Here’s what’s next for victims of the Surfside condo collapse and the property

Sales contract for the site will be addressed in court soon

Miami /
Aug.August 25, 2021 09:45 AM
A memorial site for the collapsed Champlain Towers South (Getty)

A memorial site for the collapsed Champlain Towers South (Getty)

The rest of the world has largely moved on since the oceanfront Surfside condo collapsed in late June, killing 98 people. But for the survivors and families of those who died, the devastation is ever-present, as they try to pick up the pieces and move forward.

Though the official causes of the partial collapse on June 24 are still under investigation, and likely will be for some time, the tragedy is playing out in the courtroom, where vital decisions about insurance payouts and the future of the Champlain Towers South property will be made. The town of Surfside’s role in the collapse and potentially a future rezoning of the site could also be a factor.

Miami-Dade Circuit Judge Michael Hanzman is presiding over the deluge of lawsuits filed over the collapse and appointed Akerman attorney Michael Goldberg as receiver, overseeing the Champlain condo association’s financial and other affairs. Lawsuits have been filed mainly against the condo association.

The Real Deal put together this guide on the ins and outs of the site’s future, the town downzoning proposal and ongoing litigation, culled from court hearings, documents and sources.

Jurisdictional fight

The 136-unit, 12-story building sat on a prime piece of waterfront land in Surfside, immediately north of Miami Beach. Miami-Dade County had the remaining part of the structure demolished in early July, following the collapse of the northeast portion of the condo tower. The county’s police department, which is investigating the deaths, still has control of the site, with plans to turn it over to the receiver in early September.

The National Institute of Standards and Technology is also working on its investigation into the collapse.

Judge Hanzman, who has said that he wants to “compensate these victims as soon as possible,” has made himself clear on the future of the site. It will sell to the highest bidder. A team led by Avison Young broker Michael Fay is marketing the site.

The proceeds of the sale will supplement the $49 million in building insurance.

But a fight is brewing among three camps: those who want to sell the property with the current zoning locked in; the town of Surfside, which is in the midst of revising its zoning code; and those who want the site to be turned into a memorial. In court hearings over the past few weeks, Hanzman and others have been critical of the town for suggesting that Surfside would in any way reduce the property’s value. If Surfside were to go through with the rezoning, the method in which the Champlain property is measured would change, reducing its size and therefore its density.

As it stands, the property measures nearly 1.9 acres. But under the proposed zoning overhaul, the line of demarcation would move, reducing the property to just under 1.3 acres. That’s how the site was measured at the time it was built, until the demarcation line was moved in 2009.

That means that if the rezoning goes through, whoever ends up purchasing the property would only be able to build 139 units, versus the 205 units currently allowed, making the site less valuable.

Surfside Mayor Charles Burkett has been vocal regarding the rezoning. In a recent interview with TRD, Burkett said it was “one of the most significant campaign issues” for his reelection in 2020. (Burkett was also elected mayor in 2006 and 2008.)

He has also been firm in saying he supports the families’ request to have a memorial on the property where their loved ones died, despite how unlikely it is that that will happen.

But the lack of clarity surrounding the zoning has already taken a toll on marketing efforts.

And the future timeline is also a bit murky. A town spokesperson said the commission has not set a date for a vote on the rezoning, but a workshop is scheduled for Sept. 6. Prior to that, the most recent workshop was held in May.

The bidders

An undisclosed stalking horse bidder made the first offer for the site, setting the minimum floor price for the property at $110 million. The bidder offered to go up to $120 million, Fay said in court. He and others have declined to identify the developer.

The purchase contract is being drafted and reviewed, and will likely be filed this week, Fay told TRD.

A number of top developers in South Florida are not interested in buying the property, according to sources. Those who have been ruled out by TRD include the Related Group, Vladislav Doronin’s OKO Group, Continuum developer Bruce Eichner, Nadim Ashi’s Fort Partners, Edgardo Defortuna’s Fortune International Group, and Ugo Colombo’s CMC Group.

It is also unlikely that David Martin’s Terra, which developed the adjacent Eighty Seven Park condo tower along with partners, would bid on the Champlain site, sources say. The Eighty Seven Park entity that built the condominium is named as a defendant in lawsuits regarding the collapse. Residents of Champlain Towers South also filed complaints against the developer during construction over concerns that it was damaging Champlain.

Litigation

Since the collapse, 38 lawsuits were filed, but litigation will proceed under one consolidated complaint seeking class action status.

If the judge certifies the class, then the lawsuit will continue on behalf of everyone affected, regardless of whether they have sued so far. Victims do not need to do anything to join the suit, unless they want to pursue claims separately and at their own expense.

Litigation would move on two class tracks: one for personal injury and wrongful death, and a second for economic loss and property damage.

The Aug. 16 consolidated complaint is against the Champlain association for a single negligence count, although it will be amended in the coming months once subpoenas, discovery and investigations reveal who and what else allegedly could be to blame for the collapse. Surfside, Miami Beach and Miami-Dade County are among those who will be subpoenaed.

The lawsuit heavily relies on engineering firm Morabito Consultants’ 2018 report that found “major structural damage” to the concrete slab below the pool deck and entrance driveway, among other problems. The association is accused of failing to keep Champlain structurally sound and “adequately warn” residents of structural problems.

Mortgages

Banks that provided mortgages for condos would likely be first in line to dip into disbursements that result from the litigation.

Hanzman has directed Goldberg to identify all lien-holders on units, as they would have first-priority claims on disbursements, according to court discussions.

This does not necessarily mean all mortgages and other liens will be paid in full, since the collateral was destroyed in the collapse. At least in some cases, the amounts could be negotiated down.

Some surviving unit owners are wondering whether they are on the hook for mortgage payments, even though their homes were destroyed. The court has not paused these payments, but owners still can negotiate with their lenders. Still, banks could sue a borrower who stopped paying a loan backing a unit.

Only Congress could sign off on mortgage forgiveness for all, but it has not done so yet, and the process can be challenging.

Miami businessmen Manny Kadre and Rodney Barreto, the court-appointed government relations liaisons, are working with elected officials on this, including U.S. Rep. Debbie Wasserman Schultz.

Owners do not have to worry about property taxes, as Gov. Ron DeSantis has suspended those for Champlain Towers South.

Also, a dissolution of the condo association is necessary for the case to proceed. Goldberg said he plans a court filing to that effect.

Insurance

Insurers are playing key roles in the aftermath of South Florida’s deadliest building collapse. They would be footing part of the payouts to those who lost loved ones or their homes, or both.

So far a little more than $49 million of building insurance has been identified, although this does not include insurance homeowners held on individual units.

Out of this, Great American Insurance has agreed to tender its full $31.4 million policy on the physical structure.

The remainder is $18 million of liability insurance from various carriers, several of whom have voluntarily tendered their policy amounts. Goldberg has said at court status conferences that $2 million from James River Insurance, $1 million from Philadelphia Indemnity Insurance and $10.3 million from Fireman’s Fund Insurance have been tendered.

Goldberg also said $5 million is expected from QBE Insurance Group. And he is in discussions with Arch Insurance Group and AmTrust Financial.

Hanzman has said the available insurance on Champlain is nowhere near enough to cover potential disbursements, prompting him to push the receiver for a market value sale of the site.

Disbursements

Although litigation is pending, Hanzman has directed Goldberg to preliminarily disburse up to $10,000 per displaced family to cover housing costs, and up to $2,000 for a relative of a deceased to cover funeral and related costs. The exact amount each family gets in disbursements varies based on need.

Goldberg had approved 65 assistance payments totaling $386,000 for both housing and end-of-life benefits as of Aug. 11. This has been covered by a $1 million donation by Miami attorney John Ruiz.

Another 10 assistance applications have been denied, Goldberg told the court.

Some Champlain unit owners appear to have received insurance checks, although it is not clear from discussions in court whether that is from individual unit insurance companies or those for the building.

State Sen. Jason Pizzo, whose district includes Surfside and who is working with victims, said some of the check recipients are holding back on cashing them for fear they could be giving up “their place” in line for future collections, or even their right to collect larger insurance disbursements later.

Hanzman advised victims to seek an attorney’s opinion before cashing checks. Whether accepting a disbursement now would impact collections later could depend on different policies.

For free legal advice on the issue, victims can contact the Dade County Bar Association at [email protected].

Dividing up funds

Exactly how disbursements would be allotted to victims is yet to be hammered out. Two possibilities floated are based on the appraised market value of each unit or each owner’s percentage stake in the building under the condo declaration.

Goldberg hired First Real Estate Appraisers to determine the market value of the units, taking into account their size and the views they offered. The appraisal is expected to be completed in early September.

Some surviving unit owners have said they prefer the appraisal method, and some have said they prefer the percentage ownership split.

Yet others have another vision for how they could be made whole. They want to participate in some way in the development of a new building. This could be handled by having several units in a new condo reserved for them, as they want to move there. Or this could be a profit sharing from the sale of the redeveloped site.

Hanzman has said this is not legally, practically or financially feasible.

“So it is OK for somebody to spend $200 million [on the site] and sell [it] for $900 million and profit that much, and [we who] are residents [who] were left with nothing, don’t even have a consideration to go in and participate?” surviving unit owner Marcelo Peña retorted.

“What you said is absolutely true,” Hanzman responded. “What the victims of this case have a right to is to be compensated for the fair value of their property and the value of their loss in terms of injury and death. They do not have a right to participate in the upside.”

In addition, a profit sharing years down the road is an “elusive” concept and not within the court’s jurisdiction, he added. Developers often take a risk, and projects do not pan out, becoming money-losers.

Renters’ rights

The lawsuit would cover renters’ losses, if the class is certified.

Champlain renter Sharon Schechter told the court she has lost all of her possessions and has minimal renters insurance. She inquired about coverage for her property and her post traumatic stress disorder, as she escaped by climbing over rubble in the dark while holding her dog.

Although renters like Schechter would be included in the suit, there is no assurance she will be made entirely financially whole, Hanzman told her. As for her post traumatic stress disorder, financial recovery is less likely, as “the bulk, if not all” disbursements would be for property and loss of life, he added.

Another renter, Raquel Oliveira, who lost her husband and son, shared in court her struggle to cope. The collapse not only took her family, but also all mementos she could hold onto, she said. Miami-Dade authorities have been cataloguing personal belongings found at the site, but have said it is possible not everything will be returned to survivors over asbestos concerns.
(Survivors and families of those who died can visit Surfside Family Information and Assistance System to report missing belongings.)

“I don’t even have any memory that I could have,” Oliveira told the court. “I don’t have a clothing to smell or an object to look at to keep as a memory of my son and my husband.”










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