Thursday, February 04, 2010

How much uglier can it get ?

The "preconstruction blues" are not over yet. From both sides, trying to avoid responsibilities have become the accepted norm. In this particular case, partial refund of a deposit should be a "no-brainer", as stipulated in the contract. Not so fast said the attorneys. Should the judge side with buyers, or with developers?

I leave it to you to decide.

We read today in the DAILY BUSINESS REVIEW – FEB. 4, 2010

Judges join buyers’ frustration over litigation delays

ICON Brickell

For months, lawyers for condo buyers have complained that Related
Group is improperly delaying litigation over deposits, but judges have
joined the chorus accusing the giant developer of dragging its feet
and ignoring a court order.

Related, one of the largest condo developers in the country, is
defending lawsuits involving more than 1,000 purchase contracts. In
most cases, the buyers failed to close following the meltdown of the
condo market and they are trying to get their deposits back. Under
federal law, buyers in condos with more than 99 units are entitled to
any money they put down in excess of 15 percent of the purchase price.

In one recent order, Miami-Dade Circuit Judge Peter Adrien said
Related ignored his order to refund a portion of deposits to a group
of buyers in the 1,796-unit Icon Brickell project in Miami.

In another order, Judge Lynn Gerald Jr., a circuit court judge in Lee
County, cited Related’s legal delays.

“Through [the] entire case, the defendant has constantly missed dates
on which they were supposed to file and/or filed something at the last
minute just apparently to delay the proceeding,” Gerald wrote in an
order denying Related’s motion to vacate his ruling. “It is clear that
the defendant has failed to establish excusable neglect.”

Related is appealing both orders.

Betsy McCoy, vice president and associate general counsel for the
Related Group said she is “deeply offended” by the judges’ orders and
said the problems they cite are isolated cases.

“Do you think I would risk my reputation for the Related Group when
I’ve got 22 years of experience as an AV-rated lawyer?” she said.
“There are legitimate reasons for these defenses.”

Judge Gerald didn’t buy Related’s reasons for delaying responses and
then seeking to vacate a judgment in a case involving a dispute over a
$132,000 pre-construction deposit on a unit in the 240-unit Oasis
Tower 2, a Related project in Fort Myers.

Peter Huy, the attorney representing the two buyers in that suit, said
there is a pattern in Related’s actions.

“You can see a complaint is filed, then they file a notice of
appearance to avoid default, then they file motions for enlargement of
time, then the day before the hearing they file an answer or something
else to avoid a judgment,” he said.

“When they are hit with a judgment they file a motion to vacate and
even after that is denied they still don’t return the money.”

Huy said he has a hearing in two weeks to compel a title company
holding deposits in escrow to release the money to his clients.

Related has appealed the case and claims the money should remain in
escrow until the dispute is resolved. McCoy said this is an isolated
case caused by “service issues.”

“That case had to do with logistics,” she said. “We didn’t receive the
paperwork that was served by the council. The mail was going to the
wrong place. That order is outrageous. It was a procedural error on
our side and I think [the judge] went way overboard on his findings
and I don’t think the 2nd [District Court of Appeal] is going to agree
with him.”


Related has also “chosen to ignore and intentionally violate” orders
to release partial deposit refunds to buyers, according to an order by
Judge Adrien in the case involving Icon Brickell.

The court gave Related 10 days to return escrowed deposits exceeding
15 percent of the purchase price.

The contracts say buyers are entitled to refunds exceeding 15 percent
of the purchase price if they default on the contract.

Since the order was issued in December, Related has returned money to
about 41 buyers, said attorney Robert Cooper, who is representing the
buyers of 150 units in the case who have paid a total of about $23
million in deposits.

Cooper said Related refuses to return money to about 102 buyers who
received letters of default after August, claiming the order only
applies to buyers who defaulted before August. Related also said it
cannot return money to seven buyers because there are discrepancies in
the spelling of their names on the contract and the lawsuit.

“They are still playing games and are simply ignoring the court
order,” Cooper said.

The first order demanding that Related return money was issued last
August. Related contends that only buyers who received default letters
from the company before Judge Adrien issued the order have the right
to refunds. Last month, the judge amended the order to include all
buyers seeking refunds, but Related said the judge “did not have the
right to amend or alter” the order.

“You can’t decide to add buyers to an order,” McCoy said “That’s a
violation of Florida law — granting relief with no motion. He has no
jurisdiction to do this.”


McCoy claims she is protecting the buyers’ interests.

“Judge Adrien’s willingness to order the partial refund with no record
evidence whatsoever of who the buyers are and who may have contract
right of interest lead to a mess … [we have a duty] to be sure only
buyers having an interest in the escrowed deposits receive money from
escrow,” she said.

McCoy’s appeal and a motion to have Adrien removed from the case are
pending before the 3rd DCA.

She said a buyer is not in default until the developer notifies the
buyer of the closing date and the buyer fails to close.

Attorney Michael Schlesinger , who represents several buyers of units
at Related’s 500 Brickell, said that even when the buyers have letters
of default, Related’s attorneys still try to avoid returning the
partial deposit.

“Every single order that I have gotten requires them to pay back the
amount exceeding 15 percent,” Schlesinger said. “They have not
complied. Do I think this is intentional? I believe so. They are
holding the money and they are earning interest.”

He said Related has denied his 500 Brickell clients were in default.
And even after the letters of default were filed with the court,
Related refused to return the partial deposits.

“They delay everything. They fight everything. McCoy doesn’t return
phone calls or e-mails,” Schlesinger said. “I wonder if she is
exercising her diligence as an officer of the court by handling so
many cases by herself and in-house”

McCoy has asked for extensions in dozens of Related cases, citing the
overwhelming number of lawsuits the developer is facing. She said she
is not working alone and has some of the “top condo lawyers in the
nation” as co-counsel.

Boca Raton attorney Eric Neuman, who also represents buyers in
disputes with Related, said the company’s actions are frustrating.

“Whoever holds the money holds the power and the longer they hold on
to these deposits the better it is for them,” he said. “Plus, most
buyers have limited resources. How long can they go on paying a lawyer
to pursue a lawsuit that is continually being stalled?”

McCoy said many lawyers working condo disputes are paid on a
contingency basis, which makes them push for speedy resolutions.

“I suspect that many buyers’ lawyers became involved expecting easy
and fast pay offs. There is no automatic right of refund,” she said.

She said the lawyers’s claims are absurd.

“I take great exception to any suggestion that the Related Group has
delayed cases’ progress,” she said in a written statement to the Daily
Business Review. “Please be assured we are represented by very
competent counsel and not a one would compromise their own reputation
for the sake of one client.”

McCoy said she is being cautious in defending Related’s rights during
“unprecedented times in the real estate market of South Florida.”

“As the largest condominium developer in the United States, we have a
duty to defend these cases in a responsible and intelligent manner.”

Henry B. Nathan is a Real Estate professional at United Realty Group Inc.

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