1533 Drexel Avenue in Miami Beach (Apartments.com, City of Miami Beach Planning Department)
A real estate investor wants the price of a Miami Beach apartment building drastically reduced, saying he signed an inflated purchase agreement after being duped the building could be rented on Airbnb and VRBO.
Raz Ofer, through an affiliate, sued sellers Alfredo and Regina Arias, alleging they knowingly misrepresented the fact 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 filed a $50,000 escrow deposit, filed lis pendens on the property, which could prevent the Ariases from selling it to someone else.
The lawsuit, filed Wednesday in Miami-Dade Circuit Court, highlights the value of short term rental licenses on multi-family real estate and how local government crackdowns on Airbnb and VRBOs impact 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 an apartment building with a hotel license on Pennsylvania Avenue and today I get $700 per night per apartment.”
The price reduction he is asking for is equal to what it would cost Ofer to obtain a license, he said.
Whether or not he can get the license is in dispute.
In an effort to crack down on short-term rentals at South Beach residences, the city has banned them from certain areas. The 18-unit Drexel property is in a section where such rentals are outright prohibited and no waivers are allowed, according to Yisel Morales, an assistant with 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 citywide referendum. Ultimately, the Ariases hoped to sell that property to an “unsuspecting buyer” on the pretext that he had the permit, Winker said.
Michelle Marie Urbistondo, the Ariases’ lawyer, said the couple did not intentionally misrepresent the fact that the building had the permit and that it was beyond their control whether it would ultimately obtain a permit.
“Ofer’s goal is to get this property for pennies on the dollar and force my client to sell it to him for less than the agreed upon price,” Urbistondo said.
The Ariases, an elderly couple, discovered the missing permit about a day after signing the contract and immediately inquired with the city about it, she said. Yet it is also Ofer’s responsibility to check whether the property had a permit, Urbistondo said.
The Ariases have owned the 0.2-acre property for 30 years, having bought it for $350,000 in 1991, property records show.
It’s one of many low-rise apartment buildings in South Beach that for years has been the top choice among those looking to enjoy the beach lifestyle, while still being just a few blocks away. west of the iconic and noisy tourist streets Ocean Drive and Collins Avenue.
Ofer first sued Ariases in April over the same issue, but that lawsuit was related to technical issues. A judge at a hearing on Wednesday – held before the new complaint was filed – agreed with Urbistondo that the April complaint was improperly served on Ariases, although a formal order to that effect has not been issued. .
Winker, who is representing Ofer in the new lawsuit and was not involved in April’s case, lists breaches of contract, specific performance and fraud in the inducement counts.
This is not the first time that Ofer has filed a complaint for a south beach goods he had contracted. In 2016, a subsidiary of Ofer for follow-up owners of the building at 702 13th Street, alleging discrepancies in financial records that sellers have not resolved. This case was settled in June 2016.
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