February 5, 2023

Volume XIII, Number 36

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February 03, 2023

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The History of Condominium Development Rhymes: Contract Purchasers Are Again Seeking to Get Out of Purchasing Condominium Units

Following the real estate crash of 2008, many condominium developers nearing completion of their projects issued notices of completion only to find themselves facing lawsuits from their contract purchasers, who were looking for ways to get out of their contractual obligation to purchase a condominium unit and reclaim their hefty deposits.

The claims brought by the contract purchasers ranged from breach of contract to violation of the federal Interstate Land Sales Full Disclosure Act (ILSA), and they frequently included claims against third parties, such as the escrow agents for these transactions. 

Of course, the real estate market, and especially the condominium market, eventually made a spectacular comeback. In South Florida alone, more than 50,000 condominium units have been constructed, approved, or proposed since 2011. Because some felt that the previous model of contracting to purchase with 20% down and a financing contingency — which was in place in 2008 — was risky, developers started asking for larger deposits of 40%, 50%, and even up to 80% of the purchase price during construction. The result is hundreds of millions of dollars in escrow or in these projects already, much of it from overseas investors.

With Zillow and many others already predicting the next housing recession, and as many condominium projects are nearing completion and closing notices are being sent, some buyers are again seeking legal or factual excuses to cancel their contracts and recoup their deposits. Lawsuits are now being filed or planned, which will threaten the completion of many condominium projects. Now is the time to anticipate and prepare for this new litigation.

©2011-2023 Carlton Fields, P.A. National Law Review, Volume IX, Number 305

About this Author

Christopher Smart Shareholder real estate, title insurance, and consumer finance

Chris Smart tries real estate, title insurance, and consumer finance cases. His clients are national title insurance companies, mortgage lenders, and real estate owners, developers, and investors.

For the last 16 years Chris has handled high-profile litigation involving title insurance coverage, closing protection letter claims, title agent defalcations, and insurance bad faith claims. He has tried lender liability, consumer protection, loan servicing, and mortgage foreclosure cases and defended real property developers.

His trials have involved litigation over the sale of...

William Sklar Of Counsel West Palm Beach Banking, Commercial, and Consumer Finance Real Estate
Of Counsel

William Sklar, a member of the Real Estate and Commercial Finance Practice, represents developers and lenders. He assists them with planning, drafting, and the development of residential, commercial, and complex mixed-use condominiums and planned developments. William also serves as regulatory counsel in compliance matters under numerous federal, state, and local statutes; regulations; and ordinances, including the Interstate Land Sales Full Disclosure Act (ILSA), the Fair Housing Act, and the Florida Condominium and Homeowners Association Acts. Additionally, he represents clients in real...

Richard C. Linquanti Of Counsel Tampa Banking, Commercial, and Consumer Finance Real Estate
Of Counsel

Richard Linquanti practices primarily in law relating to land business, including finance, borrowing and lending side, the Interstate Land Sales Full Disclosure Act, business planning and implementation, front-end transaction structuring, partnerships, limited liability companies, joint ventures, land use, condominium, and mixed-use and master communities. Rich has a substantial background in public-private partnerships, governmental entities, and community nonprofit corporations.

Rich’s practice has also involved substantial work for government-related entities such as the Denver G...

Robert S. Freedman Tampa Shareholder Corporate Law, Governance Creditors’ Rights and Bankruptcy, Banking, Commercial, and Consumer Finance Real Estate

Rob Freedman has represented developers, lenders, and purchasers of developments in Florida and other states for more than 25 years. He has extensive experience in the acquisition, structuring, design, development, and operation of residential and commercial condominiums, subdivisions, homeowners associations, community and master associations, master-planned communities, mixed-use projects, resort communities, and timeshares, fractionals, and vacation clubs. His experience includes obtaining regulatory approvals for the sale and marketing of projects, working on property management...

Jourdan R. Haynes Real Estate Lawyer Carlton Fields Law Firm

Jourdan Haynes counsels on a wide range of complex commercial real estate matters, with an emphasis on property acquisition; disposition; commercial leasing, including telecommunication leasing, and condominium and planned unit developments; and construction and permanent financing. He also represents note holders, servicers, and other financial institutions in a variety of loan transactions, loan sales, workouts, and dispositions of real estate. Jourdan has handled numerous types of commercial and real estate transactions, and regularly represents clients in connection with mortgage...