New York Attorney General’s Office Orders The Related Group To Pay Back Buyers’ Florida Condo Deposits
As reported in the Miami Herald and the South Florida Business Journal, the New York Attorney General’s Office recently ordered developer giant The Related Group to refund preconstruction deposits to buyers who were marketed and sold certain Florida condo units in New York State.
The directive was issued under a New York statute called the Martin Act, a provision of which makes it illegal “to make or take part in a public offering or sale in or from the state of New York of securities of participation interests or investments in real estate,” including condominium units, unless the offering or sale has been registered in New York. See N.Y. General Business Law section 352-e. By way of background, the Martin Act is an old law dating back to 1921 that grants the New York Attorney General rather broad prosecutorial powers, and, in fact, disgraced ex-Governor Eliot Spitzer prominently made rather expansive use of the statute during his days as Attorney General in prosecuting various securities frauds.
From the news reports, it appears that Related is being given an opportunity to respond to the Attorney General’s Office and challenge its finding. One may wonder what kind of power the New York Attorney General would have to enforce its mandate, although it would seem that if push came to shove, the Attorney General could seize any assets held by Related in New York for purposes of enforcement. Also, while the Martin Act does not itself allow for a private cause of action (meaning that only the New York Attorney General can enforce the law), it is important to bear in mind that the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”) is broadly worded insofar as “any law, statute, rule, or ordinance which proscribes unfair methods of competition, or unfair, deceptive, or unconscionable acts or practices” may serve as a basis for a violation of FDUTPA. Because FDUTPA, unlike the Martin Act, is privately enforceable, buyers who have been aggrieved under the Martin Act could conceivably sue on the basis of these violations in Florida court under FDUTPA.
For these reasons, the attempt to enforce the Martin Act should be an object of close attention for buyers and developers of condo units located in Florida and other parts of the country, especially where the units were marketed in New York State and the sales transaction took place there. Depending on how things shake out, the New York Attorney General’s Office may have added considerable fuel to the already brightly burning fire of condo contract litigation.
This article does not constitute legal advice or the formation of an attorney-client relationship, and is not for re-publication without express permission of the author.
Mr. Beck has a law degree from Harvard Law School, and practices law in the courts of South Florida. His law firm, Beck & Lee Business Trial Lawyers in Miami, is dedicated to the practice of business and real estate litigation. A significant portion of Mr. Beck’s practice is devoted to issues arising under condominium and other real estate purchase agreements. He can be reached at 305-789-0072 or jared@beckandlee.com
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