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.

OWNERS IN DARK

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.

BOARD BLAMED

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.

NEW BOARD

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.''