Developer on both sides of condo legal conflict

The enemy of your enemy is your friend

By Allan Classen

Tiffany Sweitzer has a complicated relationship with the homeowners association at the Cosmopolitan condominiums, where she lives and owns two units with her husband, John Tess.

Sweitzer is CEO of Hoyt Street Properties, which built the 28-story Pearl District luxury tower in 2016. The HOA is now suing her company and various contractors for $31 million to replace a dysfunctional heating and cooling system.

Presumably, she voted against her HOA taking on her company, but in a building of about 150 units, one vote would not have prevailed.

That is not to say she had no legal options. She and Tess joined a suit with a dozen other Cosmopolitan HOA members who did not like the association’s elaborate plan to rip up walls and replace the entire HVAC system. She thus became the adversary of her company’s adversary.

All of which is perfectly legal, apparently, in the view of several attorneys. It is not a conflict of interest because she and Tess, as plaintiffs against their HOA, are not representing anyone else. Were either of them HOA officers, that might be a different story.

Their motives are open to question, however. The HOA suit weakens an association already facing a heavy financial lift. It is attempting to tax its members $31 million to directly underwrite and complete the repairs while waiting for their case to be resolved. At the same time, the HOA is building a legal war chest to eventually recover that outlay. The assessment was to cost each owner $110,000-$850,000, depending on unit size.

The HOA’s taking on such a massive repair project depended on loan arrangements that fell through when the lender learned of pending litigation by some unit owners. That leaves the HOA with a looming obligation that grows daily as construction costs rise.

In the meantime, it must pay for perpetual repairs that do not fix the underlying problem. One resident estimated that about $1 million has been spent over the past four years to repair the system.

As unit owners, Sweitzer and Tess must pay a fraction (perhaps 2 percent) of the total costs of keeping the building sound and livable, but their obligations as property owners pale compared to the liability of her company, which could be forced to retrofit the entire building. If their HOA fails to mount an effective case against Hoyt Street Properties, that obligation could diminish if not vanish entirely.

There is no evidence that Sweitzer and Tess instigated the suit against the HOA, but even if they are merely going along with plans that would have unfolded without them, they bear a share of sustaining that suit. In a small group, each member could be pivotal.

We asked Sweitzer and Tess to explain their multiple roles and allegiances. Neither responded. Sweitzer is not a named plaintiff in the suit against the HOA, which does eliminate her interests as a spouse of a plaintiff. It may, however, suggest sensitivity to appearances. If there is a downside to being identified with a rear-guard action against her company’s adversary, she may soon be in a position to know.