The Real Deal New York

Miami Beach Edition developer sued for alleged fraud by penthouse buyer

Suit alleges $12M unit is 19 percent smaller than advertised

February 13, 2015 05:05PM
By Ina Cordle

Edition Miami Beach site and Ian Schrager

Miami Beach Edition site and Ian Schrager

From the South Florida website: A buyer at the ritzy Edition Residences has sued the development group, which includes famed hotelier Ian Schrager, charging fraud related to the square footage of a $12 million penthouse.

Edition Residences at the Miami Beach Edition, at 2901 Collins Avenue, is a luxury, oceanfront hotel/condominium project, recently developed by Schrager, renowned architect John Pawson and Marriott International.

On Thursday, Rising Sun Ventures and Edition Penthouse Ventures  two Florida firms managed by attorney Paul Gleiberman  filed suit in U.S. District Court against Seville Acquisition, the developers of Edition Residences. Citing fraudulent inducement, misrepresentations and omissions and violation of the Florida Condominium Act, the suit seeks to preclude the closing of the unit. It also seeks payment of compensatory and punitive damages and for the developer to remove “false advertising” from its website, promotional materials and floor plans.

Schrager disputes the allegations.

“To say that this lawsuit is completely frivolous and disingenuous is to give it the benefit of the doubt,” Schrager said in a statement. “It is an outrage. We intend to defend ourselves vigorously and to pursue whatever remedies are available to us to right this wrong.”

According to the suit, the investors placed $3 million in three separate, $1 million deposits, toward the $12 million purchase price of unit #1404. The penthouse was described in advertising materials and represented by the developer as having 4,416 square feet, the suit said. At $12 million, that is a price of $2,717 per square foot, which the developer’s sales agent deemed “a very solid deal,” and the plaintiffs’ broker stated was “the best value on the beach,” according to the lawsuit.

But when the buyer sought financing and had a certified appraiser measure the apartment, it was discovered that it had 3,576 square feet, or 19 percent less than described, according to the suit. That translates to $3,355 per square foot, or 23.5 percent more per square foot than at 4,416 square feet.

“The developer, very likely acting in concert with others, fraudulently induced plaintiffs to agree to an inflated $12 million purchase price that is nearly 23.5 percent higher [per square foot] than plaintiffs were promised and led to believe they were paying, for a penthouse apartment that is 19.02 percent smaller than was advertised, promoted, represented and promised by the developer at the time of contracting,” the suit says.

According to the suit, the developer refused to reduce the price, and scheduled the closing of unit #1404 for Thursday. Despite being aware of the alleged discrepancies, the developer refused to reschedule the closing, the suit says.

“We offered to buy it at the real price, the $2,717 per square foot, which comes out to $9.716 million.” Gleiberman said. “And they refused.”

The investors have not yet requested a return of the deposits, but seek to purchase the unit at a reduced price, he said.

“The 4,416 is a fabrication. They advertise it, they promote it, they put it in their floor plans, but in reality it’s a fabrication,” Gleiberman said. “It’s not livable square feet. It doesn’t exist.”

  • irobot

    welcome to the world of real estate brokerage

  • Stent

    No square footage in Miami is right. Property appraisal office has all sorts of different ways to account for or measure sq ft…ex: sometimes covered outdoor spaces are fully counted other times only a certain percentage is considered, same with garages etc… Sometimes the measurements are reflecting dimensions considering the exterior of the block walls. Other times interior walls are the boundaries… In other words, when you go purchase any real-estate in Miami your square footage will 99% of the time not reflect the actual ‘under a/c’ square footage. I flip property in Miami and this is a constant everyday problem. Don’t take my word for it test it out for yourselves. Measure the interior spaces of your property and compare it with the property appraisers numbers…. You’ll be be surprised.

  • Clare

    True Stent-
    Many times properties are listed with their “gross” sq footage which considers everything covered and under air conditioning. But other times properties are listed showing their “net” sq footage which can consider a certain percentage of the covered areas (not under A/C) ie: garages, covered terraces. So that number can be considerable less than the “gross” number. So what properties are listed in what way? No one seems to know? Frustrating! Especially when you’re trying to sell. This is more than likely what happened here. The developer conveniently listed at “gross” or even “net” and the buyer thought it was “under A/C”.

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