Article
Courtesy of Jacksonville Times Union
By ALISON
TRINIDAD
Published
Sunday, July 16, 2006
After
spending months looking for a second home, Kathy Rogers and Pat Harris
left St. Petersburg and bought a $342,000 condo and boat slip on the
Ortega River in December 2004.
The home -- part of a 37-year-old apartment complex
that was converted and sold for luxury condominium living from 2003 to
2005 -- faces a lagoon that runs into the river, where sunsets color the
water shades of peach and coral.
At the time, their dream purchase seemed like a
bargain. It wasn't long before it became a nightmare.
Rogers and Harris live in one of the 137
units at The Venetian, just off Timuquana Road at 5375
Ortega Farms Blvd. For nearly six months, homeowners at the
multimillion-dollar conversion have come home to overflowing
tubs and toilets, leaking roofs and falling patios -- a $5
million problem, they contend, because of shoddy
construction work by Jacksonville-based Montecito Property
Co. |
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The
beautiful setting of The Venetian condominiums
and
marina on the Ortega River in Jacksonville
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Officials
from Montecito, last year's No. 2 condo converter in the U.S based on
acquisition volume, say they are not at fault for the problems. And,
legally, they argue that they have no obligation to repair them. Yet in a
lawsuit filed against the developer, roofers claim that the project's
managers rushed work through and did not heed their recommendations. And
area plumbers involved with the conversion, the first such project for
Montecito, say that they warned the developer that problems would arise at
the aging complex. They say the company just didn't listen.
By
law, anyone selling a house must disclose any known defects
of the house that are not easily seen by a prospective
buyer, said Missy Turra, a partner at Holland & Knight
who specializes in real estate law but is not involved in
Montecito litigation.
But because condo converters are not
required to inspect under the foundation of a piece of
property before selling, it is difficult to pinpoint who is
to blame.
All the same, several residents have
had to tear out their floors, mop up feces and been left
homeless. |
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The
problems lurking inside the conversion property, like crumbling
walls, rusted pipes and water bubbling from the sewer into the
bathtubs, according to homeowners, who say the problems are causing
big headaches -- and some have sued. |
After a series of complaints -- unanswered for so
long that individual homeowners have filed suit against Montecito -- the
developer, this month, made an undisclosed offer to the homeowners
association to settle the problem out of court.
Homeowners are hopeful that the settlement will keep
them from paying thousands of dollars for repairs. But even if the
settlement covers the cost to fix the condominium's problems, they say
there is no way to compensate for the months of stress, heartache and
inconvenience that they have endured.
"I paid what I consider top dollar based on the
market [in 2004]," Rogers said. "What I got was a rehab project
and both emotional and financial hardships."
Stench of
sewage
Upon
first glance, The Venetian looks like a resort community,
with palm trees and a glistening marina. Rainbows of potted
plants line some back porches while residents lounge near a
bright blue swimming pool. But on closer inspection, it is
evident that paint has chipped away from styrofoam wall
decorations, sliding screen doors are off track and the
irrigation system is malfunctioning. In some units,
clogged-up sinks have fallen from counters and mold has
multiplied on walls. Portions of the roof have fallen to the
ground, a pergola above the clubhouse collapsed Memorial Day
weekend and |
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Several
residents of The Venetian walked around the property on June 7
pointing out problems. Here resident Pat Harris shows where caulking
material was used to secure a post that held up a pergola over the
clubhouse. The pergola collapsed Memorial Day weekend. |
there
is a 2-square-foot hole in the floor of the common laundry area covered by
a wooden plank.
The stench of sewage is distinct upon entering the
complex.
Sewage backups are common, evidenced by the line of
plumbers and drain cleaners who have been called to the condominium
complex before, during and after renovation.
Settlement
announced
Early last month, nine homeowners
showed the problems occurring in their homes and throughout
the complex to the Times-Union. Since then, two have
declined to be named because they say they fear retribution
or denial of repair by Montecito. The homeowners
association, which has dealt with the brunt of the problems
and the cost to fix them, had been negotiating with
Montecito to pay for the repairs for at least three months,
to no avail. Its members say they have put off taking the
case to court, worried that a lawsuit would further delay
repairs, preclude sales of units or stop mortgages from
being issued.
Montecito denies stalling the
agreement. Company president Campbell Fraser said Montecito
was waiting for the homeowners association to determine the
cost of repair, a figure that he said it received only two
weeks ago.
"We have done everything in our
power to move this forward," Fraser said. "It's
not that we were dragging our feet. We have got to reach an
overarching agreement. I hope you don't think that we've
been insensitive to what they've been going through." |
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Ruth
Budjak shows mold and water damage in her unit at The Venetian on
the Ortega River and some of the partial repairs made. |
Fraser,
Rogers and Cindi Boudreaux, the company's director of marketing, sat down
with the Times-Union on July 6 to discuss the issues at The Venetian. They
announced that morning, alongside the president and vice president of the
homeowners association, that the two parties had reached an agreement.
Homeowners
still have to vote on that settlement, so the three Montecito employees
declined to provide the date Montecito first received complaint.
Nevertheless, homeowners and contractors have filed at least seven
individual lawsuits concerning The Venetian against Montecito, and others
are pending. Montecito is hoping a settlement will resolve those
individual issues.
'Sold
us a bum rap'
Numerous homeowners say both Montecito
and the property's manager have handled the situation poorly
and accuse them of slow response times and lack of
communication. They say construction defects listed by some
homeowners on their final walk-throughs either were
unsatisfactorily repaired or have yet to be done. In another
lawsuit, investors say Montecito has failed to come through
on a promise to build additional boat slips at the complex.
And, less than a year after the homeowners association took
control of the property, the $127,500 reserved to repair
common area plumbing systems has nearly been depleted,
homeowners say. |
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When
the floor in Ruth Budjak's unit in The Venetian was opened for a
closer inspection of the pipes on Thursday, a newer PVC pipe was
found connected to old cast iron pipes. The Venetian's developer
Montecito and the homeowners association announced an agreement to
settle over numerous owner complaints. |
"What am I supposed to do?" said Tim
Steele, a homeowner at The Venetian whose toilets have dumped sewage into
the unit at least twice since Memorial Day weekend. "Montecito has
basically sold us a bum rap. Why would you buy a piece of property if you
can't use your toilet?"
A history of mishaps
Previously known as the Hidden Harbor Apartments,
The Venetian's buildings suffered from plumbing problems as far back as
2003, according to property reviews posted by former tenants on Web sites
that allow residents to rate and review their complexes. However, while
anyone selling a house must disclose, by law, any known hidden defects of
the house, sellers of commercial property do not. That means the
apartments' previous owners were not required to disclose plumbing
problems to Montecito even if they knew about them.
Neither Montecito's president, who was hired to
supervise the company's daily operations in January, not its legal counsel
or marketing director could personally verify the conditions of the
buildings when they were purchased or during their renovation. All started
working for the company after construction of The Venetian had begun. Chip
Conk, founder and CEO of Montecito, did not return a call to his office or
cell phone seeking comment.
According to city files, however, The Venetian has
had a history of mishaps, beginning with unpermitted construction. In June
2004, city inspectors found that the private-party inspector hired to
conduct the building inspections on the project was rubber-stamping work
that did not meet building code. Montecito officials who met with the
Times-Union said they were not aware that happened. City building
inspection records show that the city stopped work on the project until
the appropriate permits were issued. That month, general contractors on
the project changed hands, bumping up the estimated construction cost from
$892,500 to $2.46 million.
In the end, the work passed muster and city
inspectors signed off on the project.
Tenants and, later, homeowners filed a litany of
complaints with the city against the developer, from loud all-hour
construction work to the plumbing failures. In a few instances, the
developer was fined. And, in others, code violations were not found. Two
complaints also were filed against the condominium with the state
Department of Business and Professional Regulation, claiming that there
was a failure to disclose water and plumbing problems. Those complaints
did not fall under state jurisdiction and were diverted back to the city,
DBPR spokesman Thomas Butler said.
In March, Montecito filed a lawsuit against two
Texas roofers it said it hired to replace the roofs at The Venetian. In
its complaint, Montecito claims the roofs are defective and are suing to
have them fixed. In June, the roofers hit the developer with a
counter-suit, alleging that Montecito ignored their recommendations and
moved equipment (including air-conditioning units) after the roof was
installed -- alterations, they say, that caused the defects and voided any
warranties.
Jay Jason, an on-site sales agent at The Venetian in
2004, caught wind of new homeowners' complaints -- from toilet problems to
irrigation issues -- even before he left the project. Jason, who still
sells real estate in the area, said all but five of the units at the
condominium were sold before his contract with Montecito ended in 2005. He
said he was not asked to renew that contract.
"I haven't a good thing to say about
Montecito," Jason said. "Nobody made it through that whole site.
They fired everybody, including me. ... No one knew what was really going
on."
Clean bill of health
Montecito bought the roughly four-acre parcel in
November 2003 for $11.1 million, according to public records.
Whether Montecito could have foreseen the extent of
the roofing or plumbing problems is debatable. Condo converters are
required, by law, to disclose the condition of the building and estimate
the cost to replace certain components, like plumbing, roofing and
electrical systems. The report, prepared by professional architects and
engineers, also calculates how much life is left in each individual
system.
Asset Advisory Services, Inc., an Atlanta-based real
estate consultant with nine offices across the country, gave The Venetian
a clean bill of health in January 2004. It put the plumbing system's
remaining life at 16 years and assumed that the new roofs would be
installed in sound condition. According to its report filed with the
state, Asset Advisory did not inspect behind the walls or beneath the
foundation of the building, nor was it required to. And it reported that
the plumbing system was "in functionally sound condition."
"We had to rely on that," said Bill
Rogers, Montecito's general counsel.
"As did the buyers," Fraser added.
But Mark Gallagher, owner of All Hours Plumbing of
Amelia Inc. in Fernandina Beach, said that any plumber worth his salt
would have seen the potential for problems after looking at the corroded
pipes running above the slab. Gallagher, who established his business in
March 2004, worked on site as a subcontractor during The Venetian's
renovation, begun in late 2003. The faulty pipes were exposed, and
replaced, during construction, Gallagher said. He said the poor condition
of the pipes above the building slab were indicative of the pipes below,
but the developer did not authorize the plumbers to inspect beneath the
slab at the time.
Because he was a subcontractor on the project,
Gallagher said he did not bring his concerns to the developer at the time.
Rogers and Fraser at Montecito said they did not
know Gallagher had worked on the project, although All Hours Plumbing of
Amelia has pulled at least three city permits to replace pipes at The
Venetian since then.
"In my professional opinion, looking at the
pipes in the wall ... it all needed to be replaced at that time,"
Gallagher said.
Speed, location, pricing
Montecito bills itself as "the official home of
the American dream," experiencing a meteoric rise from novice
condominium investors in 2003 to become the second-largest condo converter
in the U.S. in 2004 and 2005, as calculated by real estate industry guide
Real Capital Analytics. It has projects in Arizona, California, Florida,
Georgia and the Carolinas.
But Fraser, Montecito's president, makes clear that
the condo converter is not a construction company.
"We are an investment company," Fraser
said.
According to a statement by Bruce Taylor, a partner
at Montecito, the company's business model is based on speed, location and
pricing below the market average. The company focuses on entering cities
where people would want to live but cannot afford to do so. Montecito buys
the property, adds luxury amenities like resort-like landscaping and sells
them as quickly as possible.
Some optimism
Homeowners at The Venetian, many of whom are
investors, are expected to vote on the settlement negotiated between the
homeowner association and Montecito staff. Many are optimistic that, once
the problems are fixed, the property will recoup its value.
"It's a pretty nice condo," said Mandarin
resident James Anderson, who bought a unit at The Venetian in April 2005
for $159,900. A first-time investor, Anderson planned to either rent or
sell the unit -- right now, he can't do either: As Anderson was showing
the property to a potential buyer earlier this year, the bathtub filled
with sewage.
"If we could get the sewers repaired, it'll be
a neat place," Anderson said. "It's one thing to have a luxury
condo, but if you can't flush your commode, you can't live there."
Fraser said Montecito's principals are eager to fix
the problems at The Venetian. He said that of all the times problems have
surfaced at any of the company's projects, Montecito's principals have
taken the high road.
"Every single time, they've pulled out the
checkbook," Fraser said. "I don't regard this project [The
Venetian] as a failure. It would only be a failure if we didn't step up to
the mark and fix it.
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