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September 2, 2010 |
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| March 18, 2010 |
By: Paola Iuspa-Abbott |
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hen Diana and Ciro Zegretti bought a room in the Mayfair Hotel & Spa in Miami’s Coconut Grove during the real estate boom, they never expected they’d be hit with an $1,850 monthly maintenance fee.
The couple claims a management contract governing the 425-square-foot unit exempted them from most of the fee, which was to help pay for the the condo-hotel operation. The exemption was in exchange for agreeing to place the unit in the hotel’s rental program.
The deal worked well until a year ago. That’s when the couple went from earning several hundred dollars a month from room rentals to writing a check for more than $1,000, the difference between the new maintenance fee and the modest room revenues.
The Zegrettis decided the fee, on top of a $1,926 monthly mortgage payment, made the investment unaffordable. They quit paying the mortgage and in December deeded the unit to Regions Bank in lieu of foreclosure. “Everything just went downhill, down the tube,” Diana Zegretti said of the new fee. “It’s been horrible. It made my life miserable. I just wanted to run away and slit my wrist.”
The Zegrettis aren’t the only ones dismayed by the fee. Owners of 25 other units have sued West Palm Beach-based Ceebraid-Signal, which owns 128 of the 180 Mayfair units and implemented the fee a year ago.
The owners claim the hefty fee was established to pressure them to sell their units at a discount to Ceebraid-Signal so it could convert the property back to a conventional hotel.
“[Ceebraid-Signal] has implemented these changes to assert economic pressure on the owners of the units … and coerce them to sell their units … at substantially less than originally paid for these units,” their lawsuit says.
The lawsuit
The individual owners want the fee overturned and are seeking an undisclosed amount of compensation. Ceebraid-Signal attorney Mark Bideau called the lawsuit “frivolous” and is seeking its dismissal.
In a condo-hotel, the units are individually sold to investors and are usually placed in a rental program. Rental revenue and hotel operation costs are typically split between the owners and the hotel company.
Controls Condo Association
Ceebraid-Signal, led by veteran South Florida condo converter Adam Schlesinger, controls the Mayfair’s condo association. It imposed the fee to help cover the hotel’s $6 million operating budget, according to the owners’ suit. Unit owners must pay the fee even if their units don’t participate in the hotel program.
Only 52 units — fewer than 30 percent — were sold to individual investors at prices ranging from about $230,000 to $326,000 before the real estate market collapsed in 2007.
Fort Lauderdale attorney Joseph Altschul, who represents the owners, said many can’t afford the fees.
Twenty-five owners have fallen behind on their maintenance fees and are being foreclosed on by the Ceebraid-Signal-controlled association, according to Miami-Dade property records.
Ceebraid-Signal is assessing owners maintenance fees of more than $4 per square foot. The owner of a 400-square-foot room faces a condo maintenance fee of more than $1,600 each month.
“If you compare what other condo hotels are charging, you can call this a predatory-type pricing that is intended, essentially, to put people into foreclosure,” Altschul said.
He claimed in the lawsuit that maintenance fees in similar condo-hotels range from about $1 to $1.20 per square foot.
Bideau said the cost of running a high-end hotel is high. “These folks in discovery will see all our numbers. If anything, we have an incentive to keep the cost down because we are paying most of it” because Ceebraid-Signal owns most of the units.
Some condo-hotel experts consider the Mayfair fee excessive. “It is twice as much as in most places,” said Joel Greene, a broker with Condo Hotel Center, a division of Miami-based Sheldon & Greene Associates. “You would expect a property in Bal Harbour to come with a hefty fee like that.”
Bideau, with Greenberg Traurig in West Palm Beach, said Ceebraid-Signal has “no interest in these people being foreclosed… and us essentially buying back the units.”
He said Ceebraid-Signal wouldn’t want to take title to the units because many have mortgages and the company would become responsible for the debt.
Altschul said that if the company gains control of 90 percent of the units they will have enough votes to dissolve the condominium and switch back to a hotel. That will make it easier to deal with lenders of the remaining units.
“If they make a conversion [to a traditional hotel,] no lender will want to buy back the property at a foreclosure sale,” he said. “A lender will want to work it out.”
Zegrettis' Deal
The Zegrettis bought their unit in early 2006 from Mayfair House Hotel, a partnership of the Falor Cos. in Chicago and Colony Capital in Los Angeles. The partnership converted the property to a condo-hotel, but in early 2007 sold most of the units to CSC Mayfair Land, an affiliate of Ceebraid-Signal.
The Zegrettis said that when they purchased their unit from Mayfair House Hotel the company agreed to reduce maintenance fees if they put the room into the rental program. Owners were to receive half of the revenue from their units; the other half was to go to the partnership, in part to cover the hotel operation.
The condo-converter honored the deal, they said, but the agreement was not part of the condo documents.
Ceebraid-Signal is operating the property based on what is in the condo documents, Bideau said.
The owners want to “reform” the documents to include the agreement they had with Mayfair House Hotel. Altschul said he has e-mails from Mayfair House Hotel to the owners showing that the agreement was to be permanent. The agreement was mistakenly left out of the condo documents, he said.
Want Contracts Overturned
“We haven’t spoken with the original developer, but it is our hope that the original developer will corroborate that was the intent of the parties,” he said.
If the court rules the unit owners are responsible for the maintenance fee, they want the purchase contracts overturned, citing misrepresentations by the condo-converter.
Diana Zegretti, who is not a party to the suit, said she is still paying the nearly $100,000 line of credit she took out on the family home in West Kendall to buy the unit at the Mayfair.
“It ruined my life,” said Zegretti, who works in sales for AT&T. “I am on depression meds; I had a credit score of 890 and so did my husband. Now our credit score is about 500 or less.”
Paola Iuspa-Abbott can be reached at (305) 347-6657.
The Mayfair photo by A.M. Holt
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