PANAMA CITY BEACH — Bay County Circuit Court Judge William Henry has denied a request by the condominium association for the Shores of Panama complex to throw out a lawsuit filed by residents.

The lawsuit claims the association failed to properly inform tenants of its plans to assess them for millions of dollars of repairs to the structure. At the same hearing, Henry also extended a "standstill" order preventing the association from doing any work on the building until at least Sept. 7. The order not to dismiss the case means that unless attorneys for the homeowner's association can convince Henry to reverse his decision, the residents' case will come to trial, said Dana Matthews, who is representing owners of 58 units in the 709-unit complex. "It's a very important ruling," he said. "The case can move forward." Condominium association attorneys were given 20 days to file an answer to the judge's ruling, which was handed down Aug. 22.

Michael Kelly, the attorney who presented the condominium association's argument in favor of dismissal, said he expected an answer would be filed "within the timeframe required to do so."

Kelly could not comment further because the Aug. 22 hearing, at which three issues were scheduled to be discussed, was not completed. At a continuation of the hearing slated for Sept. 7, Matthews will ask the judge to issue a temporary injunction that would prevent all structural work at the building from taking place prior to the case coming to trial.
What did the lawsuit filed against the condo association claim?

The original lawsuit was filed May 11 on behalf of three condominium owners, David Spira, Rachele Doukas and Laura Doukas. It alleges that the Shores of Panama COA is attempting, without notification, to thrust a special assessment upon owners to cover $76 million in renovations.

It sought an injunction and declarative relief regarding "condominium governance issues."

The litigants "are in doubt as to the rights of the association to proceed in committing each of them to a long-term debt obligation through special assessments without their knowledge, consent, or participation," the complaint states.

They "are without any adequate remedy at law if the defendants are allowed to move forward with a special assessment obligating each unit owner in the Shores of Panama Condominium to the extent disclosed," it said.

On June 7, the condominium association board voted to pass an $8.9 million special assessment. Work had gotten underway before the original standstill order was issued July 27.

The standstill order prevents the association from collecting additional funds related to the $8.9 million special assessment or from pursuing repairs, other than safety repairs, related to the special assessment. It also prevents the association from collecting money from unit owners for work related to the special assessment.

Additionally it bars the association from entering agreements with or paying special assessment funds to contractors, subcontractors, architects and others for work other than safety work.

If granted Sept. 7, the temporary injunction will uphold the standstill order until such time as the lawsuit filed by the owners comes to court.

"We're safe against the Board's outlandish spending," Laura Doukas said in an email discussing the continuance of the standstill order. "The board of directors cannot spend, collect or perform any work regarding the Special Assessment until our next court date. But, this isn't the end."
Cost estimate for damage mitigation

The original lawsuit alleged that the condominium's board of directors "solicited and encouraged the city of Panama City Beach to accept, and act upon, self-authored allegations of widespread unsafe conditions on the premises of Shores of Panama Condominium."

Mark McWaters, the Panama City Beach Building Official, said at the time the suit was filed the $76 million estimate for damage mitigation likely represented Florida Architects "worst case scenario" of a cost of repairs. Engineering reports and other documents obtained through public records requests, however, provided graphic evidence of a building badly in need of a makeover.

In 2009, just two years after the two buildings at the Shores of Panama complex were completed, a Santa Rosa Beach law firm notified six companies that had played a role in construction of its intent to sue on behalf of the Shores of Panama Resort Community Association.

The long list of defects reported over the years includes roof leaks, exterior stucco in poor condition, water infiltration of an exterior wall and leaks in seven units. Engineering reports said investigators had detected shifting or settling of a wall holding up a structure that connected the two high-rise buildings that comprise the complex.

One engineering report compiled in 2019 said a water absorption test conducted in 2014 found the waterproof finish on the building was failing in several locations and needed to be replaced.

"Our recommendation is to remove the entire wall finish system down to the surface of the stucco," it said. "Over time as it continues to fail it will lead to leakage into the units as well as increase the rusting of the reinforcing steel in the concrete walls and slabs."

In its motion to dismiss, the condominium association attorneys cited state law in defending its decision to levy the special assessment.

"When the purpose of the special assessment is limited to the payments of costs of construction and repair(s) immediately necessary to avoid damage to the condominium it may be made by the board of directors without approval of the unit owners," association attorneys argued.

"Certain repairs are immediately necessary to avoid damage to the condominium," they argued in their motion.