2002-24767 Reso
RESOLUTION NO. 2002..,24767
A RESOLUTION OF THE MAYOR AND THE CITY COMMISSION
OF THE CITY OF MIAMI BEACH, FLORIDA MITIGATING FINES
FOR SEACOAST 5151 CONDOMINIUM ASSOCIATION, INC. IN
THE AMOUNT OF $624,361.39 WITH THE RESULTING FINE TO
SETTLE THE MATTER IN THE AMOUNT OF $0.00
WHEREAS, the Seacoast 5151 Condominium Association, Inc. has accrued
significant building violations fines dating from 1998 to 2001; and
WHEREAS, certain extenuating circumstances exist relative to the financial and
ownership patterns associated with the Seacoast 5151 Condominium Association, Inc.;
and
WHEREAS, the extenuating circumstances associated with the Seacoast 5151
Condominium Association, Inc. are such that imposition of a significant fine may
inappropriately and unfairly burden current condominium owners; and
WHEREAS, building violations at the Seacoast 5151 Condominium Association,
Inc. have been diligently corrected upon notice of the current Board of Directors.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that building violation
fines associated with the Seacoast 5151 Condominium Association, Inc. be hereby
mitigated and reduced in the amount of $624,361.39 with the resulting fine to settle this
matter in the amount of $0.00.
PASSED and ADOPTED this 20th day of February
,2002.
~p~
CITY CLERK
ATTEST:
APPROVED AS TO
. FORM & LANGUAGE
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BILZIN SUMBERG DUNN BAENA PRICE & AXELROD LLP
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
21500 FIRST UNION FINANCIAL CENTER
200 SOUTH BISCAYNE BOULEVARD. MIAMI, FLORIDA 33131-2338
TELEPHONE: (305) 374-7580 . FAX: (305) 374-7593
E-MAIL: INF'O..ILZIN.COM . WWW.BILZIN.COM
BROWARD: (954) 358-0030
January 30, 2002
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Mr. Robert C. Middaugh
Assistant City Manager
City of Miami Beach
1700 Convention Center Drive
Miami Beach, Florida 33139
Re: Fine Mitigation for Seacoast 5151 Condominium Association, Inc.
Dear Bob:
Thank you for your continuing assistance in resolving the fines levied against Seacoast 5151
Condominium Association, Inc. ("Seacoast"). We have prepared this letter and a timeline of events
in order to assist your office in evaluating the appropriate fine, if any, the condominium owners of
Seacoast should pay given the unusual circumstances surrounding the control of the condominium
association since its formation in 1998.
At the present time, Seacoast is a financially stable condominium association. The current
Board of Directors is comprised of condominium unit owners and is the third board in the
condominium's history. The current board was elected in February 2001, and has undertaken a
number of significant projects since it took office. These projects include the modernization of the
elevators, replacement of the roof and replacement of the original cooling towers. The total cost of
these improvements is approximately $1.7 million. In order to appreciate the hard work and progress
of Seacoast's current Board of Directors and to understand why the current amount of fines relating
to the 1998 elevator violations is over a half million dollars, it is important to briefly outline the
history of Seacoast's transition from rental apartment to condominium association.
In 1995, Mr. Riva, sought to convert an existing rental apartment community into a
condominium. From its onset, the project met with many obstacles which ultimately led to the
foreclosure of the property by the developer's bank. Riva's development group filed for Chapter 11
bankruptcy protection shortly thereafter. The foreclosure and bankruptcy filings led to the
appointment of a Receiver, who in turn selected Seacoast's first Board of Directors (the "Board").
The Receiver and/or the first Board were responsible for overseeing the management and operation
of the condominium from December 1998 until the selection of the first unit-owner elected board
in February 2000. The Receiver appointed Board (the "Receiver Board") was in power at every
critical juncture in the condominium's briefhistory. For example, this Receiver Board was in power
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BILZiN SUMBERG DUNN BAENA PRICE & AXELROD LLP
Middaugh, Robert
January 22,2002
Page 2
when the court auctioned off the condominium units which had not been sold by the original
developer. The Receiver Board was also in power when the first elevator code violations were
issued on March 24, 1999. This is important because the Receiver Board was the only party to
receive and have actual knowledge of the 1998 elevator violations. No apparent attempt was made
by the City to notice individual unit owners of the violations. As a result, from March 1999 to early
2001, the condominium resident-owners had no idea that elevator violations had been issued and that
fines stemming from these violations were accruing against the condominium association.
In December, 1999, almost nine months after the initial elevator violations were cited, the
first Special Master hearing was held by the City. No one representing Seacoast appeared at the
hearing and it was rescheduled for January 2000. At the next month's Special Master hearing, the
Receiver Board requested a deferral, which was granted by the Special Master. The following month
(February 2000), the Special Master heard the case and ordered Seacoast to fix the elevators by
March 3, or face a fine of$150/day. No unit-owners were aware of the problem or the hearings. No
action was taken by the Receiver Board to correct the violations and the fines began to run on March
3,2000, at $150/day.
Seacoast emerged from bankruptcy protection on February 23,2000. Seven days later, the
first unit-owner board was elected and control of the condominium was handed over to the residents
and owners for the first time. The next month, an Affidavit of Non-Compliance relating to the
elevator violations was issued by the City but there is no evidence that the Affidavit was served upon
the new Board. Sometime between May 2000 and late August, the First Owner Board became aware
of the elevator violations. A Board meeting was held September 12, 2000 to discuss the problem,
which resulted in a search for a contractor to modernize the elevators. On January 15,2001, an
elevator contractor was retained and work on the elevators commenced; however, the First Owner
Board was not aware that fines of $150/ day were accruing against the condominium association.
A month after the work commenced on the elevators, Seacoast held its second election to
select its second unit-owned board of directors, this is the current Board. The Board began to
immediately address problems with the condominium's physical plant, including hiring a second
elevator contractor to complete modernization of the elevators. The elevator modernization was
completed on September 24, 2001. Still, no condominium unit owners, including the current Board,
realized that fmes were accruing from the original elevator violations. The fact fines were levied
against the property and the extent of the fmes only came to the Board's attention when the valet
company operating Seacoast's parking sought a renewal of the valet license and was turned down
because Seacoast owed over half a million dollars in fines to the City. Seacoast immediately began
to contact the City to settle the fine issue. Several meetings were held with Mr. Robert Dixon and
other City staff members to work out a compromise with the City over the fme amount. Because of the length of time Seacoast has been in non-compliance with the Special Master order, the City
Manager is the only office which can mitigate the amount of fines for the elevator violations.
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BILZiN SUMElERG DUNN BAENA PRICE & AXELROD LLP
Middaugh, Robert
January 22,2002
Page 3
In sum, the unit owners of the condominium had no knowledge of the elevator violations for
almost a year from the notice of violation issued in March, 1999. If notice was served by the City
it was to either the Court appointed Receiver or the Receiver Board. Thus, Seacoast unit owners
were never represented at any of the three Special Master Hearings which led to the $150/day fme.
The parties with the most at sake, the unit owners, were not aware of the fines accruing against the
condominium association until the valet company attempted to renew the City issued valet license.
The current Board has been actively working with the City to modernize the elevators as well
as initiate improvement projects including re-roofing the condominium ahd replacement of the
original cooling tower. These improvements along with the modernization of the elevators cost $1.7
million. The current unit owners have already been penalized by the developer because the type of
renovations outlined above were required by law to be addressed by the developer when renovating
the apartment units prior to the sale. These major improvements should not have been required for
at least fifteen to thirty years or there should have been a developer funded reserve fund to cover
these expenses. In this case, neither the developer, the Bank nor the Receiver funded this reserve
account. The unit owners have also been done a disservice by the Receiver-appointed Board because
that Board's interest was in protecting the bank's investment. The first Board represented creditors,
not unit-owners. No one was looking out for the unit owners. Seacoast has been out of bankruptcy
for less then two years. Imposition of any significant fine may force Seacoast back into Bankruptcy
Court. Accordingly, we seek your help in resolving the elevator fines, so that Seacoast may move
forward with its much needed renovations and remain a financially solvent condominium
association.
Thank you again for all of your assistance in this matter. If you have any questions, please
do not hesitate to contact me at (305) 350-2384.
ENC.
cc: Donald Westbrook, General Manager, Seacoast
Martin Schwartz, Esquire
Ty Harris, Esquire
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CITY OF MiAMI BEACH
COMMISSION ITEM SUMMARY
m
Condensed Title:
A Resolution mitigating fines for Seacoast 5151 Condominium Association, Inc. in the amount of
$624,361.39.
Issue:
Shall fines in the amount of $634,361.39 be mitigated and reduced to $10,000 for the Seacoast 5151
Condominium Association.
Item Summary/Recommendation:
From 1998 to 2001, building violation fines associated with elevator violations accrued for the Seacoast
5151 Condominium Association (SCA). The SCA has had a difficult financial and ownership pattern that
has resulted in violation notices not being made known or available to unit owners who recently were able
to take control of SCA. Upon notice, violations were diligently corrected. Imposing a large fine would
burden current owners and possibly force SCA back into bankruptcy. Mitigation of fines to an amount of
$10,000 to cover administrative costs is recommended.
Advisory Board Recommendation:
I
Financial Information:
Amount to be expended:
D
Finance Dept.
Source of
Funds:
AGENDA ITEM
DATE
R7H
2..-20-o~
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
www.cLmiami-beach.f1.us
COMMISSION MEMORANDUM
To:
Mayor David Dermer and
Members of the City Commission
Date: February 20, 2002
From:
Jorge M. Gonzalez \ __~.
City Manager d I^'O-
A RESOLUTION OF THE MAYOR AND THE CITY COMMISION OF THE
CITY OF MIAMI BEACH, FLORIDA, MITIGATING FINES FOR SEACOAST
5151 CONDOMINIUM ASSOCIATION, INC. IN THE AMOUNT OF
$624,361.39 WITH THE RESULTING FINE TO SETTLE THE MA TIER IN
THE AMOUNT OF $10,000.00.
Subject:
ADMINIST A TION RECOMMENDATION
Adopt the Resolution.
ANALYSIS
The Seacoast 5151 Condominium Association has had a very troubled recent history as
it relates to its financing and ownership patterns and also as a result of those issues
various building violations have resulted in a very significant amount of fines that have
accrued against this property. At present, building violation fines have accrued in the
amount of $634,361.39.
The building violation fines associated with the Seacoast 5151 Condominium Association
are largely the result of elevator violations that have accrued with the passage of time at
the rate of $150.00 per day. All outstanding violations have been corrected as of this point
in time.
The condominium association accrued the rather extraordinary amount of fines as a result
of extenuating circumstances that are described in detail in the attached letter from the
attorney representing the condominium association.
In brief, as a result of the different owners and receivers associated with the bankruptcy
proceedings, the actual condominium residents and now the current owners, never
received notification of the building violations such that the violations might be addressed.
By the time the unit owners took control of the condominium association and were made
aware of the fines, the fines had grown to such a large amount as to be beyond their ability
to address. The first notification that owners received was when their valet parking
operator attempted to recently renew his license. As outlined in the letter, the current
Board of Directors upon notification have diligently pursued and corrected all of the building
violations, as well as a variety of other necessary renovations on the property.
The condominium association has requested that the City consider a fine and lien
mitigation given the extraordinary and extenuating circumstances. The Administration
does not challenge the explanation of the circumstances as presented by the condominium
association's attorney, and is sympathetic to the facts and the plight of the condominium
association owners. While normally the City would pursue some percentage of the overall
fine or lien amount, in this particular instance the circumstances seem to warrant a different
treatment as an equitable resolution.
Were the City to assess any substantial fine or penalty as part of a mitigation process, this
amount would be directly born by the current unit owners who have been responsive to the
necessary corrections and responsible in dealing with the City towards that end. Through
no fault of their own, fines of a substantial nature have accrued on the property and to levy
a substantial penalty against the current unit owners would further penalize the property
owners beyond the difficulties they have experienced as a result of previous owners of the
condominium association.
In light of the extraordinary circumstances in this condominium association, it is suggested
that the Commission give virtually a complete lien mitigation and only recover a nominal
amount in order for the City to be made whole for its efforts associated with processing the
various violations over a period of time. To this end, it is recommended that the
Commissioners reduce all of the fines associated with the Seacoast 5151 Condominium
Association to a fine amount of $10,000.00.
In conclusion, the Administration recommends that the Mayor and City Commission adopt
this Resolution.
JMG/RCM/sam
Seacoastfinemitigamem.doc