Residents fight big loan, thousands in monthly fees in condo takeover [10-28-15]
Article Courtesy of The Palm Beach Post
By Christine Stapleton
Published October 27, 2015
WEST PALM BEACH — When three members of the Green Terrace Condominiums board — all given condos by Ken Bailynson — were asked during a court hearing in May about Bailynson’s sober housing business, they took the Fifth.
Board members also told the court they did not know the details of the $1.5 million loan they had approved from a lending company created by Bailynson, who ran Good Decisions Sober Living before it was closed after an FBI raid.
The loan from Bailynson’s company carries a 24 percent interest rate.
When the association could not make its monthly $30,000 loan payment in September, Bailynson foreclosed on 10 condos. The board, controlled by Bailynson cronies, failed to dispute the foreclosure — a decision that would enable Bailynson to quickly take ownership of the units.
How the Bailynson-controlled board spends its money is the target of an investigation by the state Department of Business and Professional Regulation.
At stake is whether a controversial former sober home operator will seize control of an 84-unit low-rise condominium complex off Belvedere Road east of Interstate 95 in West Palm Beach.
“It seems clear to me that there is a conspiracy between Ken and the board members to continue to jack up assessments,” said William Pincus, attorney for a group of residents suing Bailynson and the board. “Everything he’s doing reads to me like he’s intending to take over the entire community.”
The rising fees can force residents out of their homes. With few buyers willing to jump in, it’s unlikely the condo owners could sell — to anyone other than Ken Bailynson.
For Angela Ciriello, the $613 assessment now tops $2,000 a month on a condo with a market value of $16,000. When she couldn’t pay, the homeowner’s association slapped a lien on the unit.
“It was crazy,” Ciriello said.
Controlling 75 percent
In March, the board, with Bailynson as treasurer, approved a $1.5 million loan from BOK lending II, a company created by Bailynson in February. The board also considered borrowing an additional $2.5 million to pay for upgrades and repairs at Green Terrace.
The board told owners the complex was in such disrepair that it had racked up more than $300,000 in code violations and did not have windstorm insurance. As collateral, the board put up 18 condominiums owned by the association.
Bailynson owns 38 units. If the board takes over 18 more, he would have control of 56 units.
He needs 63 units, 75 percent of the complex, to have the power to dissolve the association.
“Seventy-five percent allows him to do whatever he wants,” Pincus said. “He would have control and our people would lose their homes.”
Bailynson refused to answer a reporter’s questions for this story. His lawyer, Steve Cohen, also declined to comment.
In March, residents sued. In their lawsuit they asked a judge to block steep increases in fees and assessments, stop the second loan, halt construction and end the use of armed security guards, which costs the association $174,000 a year.
The security company, Black Diamond Security Agency, is not licensed by the state, Department of Agriculture and Consumer Services records show.
Monthly fees for residents had tripled, the lawsuit said. Plus residents had to pay an assessment of $5,550 or more. For many, that meant paying more in assessments than their condos are worth, ranging from $17,000 to $40,000.
But at hearings in May, board President Sandra Matus, who lived in a condo Bailynson gave her, said she did not know whether the association had windstorm insurance.
None of the board members — Matus, Matthew Noel and Steven Dockswell — knew the details of the loans from Bailynson’s company.
None presented evidence that the city required all balconies, windows and doors to be replaced to cure code violations. In fact, Palm Beach County Circuit Judge Gregory Keyser found the code violations were not related to structural problems.
But the $1.5 million loan that the residents were struggling to pay off was paying to rebuild those structures.
Residents recorded Bailynson angrily ordering their attorney out of a board meeting. But the judge found that they should have been allowed to vote on some of the renovations.
The board members invoked their Fifth Amendment right against self-incrimination when asked why the condo community needed armed guards. In fact, board members took the Fifth in response to every question about Good Decisions, which the FBI raided in September 2014. Bailynson did not testify.
No criminal charges have been filed in relation to the raid.
The judge issued a temporary order blocking the loan, freezing assessments and stopping new construction. He allowed the armed guards to remain.
In Bailynson’s most recent legal maneuver, his attorney asked the judge to increase the $500 bond residents had to post to cover Bailynson’s potential damages. If it’s granted and they can’t pay it, the judge’s order would be dropped, meaning higher fees, continued construction and a potential second loan.
Bailynson’s lawyers also asked the judge to let them renew fee collections because without fees, the association can’t even pay its water bill.
Meanwhile at Green Terrace, board member Noel has gotten the city’s permission to lease his apartment — the one given to him by Bailynson — to six recovering addicts.