The New Year is still relatively young, but the news on the troubled U.S. housing and Florida condo market is already coming fast and furious. Here are the latest highlights:
1. Everyone has their eyes on Bank of America’s takeover of Countrywide, which was announced today. As The Wall Street Journal puts it, “Bank of America’s move is a gamble that the U.S. is nearing a housing bottom and crystallizes the divide on Wall Street over whether now is the time to buy housing-related assets on the cheap — or flee from them to avoid further losses.” Time will tell whether this was the right time to pick up troubled Countrywide, or whether the second largest bank in the U.S. should have waited, possibly until after what many saw as Countrywide’s imminent bankruptcy. In any event, The Arizona Republic speculates on what the ripple effects of the buyout could be in Arizona, one of the centers of the subprime crisis. I suspect the effects could be similar here in South Florida.
2. Closer to home, the Daily Business Review reports that the Whitney Condominium in West Palm Beach is the target of a foreclosure lawsuit brought by the developer’s lender for default on a $52.5 million loan. According to the article, the Whitney is beset by contractor and subcontractor liens. A whopping 146 of the 210 units in the building remain unsold, and no closings have taken place for 2 months.
3. Finally, here’s an article from Miami Today which reports on the bulk purchases of condo units by investment funds which are almost sure to hit Florida in the coming year, and contains some of my own analysis on why such deals might not be so great for individual condo buyers (at least in the short term). The upshot: individual buyers who close on their units may end up moving into nearly empty or renter-dominated buildings where investment funds run the condo associations without a real incentive to keep up the common areas and scrupulously maintain the premises. In the meantime, some developers are, in the words of Condo Vultures’ Peter Zalewski, “actively defaulting” individual buyers who currently have a purchase agreement — perhaps by rushing to schedule closings on very short (or even no) notice, perhaps by simply refusing to negotiate any price reductions or other types of concessions on the units — in the hopes of freeing up units for bulk sales. As the story has me stating, such practice could be considered unethical, and may even be a violation of the purchase agreement itself.
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 purchase agreements. He can be reached at 305-789-0072 or firstname.lastname@example.org