Zeidel & Associates Guides Hotel Owner Through Complex Reciprocal Easement Relationships & Drafts Agreement that Protects Owner’s Interests

Situation

A large hotel in South Florida needed to replace its roof after it sustained significant damage from Hurricane Ian in 2021. Insurance was going to cover the replacement under a joint insurance policy for the building and the condominium association, which governed the timeshares located in the complex. The condominium association had taken the lead in communicating with the insurance company, hired the engineer and project manager, and selected the roofing contractor.

The owner of the hotel retained Zeidel & Associates to draft the construction contract with the roofing contractor. The owner was under tremendous pressure from the insurance company and the condominium association to execute the contract before Florida’s next hurricane season. Our charge was to ensure the contract adequately protected the hotel owner’s rights.

Approach

The relationship between our client, the condominium association, and the insurance company raised red flags from day one. The insurance company had already paid the condo association over a million dollars, from which the roof work needed to be paid. We were concerned with how our client would access the funds since the association refused to turn them over in advance, leaving us at an impasse.

Despite pressure from the insurance company and condo association, we encouraged our client to identify governing documents with the condominium association related to capital projects. An easement and cost-sharing agreement between the condominium association and the building owner explaining how they would share costs was found and revealed that the insurance payment made to the condo association violated that agreement, which specified that the building owner had the right to supervise and direct repairs of the building’s roof. Zeidel & Associates counseled our client to inform the condominium association before executing the roof contracting agreement that it needed to be indemnified for the cost of the work and provided a guarantee of the work done without the owner’s input.

Other violations of the cost-sharing agreement and concerns included the suitability of the roof design an engineer hired by the association provided and the qualifications of the project manager the association hired.

Result

While negotiating the roof construction contract, Zeidel & Associates convinced the condominium association to enter into a payment guaranty and indemnification agreement with the building owner, providing our client with indemnification for possible claims by the roofing contractor and from engineering work that had been approved by the condominium association. At our request, the condominium association provided board resolutions confirming that it approved the replacement and design. In addition, the hotel owner used its leverage to replace the project manager the condominium association hired with one it previously worked with.
The hotel owner was pleased that we helped them to understand the complex legal relationships and protected them from undue risk by the association, the roofing contractor, and a possible defective design.