THE GREAT CONDO ESCAPE CLAUSE?

Rather than close on condos that are worth less than the purchase price, some investor are turning to the courts to get out of their contracts.

Destin real estate attorney Craig Tingle told The Log that while he has seen some local efforts to get out of condo purchases with a lawsuit, “there’s significantly less than it has been in South Florida, particularly Miami, where they had a huge condominium boom. Most of the condominiums didn’t go through (and) in some cases that down payment had already been spent.”

Florida condominium prices have dropped 22 percent since 2005, according to the Wall Street Journal, and haven’t bottomed out yet.

That gives buyers — particular investors who hoped to profit from a quick resale — an incentive to wriggle out of the deal rather than close on the condo or walk away from their deposit. The Journal says the courts haven’t been sympathetic.

This summer, for example, the U.S. District Court in Miami dismissed two dozen federal lawsuits in which Opera Towers buyers said they were misled by a brochure advertising an “Olympic-style pool” at the Miami high rise. The judge ruled that the contract clearly stated the size — 2,530 square feet, smaller than an Olympic pool — so the plaintiffs shouldn’t have relied on the ads.

In another case, an appeals court sided with the developers of Marina Grande in Palm Beach County, ruling that while the law allows buyers to back out over “material changes,” rising insurance and utility costs didn’t constitute such a change.

“If a developer doesn’t deliver on what he promised in the contract or the prospectus,” Tingle said, “that’s a way you can get out of it. ... If he promised a three-bedroom and delivered a two bedroom and a bunk room.”

Tingle said the degree of deviation from the contract would determine whether the plaintiff had a case: “If (the developer) promises to deliver a nature trail with a four-foot wide bike path and it’s a three-foot bike path that’s probably not material. Or he promises to deliver an amphitheater, two swimming pools and a golf course and he drops the amphitheater, the golf course and one swimming pool, that’s significant.”

One escape clause for buyers that’s seeing frequent use, Tingle said, is that developers normally have to register their projects under the Florida Land Sales Act, but they can skip that step and the registration fees if they can finish construction within two years.

“A lot of condominiums along the Panhandle,” Tingle said, “had optimistic developers back in the boom times who thought they’d build quickly and didn’t do a registration.”

If the project wasn’t registered and didn’t finish, Tingle said, buyers could invoke their “right of rescission” to back out of the deal:

“Typically, developers aren’t real interested in handing back money, so there’s litigation.”

Tingle said he’d been successful winning lawsuits for investors using that point of law, and others: “There’s ways you can get out of it.”