The National Law Review is alerting litigators to be prepared for a rash of lawsuits related to a possible looming housing recession, likening the outlook to what happened in 2008’s economic crash. As the condo developers of a decade ago notified their contract purchasers of their projects’ impending completions, many of those would-be owners sued for breach of contract or disclosure violations in a bid to get out of their contracts and reclaim their (usually substantial) deposits in light of declining property values. The National Law Review is seeing a potentially similar scenario unfold now in light of the condo-building boom of recent years combined with what some predict is an impending recession.
As the economy bounced back post-2008, development went into overdrive in many of the country’s big real estate markets. Leery of the 2008 model of accepting 20% down payments with a financing contingency, today’s developers require deposits of up to 80% of a unit’s purchase price to enter into contract during construction, per the Review. With that model taking hold, there are now hundreds of millions of dollars sitting in escrow as this plethora of projects nears completion.
In the Review’s estimation, this is a recipe for litigation. With so many developments newly completed or nearing completion, the outlet is already seeing “some buyers ...again seeking legal or factual excuses to cancel their contracts and recoup their deposits. Lawsuits are now being filed or planned, which will threaten the completion of many condominium projects.”