Monday, February 7, 2011

Some Condominium Purchasers Might See the Return of Their Deposits!

Scott Salzman had originally planned to buy a condominium unit at Axis Condominium in Miami's Brickell area. He made two deposits in 2004 and 2005 totaling $74,000 on the unit which was listed for $370,000. After seeing the built-out unit and common areas, Salzman changed his mind about going through with the purchase as the construction did not meet the design aesthetic, quality and common amenities he was promised.

The developer, BCRE Brickell, returned only 5% of the purchase price or $18,500. Salzman then sued for the return of the rest of his deposit. The Circuit Court sided with the Salzmans and ordered the developer to return the deposit because it failed to split the money in half and hold it in two separate escrow accounts pursuant to Section 718.202 of the Florida Condominium Act.

What makes this case so interesting is the fact that Section 718.202 was amended in 2010 at the behest of the developers' lobby to ensure that they could keep deposits higher than the standard 10% in one escrow account so long as they keep separate accounting records. In reality, this legislative change made it much more difficult for condominium purchasers who backed out of their contracts while the housing crisis was exploding to recover their substantial deposits.

Salzman successfully argued at the Circuit level that the 2010 amendment was not just a clarification of existing law but a substantive change which would be unconstitutional if applied to existing contracts.

The case is now in the hands of the 3rd District Court of Appeal. The 3rd DCA will have to determine if the original statute required that 20% deposits for condominium purchases were required to be placed into two separate escrow accounts as well as whether or not the 2010 amendment allowing one escrow account with separate accounting records can be applied retroactively.

The 3rd DCA's decision will have wide-ranging impact on the thousands of Floridians who have millions of dollars in unreturned deposits on failed or aborted condominium purchases.

This work by Donna DiMaggio Berger, Esq. is licensed under a Creative Commons Attribution-NoDerivs 3.0 Generic License.

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