The buyers-remorse crowd in the condo market suffered a big legal
On July 11, the 4th District Court of Appeal ruled that a buyer
cannot easily get out of a pre-construction contract on a Riviera Beach
Is this the death knell for people trying to undo their purchase
deals and avoid the closing table?
Lawyer for developers say that buyers have filed lawsuits to renege
on purchase contracts simply because the flippers' market has died.
Buyers maintain they want out of deals for a number of valid reasons.
Among them: Claims that developers have changed terms of their deals,
failed to abide by rules governing certain disclosures; or failed to
finish buildings on time.
Looks like buyers may be out of luck, at least on the first
With the 4th DCA ruling, "we're closing, one by one, the doors on all
those flippers trying to speculate in the real estate market," said
John H. Pelzer, a Fort Lauderdale attorney who represented the condo
developer in this case.
In other words, a deal is a deal.
Pelzer said condo developers throughout the state will be using this
case to hold buyers accountable to the pre-construction contracts they
signed. "This decision is binding on all the trial courts in the state
of Florida," Pelzer said.
To recap: In a unanimous decision, the 4th DCA found that a
pre-construction buyer of Riviera Beach's Marina Grande condo
could not cancel a purchase contract simply because the developer was
hiking maintenance fees. The increases were mostly for insurance and
utilities, but also for the upgrade of the condo's multimedia system.
(Can't remember which condo Marina Grande is? Hint: It's the one
known as the "condiment building," as in ketchup, mustard and
mayonnaise, a reference to the building's garish exterior paint job.)
The 4th DCA decision stemmed from a lawsuit filed by D&T
Properties, a partnership of two investors.
In 2005, D&T bought a $495,000 pre-construction condo at Marina
Grande. Subsequently, D&T objected to a proposed 36 percent increase in
the condo's maintenance fees. Marina Grande was built by Marina
Grande Ltd., a company associated with Deerfield Beach-based
In 2006, D&T filed a lawsuit against Marina Grande Ltd., seeking the
return of its $99,000 deposit by calling the fee hike a "material and
adverse" change. Florida law contains a buyer protection clause that
allows condo buyers to undo deals if developers make changes a buyer
considers "material and adverse." But the law was vague about exactly
what "material and adverse" meant.
Last July, Palm Beach County Circuit Court Judge Jonathan Gerber
took a stab at defining the terms. In his order, he ruled against D&T by
concluding that since D&T could afford the fee hike, the increase was
The 4th DCA deep-sixed Gerber's affordability test, calling it
But the 4th DCA ruled against D&T anyway, for a different reason. In
its decision, the appeals court looked to a recent clarification of
Florida law. Earlier this year, lawmakers decided that costs "beyond a
developer's control" did not count as a budget change that would trigger
the "material and adverse" rule.
Since most of Marina Grande's budget increase had to do with
uncontrollable insurance hikes prompted by the hurricanes, the appeals
court ruled that the increases could not be used by D&T to undo its
The appeals court also found that a budget increase for an upgraded
multimedia system was in the developer's control - but wasn't large
enough to be "material and adverse" to D&T.
Gary Nagle, the Juno Beach lawyer who represents D&T and a
host of other unhappy condo buyers, says the 4th DCA decision is all
wrong. He hopes the Florida Supreme Court will review the case and
He says recent court decisions against buyers have been too
developer-friendly. "The courts fear an economic downturn for developers
and the economy," Nagle said. "It seems like courts are favoring
developers quite strongly in certain areas."
Nagle has a problem with the 4th DCA applying the recent
"clarification" to a case filed well before the law was altered.
He also says the appeals courts aren't consistent, necessitating a
review by the state's highest court. Nagle said the 3rd DCA recently
ruled that a condo developer had made material and adverse changes to a
buyer. (Pelzer disagrees, saying that case is totally different from
Interestingly, the 4th DCA doesn't make a distinction between the
motivation of the buyer; in fact, the court specifically says it does
not matter whether the buyer wants to void the deal because of the real
estate market decline.
But Pelzer and other lawyers says it's obvious that it's the
speculators who are trying to get out of their deals, now that the real
estate market has tanked.
"The courts are recognizing that this cottage industry has been
created in great part because of the downturn in the real estate
market," agreed Gary Dunkel, a West Palm Beach attorney who
represents Catalfumo Construction of Palm Beach Gardens.
Developer Dan Catalfumo is battling lawsuits over his luxury
condominium, 2700 North Ocean, on Singer Island in Riviera Beach.
Even though Catalfumo has closed on 60 of 242 units - and has another
20 closings set for the next couple of weeks - about 40 condo units are
still tied up in litigation. That amounts to a whopping $50 million in
sales tied up in the courts.
Not surprisingly, Dunkel was in court last Monday to try to toss the
Palm Beach County Circuit Court Judge Thomas Barkdull III
didn't dismiss the cases, but in one, he did order the posting of a
$20,000 bond. That bond is for an allegation that Catalfumo did not
fully disclose to buyers that they were buying a condo-hotel, instead of
a regular condo. Catalfumo says the disclosure was clearly made to