Twenty-four owners of condominiums at Grande Bay Resort filed a temporary restraining order on June 6 against the luxury condo developer, Bay Isle Associates, alleging that recent changes to condominium documents drastically reduce the value and desirability of their units.
The restraining order seeks to prevent Bay Isle from recording the new condo docs at the Recorder of Deeds.
The new documents were delivered to owners at Grande Bay on May 17, along with a letter acknowledging that Bay Isle was “making significant changes to the operation and structure of the resort,” according to the memorandum of law in support of the temporary restraining order, filed on June 6 by the Bornn Firm, which is representing the condominium owners.
Contract holders were given 15 days to either cancel their contract and get their money back, or consent to the new condominium documents, along with a new guaranteed construction completion date of March 31, 2008.
“Bait and Switch”
“Bay Isle attempts to cover their blatant breach of the purchase agreements by giving the plaintiffs a take it or leave it situation — a classic bait and switch,” according to the memorandum.
The new condo documents allegedly take away several things Grande Bay owners were originally promised.
“Prospective buyers were told that there would be a common ‘game and club room’ available, an exercise facility, a waterfall cascading into an infinity edge pool, a temperature controlled wine storage locker exclusively for owners, and condominium units finished with the finest materials, along with ‘your own underground parking space in paradise,’” according to the memorandum.
“Individual deeded parking spaces were promised, along with other luxuries, including an outside bar, resort type phone system, internet and cable TV service, and beach access,” the memorandum continues. “Most of these commitments remain today on the developer’s Web site, www.grandebayresort.com.”
Parking, Services Denied
The new condo documents take away the promised deeded parking space and require that owners pay $175,000 annually for valet parking; allow owners to occupy their unit just 90 days per year, compared to the unlimited use allowed under the original condo documents; and require owners to spend $39,000 per year for services which were promised in original purchase agreements, including access to digital TV, telephone service, DSL internet access, garbage collection and removal and access to the wine storage areas.
The change in the parking structure is part of Bay Isle’s plan to bring in more money, according to the memorandum.
Paid Parking Planned?
“The reason for this change (in the parking plan) is to facilitate a scheme of Bay Isle to install lifts in each of the parking spaces which would allow a car to be stored above the car parked on the ground, effectively doubling the parking capacity from what is necessary to satisfy the needs of the condominium as originally represented, as Bay Isle proposes to retain the right to use, sell or rent all vacant parking spaces to the general public,” according to the memorandum.
Allowing owners to spend just 90 days per year in their Grande Bay condominium has the potential to greatly affect owners’ future plans, the memorandum continues.
“The rental management agreement that was a part of the original condominium documents allowed the plaintiffs to let Bay Isle market, rent and manage their individual condominium units for a percentage of the rental proceeds,” states the memorandum. “The original rental agreement allowed the owners unlimited use of their unit with prior notice to Bay Isle, allowed Bay Isle seven nights of complimentary use every five years and required Bay Isle to spend a minimum of $50,000 per year on marketing.”
“A buyer who purchased believing that he or she would rent their unit for the first several years, before moving or retiring to St. John, is now prohibited from doing so,” the memorandum continues.
While Bay Isle has made changes to its Grande Bay condo documents in the past, this was the first significant change, according to plaintiff Thomas Hill, a lawyer who resides in Maryland.
“Very Materially Different”
“This is the first time the changes which were made were substantial,” said Hill. “We realized things were very materially different than what we had contracted for and what had been promised to us. Certainly, our rights were affected materially and adversely.”
Backing out in lieu of the new condo documents is not an option for many of the contract holders at Grande Bay who look forward to calling St. John home, explained Hill, who has been visiting the island for the past 25 years.
“We all love St. John and this is, for a lot of us, our opportunity to become residents,” he said. “If there’s anything I want to emphasize, it’s that a lot of the provisions we have a really strong objection to are things that would make it less appealing, not only for ourselves, but the community as a whole. A lot of us have visited St. John over the years, and want very much to be a party of the community in a responsible way.”
The change in the condo documents was inevitable following the developer’s failed attempt to rezone its 0.28-acre parcel from W-1 to R-4 in late 2005, explained Kelly Frye of Bay Isle Associates.
“With the lack of the rezoning, we had to amend the condo documents, which I warned everybody all along would be the case if we didn’t get the rezoning,” said Frye.
Frye is optimistic that the developer and Grande Bay’s contract holders will come to an agreement, he explained.
“We’re meeting with them to work out the details of the condo documents, and we’re optimistic that we’ll work out the details and we’ll proceed ahead,” said Frye. “We want to make it so the owners are happy and we can move ahead with closing and finishing the project.”
Also under fire in the motion for a temporary restraining order is the use of building E, the steel structure on which construction recently began.
While Bay Isle originally promised its Grande Bay contract holders amenities including a pool, a gym and a fitness center among other things to be located adjacent to the condominium development, the developer is instead allegedly using the adjacent parcel to construct a hotel/fractional share rental property, according to the memorandum.
Use of Building E Under Question
This information was disclosed to Hill by David Band of Bay Isle Associates in a May 23 telephone call, according to Hill’s affidavit.
“(Mr. Band) told me that (building E) ‘would be sold as fractional interests,’” Hill states in his affidavit. “I told him I was surprised since I had read in the Tradewinds that building E would be a two-family dwelling and I understood from the article that the proper zoning for the parcel of land which building E was being constructed on only allowed zoning for a two-family dwelling.”
“Mr. Band said that building E actually had 14 bedrooms which would be like ‘hotel rooms,’” Hill’s affidavit continues. “Mr. Band said that each hotel room or bedroom would be sold on a monthly basis, unlike the typical weekly timeshare.”
Frye asserts that building E will be just two dwelling units, and said he is unsure where the plaintiffs got the idea that the building will be used as a fractional-type hotel.
“Building E will be two dwelling units, but we haven’t decided what we’re going to do with that building yet,” said Frye. “If we keep it, we’ll rent it.”
Land Taken from Condo Association
The plaintiffs also allege that parcels 86-4 and 86A-4, which provides Grande Bay owners beach access, and parcels 3Abc and 3Aac are being taken away with the new condo docs.
“The new condominium documents take away land, specifically four parcels, from the condominium form of ownership,” according to the memorandum. “Not only is land unique, and therefore irreplaceable, the land that Bay Isle is attempting to take away from the plaintiffs in this case was not only specifically promised to the purchasers, but is particularly valuable. For many plaintiffs, the unique positioning of this land was the primary inducement to execute their purchase agreement.”
This is not the first legal problem Bay Isle Associates has faced during the construction of its Cruz Bay luxury condominium development.
A lawsuit was filed against Bay Isle Associates in November 2005 by four St. John property owners — Alexander Jadan, Natalie Jadan, Anastasia Trey and Liza Trey — alleging three zoning violations: height, density and lack of lateral support.
Depositions are scheduled in that case in July.
“Myself and my family are looking forward to finally getting this case off the ground, and we’ll be seeing more activity in the near future,” said Liza Trey. The next hearing regarding the temporary restraining order is scheduled for June 20.