San Jose tower suffered poor upkeep, many units lacked heat, cooling: court papers

SAN JOSE — A troubled tower in San Jose is mired in a fresh lawsuit, a filing that claims the building has suffered poor maintenance, financing woes, water damage, and a lack of heating and cooling in many units.

The litigation and real estate woes have engulfed the western highrise of the two-tower residential complex at 188 West St. James Street in downtown San Jose.

188 West St. James, a double-tower residential complex at the corner of West St. James Street and North San Pedro Street in downtown San Jose. (George Avalos/Bay Area News Group)

Along the way, nine units in the tower have been auctioned off due to unpaid maintenance fees. The condos were auctioned for a jaw-dropping average price of $31,900.

Separately, a whirlwind of litigation has buffeted the tower. The tower’s developer has sued the homeowners association, the homeowners association has sued the developer and the developer has sued people who bought condos through the foreclosure auction.

Bidders, attorneys, a trustee representative and observers gather outside the Santa Clara County courthouse for the auction of condominiums in a downtown San Jose housing tower that’s located at 188 West St. James Street. (George Avalos/Bay Area News Group)

In the latest legal battle, the HOA for the towers and three members of the HOA filed a lawsuit against China-based Z&L Properties and its affiliate FPP MB, which developed the two towers.

Both sides in the case, as a group and as individuals, claim in various legal filings that their opponents have intimidated them. The claims include stalking, physical harassment, and aggressive behavior.

For the first time, however, allegations have surfaced of substandard living conditions and shoddy upkeep in the western tower of the residential complex.

The lawsuit’s allegations include claims that Z&L Properties and its affiliate FPP failed to provide heating and cooling for the units of many residents for a lengthy period.

“Defendants FPP MB and Z&L, acting in concert, violated many duties to the unit owners within the association property,” according to a lawsuit filed on April 17 in a Santa Clara County court.

The claims involve poor maintenance and other alleged failures for a downtown San Jose tower’s condos that often sell for $1 million each.

The HOA and some of its members raised several complaints against Z&L and its affiliate. Here are some deficiencies listed in the lawsuit:

— Failure to maintain heating, ventilation and air conditioning systems in working order, “leaving many residents without heat or cooling in their units for more than a year.”

— Failure to maintain and clean the common areas.

— Failure to address drainage problems in the property’s garage, resulting in water damage to residents’ property in the nearby storage areas.

— Failure to use insurance proceeds from the association’s insurance policy to repair damaged common area windows.

— Failure to secure the building, “resulting in intruders squatting in one of the units and another intruder camping in a hallway.”

This news organization requested a comment about the latest litigation from HOA legal representatives with law firm Briscoe Ivester & Bazel and from Z&L legal representatives with law firm Nixon Peabody.

The HOA litigation also claims a misuse of the association’s revenue.

Z&L and its affiliate, the HOA lawsuit claims, “diverted assessments paid by association members to pay for insurance coverage and utilities for other real property owned by said defendants.”

The HOA’s lawsuit against the developer also raises the specter that financial woes have jolted the developer.

“In July of 2023, due to problems with their lender, FPP MB and Z&L, acting in concert, laid off the unit sales staff for the building and essentially ceased selling units in the building,” the HOA litigation claims.

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The basis for the HOA’s claim that Z&L and its affiliate had encountered problems with the lender wasn’t described in the lawsuit.

However, this news organization’s review of Santa Clara County property documents does confirm one key part of the HOA’s allegation: July 2023 was the last month a condo sale was completed for either tower.

The claims in the lawsuit contrast starkly with the visible aspects of the two towers, which are an eye-catching addition to the San Jose skyline and command a location on a choice block near bustling San Pedro Square, one of the Bay Area’s hottest spots for dining, drinking and nightlife.

Together, the two towers contain a combined 600-plus residential units, all condominiums. Each tower has about 303 residential units.

The three lawsuits erupted after the HOA moved to auction off 10 units because Z&L and its affiliate had fallen behind in payment of HOA dues on completed but unsold units. The delinquencies prompted the auction effort. Nine of the 10 units were auctioned.

Z&L maintains the auction was conducted improperly in defiance of a court-issued temporary restraining order.

The 188 West St. James towers saga has become a “soap opera” that can only be resolved in court, said Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy.

The primary lender may have to step in to stabilize the property and salvage its value, in Staedler’s view.

In 2019, Mack Real Estate Credit Strategies provided a $330 million, five-year construction loan slated to expire by the end of 2024.

Meanwhile, the lack of sales for the completed condos stifles a revenue flow for San Jose and Santa Clara County.

“The big loser in this is the city of San Jose and the property taxes that are being lost,” Staedler said.

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