Two Roads Development was dealt a major blow in its legal battle over a condo buyout in Miami’s Edgewater, where the company plans an Edition Residences luxury condo project.
The Third District Court of Appeal issued an opinion in response to Two Roads’ request for a rehearing, siding with the eight holdout unit owners who have been fighting the buyout of their condo building, Biscayne 21, for years.
The litigation has put the developer on hold for well over a year, likely creating uncertainty among existing and potential buyers at the planned Edition. Developers have been waiting for the Third DCA to rule on the issue, which could affect future buyouts.
It’s unknown how Two Roads plans to move forward beyond requesting the Florida Supreme Court hear the case. The appeals court’s latest opinion gives the holdout owners leverage.
“We’re very optimistic that even if the question were to get to the Supreme Court, based on how it’s framed, there’s no way TRD Biscayne [Two Roads] is going to get any of the relief they’re seeking,” said attorney Glen Waldman, who represents the holdout condo owners.
In 2022, Two Roads paid about $150 million for the majority of units at Biscayne 21, a bayfront 13-story, 192-unit building at 2121 North Bayshore Drive in Miami. It was built in 1964. Later in 2022, Two Roads launched sales of the first of three planned towers, a 55-story, 185-unit tower, with unit prices starting at $1.7 million.
In 2023, holdout owners Angelica Avila, Nicolas Bello, Maria Beatriz Gutierrez, Franah Vazir-Marino, Robert H. Murphy, George Garcia, and two couples, Lazaro Fraga and Jacqueline S. Fraga, and Jeffrey Ulman and Shari Ulman sued the developer and the developer-controlled association. They alleged that the developer-controlled condo association illegally amended the condo declaration to lower the requirement for a condo termination to 80 percent of owners, from 100 percent. A condo termination is required to eventually redevelop the site.
In March 2024, the Third DCA reversed a lower court decision that had denied the holdout owners a temporary injunction. The lower court had determined that amending the termination requirement did not “alter” the voting rights of the unit owners. The Third DCA disagreed with this, and said that amending the vote threshold did alter the unit owners’ voting rights.
Shortly after the Third DCA issued the March 2024 opinion, the developer requested a rehearing or rehearing en banc, the latter of which would require all judges in the Third District to hear the case. Two Roads also vowed to take the issue to Florida’s Supreme Court, which it still plans to do, according to a statement it provided to The Real Deal on Thursday.
Since last year, both sides have been in limbo, waiting for the Third DCA to rule on a rehearing. The developer has been on the hook for mounting interest, in the millions of dollars, on loans tied to the 2022 bulk purchase, filings show. The firm also wrangled the support of the most powerful people in the industry. Last April, the Pérez family’s Related Group teamed up with the Defortuna family’s Fortune International and the Dezers’ Dezer Development to submit a brief requesting that the court reverse its opinion.
Two Roads said in its statement that it is disappointed that it took the court so long to rule.
“The delay has only compounded the uncertainty created by the initial ruling,” said Taylor Collins, Two Roads’ managing partner and co-founder, in the statement.
Thursday’s opinion officially denies the developer’s motion for rehearing and revises its previous opinion. The Third DCA found that Biscayne 21’s original condo declaration gave each unit owner an effective veto over any termination, which means that the developer-controlled association’s vote amending the declaration is invalid.
“The trial court erred in determining that the declaration permitted amendment of the voting threshold from unanimity to an 80% vote share by a simple majority vote,” the opinion states.
The Third DCA also gets into the issue of Kaufman language, which refers to the phrase “as amended from time to time.” That phrase is used to bring condo declarations up to current state law. In its latest opinion, the court found that the developer misapplied the Kaufman language.
Developers have said the previous ruling and this latest opinion would set a detrimental precedent and put a hamper on condo buyouts.
Collins, in his statement, said “the initial decision has already caused billions of dollars in disruption and damage to the real estate industry across Florida.”
But condo buyouts have continued to occur. Experts say the ruling could affect potential buyouts and terminations of condo associations that have similar condo declarations.
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