Pre-Construction Contract Termination and Deposit Return Litigation
By John L. Urban, Shareholder - Urban & Thier, P.A
Background:
During the height of the Florida real estate market, speculators, investors, and others eagerly entered into pre-construction real estate purchase contracts, paying deposits in the $10,000’s and even $100,000’s for the opportunity to resell or flip the properties and make “easy money” in a hot market. However, with the significant downturn or correction of the Florida real estate market, many of these buyers are locked into real estate purchase and sale contracts which commit them to close on the purchase of properties which they no longer want and which no longer have the potential for a quick profit. The developers/sellers want these individuals to believe that they have only two options: 1) walk away and forfeit their deposit and/or face a lawsuit by the developer for additional damages or 2) close on the sale (assuming they can secure sufficient financing) and potentially own a property worth significantly less than what they were forced to pay for it. However, there is a third option that developers do not want you to know about – see below.
The law firm of Urban & Thier, P.A. has helped and continues to help buyers who are parties to pre-construction purchase agreements for condominium units and houses located in Florida and who wish to terminate those agreements and recover their deposits. We have successfully represented numerous individuals including buyers located within Florida, in states outside of Florida and within the European Union, including England. With offices in Orlando, Florida, and Munich, Germany, we can assist buyers throughout the United States and European Union countries in terminating their pre-construction purchase agreements. In many cases our clients are not even required to travel to Florida.
What the developers do not want you to know is that they are required to comply with certain federal and state laws which are meant to protect buyers from overreaching developers. Almost all pre-construction contracts are written by attorneys for the developer and are one-sided contracts with the goals of protecting the developer/seller and locking in the buyer/purchaser. Virtually none of these developers elect to use the Florida Bar approved (FLA-BAR) standard purchase and sale agreement, which aims to bring more balance to real estate purchase and sale agreements. However, in their quest to create the “perfectly one-sided contract,” these developers and their attorneys often go too far and break the laws that are in place to protect potential buyers.
The Third Option – Contract Termination/Deposit Return
The first step in protecting yourself as a buyer is to contact an attorney - one who is not affiliated with the developer - in order to understand your particular contract(s) and circumstances. Almost all pre-construction purchase agreements appear to provide the legally required federal and state disclosures and protections – many even naming the various laws right in the pre-construction purchase and sale agreement. However, a qualified lawyer with the proper experience in real estate litigation and transactions can quickly identify any weaknesses in the contract which may subject it to attack. The primary legal causes of action most often utilized by Urban & Thier, P.A. are claims under 15 U.S.C. §§1701-1720, the Interstate Land Sales Full Disclosure Act (also known as ILSA or ILSFDA), claims under Florida Statutes Chapters 718 and 720, claims for breach of contract and, depending on each buyers’ potential circumstances, other claims.
The Interstate Land Sales Full Disclosure Act, 15 U.S.C. §§1701-1720, (a/k/a ILSA or ILSFDA), is a federal law which was originally enacted as part of the Housing and Urban Development (“HUD”) Act of 1968 as an antifraud statute utilizing disclosure as its primary tool and was enacted to protect purchasers. Essentially the act requires every developer of a condominium or housing development in excess of 100 units to provide each purchaser with a comprehensive Property Report prior to signing any purchase agreement or contract. Most developers either provide the Property Report or elect to utilize one of the exemptions to ILSFDA compliance. However, given the complexities of ILSFDA compliance, many developers either provide an insufficient Property Report or claim an exemption but then fail to properly qualify for the exemption. The consequences to developers for failing to properly comply with ILSFDA are that the purchaser may elect, at the purchaser’s option, to rescind and terminate the contract, recover all deposits (plus interest) and to be awarded attorney fees and costs.
Florida Statutes Chapters 718 (for condominium developments) and 720 (for housing developments with a homeowners association) are Florida laws which are meant to protect buyers of Florida houses and condominiums. Although not as complex as ILSFDA, many developers also fail to comply with these laws by failing to include all of the required statutory language and disclosures in the pre-construction purchase and sale agreement. As a consequence of such failure, purchasers may be entitled to rescind/terminate the contract and have their deposit(s) returned. A careful review of the pre-construction purchase and sale agreement by an experienced attorney may also reveal a basis for contract termination and deposit recovery, based upon a breach of the contract by the developer. These contracts are usually many pages long and cover varying issues. The developer, just as the buyer, is required to comply with the contract terms and may be in breach – allowing the buyer to terminate the contact.
Conclusion
If you are a buyer/purchaser who is a party to a pre-construction purchase and sale agreement, we encourage you to consult with us or another law firm and explore your rights and options. Urban & Thier, P.A. can provide you with a consultation and, in many instances, we can represent buyers on a contingency basis and/or refer you to another law firm. Urban & Thier, P.A. has represented and/or currently represents buyers in connection with housing developments and condominium projects throughout central Florida – including in connection with:
- Lake Buena Vista Resort at Lake Buena Vista Drive, Kissimmee, Osceola County, Florida, by Lake Buena Vista Resort, LLC (Condominium project)
- Orangebranch Bay in Kissimmee, Osceola County, Florida by Mercedes Homes, Inc. (Housing project)
- The Plaza at Solaire in Orlando, Orange County, Florida, by Plaza Court, LLP (Condominium project)
- Floridays Resort in Kissimmee, Osceola County, Florida, by Floridays Orlando Ventures, LLC (Condominium project)
- Chanler Ridge II at Chanler Ridge Community in Haines City, Polk County, Florida, by Nicholson USA Properties Ltd and/or Nicholson USA Properties Inc. (Housing Project)
- Mona Lisa at Celebration, a Condominium Hotel in Celebration, Osceola County, Florida, by Mona Lisa at Celebration, LLC (Condominium project)
- 101 Eola Condominiums in Orlando, Orange County, Florida, by BA Eola, LLC (Condominium project)
In addition to the above developers and projects, Urban & Thier, P.A. is also accepting clients in connection with other developers and projects.
We encourage you to explore our websites – www.urbanthier.com (English language) and www.urbanthier.de (German language) – to learn more about Urban & Thier, P.A. and its attorneys and practice areas. Urban & Thier, P.A.’s representation of buyers includes litigation of cases in state court, federal court and arbitration proceedings. We encourage you to become informed of your rights and options. You should also ensure that any law firm you consult or retain to represent you has the experience, resources and ability to take your case through trial, if necessary.
Please note that we do not represent you and cannot take any action on your behalf unless and until we enter into a formal written Legal Representation Agreement and any cost deposit or retainer has been cleared into the firm’s attorney trust account.
Tags: American, Deposit Recovery, Deposit Return, Developer, Dispute, firm, Florida condominium attorney, German, Interstate Land Sales Full Disclosure Act, Law, Orlando condos, Pre-construction Contracts, Real Estate Litigation