Buying a condo in development comes with risks. You could lose money if your developer files for bankruptcy before the project is completed.

Here are some ways to handle this problem.

Check Your Contract 

The first thing you should do is read over your building contract. It should outline the steps you should take if the developer stops working. 

Usually, a new developer is hired to complete the project. This allows construction to continue normally. 

Contact Your Escrow Company 

Most buyers put their deposits in escrow. This is a third-party service that holds the money until your building project is completed. If something bad happens, the escrow company can refund you.

Contact your escrow company to let them know your developer declared bankruptcy. You may need to give them a copy of your building contract. Your funds should be released when the company verifies the developer abandoned the project.

If you paid the deposit to the developer themselves, you have fewer options to get it back. 

You Might Lose Interest 

Unfortunately, you might lose interest if your developer declares bankruptcy. Even if you get your deposit back, that money would have earned interest had you invested it somewhere else. 

This is something to consider when buying unfinished property. You may want to put your deposit in the bank instead of paying your developer so you can earn interest while you wait for your project to be completed. 

If your developer cancels the project, you won’t have lost any money. You also won’t have to wait for escrow to return your deposit. 

How Florida Property Buyers Can Protect Themselves 

Make sure any contract you sign clearly states what happens if the builder goes bankrupt. It should also cover if you will get your deposit back and how. Don’t sign anything before your lawyer has a chance to look over it. 

If the contract you’re given doesn’t protect you, your attorney can draft a new agreement for your developer to sign instead.

Experienced Legal Representation For Florida Developer Disputes 

Feinstein Real Estate Litigation & Business Law can provide you with comprehensive legal support if your developer declares bankruptcy. Our experienced legal team has the skills to negotiate zealously on your behalf to get the best outcome possible. 

Call our office now for a consultation at 954-767-9662 and we can start right away.

When you decide to build a home, it’s crucial to read the fine print in your contract and know what to expect and what you’re getting before signing on the dotted line. Many Florida developers take advantage of unsuspecting buyers, who often believe they’ve finally invested in their dream home, like the homebuyers of the still-under-construction Coconut Grove townhouse community. 

60 Days vs. 3 Years Of Construction & Development 

A group of Florida homebuyers became involved in a 60-day project that has turned into 3 years of nightmarish back-and-forth between the homebuyers and the developer’s legal team, who continue to claim that they couldn’t help the delays. But, this pattern isn’t uncommon in South Florida where property value is at an all-time high and developers can collect a down payment from each buyer well in advance of being required to provide access to the purchased property. 

And in the case of the Coconut Avenue townhomes, it begs the question of whether a developer is ever required to produce the property or if they can claim infinite delays. Some home buyers have brought forth lawsuits, but the original contracts state that the cases must be handled via mediation or arbitration – a huge benefit to the developer that has resulted in the dismissal of litigation suits. 

Here’s how to read your home building contract and what to look for to make sure you’re not signing something that puts you at a disadvantage later on if your developer decides not to deliver. 

Red Flags To Look For In Your Home Building Contract 

Since your building contract is legally binding, you need to make sure the terms work for you. The contract should include specific language about the details of the project, what materials will be used and where they’ll be sourced, how long the project will take, what warranties are available, and any special terms that both parties have agreed upon. 

When reviewing your contract, be sure to look for: 

• Misleading terms and conditions 
• Unfair payment schedules
• Hidden costs 
• Vague language 
• Missing details 
• Large upfront deposits 
• Arbitration or mediation-only agreements 

Ideally, you will be able to back out of the contract at any time and for any reason, but this may not be feasible. Make sure the terms are at least reasonable for you and that you won’t be stuck honoring your end of the contract while your developer is free to do as they like. 

Look for terms like “at developer’s discretion” or “unless otherwise noted,” which are phrases that essentially allow the developer to decide what they mean later on, depending on what will benefit them the most. 

Feinstein Real Estate & Business Litigation Law can provide you with comprehensive legal representation for your building project. Call now at 954-767-9662.