Condo Litigation

From Daily Business Review – November 5th, 2007

New Yorkers sue Related Group, seeking to bail out of contracts

A group of New York residents who hope to break free of their contracts to
buy Related Group condos in Miami-Dade County claim the developer broke New
York, Florida and federal real estate laws.

In proposed class action complaints filed in Miami-Dade Circuit Court,
buyers at 50 Biscayne and Harbour House claim representatives of the
Miami-based developer promised them a return on their investment in
violation of New York law. Most of the plaintiffs are originally from the
former Soviet Union and reside in New York.

Contract holders also allege Related violated federal law by not legally
recording a condominium declaration before putting units up for sale and
violated Florida law by spending deposits on salaries and commissions.

The complaints were filed today for each building by Aventura solo
practitioner Robert Cooper, who has other suits pending on behalf of Related
contract holders.

"These people did not get what they were bargaining for, and now the
developers are using it as an excuse to get away with giving them less than
what they deserve and less than what they paid for," Cooper said. "They
should have never been promoting these as investments, which is what they
were doing."

Another claim by Harbour House plaintiffs cites the quality of kitchens,
following an August lawsuit against Related by Dellacasa.

Dellacasa, the luxury Italian kitchen designer and installer, claims the
developer, the nation's largest luxury condo builder, and its contractors
conspired to steal signature kitchen designs and break a contract with
Dellacasa to cut project costs in a sinking condo market.

Related representatives gave presentations about the properties at Russian
dinner clubs in New York and at South Florida lunches two years ago, the
plaintiffs say.

Contacted on his cell phone, Related CEO Matt Allen dismissed the claims as
a sign of the times in the bearish South Florida condo market.

"We have lawsuits that are driven by speculators who are trying to profit
and don't respect their contracts," he said. "We have to let the justice
system weed these guys out and [get them] to respect their contracts."

The plaintiffs allege Related's promotional dinners in New York violated the
Martin Act, a New York state law governing the sale of securities and
cooperative real estate including condos. Under the law, a real estate agent
can't sell or advertise units in New York unless an offering plan has been
filed with the New York attorney general.

"Any offering of a new condominium unit to a New York state resident must be
registered with the New York state attorney general," said Vincent
DiLorenzo, a professor who teaches real estate law at St. John's University.
"As long as it's being offered to a New York resident, registration is
required."

Irina Herman, one of the plaintiffs in the Harbour House suit, said she
first heard about the dinners through Russian-language AM radio pitches. The
native of Kiev, Ukraine, has lived in New York for 20 years.

A Russian speaker working for Sunny Isles Beach-based M.A.K. Realty handled
sales for the developments and told a restaurant full of people about condo
investment opportunities in South Florida, Herman said.

Without looking at the unit, Herman and her husband put down a $127,000
deposit on a Harbour House unit and signed a contract for $635,000 on Nov.
2, 2006.

She said she thought she was buying an oceanfront unit. But when she came to
Bal Harbour to look at the condo, "I was shocked to see where my unit was
going to be."

The noisy second-floor unit had a view of the Collins Avenue Bridge, Herman
said. The kitchen wasn't the quality she was promised, and the square
footage was smaller, she said.

A certified public accountant with two children, Herman said she's "going to
fight. It's money going down the drain. It's the same thing as killing
yourself."

After moving from place to place in communist Ukraine, Rita Dobrer emigrated
to the U.S. 28 years ago, got married, gave birth to two daughters and got a
divorce. She worked as a housekeeper in Brooklyn making up to $30,000
annually.

After suffering a debilitating car accident, she won a $650,000 verdict
against her insurance company in 2005 and was looking for a way to invest
the money.

While on vacation, an acquaintance introduced her to M.A.K. Realty's
managing director, Tatiana Rybak, who took Dobrer out to lunch at an Italian
restaurant in Bal Harbour and persuaded her to buy two studio units at 50
Biscayne for $276,000 each, Dobrer said.

She said she paid deposits totaling $110,000 on the assurance she would
never have to close on the properties because M.A.K. could resell them if
she couldn't find a way to flip them before construction was done.

Two months later, Dobrer also put down 20 percent deposits on a studio and
three one-bedroom units at Harbour House selling at a total of $2.3 million.
She put one unit in the name of her 18-year-old daughter.

All told, she had committed herself and members of her immediate family to
more than $2.8 million in condos and had paid more than $500,000 in
deposits.

When resale programs started at the condo towers the following year, Dobrer
said she was told her property was too expensive to move. She was shocked
when she realized she was expected to pay the mortgages.

"If they did not promise a resale, how could an 18-year-old get a mortgage
for half a million dollars?" she asked. "No one ever said we'd need to
close."

M.A.K. Realty is not named in the two complains, and M.A.K. Realty owner
Tatiana Rybak declined comment on the condo sales.

For Cooper, the primary culprit is Related, which "should never have been
targeting someone to buy these units, who are inappropriate to buy them," he
said.

Before the condo boom, he said developers carefully vetted the financial
background of their buyers.

"These developers basically decided not to do that and put themselves in
this situation."

Related's Allen said, "I have confidence in our judicial system to do what's
right."

The plaintiffs hope the courts will allow them to escape from financial
burdens they took on in hopes of living the American dream.

"We are the victims," Dobrer said. "Hopefully we'll become survivors

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