The notion of “buyer’s remorse” as applied to the Florida condo market downturn should be familiar to anyone with even a passing interest in the market trends of the past couple years. Here, by way of example, is a rather lengthy recent article from the New York Times entitled “This is the Sound of a Bubble Bursting,” which charts the experiences of individuals who bought and profitably flipped properties in Lee County (on Florida’s West Coast) during the boom, but who got caught in disastrous positions when the market went south and their finances were too reliant on their rapidly depreciating investments. Running visibly through the article is the moral thread of “buyer’s remorse,” which is essentially the view that the speculators are now getting what they deserve because they (1) made money when times were good; (2) never diversified their investments in preparation for the end of the real estate cycle; and (3) failed to pocket their winnings and exit the market when they had the chance, choosing instead to stay at the table and plow more money into the Florida real estate market, knowing full well that the good times could not last indefinitely.
Now consider this article from today’s New York Times, “Masterful Web Entrepreneurs Hit a Snag in Miami’s Condo Market,” which profiles the recent experiences of the developers of a few currently troubled Miami condo projects, including Blue, Marina Blue, and Midtown Miami. Two businessmen in particular get much of the article’s attention: Hyperion Development’s Jim Clark and Tom Jermoluk, who are renowned for their achievements as Internet entrepreneurs, having spawned such companies as Silicon Graphics, Netscape, and WebMD. One might say that their story, as portrayed in the Times article, is essentially the tale of businessmen with little to no experience in real estate development who noticed developers practically minting money in Florida during the boom, and then swept in to grab a piece of the action for themselves. One could say that the moral thread of this story is what might be termed “developer’s remorse“: the notion that some developers ought to share some of the blame for the present market conditions because they (1) rushed into a complex business without the requisite experience; and (2) as a consequence, delivered condominiums which are not worth the prices that buyers (who are not necessarily investors) paid or put down deposits for, leaving the buyers with properties that they don’t want and can’t resell.
Jermoluk is quoted as saying, “Anytime you start a new company in a business . . . you learn new things.” That may very well be true, but should the buyers in Jermoluk’s projects have to pay the price for his acquisition of new knowledge?
I’ve written elsewhere in this blog in somewhat different terms, for example here, on the developer-buyer morality play at the center of the recent spate of Florida condo litigation. For now, I would just like to conclude that the issue of “who’s to blame for this mess?” is inherently complex, because the forces behind the condo market downturn are themselves complex. Florida courts certainly have their dockets full (and getting fuller) in the coming months and years with some of the fallout from this downturn, and one of the tasks before them is to provide a legal answer to the “who’s to blame” question — on a case-by-case basis.
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 litigation. A significant portion of Mr. Beck’s practice is devoted to issues arising under condominium purchase agreements. He can be reached at 305-789-0072 or email@example.com