Lawsuits Against Condo Developers Increasing

(As the housing market continues to slow, most notably the condominium market, there has also been an increase in the amount of lawsuits and complaints filed against the developers. )

More and more people are filing lawsuits because of canceled projects or other amenities that were advertised, but not included in finished condo complexes across the nation.

A November 10, 2006 article by Troy McMullen of The Wall Street Journal, "High-rise lawsuits," looks into the increase in lawsuits against condo developers.

"With once-hot condominium markets across the country in sharp decline and many real-estate professionals predicting a further weakening, some developers are facing more than a glut of unsold inventory. Angry condo buyers from Boca Raton, Fla., to San Diego are taking them to court, alleging everything from breach of contract to fraud."

"Some of the lawsuits claim that the amenities featured in glossy marketing brochures and model apartments never made it into the final product. Others involve much-hyped projects that went bust, leaving hundreds of buyers with contracts for condos that will never materialize."

Florida is one market that has seen a tremendous increase in the amount of lawsuits being filed. According to their Department of Business and Professional Regulation, there were 2,557 individual complaints filed against developers in fiscal year 2006 which ended June 30. This was up from 1,825 complaints filed two years ago.

Most of the lawsuits are because the project was either canceled, there are defects with the condo or it did not turn out as advertised.

"Legal professionals say that the increase in litigation isn't surprising, given the furious pace of new construction in the past few years, and that some suits may rely on dubious legal strategies that have little chance of prevailing in court. Several states, including California, Colorado and Nevada, have tightened construction-defect laws to help stem the tide. The laws, a result of intense lobbying by the building industry, make it tougher for homeowners to sue or require mediators to settle disputes out of court."

"'These types of laws help weed out many complaints that, frankly, never should have ended up in court in the first place,' says Chicago attorney Howard Swibel, president of the National Conference of Commissioners on Uniform State Laws, a nonpartisan advisory group."

According to information from the National Association of Realtors, the increase in suits being filed comes at a time with a decrease in condo sales.

Sales of existing condos fell 16 percent in September, in comparison with the same period last year.

'Right now, the condo market is a disaster,' says Lewis Goodkin, a Miami economist and real-estate analyst. The crash in some areas was inevitable, he adds. 'These markets were essentially propped up by speculators.' Indeed, investors accounted for as much as 80% of the preconstruction purchases of luxury condos in Miami, according to a 2004 study by Esslinger-Wooten-Maxwell Realtors."

Those who file the lawsuits may have a tough time proving their case, since the situation is speculative, especially if they are claiming lost profits.

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