Pre-Construction Contracts

Dark Side of the Boom

Posted on July 14, 2007. Filed under: Foreclosure Research, Nationwide Markets, Out of Town Buyers, Pre-Construction Contracts, Real Estate Marketing |

Miami’s rapid appreciation and new development arrived with highter taxes and huge increases in resale values spurred by out of town buyers.  It didn’t take long before the cost of purchasing a home in that area far surpassed the average income per family based on the tourism-fueled job market in the area.  

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Developer Faces Class Action, Lawyer Says, “Just Two Years Ago, People Were Waiting in Line”

Posted on July 14, 2007. Filed under: Insurance and Taxes, Nationwide Markets, Pre-Construction Contracts, Real Estate Marketing |

Under a purchase agreement, developers for the 337-unit Two Midtown Miami in the Wynwood neighborhood just north of downtown Miami agreed to “substantially complete construction” no later than two years after purchasers signed the contracts in May and June 2004.

Now a class action lawsuit been filed which contends units were not substantially completed within two years, as required in the contracts. According to this July 12, 2007 article by the Miami Herald, the developer’s law firm, Greenberg Traurig, responded with letters that said the two years is subject to legally defendable delays – in this case general construction delays in South Florida and materials and labor shortages.

An increasing number of buyers nationwide, many in South Florida and the Gulf Coast, are scrutinizing contracts to see if they can get out of deals as the residential market cools. Law firms are gearing up teams of attorneys to deal with the litigation.

“It is a growing problem that I expect will persist for at least the next three years,” said Jack McCabe, CEO of Deerfield Beach-based McCabe Research & Consulting. “It will be interesting to see if the courts will rule that delays in materials or shortages of labor rank like hurricanes as an act of God for developers who have run over their contractual two-year construction deadline.”

chlesinger said the current craze over canceling condo contracts is a byproduct of “a miscalculation of the Miami boom.” According to the suit, pre-construction units sold within 48 hours in May 2004. About 700 people were on a waiting list for units.

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There May Be a Way to Back Out of a Pre-Construction Purchase on a Condo

Posted on July 14, 2007. Filed under: Pre-Construction Contracts |

Buyers are eager to get out of pre-construction contracts signed during the recent real estate frenzy. Now that the market has turned and the flippers market has died, many buyers are trying to undo their deals based on even minor changes to a project by a developer. Under Florida law, buyers can void purchase contracts if developers make changes a buyer considers “material and adverse.” (Source: The Miami Herald: July 13, 2007)

Unfortunately, the law is vague about what “material and adverse” means, creating confusion among buyers and developers. In a July 6 ruling, a Palm Beach County judge  sought to clarify the law for the first time.

Changes in a condo’s proposed budget can be a big issue for buyers facing sky-high insurance increases. If a buyer shows evidence the rise in costs “outweigh the buyer’s financial capabilities . . . the buyer should be able to void the agreement,” the Judge wrote.

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