Hospitality Report - Special Issue - Winter 2008 - 2009
By Paul Hastings Professional
Does anyone know of a recently completed condominium or condo-hotel project or one under construction that has not been subjected to threats of litigation, administrative action or purchase contract rescission? There may not be any. The current financial crisis, in which even the most credit-worthy developers cannot obtain construction financing, combined with a severe decline in real estate values has led to the real estate industrys very own version of a run on the bank in that persons under binding contracts to purchase condominiums are doing anything and everything they can to get out of their contracts and have their earnest money deposits returned. As a result, even the most carefully and competently drafted condominium purchase agreements are being micro-inspected for any flaw or defect that might allow a purchaser a foothold for a claim of rescission. Federal and state statutes and regulations are being analyzed to see if there is any ambiguity or provision that a purchaser can exploit. Some courts are ignoring industry standards and protocol and government agency rulings and stretching the plain meaning of statutes and regulations in order to rule in favor of purchasers seeking to rescind their purchase contracts. Is there anything a developer can do to protect itself in this environment?