Developers lose appeal on condo deposits

By September 8, 2011

Although we are seeing a recovery here in Miami, our courts are still sorting through litigation from the real estate bubble burst.
Read the full story here.
Developers lose appeal on condo deposits
South Florida Business Journal
Date: Thursday, September 8, 2011, 9:37am EDT
Courts are still sorting through litigation filed when the condo building boom in South Florida fell flat.
Florida’s 3rd District Court of Appeal on Wednesday handed condo developers a loss in the ongoing legal war over sales contracts aborted after the real estate market crashed in 2007.
The appellate court ruled in favor of two condo investors who were seeking a refund of deposits from the original developer of the Canyon Ranch Living condo-hotel in Miami Beach.

Previously, Miami-Dade Senior Judge Herbert Stettin had ruled in favor of the developer, North Carillion LLC and its title company, First American Title Insurance Co., allowing them to keep the money.
Thousands of lawsuits were filed from 2006 to 2009 – and continue even today – by condo buyers who tried to exit contracts following the real estate bust. The big fight is over deposits.
In most cases, those deposits were either 10 or 20 percent of the purchase price. State law required that the deposits be kept in separate escrow accounts – one for each 10 percent amount – and allowed the second 10 percent to be spent on construction.
In March, a federal judge in Miami upheld the right of a purchaser to rescind its contract if the developer failed to hold separate escrows. This week’s ruling by the 3rd DCA falls in line with that ruling.
However, after the federal ruling in March, the Florida Legislature attempted to tweak state law to the benefit of developers, and make the change retroactive. But the 3rd DCA ruling falls in line with the federal court ruling and states: “Notwithstanding the Florida Legislature’s apparent intention that the 2010 amendment and new section be applied retroactively, we conclude that this would impermissibly impair each buyer’s pre-amendment contract rights.”
The buyers at Canyon Ranch Living are named only as companies – CRC 603 LLC and CRC 1103 LLC. Miami attorneys Joseph Altschul and Lawrence Metsche represented them. The dispute was over two deposits of more than $176,000 on units valued at more than $1 million.
“Thankfully, the appellate panel saw through the smoke and mirrors of the developers’ well-funded lobbying and legal efforts and correctly interpreted the statute as intended and written more than 25 years ago,” Altschul said.
Panel judges with the 3rd DCA noted: “The stakes are significant for the parties and for others—one consequence of the current real estate recession in South Florida is that many prospective condominium buyers are attempting to void the purchase contracts they signed in what hindsight now discloses was an irrationally exuberant real estate market.”
Attorneys representing condo buyers fired off news releases Wednesday announcing the ruling. Attorney Aaron Resnick of Miami Beach called the ruling “cataclysmic” for developers.