Shelborne South Beach unit owners lose appeal contesting $30M in assessments

A pair of investors who bought condo-hotel units in the Shelborne South Beach suffered a significant setback in their quest to reverse a three-year-old court ruling that deemed $30 million in special assessments legal and necessary.

Earlier this month, the Third District Court of Appeals denied a petition by Evelyn Bailey and Robert Farnik to overturn Miami-Dade Circuit Judge Beatrice Butchko’s 2017 ruling granting summary judgment in favor of Shelborne Ocean Beach Hotel Condominium Association and Shelborne Property Associates and Shelborne Operating Associates, two entities that own a majority of the hotel’s rooms.

In 2012, Bailey and Farnik were among 40 Shelborne South Beach condo-hotel unit owners who sued the association and the Shelborne entities, as well as four association board members. The 40 investors alleged the association and the Shelborne entities violated Florida law when $30 million in assessments were approved to repair and renovate the Art Deco hotel at 1801 Collins Avenue in Miami Beach.

Since Butchko’s ruling, only Bailey and Farnik moved forward with the appeal. Both investors allegedly owe tens of thousands of dollars for the special assessments, and the association has pending foreclosure proceedings against them.

Bryan Gowdy, the lawyer for Bailey and Farnik, said his clients are filing a motion for a rehearing this week. He declined further comment.

In its opinion, the Third DCA affirmed Butchko’s summary judgment for the association that the $30 million in assessments were legal, except for two construction items involving pool paver repairs and reinforcement of the structure under the Shelborne’s townhouses that totaled about $71,000. The Third DCA ruled the association must provide evidence of those two items before Butchko. The appeals court also ordered Bailey and Farnik to pay attorney fees for the two Shelborne entities.

“The trial court based its findings on the Association’s extensive evidence detailing the necessity of each construction item,” the Third DCA opinion states. “The court allowed the unit owners ample opportunity to present any evidence to the contrary, but no such evidence was forthcoming. We therefore affirm summary judgment with respect to all the items the trial court found were necessary maintenance.”

Alice K. Sum, a Fowler White Burnett shareholder representing the Shelborne association, said her client provided more than 20 binders worth of documentation showing the assessments were necessary, while Bailey and Farnik did not produce a single piece of evidence that the work wasn’t required. “The appellate court saw the voluminous amount of evidence that the trial court also looked at in reaching its decision,” Sum said. “We believe the association has been vindicated.”

In late January, W.P. Carey and Russell Galbut sold a majority of the rooms in the oceanfront hotel for $120 million to a joint venture involving King Street Real Estate GP, Westdale Properties and Cedar Capital Partners. An affiliate of Westdale also bought 30 units from individual unit owners. The Shelborne is managed by Menin Hospitality.