Fighting buyer mutiny

Editor's note: This article is reposted with permission by The Real Deal. Click here to view the original article.

By SARAH RYLEY

NEW YORK CITY -- While most developers are feeling the pain of the downturn, some are feeling it more than others.

This month, The Real Deal looked at the new condo buildings that have seen the most buyers trying to renege on their contracts since the real estate market took a nosedive last year.

The analysis found buyers asking for their deposits back on nearly 400 units within 20 buildings. In one case, more than 50 percent of the buyers in a building, the 505 in Hell's Kitchen, filed lawsuits in federal court asking for their deposit back.

The Real Deal obtained a list of escrow disputes from state Attorney General Andrew Cuomo's office via a Freedom of Information Law request, searched published archives and court databases for lawsuits against developers, and consulted with attorneys who are working on these cases.

While there is no comprehensive list of contract disputes, the result of the research is the accompanying list of the 20 buildings citywide that our analysis found had the most wrangling over contracts (see "Where are buyers backing out?").

Some buildings may not have made The Real Deal's list because the AG's office only provided information on 123 disputes, while 410 have been filed this year alone, according to spokesman Matthew Glazer.

The Rushmore by Extell Development was one of the buildings that was not mentioned by the AG, but which is on The Real Deal's list because sources said the AG's office was deciding it.

Attorney Richard Cohen, who is representing buyers there, said 34 disputes are filed against the developer with the AG's office for contracts worth a combined $110.7 million.

He said Extell missed its promised closing date of September 2008. Although Extell declined to comment, the company has publicly said the date was a typo intended to read "September 2009."

Other buildings may not appear on the list because contract disputes are often settled outside of court and contain confidentiality agreements. And at least 22 of the court cases listed in the accompanying chart are closed.

Despite repeated requests, the AG's office would not disclose whether the disputes they listed have already been decided and, if so, in whose favor.

While developers like Extell and their litigious buyers now anxiously await decisions, the number of people actually filing claims to break contracts have waned in recent months.

Between 100 and 150 escrow disputes were filed with the AG office each quarter during the first three quarters of this year, but only 10 were filed in October and the first half of November. Similarly, only a handful of court cases have been filed during those months.

For those who have pending cases, though, significant fortunes are at stake on both sides. ...CONTINUED

All rights reserved. This content may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this content without permission is a violation of federal copyright law.