Condo-buyers’ suits in Florida continue to rise

MANATEE COUNTY, Fla. – Sept. 24, 2007 – A growing number of buyers, who eagerly locked in prices during the Florida condo boom’s height only to see the market collapse before their units were built, are suing to recoup their deposits and get out of their purchase contracts.

While no one knows exactly how many such “buyer’s remorse” suits have been filed, they are widespread and on the rise statewide.

“It’s all over the place,” said William P. Sklar, a West Palm Beach real estate attorney who has been following the trend. “I would say there are probably dozens, maybe hundreds, of these suits pending in Florida. The market has changed and more buyers have remorse and they want out.”

Sklar said he’s aware of numerous cases in Palm Beach, Broward and Miami-Dade counties but the trend extends far beyond the glutted South Florida condo market:

• In Manatee, buyers have filed more than two dozen suits against three separate developers, court records show.

• Buyers at two condo projects, one in Charlotte County and the other in Sarasota County, have filed at least five suits, said an attorney involved in those cases.

• Almost three dozen buyers in one condo in Tampa’s Channelside district are suing the developer, the St. Petersburg Times recently reported.

Buyers also are increasingly complaining to state regulators. The Florida Department of Business and Professional Regulation said it opened investigations on 2,682 condominium complaints between July 1, 2006 and June 30, 2007 – a 44 percent jump from two years earlier.

Not just in Florida

The growing number of suits isn’t limited to Florida, either. Buyers in Las Vegas, San Diego and other former condo hot spots also are increasingly accusing developers in court of everything from breach of contract to fraud, according to news reports.

“It has really spiked nationally,” said Robert Chasnow, a partner with the law firm Holland & Knight in Washington D.C., who frequently lectures and writes about a federal law governing land sales. “I would say the number of buyers seeking to get out of contracts is concentrated in just a few states, Florida being one of them.”

The unique nature of Florida’s condo boom and bust are behind the rise in legal actions, observers said.

At the boom’s 2004-05 height, investors eagerly snapped up condos at pre-construction prices with visions of quickly flipping the units for fat profits. Developers fed the buying frenzy with plans to build a glut of new condos, including as many as 3,000 in Manatee.

But hurricane-related material and labor shortages delayed construction or canceled projects outright. By early 2006, as the first condos neared completion, the once-sizzling market was fizzling. Prices dropped as more units came online in an overbuilt market. The resale market evaporated.

Getting out of contracts

Many investors, on the hook for units they couldn’t afford or sell, began seeking ways to get out of their contracts.

“I’ve had people ask me if chipped paint is enough,” said Ryan Snyder, a Bradenton real estate attorney who’s not involved in any of the Manatee lawsuits. “They’re looking at anything.”

Some buyers opted to sue, generally alleging the developer broke the terms of the purchase contract – usually by failing to complete the unit on time, failing to build promised amenities, canceling projects or making other changes the lawsuits claim are “material and adverse” to buyers.

Developers generally argue the contracts remain valid, the delays were legally excusable and any changes were not detrimental to buyers.

Attorneys involved in the cases and other legal observers said buyers appear more willing to risk the uncertainties of court than walking away because they had to put up larger deposits – many in the mid- to high six figures – and prices are falling.

“The reason it was not litigated much previously was because no one wanted out of their contract,” said Sheryl Edwards, a Sarasota land-use attorney who is representing several discontented condo buyers in Manatee, Sarasota and Charlotte counties. “They still wanted to buy. Now, it’s different.”

Copyright © 2007 The Bradenton Herald, Fla., Duane Marsteller. Distributed by McClatchy-Tribune Information Services.