Preconstruction Deposits: The Final Scraps On The Table In The Current Condo And Housing Market Crisis

This recent item from Miami realtor Lucas Lechuga’s blog caught my attention and prompted me to provide a brief commentary.  In sum, Lechuga reports on a cancelled Miami Beach project where, allegedly, some buyers have requested through their brokers that their deposit monies be refunded, but the developer has taken the position that it will only return deposits in the event that the broker refunds any front-end commission he or she was paid on the sale.  (The situation described is reminiscent of the recent lawsuits filed by The Related Group to “claw back” commissions which were paid to brokerages for units that eventually failed to close.)

While the comments left by readers of Lechuga’s blog suggest a factual issue as to whether the developer is actually drawing this particular line in the sand, I can state as a general matter that I have never seen a purchase agreement where a deposit refund was made contingent upon the repayment of a commission by the broker on the sale, and I have strong doubts as to whether such a condition would be enforceable as a matter of Florida condominium law.  At the same time, however, given current market conditions, it is not unusual for developers to be taking hyper-aggressive stances with respect to their buyers — even where buyers have a clear and indisputable entitlement to a refund of some or all of their deposit monies.  One can only speculate as to the true reasoning behind such stances, but the reality is that many developers have likely resigned themselves to the fact they will be (if they are not already) hit with multiple lawsuits.  With defense lawyers already on retainer to defend against such suits, these days developers may simply find it more in their economic interest to require buyers to go to court rather than to issue refunds to all those who ask.

By Jared H. Beck, Esq.

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


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