Monday, August 04, 2008

Real Estate Lawsuit - Developer wins

Lawsuits between preconstruction buyers and developers are becoming a major field for real estate attorneys. So far, there are no definite trends and judges are assuming different positions alternatively favoring either side, depending on the case and the judge.

A definitive plus for the buyers to win a case would be by proving that the developer did not deliver on his material promises. This could be amenities that are not quite the same as promised in the brochures; square feet that are too far apart from what the original floor plans stated; units features that differ from what was offered originally. We have even seen cases when private elevators where substituted by elevators shared between two units.

However, cases where buyers’ main reason to revoke the contract is non-compliance with a legal formality by the developer, are getting a closer look. As in the following case reported by the Daily Business Review today.

“Judge sides with seller who sued buyer who backed out of condo deal”

“Judge decision: $300,000 defense verdict”.

Details: Fenster purchased a condominium unit for $800,000 and entered

into a contract to sell it to Hiaeve in February 2006 for $1.5 million. The condo is located in the One Bal Harbour Towers on Collins Avenue in North Miami Beach. As a deposit, Hiaeve placed $300,000, 20 percent of the purchase price, in an escrow account with Arlene Raijman, a Bay Harbor Islands attorney.

But in November 2006, Hiaeve backed out of the contract, which was set

to close on Dec. 31, 2006. She alleged Fenster failed to do four things that breached the contract, and she sued to retrieve the money. Fenster countersued to keep the deposit.

Plaintiff case: In the complaint, Hiaeve alleged Fenster failed to provide her with the declaration of condominium, among other condominium documents, failed to obtain approval from the condominium association for the transaction, she was never approved by a bank for a purchase loan, and Fenster failed to provide her with a title

insurance commitment.

At trial, the plaintiff team abandoned three of those arguments and decided only to pursue the allegation that Fenster failed to provide her with the condominium documents, Shapiro said.

Shapiro said the plaintiff team appealed the case because they disagree with Fernandez' interpretation of a Florida statute regarding whether she must request the condominium documents in writing. He also said the contract itself already suggests a request by Hiaeve for those documents.

"We would like to have our case completely presented to a jury and determined by a jury," Shapiro said. "I think, frankly speaking, that an appeals court is not going to impose an additional requirement upon a buyer to have to make a written request separately when the seller is in the best position to simply turn them over."

A woman who answered the phone at Hiaeve's residence in Flushing, N.Y., referred a call to Yona Kogman, a commercial real estate operator in Jamaica, N.Y., who could not be reached for comment.

Defense case: Zarco said Hiaeve tried to get her deposit back after the condo market slowed, and she realized she wouldn't make a profit from the unit.

Zarco and Brito said Hiaeve admitted on the stand that she never requested the condominium documents in writing, and they said there was no evidence that she requested them orally, either. They argued that Hiaeve also failed to try to obtain a loan, that she was required to obtain title insurance not Fenster, and that a condo association

hadn't been formed, so no approval could be obtained.

"The reality was those facts she alleged didn't exist," Brito said. "Our client did nothing wrong and complied with the terms of the contract [which] made her responsible to close or say, 'I'm not going to close,' but our client gets to keep the $300,000."

Zarco said the case is indicative of how feverishly investors sought to buy oceanfront property during the real estate boom of a few years ago in order to quickly sell at a profit. He said the downturn has left investors with properties worth less than what they paid, which has caused some to look for ways to get out of their contracts.

"She got buyer's remorse," Zarco said of Hiaeve. "She was stuck in a situation where she committed to buying a unit which she had no intention to live in and didn't have the means to go about closing on the transaction. She tried to fabricate a way of getting out of the contract."

Following Hiaeve's withdrawal from the deal, Fenster later sold the property, but for less than the $1.5 million.

Important evidence in the case included the contract and Hiaeve's and Fenster's testimony.

The defense also included a chain of e-mails that established Hiaeve never indicated she was dissatisfied with the deal until she sued.

Outcome: A six-member jury and one alternate, made up of six women and one man, heard two days of testimony as the plaintiff team laid out its case. But Zarco and Brito successfully petitioned the judge for a directed verdict before presenting their case. Judge Fernandez ruled in favor of Fenster on June 24.

Comments: "It sets a standard for some of those cases currently being litigated or for parties considering litigating," Zarco said of the decision. "It gives guidance as to what is permissible and what isn't with regards to trying to revoke a condo contract."

Shapiro agreed. "I think it could have sweeping effects insofar as it’s a case of first impression. There are no other appellate decisions interpreting the statute in this fashion."

Post verdict: Hiaeve appealed the case to the 3rd District Court of Appeal last month according to court records.

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