NoVa condo buyers stuck with deal, however bad

October 31, 2008

U.S. District Judge Gerald Bruce Lee could well understand why purchasers of condos in the Merrifield Town Center in Northern Virginia might want to get out of contracts they had signed in June 2005.

“In the intervening months, our economy is in a tailspin, the real estate market softened, there is a surplus of available condominiums,” he observed in a case in which the buyers sued to break their deal and get back their deposits.

Lee added that the condos at issue had declined in value by 20 percent since the purchase agreements were signed.

Sympathy notwithstanding, Lee found no basis for invalidating the contracts in Bartley v. Merrifield Town Center Limited Partnership.

The plaintiffs contended that Merrifield had violated the Interstate Land Sales Full Disclosure Act (ILSFDA) because the developer did not file a statement of record with the Department of Housing and Urban Development required by 15 U.S.C. § 1704.

Merrifield argued, and Lee agreed, that the disclosure is required only if the development involves 100 units or more. The project at issue had only 97 units.

The plaintiffs also sought rescission of their purchase agreements under § 55-79.88(2) of the Virginia Condominium Act, which requires a developer to provide purchasers a current and recorded offering statement. Lee found, however, that the statement must be provided at “disposition” of a unit, which occurs only when a deed to it is delivered.

Because disposition has not yet occurred, Merrifield is not required to provide the offering statement, Lee said. Moreover, Lee said, plaintiffs had not alleged a material change in the statement that adversely affected their bargains.

Written by Alan Cooper  |  Filed Under Home Page Items, Real Estate, Weekly Update 

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