House or yacht? Legal fight looms over property taxes for floating Star Island mansion

Arkup #1, a gleaming rectangle-shaped house boat anchored off Miami Beach’s exclusive Star Island, has all the trappings of a floating mansion: a luxury kitchen, spacious living room, two upstairs bedrooms, gym space and even a patio overlooking the sparkling waters of Biscayne Bay.

But despite the fact that the Arkup is registered with the U.S. Coast Guard and can travel the seas at a modest five knots per hour, Miami-Dade County says it’s not actually a boat.

The result: the county has slapped the media darling house boat with a property tax bill of nearly $120,000.

The decision to declare the Arkup a “floating structure” has led to an unusual ongoing legal battle, pitting a wealthy businessman against the tax collectors of Miami-Dade.

The Arkup’s owner has now filed a lawsuit against county officials, saying they are violating a Florida constitutional ban against levying annual property taxes on boats. The builders — Arkup, the namesake company that touts the design as an eco-friendly model that could one day help address the housing shortages and sea-level rise threats — is also suing, after it too got hit with back taxes.

“We believe the sole reason our client is in this position — an unconstitutional tax assessment — is because of the shape and the style and the look of this boat,” said attorney Ivan Abrams, who represents the boat’s owner, MacKnight International Inc. “If it were designed like any other yacht, we don’t think we’d be in this position.”

“That’s all the government has going for it is the shape,” said Karen Lapekas, his co-counsel on the case.

The latest complaint, filed in January, names Miami-Dade Property Appraiser Pedro Garcia, Jim Zingale, the director of the Florida Department of Revenue and Peter Cam, Miami-Dade’s Tax Collector. The property appraisers and county attorney’s office declined to comment on the pending litigation.

The 75-foot Arkup is anchored off a piece of property on Star Island that once housed the mansion of John H. Levi, one of the founders of Miami Beach. A modern home is under construction there now.

The property and boat are owned via companies of British-born businessman Jonathan Brown, who made his fortune in the fish processing business and ran Miami-based MacKnight Food Group until its sale in 2019. Despite his wealth, Brown is a low-key figure, most famous for hiring five private jets to rush aid supplies to Dominica after the island was devastated by Hurricane Maria in 2017.

The Arkup #1 was built in Miami by Nicolas Derouin and Arnaud Luguet, two French engineers who live in South Florida and dedicated themselves to renewable energy and environmental preservation amid the threat of climate change and sea-level rise.

The first Arkup boat debuted in 2019, dazzling Miamians while docked off Palm Island, a gleaming two-story glass box with 2,600 square feet of indoor space and 1750 square feet of patio. The bow deck has an outdoor kitchen and console controls for navigation and operating the 136-hp rotating electric thrusters, which emit no noise and require no diesel fuel, and the anchoring system, which allows adjustments of 40-foot pilings to anchor the boat in up to 25 feet of water.

The Arkup earned write ups in the Miami Herald, Bloomberg and Forbes — and even appeared on Netflix’s “The World’s Most Amazing Vacation Rentals.”

Solar-powered and outfitted with a rainwater-collecting-and-purifying system, the mini-mansion was billed as a model for more modest neighborhoods on the water to help ease the world’s housing crunch. “We want to design small apartments on the water for students, townhouses for families,” Derouin told the Herald in 2019. “We want to create housing solutions for a broader audience. That’s the vision behind Arkup.”

Arkup is the only “floating structure” that’s currently being taxed by appraiser’s office, a spokeswoman confirmed.

Lapekas, the attorney, said she believes it’s a slippery slope, and officials could start taxing boats of all stripes that rarely move — and that people call home.

“Every boat sitting on Dinner Key right would be subject to property taxes,” Lapekas.

Said Abrams: “If this boat is a floating structure, that means all the other yachts docked around Palm Island and Star Island that are not used every single day to go cruising are subject to taxation.”

House boats communities were once common in Florida. But the state and some cities have moved to restrict or limit live-aboard areas but mainly because of water pollution concerns. In 2002, after years of wrangling, the state finally moved a colorful houseboat in Key West into a marina with sewer hook-ups. Famously, Hurricane Wilma destroyed a house boat community marina in North Bay Village in 2005.

That spurred an activist named Fane Lozman, who lived at the marina, to move his house boat — which had no engine and had to be connected to utilities on land — to Riviera Beach. City officials destroyed it and Lozman took the case to the U.S. Supreme Court, which declared it wasn’t a boat and ruled in his favor.

This Arkup legal fight is the complete opposite: lawyers want to prove it’s a boat, and the county wants to prove it isn’t.

MacKnight International purchased the Arkup last year for $3.3 million. The property appraiser’s office issued the tax bill in November 2021. It valued the Arkup at $5.1 million — ironically, lawyers say — by looking at the value of other yachts.

In response, lawyers for Arkup’s owner pointed out that the U.S. Coast Guard has determined it as recreational vessel, with all the necessary features: propulsion system, anchors, navigation and anchor lights, a VHF radio and even life vests. In February, the owner hired a captain, who took three members of the property appraiser’s office and a county attorney on a two-hour cruise around Biscayne Bay.

“It has all the same exact physical characteristics of the other yachts, with the ability to transport on water and cruise around the waterways around Miami-Dade County without any issues, and the ability to control the boat with high functioning steering and navigation mechanism systems,” Abrams said.

County officials weren’t swayed. In court documents, a county officials said the Arkup “was not built to be primarily used as a means of transportation over water” and said it was “not relevant” that it “theoretically” capable of transportation by water.

This story was originally published March 28, 2022 at 7:00 AM.