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Judge: James Zenney Jr.’s company has so much control over common areas that residents are reduced to ‘hotel guests’
Z Capital Group is poised to lose significant power at Carillon Miami Wellness Resort.
Miami-Dade Circuit Judge Michael Hanzman ruled Monday that the portion of Carillon’s master statement giving Z Capital authority over common areas is void and illegal.
Waterfront Carillon, at 6801 Collins Avenue in Miami Beach, consists of the North, Central and South towers, each with its own condominium complex. Together the complex has 580 units. James Zenney Jr.’s Z Capital, based in New York, owns, maintains, enforces assessments and otherwise controls the rest of the development, including the spa, pools, restaurant and about 70 hotel units in Central Tower.
The latest ruling surrounds Z Capital’s ownership and control of those spaces, including hallways, elevators, heating, ventilation and air conditioning, roofs and all other common areas — essentially everything except the apartment units .
That level of control of the common areas is an “overreach” that allows Z Capital to have power over parts of the property that under Florida condominium law should be collectively controlled by the apartment owners, Hanzman wrote in his order .
“Unit owners … have no say in how the condominium they live in will operate. They cannot vote to replace or renovate the exteriors of their buildings, their building lobbies, the fixtures that provide utility services to their buildings, or any other facilities outside the four corners of their units,” Hanzman wrote . “Condominium owners are nothing more than long-term hotel guests.”
Unit owners don’t even have a say in the amount of budget reserves for common areas, which the 2021 collapse of Champlain Towers South in Surfside showed is imperative to running an apartment, the judge added in his order.
The associations first sued Z Capital affiliates in 2016 over various issues. In court filings against Z Capital’s control of the common areas, the associations argued that the master declaration violates Florida’s condominium law. Carillon’s governance structure, by contrast, “distorts condominium democracy into a dictatorship of unfettered control by” a private commercial entity, according to the associations’ court filings.
Lawyers for the associations hailed the latest outcome as opening the door for other condominiums to fight unfair control by private entities.
“The order is obviously the right thing to do and it addresses issues that I think affect many associations in the state of Florida,” said Eugene Stearns, who represented the North Tower.
“With Judge Hanzman’s decision today, we can finally begin the process of repairing the broken, illegal structure and ensuring it is fully compliant with Florida condominium law,” added Stevan Pardo, Central Tower’s attorney.
Brian Dervishi, a lawyer for Z Capital affiliate, warned that this was not a complete victory for the unions as they sought to invalidate the entire master statement.
“The judge’s decision is very careful and limited,” he said. “We’re still looking at it and determining our options.”
Carillon’s governing structure is actually common throughout Florida and nationally, and Florida’s condominium law doesn’t even apply to these types of apartment structures, Dervishi said.
Z Capital did not devise the governance structure in the master filing, but inherited it when the firm bought Carillon out of bankruptcy in 2015. The property at the time was called Canyon Ranch Miami Beach. The original developer recharacterized the “common elements” as “shared facilities” and completed the master statement in a way that gave the private entity that owns a portion of the development, rather than the unit owners, “perpetual control over the entire shared campus.” Hanzman wrote.
Z Capital argued that the associations are precluded from claiming that the master declaration is illegal because they did not make such a claim when the property was purchased in bankruptcy.
But Hanzman shot that idea down. The associations were not required to warn Z Capital that the master statement might not be legal. In fact, Z Capital’s affiliates “walked into this ‘wasp’s nest’ with eyes wide open, especially considering it had sophisticated lawyers for the purchase,” the judge wrote.
“If it turns out that Florida law did not allow them to legally own some of the rights they claimed to have purchased, then so be it,” Hanzman said in his order.
The decision, while a landmark in the case, is hardly the first or the last in the Carillon trial now in its seventh year.
In the coming weeks, Hanzman is expected to rule on two more claims from the union. It’s about whether associations, with a vote of 75 percent of unit owners, can waive spa fees. and whether associations can buy pools in the North Tower for market value, according to Stearns.
Z Capital also won parts of the difference. In November, Hanzman sided with Z Capital and shot down the unions’ push for $450 million in damages due to alleged “diminished value” of the property, according to filings. The associations had alleged that Z Capital breached previous agreements under which it would manage the property as a premier resort, achieving a Forbes 5-star or AAA 5-diamond rating, an iconic hotel brand and a level of service equivalent to that of Acqualina. Resort & Residences in Sunny Isles Beach and other luxury condos in South Florida.
In December, a jury slapped Z Capital with a $16.3 million verdict for overcharging estimates, including inflated spa, hotel and electric fees.
Earlier last year, Z Capital lost its push to impose a $7.7 million assessment on unit owners to reimburse it for its costs in the case. Z Capital is appealing the order.
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