The escrow agent for St. Petersburg's Signature Place condos has sued developer Joel Cantor, alleging he reduced the amount of a surety bond so much that there is no guarantee disgruntled buyers will get their deposits back even if they win their pending court cases against him.
Sales and closings at the 36-story high rise were halted for several days because of the lawsuit, filed this month by Fidelity National Title Insurance Co.
But Cantor said sales activity resumed Thursday after another title company was hired.
The suit "doesn't have any effect because the new title company is going to guarantee closings,'' he said.
Florida law requires condo developers to put deposits in escrow or provide an "alternative assurance,'' such as a surety bond, that there are sufficient funds to cover refunds. With state approval, the developer can reduce the amount of the bond as refunds are disbursed.
In its suit, Fidelity says Cantor's Gulf Atlantic Communities withdrew cash deposits from escrow to continue work on Signature Place. In lieu of keeping money in escrow, the company got a $4.9 million surety bond in 2007.
In March, the suit says, Gulf Atlantic falsely certified to regulators that it was entitled to reduce the bond to just $182,432 even though it faces 25 lawsuits from buyers claiming they are entitled to refunds totaling nearly $2 million.
Fidelity wants Gulf Atlantic to increase the bond amount and to pay damages, including any costs Fidelity might incur in defending itself against claims that it improperly released deposits due to what the suit calls "fraud and misrepresentation'' by Cantor and his company.
Also named as defendants are Westchester Fire Insurance, which issued the surety bond, and the state Department of Business and Professional Regulation, which approved the reduced amount.
Cantor said Fidelity, as keeper of records, was responsible for certifying how much the bond should be.
"It's their job to protect the buyer,'' Cantor said Thursday. "Basically, (Fidelity) filled out the form and five months later realized they made an error on their end. Now they want to rescind their error so Fidelity doesn't have any liability. That's why they're freaking out.''
Cantor said he doesn't plan to increase the bond amount, saying it is up to the lenders, a consortium of banks led by Fifth Third. Fidelity wouldn't comment and Fifth Third didn't return calls.
"The developer doesn't have any money, it's essentially the bank's property,'' Cantor said of Signature Place. "The bank is really the stakeholder, and it has the ability (to increase the bond). It could simply post a letter of credit and satisfy that requirement.''
Signature Place, at First Avenue S and Second Street, is considered one of the most innovative projects in the Tampa Bay area. Most of the units command a view of the bay, thanks to the building's slim, sail-shaped profile.
But even though prices were below most of the million-dollar units dominating St. Petersburg's waterfront, many early buyers backed out as the real estate market plunged. Others sued to get their deposits back, claiming the units weren't finished on time or that there had been "substantial'' changes in floor plans and amenities.
In March, auctioneers sold 62 units at discounts of up to 50 percent. Prices ranged from a $199,000 for a lower loft to a $742,000 condo on the 31st floor.
Of the project's 244 units, 198 have been sold and 15 more are under contract with deposits, Cantor said.
Susan Taylor Martin can be contacted at firstname.lastname@example.org.