Posted on Sun, Nov. 18, 2007
New condo conversions bring broken promises
BY DONNA GEHRKE-WHITE
Their first home should be their joy. But Michelle Fernandez and her fiancé, Efrain Uribe, are bitterly regretting buying a place from a developer converting a high-rise apartment complex into condos in North Miami Beach. Now, they say, they're stuck with shaking elevators, exposed pipes, badly stained hallway carpets, a flooded laundry room and even mold in the couple's air conditioning closet. ''Nothing is what they promised,'' Fernandez says. Yet, she and her fiancé may be among the more fortunate among the thousands who bought apartments converted into condos in South Florida in the last five years: An executive at the development company says at least some of the work will be done.
Others who have bought condo conversions have discovered they're on their own to fix code violations, an aging infrastructure and faulty equipment. In some cases, that means the new condo associations are levying thousands of dollars in special assessments for repairs. ''The actual nightmare starts after they move in. Six months to a year later, they discover they got sold a lemon,'' says Jan Bergemann, founder of Cyber Citizens for Justice, a grass-roots consumer group that has fielded dozens of complaints about condo conversions. Most are from first-time home buyers ''who don't even have money to talk to an attorney,'' he adds.
More than 43,000 apartment units have been converted to condominiums and sold in Miami-Dade and Broward since 2004. Because most of the buildings were older, the units were less expensive than ones in new buildings, attracting lower-income and first-time buyers.
The condition of the buildings varied widely, as do the required repairs. And different cities have different laws on what repairs are required before apartments can be converted to condos and sold.
The state law on condo conversions is ''very vague,'' says Dale Lee, building official for North Miami Beach. ''Some municipalities feel no requirement'' is mandated when rental apartments become condos, he says. But North Miami Beach interprets the state law as requiring that life-safety equipment be up to code at the time the units are sold. That includes balcony railings, smoke detectors and fire alarms.
''I'm looking out for the consumer,'' Lee says. ``We feel it is a change of use.''
Some new owners complain cities don't find code violations in converted buildings until after the developers have sold all the units, says state assistant condo ombudsman Bill Raphan.
In fact, some developers did little more than cosmetic work while converting aging apartment buildings, he says.
''The developer painted the walls and called them condos,'' Raphan says.
One woman told Bergemann, the condo activist, that she had to take out a $15,000 line of credit to pay a special assessment for repairs after she moved into her converted unit -- only to discover that her new condo association was planning another assessment to cover more work.
She and several others declined to talk to The Miami Herald because they feared property values would plummet if people knew of their buildings' problems.
Nikki Poulos, who bought two units in 2005 in a small converted apartment complex just off Biscayne Boulevard in Miami, says people should know that problems can arise months after signing on the dotted line.
''I was happy to buy -- the model apartment looked nice,'' she says.
Then months later she says the carpeting disintegrated and had to be replaced.
She also discovered after closing that an electrical plug didn't work -- it hadn't been connected to electrical wires. A door rotted and there was mold on baseboards. ''In one bathroom the tile was so poor that water leaked down the well and into the kitchen,'' she says.
Developer David Meunier also didn't keep his promises, such as providing pool furniture, she says.
Meunier says the units were all in good shape at the time of turnover. He says the chaise lounges he had bought for the pool deck were stolen. He blames any problems on renters. ''Out of 15 condominiums, only one has been used by a homeowner,'' says Meunier.
He himself kept two of the units as investments. ''This is an up-and-coming neighborhood,'' he said.
STRUGGLING TO PAY
He notes that some of the building's cash-strapped investor-owners are struggling to pay their monthly maintenance fees of about $125 to keep the complex in good shape. ''Some are behind $1,400,'' he says.
During the real estate frenzy, when entire buildings sold out in a day, many buyers snapped up units without reading the fine print, analysts say.
''When you are buying a condo conversion you aren't buying new,'' reminds Gary Saul, an attorney who represents developers.
The state requires developers to give buyers copies of an engineer's report outlining the condition of the building, he says. But Saul believes few buyers actually read it.
Developers also are required either to set aside reserves or buy warranties, usually for a few years, on major items such as roofs, he says. Again, he believes few of the buyers learned what developers were leaving behind.
''In some cases the developers were supposed to place monies in reserves to cover systems that would become obsolete such as roofs, the electrical wiring. In many cases they did not place sufficient amount of money,'' says real estate analyst Jack McCabe, president of McCabe Research & Consulting in Deerfield Beach.
But during the boom few objected because property values were going up ''double digits every year,'' he says.
Buyers thought they would sell quickly so it wouldn't matter if the developer hadn't put up the required reserves, he said.
Then the market tanked and suddenly many discovered they couldn't sell -- and their aging building needed work that they would have to pay for, he says.
Reputable developers will make repairs, Saul says, because they want to stay in business.
At Inland Towers in North Miami Beach, an executive with the developer, Mederos & Associates, told The Miami Herald his company would make the promised repairs.
''Do you think I want bad conditions? We are trying,'' says operations manager Gene Lopez.
CASH FLOW WOES
But the company had a cash flow problem earlier this year after buyers became scarce and it was hard to get loans. Now that a bank has committed to loans for improvements such as hall carpeting, ''we expect to get things done,'' Lopez says.
The company is also renting units to get cash, he adds, while continuing to try to sell apartments, with prices starting at $159,900. He recently met with a Herald reporter to show how Mederos & Associates had painted the tower, refurbished the lobby and installed new mailboxes.
He adds that his company is now finishing work on new balcony railings required by the city.
North Miami Beach building official Lee says none of the apartments should have been sold until the developer installed the new railings, and he refused to give certificates of occupancy to the new units until the work was done.
That's why buyers earlier this year, such as Fernandez and Uribe, weren't listed as actual owners and couldn't get the $25,000 homestead exemption for the condos.
''Our taxes are due and we will have to pay the entire amount,'' Fernandez says.
Last year, the couple oohed and ahhed over the model apartment's granite countertops, maple cabinets and crown molding.
They closed last March after they say they received promises that the building would be renovated just as tastefully.
They thought the covered walls on the 10th floor of the model unit were a rendition of how their own floor would look once the overhead pipes were hidden.
But Lopez now says developers never promised the upgrade. Previous investors had covered the pipes on the 10th floor, he explains.
But what alarms the couple most is that a firefighter during a recent inspection spotted mold in their air conditioning closet. ''He said we shouldn't be in the unit,'' Fernandez says.
Lopez blamed any mold on the couple not properly maintaining the air conditioning.
''But how could the mold develop so fast?'' Fernandez counters.
She worries about its health effects -- and is demanding that the developer fix it to their satisfaction, which she says hasn't been done yet.
''It's making the place unbearable to live in,'' says their attorney, Joseph H. Fernandez.
© 2007 Miami Herald Media Company. All Rights Reserved.http://www.miamiherald.com
