A bayfront Miami condominium in need of repairs is in a legal fight pitting unit owners against the condo association.
The 27-story, 235-unit Palm Bay Yacht Club made headlines last week over a proposed $46 million special assessment to fund repairs required for the property’s 40-year recertification. A group of 10 unit owners filed a lawsuit in October against the Palm Bay Yacht Club Condo Association, affiliates of the property management firm AKAM and other companies, alleging fraud and negligence.
The tower at 780 Northeast 69th Street was constructed in 1982 on a waterfront lot that includes a pool, sports courts and a parking lot.
In the lawsuit, unit owners allege that AKAM and the association knowingly made false statements about the scope of the project by including additional repairs beyond those required by the 40-year recertification, said attorney Jane Muir, who represents the 10 unit owners. The lawsuit alleges each unit owner would owe more than $175,000 for the repairs. It claims that AKAM is double-dipping and inflating the cost of the project, which AKAM denies.
An amended complaint, filed in Miami-Dade Circuit Court in December, alleges that engineers hired by the plaintiffs found errors that had a combined cost of more than $11 million. It claims that the defendants “mismanaged, misappropriated, or facilitated the misappropriation of association funds.”
“Absent court intervention, defendants will encumber the residents with insurmountable debt, risking foreclosure and bankruptcy for many individual residents and for the association,” the lawsuit states.
Unit owners are seeking an injunction against the association, with the goal of having a receiver appointed to take over the association, according to Muir. An evidentiary hearing that began on Monday was postponed to later this week, said representatives for both sides.
“No matter what these 10 unit owners think, the work has to be done. It’s only limited as to what can or cannot be done,” said attorney Jonathan Bloom of Bloom & Freeling, who represents AKAM. “Don’t people want to go to bed safe?”
The dispute is also playing out in the court of public opinion, with the unit owners appearing on local TV news fighting the size of the assessment and how money allegedly has been handled.
Increased scrutiny of the physical conditions of condo buildings in the 20 months since the deadly Surfside condo collapse has led many associations across South Florida to impose multimillion-dollar special assessments or increase homeowners association fees to pay for life and safety repairs.
Palm Bay Yacht Club’s association estimated that the recertification — which is required by law in Miami-Dade County — will cost about $33 million, and that the cost to replace the windows and doors with storm impact windows and doors is $15.7 million. The building has received unsafe structure violations from the city of Miami.
Amid the legal battle, the board voted on Saturday to approve a loan to fund the $33 million recertification project. The association approved replacing the railings, but did not approve the impact windows and doors, according to a spokesperson for AKAM. The spokesperson declined to disclose the loan amount.
According to a letter sent to unit owners, an engineering firm found that the balcony railing system “reached its end of useful life,” and the railings no longer comply with the city’s building code.
“My clients do agree that the recertification must be achieved, and they also believe that some repairs must be done,” Muir said. “The problem is the scope of the project.”
Greg Main-Baillie, who leads the new condo restoration division at Colliers, said he expects more associations will face similar lawsuits in the wake of the Surfside collapse, as many condo owners don’t understand what it takes to maintain older structures. Main-Baillie compared an aging building to a person in need of surgery.
“Until you actually get into the area of infection, you really don’t understand how bad it is,” said Main-Baillie, who is not involved in Palm Bay Yacht Club. “In the buildings that haven’t maintained themselves, the cancer is going to spread.”
The letter the association sent to owners suggests the same, imploring owners to “properly repair and protect our investment.”
“We feel bad that unit owners are going to incur expenses,” Bloom told The Real Deal. “[But] when you buy a condominium, you take the good, bad and the ugly.”