A real estate investor wants the price of an apartment building in Miami Beach to be drastically reduced, saying he signed an inflated purchase contract after being tricked that the building could be rented on Airbnb and VRBO.
Raz Ofer, through an affiliate, sued sellers Alfredo and Regina Arias, alleging that they knowingly claimed that their building at 1533 Drexel Avenue had a short-term rental license.
Ofer said he wanted the price to drop to around $ 500,000 from the $ 3.3 million they agreed to in a 2019 contract for the two-story building. Ofer, who has a deposit of $ 50,000 in receivership, has filed a lis pendens on the property, which could tie the Ariasse’s hands to sell it to someone else.
The lawsuit, filed in Miami-Dade circuit court on Wednesday, highlights the value of short-term rental licenses on multi-family real estate and the impact of local government crackdowns on Airbnbs and VRBO in the market and transactions.
“A building with a hotel license is worth two and a half times more than a similar building without a license,” Ofer said, adding that this is because rental income is higher. “I have a licensed hotel building on Pennsylvania Avenue and today I’m getting $ 700 per night per apartment.”
The price reduction he is seeking is equal to what it would cost Ofer to obtain a license, he said.
Whether or not he could obtain the permit is in dispute.
In an effort to crack down on short-term rentals in residential areas of South Beach, the city has banned them in some areas. The 18-unit Drexel property sits in a section where such rentals are prohibited outright and no waivers are allowed, according to Yisel Morales, an assistant in the Miami Beach planning department.
Ofer’s lawyer David Winker countered that the ban is not set in stone and could be lifted by a city-wide referendum. Ultimately, the Ariases hoped to sell this property to an “unsuspecting buyer” on the pretext that he holds the permit, Winker said.
Ariases lawyer Michelle Marie Urbistondo said the couple did not intentionally misrepresent that the building had the permit and that it is beyond their control whether they ultimately get a permit.
Ofer’s goal is to get this property for pennies on the dollar and force my client to sell it to them for less than the agreed price, Urbistondo said.
The Ariases, an elderly couple, discovered the missing license about a day after signing the contract and immediately inquired about it with the city, she said. Nevertheless, it is also Ofer’s responsibility to check whether the property had a permit, Urbistondo said.
The Ariase have owned the 0.2 acre property for 30 years, having purchased it for $ 350,000 in 1991, according to property records.
This is one of several low-rise apartment buildings in South Beach that, for years, has been the first choice among those looking to enjoy the beach lifestyle, while staying a few blocks to west of the iconic and noisy tourist streets of Ocean Drive and Collins Avenue.
Ofer first sued the Ariases in April over the same issue, but that lawsuit was linked to technical issues. A judge at a Wednesday hearing – held before the new complaint was filed – agreed with Urbistondo that the April complaint had been improperly served on the Ariases, although an official order to that effect was not socket.
Winker, who is representing Ofer in the retrial and was not involved in the April case, lists breach of contract, specific performance and fraud in the incitement counts.
This is not the first time that Ofer has sued a South Beach property he had contracted. In 2016, an Ofer subsidiary sued the owners of the building at 702 13th Street, alleging discrepancies in financial records that the sellers had not resolved. This case was settled in June 2016.