Residents of the Surf Club I condominiums (pictured above) in Flagler County, Fla., have filed suit to determine whether Bay Communities, a transplanted Bay State development firm, has misused reserve funds set aside for maintenance and other needs.
Flagler County, Fla. – The Matanzas Shores residential enclave is located here in a sleepy, unincorporated stretch of oceanfront property appropriately known as the Hammock. Despite the soothing title, however, many of the retirees who live in the complex say they are having a difficult time relaxing these days.
“It’s like a big old stew,” longtime resident William Regan said last week of an ongoing imbroglio with Bay Communities Real Estate. “Things keep boiling up all around us.”
As with more than a dozen residents who met with Banker & Tradesman last week, Regan has been in a lengthy battle with Bay Communities, a transplanted Massachusetts firm now located in Palm Coast, Fla., that began buying properties at Matanzas Shores in the mid-1990s. Many of the approximately 500 residents in the mix of condominiums and single-family homes charge that Bay Communities has grabbed control of the board of the Matanzas Shores homeowners group, providing them with little say in how the complex is operated. The company was able to exert majority control, residents say, because it has multiple parcels in the development.
The situation has gotten so onerous that one subset of the development, made up of residents of the Surf Club I condominiums, has filed suit against the governing Matanzas Shores board that Bay Communities controls to establish whether the firm has misused reserve funds set aside for maintenance and other needs. They also claim that the company is in arrears of a substantial sum for assessments each property owner must pay annually. By some estimates, the overall deficit could run as high as $600,000. Residents say they have had to guess at the shortfall, however, claiming that Bay Communities has refused to allow them access to financial records.
“We’re paying to find out what’s happening to our books by suing ourselves,” one resident said in assessing the situation. “It’s really us suing ourselves.”
Except for Regan, who has been out front for years in his battle with Bay Communities and principal William F. Harkins, a former Andover resident, none of the residents who met with B&T would agree to speak on the record, with most claiming there has been a pattern of retribution against those who challenge the firm publicly. One example, they said, occurred during a March 22 meeting, at which Harkins allegedly threatened to charge the residents for legal fees incurred by the Surf Club I lawsuit.
“It’s crazy,” one resident said last week. “If the developer would keep current with his fiscal duties and stop using our reserves as [their] own piggy bank, there wouldn’t be a need for a lawsuit in the first place.”
Residents who attended the March 22, meeting said Harkins also ordered that the Surf Club building be painted, with the costs to be passed on to residents of that property. While Harkins supposedly said the paint job was due to local complaints about the building’s appearance, the residents attributed it directly to the Surf Club I lawsuit.
Harkins did not return a phone call and was not available for comment when Banker & Tradesman went to the firm’s headquarters last week in Palm Coast, located a few miles from the Matanzas Shores complex. Also not responding was Ronald W. Brown, the St. Augustine, Fla., attorney retained by Surf Club I residents to handle their lawsuit.
In the civil action, the plaintiffs charge that Bay Communities has incorrectly claimed to be the so-called Declarent of the complex, a designation granted to the original owner of the development, ITT Corp. which gives the subject certain rights over the operation of the complex. The plaintiffs maintain that those rights were not transferred to Bay Communities. The suit also asks the court to investigate whether the board and Bay Communities “allowed the improper deletion of the reserve accounts and [to determine] the amount of any such improper deletion.”
‘Uncomfortable Situation’
In response to the ongoing complaints, residents say Bay Communities has offered to allow representatives from the Surf Club and other subsets to join the board, but add they consider that a token gesture since Bay Communities would still have a majority say in board matters. Besides Harkins, other Bay Communities members on the board include his sister, Judith Kincaid; her husband, Lance Kincaid; and Bay Communities Vice President Greg Robinson. All are employees of the company.
Regan, an Arlington native who moved to the Hammock in 1990, said there have been confrontations with Bay Communities almost since Harkins arrived on the scene in the mid-1990s. The firm has fought to increase the number of units at one planned condominium development at Matanzas Shores known as Las Brisas and to increase the height of another condominium building next to the original Surf Club from six to eight stories. That project is known as Surf Club II and III.
Bay Communities ostensibly is run by former Winthrop resident Valerie Kann, although federal officials claim she is a front for real estate felon William W. Lilly, another transplanted Bay State native. Lilly, the self-proclaimed “Condo King,” served five years in prison at the Allenwood Federal Penitentiary in Pennsylvania for real estate crimes committed in Massachusetts during the late 1980s and early 1990s. Federal officials maintain that Lilly rebuilt his real estate empire from prison using Harkins and Kaan as straws to cover up his ownership of Bay Communities and avoid payment of $5 million in court-ordered restitution.
Residents won a slight compromise on the Las Brisas project when county commissioners only approved an increase from 30 to 32 units and not the 40 units Bay Communities had sought, but were defeated on the Surf Club issue. The latest controversy occurred this year when Bay Communities tried to have the Matanzas Shores residents help pay for a new habitat that must be created for a rare bird in order to allow the Surf Club II and III buildings to be constructed. Residents claim the board circumvented their wishes when it pushed for the shared expenses in seeking permits for the project from the federal Fish and Wildlife Service.
“Why is that our responsibility?” asked one resident. “That should be a developer’s cost, not ours.”
According to a permit issued last month, the developer will be responsible for maintaining the habitat during the first 20 years, but it appears Matanzas Shores would have to contribute after that time. Residents said they are upset because a board meeting on the matter was cancelled, and there was no follow-up session prior to the permit being issued.
Other critics are questioning the subsequent clear-cutting of the Surf Club II and III sites, noting that there were no topographical studies or efforts to save certain trees from the bulldozer. Work on a similar site in nearby Ponce Inlet, Fla., was halted earlier this year when city officials claimed Bay Communities had improperly cleared the land.
Another issue is whether the clear-cutting in the Hammock is actually a sign that Surf Club II and III are about to get underway. For reasons unknown, Bay Communities has been unusually slow in launching development projects. One site in Highland Beach, Fla., remains virtually untouched nearly two years after the company cleared that site, while half of the Las Brisas units are unfinished two years after work began on that project.
Part of the slowdown may be attributed to continued fiscal difficulties in paying contractors, many of whom have filed liens against Bay Communities and its various divisions for non-payment. Local firms such as Love Tile Corp., Riehl Electric and Knicely Painting have filed liens against the company in recent months, for example. Other nearby projects where work has been slow to commence include the Enclave, also in the Hammock, and the Sanctuary, an undeveloped parcel in Palm Coast.
As for Matanzas Shores, Regan said he and other residents have asked the state’s Department of Consumer Affairs to audit the Matanzas Shores Homeowners Association books, but said they were turned down because the homeowner’s board must authorize such an action.
“There’s something wrong with the homeowners’ laws in Florida when 500 residents can be totally disenfranchised by the actions of … [a few] cronies,” said Regan. “It’s a very uncomfortable situation for us.”
