Chetrit Wins Reversal of Lender's Foreclosure

The Chetrit Group, a New York-based developer, won an appeal in a legal battle against Safe Harbor Equity, a Miami Beach-based lender, over a $45 million loan for the Tides hotel in South Beach, Miami Beach. The Third District Court of Appeals reversed a summary judgment issued in late 2022, which had found Chetrit liable for $82.1 million plus fees and interest.

The dispute arose after Safe Harbor Equity acquired the debt from Ocean Bank in early 2021 and sued Chetrit, alleging that the developer had stolen $2 million in insurance money without the lender's consent and defaulted on the loan. The insurance funds were meant to repair damage caused by Hurricane Irma in 2017.

The appeals court pointed out conflicting evidence regarding Ocean Bank's knowledge and approval of the use of insurance proceeds for repairs. Chetrit argued that Ocean Bank had approved the use of funds verbally and in writing, while an Ocean Bank vice president denied this.

Chetrit has accused Safe Harbor of exploiting borrowers by searching for prior defaults after acquiring loans, while Safe Harbor maintains that it simply enforces loan documents. Chetrit claims it had refinancing in place to repay the mortgage before Safe Harbor acquired the loan.

The case will now go to trial, and Chetrit's attorney asserts that Safe Harbor faces potential damages claims for blocking the refinancing, which could be collectible against the $41 million mortgage it purchased from Ocean Bank.

Our Opinion:

The Chetrit-Safe Harbor dispute highlights the importance of clear lender-borrower communication and documentation, especially regarding fund use for repairs. The case's outcome could have significant implications for commercial real estate lending practices.

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