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Colony ownership showdown heads to court

STEVE REID
Editor & Publisher
sreid@lbknews.com

Conflict can often be resolved with money. Sometimes it can be resolved in the courts. In the case of the Colony Beach & Tennis Resort on Longboat Key it always seems to take a healthy dose of both to reach any conclusion.

This is true as Unicorp owner Chuck Whittall is heading to a Jan. 10 hearing wherein he hopes to terminate once and for all the Association of Unit Owners and compel the sale of the remaining units so he can proceed with the construction of a St. Regis Hotel and Condominiums.

 

The complaint

The case will be heard in Sarasota Circuit Court and Unicorp is seeking what is referred to as “equitable relief” from the Court.

The complaint centers on the argument that the Colony – a once world-famous vacation and tennis resort – has been vacant, closed and deteriorating since Sept. 23, 2010.

The Colony units were owned and subject to the Declaration of the condominium that was adopted in November 1973. The Declaration specified the ownership rights of the common areas and individual unit owners as well as stipulating that it takes 80 percent of the owners to voluntarily terminate the Condominium Association. Therein lies the rub.

 

The issue…

The original Colony Condominium was composed of 237 residential units, seven non-residential accessory units, as well as common elements. Additionally, the Colony historically contained recreational facilities on three of the 18 acres of property that made up the resort and these facilities included a swimming pool, 12 tennis courts, and other buildings.

Right now, Whittall and Unicorp own 11 percent of the 237 units. Unicorp also owns outright the three acres and recreational facilities.

Whittall has entered into development agreement with the Association as well as the owners of about 60 percent of the units for redevelopment of the Colony into a 166-room St. Regis Hotel and 74 condominiums.

However, the problem for Whittall is Unicorp, the Association and joining owners have not been able to either terminate the condominium through a vote nor has Whittall been able to buy out Andy Adams, who owns more than 30 percent of the remaining units. In short, Whittall cannot meet the procedure laid out in the condominium documents to terminate and he has reportedly offered Adams more than $22 million for the outstanding units, but Adams reportedly wants about $30 million. Hence, the court action,

In court and through the court filings, Unicorp is arguing that all of the owners have suffered through costly litigation, none of which has advanced a productive outcome for either the owners or the Association.

The court filings speak of the deterioration of the Colony that culminated in its demolition last fall. Whittall’s case states the following:

• The Colony was shuttered in September 2010 and has never reopened

• Electric and water service are unavailable

• The Partnership is in bankruptcy and has been administratively dissolved

• The Association, whose bankruptcy case has been closed, agrees that The Colony is not salvageable and should be terminated

• All of the buildings were either condemned and/or demolished and cannot be rebuilt or repaired

Next, Whittall’s case to the court claims that the failure to terminate the Condominium Association is exposing the parties to continuing financial loss and liability. To remedy this, Whittall has submitted a termination plan based on Florida law that allows for Equitable Relief under Sec. 718.118 of Florida Statutes. This statute provides that if a property cannot be repaired or reconstructed within a reasonable period of time, any unit owner may petition the Court for relief, “which may include a termination of the Condominium and a partition.”

The complaint goes on to talk of the impossibility of renovating the units that were demolished last fall and makes the case that the very agreement between the managing partnership and the Unit Owners is defunct and cannot be restored.

The final argument says the condo/hotel “can never be restored to its intended use as contemplated by the Declaration.”

Then, it adds that there is no adequate remedy under the law and thus the court is required to order termination of the Condominium Association.

Unicorp requests that the Court appoint a Termination Trustee and implement a termination plan and that the court and trustee approve the distribution of the values of the property and ownership interests and that essentially the percentage of ownership be monetized and consolidation achieved.

 

Why the effort?

In essence, if Whittall can argue successfully that termination of the Condominium Association can only the achieved in court due to an impasse and further, that it is necessary because of continued liability and losses to the owners, the act would lead to Ownership Consolidation. Ownership Consolidation is the final action necessary for Whittall and Unicorp to move forward with its development plans for the St. Regis that were approved in March 2018 by the Town of Longboat Key.

The Town made a condition of approval that no building permit can be issued until complete ownership of the 18-acre property is demonstrated.

 

Opposing argument

Unsurprisingly, there is an opposing argument.

Andy Adams argues in a response and Motion To Dismiss that Unicorp is seeking relief in a manner that is improper and unrecognized as a matter of law. The Adam’s attorneys asked that Unicorp’s case be dismissed because the termination plan is not a legal remedy.

Adams argues that Unicorp admits it cannot reach the 80 percent owner vote threshold to legally terminate the condominium association. Adams contends that Unicorp is improperly attempting to ask the courts to terminate the condominium Association using solely a vote by the Condominium Association.

The Motion to Dismiss says that Florida Law requires clearly that unit owner approval be achieved before a condominium can be terminated.

“There is simply no statutory mechanism by which the plaintiff (Unicorp) can avoid the Unit Owner approval requirements via Association approval,” said Adams’ attorneys in his motion to dismiss.

Adams’ motion says that if Unit Owner approval cannot be achieved, a unit owner can still seek an equitable termination of the condominium and a partition. This is where Adams is arguing that the proper mechanism  under Florida Law is not a termination plan authorized by the Association, but a Partition Action is what should occur.

 

So what does all this mean?

In short, there appears to be three paths that could lead to ownership consolidation. The first is what Whittall hopes to accomplish in asking a Judge to terminate the Condominium Association and provide “Equitable Relief” and approve a termination plan that would distribute the property and approve the value of each owner’s interest.

The second method is hinted at by Adams in his Motion to Dismiss. That Motion to Dismiss says that when no agreement to terminate can be reached, and the other conditions have been met, the court can order a partition action. Adams argues that Unicorp and the vote of the Association cannot represent all of the owners when such an action is pursued. If the Judge agrees with this argument in January, then it would not side with Unicorp.

If a Partition Action must occur, then Whittall will likely move forward with buying the 60 percent of the units that he currently has under contract. In that case it would then remove all of the other parties except Unicorp and Adams and his interests. Whittall has a performance clause in the contract and he simply has to pay the amount that he would have ideally paid after pre-sales of the condominiums had occurred. In this scenario, he would have to spend an estimated $27 million to close on the units.

The other method, and obviously the fastest path, is if Adams and Whittall in the midst of these final court battles, reach an agreement to buy out the other’s interest.

Meanwhile, Unicorp will grade and seed grass on the now vacant site and seek approval from the town to build a sales office on the site. The town has a rule that says a sales office is only allowed after a building permit has been issued. Whittall is attempting to modify that rule to allow pre-sales to occur while the final ownership consolidation continues. Town Staff has recommended approval of allowing the sales office and told Longboat Key News that there is no liability to the town or residents and that moving the project forward may serve the public interest.

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