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from Local Attorney, Michael H. Wasserman

Monday, February 11, 2008

Builder's Own Daughter Walks Away from a Contract

Last week, I wrote about defaults resulting from Occupancy Fraud (obtaining a mortgage loan based on a false promise that one will live in the unit as a principal residence)

This morning I wrote about a developer who is being sued for trying to cancel (discounted) pre-construction contracts in an effort to pocket the profits he was originally willing to forgo to get secure those buyers in the first place. His margins are getting so close that he need cannot afford to let those buyers proceed on their speculative contracts.

Now this:
Toll Brothers, the country's biggest builder of luxury homes reports that included among the 28% of all buyers who canceled their purchase contracts in the fiscal quarter ended January 31, 2008, is the co-founder / vice chairman's own daughter! Reportedly, she signed the contract to buy a Florida condominium for $2.5 million (on the friends and family discount plan) but will not proceed to closing.

How bad is the marketplace, that the firm leadership's own family is willing to default on a contract? Toll Brothers says its cancellation rate in Florida was nearly 61% thu the 12 month period ended Oct. 31, 2007.

Toll Brothers response to the news? The company "intends to pursue its rights" under the purchase agreement.

as i said just hours ago, with friends (family) like these.....

Developer (TRUMP) Sued for Breaking a Sales Contract

I posted last week about folks who buy condos at discounted rates, before construction starts in on the speculation that they can sell the finished product at a profit. The market downturn has soured those speculations and some of those buyers are defaulting on their contracts (not closing) or on their mortgages after closing (since they cannot sell or service the interest payments).

Today, we look at a developer who wants to cut the speculators out of his project, hoping to maximize his revenues unit sales in the slow marketplace.

The Trump Organization caused many eyebrows to rise last year when they announced they were canceling several purchase contract at Trump Towers. Certain "friends and family, including many of the sales agents and construction contractors were given the opportunity to buy condos at Trump Tower at discounted, pre-construction prices. Last year, when the Condo market slowed, Trump changed his mind, sending notices to those buyers announcing that they would not honor the discounted contracts. Many (most) legal practitioners agreed at the time that there was no good legal basis to allow Trump to take that action. I for one have been looking forward to seeing a Buyer sue to enforce his or her contract. As a practical matter, most everyone effected has an ongoing working relationships with Trump, and certainly would have the financial wherewithal to do battle with him in Court to force the issue.

Well, Crains is reporting today that buyers are indeed suing to enforce their contracts. The report cites none other than F. David Radler, former publisher of the Chicago Sun Times is suing to enforce his $1.7 million condo contract and two daughters are joining him to try to force Trump to honore their contract for a $688,000 unit (The Trump Tower sits on the site of the former Sun Times headquarters). We are told that at least one other Buyer has also sued to try to enforce these contracts.

As the saying goes, with friends like these....