The Fort Myers City Council has voted to guarantee that it has absolute ownership of a parcel that will become home to a $91 million downtown hotel and convention center.
Ownership issues emerged with part of the downtown property planned to be used for the Luminary Hotel and Convention Center, which would include a parking garage that would link to the Harborside Event Center.
Attorneys for the city will file a complaint in circuit court to "quiet" title to the property. That is a process that would seek a court order to head off any potential claims that the city would forfeit ownership of the site if a hotel is built on the property.
Fort Myers acquired the acre-and-a-half parcel in 1936 through a deed that said it could only be used for yacht basin or park purposes.
Former Mayor Jim Humphrey, who along with his law partner, Mark Eberlini represents the city, said the condition is not enforceable, primarily because nothing in the deed gives any of the original property owner's heirs the right to sue to stop it.
"We continue to take the position that there are no legal enforceabilities relative to the restrictions remaining on the hotel site," Humphrey said. "We are comfortable with our legal position that there is no interest that anyone has on the land, it is just a question of the restriction whether it is still valid."
Fort Myers resident Ann Martindale, who lives in the Dean Park area east of downtown, accused the city of gambling on a private enterprise through its guarantee that it owns the land.
"You are breaching the public trust represented by the dedication of these waterfront properties exclusively for park and yacht basin purposes," Martindale said.
The city will file a suit in circuit court to shut down any potential claim by the Deans' heirs that the property reverts to them if anything other than a yacht basin or park is built on the site.
Eberlini said the heirs of John Morgan Dean and his wife, Annie, who sold the land to the city, have been located and will be given notice of the case. John Dean died in 1938 and his wife in 1971.
In the meantime, Fort Myers has pledged to pay Mainsail Development's expenses if a challenge to the city's right to build on the property heads off construction. The cost to the city would be $1.5 million if the project stops the closing of Mainsail's construction loan and up to $2.8 million if the challenge comes after construction starts.
The arrangement came under questioning from Councilman Fred Burson, who asked if the city is "ensuring something nobody else will ensure."
Mainsail President Joe Collier responded that the city is being asked "to keep progress going" on the project.
"We won't draw money from the construction loan until we have clear title," Collier said. "That's the deal with the lender, they're not going to loan us the money until we have clear title."
Collier said he expects the $48 million construction loan to close Thursday, and says delays could send spiraling costs even higher.
The cost of the project has soared to $91 million because of rapidly escalating construction costs. The city's portion is $21 million.
George Knapp, a senior vice president for Florida with the building contractor, Manhattan Construction, said construction costs have increased 6.7 percent in the past six months.
Higher prices for steel, steel-enforced building materials, sheet metal and concrete have led the increases in costs. Last month, President Donald Trump imposed stiff tariffs on imported steel and aluminum.
"I have to tell you that construction is in a bit of a frenzy right now," Knapp said. "There is a tremendous amount of activity in Florida and throughout the U.S., the cost of materials is going up every quarter."
The city bought the land in 1936 for $100.
Under a title insurance policy, an insurance company agrees to pay damages if there is a mistake in the claimed ownership of the policy.
Title insurers are meticulous about proving the presumed ownership of property is correct under state conveyancing standards before issuing a policy. Banks usually will not lend money with land as security unless a title insurer is willing to issue a policy for the site.
The council voted 6-1, with Teresa Watkins Brown voting no, to sign a contract with First American Title Insurance to provide a guarantee that Mainsail's lender will not lose money due to a title problem.
Councilman Johnny Streets questioned why the deed issue surfaced so late.
“How did we not see this issue with the deed over the years with numerous lawyers and title searches?” Streets asked.
“It should have been discovered maybe earlier,” Humphrey said. “In all candor, they did not see it as an impediment to the closing.”
The 243-room, 12-story Luminary Hotel will include a new parking garage and will make use of the city-owned Harborside Event Center for conventions and other events.
Connect with this reporter at bsmith@news-press.com and via Twitter @BillSmithSWFL