Z Capital sues Carillon condo association’s board members in latest chapter of eight-year legal saga

Z Capital Group sued condo association board members at the Carillon Miami Wellness Resort in Miami Beach, marking the latest chapter in South Florida’s drawn-out and most prominent condo-hotel dispute. 

The New York-based firm sued four past board members of the Central Tower association, as well as current board president Marvin Rosen and vice president Bruce Gorsky. The suit is tied to the Central Tower’s role in eight years of litigation against Z Capital and having allegedly improperly imposed special assessments, according to the complaint. 

The suit, which claims breach of fiduciary duty against the defendants, was filed by Z Capital’s affiliate, Carillon Hotel LLC, in Miami-Dade Circuit Court early this month. 

South Florida condo-hotels often exhibit a fragile balance of power between condo owners and investors, known as the commercial lot owners, that own the hotel keys, retail space, restaurants, spas and other amenities. Generally, declarations outlining the governing structure give more power to commercial lot owners, including to maintain common areas and amenities, as well as levy assessments on condo owners for the complexes’ upkeep. In many cases, this leaves residents with owning nothing outside their units. 

The commercial lot owners hire hotel flags such as the Ritz-Carlton, St. Regis or Carillon to brand the complexes. They argue that because they have to maintain the properties up to the brands’ standards, they should have the right to own and maintain most of the complexes and levy assessments for the upkeep. 

Z Capital, led by James Zenni Jr., is the Carillon commercial lot owner, purchasing its portion of the complex out of bankruptcy in 2015 for $21.6 million. The 580-unit oceanfront Carillon Miami Wellness Resort at 6801 Collins Avenue consists of the North and South towers, which only have condos. The Central Tower has a mix of 157 condos and Z Capital’s 74 hotel rooms. Each tower has its own association and declaration, and the entire complex also is governed by a master association and declaration. 

Z Capital took aim at the Central Tower’s board members because of its mixture of hotel keys and condos. The Central Tower association “has a unique relationship” with Z Capital because the firm is “physically integrated into” the tower due to its ownership of the hotel rooms, which represent nearly a third of all units in the tower, according to the complaint. Yet, the Central Tower association worked in “lockstep” with the North and South towers’ associations to file a barrage of lawsuits against Z Capital’s affiliates since 2016, the suit says. The Central Tower association’s participation in the litigation was contrary to one of its members’ –– namely Z Capital’s –– interests, the suit alleges. 

To bankroll attorney and experts fees and other litigation costs, the Central Tower association imposed special assessments on all units at the building, including Z Capital’s hotel rooms. Essentially, Z Capital has been paying for lawsuits filed against it, according to the complaint.. 

Central Tower board members levied “excessive and unnecessary assessments to fund a bad-faith and malicious campaign against” Z Capital and continue “with vexatious and unlawful claims,” the complaint says. Assessments were imposed in violation of the Central Tower declaration, which prohibits levies from exceeding 115 percent of those levied in the previous year, according to the complaint. The Central Tower association has spent over $2.3 million in litigation costs, the suit says. 

At one point, Z Capital got fed up and stopped paying the special assessments, but reluctantly forked over a portion, $49,257, in 2022 for fear of losing its hotel rooms in a lien foreclosure. When Z Capital asked for a debt verification letter, the Central Tower quoted the “outrageously inflated” amount of $130,383, according to the complaint, which argues Z Capital wasn’t credited for amounts it already paid. The amount also included multiple late fees in violation of the Florida Condominium Act and the Central Tower’s declaration, which only allow for one late charge per assessment, the suit claims. 

Carillon didn’t immediately return a request for comment, and its affiliate’s attorney, Brian Dervishi, declined to comment. 

In past litigation, the associations for the North, South and Central towers have argued that Z Capital’s control at the Carillon amounts to a “dictatorship.” 

The new suit follows several court orders in recent years in which the associations and Z Capital each won and lost aspects of their dispute. 

In a November final judgment, Miami-Dade Circuit Court Judge Jennifer Bailey shot down the associations’ push to purchase the spa, pools and other amenities from Z Capital, but upheld their motion for more control. Bailey listed 13 common areas that are to revert back to the associations’ control. This includes utility and electrical equipment, trash rooms, exterior walls, roofs, landscaping, lights, balconies, lobbies, hallways, and heating, ventilation and air conditioning systems. 

Rosen, the Central Tower association president, said Z Capital’s suit against him and five other board members is in response to its loss in Bailey’s order. The new lawsuit “can only have been motivated by its anger for losing to the associations and a desire to retaliate by purposely intimidating and harassing the individuals who served … in leading the Central Tower association to that successful outcome,” Rosen said in a statement. 

Stevan Pardo, the attorney who has represented the Central Tower in its suits against Z Capital, called the latest complaint “retaliatory and frivolous,” adding that it will be “vigorously defended.” In the suit, Z Capital points out that the firm admits to not paying special assessments, Pardo said. It’s not yet known whether Pardo or an attorney appointed by the association’s directors and officers insurance policy will defend the Central Tower board members. 

In her final order, Bailey also upheld previous judgments in the case, including a $16.3 million jury verdict in favor of the condo associations for Z Capital’s overcharges to residents for their share of the electricity, spa and hotel assessments from 2015 to 2022. The amount Z Capital owes is now over $20 million, according to Pardo. 

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In past orders, a judge shot down the associations’ claim that Z Capital owes more than $400 million in damages due to its mismanagement of the amenities leading to the “diminution in value” of the complex. Z Capital has said it actually turned the Carillon into an award-winning condo-hotel and increased its value by more than $470 million, according to its complaint. 

The Carillon condo associations have long tried to wrest control of the commercial lot from Z Capital. First, they tried to purchase the commercial lot out of bankruptcy, according to the complaint. After they lost, they started suing Z Capital and tried other tactics, such as infringing on its voting right as a member of the Central Tower association, the suit alleges. 

Both sides are appealing Bailey’s final trial court judgment. This month Gov. Ron DeSantis signed a bill into law that’s beneficial to commercial lot owners at condo-hotels. The new law could be invoked in the pending Carillon appeals.