A Federal Court In Florida Tosses Out Developer’s “Real Estate Speculator” Defense In Condo Contract Rescission Case

The Middle District of Florida recently chimed in somewhat negatively on a defense often raised by developers in the many lawsuits brought by buyers of condominiums looking to recover their preconstruction deposit monies in oversupplied and tanking residential real estate markets such as Florida.  The defense might be best termed the “real estate speculator” defense.  I suspect that the Court’s language will be cited by buyers’ attorneys in many future cases.

In Huggins v. Marriott Ownership Resorts, Inc., 2008 WL 552590 (M.D. Fla. Feb. 27, 2008), the purchasers of a condo in a Panama City project called The Grand Residences by Marriott at Bay Point, sued for the return of their deposits upon learning that the unit was allegedly built 90 square feet smaller than promised, and that the floor plan was significantly altered.  Among a host of grounds presented in its motion to dismiss the complaint, the developer “characterize[d] the Huggins as disappointed real estate ‘speculators,” asserting:

Plaintiffs are real estate speculators who reserved a condominium unit near the end of the boom in the market in 2005. The market experienced a significant downturn since the Plaintiffs reserved their units, so they are now drumming up theories from breach of contract to fraud to breach of implied warranties in an effort to avoid the effect of their decision to speculate. (emphasis added).

While the Plaintiffs responded by denying that they were speculators and that they actually intended to live in the unit, the Plaintiffs’ intention regarding the property was beside the point, in the Court’s opinion, at least with respect to the early stage of the lawsuit.  As the Court held, “The issue of whether the Huggins were real estate speculators or, instead, intended to live in the condominium unit at Bay Point is beyond the four corners of the Complaint and its exhibits.  For that reason, those matters are irrelevant for purposes of deciding Marriott’s motion to dismiss.” (emphasis added).

In other words, “speculators” are every bit as entitled as any other purchaser to state claims for breach of contract, breach of warranty, fraud, etc. arising out of a purchase agreement.  Whether they will ultimately prevail on such claims, of course, will depend on the facts at issue, but the Court was unwilling — and rightly so — to grant developers a “shortcut” to having so-called “contract cancellation” lawsuits thrown out of court.  At the end of the day, legal rights are immutable and should not be applied differently depending on economic conditions.

 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 jared@beckandlee.com


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