DELRAY BEACH — So what is behind the highly unusual bankruptcy at Palm Greens of Delray Beach, one of the county’s largest 55-plus condominium developments?

Recently filed bankruptcy court documents paint a sordid tale of intrigue that alleges one of the condo associations cannot account for more than $5 million, a local law firm conspired to cover up the alleged diversions and a home builder failed to honor its obligations.

The Palm Greens Recreation Association sought protection last month from creditors under a Chapter 11 filing after concluding it could not pay its bills. Palm Greens, built more than 50 years ago, is located north of Lake Ida Road between Military Trail and Jog Road in Delray Beach. The Recreation Association oversees leisure amenities that include the swimming pool, clubhouse and tennis courts, at Palm Greens, which has over 1,400 condominiums and villas. Those residences are governed by two separate entities, Condo 1 and Condo 2. Neither Condo 1 nor Condo 2 are parties to the bankruptcy filing. The Recreation Association reported to the bankruptcy court on March 12 that it was the victim of "a coordinated campaign to seize control of its reserves, and valuable real estate assets through fraudulent elections, defamatory communications, diversion of funds, and interference with life-safety remediation affecting thousands of elderly residents." But creditors, including Lennar Corp., counter that the Recreation Association has itself to blame for its predicament.

The Clubhouse built by Lennar to serve Palm Greens and Delray Trails opened earlier this month.

 

A Realtor who is a resident at Palm Greens said the dispute is lamentable.

"This is so unfortunate," said Naomi Motta, who sells properties at Palm Greens and also lives there. "Everyone is pointing fingers at each other. The result is that it is hurting sales. Buyers want to see how this is resolved before buying."

Motta emphasized that while the condo associations at Palm Greens are solvent, too many people believe that they are not, she said, noting "That is not true." Motta added she has already had a sale fall apart because of the Recreation Association bankruptcy filing.

Conflicts have simmered for years at Palm Greens, with the Recreation Association alleging that mismanagement at Condo 2 was so pervasive it cannot account for millions of dollars. There is also an allegation that the law firm representing Condo 2, Fort Lauderdale-based Becker & Poliakoff, conspired with certain board members of Condo 2 to conceal the alleged diversion of funds and help its board members conduct a fraudulent board election.

Becker's lawyer, J. Chris Bristow, though, claims there is no merit to the allegations and that the Recreation Board's filing of meritless lawsuits is what is responsible for it becoming insolvent.

He said there is no basis for the claim that Becker & Poliakoff was involved in a conspiracy to conceal diversions of condo money. Bristow referred to the March 12 depositions of three Recreation Association board members who all said they had no knowledge of Becker's representation of Condo 2, suggesting a contradiction in the board members' positions.

"If they had no knowledge of the firm's representation, then how could they make the allegations they did?" Bristow said.

As for the cause of the bankruptcy, Bristow said the Recreation Association spent money to file lawsuits that it never should have pursued. For example, he said a recreation board member used $150,000 in board funds to contest an election that he lost and to file a defamation lawsuit that had nothing to do with Palm Greens.

Bristow called the bankruptcy filing "a classic case of forum shopping," noting that it was filed a day before a state court decision that could have gone against the Recreation Association.

Circuit Judge Reid Scott ordered Condo 2 in September 2024 to make its required payments to the Recreation Association after a seven-month lapse. As of June 9, 2024, Condo 2 owed the Recreation Association $170,000.

Scott cited numerous examples of "failures" to account properly for financial transactions by Condo 2, noting the governing entity failed to account for the withdrawal of $320,606 during a 17-day period at the end of 2023.

“The withdrawals were not accounted for on the Number 2 Association books,” he stated.

Additionally, the Recreation Association claims Lennar breached its agreement to construct a clubhouse for Palm Greens and Delray Trails, the community the developer is building on the old Palm Greens golf course. Lennar agreed to build the clubhouse in exchange for permission to develop the 119-acre site.

Lennar was required to build new recreational facilities for both Palm Greens and Delray Trails before beginning to construct Delray Trails, but it never did, according to the Recreation Association. The new recreational facility opened last month, but the Recreation Association claims it should have been completed four years ago.

The Recreation Association alleges Lennar improperly increased operating expenses, affecting its financial health. The Recreation Association listed $43.7 million in liabilities and assets of between $10 million and $50 million. Lennar, based in Miami-Dade County, is the largest creditor with a $25 million claim; Condo 2 has a claim of $18.5 million.

Like Bristow, however, Lennar says the Recreation Association has itself to blame for its financial problems.

“Lennar has fulfilled its obligations under the development agreement and will continue to work with all parties to do so. We remain committed to completing all amenities for the enjoyment of the entire community." said Lennar in a prepared statement emailed to The Palm Beach Post.

"The recreation association’s bankruptcy relates to its management of its affairs and is in part due to its filing of multiple lawsuits against multiple parties. In its litigation against Lennar, the vast majority of claims were dismissed by the Court."

Joshua Gerstin, a Boca Raton lawyer who specializes in condominium law, said community associations need to be careful when selling land formerly used for golf courses. "It can be a great idea or a disaster if not done correctly," he said.

Litigation shows no signs of letting up

The Palm Greens case, Gerstin said, reflects a rare but highly consequential breakdown in the governance and development structure of a large condominium community.

"At its core, the dispute involves the enforcement of a development agreement governing replacement of recreational facilities, the financial obligations between affiliated condominium associations that fund those facilities, and the protection of essential community infrastructure serving an elderly population. The conflict escalated into a war of attrition involving multiple lawsuits," he said.