Hotel developers sue contractor for alleged fraud and failing to start construction

According to suit, Chai Developers paid Phoenix Building Corp. $1.9M with nothing to show for it

Jun.June 30, 2016 12:00 PM

UPDATED June 30 10:30 p.m.: Three years after announcing plans to build a Holiday Inn Express & Suites near Aventura, a pair of Tennessee investors have not been able to break ground on the 153-room hotel. In a recent lawsuit filed in Miami-Dade Circuit Court, Eliahu Ben Shmuel and Daniel Ben Shmuel blamed the general contractor, Phoenix Building Corp., for the lack of progress.

The Shmuel’s company, Chai Developers, is seeking compensatory damages against Phoenix, whose principal, Craig Greene, did not want to address allegations in the lawsuit that his company committed fraud. “I will respond through my attorney in court,” Greene told The Real Deal. “I am not going to get into any details about this.”

In a written statement, Chai’s attorney Stephen Padula said Chai has paid Phoenix $1.9 million with nothing to show for it. “Chai Developers is incredibly disappointed with the conduct of Phoenix,” Padula said.

According to the lawsuit, Chai hired Phoenix in 2013 after Greene and his partner Tom D’Iorio allegedly informed the Shmuels that their company had 25 years of experience in construction and has worked on projects that have ranged between $3 million to $300 million.

But problems quickly arose a year later when Phoenix allegedly delayed payment of $794,884 in impact fees to Miami-Dade County, resulting in an additional charge of $96,389 against the developers, who own the 3.5-acre site at 19800 West Dixie Highway. In 2015, Phoenix agreed to pay the extra $96,389 and agreed to provide Chai a credit of $300,000 from the general contractor’s total profit of $585,000, the lawsuit states.

The lawsuit further alleges that Chai recently discovered that Phoenix wrote a bad check to the county for $794,884. Padula provided TRD with a copy of a bad check crime report submitted by Miami-Dade’s building department to the state attorney’s office.

Since hiring Phoenix, Chai has paid the firm $1.96 million, yet it has not substantially completed the project within 300 days of the building permit being issued on November 20, 2015, the lawsuit alleges. In fact, Phoenix has yet to comment the project, resulting in Chai’s termination of the contract.

What’s more, the Shmuels accuse Phoenix of jacking up the final construction cost of the project by 33 percent this past December. According to the suit, Phoenix originally stated the hotel would cost $10.5 million to build, but that Phoenix increased the contract price to $14 million, the lawsuit alleges.

Correction: A previous version of this story said that the property is in Aventura. It is actually near Aventura.

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