Z Capital Group has lost its attempt to levy a $7.7 million appraisal on owners of condominium units at the Carillon Miami Wellness Resort.
The result is the latest in the long-running and still ongoing legal battle between the North, South and Central tower associations and Z Capital affiliate Carillon Hotel. The beachfront resort is located at 6801 Collins Avenue in Miami Beach.
Z Capital owns the spa and about 70 condo-hotel units at the central tower, the order says. It’s the only tower among the three that allows individual ownership of condo units and allows owners to put their condos in a hotel pool, according to a lawyer representing one of the associations. Under the Master Declaration, this ownership gives Hotel Carillon control of the majority of common areas such as hallways, elevators, swimming pools and gymnasiums in all towers, as well as the right to levy dues on unit owners for the maintenance, operation and insurance of these shared facilities.
It is this level of power of control and appreciation which is at the heart of the dispute. The associations sued the Hotel Carillon in 2016, the case being in its eighth year. Z Capital has argued in court that it has created an internationally renowned wellness center since buying the keys to the hotel and spa in bankruptcy court in 2015.
In the latest chapter of the case, Z Capital, through Carillon Hotel, has sought to collect the $7.7 million valuation to cover the legal fees and costs it has accrued in connection of the lawsuit since 2017. New York-based Z Capital, led by James Zenni Jr., is a private investment bank with $5.2 billion in assets. Its portfolio of companies includes Affinity Gaming, Alchemy Wellness Resorts and Mrs. Fields.
On Monday, Miami-Dade Circuit Judge Michael Hanzman sided with the condo associations, calling the push for the valuation “bold.” The charges are illegal and in violation of the primary statement that outlines the governance structure of the campus, the judge wrote in his order.
Because it was a temporary ban on the appraisal, Hanzman ordered the associations to post a $712,000 bond in case his decision was overturned.
The order could pave the way for a decision on the larger issue of control over shared areas of condo hotels. Hanzman wrote that he intended to “address, on an expedited basis, the legality of the structure governing the shared campus.” Additionally, some of the common area unit owners for which reviews are paid are actually amenities, such as the spa and restaurant, that generate a profit for Hotel Carillon, Hanzman noted.
“The Hotel Carillon has no right to charge anyone for the costs of the defendants” [Carillon Hotel] for-profit hospitality business,” he wrote.
Lawyers for Hotel Carillon did not return a request for comment. During the case, he filed a countersuit against the condominium associations, arguing that the whole affair is really a scheme by the associations to cancel the purchase of the resort by the Hotel Carillon in the court of bankruptcy and take ownership and control of the property for themselves. She also argues that the associations could not sue until Hotel Carillon exceeded a rating cap.
In two letters sent to unit owners in late July after Hanzman delivered his order verbally in a hearing, Hotel Carillon said he planned to appeal. He called the lawsuit “baseless” and said he looked forward to a potential trial in the fall.
Its chief financial officer testified in court in July that he was entitled to levy dues to maintain and operate the shared facilities and that residents had no say in the management of the shared facilities, according to the order. of the judge.
Gene Stearns, an association lawyer, argues otherwise. He said it is illegal for a private company to unilaterally monitor and issue assessments for the maintenance of common areas used by residents. Associations should elect a board of directors that will give them a voice in the maintenance and operation of facilities, said Stearns, of Miami-based Stearns Weaver Miller Weissler Alhadeff & Sitterson.
Z Capital cannot be “the dictator, the authoritarian ruler of a master association that controls all three buildings,” Stearns added.
South Florida condo market analyst Peter Zalewski said it’s a common problem for condo hotels because they typically give to the hotel owner — not the owners of the property. unity – decision-making power.
“Corporate investors love this type of structure because of the subsidy,” Condo Vultures’ Zalewski said, referring to unit owner reviews. “It’s not officially called a grant, but it is.”
In a similar case, the One Bal Harbor Condo Association claimed the condo association changed the statement to reduce its own expenses for shared utilities, parking and access to beach services. . The lawsuit was settled this year.
“Corporate investors in condominium hotel ownership can essentially waste money and put the debt on individual unit owners,” Zalewski said.