The number of buyers backing out of their contracts for condominiums all across New York City continues to increase, and, in response, developers are fighting an arduous battle. It appears that the proliferation of such claims will continue well into 2010 and perhaps beyond. It was recently reported that more than 30 percent of buyers purchasing from Orange Management, Parkview Developers, and Africa Israel have filed complaints and contract disputes with the Attorney General’s office or in state and federal courts.
So, why are these buyers attempting to rescind their contracts? Among the complaints are claims of the developers’ failure to meet deadlines, failure to uphold agreements, incomplete construction and various safety hazards. Buyers striving to rescind their agreements are savvy and engaging in due diligence to support their claims for the return of their contract deposits, having units and entire buildings inspected to ascertain if there is a variance between the building as built and the offering plan. Buyers’ attorneys are also relying on ILSA (Interstate Land Sales Full Disclosure Act which requires that properties, with 100 or more units, provide purchasers with a Property Report prior to signing a contract) claims to protect their clients and to confirm that developers follow-through with full disclosure to purchasers. Failure to follow ILSA can lead to an automatic right of rescission.
Developers fight these claims by stating that the current economic climate does not provide basis for the return of a contract deposit. Simply put, buyers signed the contracts at the height of the market and now that the markets are down, they are refusing to close. Developers believe purchasers are just looking for excuses to back out of valid contracts and are counter-suing to retain full deposits in addition to legal fees and other damages. Still, some developers try to negotiate with their buyers by offering partial return of down payments, financing alternatives and price reductions. For those just entering the market, good deals abound.
Written by Debra J. Guzov |
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