Judge affirms Colony rec lease decision

Judge Steven Merryday ruled March 16, that a recreational lease associated with a portion of the Colony Beach & Tennis Resort did not transfer with real property in a 2014 foreclosure sale.

By Alex Mahadevan
| 6:00 a.m. March 29, 2017

The Colony Beach & Tennis Resort has been shuttered for more than seven years.

Longboat Key
News

Two days after Longboat Key voters rejected a referendum that would have laid the groundwork for redevelopment of the Colony Beach & Tennis Resort, legal issues underlying the proposal came to a close in court — for now.

Why does the rec lease matter?

In July 2014, Colony Lender paid $15.2 million for an 80% interest in the 2.3-acre slice of recreational property at the Colony Beach & Tennis Resort. That brought its ownership on that property to 95%.

With the land, Colony Lender claimed it had also acquired a recreational lease slated to expire in 2072.

Unit owners paid former Colony owner Dr. Murray “Murf” Klauber for use of the resort’s amenities through this lease while the property was still in operation.

Shortly after acquiring the property, Colony Lender ordered unit owners to pay $5.1 million in back rent and damages on the lease.

Concurrently, Unicorp National Developments sent letters to owners with offers for their units and a warning: They could face more than $42 million in liabilities for accrued and future rent if they don’t sell.

The Colony Association has denied these claims, with attorney Jeff Warren saying in an interview Tuesday that the association technically controls the rec lease — which it says has not been active since around 2008 or 2009.

“Once the fat lady sings, our intent is to record a formal termination of the rec lease to remove any contention that it remains in force,” he wrote in a March 17 email to stakeholders.

On March 16, U.S. District Judge Steven D. Merryday affirmed a bankruptcy judge’s ruling that Colony Lender LLC — the firm that sold a 2.3-acre portion of the property it acquired through foreclosure in 2014 to Unicorp National Developments last year — had not acquired a recreational lease associated with the property. Colony Lender sued units owners in 2014 seeking more than $5 million in damages and back rent on the lease.

In a July 2016 ruling, U.S. Bankruptcy Judge K. Rodney May ordered Colony Lender and Unicorp to pay about $70,000 for allegedly violating an automatic bankruptcy stay for filing that lawsuit. May also determined the rec lease was not transferred in the 2014 foreclosure sale.

“This dispute cannot benefit from the issuance of another legal opinion, which could accomplish little or nothing to improve on Judge May’s July 20, 2016 opinion, which is entirely affirmed,” Merryday wrote in the March 16 order.

“We’re pleased with the decision and we believe that the judge did the right thing,” said Colony Association President Jay Yablon.

Still, the sanctions remain under appeal in the U.S. District Court for the Middle District of Florida, and Colony Lender principal David Siegal said he has filed a notice of appeal in the U.S. Court of Appeals for the Eleventh Circuit challenging Merryday’s ruling. He said Colony Lender owns a 15% interest in the rec lease and can sue that at any time over that portion, and that he will continue to appeal the case unless unit owners come to a final agreement with Whittall for redevelopment of the property.

“We hope we don’t have to do that,” Siegal said. “You know, Kumbaya and all that.”