Tuesday, August 05, 2008

Again. A US District Judge dismisses lawsuits against developers.

I just read this article in the Daily Business Review – August 5, 2008

Study the fine print before buying by: John Pacenti

No matter how beautiful a condominium complex looks in the brochure,
it might behoove any buyer to look at the fine print in the contract
based on a ruling by a federal judge.

U.S. District Judge Patricia Seitz in Miami dismissed 29 lawsuits
Friday against Opera Tower near downtown Miami, stating the contract
was explicit about what buyers were getting, no matter what a slick
advertisement promised.

There was no Olympic-sized pool, there were "quality variations" in
the designer tile, it was not on the shores of Biscayne Bay, and some
views were obstructed.

The brochure showed a 56-story elliptical-shaped building on the water
with a nearby marina. The illustration omitted surrounding high-rise buildings. The one- and two-bedroom units were priced from $200,000 to $800,000.

"It is well settled that a contracting party may not as matter of law
reasonably rely upon prior written or oral misrepresentations
expressly contradicted by a subsequent written agreement," Seitz wrotein her 10-page order.

The decision is a victory for developer Tibor Hollo and may influence
hundreds of similar lawsuits against other condominium builders. Most of the lawsuits aim to recover condo unit deposits under the federal Interstate Land Sales Act and the Florida False Advertising Statute.

Both laws were passed to fight fraudulent Florida swampland sales to out-of-state buyers.
Hollo said the lawsuits filed against Opera Tower are from "flippers" upset with the turn in the housing market.

"When they couldn't make the extra money, they didn't want to close, and they sued for their deposit," he said. "It's human nature."

Hollo said he always felt the lawsuits were without merit.

"The brochures are not misleading," he said. "However, as any proper business, the contract defines each entire building and gives a complete survey. The spa, the pool, everything is in there, including the units."

Hollo said the contracts were given to potential buyers with instructions to read them carefully with a money-back guarantee good for 15 days.

Miami Beach attorney Kent Harrison Robbins, who filed the lawsuits against Opera Tower, said he plans to appeal to the 11th U.S. Circuit of Appeals in Atlanta.

"This is a big loss for consumer rights in the Southern District of Florida," Robbins said. "What this ruling says in essence is that developers can say almost anything in [their] advertising and
brochures as long as they use certain magic words and certain small-type disclaimers."

The Opera Tower contracts specify buyers have "not relied upon any verbal representations, advertising, portrayals or promises other than as expressly contained herein and in the condominium documents."

Miami attorney Robert Cooper said such language is required by Florida law, but lawmakers made it clear that doesn't trump false advertisements.

Cooper and two other attorneys who work for him have eschewed all other cases in favor of deposit litigation. He said he represents 800 clients seeking return of their money because of false claims by developers.

"Obviously, the false advertising statutes are designed to protect the consumer," he said. "The Legislature didn't intend for the consumer to be duped because they stick something in the fine print."

Cooper said he hopes Seitz's decision is case-specific and is not adopted by other "lazy" judges.

Real estate lawyer Jared Beck, a partner with Beck & Lee in Miami, was less optimistic.

"It could have broader implications beyond Opera Tower and cases of this nature across the board even outside of Florida," he said. "The Florida federal courts are very persuasive in their interpretation of the Interstate Land Sales Act."

He said judges handling similar suits in Nevada, California and Hawaii will look for an established precedent when trying to apply ILSA.
Beck, who also represents some Opera Tower owners in separate actions, called Seitz's decision "draconian as far as consumer protection implications."

The 29 lawsuits filed by Robbins alleged four misrepresentations in the Opera Tower brochure: an "oversized Olympic-style pool," "designer" tile, "wide panoramic views with 'magnificent vistas,' " and a tower adjacent to Biscayne Bay as pictured.

But Seitz said each of the promises was negated by contract specifics:

• The pool is L-shaped at 2,530 square feet.

• No promises of a "view" from any unit or that any existing "view" would not be obstructed in the future.

• Tiles are understood to be subject to size, color, grain and quality variations.

• The legal description of the property places it a block from Biscayne Bay at 1750 N. Bayshore Ave., not on the water.

"Plaintiffs are clearly not entitled to condominiums bearing a different address, constructed at a wholly separate location," Seitz wrote.

Robbins said the fine print in contracts should not be a way to avoid liability for lies made in advertising.

"We certainly know what is morally right has not been followed here," he said.

Hollo said the 635-unit Opera Tower is financially healthy with 220 units closed so far. A few units reserved by depositors whose mortgages fell through have been sold to other buyers at full price.

"I think things are starting to turn around," Hollo said of the condo market. "I think there's a little renaissance now, especially in the last 30 days.

Henry B. Nathan is a Florida Realtor at United Realty Group Inc. and a Florida Licensed Mortgage Broker.
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