Case Studies, Spinnaker West: Brief update (May 17, 2005)

The following update was attached to a copy of James Balderson's previous memo and sent to Mary Kagami and the other Owners of Spinnaker West.











Castle Beach Club (Miami): Forced Out by Inspectors, Condo Owners May Lose Their Homes

Article Courtesy of the Sun Post

By Omar Sommereyns
Posted May 28, 2005

About 250 flustered Castle Beach unit owners congregated in a grand, crème-colored assembly room in the Marriott Biscayne Bay last Monday evening to hear their court receiver address them publicly for the first time.

At one point, an altercation almost broke loose between a couple of exiled Castle Beach residents, but a Miami police officer promptly shoved one of the perpetrators out the door. "Keep him outside if he starts instigating again," he said.

"The uncertainty has created a level of anxiety, so this is a forum to let you know what's going on," said Robert Stone, the court-ordered receiver, endearing himself to the audience in a speech that preceded an open conference for unit owners to express their concerns individually. I'm not leaving until people have the ability to be heard."

On Thursday, April 14, hundreds of residents of the 18-story complex at 5445 Collins Ave. were - with no preliminary notice - ordered to evacuate the building the next morning after Miami Beach inspectors declared it a fire hazard and structurally unsound.

During Monday's meeting, Stone, an accountant with the firm of Kaufman Rossin & Company, coolly attempted to give unit owners an overview of the situation, emphasizing that,
in terms

Miami Police Officer Cummings (left) keeps the peace at the Castle Beach unit owners meeting in the Marriott Biscayne Bay ballroom.

of construction and restoration, the big issue is replacement of the 40-year-old electrical system. Another major predicament, Stone stressed, is finding money to finance the repairs. It will cost $25 million just to restore the building, without improvements, and an initial $10 million in repairs to allow residents back into their units.

Stone said he is trying to secure a 15-year bank loan, with interest rates running from 8 to 10 percent, on behalf of the condo association. He also mentioned residents would be able to move back in about six months after he gets the money (though he couldn't say when that might be), but emphasized no contractor would start any work until they see the green.

When asked if any work has been done on the building to date, Stone replied that only the air conditioning system has been restored since he doesn't have enough money yet to pay a contractor.

"We basically wasted a month," said resident Denitza Petrova.

Court-ordered receiver Robert Stone speaks to a group of more than 100 at a meeting to discuss the fate of the Castle Beach condo.

More than a year ago, condo owners sued Leopoldo Gonzalez, Emilio Berkowitz and Horacio Mecozzia - who collectively owned 150 units used as a hotel - and the Castle Beach Condominium Association for not properly allocating fees to maintain the building. Then, in mid-April 2005, a court order froze the board of directors from pursuing further action, leaving the financial receiver, Kaufman Rossin & Company, in charge of the building's operations.

Until now, however, several residents claim they had no idea what was happening to their homes and were basically left to fend for themselves.

"I feel very frustrated that it had to come to this," Elizabeth Martialay, a Castle Beach unit owner and partner with the Shutts & Bowen law firm, told the SunPost, "but the sad truth is that it took a catastrophe for anybody to notice or do anything about what's happening here."

Martialay, on behalf of more than 100 residents, recently filed a new class-action lawsuit against the three board members for misappropriating condo funds and neglecting numerous building-code violations. She said she tried everything she could, as of September 2004, to make the situation apparent, approaching everyone from the state attorney to the Division of Florida Land Sales, Condo & Mobile Homes.

"One of the remedies is that you can do a recall of directors," she said, "but you need 51 percent of all owners. We have owners living all over the place, many don't speak English, and the recall process is extremely difficult and rarely works."

"We have made many calls to the city and the housing authority to try to get to the bottom of the assistance program that you referred to in your article," Martialay previously wrote in an e-mail to the SunPost, referring to "No Time Frame on When Castle Beach Evacuees Can Return Home," published in the May 5 Miami Beach, North Beach and Metro editions. "Many of the calls have not even been returned, and of the people we spoke to, they all had different stories about what was available. It is shocking that the city would put so many people on the street without an organized program to assist them."

In a telephone interview, Michael Gongora, the attorney for the defendants in the class-action suit, said, "My clients did not believe the maintenance issues were an emergency in the summer of 2004. However they were trying to remedy them as best they could with a limited budget."

Nonetheless, Martialay maintains, "Here are people that have been clearly abusing their authority, and nothing has been done about it for over a year."

Gongora explained that "there has never been any evidence that the individual directors took money from the association or spent money inappropriately." He also said his clients never used association personnel to remodel their units, as every maintenance worker testified in court in November 2004.

"Some people are trying to make my clients the bad guys," he added, "but the city, the receiver and the contractor were all aware of the issues since last summer, though no one deemed it an emergency until the city drastically changed its position [in April 2005]."

During the meeting, Stone noted the city has also received 20 or so resident complaints against condo associations from other Miami Beach buildings. "The city is under tremendous pressure and scrutiny to do [its] job right," he said. "But it will absolutely not allow us to do anything less than the code requires."

Stone deferred several questions to the court or the city, such as when one resident cited the summer 2004 report by the consulting engineering firm Pistorino and Alam, which stated the building had "catastrophic structural deficiencies."

"It took them a year to get the city to shut down the building," one angry resident said.

"I cannot speak for the city of Miami Beach," Stone replied, " need to ask the city for the reason or time frame behind that."

However, no one representing the city was present. "Why isn't the city here?" someone shouted, as people throughout the crowd began babbling.

"I know the receiver was going to have meetings for the residents," Nanette Rodriguez, spokeswoman for the city of Miami Beach, later told the SunPost, "but as far I know, we weren't made aware of the Monday meeting and the city has not planned on meeting with the residents."

In a separate e-mail message, Rodriguez said, "The city's building department meets with Robert Stone on a regular basis...and gladly provides information to any unanswered questions, should he bring it to our attention. No new questions have been forwarded to the building department."

While many unit owners thanked Robert Stone for taking on the role of receiver, most felt they didn't have the proper representation (such as a board) to voice their concerns. "We're completely out of this," said one resident. "All we get to do is go to the bank and pay."

"If you think we're spending one dime without taking into consideration the best interest of the owners, you are mistaken," Stone said. Later, he added, "My only responsibility is to fix the building. If you don't pay, you will lose the unit."

On that subject, Gongora offered: "What's most concerning to my clients is that building is being run by the receiver, without any unit owners on board. If they need to relinquish some control in order to have a board of directors as unit owners, they are exploring that possibility."

At the meeting, concerning the financial dilemma, one skeptical unit owner, Max Pineda, stepped up to ask, "If you can't come up with the money within 30 days, what is Plan B?"

"There is no Plan B," said Stone. "We're keeping the building closed until we have the money to do the repairs."

Pineda then contended perhaps unit owners could come up with the first $10 million or create some sort of committee to help raise the money to expedite the process. Moreover, in the memo sent to residents, Stone denied rumors that the building is being sold, arguing it would be close to impossible since owners would need to vote unanimously in favor of a sale. Yet he mentioned five or six developers have approached him to buy and raze the property.

"OK, we want to sell!" someone exclaimed, as the crowd, again, began to chit-chatter.

Unit owner Angel Leal mentioned a new "Condominium Terminations" state bill #2360 with an effective date of July 1, 2005 that states "economic impossibility" could allow unit owners to forgo the unanimous vote in order to dissolve their condo association and sell.

"Based on what the receiver said tonight, I think the financing that he needs will be unrealistic to get," Leal told the SunPost. "He'll need to turn to unit owners, who would owe about $50,000 each, which would have to be paid as a lump sum and, since owners can't afford it, the city would have to foreclose on the units."

Hence, it might be wisest to sell, Leal said during the meeting. However, no one was sure of the legislation's status or whether it had been signed into law by the governor. Martialay later confirmed the pertinent piece of the bill did not pass, so a 100 percent vote is still needed to dissolve the association.

In April, resident Ruth Charles had e-mailed Rhonda Montoya Hasan, the Miami Beach building department's legal advisor, alleging the city violated federal "Public Health and Welfare" law by not "minimizing the adverse impact of displacement to maintain social and economic well-being."

To this, City Attorney Murray Dubbin responds: "The city is terribly unhappy about its residents being inconvenienced because of what happened, but the city is not in violation of anything."

Another issue raised at the meeting was individual unit violations; for example, renovations made without permit or improvements such as kitchens illegally added. Stone said 75 percent of the units aren't up to code and residents will have to resolve this on their own. Notices will be issued within 20 to 30 days.

"If you bought a unit that had a violation in it, you're still responsible," Stone said. "Any legal recourse back to the seller can be discussed with your lawyer."

Moreover, Stone reminded owners they must pay their maintenance fees so their units aren't foreclosed. "As hard as that may seem since you have all these other expenses, these assessments will need to be paid, even if you're not in the building."

In an effort to involve the city and elucidate matters from the residents' vantage point, Elizabeth Martialay and Peter Fullerton, her partner at Shutts & Bowen, sent a May 10 letter to Mayor David Dermer and the Miami Beach commissioners.

"Many owners will face the prospect of losing their homes because they will not be able to afford this financial burden over an extended period of time," she wrote. The letter goes on to ask for the city's assistance.

"It should not have happened this way and the city handled this very poorly, but I think that we are in a better-off position now," she later told the SunPost. "We can clean up this property and get some better management. Hopefully, [Stone] can get the money. I know it's a problem because this is not a typical loan and bankers like things that are typical and predictable. But I am cautiously optimistic."

Case Studies, Spinnaker West: Folprecht - Balderson correspondence

-----Original Message-----
From: Otto Folprecht
Sent: Thursday, May 19, 2005 1:21 PM
To: James Balderson

Dear Mr. Balderson,

In regards to your email sent to the strata council I would like to present my view of the current situation;

As you are aware several study's were made to determine the state of the building before we proceed with the remediation of our building. The first engineering study was done in the early/mid 90's. The outcome of the report stated that there were potential hot spots on the building with a high potential to become a water penetrating problem in the near future.

As this was an issue for the home owners of 2368 Laurel street more study's were made to reinforce the engineering reports to get a better understanding of what we are up against.

My personal conclusion is that all of the study's were over rated as the engineering company's fear of loosing court cases if being wrong in their estimates / findings / recommendations. To be presses. There is NO method of assessment were a engineering company can give a 100% accurate report, without major intrusion in large sections of the wall to determine the true facts. So in reality we do not know what we are up against since the building did NOT LEAK from day one. There was several issues that came up in Mary's apartment but they have been addressed and to my knowledge there are only some minor fixes to be made to put this issue behind us.

To support my facts, you may remember that we had a vehicle hit our building last year. When the contractor came on site and was doing the repair their were no visible damage to the wall when the cracked stucco was replaced.

Further to my thoughts and actions I am now getting professional advise on how to further pursue this matter. My view is that the reports have been overstated since there is/was no water penetration from the submission of the first report to the strata council. I am engaging my collages that are professors of civil engineering at both UBC and BCIT to give me their professional recommendation on this matter and also coordinating my effort with my lawyer if further action is required.

I do not wish to make a major investment if the investment is not needed.

To conclude my email; As the owner on 8-2368 Laurel street I would prefer that you do not address MY HOME as ROTTEN as this has a very insulting meaning to me when referred to someone's home as (1 : morally corrupt; 2 : extremely unpleasant or inferior; 3 very uncomfortable) according to the Webster Dictionary of English Language. Furthermore we do not know the depth of the problem. Dose that imply that if someone has a cavity in one tooth that we remove all teeth or just fix the cavity? Unfortunately the city laws and insurance agency's have regulations that do not address the real need of the owner, thus requiring owners to blind folded trust a overly conservative engineering reports in order to avoid court cases? I do not believe so.

I do appreciate your incite and help, but as mentioned until we know the true outcome lets not jump to conclusions and please do restrain your emails by not using insulting fraises as we are talking about my neighbors and my home.

Kind Regards,

Otto K Folprecht

Dear Mr. Folprecht,

Thank you for your reply.

Please be assured that I do understand the predicament that you, your family, and the other owners of LMS 0497 are in.

However, I am not sure you understand the true nature and history of the problem at Spinnaker West.

I suggest that you call Mary Kagami at (604) 879-0393.

Ask Mary if you can inspect the rot and damage inside her condo.

Remove one or both of the plywood panels on her patio and view the extent of the rot inside the walls.

Inspect the stucco walls at the concrete stairs to your entranceway to see how they are beginning to bulge out.

The bulging and cracking is typical as the rotten supporting wood gets crushed.

Open up the walls and see for yourself if they are rotten at your entranceway, as was done several years ago at Mary's place.

Mary has received too many false promises that everything would be fixed, for too many years.

Mary's condo is suffering from leaks and rot.

The value of Mary's condo has been reduced because of the leaks and rot, as has yours.

Please feel free to contact me again regarding this matter.

I am interested in any information that your experts can provide about the leaks and rot at Spinnaker West.

It is my understanding that the Strata Corporation has lost out on an opportunity to sue defendants in order to recover some of the cost of repairs.

Delays in fixing the leaks and rot and in litigation cost money.

James Balderson

Case Studies, Spinnaker West: Repair or destroy

COLCO: Coalition of Leaky Condo Owners

May 18, 2005

Dear Mary Kagami,
Owner, Leaky Rotten Condo, Strata Lot 3, Strata Plan LMS 0497
Spinnaker West, 2368 Laurel Street, Vancouver, B.C., Canada

Further to many previous written and oral communications about your leaky rotten condo -

The Honourable Mr. Justice E.R.A. Edwards recently wrote (20050428),

Richardson et al. v. The Owners, Strata Plan LMS2435 and Gooch et al. v. E.M.F. Holdings Ltd. et al.,

2005 BCSC 636

I am not persuaded that the Owners through the Strata Corporation have "done all that can reasonably be done to [sic] in the way of carrying out their statutory duty".

[20] That duty is imposed by s.72 of the Act which provides:

72(1) Subject to subsection (2), the strata corporation must repair and maintain common property and common assets.

[21] Before 2000, the predecessor section 34(1) of the Condominium Act RSBC 1996, c. 65 (repealed) imposed a similar duty:

34(1) A strata corporation must do all of the following:


(d) keep in a state of good and serviceable repair and properly maintain common property, common facilities and assets of the strata corporation;

[22] Failure by the Strata Corporation to meet these statutory duties exposes the Owners to potential litigation and an award of damages for failing to effectively address the problems identified in the BCPI report and any other building repair issues of which they were or are aware.

[23] Obtaining the BCPI report was an appropriate but not a sufficient response to the Mortgagees' complaints. Once alerted there were problems rated "B" and "C" by the BCPI report, the Owners had a duty to do all that was reasonable to address them.

[24] The next appropriate step was to obtain a professional assessment by recognized engineering experts of the extent and cost of the necessary repairs and to effect any such repairs either from the contingency fund or by special assessment. [emphasis added]

Given the several professional assessments by recognized engineering experts that you have paid for, including the most recent RDH Report, and the continued refusal of the Strata Corporation to effect repairs, and the recent decision last night to investigate "redevelopment opportunities", we advise that you consult your legal counsel regarding your options in seeking a court order to repair the building as per the Strata Property Act.

In particular, we draw your attention to:
165 On application of an owner, ...the Supreme Court may do one or more of the following:

(a) order the strata corporation to perform a duty it is required to perform under this Act, the regulations, the bylaws or the rules;

(b) order the strata corporation to stop contravening this Act, the regulations, the bylaws or the rules;

(c) make any other orders it considers necessary to give effect to an order under paragraph (a) or (b).

We also advise that you have your legal counsel confirm that a decision to "redevelop" would require a unanimous vote. In other words, you may be able to veto the decision to destroy rather than repair the present strata plan.

Yours truly,

James Balderson

Castle Beach Club (Miami):Class action lawsuit against three members of the condo board

Article Courtesy of the Miami Herald

Posted Friday, May 13, 2005

The residents of a high rise condominium on Miami Beach, who were forced to evacuate April 14 after building officials declared it structurally unsafe, have filed a class action lawsuit against three members of the condo board.

The suit, brought by resident and attorney Elizabeth Martialay, was filed this week in Miami-Dade Circuit Court.

Martialay alleges that the three members of the board -- Leopoldo Gonzalez, Emilio Berkowitz and Horacio Mecozzia -- knew of the building's mounting problems and ignored them.

The three board members own 150 of the 540 units at Castle Beach Condominiums, 5445 Collins Ave.

According to the suit, the three ``knew about numerous code violations and failed to remedy them despite demand from the city of Miami Beach.''

Their negligence, Martialay said in the suit, has forced hundreds of residents to ''remain liable for maintenance, assessments, taxes and mortgage obligations'' on units they are not allowed to visit without first making an appointment.

Michael Gongora, the attorney representing the three board members, said his clients ``deny many of the allegations contained in the complaint.''

He also questioned the need for a class action suit since many of the same allegations have already been raised in a separate lawsuit filed by another unit owner.

Building officials ordered the evacuation after finding electrical wiring defects they say made the structure unsafe. The short notice prompted an outcry from resident but city officials said the building had had a growing list of violations over the past two years.

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