Two things have brought a halt to the renovation of the Rat, as it is affectionately known to generations of devoted customers.

One is a sagging section of ceiling beams that must be reinforced with a permanent support system before demolition work can be resumed in that section of the restaurant. That can be fixed, and the building's owner says work should begin soon to do that.

The other issue may be more problematic: A dispute between the landlord, Mary Stockwell of Munch Family Properties, and her tenant, Diane Fountain, who owns Rathskeller Partners LLC, that has brought the project to a standstill.

"It's kind of a standoff right now," said Fountain, a 1980 UNC graduate and real estate developer who bought the defunct restaurant in 2010 to renovate and reopen it.

Stockwell, managing partner with Munch Family Properties, said she has had to deny Fountain access to the property until the standoff is resolved.

"About a month ago, I realized she had not paid her architect for work he did more than a year ago," Stockwell said. "That violates the terms of her lease. I told her, 'We won't let you proceed until you reach an agreement with the architect and resolve this.' Diane hasn't been responsive to that. So we had to change the locks."

Stockwell said the lease requires Fountain to remain in good standing with anyone she contracts with to work on the property.

"If I hadn't made a stand, I think the same issue would have come up later," Stockwell said.

From Fountain's perspective, responsibility for the stalemate rests with Stockwell and the architect, Jim Spencer.

Fountain says the building is in need of more substantial repairs than just the sagging ceiling beams - primarily leaking sewage pipes from the street-level businesses above - and says a sewage pipe that runs through the prep kitchen and main dining room must be moved.

"The reason for the standstill is that she needs to fix her building," Fountain said. "It's dangerous, and we have sewage leaking onto our heads. I've spent a ton of money already fixing things that she should have fixed.

"The architect hasn't been paid because he hasn't finished the work. Once the building is fixed and the pipe is moved, and the architect sits down to help me determine the numbers we need to get ready to open, then he'll get paid and we can move forward."

Spencer said he has fond memories of the Rat and was thrilled to be hired to help bring it back. Given the age and condition of the building, he said it was clear from the start that it would be a difficult and expensive project.

"We spent a tremendous amount of time, energy and passion plotting the Rat's future with Ms. Fountain, and produced a preliminary design and received bids on it on her behalf."

But, he said, he and his team haven't been paid for contracted work they've delivered on the project.

"All of us involved have put our heart and soul into the project, as well as our reputations," he said. "While we haven't been paid, that is of less concern to me than the fact that our involvement might somehow be portrayed as an impediment to the Rat's revival."

Stockwell said she still hopes to resolve the matter so that Fountain can proceed with the renovation and reopening of the restaurant.

"If a tenant is in default, I have to either terminate the lease or take possession of the premises," Stockwell said. "I'm taking the second course. I told her I'm still willing to work with her, and I'm hopeful of doing that. I would love to bring the Rat back to Chapel Hill."

The subterranean eatery in Amber Alley, which fed generations of UNC students and Chapel Hill residents, closed in late 2007 after 60 years in operation, and most of its contents were sold at auction to pay then-owner Francis Henry's delinquent withholding taxes.

Fountain bought the Rat in 2010, intending to bring back the beloved old menu and some of the longtime staff.

She originally hoped to reopen by early 2011, and then by August, but the project has been slowed by numerous delays.

Still, she said, demolition crews were making good progress early this year until it became clear that a section of the ceiling below the Krispy Kreme doughnut shop, which occupies the Franklin Street-level space above the Rat, was sagging badly.

A temporary support system is in place, but town of Chapel Hill inspectors recommended that work be halted until a permanent fix can be established.

"Our concern is that the demolition work might accidentally dislodge or damage that temporary support system," said Bobby Pettiford, the town's building inspection manager. "There should be a permanent support system in there before they do any more work on that part of the space."

Stockwell said her company was weighing the bids on that repair and on a separate plumbing problem. Those issues should taken care of in short order, she said, depending on how quickly contractors can begin work.

Fountain, who has done projects in Wilmington and Boone, said she took on the Rat as a labor of love. She's a Tar Heel through and through - her father, Jim Fountain, was once the head cheerleader at UNC, and she was a member of the Sweet Carolines - and she says she's determined to bring the restaurant back because "the Rat should not be closed."

Until work halted recently, she and her crews were stripping the labyrinthine interior of the Rat of just about everything, including the wallboards and ceiling panels. Once the demolition is done and all the necessary repairs and upgrades have been made, she said, the plan is to refurbish the space and put everything back together.

"It's an old building, and every time we take something down, we find something else behind it," she said last month. "You take down a wall and find another wall behind it, and another one behind that - and then asbestos."

In anticipation of reopening the restaurant, Fountain tracked down several of the restaurant's well-known wait and kitchen staff - including Eugene "Pop" Lyon, Ed "Squeaky" Morgan, Larry Alston and Roderick Nunn, whose collective experience there comes to more than 100 years - and invited them to return to work at the new Rat.

"I grew up down there," Alston said. "I love that place, man. When it closed, that was like seeing the book close on a lot of memories. I want to see it come back. I want to see all the old customers back in there."

Fountain said that if the problems in the Amber Alley space can't be resolved, she'll open the Rat in a new space.

"I'm dead serious about that," she said. "We're going to reopen the Rat, if not there then somewhere else. I have the name, the trademark, the menu, the staff, the whole nine yards. The Rat will open."