Florida Condo Buyers Seeking Escape from Contracts

The Wall Street Journal reports that Florida is “awash” in empty or unfinished condominiums and that investors, trying to escape their contracts, are going to court seeking to recover their deposits. Thus far, the courts have been unsympathetic. The WSJ suggests that some of these buyers were speculating in the housing market and are now desperate to be relieved of the real estate because prices in the Florida condo market have declined 22% since 2005.

In one case, plaintiffs claimed they were misled by advertisements promising an “Olympic style” swimming pool at one Miami condo. The developer successfully maintained that “Olympic style” meant only that the pool would have lanes. Judge Patricia Seitz noted that the parties were put on notice that the pool was L-shaped and smaller than an olympic-sized pool. They also might have figured out that it is not housed in a futuristic cube or located in Beijing. In another case, plaintiffs D&T Properties tried to rely on a state law provision that permits buyers to back out if there are “material changes” in the project. Florida’s Fourth District Court of Appeal ruled that rising insurance and utility costs were not covered by the statute. The court ruled that even an 18% increase “in costs controlled by a developer” is not “material” within the meaning of the statute.

The article ends on a pessimistic note, suggesting that all the litigation, whether or not it is successful, just makes a bad situation worse and that the Florida condo market is going to get worse still before it gets better.

[Jeremy Telman]