The Real Deal New York

Hamptons troubled by legal woes

May 13, 2009 11:32AM
By C. J. Hughes

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Panoramic View (top left), Bulova Watchcase Factory (top right) and Prime 103 (bottom) are at the center of legal controversies

This summer, a court is set to decide whether a group of brokers in the Hamptons is functioning like a monopoly. By charging too-high fees for their shared online system, known as OREX, the brokers are illegally hoarding key property data, a lawsuit alleges.

But while the sweeping legal action is keeping lawyers busy, it’s not their sole source of work, as the upscale second-home destination on Long Island’s East End suffers from the housing downturn like the rest of the country.

For one, the region has been hit with a rash of short sales, brokers say, as homes teeter on the brink of foreclosure. The Springs section of East Hampton has been particularly hard hit, with 12 short sales in the last few months, said Veronica Montemarano, a sales agent with Prudential Douglas Elliman in Montauk. In contrast, before this year, there were about two a year in the entire town of East Hampton, said Montemarano, who’s sold homes for five years.

Also, projects small and large are stalling, especially if they broke ground in the past two years, which could lead to disgruntled buyers suing to get their money back, lawyers say, without mentioning specifics.

One development that the real estate community is keeping a close eye on is Panoramic View, in Montauk, which has postponed the final phase of its renovation of its 10.5-acre beachfront site until after the summer.

The property, which is being developed by Distinctive Ventures, based in Great Neck, LI, was purchased in 2007 in a “stock transaction” for an undisclosed amount, said Adam Manson, the company’s director. So far he’s created 50 hotel rooms, as well as 20 residences for $1.5 million to $10.5 million; 10 of the homes, which are co-ops, have sold in a year, Manson said.  

Local brokers, who asked to remain anonymous because the community is small, say interest has been weak for Panoramic’s remaining units because of the economy, which has made financing the project’s last leg difficult.  
 
But Manson denied that, saying that the delay is more about pleasing his guests “in order for them to have the quiet enjoyment of our property this summer.”  

In the village of Sag Harbor, meanwhile, a court fight over a controversial luxury condo project may have taken a breather but could resume again soon.

The project, to be developed by Cape Advisors, would add 65 units to a rundown brick four-story building known as the Bulova Watchcase Factory. But the Group for the East End, a longtime environmental organization, sued the village twice to stop it, saying the planning board should not be granting permits for a project that could be in violation of state environmental laws.

A state Supreme Court judge disagreed and dismissed both suits, one in November and the other in March. Still, the Group has not ruled out the possibility of an appeal.

“We are still evaluating to see how things are going to shake out,” said Jeremy Samuelson, a spokesperson for the Group. David Conman, a project manager for Cape Advisors, didn’t return calls for comment.

Another real-estate-themed legal dustup concerns Ed Kleefield, a Hamptons restaurateur better known as Jean Luc, who was arrested in April for writing almost $300,000 in bad checks to a concrete company.  

According to reports, the company, LGP Foundations, which is based in Southampton, lent Kleefield a total of $700,000 last year to keep four restaurants open, including Prime 103 in East Hampton.  

Under the terms of the loan, LGP would take control of the restaurants on which Kleefield defaulted, according to its lawyers, and when Kleefield did, LGP started eviction proceedings, including changing locks, Kleefield’s lawyers said. The conflict’s now working its way through the courts.

In another legal matter, currently appearing on a Hamptons docket is George Semerjian, a longtime Southampton developer, who said he’s suing a property owner in the commercial area over a parcel where he had hoped to build condos, “but I really can’t get into any more specifics right now.” Semerjian, who works as a broker for Meadowmere Realty, currently has four listings on his Web site.

Also: Trouble may be brewing for home developers who put up speculative mansions up and down Route 27. As the developers’ construction loans come due, and their buildings linger for sale without buyers, they’re being forced to slash prices to get out from under piles of debt. If they don’t, they could easily default on their loans, brokers say, landing them in hot legal water with lenders.

These quick-fix pre-season price reductions can be 20 percent less than what the properties planned to sell for, said John Shea, an attorney with Twomey, Latham, Shea, Kelley, Dubin and Quartararo, based in Riverhead.  

“It may be better to offer their houses at slower prices to avoid problems,” he said.

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