equitably. We followed up offering times we could meet. His only response was that he was unwilling to meet and was pursuing legal action. So we have written documentation that we tried to resolve the issue, made a good faith payment withholding only the calculation for the discrepancy, and he refused to even speak with us. (This will look bad in court. He can argue that the others withheld an unfair amount if we are not part of the lawsuit.)