Castle Beach Club (Miami): Owners still can't return to uninhabitable condos

Article Courtesy of the Miami Herald

By Donna Gehrke-White
Published February 12, 2006

Elizabeth Martialay should be comfortably set as a partner in a top Miami law firm.

But after Miami Beach officials closed down the Castle Beach Club condominium complex 10 months ago, she has been scrounging each month to pay the $2,000 mortgage, the $490 maintenance fee and $600 in special assessments for a unit she can't live in, plus $1,100 in rent for a ''tiny apartment'' for her husband and her.

''It's a huge strain on my marriage and my health,'' says Martialay, who bought her home two years ago. "I wish I could relieve some of the stress by going to a gym but I had to cut that out of my budget.''

Hundreds of other Castle Beach owners are just as strapped after the unthinkable happened: Following years of citing the oceanfront building for code violations -- information residents said was never shared by the board -- the city shut the building, refusing to allow residents to return until millions of dollars worth of repairs are done.

''It is a nightmare, the state of the law is so bad,'' says owner Caridad Amores, who helped elect a new board. "It is a crime, an outrage of what we are going through.''

The story of Castle Beach is the ultimate condo nightmare story: an aging building, a board that failed to make repairs and residents who say they didn't know there was a serious problem until the city ordered them to leave.

''They allowed us to take clothes. No furniture or TVs,'' says long-time owner Graciella del Val.

The 527-unit Castle Beach Club, at 5445 Collins Ave., was built in the 1960s as a Playboy Hotel with mostly standard-size hotel rooms but some bigger suites. In the 1980s, the hotel was converted to condos, with some of the smaller rooms designated as condo-hotel units since they were too tiny to be classified as apartments.

More than 400 of the units are one room, ranging from 260 to just over 500 square feet. Fewer than 100 of the units have a separate bedroom. The year before the building was closed, most units sold for $125,000 to $225,000, a bargain for oceanfront condos in Miami Beach.


Unit owners say they didn't know that for years the city of Miami Beach had been citing the building for violations, from rusty stairwells to an overloaded electrical system, says new board president Juan Carlos Gonzalez.

If people complained about problems in the building the old board would assure them repairs would be made, he says.

Few owners attended board meetings, Gonzalez adds, until it was too late. Contributing to the problem, he adds, is that many Castle Beach owners are absent most of the year.

''The lesson learned,'' Gonzalez says, "is that condo owners need to question, not ignore matters. They need to make sure their board is doing everything right.''

Adding to the problem, says Miami Beach senior building inspector Andres ''Andy'' Villarreal, is that many unit owners illegally renovated their units without permits, including adding kitchens that further overloaded the aging electrical system. Some converted a bathroom sink into a stove top, hauled up full-sized refrigerators and punched holes in fire walls, designed to keep a fire in one apartment from spreading to another.

By April 2005, when the residents were ordered out, ''the electrical system was in such poor condition,'' says Tom Ratner, a Miami Beach senior electrical inspector. "And it was never maintained by the board. They were repeatedly asked to get it under control and they did not do so.''

''The building is in imminent danger of an electrical fire,'' Miami Beach spokeswoman Nanette Rodriguez said at the time.

Gonzalez and other new board members, elected last November, recently passed a $25 million special assessment to get the building up to code and cover Wilma's damage, including a $1.2 million insurance deductible.

That adds up to about $400 extra a month for an owner of the smallest unit for the next 7 ½ years, he estimates. (Those who have bigger units, such as Martialay, pay more.)

Still, he can't tell weary residents when they'll be able to move in.

It all depends how quickly the insurance claim for Wilma is settled and how fast the general contractor works, he says.

Building inspector Villarreal says the renovations may take a year, especially if the board decides to remove the building's drywall because of mold.

Still unresolved is how much illegal renovation in individual units the city will allow, he adds. Miami Beach's zoning laws, for example, allow kitchens only in units that have at least 400 square feet.


Faswag, a company that leased the building's theater, blames the maintenance problems on three of the former board members -- Leopoldo Gonzales, Emilio Berkowitz and Horacio Mecozzia -- who owned about 120 units in Castle Beach and rented them out as hotel rooms.

In a lawsuit filed in 2003, Faswag claimed that it was impossible to put on shows because of a badly leaking roof that the board wouldn't fix.

''The pool collapsed into the lower garage and people weren't doing anything,'' adds Faswag's attorney, Richard J. Burton. Plus, the building was operating without heating, he says.

Burton says he believes many residents looked the other way because they didn't want to pay for repairs.

The three former board members could not be reached for comment. A telephone number for their hotel operation has been disconnected.

Michael Gongora, an attorney for the three, said there wasn't money to make repairs because the board ''didn't want to raise the maintenance fees,'' Gongora says. "And members of the association had voted against keeping reserves. The building had no reserves.''

In 2004, Miami-Dade Circuit Judge Marc Schumacher found ''financial mismanagement'' and appointed a receiver, Robert Stone, a certified public accountant, to oversee the association's money.

Stone found irregularities in the finances in addition to determining that the board had ignored Castle Beach's extensive maintenance problems.

''The plumbing was in very bad condition and needed to be replaced immediately,'' according to a 27-page report Stone wrote for the court. Yet only ''patchwork'' repairs were done, he reported.

Castle Beach also had problems with its cooling tower, roof, electrical system and elevators.

Sea water and air had intruded into the building's concrete, rusting the reinforcing steel. ''The spalling concrete was open and obvious and fell often,'' Stone wrote. "In one particular incident, the concrete fell onto a vehicle, causing damage.''

However, Stone wrote, the former board members used the ''association's assets, employees and funds'' to renovate their own units rather than maintain the building.

They told Stone they reimbursed the association for the work, but Stone challenged some of the receipts they gave him as evidence.

Stone also said the three were late with their maintenance fees but did not pay the required late fees and interest. Also, he said they gave ''credits'' to themselves and other owners for thousands of dollars in maintenance fees and special assessments that were never paid.

Gongora, the former board members' attorney, says they had gotten behind in payments because of slow business after the Sept. 11, 2001, terrorist attacks.

''They had lost their source of income,'' he says. He said they had caught up by the time Stone took over although they still owed late fees.

He adds that the association's cash problems went far beyond his clients' being late with maintenance payments.

The old board did pass a $2 million special assessment in 2004 for air conditioning repairs that owners paid off this August.

Last year, when Judge Schumacher found the city had ordered the residents out, he called an emergency hearing. He excoriated the three board members for ''inexcusable neglect'' and "dereliction of their duties.''

In a two-page order, the judge then turned over the condo management to Stone.

Many unit owners were furious. They felt that Stone was costing too much (about $50,000 a month, including his legal staff). They accused Stone of wanting to spend too much for repairs. They also blamed him for the building's closing, arguing he could have ordered the electrical repairs.

Finally, they didn't like that owners had ''no voice,'' says unit owner Martha Gonzalez, who was one of dozens of unit owners who picketed their closed condo complex with homemade signs.


In November, the owners were able to hold an election and elect a new board. Stone is still acting as receiver, monitoring the building's finances.

By early this fall, some owners, including Dennis Morsani, were ready to sell. He says he had bought his unit for ''fun'' -- which, he laments, it wasn't anymore.

Stone says developers have been interested in the property since it is perched on a four-acre lot on the ocean.

But, he says, owners are divided: Half want to sell, half don't, according to those who responded to a survey.

''So we are going ahead and fixing the building,'' Stone says.

That pleases Martialay. She misses her apartment's panorama of the Atlantic.

''I bought to be on the ocean,'' she says.

Michael and Nieves Kobiakov also yearn for their piece of surf and sand in back of their 1,600-square-foot unit, for which they paid $145,000 a decade ago.

With new condos costing $700 to $1,000 per square foot, they can't afford a new home on the water.

''Our backyard is a beach,'' adds Michael. "It is awesome. I want it fixed.''

Castle Beach Club (Miami): Owners regain control of condo

Article Courtesy of the Miami Herald

Published November 18, 2005

For the first time in seven months, condominium owners in the troubled Castle Beach Club have regained political control over their dilapidated building.

Court-ordered condominium elections on Sunday produced a new board -- one promptly ratified by the same Miami-Dade judge who suspended the previous board when the city ordered the residents to evacuate the 527-unit building.

The city cited multiple life-safety code violations that went unrepaired as bitter disputes between the condo board and other residents flared.

A court-appointed receiver who had control over the building still manages its finances, but now the five newly elected condo representatives have regained an important voice in its future.

''This means a return to democracy in the building, because for the first time in seven months we finally have a voice in matters concerning our building,'' said attorney Angel Leal, one of the new board members. ``It's important because this means for the first time there is some light at the end of the tunnel.''

The other new members of the board are: Elizabeth Izquierdo, Sergio Purrinos, Juan Gonzalez and Margarita Suarez-Rivas.

Since the evacuation at 5445 Collins Ave., hundreds of residents have suffered under the financial burden of maintenance fees, mortgage payments and special building assessments for apartments in which they can't live. Many risk losing their units to foreclosure.

The new board, which must answer to court receiver Robert Stone on financial matters for an unspecified transition period, faces daunting challenges.

One of the two engineers hired by the receiver, John Pistorino, has estimated that it would take $25 million to bring the building up to code. The second engineer hired by Stone, Reymundo Miranda, has developed a $4 million plan that he says could cover the minimum repairs while still allowing residents to return to their apartments.

The other repairs would be dealt with later under Miranda's plan.

''We expect the new board will meet with engineers next week and establish the initial funding requirement for first phase of the rehab plan,'' said Joseph Ganguzza, an attorney who represents the five new board members and many of the owners who supported them. ``With that phase, we hope to get the building open, hopefully in a time frame of six weeks.''

The funding for that initial phase will likely come from a special assessment because of the difficulty in obtaining financing, Ganguzza said.

Because the building has been declared unsafe by the city and the fact that some unit owners have begun to default on their maintenance fees, few lenders are willing to consider financing the multimillion-dollar repairs.

Castle Beach Club (Miami): New hope for evacuated condo owners

Article Courtesy of The Miami Herald

By Casey Woods

Posted October 16, 2005

Unit owners in the troubled Castle Beach condominium, which was evacuated months ago because of code violations, could regain control of their building after a judge ordered accelerated elections.

A judge's ruling has paved the way for accelerated condominium board elections at the troubled Castle Beach condominium, which was evacuated in April for life-safety code violations.

A court-appointed receiver has controlled the building, located at 5445 Collins Ave., since it was shut down. Many unit owners are unhappy with the receiver's management and asked Miami-Dade County Circuit court Judge Marc Schumacher to remove him immediately and replace him with a five-member board chosen by the disaffected owners.

Instead, on Oct. 6, Schumacher opted to schedule elections within 30 days to elect a new board.

''I'm pleased the judge is finally listening to unit owners, though I'm disappointed in the delay of 30 days for elections,'' said attorney Joseph Ganguzza, who said he is representing more than 200 of the unit owners. "We have individuals who are interested, committed and qualified to serve on the board of directors who have a greater stake in turning this around than the receiver does.''

The problems at the 573-unit condominium building, located at 5445 Collins Ave., began in 2003, when one of the owners of the ground-floor theater sued the condominium board, accusing the members of not properly maintaining the theater's roof. A judge in the case appointed the receiver, Robert Stone, initially giving him power only over the building's finances.

When the building was evacuated after the city gave repeated notice of code violations that were not fixed, the judge took power away from the board and gave complete control of the building to Stone, an accountant.

Three of the five members of the board of directors collectively own 125 of the units.

One of the two engineers hired by Stone, John Pistorino, estimated that it would take $25 million to bring the building up to code because of the long list of violations, both life-safety and otherwise. In discussions with the city, a second engineer working for Stone, Reymundo Miranda, has worked out a plan to do the minimum amount of repairs necessary to get residents back into the building. His estimate for that first repair phase: four weeks and $4 million.

But because of the building's financial straits and the fact that it has been declared unsafe by the city, it has been impossible to get loans to finance the repairs.

Stone did not return calls seeking comment.

Since the evacuation, hundreds of unit owners at the building have struggled to keep up with maintenance fees, mortgage payments, and special building assessments in addition to rent payments on an alternate place to live. Many are at risk of losing their homes to foreclosure.

''I've worked all my life to have an apartment on the beach, and now I face losing it,'' said Frank Loureda, a unit owner. "It's not believable that this would happen, not in the United States.''

Ganguzza said his clients were pursuing different avenues to regain control of the building. ''We are proceeding on a couple of different fronts to make sure, that one way or the other we have unit owners running the show at Castle Beach Club,'' he said.

Ganguzza's clients are also working on a recall election that would remove the old board and replace them with the five candidates they presented to Schumacher. So far, they have 359 recall votes, including the 125 from the suspended board members.

''If we get a good board through the election, we will withdraw the recall,'' Ganguzza said.

Not all of the unit owners believe a new board, either through recall or election, will help the building's problems.

''We don't think that having a new board will change circumstances to open the building any quicker,'' said Elizabeth Martialay, a unit owner and lawyer at a law firm that represents several unit owners. "Nobody has answered how it's going to help.''

Castle Beach Club (Miami): Owners still can't return to uninhabitable condos

Article Courtesy of Local
Posted October 6, 2005

Tempers flared Wednesday morning when a group of angry condo residents showed up at a courthouse wanting to make their case.

Residents of the Castle Beach Condominium on Miami Beach want the court-appointed receiver removed. A receiver is a person appointed to take charge of assets, usually the subject of a legal dispute. They were told Wednesday that the case is postponed until Thursday.

The residents were forced to evacuate April 14 after building officials declared it structurally unsafe. They have filed a class action lawsuit against three members of the condo board.

The suit 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.''

The suit also says that the condominium 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.

In April, residents said they were told by building inspectors said it could take 7 to 10 days to get temporary fixes in place that would allow them to move back in.

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."

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