Sanctions likely for Colony Lender

U.S. Bankruptcy Judge K. Rodney May said in court Tuesday that he will rule that Colony Lender LLC violated an automatic bankruptcy stay, according to an email to the Longboat Key Town Commission from Assistant Town Attorney Kelly Fernandez.

The judge said he will hold a hearing April 14 for the parties to argue appropriate sanctions and will then issue an order.

Colony Lender LLC sent demand letters to unit owners in August telling them they could face millions of dollars in liabilities if they do not sell their units to Orlando-based Unicorp National Development Inc., which has an agreement to purchase Colony Lender’s resort assets.

In October, Colony Lender filed lawsuits against unit owners seeking more than $5 million in damages for unpaid rent plus interest on a disputed recreational facilities lease.

The Colony Beach & Tennis Association, which represents most of owners of the 237 units, and Chapter 7 Bankruptcy Trustee Douglas Menchise had argued for sanctions.

Colony Lender purchased overdue bank loans on resort property controlled by longtime Colony owner Dr. Murray “Murf” Klauber, including an 80% interest in loans on the 2.3-acre recreational property, plus a 15% interest in the same property.

It received a judgment of more than $14.3 million in a foreclosure trial in September 2013, which increased by several hundred thousand dollars as interest accrued each month. It placed the winning bid of $15,200,001 in a July auction to become 95% owner of the recreational property.

It argues that the recreational facilities lease is attached to the land, a claim the association denies.

The judge will rule on other issues, including who controls the recreational facilities lease, after resolving the sanctions issue.

Contact Robin Hartill at [email protected].