SAN JOSE — The auctions of several downtown San Jose condominiums have spawned a widening legal war now that a troubled China-based real estate firm has filed a new lawsuit in the increasingly tangled case.
A growing number of legal thickets have begun to hem in two residential towers at 188 West St. James Street in downtown San Jose due to delinquencies on maintenance dues for the auctioned-off condos.
SAN JOSE, CALIFORNIA – MARCH 24: 188 West St. James residential towers near San Pedro Square in downtown San Jose, Calif., on Tuesday, March 24, 2020. (Nhat V. Meyer/Bay Area News Group) (Nhat V. Meyer/Bay Area News Group)
China-based Z&L Properties, the developers of the housing highrises, fell behind on homeowners dues. Typically, a buyer of one of the condos in the highrise complex would be responsible to pay the dues. The developer is on the hook for the payments for condos that are completed but unsold.
On April 8, Nationwide Reconveyance, a trustee for the 188 West St. James homeowners association, auctioned off 10 condos with delinquent maintenance dues. The proceeds from the auction were slated to cover at least some, or even all, of the dues that Z&L owes.
Western tower of 188 West St. James Street, a residential complex in downtown San Jose. (Google Maps)
In the latest twist, a Z&L Properties affiliate has sued Nationwide Reconveyance, and two individuals named Ollie Lopez and Angelica Robles. The lawsuit didn’t identify Lopez or Robles, or why Z&L named them as defendants. However, people named Ollie Lopez and Angelica Robles were among those who successfully bid to purchase condos during the April 8 auction.
In the new lawsuit, filed on April 10 with the Santa Clara County Superior Court, Z&L Properties noted that the auction was conducted despite a temporary restraining order issued by a county judge.
Nine of the 10 units were auctioned off at an average price of $31,900.
“The fair market value of each of the units exceeds $1 million,” Z&L Properties stated in the court filing.
Morgan Cahill-Marsland, an attorney with law firm Nixon Peabody, which is representing Z&L Properties, gave a representative of the trustee a copy of the temporary restraining order. In addition, Cahill-Marsland made people in attendance at the auction — including prospective buyers — aware of the existence of the judge’s order.
The lawsuit also claims that the successful bidders in the auction were allowed to enter the western tower of the 188 West St. James residential complex to go to the condos they had purchased.
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“On or about April 8, 2024, defendants, who do not hold title to the units, unlawfully changed the locks to the units and claimed they were the record owners of the units,” the lawsuit claims.
The auction involved just a small portion of the condos in the double-tower complex, which has more than 600 units. Each tower has slightly more than 300 residential units. Z&L has sold more than 100 condos in the western tower. The western tower also has ground-floor commercial condominiums, which remain unoccupied. The eastern tower is unoccupied.
The company has proposed several projects downtown but has yet to build anything besides the two-tower complex on West St. James.
Over the last decade, the 188 West St. James high-rises have endured numerous setbacks, including lawsuits, disputes with contractors, development delays, and construction workers who were forced to live in a locked shipping container in an East Bay industrial yard.
As for the recent condo auctions, Z&L has 90 days to regain ownership of the just-sold units — if the company pays the delinquent dues, late fees and penalties for each condo.
Plus, a court hearing is scheduled for May regarding the temporary restraining order regarding the auctions.
For now, though, the buyers of the nine condos paid a stunning fraction of what people might expect to pay in a region where the average home goes for well north of $1 million — a move that could have long-range implications.
“Prices this low could affect the future values for the condos in the tower,” David Taxin, a partner with Meacham Oppenheimer, a commercial real estate firm, said in an interview in the wake of the auction.