Chetrit scores appeals court win against lender in foreclosure case of Miami Beach hotel

Third DCA’s opinion reversed summary judgment ruling in late 2022 linked to Tides South Beach

Appeals Court Reverses Lender’s Win in Chetrit Foreclosure
Jo Chetrit and the Tides South Beach at 1220 Ocean Drive (Getty, Tides South Beach)

The Chetrit Group scored a win in the legal battle against its lender over the Tides hotel in South Beach. 

This week, the Third District Court of Appeals reversed a motion for summary judgment issued in a lower court in late 2022 over the $45 million loan backing Tides, a 45-key hotel at 1220 Ocean Drive in Miami Beach. 

An affiliate of Miami Beach-based Safe Harbor Equity acquired the debt from Ocean Bank in early 2021. It later sued affiliates of New York-based Chetrit, alleging that the developer stole $2 million in insurance money without the lender’s knowledge and consent, and allegedly defaulted on the loan. The insurance funds were to repair damage caused by Hurricane Irma in 2017. 

The Third DCA’s opinion, released on Wednesday, addressed that point and found that summary judgment should not have been issued in late 2022. The appeals court pointed to conflict between the testimony of an Ocean Bank vice president, who denied that the bank knew and approved of the use of insurance proceeds to repair the hotel; and Chetrit’s argument that Ocean Bank approved that use of the insurance funds verbally and in writing in its own internal records. 

The summary judgment ruling that was just reversed found that Chetrit was on the hook for $82.1 million, plus fees and interest, which included $41.8 million in unpaid principal debt, nearly $47.8 million in interest and a $7.5 million credit for payments made. 

In the 2022 order, Miami-Dade Circuit Court Judge Pedro Echarte Jr. also ruled that the Chetrit entities breached their mortgage when they allowed their insurance coverage to lapse for months, and that they defaulted on the loan when they failed to pay it back by the extended maturity date of Dec. 20, 2020.

The Third DCA only opined on the insurance proceeds issue. 

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“Any denial by Ocean Bank of the use of the proceeds for repair had to be reasonable,” the Third DCA’s opinion reads. The hotel was Ocean Bank’s collateral, and the loan amounted to more than 20 times the value of the insurance money. The repairs allowed the hotel to reopen, according to the opinion. 

“The parties also continued to cooperate and make modifications to the loan that were beneficial to both parties,” it continues. “The point is not that any of these ‘facts’ have been finally established as ‘true.’ The point is that the evidence and inferences [therefore] conflict.”

Chetrit has argued in court filings that Safe Harbor’s business plan is based on acquiring loans and searching for prior defaults to “exploit” the borrowers with “retroactive default interest.” Chetrit said it had refinancing in place to repay the mortgage before Safe Harbor acquired the loan. 

Christopher Spuches, Safe Harbor’s attorney, said that the allegation that Safe Harbor is exploitative was “taken completely out of context and [is] obviously false.” Spuches said Chetrit has not made a payment in three or so years. 

“Like any other lender, we enforce loan documents, nothing more, nothing less,” he added. 

Spuches said the case will go to trial. 

Chetrit’s attorney, Dennis Richard of Miami-based Richard and Richard, said in a statement that Safe Harbor is “now facing tens of millions of dollars in damages claims” for blocking the refinancing, which Richard said is “collectible against the $41 million mortgage it purchased from the bank.” 

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