Condo buyer loses key ruling
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An appeals court says maintenance-fee hikes cannot
void a pre-construction purchase agreement.
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By ALEXANDRA CLOUGH
Palm Beach Post Staff Writer
Friday, June 13, 2008

In a major victory for real estate developers, the 4th District Court of Appeal has ruled against a condo buyer trying to wriggle out of a pre-construction contract.

In a unanimous, 10 page decision Wednesday, the court found that maintenance fee hikes imposed by the developer of Riviera Beach’s Marina Grande condominium do not give a condo buyer the right to cancel a purchase contract.

The ruling closes a key avenue for buyers hoping to avoid closing on their condo purchases.

Hundreds of lawsuits throughout the state have been filed by buyers seeking to avoid coming to the closing table.

Buyers say they’re entitled to undo deals – and get back their deposits – because developers changed terms in the course of the deal.

"The court has made a ruling that supports big business, in particular, developers in florida." Said Gary Nagle, the Juno Beach lawyer representing condominium buyer D&T Properties.

"Buyers of condominiums have had their rights diminished."

Developers have countered that buyers are reneging simply because the condo-buying frenzy has cooled, and with it, the buyer’s ability to quickly resell units at a hefty profit.

"Buyers don’t have the right to get out if the market is bad," said the projects developer, Dan Catalfumo.

Some 40 units at his 270 North Ocean condo on Singer Island in Riviera beach are the subject of there lawsuits, representing about $50 million worth of sales.

Now, in the light of the appeals court ruling, Catalfumo says he plans to get back in front of a judge as soon as possible to have the cases thrown out.

Nagle plans to appeal to the Florida Supreme Court.


                                       

Marina Grande ruling adds to
buyers' remorse in condo market

The buyers-remorse crowd in the condo market suffered a big legal setback recently.

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 condo unit.

Is this the death knell for people trying to undo their purchase deals and avoid the closing table?

Possibly.

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 complaint.

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 Boca Developers.

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 not adverse.

The 4th DCA deep-sixed Gerber's affordability test, calling it "subjective."

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 deal.

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 reverse it.

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 D&T.)

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 cases.

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 buyers.

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