Miami-Dade County

Surfside condo owners battle over selling to developer

The Seaway Condominiums at 9149 Collins Ave in Surfside. Condominium unit owners complain that their condominium board has made deals with developers to make the building ripe for demolition.
The Seaway Condominiums at 9149 Collins Ave in Surfside. Condominium unit owners complain that their condominium board has made deals with developers to make the building ripe for demolition. MIAMI HERALD STAFF

For 20 years, Stephen Norris has lived in a modest condo in pretty Seaway Villas, a low-slung 1930s building with a primo spot right on the beach in Surfside.

But a majority of his fellow condo owners, most of whom don’t live in the building, have accepted buyout offers from a big developer that will make many of them rich. And now, because of a controversial loophole in Florida condo law, Norris — who says he doesn’t want to sell — could be forced out of his home. Two other holdout owners who don’t live in the two-story garden-style building, including a Bal Harbour council member, would also be compelled to sell.

As the holdouts cry foul, the battle over little Seaway Villas has blown up into a saga replete with allegations of conspiracies and high-pressure tactics by some eager-to-sell condo owners and developer Fort Capital Management, questions about the role played by development-friendly town officials, and a last-minute intervention by Miami-Dade County historic preservation officials — who say the 1936 building, the first apartment house in Surfside, qualifies for protection as a historic landmark.

In perhaps the strangest twist, Seaway board president Faith Doyle applied for, and got, a permit for demolition of the condo from the town building official — even though no sales have closed, the condo board apparently took no vote on the sale of the building or the demolition, and the three holdouts are still legal owners of units in the building.

To make matters even more complicated, a letter emailed by the Seaway board to Norris and other unit owners strongly suggests Fort Capital and Surfside building officials were complicit with condo leaders in concocting an essentially phony demolition permit, which they had no intention of acting on, in an attempt to forestall historic designation.

The email says that after Fort Capital officials “approached’’ the board with the idea, unnamed town building officials told them they could file for the permit “with no supporting documentation or materials’’ and “the Town would take no action on the application.’’

“This simple act, it is said, may prevent an historic designation. That application could then sit inactive for up to six months, following which it would be denied by the Town,’’ the email continues.

“It borders on the insane,’’ Norris, a stockbroker, told members of the county’s preservation board at a heated meeting on Wednesday as he described his reaction to receiving a copy of the demolition notice. “It’s nothing short of bizarre.”

Demolition on hold

Surfside’s building official, Ross Prieto, denied being involved in any discussion of the matter, calling the suggestion “absolutely false.’’ Doyle, a nurse, did not respond to an email and a message left with someone at her home by phone. Fort Capital’s Michael Conaghan did confirm that his firm told the condo board that obtaining a demolition permit — which is valid for six months — before designation happens could trump the legal protections conveyed by historic status. But he said the firm had no further involvement.

Demolition is not imminent. The Miami-Dade preservation board voted last month to consider designation of the Seaway as historic at the request of Norris and another holdout, Bal Harbour councilwoman Patricia Cohen. That triggered an automatic moratorium that preservation officials say they believe freezes the demolition permit, issued in August, until the preservation board makes a final decision.

Prieto also said the condo board would have to satisfy a long checklist of other requirements before the building could be torn down.

For now, the three holdouts can block dissolution of the condo association under Florida law — though that could change over the next couple of weeks, when the Seaway board will meet to change its rules to allow termination of the condo.

Some of their fellow condo-owners say it’s Norris and Cohen who are acting unfairly. They say blocking the condo termination or designating the building as historic would likely kill the pending sales and deny other owners, some of whom they say are elderly and not financially well off, a chance to cash out and improve their lives.

High payouts

The payouts from Fort Capital range from the high six figures to more than $1 million depending on unit size, several owners say. That represents a substantial premium over the market value of the condos, which according to the county appraiser’s website range roughly from around $150,000 to over $300,000. The payout would be especially rich for a handful of owners who control multiple units.

The willing Seaway sellers and Fort Capital officials contend the holdouts are not interested in historic preservation, but are using the process to “extort’’ a bigger payout from the developers, an allegation Norris and Cohen strenuously deny. Conaghan called Cohen and Norris “deadbeats’’ who refused to pay a substantial assessment for major repairs a couple of years ago — though both say they are in litigation with the board, which they claim improperly handled the project.

The sellers and Fort Capital also claim the building, which passed a 40-year certification just two years ago, is in bad shape and needs extensive maintenance that most owners and the association, which they contend is broke, can’t afford to pay for — even though most of those owners have homes somewhere else and many rent out their units.

“There is no doubt this will change the lives of the majority of these residents. This is more money than they have ever seen in their lives,’’ said Brian Campbell, an investor and businessman who owns two units in the building but lives in Brickell. “It’s a tremendous windfall, a great good fortune.

“There is no doubt the building is a ticking clock of maintenance issues. The building is going to fall further in disrepair. If they can’t sell, what are these people going to do?”

Just how much is at stake financially? Campbell and a group of other owners hired powerhouse zoning attorney Lucia Dougherty of Greenberg Traurig to represent them. Dougherty, whose appearance at a historic preservation board meeting this week raised eyebrows, more typically represents big developers in permitting projects worth hundreds of millions of dollars.

The Seaway tussle is unfolding amid the broader backdrop of a sizzling luxury-condo boom and a brewing battle over historic preservation as developers target previously overlooked waterfront areas like North Beach in Miami Beach and small towns like Surfside and Bay Harbor Islands.

Controversial sales tactic

Some critics say it’s also helping expose a dark side of the new real-estate boom — a controversial tactic that cash-rich investors are increasingly adopting across Florida as they seek properties to redevelop.

In scores of cases across the state, developers have exploited a little-known loophole in the state’s condo law to force unwilling owners to sell. The 2007 revision, signed by then-Gov. Charlie Crist, was meant to make it easier to quickly repair condo buildings badly damaged by a natural disaster or in urgent need of repair or demolition when all owners can’t be located.

The measure requires a vote of just 80 percent of owners to terminate a condo corporation, though that can be blocked if more than 10 percent of owners object. Formerly it took a vote of all owners to dissolve a condo.

Cohen, Norris and the third holdout, Giovanni Macri, who lives in Italy but uses his Seaway condo as a vacation place, represent just over 10 percent of owners, enough to block termination. But the Seaway board is proposing to change the threshold to block termination by changing the rules governing the condo, a move condo-law attorneys consulted by the Miami Herald say could well be legal, depending on how those rules are drafted.

In many of the publicized cases of forced condo sales, owners end up getting market prices significantly lower than what they paid, often at the height of the previous market.

Tightening loopholes

Several legislators have pledged to tighten the loophole during next year’s session, but right now condo owners in Norris and Cohen’s situation have little choice but to fight deep-pocketed developers in court, said attorney Michael Mayer, of the Fort Lauderdale firm PaytonBolin, who represents holdouts in a Boynton Beach case.

Mayer said the Seaway case, in which he is not involved, represents a new wrinkle in the trend, in particular the apparent demolition ruse.

“It’s the first I’ve heard of that. But that’s the problem with these things,’’ Mayer said. “There are so many loopholes now that, for innocent owners who want to stay in their homes, there are so many ways that they can get kicked out. It’s a very slippery slope.’’

But there’s a big difference in the Seaway case, said Fort Capital’s Conaghan, noting that he’s offering owners there several times the market value of their condos.

“We don’t feel we’re abusing the process at all,’’ Conaghan said. “On the contrary.’’

Fort Capital’s principals say they are preservationists, pointing to their work at the Surf Club redevelopment project. They are restoring the landmark Mediterranean Revival core of the club, which is designated historic, and combining it with a set of new glass towers as part of a conversion into a Four Seasons, with a project cost running into the hundreds of millions of dollars.

Conaghan said Fort Capital would be willing to work with the county preservation office, which oversaw the redesign of the Surf Club, to save the facade of the Seaway Villas and some of its chief features, including a keystone beachfront patio. That would be combined with a redevelopment of the Surf Club Apartments, a separate co-op they’ve bought just north of the Four Seasons project and immediately south of the Seaway.

Meanwhile, Fort Capital has filed plans with the town to build on the Surf Club Apartments site alone, saying it can’t make their investors wait.

To combine them, Conaghan said, Fort Capital needs to own the Seaway.

“Unfortunately, two people are standing in the way of that happening,’’ Conaghan said, referring to Norris and Cohen.

The American way?

But Cohen says being coerced by private interests to sell her property is un-American. And she said the issues go beyond questions of fairness, adding that hers is just one example of the consequences of the foreign and out-of-town investment money flooding into Miami real estate, and pricing or driving out local residents. Fort Capital is backed by investors from Turkey, Brazil and Peru.

That the price Fort Capital is offering her — $1.25 million, according to Conaghan — is several times what she paid for the condo is beside the point, she said.

“I don’t know when this notion began that, just because they’re overpaying, I have to sell my unit,” Cohen said, complaining that Conaghan, his representatives and other condo owners have harassed her relentlessly even though she has made it clear she does not want to talk to them. “Where does it say in the U.S. Constitution that the sharks get to gobble up the small ones?

In any case, both Cohen and Norris note, the assessed market values have more than doubled at the Seaway, thanks to the Four Seasons project, and they expect they will continue to rise.

“I applaud them for building a Four Seasons. I’m happy everyone’s value is going to be enhanced,” Cohen said. “I don’t want to fight with them. But these are bullies. Last time I checked, that’s not the American way.”

Norris and Cohen’s request for historic status, meanwhile, has exacerbated tensions between Surfside officials and the county’s preservation staff and the independent, appointed board that makes decisions on designations.

The county’s preservation office, which has jurisdiction over municipalities lacking their own programs, has for years been trying to identify and protect historically or architecturally significant buildings in Surfside and Bay Harbor Islands, among other waterfront towns, before they are overtaken by redevelopment — a central mission of the office.

But the effort has spurred a backlash by developers and some municipal and elected officials in both Surfside and Bay Harbor, whose objections have blocked or stalled designation of some significant Art Deco and Miami Modern buildings. Earlier this year, at the request of Surfside officials and Miami-Dade Commissioner Sally Heyman, the preservation board granted a six-month delay on designation of a proposed historic district and an individual Deco apartment building in that town.

At a Surfside commission meeting Sept. 12, Heyman delivered a rambling broadside against county preservation officials, accusing them of unspecified violations of preservation law, and — to huzzahs from some commission and audience members — ridiculing the buildings they had identified as meriting protection.

The vice mayor, Eli Tourgeman, called the buildings — which include Deco and MiMo designs by some of Miami’s most prominent architects of the era — “dumps,’’ while extolling an unnamed developer who wants to replace them with what he called a “really, really high end’’ project.

Then, at the county preservation board’s Sept. 17 meeting, Cohen and Norris made their request for designation for the Seaway with no advance notice. The board voted to consider the application after the assistant county attorney who advises them, Eddie Kirtley, told them property owners have the right to make such a request.

The preservation office had already identified Seaway Villas as a candidate for designation, but abstained from bringing it to the board to honor Heyman’s wishes, Miami-Dade preservation chief Kathleen Slesnick Kauffman says.

At the board’s next meeting, this past Wednesday, Slesnick Kauffman and preservation specialist Sarah Cody presented an extensive report that concludes the building, constructed by the company that developed Surfside, met two separate legal criteria for designation — for its “excellent’’ traditional or vernacular architecture and as an important milestone in the town’s early development.

Miffed Surfside officials then asked the board to suspend the Seaway process, saying they had been caught unaware.

Because no vote was scheduled, the town officials and Seaway owners were told to come back next month for a public hearing on the matter.

Preservation board members also praised Kauffman and Cody’s work. The board chair, Mitch Novick, asked Kirtley point-blank whether he knew of any violations by staff or the board. Kirtley said no.

Norris told the board he is sincere about protecting Seaway Villas.

“It is a beautiful building, the jewel in the crown of Surfside,’’ he said.

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